A frequently overlooked, yet critical, aspect to analyze the prospects for regime survival after Fidel Castro’s final demise has to do with the extra-official global business and financial conglomerate under his control. Former regime insiders available for comment ignore what plans are in order, but all agree that this matter is ever present in the minds of Cuba’s power elite. 

            Fidel Castro has been in power since January 1, 1959 and had been the longest serving head of state for some time before he delegated his functions to Raúl and six top officials, to recover from what was described as surgery to correct intestinal bleeding, on July 31, 2006. Currently, Fidel still has the titles of President, Head of Government, First Secretary of the Communist Party, and Commander in Chief of the Armed Forces. During his entire tenure his brother and designated successor, Raúl, has been head of Cuba’s Armed Forces and his principal ally.

For almost five decades the Cuban economy has been under strict socialist central planning. The state is sole employer and owner of all resources; ordinary citizens are banned from engaging in most independent economic activity. The underground economy is huge, but steep fines or prison and confiscation of goods are routine.

            In 1993 the government implemented some reforms to alleviate severe economic crisis after the end of massive Soviet support with the fall of Communism in the former USSR. The dollar was legalized, limited self-employment was allowed and joint ventures with foreign capital were authorized in sectors such as tourism, telecommunications, and mining. Some foreign investment, the growth of foreign tourism and a large influx of remittances from abroad generated a relative economic recovery. That, together with huge subsidies from Chavez’s Venezuela in recent years has prompted a rolling back of many of the reforms.

In Communist Cuba, only designated top government officials may accumulate wealth. But, even those within the Castro brothers’ tightest circle are subject to constant monitoring by the intelligence apparatus. Despite their privileges, they must stay within certain bounds. In essence, for almost five decades, Fidel has reigned supreme over one of the world’s most closed economies. His brother is his designated heir.

            The “Comandante's reserves" are an integrated system of overseas bank accounts and enterprises together with firms in Cuba and an on-island reserve of cars, buses, trucks, tractors, repair parts, gasoline, medicine, medical equipment, food, clothing, construction materials, appliances, and household and luxury goods. Historically, only Fidel has been able to order dispensing of this domestic reserve -for his personal use or as gifts to the ruling elite, diplomats in Cuba, and VIP foreign visitors.

The vast wealth under Fidel’s command may well exceed our wildest guess.  Forbes just took into account a small fraction of enterprises within a gigantic international network of enterprises and financial institutions that, according to numerous high-ranking defectors, are under the Castro brothers’ control. Huge inventories of assets and real estate holdings all over the world are also part of the holdings. 

Fidel’s accounts are located in banks in Switzerland, Grand Cayman, London, Lichtenstein, and Panama. They are replenished primarily in hard currency with: 1.) assigned percentages from tourism, remittances, and revenues of businesses inside and outside Cuba, 2.) earnings of Cubans employed overseas under the control of the Cuban state, 3.) the sale of Cuban state assets to foreigners, 4.) the sale of Cuban art, artifacts, jewelry, antiques, and other valuables confiscated by the state, and 5.) revenues from drug trafficking and criminal activities perpetrated by subversive or terrorist groups.   Raúl and his late wife are also reported to have accounts in Swiss banks since the early 1960s.

The “sociedad anónima” (S.A.) is Cuba’s unique version of a capitalist enterprise. These entities mirror the business activities of private firms in free market societies. But, the companies formed in or by Cuba are not subject to financial disclosure, their real owners are unknown, and their managers are individuals designated by the government. They enjoy rare advantages – the exploitation and use of the resources, both capital and human, of an entire nation as well as total freedom from oversight and taxation.

            Hundreds of such firms exist inside and outside Cuba and most are involved in joint ventures or other business arrangements with foreign interests. Entities within the business conglomerate are also said to launder drug monies.  The secret foreign operations are typically represented as belonging to Cuban nationals or foreign lawyers or other intermediaries receiving payment for these services. The “owners” are typically given juicy compensation packages and a lavish lifestyle as long as Castro is guaranteed a designated share and leakage remains within certain bounds. Some of these companies operating overseas are known to use “imported” Cuban workers paid minimal salaries and kept secluded from the societies in which they work, under the strict vigilance of Cuban security agents preventing defections, their families hostage on the island.

            Spain hosts a large number of these firms. Some are said to be managed or to belong, in whole or in part, to a growing number of sons and daughters of high-ranking members of Cuba’s ruling elite, including two of Raúl’s daughters and a son of Ché Guevara.  

