The lack of transparency of Fidel Castro government in Cuba is very well known. Information about the inner workings of the government, however, is becoming available, though in a fragmented way as high Cuban government officials defect and freely report their experiences in Cuba. The information reported in this special edition of the Cuba Monthly Economic Report comes from just such a source --Jesus M. Fernandez, who left Cuba in May 1996 after holding important positions in the Cuban government, including Secretary of the Food Committee of the Cabinet and Secretary of the Foreign Exchange Commission of the Food Group.
The July 28, 1997, issue of Forbes magazine lists Fidel Castro as one of the richest people in the world, with a net worth of $1.4 billion. Forbes' estimate of the funds that Castro controls may be low, however; it merely assigns to him 10 percent of an estimate of Cuba's gross domestic product. In fact, in addition to controlling the Cuban economy, Castro possesses and personally controls international bank accounts and large amounts of gold and commodities, and has done so virtually from the start of the Revolution.
What today is referred to in the innermost circles of the government as "the Comandante's reserves" had its origin in 1959 in the famous "Fidel's checking account." >From this account --which proved to be an administrative nightmare to Cuban fiscal authorities, being subject to no control or budget-- Fidel Castro drew funds with which to satisfy all manner of needs and requests throughout the Island, instantly creating an image of himself as powerful benefactor. It was then that it was decided to create an account in Castro's name, not related to his official titles, that he would personally manage without giving an accounting to anyone. This account, which was in pesos, served as precedent for later creating a dollar account to finance international transactions, primarily of a political nature. This dollar account was used to finance subversion in other countries and propaganda activities such as the meeting of the Tricontinental Assembly.
Though the amounts involved are not known, the account was financed from state funds and from the forced exchange of dollars from Cuban workers at the American Naval Base in Guantanamo. In that account were also deposited foreign funds whose purpose was to finance insurrections in Latin America.
In 1970 it became known that the proceeds from the sale of cattle to Canada --the intermediary for which was Merejo Curbelo, brother of the Minister of Agriculture, Comandante Raul Curbelo-- were deposited in Castro's account. The magnitude of the sale has been estimated at between $5 million and $10 million. Sales of cattle have continued to this day and have included Venezuela as a buyer. The cattle come from another of Fidel Castro's exclusive reserves, which contains some 50,000 head of cattle.
Also in 1970, Emilio Quesada Rey, excolleague of Fidel Castro at the University of Havana, created an integrated system of reserves under Castro's exclusive control. These reserved consisted of automobiles, trucks, tractors, and other wheeled vehicles, and general construction equipment. By then, reserves of housing, also managed by Fidel Castro, were in existence. From these reserves Castro assigned resources to productive enterprises without any sort of plan and provided gifts to many of his collaborators and allies, both at home and abroad.
In 1976, the State Committee for the Provision of Technical Material was created under the direction of Provisions of the Central Planning Board (JUCEPLAN). Irma Sanchez, a member of the Central Planning Board, was placed in charge of the new committee as Minister- President. The new committee would become the most powerful organ of the Cuban government, since it centralized control of the country's physical resources, with the exception of foodstuffs, clothing, and shoes. The resources it managed included equipment and machinery, petroleum, and construction and raw materials.
The new committee expanded the reserves personally controlled by Fidel Castro. By then~, those who knew of them at JUCEPLAN referred to them as "the Comandante's reserves." The reserve of automobiles, for example, came to number 7,000 units, which were stored outside in the area of Managua, south of Havana. The reserve of trucks, which also numbered in the thousands, was kept in Alberro, in the area of Cotorro in the province of Havana. These reserves were administered by Castro separately from the planning system, which he himself did not trust; he assigned resources and equiment only to projects he initiated and directed. This system caused a great deal of discomfort among the middle-level economic planners, and it generated friction and strong disputes among Vice Minister of the Central Planning Board Luis Gutierrez, Irma Sanchez, Emilio Quesada, Osvaldo Dorticos (in charge of the Central Planning Board), and Fidel Castro himself. By then the lines that could have separated what was public property managed by Castro and what was de facto private property had been erased.
At the start of the war in Angola, in the middle of the 1970s, Castro's financial reserve was funded in part by monies from the Soviet Uluon and the rest of the Soviet block for financing Cuban military operations in that country. The same was true with respect to the war in Etiopia.
