Mexico & Caribbean A r e a S e r i e s
No. 12
Vol. v
(CUBA)
Unive
ASPECTS O F THE CUBAN ECONOMY
P a r t V: F i d e l i s t a F i n a n c e s
by Irving P. Pflaum
September 1960
Cuban Government financing and accounting
p r a c t i c e s had been so i n t r i c a t e for decades before
D r . F i d e l C a s t r o Ruz s e i z e d power that i t i s not
s u r p r i s i n g to find conflicting opinions on how they
have been affected by the Revolution.
"The Revolutionary Government h a s done a
m o s t r e m a r k a b l e job ,I' a conservative A m e r i c a n bank
m a n a g e r told m e in H a v a n a - - r e c e n t l y but before the
r e g i m e made i t s move to s e i z e a l l banks. "Cubans
s t i l l have faith in the peso. You m a y not believe i t ,
but they a r e hoarding t h e i r c u r r e n c y . And the Gove r n m e n t h a s held the line on p r i c e s p r e t t y well.
T h e r e Is nothing like a runaway inflation h e r e . I '
A few days l a t e r I interviewed C u b a ' s #1
practicing b a n k e r , a v e t e r a n of 40 y e a r s with one
financial institution. " T h e y ' r e printing bank note s
like m a d , " he told m e . "A couple of hundred m i l lion new ones have come out t h i s s u m m e r . The
peso h a s been shot to hell. A lot of 25,000 just sold
in Miami a t 2.5 pesos to the d o l l a r . " l
1
The t r a n s a c t i o n mentioned w a s of Cuban peso
bank notes illegally taken out of the country f o r s a l e
abroad. T h e r e was a l i m i t e d i l l e g a l m a r k e t in Cuba
and the p r i c e r e p o r t e d i n the F l o r i d a p r e s s i n July
and August 1960 was 1.7 5 peso for $1.00. The off i c i a l exchange r a t e i s one peso for $1.00. The
dollar was l e g a l tender i n Cuba until a decade ago.
IPP- 12- '60
Somewhere between t h e s e views i s the t r u t h about F i d e l i s t a f i n a n c e s ,
but i t i s n ' t e a s y to find. The words "bewildering complexities" w e r e u s e d
often by e x p e r t o b s e r v e r s to d e s c r i b e C u b a ' s finances even before C a s t r o a p p e a r e d on the s c e n e with h i s checkbook.
In p r e - C a s t r o Cuba, the Government p r e s e n t e d two budgets a f i c tional one c a l l e d "ordinary" and a somewhat l e s s fictional one called " e x t r a o r d i n a r y . " Moreover t h e r e w e r e 242 extrabudgetary accounts which the Gove r n m e n t supported o r with which i t was to s o m e d e g r e e involved. Although no
f i g u r e s w e r e published for many of t h e s e a c c o u n t s , a n official t r e a s u r y e s t i m a t e showed they contained f r o m 52 million to 86 million p e s o s during e a c h
of the y e a r s 1949 to 1955.
The two "fictional" budgets w e r e the r e s u l t of A r t i c l e s 52 and 53 of the
Constitution of 1940, s a i d to be a m o d e l document. (It h a s been suspended by
C a s t r o who h a s h i s own "basic law.") T h e s e a r t i c l e s provide that the budget
of the M i n i s t r y of Education s h a l l not be l e s s than the " o r d i n a r y budget of any
other m i n i s t r y " ; that the monthly s a l a r y of a p r i m a r y - s c h o o l t e a c h e r s h a l l not
be l e s s than one-millionth of "the t o t a l o r d i n a r y budget1'; and that the Univer s i t y of Havana, s o long a s i t i s unable to pay i t s own way, s h a l l r e c e i v e 2 1l4
p e r cent of the t o t a l o r d i n a r y budget a f t e r the payment of i n t e r e s t on C u b a ' s
foreign debt.
The worthy m o t i v e s inspiring A r t i c l e s 52 and 53 i n the Constitution
B a t i s t a h i m s e l f h a d proudly p r e s e n t e d to the nation, m a d e i t i m p o s s i b l e f o r
h i m to i g n o r e t h e s e provisions. Hence, the "ordinary" and " e x t r a o r d i n a r y "
budgets. The Constitutional provisions w e r e applied to the f o r m e r and not to
the l a t t e r , t h i s being the only difference between the two budgets, a s i d e f r o m
t h e i r s i z e . The p r a c t i c e was e s t a b l i s h e d i n B a t i s t a ' s only constitutional p r e s i dency (1940-44) and continued during the p r e s i d e n c i e s of G r a u (1944-48) and
P r i o (1948- 52), during the Batista Dictator s h i p (1952- 58), and during C a s t r o ' s
r e g i m e i n 1959, to s o m e d e g r e e .
