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• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00589R000100130005-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 23
• Document Creation Date: January 12, 2017
• Document Release Date: September 10, 2010
• Sequence Number: 5
• Publication Date: March 1, 1985
• Content Type: REPORT

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Economic War
Directorate of
Intelligence
Cuba: Castro Declares
ALA 85-10030
March 1985
-fix+
Copy 405
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Intelligence 25X1
Economic War
Cuba: Castro Declares
the Office of African and Latin American
Analysis. It was coordinated with the Directorate of
Operations.
Comments and queries are welcome and may be
directed to the Chief, Middle America-Caribbean
Secret
ALA 85-10030
March 1985
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Secret
Cuba: Castro Declares
Economic Warl 25X1
Key Judgments Cuba's mounting economic problems and Soviet criticism of Havana's
Information available economic management probably are behind President Fidel Castro's recent
as of 28 February 1985 emphasis on increasing access to Western markets, implementing austerity
was used in this report.
measures at home, and reducing tensions with the United States. The
Cuban leader's statements over the last few months, as well as the hasty re-
vision of Cuba's 1985 economic goals-aimed at boosting exports to the
West, meeting trade commitments to the Soviet Bloc, limiting imports, and
honoring Western and Soviet debt obligations-indicate that he is heeding
Moscow's implicit warnings about future levels of economic assistance.
Castro has called on all Cubans to wage an "economic war" against waste
and inefficiency, and warned them that they will face continuing hardships
for at least another 15 years.
Castro's economic battle plan and the punitive action taken in January
against several high-ranking party hardliners who seem to have opposed
the policy shifts indicate a resurgence of more pragmatic economic
planning in Havana. For example, Castro apparently recognizes that Cuba
cannot afford the increased imports to stimulate long-term economic
growth without expanding exports. Havana's ability to export, however, is
limited by its dependence on sugar exports-its primary foreign exchange
earner-and the weak world market for sugar. The Castro regime's new fo-
cus on austerity and conservation measures probably will cause Cuba to
fall far short of its 5-percent economic growth target this year, especially as
energy rationing takes hold and cuts are made in construction and social
service projects.-]
The influence of the pragmatists appears to extend to other policy areas as
well. They probably are counseling Castro that improved trade relations
with the West will require a lowering of Castro's profile in subversive
activities as well as an easing of political tensions with Washington. In our
opinion, this could explain Castro's propaganda efforts since early January
emphasizing his willingness to be more conciliatory toward the United
States on a variety of issues, and his contention that the emigration
agreement reached with Washington presages a general improvement in
US-Cuban relations. Castro's campaign to project an image of responsibil-
ity and moderation probably is the cornerstone of a broader campaign to
reduce Cuba's isolation and deflect US pressure on Central America, as
well as to locate willing trading partners-especially in Western Europe
and Latin America.
Secret
ALA 85-10030
March 1985
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By hinting that the emigration agreement with Washington is the start of a
trend toward a general reconciliation, Castro appears bent on exploiting
fears that a sudden breakthrough in relations with the United States will
leave Latin American governments politically embarrassed and West
European firms at a trade disadvantage. For their part, many Latin
American leaders view upgraded ties to Cuba as an expression of their
independence and Third World credentials, although they remain suspi-
cious of Havana's intentions and are likely to be guarded in their
association with Castro.
Despite Castro's conciliatory overtures, we do not believe the new policy
thrust portends a change in Castro's basic distrust of and antipathy toward
the United States. Even in his most recent public statements, the Cuban
leader reiterated his unwillingness to alter Cuba's relations with the Soviet
Union, to renounce his commitment to revolution, or terminate his support
to the Sandinistas or the Salvadoran insurgents
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Key Judgments
Growing Economic Pressures
Little Improvement in Sight
Pragmatists Versus Hardliners 4
Key Hardline and Pragmatist Personalities 13
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Figure 1
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Cuba: Castro Declares
Economic Warl
Growing Economic Pressures
After two years of tightened economic austerity
caused in part by debt rescheduling agreements with
its Western creditors, Havana apparently gambled in
1984 that a burst of spending on imports and govern-
ment construction projects would stimulate sustained
economic growth. The Cuban leadership probably
hoped that pumping up the economy would increase
employment and eventually improve dreary Cuban
living standards, and that this might soothe growing
popular discontent and divert attention from its recent
foreign policy blunders. By the middle of last year,
however, it was apparent that unfavorable world
markets for Cuban commodities and domestic eco-
nomic bottlenecks were foiling Havana's recovery
effort. At best, the costly experiment was producing
moderate short-term economic growth, but at the cost
of a rapid expansion of the hard currency trade
deficit, and sharp criticism from Havana's Western
Figure 2
Cuba's Trade Balance With Communist
and Non-Communist Countries
Trade with
Communist
countries
Trade with
non-Communist
countries
and Soviet creditors.