At the same time, the Cuban armed forces accumulated large quantities of canned goods. These reserves were located in Cuba and were maintained at great cost to the country because of the need to renew them frequently to keep them fresh. These reserves are currently being turned over to military personnel as compensation for their lack of access to dollars and because they cannot be maintained fresh as before given the economic crisis. The reserves were never used to supply the civilian population.
At the beginning of the l980s, the sources of funds for the Comandante's reserves were diversified. Of unknown ownership, they were enterprises created to generate finds outside the planning system, as if they were the private property of certain government officials. These enterprises also served to launder drug money, which became known during the process leading up the execution by firing squad of General Arnaldo Ochoa in 1989. The most important of these enterprises are the following.
- The Corporation CIMEX was founded by Jose Luis Padron, a Colonel who was assistant to Jose Abrahantes, the Minister of the Interior who was arrested along with General Ochoa; by Orlando Perez, expresident of the National Bank; by Regino Boti, ex- minister of JUCEPLAN; and by Emilio Aragones, ambassador to Argentina and one of the persons closest to Castro on financial matters since the days of the Sierra Maestra. This corporation is a conglomeration of export and import enterprises that currently has chains of stores in Cuba that only sell in dollars. The most important of these is the chain Panamericarna, which has sales of $1 million a day. Part of CIMEX is the Treviso company, initially run by Colonel Tony de la Guardia, who was shot with General Ochoa in 1989. The firm sells tobacco products, shellfish, and construction materials. It also produces knock-offs or adulterations of high quality international goods, such as Chivas Regal whiskey or Levi's pants.
>From this enterprise, the now defunct Department MC (for convertible money) in the Interior Ministry was created. This was a secret operation designed to get around the U.S. embargo on Cuba. This department generated several million dollars a year, which was presented to Castro on his birthday, every August 13. The largest amount we know of involved a "gift" of $10 million, delivered in a suitcase full of bills by Jose Abrahantes during one of Castro's birthday parties in the 1980s. Part of this money came from drug trafficking.
Independent of the net earnings of MC, CIMEX should generate a minimum of $50 million a year, possibly much more. There is information that on one occasion, toward the end of the 1980s, the enterprise suffered a lose of several million dollars speculating on the London financial markets. On that occasion, Raul Castro became involved, severely criticizing functionaries of CIMEX for playing at capitalism, but no one was seriously punished.
- Cubanacan is a group of enterprises founded by Abraham Masiques, a Cuban entrepreneur who is a friend of Castro's. Cubanacan is the enterprise that open the door to foreign investment in tourism. Like CIMEX it has several chains of stores that sell in dollars. Cubanacan controls approximately $600 million in foreign capital, primarily from Melia, LTI International, TRIP, Delta International, Golden Tulip International, Cosmo World, and Super Club. It is estimated that Cubanacan currently contributes around $30 million a year to "the Comandante's reserves."
- EI Palacio de Convenciones (literally, The Convention Palace) contributes its net earnings to the Comadante's account. Its eamings are generated ty international events held there, many of a political nature. The earnings it generates are on the order of $3 million to $5 million a year.
- Cubalse consists of a single store that was originally dedicated to selling to the diplomatic community. It is now open to any member of the general public who has dollars. It is the only store that always has beef, which it sells at monopoly prices. The beef comes from Castro's cattle reserve. Cubalse's net eamings go to enrich Castro's reserve. It is estimated that it can generate net earnings on the order of $30 million a year.
- Medicuba, which sells pharmaceutical products manufactured in the country, especially vaccines, generates an unknown amount of revenue that is estimated to be several million dollars. Fidel Castro is the principal investor in the biotechnology sector. He is kept informed of rescarch on AIDS and other programs in this field.
In addition to the earnings of these enterprises, the Comandante's reserves are also supplied from other transactions, possibly the largest of which was the sale of rum factories and distilleries under the Havana Club name to the French firm Pernaud Ricard. The sale price has been estimated at $50 million, an amount that reportedly was deposited in its entirety in the Comandante's reserves.