Even under the double-budget s y s t e m the s u m s allocated to education
w e r e r e l a t i v e l y high. The end r e s u l t , h o w e v e r , f e l l s h o r t of the expectations
of those who wrote the Constitution. What actually happened was the c r e a t i o n
of educational s i n e c u r e s , a development m o r e pleasing to s o m e t e a c h e r s and
p r o f e s s o r s than to the budgeteers and the students of Cuba.
A r t i c l e s 52 and 53 of the Constitution of 1940 c a u s e d r e l a t i v e l y m i n o r
bewilderment a s c o m p a r e d to that occasioned by constitutional r e q u i r e m e n t s
r e l a t i n g to the financing of new government s e r v i c e s and by the exclusion
f r o m the budget of expenditures for "developing the national wealth" under
A r t i c l e 255. All i n a l l , one might conclude that the Constitution of 1940 was
calculated to f i l l the m e n t a l hospitals of Cuba with c e r t i f i e d public accountants.
A c o r r e c t i v e of some kind was needed and i n fact the Constitution made
provision f o r one i n authorizing a G e n e r a l Accounting Office ( T r i b u n a l de
- 3
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I P P - 12 - ' 6 0
Cuentas) which was e s t a b l i s h e d i n 1950 under P r e s i d e n t P r i o , a decade a f t e r
the Constitution took effect. C u b a ' s GAO enjoyed r e l a t i v e immunity f r o m pol i t i c a l i n t e r f e r e n c e by P r i o and B a t i s t a and s e e m s to have c u r t a i l e d c o r r u p tion and exposed s o m e f r a u d while e a r n i n g r e s p e c t for i t s efficiency and integr i t y . It d i s a p p e a r e d a s a n effective organization under C a s t r o , though it m a y
be revived again a f t e r h i s Soviet a d v i s e r s e x p e r i e n c e a few of the "complexit i e s " of Cuban public f i n a n c e s , including C a s t r o ' s habit of writing p e r s o n a l
checks to initiate public p r o j e c t s .
The e x t r a b u d g e t a r y accounts and s p e c i a l funds of Cuba, before C a s t r , : ,
exceeded i n many y e a r s the t o t a l budgetary r e c e i p t s . F o r example, a t a x of
0.02 peso was (and i s , I believe) levied on e a c h package o r container brought
into Cuba, the money t h e o r e t i c a l l y going into a c i v i l s e r v i c e r e t i r e m e n t fund;
a t a x of 0.15 to 1.50 p e s o is collected on e a c h invoice b a s e d on i t s valuation,
f o r a customhouse b r o k e r s ' pension fund.
T h e r e w e r e 52 s u c h pension funds probably containing well o v e r 80 m i l lion pesos. Government contributions i n 1952-53 r e p r e s e n t e d 11.8 per cent of
the t o t a l r e c e i p t s of the w o r k e r s ' pension funds; 50.5 p e r cent of Government
employees ' funds, and 53.7 p e r cent of the pension funds of Cuban p r o f e s s i o n a l
m e n and women. The G o v e r n m e n t ' s contribution might be a n outright subsidy,
a t r a n s f e r f r o m another pension fund, a loan, a d i r e c t payment f r o m a collecting agency ( s u c h a s c u s t o m s ) , a payment made by the c o u r t s out of f i n e s , o r a
t r a n s f e r of income f r o m d i r e c t t a x e s (e.g., 2 p e r cent on b a r b e r supplies, .5
p e r cent on p h a r m a c e u t i c a l s , and s o f o r t h ) .
Monies accumulated i n the v a r i o u s pension funds, s o m e enjoying p r e f e r e n t i a l support f r o m the Government, w e r e i n v e s t e d , a t o t a l of around 20
m i l l i o n p e s o s being a n authoritative e s t i m a t e of the amount available p e r y e a r
2
i n the 1950's.
The pension funds of the e l e c t r i c a l w o r k e r s , the dental p r o f e s s i o n , and
hotel and r e s t a u r a n t employees w e r e invested f a i r l y heavily i n r e a l e s t a t e ; the
l a s t - n a m e d group financed the Havana Hilton (now Havana L i b r e ) Hotel. Other
funds w e r e invested in Government bonds, usually in those i s s u e d i n 1954 and
1955 (100 million p e s o s each i s s u e ) to pay f o r public w o r k s ( s u c h a s t h e Havana
h a r b o r tunnel) under a n Economic and Social Development P l a n involving the
expenditure of 350 m i l l i o n p e s o s between 1954 and 1958.