We estimate that the real growth of the Cuban
economy was close to 3 percent last year, far less than
the 7.4-percent real growth claimed by the Cuban
Government, which has traditionally ignored or un-
derestimated the impact of domestic inflation.' Ac-
cording to official statistics, growth was driven by a
surge in the construction sector-apparently stimulat-
ed by large government investments in transportation
and city planning projects-and a 6-percent increase
in industrial production.
In reality, Cuba's economic growth last year probably
was made possible only because of a sharp rise in
imports that allowed a short-term boost in production.
Earlier restraints on imports-applied in 1982 and
1983 while Havana grappled with foreign exchange
shortages and two debt renegotiation exercises-were
abandoned in 1984. According to Cuban data, im-
ports as a percentage of national income rose from 34
percent in 1983 to 43 percent in 1984. During the first
' The US Interests Section in Havana estimates that the cost of
living rose about 7 percent last year-almost 5 percentage points
0 1980 81 82 83 84a,b
a Projected, based on trade patterns over the first 6
months of 1984.
b Cuban trade with non-Communist countries is based
on hard currency world prices, while most of its
Communist country trade uses soft currency-negotiated
prices that are frequently subsidized in Cuba's favor
and do not reflect real market values. The result is a
more favorable global trade balance than if Cuba
conducted all of its trade at world market prices.
half of last year, imports from the Soviet Bloc rose 19
percent while those from the West jumped 69 percent,
probably largely the result of an expanded line of
credit from Argentina and the resumption of govern-
ment-guaranteed export insurance from Japan. Past
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Table 1
Composition of Western Imports
by Country and Economic Sector
for 1983
Total
964 8
100.0
Argentina
95
10.0
Canada
43
4.5
France
116
12.0
Italy
22
2.3
Japan
99
10.3
Mexico
27
2.8
43
4.5
123
12.6
37
3.8
Switzerland
37
3.8
United Kingdom
107
11.1
West Germany
75
7.8
140
14.5
Total
964
100.0
Capital goods
186
19
Consumer goods
64
7
Intermediate goods
670
70
trends and official Cuban policy suggest that more
than half of the imports from the West consisted of
raw materials and intermediate goods that would have
25X1 contributed directly to domestic growth.
Little Improvement in Sight
As 1984 drew to a close, Cuban policymakers were
confronted by a series of unpromising economic events
that probably convinced them that moderate econom-
ic growth could not be repeated easily in 1985. Soviet
economic assistance has leveled off in recent years
and Cuban press reports indicate that, despite
Havana's vigorous lobbying, Cuba received little as-
surance of any real increase in aid from its Soviet and
East European benefactors at the annual CEMA
head-of-state summit in October. Nor was the outlook
Table 2 Million US $
Soviet Assistance to Cuba
Total economic aid
3,463
4,558
4,666
4,215
3,750
Development aid b
830
1,415
975
1,070
850
Trade subsidies
2,633
3,143
3,691
3,145
2,900
Sugars
1,165
1,366
2,580
2,740
2,800
Petroleum d
1,480
1,657
1,006
300
0
Nickel c
-12
120
105
105
100
a Projection for 1984 is based on preliminary trade data.
b Based on balance-of-payments aid necessary to cover Cuban trade
Moscow, and public statements by Cuban and Soviet officials
concerning the amount of development aid extended. This aid is
repayable, but terms are highly concessional.
