Republicans and Democrats in Congress clash over existence of the private sector in Cuba

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A congressional hearing Thursday about Cuba’s emerging private sector exposed the political divide between Republicans and Democrats on Cuba policy, with U.S. Rep. María Elvira Salazar, a Cuban American from Miami, leading the charge against the enterprises, calling them “a government ruse.”

Salazar, a former journalist who currently chairs the House Foreign Affairs Subcommittee on Western Hemisphere Affairs, immediately set the tone for the hearing by denying a request from Texas Democrat Joaquin Castro to allow California Democrat Barbara Lee to join the session.

Salazar called Lee “a friend of Fidel Castro,” adding the congresswoman is “not a friend of the Cuban people that we are trying to liberate… She’s been able to express her admiration for Fidel Castro, but this is not the site to do that.”

Microphones were off when Salazar and Lee had a brief exchange. In a statement later read by Democratic Rep. Greg Stanton of New York, Lee called Salazar’s rejection of her effort to participate in the hearing “outrageous.”

In her opening remarks during the hearing, entitled “The Myth of the New Cuban Entrepreneurs: An Analysis of the Biden Administration’s Cuba Policy,” Salazar said that, according to information she has, the growth of private enterprises in Cuba is a “scheme” by the Cuban government to violate the U.S. embargo and that only the children of Cuban leaders have an easy path to own these businesses.

Mark Green, a Tennessee Republican, argued that “the Cuban military is embedded in every single business, so the concept of a private sector is almost non-existent in the country.”

On the opposite end, California Democrat Sydney Kamlager-Dove called the denial that the Cuban private sector truly exists a “conspiracy theory.”

Biden administration officials who testified in the hearing said that understanding the workings of a private sector in a communist island required “nuance.”

The rapid growth of these enterprises, known in Spanish by the acronym mipymes, is one of the most significant developments on a communist island where owning a private business was forbidden for decades.

Since the government authorized Cubans to own small and medium-sized private businesses in August 2021, almost 10,000 enterprises have arisen around the island despite strict government controls. Some have become major importers of food and other necessities at the time the cash-strapped government struggles to provide for the population.

“In an acute twist of irony, the island’s communist government must now rely on private enterprise to provide food and basic services for its people,” Eric Jacobstein, deputy assistant secretary of state for Western Hemisphere Affairs, said at the hearing.

Years after the existence of private businesses was originally approved by the Communist Party, Cuban leaders finally agreed to authorize them in the midst of a severe economic crisis and unprecedented mass protests. The government has recently moved to increase taxes and other restrictions on the businesses to limit their expansion. Cuban leaders also recently said they want more mixed enterprises between state companies and the private businesses and want to use them as importers of raw materials for local state productions, complicating the question of what is private and what is state-owned.

While some of the private enterprises have been linked to relatives of government officials or to people with close links to the government, there is no evidence all of the 9,652 authorized businesses are tied to the regime, several Cuban entrepreneurs, U.S. diplomats and others who favor supporting the private sector have told the Herald.

“The hearing premise is established on a falsehood,” John Kavulich, the president of the U.S.-Cuba Trade and Economic Council, a Washington-based organization tracking business with Cuba, wrote in the Cubatrade blog ahead of the session. He argued it is “wrong” to define those who have created and manage the private enterprises “as participants in a myth, as dupes of the government … rather than instruments of change.”

The Cuban government, he added, “does not embrace the re-emerging private sector. It’s tolerated. That should not mean the United States Congress should dismiss it. Or worse, work against it. “

To make that point, Kavulich used his own story: a company he set up obtained the first U.S. Department of the Treasury license to invest and provide financing to a private enterprise in Cuba almost two years ago. But the Cuban government has yet to authorize it, signaling they don’t want foreign investment going into expanding the private sector.

The existence of these businesses is also linked to policies implemented under Donald Trump.

During the Trump administration, Florida U.S. Sen. Marco Rubio and U.S. Rep. Mario Díaz-Balart were instrumental in shaping policies designed to deny cash to the Cuban military to encourage “the growth of a Cuban private sector independent of government control,” a 2017 memorandum stated.

The administration penalized military entities handling the family remittances sent by Cubans abroad, one of the primary sources of revenue for the government. That, in turn, moved the remittance business to informal channels. Owners of the mipymes have tapped into that cash to finance their businesses, because many do not have access to foreign credits or bank accounts abroad they can use to pay providers. Embargo regulations ban financial transactions with Cuba.

Florida Republicans have not taken credit for the growth of these businesses in part because the issue is unpopular among many Cuban Americans who firmly believe the mipymes are a ruse used by the government to get cash and that most of these businesses belong to or are under direct government control. Many activists fear that any support to the private sector will directly or indirectly benefit the government and help keep it in power.

The Biden administration drafted regulations to grant access to U.S. banks to private businesses in Cuba, but Díaz-Balart has opposed the effort, and the changes have not yet been enacted. Jacobstein declined to answer questions about the proposed rules during the hearing.

“We believe the organic expansion of the private sector on the island – led by the Cuban people themselves and not by any foreign government – is an opportunity that should not be wasted,” Jacobstein said. “Above all, we must encourage the freedom of Cuban citizens to define their economic future. Failing to engage and support Cuba’s private sector would leave space for Russia and the [People’s Republic of China] to shape the direction of the Cuban economy. We must not allow this to happen.”

Biden’s Cuba policy in support of the private sector is also aimed at stemming the mass migration of Cubans in recent years. U.S. officials are particularly worried about the humanitarian situation on the island, where food, medicines and almost everything else is scarce, and have pointed out the new businesses help alleviate that. However, because they have to operate with dollars in the informal market, the products these businesses sell are expensive for most Cubans, making them unpopular among regular Cubans who do not have access to dollars.

Jacobstein said that the private businesses give some young Cubans reasons to stay on the island despite the challenges.

Enrique Roig, the deputy assistant secretary in the State Department’s Bureau of Democracy, Human Rights and Labor, argued the Biden administration is not solely focused on supporting independent private entrepreneurs but also on improving the human-rights situation on the island. In particular, the administration has pushed for the release of about 1,000 political prisoners, Roig said.

But Democrats voiced disappointment with the Biden administration for not going further.

Representative Castro urged the Biden administration to embrace former President Barack Obama’s engagement policies, including removing Cuba from the list of countries that sponsor terrorism, calling it “a baseless, extremely harmful designation.”

“Our policies of the last 60 years have not resulted in the changes we would like to see; in some cases, they have even emboldened the Cuban government and strengthened their relationship with key adversaries like China and Russia,” Castro said. “The United States can both recognize the threat that the Cuban regime poses to regional and national security while also engaging on key priorities and supporting the Cuban people’s efforts to further their own democratic aspirations.”

“I was hopeful that the Biden administration would reverse Donald Trump’s disastrous policies and set us back on a path towards normalization with Cuba,” he added.

Castro said the U.S. should support entrepreneurial efforts by Cubans on the island, not “stifle” them.

By the end of the hearing, Salazar seemed to have softened her initial stance, telling the State Department officials that Republicans are “on the same page.”

Apparently contradicting her early views, she asked, “How can we help this administration really help those small business owners in Cuba that have no contact or connection with the regime to open up a good store if they want or to own a privately owned business?”

“What can we do together?” she asked.

Shortly after, the hearing ended ahead of schedule as representatives were called away to a vote.