C o n t r a c t o r s on p r o j e c t s under t h i s plan w e r e r e q u i r e d to accept p a r t
payment, usually 75 p e r c e n t , i n bonds which they sold a t a discount a f t e r taking
c a r e of the kickbacks to the B a t i s t a r e g i m e . In t h a t way m a n y s p e c i a l bonds
found t h e i r way into t r u s t and pension funds influenced by Government officials.
2
International Bank f o r Reconstruction and Development, Report on Cuba,
page 496. A l a r g e number of p e r s o n s had a v e s t e d i n t e r e s t i n retaining the
confused situation o v e r pension funds and the unequal donations of the Government to t h e m .
T a b l e N o . ]-Cuban Budgetary Revenues and Expenditures,
1940-48 and 1 9 4 9 4 6 "
[1n thousands of pesos]
a
I
Revenues
Sxpenditures 1
Surplus
or deficit
Calendar
1940- - . . . - - - - - - - - - - - - 1941-----._.--.-.----1942---.-------.--.--1943----......-------.
1944..-.-----------..1945---.-....-.-.-_--.
1946--...------.-.--.1947---...---------..1948
Fiscal
1949-50.-..-----..---l95&5l -...----------1951-52 .------....---1952-53---..-.-------1953-54 .--------...--1954-55 ?-------------1955-56 2 - . - - - - - - - - - - -
Total of ordinary and cxtraordinary budgetary expenditures.
Budgetary estimates of receipts and authorization of ex endirures.
A ..-r t d deficit for 1954-55 fiscal rear estimated at 26 m&on pesos.
Sources: 1940-48, International Bank for Reconstruction and Development Report on Cuba, page 664; 1949-54, Comisi6n sobre Estimadoa y
~ m 6 i m i e n t o sFiscales, Estadlstreas Fiscales, and 1954-56, Ministerio de
Hac~enda,Havana.
I
2
a
T a b l e N o . 2-Cuban Budgetary Expenditures, by Budgetary
C l a s s i f i c a t i o n s , by Functions, and b y T y p e s , 1953-54*
1
Expenditures
1
Millions of pesos
Percent of total
By budgetad classification
Public debt------.-.-----.----Lerrislature- - - - - - - - - - - - - - - - - - - Presidency---__--_-----.-.----Consultative Council..-..-..-.
State, Ministry of-- - - - - - - - - - - - Justice. Ministry of ..-.---------
-
Total-
- - - - -- - - --- -- - --- -
'304.1
1
100.0
By function
General government- - - - -------National defense-. - - - ---------Education and culture-- - - - - - - - Social welfare
Roads and transport - - - - - - - - - - - Becurit and justice
~ublic~ealth-_---~I:I::IIII:II
Posta and telegraphs - - - - - - - - - - - Public-debt service-------------Agriculture and resources - - - - - - - Electoral agencies ------.--...-.
Industrial and commercial development - - - - - - - - - - - - - - - - - Housing and urban services - - - - -
-
i
I
* T a b l e s token from Investment in Cuba,
U . 5. Department of Commerce, July 1956.
-
73.0
55.0
52.2
38.5
25.3
20.1
14.7
11.4
7.6
2.8
2.3
.G
.6
24.0
18.1
17.2
12.7
8.3
6.6
4.8
3.7
2.5
.9
.8
.2
.2
Personnel paymenta .------.---194.7
Purchase of materials, supplies,
32.2
and services --.----.--------Comtruction and repairs -------19.9
State ensiom -------.--------15.9
Speciay and emergency grants- - - 12.0
Subeidies- - -.
-- -- - -- - -- --ll.G
Advances and loans to retirement
7.8
fun&----------------------Interest on public debt --------.. 3 . 9
Retirement of public debt- -----3.7
Purchase of real estate---------2.4
- -- -
Total-
-
-- - - - -- - - -- -------
304.1
Thie iu only a small part of the expense of the General Accounting Office.
Total includes 1.1 million pesoa in adjustments.
Expensw in connection with 1953 Census of Population. This is a nonrecurring item.
Sources: Expenditures by budgetary classification. Miniaterio de Hacienda, Comisi6n sobre Estimadoa y Rendimientoa Fiscalea, Havana. 1955;
expenditures by function and by type, Tribunal de Cuentas, Havana.
1
2
E a r l y i n 1955, Cuban banks w e r e r e q u i r e d to purchase Government
bonds if they wanted to qualify for public checking a c c o u n t s , a s a l l the m a j o r
banks did. Between the s p e c i a l funds and the banks, the B a t i s t a r e g i m e m a n aged to m a r k e t f o r c a s h the bonds i t had i s s u e d f o r public p r o j e c t s . This i n
g e n e r a l was the situation when C a s t r o took o v e r .