S
ugar an
d
n
i
c
k
e
l
su
b
s
idi
es are est
i
d
mate
as the difference betw
een
the price Moscow pays for these commodities and their world
market value. The difference is considered as a grant.
d The petroleum subsidy reflects the difference between the value of
the petroleum purchased from the USSR and the value of these
imports at world market prices. It is considered as a grant.
for new lending from Western creditors bright. Offi-
cial statistics released last fall indicated that Havana
was falling far short of meeting yearend targets for
hard currency trade and reserves set by official
Western creditors as conditions to any further debt
rescheduling. F___-]
The short-term outlook for hard currency export
earnings at the end of last year also indicated that
Havana would be unable to fund increased levels of
hard currency imports in the future.
? The world sugar price was continuing on its down-
ward spiral and was projected to stabilize near the
record low through much of 1985 owing, in part, to
the disintegration of the International Sugar Agree-
ment in December and massive world sugar stocks.
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? The inferior quality of Cuban citrus and contracts
obligating Havana to ship the bulk of its crop to the
Soviet Union and Eastern Europe were limiting
short-term growth of hard currency citrus earnings.
? Despite Havana's expectations of increased nickel
production. as new factories are brought on line,
hard currency nickel earnings will be limited by a
continued weakness in the world market price and
by US agreements with Japan and several West
European nations prohibiting the sale of steel con-
taining Cuban nickel to the United States.
Furthermore, with no promise of increased levels of
energy shipments from the Soviets forthcoming, Ha-
vana was doubtless realizing that maintaining its
ability to resell surplus Soviet petroleum for hard
currency would require strong energy-conservation
measures to support the demands of new factories,
particularly in the energy-intensive nickel sector.
Havana's Economic Management Under Fire
Havana's handling of its economic problems came
under sharp attack from the Soviets last year.
imports. Commercial and Western government credi-
tors probably will make their concerns known as
negotiations over the rescheduling of Cuba's 1985
debt get under way later this spring.
Economic War Declared
In recent policy addresses, Castro declared a "pro-
found economic revolution" to be fought by all Cu-
bans against waste and inefficiency. The Cuban Presi-
dent announced the appointment of a high-level
working group charged with reviewing the economic
crisis and making emergency revisions in economic
plans. Discussions are to be held in every workplace
on the new economic priorities:
? Increase nonsugar export earnings to the West by at
least 20 percent.
? Meet export commitments to the Soviet Bloc.
? Limit import spending.
? Honor debts from both Western and Soviet credi-
tors.
Havana has released only general information on the
implementation measures that will be required to
meet its new goals. Judging from Castro's recent
speeches, Havana will attempt to generate increased
hard currency earnings by developing and marketing
nontraditional export products and by increasing the
availability of Soviet-supplied petroleum products for
resale on spot markets through stricter energy-conser-
vation measures. Import expenditures are to be cut by
the local production of import substitutes and by
increasing domestic productivity and savings. For
example, Cuban budget planners have warned that
cuts in construction expenditures and trimming of
some social service projects may be forthcoming.
Cuba's economic performance was also being scruti-
nized by Cuban economists and Western creditors.
According to the US Interests Section in Havana,
Cuban economists warned that the government's as-
sertions regarding economic growth should be adjust-
ed downward to reflect reality. Western creditors,
kept relatively well informed of Cuba's financial
situation through quarterly reports required under the
terms of past debt reschedulings, could not have been
pleased with Havana's free-wheeling spending on
Cuban economists may well have run up against
problems in detailing an implementation scheme;
when taken together, Havana's targets are unrealistic
and often contradictory. For example:
? Havana's overambitious plan to boost hard currency
export earnings will be limited by the need to funnel
exports to CEMA members to meet trade quotas, by
Soviet insistence that Cuba concentrate on the
production of traditional export products such as
sugar, where Cuba has a comparative advantage,
and by the difficulty of conserving energy for resale.
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? Despite the goal to limit total import expenditures,
Castro has admitted that Cuba will need increased
levels of Western inputs to production to support
economic growth this year.
? With the uncertain outlook for export earnings, and
barring substantial new trade credits, Havana prob-
ably will have insufficient hard currency reserves
with which to import necessary Western inputs.
In our judgment, implementation of Castro's "war
plan" will cause the country to fall far short of its
announced 4.5-to-5-percent growth target for 1985.