Many of the foreign enterprises defectors have reported on have been listed by the U.S. Treasury Department as blocked entities of the Cuban government due to the economic embargo.[1] Aside from Spain, many are located in Panama, but others are scattered all over Latin American and Europe, in Grand Cayman, and as far as Japan, India, South Africa, and Malta. 

A high-ranking diplomat reports that Cuba uses the overseas companies as collateral for hard currency loans obtained by state entities from European financial institutions. This explains the otherwise perplexing huge short-term loans from foreign creditors, on the order of around US$1.6 billion a year in short term loans, mostly from Europe. In default on its external debt since 1986 and with its official economy in a wretched state, Cuba is technically not creditworthy. One wonders what risk related issues would affect these collaterals if the regime collapses unexpectedly.

Table I.   Private Financing to Cuba: As of March 2007       Lenders (by country) U.S. dollars France 440 million Spain 326 million Basque Country (Spain) [3] 255 million Germany 216 million Netherlands 182 million Italy 79 million Japan 79 million United Kingdom 22 million Sweden 14 million Switzerland 9 million Belgium 6 million Portugal 4 million Total European Financing 1.632 billion Financing of Undisclosed Origin 728 million Total Foreign Private Financing 2.360 billion * All debts are rounded to the nearest million. This data does not include bilateral state-backed loans or trade credits from political allies such as Venezuela and China. Source: “Who Bankrolls the Castro Regime?, Cuba Facts, Issue 36 - November 2007,University of Miami. Derived from: Cf. Bank for International Settlements (BIS), Consolidated Banking Statistics, BIS Quarterly Review, September 2007.

 

Table II. Companies located in Europe run by Cuba’s Ministry of Interior under the holding company CIMEX   Partial List Acemex Holding (Lietchenstein) AngloCaribbean Shipping Co.(London) Cariberia (Spain) Cotei (Milan, Italy) Coprova (Paris, France) Crymsa (Madrid, Spain) Dalvest (Genoa, Switzerland) Dicesa, S.A. (Madrid, Spain) *   Partial list provided by former Cuban intelligence officer. All except those marked * are also listed by the U.S. Treasury Department as blocked entities or "Specially Designated Nationals."(See note 2.)

   

[2] Since this time, UBS, Credit Suisse and other banks have suspended their financial transactions with Cuban entities. 

            Properties in Cuba for the exclusive use of Fidel and his family include several yachts and up to three dozen homes and secluded ranches, hunting grounds, specialized fishing and cattle reserves, and even a shrimp breeding facility. Many enjoy amenities such as pools, tennis courts, runways, marinas, even golf courses and are used only occasionally to entertain guests or for short rest periods during Fidel’s travels throughout the island. Some have sophisticated communications’ command facilities and electric generation and water plants. Luxurious underground bunkers are outfitted with the latest technology.

            Properties all over the world are under disguised ownership and include a castle in Austria and large ranches in Spain, Mexico, and India. Real estate holdings are reported in France, Sweden, Switzerland, Finland, Italy, Bahamas, Tanzania, and Egypt. Properties in Ecuador are said to be under the control of Raúl and his late wife’s family, the Espíns. Different mechanisms are used to conceal their true ownership, but some may be officially owned by Cuban government entities. Because the sources for this information have had access to the data at a given time period, it is impossible to ascertain which properties are presently held by Castro.

What does the Comandante do with his reserves?

While ruling over one of the poorest countries in the world, Fidel has been able to  execute what not even the political leaders of the wealthiest countries or the CEO’s of the richest companies are able to do. On his sole command, he has been able to give away houses, cars, and luxury goods to the ruling elite, donate hospitals, manufacturing plants, air bases, and humanitarian assistance to countries, offer medical treatment -all expenses paid- to people from all over the world, and train hundreds of foreigners as doctors for free in special medical schools. Most of this has taken place outside the realm of national accounts, regardless of budgetary or fiscal considerations, beyond the constraints of any laws, and free of audits or accountability. 

Fidel is reported to use his money: 1.) to buy influence, 2.) to sway international public opinion to further political goals, 3.) finance international terrorism, subversion, and liberation movements, 4.) for his personal security and travels, and 5) for his personal use and that of his family.