Statistics a r e subject to v a r i o u s i n t e r p r e t a t i o n s . F o r example, take
the budgeted expenditures of the B a t i s t a d i c t a t o r s h i p during the y e a r C a s t r o
e n t e r e d the Isle of P i n e s P r i s o n a f t e r h i s conviction for a r m e d rebellion in
Santiago de Cuba. The y e a r 1953-54 probably i s typical of the B a t i s t a e r a ; he
had been d i c t a t o r since 1952 and except f o r C a s t r o ' s little episode at the
Moncada B a r r a c k s on July 27, 1953, the nation was a t peace.
After combining o r dinar y and e x t r a o r d i n a r y budget expenditure s we
find B a t i s t a alloting 75.2 million pesos to a budgetary classification called
"education" and 58.1 million to a classification c a l l e d "defense
"Education"
does not include funds f o r the University of Havana which i s given 2.7 million
p e s o s . If we a s s u m e the u n i v e r s i t y i s educating i t s students, the B a t i s t a budget thus gives education 25.7 p e r cent and defense 19.2 p e r cent of the total
expenditures. This i s a proportionate e m p h a s i s on education that few if any
other c o u n t r i e s i n the w o r l d c a n equal.
."
We c a n look a t the s a m e budget by functions. Now we find Batista a l loting 52.2 million pesos to "education and c u l t u r e " and 38.5 million p e s o s to
"social w e l f a r e " o r a t o t a l of 29.9 per cent of a l l expenditures c o m p a r e d to
55 million f o r "national defense" o r 18.1 p e r cent. Another i t e m called " s e c u r i t y and justice" i s down f o r 20.1 million o r 6.6 p e r cent and i f we a s s u m e
half of t h i s i s for " s e c u r i t y " and half for "justice " and that "security," o r the
National Police F o r c e , i s p a r t of "national defense" we will get 21.4 per cent
for defense against 29.9 p e r cent for education, c u l t u r e , and s o c i a l welfare
(the l a t t e r including, no doubt, Government payments into pension funds, l i s t e d
e l s e w h e r e a t 29.5 million p e s o s ) .
Any government spending n e a r l y 30 p e r cent of i t s t o t a l budget f o r
education, c u l t u r e , and s o c i a l welfare and only about 20 per cent for national
defense i s a p r o g r e s s i v e government. In a land r u l e d by such a government
the people should enjoy good public s c h o o l s , fine l i b r a r i e s , adequate s o c i a l
s e c u r i t y , and have no w o r r i e s about m i l i t a r i s m .
Cuba, in f a c t , had d i s g r a c e f u l public s c h o o l s , virtually no public l i b r a r i e s , a m o s t inadequate s o c i a l s e c u r i t y s y s t e m , and many w o r r i e s about m i l i t a r i s m . The s t a t i s t i c s a r e misleading.
C a s t r o Is budgets a r e not available for c o m p a r i s o n but I doubt t h a t
national defense i n h i s Cuba r e c e i v e s a s little a s 20 per cent of a l l h i s expend i t u r e s . And I wonder w h e r e , budgetarily speaking, he would put the millions
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I P P - 12- '60
spent by the National Institute f o r A g r a r i a n R e f o r m [INRA] for f e r t i l i z e r s ,
t r a c t o r s , housing, b a r n s , h o g s , f e e d , chickens and chicken coops, s t o r e s , w a r e h o u s e s , t r u c k s , j e e p s , station wagons, r i c e paddies, tomato plantings, e x p e n s e s
of delegations s e n t a b r o a d , e n t e r t a i n m e n t of delegations f r o m a b r o a d , and s a l a r i e s of the a g e n c y ' s personnel.
B a t i s t a l i s t e d 64 p e r cent of a l l h i s expenditures a s "personnel paym e n t s , " and 10.6 p e r cent a s payment f o r m a t e r i a l s , s u p p l i e s , and s e r v i c e s .
T h e s e i t e m s accounted f o r t h r e e - f o u r t h s of the whole budget. The other fourth
went to construction and r e p a i r s , s t a t e pensions, s p e c i a l and e m e r g e n c y g r a n t s
(12 m i l l i o n pesos o r 3.9 per c e n t ) , s u b s i d i e s (11.6 million p e s o s ) , advances
and loans to r e t i r e m e n t funds, i n t e r e s t on the public debt, r e t i r e m e n t of the
public debt, and the p u r c h a s e of r e a l e s t a t e ( a n activity stopped by C a s t r o - he just took the r e a l e s t a t e ) .