For example, planned cuts in government spending for
construction and social service projects, as well as
energy rationing, will dampen economic activity. In
addition, Havana will have to push ahead with sugar
production if it is to meet export commitments to the
Soviets and maintain sales to hard currency markets.
However, industry analysts report that even Havana
has lowered its 10-million-ton target for sugar produc-
tion next year, owing to the extended cane-cutting
season last year, unseasonable rainfall, and a shortage
of Western herbicides.
The Cuban population will feel the brunt of the new
austerity policies as the simultaneous drive to cut
imports and increase exports reduces domestic con-
sumption and as it becomes apparent that the produc-
tion, as well as the importation, of consumer goods
will become Havana's lowest priority. Castro's clear
warning that Cuba will continue to face at least
another 15 years of economic hardships is a severe
blow to the long-suffering Cuban whose rising expec-
tations have been fed by recent moderate economic
growth and optimistic rhetoric.
government polls re-
vealed great dissatisfaction over housing, public trans-
port, restaurants, and other services. New regulations
to stimulate productivity-such as longer working
hours and the relocation of workers from inefficient
factories-are likely to add to popular discontent.
In an apparent attempt to mollify the populace,
Castro already has assured Cubans that there will be
no decline in current living standards. Havana is
likely to dangle the possibility of emigration to the
United States under the recent bilateral agreement as
a means of temporarily quieting critics.2 Havana also
may loosen some economic controls, as it did recently
with a new housing law that allows the private
ownership and leasing of real estate, to assuage the
population and help stimulate production without
directly taxing government finances.F___1
However, new measures such as the housing law carry
the danger of unleashing long-pent-up expectations
within the populace for additional reform. These
demands could lead to serious ideological conflict
within the leadership. Civil disobedience is almost
certain to increase, as it has in past periods of
heightened austerity and shortages, and the regime
may have to resort to increased repression when it
needs to project an impression of governmental re-
straint.
Pragmatists Versus Hardliners
The far-reaching remedial measures Castro has en-
dorsed to meet the challenge that these economic
pressures have placed on him suggest a revitalization
of the influence of those individuals in the leadership
who have usually argued for pragmatic policies to
alleviate problems on both the domestic and interna-
tional fronts. In policy deliberations, these pragma-
tists, who are responsible for the day-to-day function-
ing of the Cuban economy, must compete with the
hardline element of the leadership for Castro's atten-
tion. The hardliners, most of whom took part in the
guerrilla struggle that brought Castro to power, head
the military and internal security establishments and
the ideological apparatus
The competition between these two general elements
of the leadership is not new, and, in our judgment,
stems largely from the pressures that each official
feels as a result of individual job responsibilities. We
believe those in the security or ideology fields see
permanent confrontation with the West as necessary
to prevent ideological penetration and contamination,
2 The United States and Cuba reached agreement last December to
return to Havana approximately 2,700 "undesirable" refugees and
to allow up to 30,000 Cubans to emigrate to the United States
annually.F__1
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and they apparently view "exporting" revolution as a
defensive measure as well as an ideological necessity.
Those who must ensure Cuba's economic survival, on
the other hand, see increased contacts and trade with
the West as imperative at this stage of Cuba's
revolution and argue that the promotion of armed
struggle contributes to Cuba's isolation and thus is
costly economically.
These job-related tensions have appeared in many
policy areas. In the moral-versus-material-incentives
debate that has continued off and on since the early
1960s, for example, the pragmatists claim that mate-
rial incentives are still a necessary evil required to
overcome worker apathy and boost productivity; but
the hardliners insist that moral incentives are the only
ideologically acceptable motivation if Cuba is to
remain true to Che Guevara's ethic of forming the
"new man." To cite another example, the pragmatists
were successful in late 1978 in convincing Castro-
over the hardliners' objections-that allowing Cuban
exiles to visit their families in Cuba would prove
financially rewarding for Havana,
The pragmatists' predictions were borne
out in 1979 as the flood of exile visitors enriched
Cuban coffers by some $100 million, but, as the
hardliners had warned, the exiles' obvious affluence
was a major source of disenchantment for those who
had remained in Cuba. This laid the groundwork for
the massive exodus that took place the following year
during the Mariel boatlift.
