Miami group proposes micro loans and investment program


The Cuba Study Group, whose board includes some of the wealthiest Cuban American businesspeople, is a weathervane of exile politics. Founded in 2000 by Miami insurance tycoon Carlos Saladrigas, in the aftermath of the Elián González clashes to bring more pragmatism to Cuban American activism, the Cuba Study Group has been inching towards advocacy of normalization with Cuba. Last year, Saladrigas stated it was time to seek interaction with Cuba, including the government, and this year the group came out in support of lifting the U.S. travel ban. In an interview with Cuba Standard, Executive Director Tomás Bilbao, a former assistant of Senator Mel Martinez, explained the group’s microloan initiative, its attitudes regarding U.S. regime-change efforts on the island, and its proposal for U.S. economic engagement in Cuba.

Please explain the Cuba Study Group’s microloan initiative.

B. In September 2006, realizing that economic development is key in the success of societies in transition, the Cuba Study Group put together a proposal to offer assistance to small business owners inside Cuba. In the proposal, we commit to working with a microloan institution to offer and to help raise seed capital.

Given U.S. sanctions, what kind of a financial institution would provide microloans on behalf of a U.S.-based NGO?

B. They would not be offering loans on our behalf. We’re offering the idea, which has attracted the interest of lots of people and governments. The Spanish government and the Holy See are in conversations with the Cuban government to issue microloans, in a large part as a result of the work of the Cuba Study Group in urging those governments to do so over the last three years. But yes, it’s a politically very sensitive topic, especially when it comes from the United States and from an organization that’s comprised of Cuban Americans. That said, what we believed in 2006 was that it was important to have these types of proposals on the table for the time when Cuban leaders recognize the need to move into a direction of greater economic liberalization. I think that now we’re seeing the beginnings of that.

What about the Cuban government?

B. There’s no doubt that, if you want to be able to operate something like this on the island, the operating institution will have to have contact with the Cuban government.

What institution could that be?

B. Initially, we thought that the best partners would be Banco Compartamos in Mexico. This is a publicly traded company, and one of the largest microloan institutions in Latin America, if not the largest. But as times have changed and things have developed inside Cuba, we’ve looked at other organizations that could also offer financial education and literacy. So we’re looking at, and talking to, other organizations. There are a lot of NGOs, such as ACCION International, Grameen Bank, and many others, there are hundreds of organizations in Latin America. The more institutions are involved in Cuba, the better.

The Spanish government is apparently giving the Cuban government control over their microloan program. Is that OK with you?

B. We have read reports that the Spanish agency for international development would issue at least the first round of loans to agricultural cooperatives through a Cuban bank. What we said in our initial proposal was that, in success cases around the world, it was non-profit organizations that were in charge of operating and disbursing these loans. The Cuban government has no experience and no expertise in this — nor does the U.S. government, or any other government, for that matter. We always think it’s better to let the professional organizations with experience in this field handle the disbursement and management of these loans.

But it wouldn’t be a fundamental obstacle for you if the Cuban government were to insist to be in charge of a microloan program?

B. We let the operational partner decide what makes sense for the program to succeed. It’s not sufficient to issue 100 microloans in the next few months, and then have the program fail. Ultimately, the goal is to have something that is ongoing, that is replenishing, to help serve millions of people, not just hundreds of people.

Does the Cuba Study Group have contacts with Cuban government officials?

B. We do not have contact with Cuban officials. I’ve seen them at conferences, and I’ve introduced myself, I’ve spoken to them, but — needless to say — we do not have ongoing contacts with them now.

Is that possibly going to change in the near future?

B. You have to ask the Cuban officials. We’re always willing to speak, we’re willing to listen, and to enter into a constructive dialogue. But we have been in contact fairly regularly with Cuban economists inside the island, many of whom have written lately articles stressing the importance of microloan programs. Some have even highlighted that it’s important these programs be operated by the microfinance institutions, and not by the Cuban government.

Microloan programs are tiny compared to the amounts Cuban relatives abroad are investing in startup businesses on the island.

B. True, the most natural source of funding for Cuban entrepreneurs are family members living abroad. That being said, not every entrepreneur in Cuba has family living in the United States. For those who do have family, the actions of the Obama Administration last year in removing limits on frequency and amount of remittances to family members is a very positive step.

Still, U.S. embargo laws make it illegal to be a silent partner in a business, a co-owner of a taxi, a lender for a bed-and-breakfast.

B. I don’t think that U.S. law and U.S. regulations discuss that. The U.S. regulations are intended to provide humanitarian assistance to relatives, helping them to meet their basic needs. One can argue, however, there’s no better way to help Cuban families to meet their daily needs then allowing them to become self-sufficient. While the U.S. government has no way in tracking whether the money is being used for buying soap or buying the prime materials to make soap to sell, I think it falls perfectly within the intent of U.S. law. While it doesn’t specify whether they can take equity stakes in those private businesses, certainly this is something that has been going on for some time.

So shouldn’t U.S. laws explicitly allow investments in small private businesses?