            The Castro family’s lifestyle is unrivaled in a country like Cuba, but top members of the nomenklatura also enjoy many privileges unavailable to the population. Rampant excess reported in the seventies and eighties, however, has been greatly curtailed. Members of the government elite, including the Castro family, have strict orders to avoid appearing ostentatious and to stay out of the limelight. But, there is no limit to the resources available for Fidel’s enjoyment and pet projects. The perks have included a cognac-making facility, a cigar rolling facility where the best tobacco rollers in the country produce Fidel’s own brand “Laguito,” a climate controlled warehouse for his cache of cigars, and a warehouse stashed with all sorts of appliances inaccessible to the population.

Keeping things under control

The business conglomerates are managed within the Castro family and by their most trusted people and high-ranking military and intelligence officers. CIMEX officers are recruited from the Armed Forces or the Ministry of the Interior and the Communist Youth Union and carefully vetted.

A gigantic and highly sophisticated internal repressive apparatus, fashioned after the KGB and trained by the former Stasi, keeps things in check.  It monitors and controls all citizens, foreign visitors, businesspeople, and even the highest members of the ruling elite. Department VI of the Armed Forces, for instance, monitors all GAESA operations, including policing, spying, taping and recording all personnel activities. Cubans posing as business owners and managers abroad are kept under close surveillance by intelligence officers deployed as diplomats. 

Closing the circle, to guarantee Fidel’s personal command over all decisions in the country, is the “Coordination and Support Staff.” This parallel structure is composed of six carefully chosen individuals charged with executing Fidel’s wishes and directives. It skirts the institutional structures of government and overrides all other decisions. According to a former intelligence officer, the group is the direct thread between the different economic sectors and the Comandante.”

By all accounts, Fidel alone has had the last word on all decisions affecting the political and economic destiny of the entire Cuban nation, at least until his illness and retreat from power last year. He has commanded vast resources inside and outside of Cuba. It is unclear to what extent that has changed, but it appears that his brother Raúl is well positioned to fully take over once Fidel is completely out of the picture. This will likely include Fidel’s economic empire, at least to a significant degree. After all, Raúl has been the only other Cuban allowed to engage in significant capitalistic forays and has run the GAESA network as his own fiefdom.

On the other hand, Fidel has a wife and six sons in Cuba who might have other plans, at least for select slices of the pie. Plus, intermediaries posing as owners of Fidel’s companies overseas are particularly well positioned to exploit opportunities that might arise in a moment of instability. If a power vacuum leaves the intelligence apparatus paralyzed, as in the former GDR (Communist East Germany), the conglomerate would become decentralized and vulnerable.

            The vast and hidden wealth amassed by Fidel Castro has been one of his most effective tools, but it could be the Achilles heel of a succession strategy. It was not that long ago that former Rumanian strongman Nicolae Ceausescu was actually brought down precisely on this account. He and his wife Elena were sentenced to death for ruining the country and keeping the population on ration cards while they enjoyed luxuries and had accounts in Swiss banks. The prosecutor at their trial, held at a military base on December 25th 1989, cited articles of the Penal Code to convict them of economic crimes. Fidel, who is known to have followed the fall of the Iron Curtain very closely, may have sensed the danger. This might help explain why he went into a prolonged and frenzied public tantrum when Forbes magazine listed him in its May 2006 annual Billionaires’ edition as the seventh richest ruler in the world, with an estimated wealth of US$900 million. 

            For the time being, Raúl has felt compelled to send a clear message to confront the uncertainty following Fidel’s illness and retreat. One of his first official acts after the transfer of power was to pass in of August of 2006 the Decree Law 251, which takes the “war on corruption” one step further by tightening punitive measures for higher ups in state enterprises. So that no one may forget, economic supremacy will remain the exclusive domain of the highest members of the elite. But, it may come back to bite him.  

The regime’s most dependable soldiers have operated Fidel, Inc. very effectively, enjoying select privileges as a result. This has assured their loyalty to the regime and tied their economic wellbeing to survival of “the Revolution.” Yet, it has also exposed them to the ways of the market and wet their appetites for the paybacks of capitalism. In fact, the intricate disguised ownership schemes and financial dealings that lie at the core of the conglomerate could become its greater weakness. In a scenario of debilitating control, a money grab can be expected. 

            How this scenario plays out in a final succession or post-succession environment is, of course, to be seen. But, one thing is clear – understanding Fidel, Inc. is vital to contemplating scenarios of change in Cuba.