B a t i s t a ' s budgets a v e r aged 300 million pesos annually during h i s dic tator s h i p (1952-58) with deficits running around 30 million p e s o s a y e a r . His
m a j o r public works p r o j e c t s w e r e not included i n the budgets but w e r e financed
with s p e c i a l bond i s s u e s . He left for C a s t r o a t l e a s t 550 million p e s o s i n dom e s t i c bonded debt a t four per cent i n t e r e s t o r m o r e . And about all B a t i s t a
did leave was debt. He and h i s gang cleaned out the T r e a s u r y ; the only funds
untouched w e r e on deposit i n New York, o r otherwise not i m m e d i a t e l y a v a i l able to the fugitives. C u b a ' s gold and foreign c u r r e n c y r e s e r v e s amounted to
535 million pesos i n 1951, just before B a t i s t a s e i z e d the government, and
521.4 million pesos i n 1955, but i n 1959, when C a s t r o took o v e r , they w e r e
v a r i o u s l y r e p o r t e d to be between 75 million and 50 million.
Still B a t i s t a ' s deficit financing was r a t h e r m o d e r a t e . The t o t a l m e a n s
of payment i n C u b a - - c u r r e n c y in the hands of the people and demand deposits
i n b a n k s - - r o s e f r o m around 900 million p e s o s when B a t i s t a took o v e r to n e a r l y
one billion toward the end of h i s r e g i m e . He s t a r t e d with a money stock (bank
n o t e s , i . e . , c u r r e n c y p e s o s ) of about 380 million pesos and left about 450 m i l lion.3 P r i c e s w e r e r i s i n g during t h i s p e r i o d but not precipitately. Cuba had
no r e l i a b l e p r i c e indexes but wholesale p r i c e s on the i s l a n d have p a r a l l e l e d
those i n the United S t a t e s , except i n the two World War p e r i o d s , and except
during B a t i s t a t s l a s t r e i g n when t h e r e was a significant decline i n Cuban wholes a l e and r e t a i l p r i c e s between 1952-56.
3
I have r e l i e d on Henry Christopher Wallich's Monetary P r o b l e m s of an
Export Economy, H a r v a r d University P r e s s , C a m b r i d g e , M a s s . , 1950, for
h i s t o r i c a l d a t a and on Stacv M a v ' s Economic Development i n Cuba, IBEC
Technical S e r v i c e s Corp., New York, 1948. Other s o u r c e s a r e P.S. Stephens,
Over s e a s Economic Surveys (the section on Cuba), Her M a j e s t y ' s Stationery
Office, London, 1954; S e g u r o s , Banca, y Bolsa, Havana, May 1956; R e v i s t a
d e l Banco Nacional de Cuba; U. S. Dept. of C o m m e r c e , Investment i n Cuba,
July 1956; and the R e p o r t on Cuba (1951) of the T r u s l o w M i s s i o n o f t h e I n t e r national Bank f o r Reconstruction and Development.
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IPP- 1 2 - '60
The e s t i m a t e d deficit of B a t i s t a ' s l a s t y e a r , 1958, was 105.9 million
p e s o s . The e x t r a o r d i n a r y s i z e of t h i s o p e r a t i n g deficit was b l a m e d on m i l i t a r y
expenditures i n fighting C a s t r o . Also i n f i s c a l 1958, for the period J u l y 1957
through June 1958, public w o r k s expenditures a p p e a r e d f o r the fir s t t i m e on
the operating budget, f o r a t o t a l of 48.8 million p e s o s f o r the f i r s t nine months
(with about 20 million m o r e f o r the l a s t t h r e e months). Public works supported with s p e c i a l funds w e r e not included, however. T h e s e a r e e s t i m a t e d to
have c o s t 3 1.3 million i n 1958.
Among the f i r s t f a c t s to be noted about F i d e l i s t a public and private
finances i s the abrupt t e r m i n a t i o n of B a t i s t a ' s device (bond i s s u e s ) for paying
f o r the "development of national wealth," i.e., f o r l a r g e - s c a l e public works
p r o j e c t s . C a s t r o could not have sold Government bonds even if he had wanted
to. T h e r e was no m a r k e t for t h e m a f t e r 1959. Yet C a s t r o e m b a r k e d i m m e d i ately on a gigantic p r o g r a m of r o a d building, public housing, postrebellion r e construction of b r i d g e s , new beach and hotel development, international p r o motional and a d v e r t i s i n g c a m p a i g n s , schools, c a m p s f o r underprivileged
c h i l d r e n , "university c i t i e s ," r u r a l housing on intervened ( s e i z e d ) f a r m s and
r a n c h e s , new f a c t o r i e s , a network of people's s t o r e s , extensive swamp d r a i n age and new r i c e and vegetable cultivation, new "hog c i t i e s , " national p a r k s ,
swimming pools, s l u m c l e a r a n c e , and m a n y other p r o j e c t s , including a laudable sanitation p r o g r a m .