B. Certainly, the United States needs to take a hard look at regulations and ensure that it’s not an obstacle to any flow of financial or material assistance to family members in Cuba or to any member of Cuban civil society who wants to reduce their dependency on the Cuban government. In addition to family remittances, there are other important steps that the U.S. government could take to help empower small businesses inside Cuba.

Such as?

B. There is no reason why this administration couldn’t issue a general license allowing any American to send remittances to members of civil society inside Cuba. It makes no sense that U.S. law and not Cuban law prohibits me from doing so. The second thing is, the administration needs to interpret Section 109 of the Helms-Burton Act to include economic empowerment activities.

Explain what Section 109 is about.

B. This is the section that describes the intent of the democracy assistance programs financed by the USAID and the State Department. A very narrow interpretation from the Bush Administration suggested that these programs could only be used for political activity. Not only is that too narrow an interpretation and not the intent of the law, but also helps aggravate situations such as the one with Alan Gross. If the interpretation of the law was to include economic activities, or any activity that helps reduce dependency on the Cuban government, or helps Cuban families become self-sufficient, then the U.S. could move away from programs that are aimed solely at political activities, and more towards programs that are more in line with what it does with other countries in the region. Two more things: The U.S. government could issue a general license for NGOs that work in the field of microfinance and financial education. And the administration could urge Congress to lift the ban on travel, which would ultimately create a flow of products and resources to Cuba. It would also create an important primary and secondary market for the goods sold by independent businesses. You can’t expect those people to succeed if they don’t have a market and access to capital.

What’s the Cuba Study Group’s opinion about the underlying premise of regime change in U.S. policy?

B. There are several problems with that. The first is that it’s not as though the United States government was capable of forcing a transition inside Cuba. The U.S. government can only help facilitate change or make change more difficult. The Cuba Study Group argues that current U.S. policy helps make change more difficult. It does so because it adds to the isolation that the Castro government has worked for 50 years to keep in place. It makes no sense if the Cuban regime has worked so hard to isolate their people from the rest of the world, that the U.S. policy would contribute to that isolation, by prohibiting Americans from traveling there, by prohibiting the exchange of resource and information, and, frankly, by micromanaging Cuba’s transition by monopolizing the exchange of information, resources and travel.

Tell us about the Cuban Enterprise Fund idea.

B. This is an initiative the Cuba Study Group announced in August 2007. It’s a proposal for the development of a fund modeled after the enterprise funds the U.S. government created after the fall of the Berlin Wall to assist in the development of private enterprise in Eastern Europe. This was a series of private boards that were appointed by the U.S. government, including people with the stature of the CEO of Ford Motor Company, who managed funds that were designated by USAID to make equity investments in companies in Eastern Europe. What that did is, it helped small businesses take the step to become medium or large businesses. In the history of U.S. foreign assistance, this is the only program ever that wrote a check back to the U.S. Treasury. It was so successful in helping build private enterprise even after they helped create credit unions, they helped create banks, they helped develop large industries, they helped write financial and small business regulations for those countries. Even after they were done with all that, and even after they wrote a check back to the U.S. Treasury, they were still able to set up legacy funds that, still to this day, help provide scholarships, help provide financial literacy programs. Realizing that in Cuba, more than in any of these Eastern European countries, the progression from micro-enterprise to small, medium and eventually large enterprise will be much quicker, thanks to the entrepreneurial spirit of the Cuban people, the high levels of education, assistance from abroad and proximity to the United States, we believe it’s important to start looking today at how we help Cuban entrepreneurs take the step from small business to medium or large business.

At this point, USAID is a non-entity in Cuba because of the underlying regime-change policy.

B. Correct. We believe that the same language that was outlined in the seed act, which created the enterprise funds after the fall of the Soviet Union is perfectly acceptable. What that language said is, once Poland and Hungary take substantive steps towards consolidating political and economic democracy, that these funds are available. We believe it will be perfectly acceptable once we get these exact same conditions from Cuba. Once they have taken substantive steps to consolidate political and economic freedom, this money would be available to help small Cuban businesses to make the leap to medium and large businesses.

The Cuban government has made it clear again and again that reforms are restricted to the economic realm. So if Cuba goes the way of Vietnam or China, your program would be in a dead end?

B. Listen to the wording very carefully: Cuba would have to take substantive steps to instituting political and economic democracy, democratic freedoms. It would have to take steps. The bottom line is that, in China and in Vietnam political steps have also accompanied those economic steps. Clearly, what we want for Cuba is the types of freedoms that we enjoy in the United States. But what that wording did in Eastern Europe, is it gave the U.S. president the ability to determine what constituted substantive political and economic steps.

An additional carrot, not the usual stick, in the hands of the U.S. president?

B. Under current U.S. law, it takes an act of Congress to determine when Cuba has met the steps necessary, and even then, it doesn’t even outline what the benefits of taking such steps are. We can’t expect Cuban reformers to be able to quantify or even understand the benefits of this all-or-nothing approach. Current U.S. policy requires Cuban leaders to all but wave the white flag before the U.S. lifts sanctions. What the Cuban Enterprise Fund does, is it very clearly lays out what the benefits are of the Cuban government taking steps on a very clear path, and has a track record of success. It allows Cuban leaders to clearly see what the benefits would be.

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