As a confirmed revolutionary, Castro, in our view,
clearly prefers the dramatic activism advocated by the
hardliners, but economic reality, especially when rein-
forced by pressure from Moscow, has caused him to
pay greater heed to the pragmatists when major
policy issues are being debated. This has resulted in
policy swings of a cyclical nature as one group
replaces the other as the predominant influence in the
leadership. Cuba's current economic difficulties, cou-
pled with Soviet pressure and foreign policy setbacks
that embarrassed the hardliners-Grenada, for exam-
ple-appear to have vaulted the pragmatists back into
predominance. A measure of their success can be
found in the ease with which Cuba's ideologically
controversial housing law was promulgated last fall
and approved in December by the National Assembly.
Many of its provisions-such as those permitting the
reemergence of landlords-almost certainly were op-
posed by the regime's ideological purists. Similarly,
Castro's decision in January to allow France to
establish a cultural center in Havana was a means of
adding substance to his stated intention to improve
ties with the West, but it must have appalled those in
the regime charged with preventing ideological pene-
tration of Cuba.
Castro appears to have ridden roughshod over those
who exhibited a reluctance to accept even temporary
ideological backtracking. Havana, for example, pub-
licly announced that the party's Secretary for Ideolo-
gy, Antonio Perez Herrero, was "released" from that
post, as well as from his alternate seat on the ruling
Politburo, at an unusual special plenum of the Central
Committee on 31 January, presumably for resisting
too strongly the changes Castro has been champion-
ing. Two other hardline officials' were shifted to
lesser posts at the same time and the plenum, accord-
ing to the Cuban media, "fully approved and gave its
highest evaluation of Fidel's untiring and creative
activities" in the formulation and execution of foreign
policy. The plenum's message is clear: Castro's deci-
sion to heed those in the leadership who would give
top priority to pressing economic matters enjoys the
firm support of the country's highest political, body.
Impact on Policy
If past patterns hold true, the current predominance
of the pragmatists among Castro's circle of advisers
will have a major impact on Cuban policy in terms of
tactics and focus, but not in ultimate goals. It has
become clear from the pattern of Cuban policy over
the past quarter of a century that the pragmatists'
differences with the hardliners lie only in how to
achieve those goals. Both groups are firmly united, for
example, in their deep-seated antipathy toward the
United States. Moreover, the hardliners continue to
' One, Orlando Fundora, headed the Central Committee's Depart-
ment of Revolutionary Orientation and had ideological control of
virtually all the Cuban media; he was subordinate to Perez Herrero.
The other was Politburo member and Havana City Province party
First Secretary Julio Camacho Aguilera, who was shifted to eastern
Cuba as first secretary in Santiago de Cuba Province.
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Cyclical Swings in Policy
Although we know little of the inner workings of the Cuban
policymaking machinery, it is reasonable to assume that, in
the guns-versus-butter type of deliberations, the pragma-
tists and hardliners are pitted against each other for a
share of the country's limited resources. It is clearfrom his
actions over the years that, in weighing the advice of both
groups during policy debates, Castro has favored the
arguments of his old guerrilla comrades among the ranks
of the hardliners. From 1959 through 1967, for example,
when Castro had virtually no institutional restrictions on
his exercise of power, he gave free rein to those who called
for radical political, economic, and social measures to
resolve Cuba's problems and pressed for a continuation of
violent revolution throughout the hemisphere. This initial
period of hardliner predominance saw large-scale national-
izations of private property, the destruction of virtually all
old institutions and the creation of new "revolutionary"
institutions, unswerving antagonism toward the United
States, and the launching of subversive operations through-
out Latin America as well as in several colonies in Africa.