-
C a s t r o a l s o gradually put h i s Government into a l l kinds of b u s i n e s s e s ,
m a n y r e q u i r i n g l a r g e s u b s i d i e s to m e e t p a y r o l l s . And he took on the w o r k e r s
i n e n t e r p r i s e s t h r e a t e n e d with bankruptcy o r c l o s e d by t h e i r o w n e r s for a
v a r i e t y of r e a s o n s r e l a t e d to h i s revolutionary r e v i s i o n s of t a x and r e n t laws.
Many of t h e s e w o r k e r s had to be employed i n m a d e - w o r k paid f o r by the Gove r n m e n t . L a r g e s u m s had to be given to INRA c o - o p e r a t i v e s a s "investments"
though m u c h of the money was used f o r c u r r e n t e x p e n s e s , including swollen
payr 011s.
C a s t r o a l s o maintained s u b s t a n t i a l m i l i t a r y and police f o r c e s and s e t
out to o r g a n i z e a huge m i l i t i a .
The c o s t s of the C a s t r o p r o g r a m s obviously a r e substantial but no outs i d e r s , and p e r h a p s few i n s i d e r s , have a c c e s s to the f i g u r e s that would m a k e
a n a c c u r a t e a n a l y s i s possible.
Although t h e r e w e r e t a x innovations under C a s t r o , he i n the m a i n had
to t u r n to the s a m e s o u r c e s of revenue a s did B a t i s t a , P r i o , and Grau. C a s t r o
i n 1959-60 i m p o s e d a four p e r cent "voluntary" t a x on a l l p a y r o l l s , a n inc r e a s e d t a x on alcoholic liquor s (but consumption f e l l s h a r p l y ) ; m u c h higher
I P P - 12- '60
- 8 -
d i r e c t t a x e s , including t a x e s on income4 (but t a x s o u r c e s declined r a p i d l y and
t a x p a y e r s i n higher b r a c k e t s d i s a p p e a r e d o r t h e i r i n c o m e s d r i e d up). He
a l s o s e t high t a x e s on c e r t a i n e x p o r t s , mainly m i n e r a l s , but they yielded l i t t l e
r e v e n u e , s i n c e mining operations gradually c e a s e d .
About half of C u b a ' s t a x yield had come f r o m i m p o r t and consumption
t a x e s . T h e s e s o u r c e s probably continued to produce the s a m e proportion of
the yield for C a s t r o , although revenue f r o m i m p o r t t a x e s dropped b e c a u s e of
r e s t r i c t i o n s on t r a d e and the limitations on peso-dollar exchange which eventu5
ally d r i e d up i m p o r t s f r o m the United S t a t e s .
T h e r e a r e no authoritative s t a t i s t i c s on the a s s e t s a c q u i r e d by the
C a s t r o r e g i m e i n 1959-60 through the e f f o r t s of the Department f o r the R e c o v e r y of M i s a p p r o p r i a t e d Wealth, nor on the funds taken out of Cuba by
B a t i s t a and h i s gang. Rufo Lopez F r e s q u e t , who for a l l of 1959 and p a r t of
1960 w a s C a s t r o ' s t r e a s u r y m i n i s t e r , told m e he believed B a t i s t a "got away
with about 350 million pesos." Another s o u r c e m a d e a n e s t i m a t e of $163.4
million stolen i n d o l l a r s alonee6 But whatever the B a t i s t a gang stole and took
out of Cuba, i t was gone and of no u s e to C a s t r o . The a s s e t s available to h i m
by s e i z u r e w e r e the contents of safety deposit boxes, working s u g a r m i l l s ,
r i c e plantations and m i l l s , and cattle r a n c h e s and s o m e income -producing
c h a t t e l s and u r b a n r e a l t y . I was given a n e s t i m a t e by a Cuban cabinet m i n i s t e r (now out of the cabinet but s t i l l i n Cuba) of "about 200 million p e s o s worth
r e c o v e r e d i n useful form."
Lf by "useful f o r m " the m i n i s t e r m e a n t that the Government a c q u i r e d
capital a s s e t s that would immediately produce income, h i s f i g u r e probably
was inflated. S e v e r a l p e r s o n a l e x p e r i e n c e s c o r r o b o r a t e t h i s e s t i m a t e .
While I was pursuing m y investigations of the National Institute for the
T o u r i s t Industry [INIT], that organization's delegate i n V a r a d e r o , M r . A b r a h a m
C a s t r o i m p o s e d a t a x of 40 per cent on the profits of a l l b u s i n e s s e n t e r p r i s e s i n Cuba with a s u r t a x of 10 per cent on profits over 1 million p e s o s .
