U.S. State Department Geographic Bureaus: Latin America Bureau

U.S. DEPARTMENT OF STATE
95/06/30 Testimony: Edward Casey on Cuba
Bureau of Inter-American Affairs



TESTIMONY OF EDWARD A. CASEY
DEPUTY ASSISTANT SECRETARY
BUREAU OF INTER-AMERICAN AFFAIRS
DEPARTMENT OF STATE
BEFORE
THE HOUSE COMMITTEE ON WAYS AND MEANS
JUNE 30, 1995

I would like to thank you, Mr. Chairman for the opportunity to share with this committee the Administration's view of Cuba's future role in the process of economic integration of our hemisphere. It is particularly appropriate that while economic and trade ministers from all over the Americas are meeting this week in Denver to plan that process -- a process that will unquestionably advance the United States' long-term economic interests -- we take time to discuss here the missing link in hemispheric solidarity: Cuba.

Mr. Chairman, Cuba is a country with great economic potential, and unlocking that potential would have tremendous and lasting benefits for Americans as well as Cubans. Cubans on the island, like those in the United States, have demonstrated their talent and energy in countless ways. The island of Cuba itself is endowed with valuable natural resources, including fertile agricultural land, rich mineral deposits, oil fields, excellent deep water ports and, of course, its beautiful beaches, mountains, historical architecture and other tourist attractions.

In spite of these sparkling possibilities, however, Cuba's economy is currently not just limping, but crawling along. While some reforms have been implemented, they have been carefully limited to preserve the regime's control over individuals' livelihood. These tight limits on reform have also greatly reduced their economic impact; changes have been far too circumscribed to provide Cubans with adequate freedom and incentive to produce what is needed in the quantities required. Cuban industries are operating at a fraction of their capacity, and shop shelves are largely empty except for dollar stores selling imported products.

The Cuban government has aggressively courted foreign investment. While the regime has claimed $1.5 billion in such investment, and alluded to U.S. businessmen making secret visits to Havana, the fact remains that most investors remain leery of Cuba's centralized and arbitrary investment approval process, the regime's still pervasive involvement in the economy and the risk of political instability. Foreign businesses still may not hire Cubans directly, but must go through a government agency. They may only in rare instances sell to the domestic Cuban market.

These and other factors have meant that investment to date in Cuba has been limited to relatively few sectors, particularly tourism, and has largely been structured to provide rapid return on investment and ease of exit should that prove necessary. The idea that "all the good investments will be gone by the time Americans get in" is ludicrous. There is no question that when change finally comes in Cuba and U.S. businesses move in, there will be a wealth of opportunities for them. The U.S. proximity to Cuba, Cubans' continuing affinity for American products and the strong cultural and historical ties that bind our two countries will mean that U.S. commercial involvement in Cuba is destined to be deep and beneficial to both Cubans and Americans.

When democratic change does take place in Cuba, Cuba will certainly take its place in our developing hemispheric economic system. The normalization of our trade relationship could proceed along three lines.

First, both Cuba and the U.S. are members of GATT/WTO. We would thus provide a democratic Cuba with MFN access to our market. American businessmen would compete in Cuba on an equal footing with firms of other countries.

Second, a democratic Cuba would be welcome to participate in hemispheric efforts to build a Free Trade Area of the Americas (FTAA). Hemispheric trade ministers are meeting today in Denver to take the first concrete steps towards the goal of completing an FTAA by 2005. The FTAA will provide opportunities for smaller economies like Cuba's to enhance economic growth and development. Cuba cannot be welcomed into this family, however, until it has embraced the same democratic and free- market principles that unite the rest of its members.

Third, the United States could extend trade benefits to Cuba equivalent to those of other countries of the Caribbean Basin once Cuba meets the same requirements. This would include duty free treatment under the Caribbean Basin Economic Security Act and NAFTA-parity legislation which you, Mr. Chairman, are sponsoring, if approved by Congress.

While the resurrection and re-integration of the Cuban economy will have immediate benefits for both Cubans and Americans, particularly Americans in Florida and other Southern States, there will be difficult obstacles to overcome. Among these will be deteriorated infrastructure on the island, the Cuban people's lack of recent experience with free markets, the lack of institutions to support a free market economy, and perhaps thorniest of all, the resolution of property claims. There are currently almost $6 billion worth of certified U.S. property claims (including interest value). Cuba will face many more uncertified claims held by Cuban Americans who have become citizens since their property was confiscated by the Cuban Government, and still more claims from Cubans still on the island. The Cuban Government created this mess through its uncompensated expropriations thirty-five years ago. It will be the task of a future Cuban Government to put things right. The U.S. Government will pursue resolution of U.S. claims in accordance with international law.

The U.S. Government will strongly encourage transition and democratic Cuban governments to resolve all property claims promptly and appropriately. The U.S. will strongly support the creation of a mechanism under Cuban or international law to do so. We will encourage restitution of property in cases when that would be appropriate. The U.S. may also pursue a government-to-government settlement agreement. The Department of State has been quite successful in gaining significant compensation for U.S. claimants from a number of countries in the last several years, and we may pursue a similar outcome in Cuba. We cannot predict what form the solution to this problem will take now, but we are confident that a solution will be found. Early resolution of claims will be essential not only for the sake of claimants, but also to firmly establish property rights for future Cuban and foreign investors, to clear obstacles to privatization, and to heal old wounds in Cuban society.

It is important for us to begin planning now how the U.S. Government, as well as other governments and institutions could most effectively support future transition and democratic governments in Cuba. Strong U.S. support would be crucial during a transition both to help meet humanitarian needs and to assist in building democratic and free market institutions. Early involvement by the international financial institutions (IFIs) in Cuba once a democratic transition has begun will also be essential to help stabilize the Cuban economy and provide incentives for the new government to undertake difficult but necessary economic reforms.

Perhaps the most important U.S. contribution to the re-building of Cuba, however, will be made by our private sector. U.S. business will be extremely competitive in nearly all sectors in Cuba, including housing construction, repair and expansion of physical infrastructure, agriculture, mining, oil extraction, developing financial service networks, telecommunications, transportation and, of course, tourism. Some studies have predicted that within a few years after a democratic transition visitors to the island could more than triple, to over 2 million per year. The island will also be an extremely attractive location for U.S. investors in light industry manufacturing. Cuba will also constitute an excellent market for all types of U.S. products. The opportunities will be there, and I believe we can all be confident that American business will take full advantage of them.

Mr. Chairman, thank you again for this opportunity to reaffirm the Administration's commitment to expanding our economic links in the Americas, and our fervent desire to do all we can to help a democratic Cuba re-join our hemispheric family.

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