Anyone who warned that these policies were detrimental to
the Cuban economy or leading to Havana's diplomatic
isolation went unheeded or was suspected of harboring
"counter revolutionary" sentiments.0
The swing toward the pragmatists began in 1967 when the
Soviet patience with Cuban behavior ran out. Cuba's
almost indiscriminate promotion of violent revolution-
without a single success-clashed head-on with the more
realistic policies of various Latin American Communist
parties and became a serious point of friction with Moscow
as demonstrated by strong public statements from both
sides. The Soviets also were critical of Havana's massive
waste of their economic assistance and eventually brought
pressure on Castro through Cuba's heavy dependence on
Soviet oil. Moscow's pressure coincided with the failure of
Che Guevara's subversive operations in Bolivia-Cuba's
most embarrassing guerrilla defeat in nine years offruitless
sponsorship of terrorism-and eventually convinced Castro
that major changes in Cuban policy were long overdue.
The period of pragmatist predominance lasted from 1968 to
the late 1970s and featured the wholesale reorganization of
the government, party, and mass organizations; the adop-
tion of a new constitution; a 60 percent reduction in the
manpower of the Cuban armed forces; and the holding of
the party's first congress. In addition, a number of top
military officers were shifted to key posts in the government
to add discipline and organizational talent to the bureau-
cracy. This resulted in the adoption of a number of
measures-the militarization of much of the school system,
for example-that sharply increased the regimentation of
Cuban society. This period became known as the era of
institutionalization.)
In the foreign policy area, Havana greatly reduced its
promotion of guerrilla warfare and made a major effort to
bring its policy in line with that of Moscow. Cuba's broad
campaign to break out of its diplomatic isolation paid off
as formal ties were established with several dozen coun-
tries. Relations with Moscow, at a low point in 1967,
improved dramatically and Cuba became a member of the
Council for Mutual Economic Assistance. Castro's efforts
to woo the Third World also were rewarded and he became
chairman of the Nonaligned Movement.0
The performance of the Cuban military establishment in
Angola beginning in 1975, and later in Ethiopia during the
Ogaden campaign, however, served to redeem the hard-
liners-as well as impress Moscow-and by 1978 they
apparently had convinced Castro that the time was ripe for
a dramatic increase in the promotion of armed struggle.
This resulted in a major guerrilla support operation for the
Sandinista insurgents in Nicaragua, involving Havana's
shipment of more arms and supplies than it had provided to
any guerrilla group during the 1960s. The victory of the
Sandinistas returned the hardliners to the predominant
position in the leadership and led to greater Cuban involve-
ment in El Salvador, Colombia, and Honduras in subse-
quent years.
The Grenada intervention in October 1983, however, put the
hardliners'fortunes again on a steep downhill slide.
the performance o t e
Cuban military detachment in Grenada was so bad-in
Castro's eyes at least-that the detachment's personnel
were cashiered on return to Cuba and sent off to Angola as
common soldiers to redeem themselves in combat. So
outraged was Castro over the defeat that the Interior
Ministry's chief of foreign intelligence, one of the regime's
top military officers, was dismissed and the chief political
officer of the armed forces, an alternate member of the
party's Political Bureau, was reassigned. Moreover, the
hardliners' efforts to exploit the revolution in Suriname
failed as Colonel Bouterse expelled virtually all Cubans
from the country; Cuba's military involvement in southern
Africa seemed threatened as Presidents Machel and dos
Santos opened negotiations with South Africa; and the
trend in Central America seemed to turn against Cuba and
its insurgent allies. It was again time for the pragmatists.
We believe Soviet pressure played a key role in the current
resurgence of the pragmatists just as it did in 1967.
Moscow's determination to halt the ever-ballooning cost of
its investment in Cuba, coupled with Cuba's own deterio-
rating economic position, appears to have precipitated a
reordering of priorities to place major emphasis on econom-
ic matters and a downplaying of support for violent revolu-
tion in Latin America.
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wield considerable power by virtue of their positions
in the party and government, and they will take
advantage of any opportunity to regain lost ground.
As has occurred before, Castro will temporarily pay
them less heed when he seeks the counsel of the
members of the leadership, but we expect he will
again turn to them and give them freer rein if the
pragmatists' policies fail to ease tensions with the
United States and alleviate Cuba's economic pres-
sures.