T h e r e w e r e r e b a t e s of 25 per cent to a g r i c u l t u r a l e n t e r p r i s e s and to e n t e r p r i s e s outside Havana but not to s u g a r e n t e r p r i s e s . The p e r s o n a l income t a x
began a t 3 per cent on i n c o m e s up to 4 thousand p e s o s and r o s e to 60 p e r cent
on i n c o m e s over 500 thousand. Special s a l e s t a x e s of 8 p e r cent and 10 p e r
cent w e r e levied on alcoholic d r i n k s , including b e e r , and on a v a r i e t y of household goods, s o m e being taxed 15, 20, and 30 p e r cent (the l a s t applied to automobiles too).
F u e l s h i p m e n t s , f o r example, f r o m the United States (not petroleum) f i nally stopped until c a s h payments w e r e m a d e . One shipload i n July was brought
back to the United States f r o m Havana h a r b o r when the d o l l a r s w e r e not f o r t h coming. The e x p o r t e r s a i d he was owed "many thousands of d o l l a r s " and
w a s n ' t p r e p a r e d to r i s k m o r e .
Huberman and Sweezy, in the July-August i s s u e of the Monthly Review,
a left-wing periodical published i n New York.
Macigues y Macigues, suggested I might like to take a tour by yacht of
V a r a d e r o peninsula. I and the sefiorita guide a s s i g n e d to m e soon found o u r s e l v e s leaving the confiscated yacht club i n a confiscated yacht, the p r o p e r t y
in B a t i s t a ' s t i m e of a North A m e r i c a n b u s i n e s s m a n . We had b a r e l y made the
open and choppy s e a on the f i r s t leg of our tour when both of the gasoline m o t o r s gave up. As we w e r e hauled back by the Cuban Coast Guard, who had
responded to a r a d i o c a l l , the g i r l guide i n f o r m e d m e that she had yet to c o m plete a t r i p on a n INIT yacht. They a l l broke down.
In another place a t another t i m e I m e t a Cuban f a m i l y whose home was
about to be intervened a s m i s a p p r o p r i a t e d wealth. The neighbors for blocks
around had h e a r d of the impending s e i z u r e and with the help of the homeowner
they w e r e stripping the place of e v e r y useful and movable thing. INIT l a t e r
got that home but I wonder how useful i t could have been. It would r e q u i r e a
sizeable investment to m a k e i t livable again.
At s t i l l another place and another t i m e I was offered a r i d e i n a f a r m
t r u c k r e c e n t l y a c q u i r e d by INRA a s a piece of m i s a p p r o p r i a t e d wealth (along
with the f a r m and f a r m h o u s e ) . We limped along f o r s e v e r a l m i l e s until the
t r u c k gave up and w a s d e s e r t e d by the d r i v e r . "Can't get s p a r e p a r t s , " he
explained. Was the t r u c k a p a r t of the 200 million pesos "in useful f o r m " ?
But i n any c a s e , C a s t r o did a c q u i r e s o m e liquid a s s e t s and they could
have been u s e d and l a r g e l y consumed during the y e a r s 1959 and 1960. Whether
200 thousand o r 200 million pesos worth ( m y g u e s s would be about 40 million)
they would lighten h i s financial burden somewhat.
Additionally, C a s t r o ' s financial burden was m a d e lighter by the abs e n c e of the payoffs, kickbacks, and inflated p r i c e s of the B a t i s t a e r a . A
Cuban Government peso would buy m o r e because l e s s was stolen. I s a y " l e s s "
was stolen because i t i s likely that s o m e of the building c o n t r a c t s signed by
the National Institute of Savings and Housing [INAV] w e r e inflated--to help
compensate f o r INAV's notoriously slow payments and to help cover i n t e r e s t
on the bank loans obtained by the c o n t r a c t o r , if f o r no m o r e s i n i s t e r r e a s o n .
Of the approximately 550 million p e s o s r e c e i v e d and spent annually
by B a t i s t a during the l a s t y e a r s of h i s r e g i m e , a n e s t i m a t e d 20 to 25 p e r
cent went into padded p a y r o l l s and g r a f t .7 That would leave not m o r e than
412.5 million a y e a r for what might be called "legitimate government activit i e s ," including the m a j o r public works that w e r e financed with bonds.
Add the a c t u a l c o s t of t h e s e public w o r k s and we r e a c h 500 million
pesos a s a n a v e r a g e annual c o s t - o f - g o v e r n m e n t - b e f o r e - C a s t r o , d i s r e g a r d i n g
g r a f t and padded p a y r o l l s .
'
E s t i m a t e m a d e by a n experienced banker who financed m a n y p r o j e c t s i n
Batista's time.