Instrurmental in this transaction were Alejandro Roca, Minister of the Food Industry; Miguel Castillo, personal administrator of the Comandante's reserves; and Jose Alberto (Pepin) Naranjo, chief of staff to the commander in chief. This transaction continues to generate earnings for the Comandante's account through commissions from the sale of Cuban rums and through the currency exchange from the salaries of Cuban workers.
A part of the net eamings of several foreign enterprises engaged in the growing of citrus also goes to the Comandante's reserves Very gross estimates place these contributions at not less than $10 million or $15 million. One of the best known entrepreneurs in this sector is Max Marambio, chief of Salvador Allende's guard. Another is Angel Domper, who is married to one of the Che Guevara's daughters. These Chilean businessmen are believed to be millionaires.
Another source of income to the Comandante's reserves comes from loans that Castro makes to the national economy from these funds. Whenever there is a shortfall in the flow of foreing exchange --something that occurs frequently in the importation of food and oil- - government officials in charge of payment submit requests for loans through Carlos Lage, Prime Minister of Cuba. If Lage passes on the request, Castro generally approves the loan, noting the date the loan is due and the interest to be paid. The latter is normally 10 percent, regardless of the length of the loan. We know of two specific transactions, one of $20 million and the other of $30 million, for imported foodstuffs, mostly cereals, and there have been other occasions involving the import of oil.
Back in the days when the Soviet Union allowed Cuba to sell for dollars its oil surplus, part of the proceeds from this implicit subsidy were suspected of making their way into the Comandante's reserves. The reason for this suspicion is that it became established custom at JUCEPLAN that the dollars from nonconventional exports would go to such reserves.
In 1984, the Banco Financiero Internacional was founded, becoming the first Cuban entity operating with dollars in complete autonomy from the state system. It operates as a corporation whose owners are the Cuban government and some foreign investors who are suspected of acting as stand-ins for other persons. This enterprise is located in the CIMEX corporation. The apparent objective of this bank was to remove from the National Bank of Cuba actions that were intended to 1eave no trace. The main clients of this bank, which has 16 branches in Cuba and an unknown number abroad (we know they exist in the United Kingdom and in Canada), are the same firms associated with the Comandante's reserves.
El Banco de Inversiones, SA is located in the Someillan building in Havana and forms part of an important mechanism that makes loans to the Cuban government at high interest rates. It is run by Hector Rodriguez Llompart, ex-president of the National Bank of Cuba, and a Swiss-Israeli citizen named Andre. It is suspected that this bank's capital comes from the Banco Financiero Internacional.
The operations of these two banks are so secretive that they give rise to many suspicions, including that they are involved in the laundering of drug money. The scandal involving the Grupo Oasis of Spain, which operated the tourist center at Cayo Largo, planted the seeds of this suspicion.
The Comandante's reserves, both financial and physical, also benefit from many of the foreign donations Cuba receives, including, for example, the World Food Program of the FAO, which made many donations of milk to Cuba between the 1970s and 1990s. The milk was intended for infants in the eastern provinces of Cuba, but was diverted intead to Nicaragua for political purposes.
The above information appears to confirm that the Cuban economy is undergoing a major institutional evolution, in which four economic subsystems are emerging. The first is Fidel Castro's economy, with his enterprises, financial institutions, and virtually absolute control of the country's resources. The second subsystem, in parrnership with Castro's economy, conists of the foreign enterprises, allowed to generate and repatriate earnings at th cost of helping Castro's own finances. The third system is the remains of the old planned economy and public enterprises, including the sugar industry, still struggling for survival but in a general state of neglect and decay. The fourth system is the Cuban marginal private sector, consisting of those who are falling outside the other three systems (mainly the self-employed) and those who, though still working in the public sector, do not earn enough to make ends meet. It appears that the first two subsystems are thriving, while the latter two are carrying the burdens imposed by predatory economics of the first two. In the aggregate, everything seems to indicate that the Cuban economy is in a freefall, with no visible solution, something similar to what happened to Zaire (now Congo) under Mobutu Sese Seko.
Dollar remittances from exiled Cubans to relatives in the island are playing an important role in helping some weather the current economic crisis. However, the remittances, combined with the alleged foreign investment activity in Cuba, are offering Castro an excellent vehicle to hide money laundering activities. Forbes' estimate of Castro's fortune may very well fall short of the reality.