The advice that Castro is now receiving-and heed-
ing-from the pragmatists seems to be much the same
as that which they offered during their previous
period of predominance in the 1970s. Havana thus is
placing great stress on developing diplomatic, com-
mercial, and cultural ties with other countries (except-
ing, of course, political pariahs such as Chile, Para-
guay, and. South Africa) in a behavior modification
program aimed at developing new markets and in-
creasing Cuban exports. To promote these ties and, in
the process, achieve Havana's economic goals, Castro
has donned the cloak of peacemaker and is relying
heavily on his own formidable persuasive skills to
refurbish Cuba's-and his own-image in Western
Europe, Latin America, and the United States. Exud-
ing charm and sincerity, he has already been able to
convince a steady stream of Western visitors to carry
the message abroad that he is ready to negotiate
virtually any differences Cuba may have with any
25X1 country, especially the United States.F__1
Former Chancellor of West Germany and President
of the Socialist International Willy Brandt, for exam-
ple, came home from a visit to Havana last October
25X1 with the clear impression that Castro would like to
free himself from his current dependence on the
Soviet Union, according to a discussion Brandt had at
our Embassy in Bonn. Brandt said that Castro denied
he was a Communist before the revolution, claiming
he was persuaded by events that Communism was the
proper course to take. The record shows that Castro
has used this bait effectively with other West Europe-
an leaders, feeding unrealistic hopes of weaning him
away from the USSR and perpetuating the myth that
Cuban-US frictions are solely the result of Washing-
ton's intransigent hostility.
More recently, Helmut Schaefer, a deputy in West
Germany's Parliament and international affairs
spokesman for the Liberal Democratic Party, spent a
Figure 3. West Germany's Willy Brandt was only
one of several West European visitors to get the
red-carpet treatment in Havana during the Cas-
tro regime's current drive to expand diplomatic
and commercial relations.
week in Cuba in mid-January and told the press that
Havana was obviously seeking greater independence
from Moscow and wanted a dialogue with the United
States. Although his scheduled meeting with Castro
was canceled when Castro abruptly decided to attend
the inaugural ceremonies in Nicaragua, Schaefer met
with Vice President Rodriguez and other high-rank-
ing spokesmen for the regime and, judging from his
comments to the press, came away convinced-de-
spite Cuba's obvious economic problems and Castro's
public pledges to meet his trade commitments to
Eastern Europe-that Havana is ready to increase
trade significantly with the West at the expense of the
Eastern Bloc.'I
In our opinion, Castro's politicking in Managua in
January is probably a foretaste of what Cuban behav-
ior will be like at least for the rest of this year.
' This claim, of course, contradicts the long-held-and, in our
estimation, unchanged-Cuban position that any increase in trade
with the West will not involve a shift in trade from the Soviet Bloc.
Schaefer's interlocutors are engaging in misleading semantics and
are taking advantage of Western hopes of enticing Cuba back to the
West because they want to encourage greater Western contacts and
openness with Cuba. What they mean, in reality, is not that Cuba's
trade with the Bloc will decline but that the Bloc's share of overall
Cuban foreign trade will be less than the current 85 percent. F_
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Judging from his statements as well as his overt
efforts to contact a broad range of personalities then
visiting Nicaragua, Castro wanted to use his trip to
Daniel Ortega's inauguration to project an image of
responsibility and moderation. The subsequent com-
ments of the people he talked with suggest that Castro
favorably impressed a number of observers. Accord-
ing to reports from several US diplomatic missions,
for example, in a private meeting that he and Vice
President Rodriguez had with three of the four Conta-
dora foreign ministers, Castro chided the Nicara-
guans for adopting a hard line and pledged to do
whatever the Contadora group wanted to assure the
success of the process. These reports indicate that the
three ministers came away convinced that he had
taken a constructive stance and would use his influ-
ence to moderate the Nicaraguan position. In addi-
tion, his meeting with British Labor Party leader Neil
Kinnock in Managua, according to the US Embassy
in London, helped to ensure the full and generally
positive coverage that the British press gave the
Nicaraguan inaugural ceremonies, and in a long
meeting with Guillermo Ungo of El Salvador's Revo-
lutionary Democratic Front, according to a source of
our Embassy in San Salvador, Castro advised him to
seek an "alliance" with Salvadoran President Duarte.
