Canada Should Start Calling the Shots in Cuba

JULY 27, 1999 | THE GLOBE AND MAIL
by Susan Kaufman Purcell

And a good place to start would be to adopt the same business principles as it did in South Africa. If apartheid against
blacks in South Africa was unacceptable to Canadians; apartheid against Cubans should be unacceptable in Cuba. After years of constructive engagement with the government of Fidel Castro, Ottawa recently acknowledged that Cuba's human?rights performance has not improved. Nor has the Cuban government become more democratic. This does not mean that Canada will now join the United States' economic embargo against the island, since Washington's policy has also failed to achieve these goals.

Instead, Canada will undoubtedly seek new ways to make its preferred policy of engagement work better. A good place to begin is in the area of foreign investment, where Canada accepted restrictions on the behaviour of foreign investors that helped strengthen the regime to the detriment of citizens seeking freedom from state control.

Canada allowed its companies to invest in Cuba despite the fact that Cubans are barred from doing so. Nor can Cubans frequent hotels managed by Canadians and other foreigners. Finally, Canadian investors agreed to relinquish their right to hire Cuban workers directly. Instead, they allowed the Cuban government to get job applicants for their loyalty to the Castro regime. Unsurprisingly, only politically safe workers were awarded jobs with foreign companies.

Canadian investors also agreed to pay wages, in hard currency, to the Cuban government, which then compensated the workers in pesos. The catch was that the conversion rate was the government?declared rate of one peso to the dollar, rather than the market rate of 23 pesos to one US dollar. As a result, the bulk of the money that Canadian companies earmarked for their Cuban workers flowed into government coffers. It is easy to understand why Fidel Castro imposed these rules. For him, the challenge was to obtain foreign capital without importing capitalism. There are several reasons why he dislikes capitalism, but the most relevant one here is that it as the capacity to create wealth that is not under state control. Many political systems have started collapsing when new economic elites were denied political power commensurate with their economic power. The restrictions imposed by the Cuban leader therefore ensured that Cubans employed by foreigners would remain dependent on the government for their jobs.

A harder question to answer is why Canada accepted these rules. One possibility is that Ottawa believed that eventually the Canadian government could renegotiate the rules of the game, on the assumption that by then Cuba would have become dependent on foreign ?capital. In the meantime, the ability of Canadian
companies to operate in a market from which their US competitors were excluded was undoubtedly appealing. Perhaps Ottawa also believed that the mere presence of foreigners in Cuba would ex pose Cubans to the outside world, causing them to demand, and ultimately get, more political power and respect for their human rights.

It is now clear that these assumptions were incorrect. Maintaining political control has always been Castro's top priority, even if it has been at the expense of economic growth. In addition, contact with foreigners has proved most effective in bringing about democratic change in countries where at least some groups are already independent of the government. Cuba, which lacks independent labour unions, a free press and a private sector of any consequence, is not such a country. Canada should not abandon its policy of constructive engagement toward Cuba.

Instead, Ottawa needs to put more emphasis on the word "constructive." Until now, only Mr. Castro has set conditions on the behaviour of Canadian and other foreign companies. It is time for Canada to lay down some conditions of its own. The constructive? engagement policy pursued with the white government of South Africa can serve as a model. There, Canadian and other foreign companies subscribed to a set of business principles, known as the Sullivan principles, that held foreign companies investing in South Africa to a higher standard of behaviour than those practiced by the South African government. One example: Foreign companies agreed to treat black and white employees equally.

Canada should adopt the spirit of these principles and insist on the right of its companies operating in Cuba to hire and pay their Cuban workers directly, either in hard currency or in pesos at a market determined exchange rate. Canadian companies managing hotels in Cuba should also insist that Cubans be allowed to frequent them. If apartheid against blacks in South Africa was unacceptable to Canadians, apartheid against Cubans should be unacceptable in Cuba.

Canada today has an opportunity to re?fashion its Cuba policy so that it more accurately reflects Canada's values and goals. If it does so, other countries might follow suit and the policy of constructive engagement would gain new credibility.
Susan Kaufman Purcell is vice president of the Council of the Americas and the Americas' Society in New York.