IPP- 12-'60
An e x p e r t a n a l y s i s of C a s t r o ' s a c t i v i t i e s and published s t a t i s t i c s i n
1959 c a m e up with the astounding t o t a l of 800 million p e s o s spent and owed
for c u r r e n t t r a n s a c t i o n s . The analyst admitted he couldn't be s u r e the t o t a l
w a s n ' t g r e a t e r ; he was being c o n s e r v a t i v e , he said. F o r i n s t a n c e , how could
he d i s c o v e r how m u c h i t c o s t to finance P r e n s a Latina, C a s t r o ' s far-flung
p r e s s agency which v i r t u a l l y gives away i t s s e r v i c e s to s u b s c r i b e r s i n Latin
A m e r i c a ? How could he discover what i t c o s t to send Cuban delegations to
a l l p a r t s of the w o r l d , mainly those under Communist c o n t r o l , o r to e n t e r tain visiting delegations, o r to stage conventions f o r t o u r i s t a g e n t s , to p r o mote t r i p s for n e w s m e n , to o p e r a t e n e w s p a p e r s and r a d i o - T V s t a t i o n s and
n e t w o r k s ? "I wouldn't be s u r p r i s e d , " he added, "if C a s t r o spent f o r p r o p a ganda and promotion m o r e than B a t i s t a stole . l t 8
It i s a s s u m e d , t h e r e f o r e , that i n h i s f i r s t year of operating the Gove r n m e n t of Cuba, C a s t r o showed a deficit of a t l e a s t 300 million p e s o s and
that for the second y e a r , one of n e a r - t o t a l nationalization of the m a j o r m e a n s
of production, the operating deficit will be considerably l a r g e r .
And how did C a s t r o finance the d e f i c i t s ? He "borrowed" l a r g e s u m s
f r o m United States i n t e r e s t s by refusing to honor b i l l s f o r goods and s e r v i c e s .
As of August 1960 the total of t h e s e f o r c e d loans was about $180 million.
That l e a v e s , if o u r e s t i m a t e s and a s s u m p t i o n s a r e sound, a running deficit
for 1959 of 120 m i l l i o n pesos. But C a s t r o a l s o "borrowed" internally; he
didn't pay h i s Cuban c r e d i t o r s promptly o r i n full during 1959. No e s t i m a t e
could be found f o r t h e s e debts. Apparently the balance of the deficit, whate v e r the amount, was c o v e r e d by printing c u r r e n c y , and to block a runaway
inflation, the Cuban Government controlled m a n y p r i c e s
.
In 1960, e x t e r n a l "loans" w e r e h a r d to get. F o r e x a m p l e , the t h r e e
foreign-owned r e f i n e r i e s i n Cuba i n m i d - 1960 stopped bringing i n p e t r o l e u m
on c r e d i t (they w e r e owed s o m e $60 million at the t i m e ) and fuel and wheat
shipments had to be m e t with c a s h on the b a r r e l h e a d . Internal "loans" a l s o
b e c a m e s c a r c e : c o n t r a c t o r s w e r e r e l u c t a n t to take on new d e a l s and m a n y
p r o j e c t s w e r e left uncompleted. I s a w s c o r e s of housing p r o j e c t dwellings
without. g l a s s i n the windows, without f i x t u r e s i n kitchen and b a t h r o o m , without lighting f i x t u r e s . So i n 1960, m o r e c u r r e n c y was p r i n t e d and a number
of the m o r e expensive p r o j e c t s w e r e halted t e m p o r a r i l y o r slowed down, f o r
l a c k of m a t e r i a l s , l a c k of c a s h , o r both.
'
This e s t i m a t e and comment c a m e f r o m a B r i t i s h c i t i z e n whose t a s k i t i s
to a s s e m b l e and a s s e s s all the available economic, financial d a t a about Cuba.
His name and title cannot be given a s the information was told m e i n confidence with the understanding that only the nationality of the a n a l y s t , who
s e e m s a t r u s t w o r t h y and honorable p e r s o n with wide e x p e r i e n c e i n t o t a l i t a r i a n
finance, would be mentioned.
N e v e r t h e l e s s , p r i c e s w e r e being held i n line; the dollar -gold position
was maintained (until the United States s u g a r quota was cut) and e s s e n t i a l
i m p o r t s a r r i v e d and w e r e paid f o r . T h e r e w e r e delays but no c r u c i a l
shortages.
In s u m m a r y , i t would s e e m that e a c h of the two b a n k e r s quoted a t the
beginning of t h i s r e p o r t was right i n h i s own way but that neither comment
h a s meaning i n a Cuba that h a s a l l but completely s e v e r e d i t s economic t i e s
with the West and s e e m s unmindful of the economic implications of c l o s e a s sociation with the Communist bloc.