Donald Trump’s farewell gift to Cuba

A Trump loss will

look to some ... to

be extremely

dubious. — murphy

Isee I just have a few hours left to write about an obscure U. S. election subplot: the Trump administration’s hardball strategy towards Cuba, which is designed to raise morale among the president’s voters in Florida. This week the Cuban government announced that it would be closing the island’s offices of Western Union, the telegraphy giant turned money-transfer institution. Cubans with family abroad have depended on Western Union to provide a link with the free world for receiving remittances, and the shutdown will choke off one of Cuba’s top sources of precious hard currency. I imagine a lot of Cubans are taking crash courses in bitcoin for victims of tyranny right now.

The closure of Western Union is a classic piece of brinkmanship for which the stage was set earlier in the year, as the U. S. State Department reversed Barack Obama- era trends and tightened various embargo restrictions on Cuban trade and tourism. Rum and cigars for Americans’ personal use, for example, went back on the naughty list in September.

But the toughest blow was adding the Cuban army- owned financial institution Fincimex to the State Department’s “Cuban restricted list.” Fincimex and its subsidiary, American International Services (AIS), essentially have a monopoly on handling remittances, with the fees thus becoming available for the Communist party’s chosen social purposes.

Those purposes, as U. S. Secretary of State Michael Pompeo announced in late September, undoubtedly include “meddling in Venezuela,” as well as investing in the army- controlled hotels, pubs and tourist traps in which Canadians so love to deposit their own slightly softer dollars. ( State has also personally sanctioned the head of the Cuban military’s ubiquitous holding company for dollar- generating assets, the Castro extended- family member Alberto Rodríguez López- Calleja.)

“Adding AIS to the Cuba Restricted List furthers the administration’s goal of preventing the Cuban military from controlling and benefiting from the flow of remittances that should instead benefit the Cuban people,” Pompeo’s statement observed. “The people should be able to receive funds from their family abroad without having to line the pockets of their oppressors. We urge anyone who sends remittances to family in Cuba to use means other than Cuban government- controlled remittance entities.”

Being tough on Cuba is popular in Florida, but that’s also where most Cuban remittances come from; most of the people sending them will not have other options ( bitcoin aside!) until Fincimex establishes new offshore ones. The State Department’s embargo measures left the Cuban government with the option of finding a new civilian partner for Western Union in Cuba — which could even have been a state enterprise — but Cuba, in the classic communist manner, chose not to be pushed around. ¡Venceremos!

This socialist sternness comes at an inopportune time, however. Cuba’s official statistics show it to be performing reasonably well at public health, as those statistics always do ( and as Cuba supporters would expect, given the country’s reputation for providing doctors to the Latin world). But harsh lockdown measures and U. S. interception of Venezuelan oil supplies have had the familiar effects on the backward Cuban economy: widespread food and medicine shortages and a hasty return to ox labour on the farm.

It is nothing Cuba has not lived with on and off since the revolution, but there is a new wrinkle: the government is finally progressing with a monetary reform that has been in the works since 2013. At the time of the revolution, Che Guevara instituted a new exclusive currency for the country, the “national” peso, which was pegged to the Soviet ruble. When the U. S. S. R. went under the regime had to scramble to create a second “convertible peso,” legally traded at par with the U. S. dollar.

Ever since then the country has operated this “dual currency” system: almost everybody is paid in national pesos, and services and Cuban- made goods are cheap, but foreign goods require the dollar- equivalent peso. Anyone earning the convertible pesos ( and U. S. dollar tips) from a tourism job is in the catbird seat, compared with a professional or a civil servant trying to get by on the idealistic commie currency. ( Canadian visitors will all be familiar with the magical effect of the sight of a dollar in Havana: it seems to be part of the charm, and in talking with Canadians who visit Cuba I have never heard of shame entering the equation.)

The ironic effect has been upside- down income inequality in the planet’s model socialist state. Cuba has intended to unify the two pesos in the name of economic efficiency — a sort of reprise, 100 years later, of the Soviet Union’s liberalizing New Economic Policy ( 1921- 28). The pandemic devastated tourism and increased the urgency of getting this done, which would help the Cuban economy open up more to well- disposed foreign states and businesses.

But it will be a difficult trick to pull off. Any populace is always hatefully suspicious of currency conversions, even when it is just a matter of lopping a zero off the end. The union of the dual Cuban currencies requires more like a total rebalancing of the economy. Vested interests, existing businesses and incomes generated by dual- currency arbitrage are bound to get butchered. The Cuban politburo will need to keep both the army and the central bank happy, not to mention fed. Amidst all this, U. S. President Donald Trump has stuck them with what may be a most inconvenient farewell gift.