Outlook
Castro's recent statements and the broad effort he has
set in motion over the past several months indicate he
is seriously attempting to address his economic prob-
lems. He appears to be placing great hope in an
opening to the West as a means of alleviating Cuba's
mounting economic pressures. He seems convinced
that, if Cuba is to increase exports, attract more
tourists, and send surplus labor abroad for hard
currency, Havana will have to adopt a posture of
appearing more responsible in its international behav-
claims the Pope has been invited-as well as trips
abroad by Castro, Vice President Rodriguez, and
other top Cubans who can sell Havana's new image
convincingly.
On the defensive ever since the Grenada intervention,
Havana will continue to place increased emphasis on
expanding its diplomatic, commercial, and cultural
relations, particularly with the countries that hold
some promise of providing Cuba with economic relief,
and this will require the Castro regime to behave in a
manner that will lend substance to the new image of
respectability that is being projected. Support for
insurgents in Central America will continue, in our
judgment, but Havana is likely to be reluctant to
promote major new "armed struggle" undertakings
unless they are especially promising or are aimed at a
government that is generally held in international
disrepute. A similar pattern of restraint occurred
during the previous period of pragmatist predomi-
nance in the early 1970s.
Diplomatic reporting over the years has indicated that
leaders in some Latin American countries that do not
have formal ties to Cuba have always feared that they
will be caught short by a sudden breakthrough in the
Cuban-US relationship. The Cubans, to "stampede"
such countries into establishing formal ties, will con-
tinue hinting-as they have already following the
bilateral agreement on the Mariel excludables and
emigration from Cuba-that a reconciliation may be
developing rapidly. The Cubans will probably also use
the same ploy in the area of foreign trade, hoping to
attract otherwise reluctant businessmen eager to pre-
empt potential US competition. To buttress their case,
they are likely to give wide press play to any state-
ments by US businessmen or other US notables
suggesting that relations are, or should be, on the
mend.
ior. Apparently it has begun to do so~
As part of his attempt to pull Cuba out of its
economic doldrums, we believe Castro will continue to
place heavy emphasis on personal diplomacy in which
he can impress important foreign figures with his
sincerity, statesmanship, and reasonableness. This
probably will entail many more invitations to visit
Cuba-Argentina's President Alfonsin has already
been invited, according to press reports, and Castro
Cuban officials will not simply limit their attention to
foreign government officials. Special care will also
probably be given to cultivating groups positioned to
influence policy in their homelands. Havana, for
example, has a campaign already well under way to
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Table 3
Cuba-South America: Scope of Relations
Diplomatic Initiatives Support to Subversives
Argentina Full relations at ambassador level; political ties correct but not Havana continues its support to the Monto-
warm; commercial ties growing. neros and the People's Revolutionary Army,
but apparently is advocating a nonviolent path
for now.
Bolivia Relations at charge level; Siles's domestic problems probably Cuba provides limited training and funding to
rule out any change before elections this summer. radical groups, but apparently playing down
its support to avoid providing ammunition to
Siles's opposition.
No relations; slight chance of full relations being established Little or no activity.
this year; commercial relations more likely but still not assured.
No relations. Cuba continues actively supporting several
leftist groups with funding and training; Ha-
vana advocating armed revolution to-oust-the
government.
Colombia No relations, but Castro and President Betancur have developed Cuba continues to provide training and possi-
personal working relationship. Restoration of relations could bly arms to the M-19, but Castro apparently
occur this year, but there is strong domestic opposition. advising them to limit their terrorist activities
for now.
Full relations at ambassador level, but President Febres- Cuba provides training and funding to two
Cordero cool to Cuba. radical leftist groups, one of which has in-
creased terrorist activity over the last year.
Relations at charge level; likely to be raised to ambassadorial Havana apparently has no contact with the
level if current favorite-a center-leftist-wins upcoming elec- Sendero Luminoso guerrillas.
tion.
No relations; full relations at ambassadorial level expected after Castro maintains contact with, and support to,
inauguration of new Uruguayan civilian government. Tupamaro guerrillas, who are mostly in exile,
but apparently not involved in.supporting
antigovernment activity in Uruguay.
Venezuelan charge in Havana, but Cuba has no official repre- Little activity.
sentative in Caracas. Full relations could be restored this year,
but bilateral problems persist.
enhance its standing among foreign religious repre- restrictions on religious practices that have hampered
sentatives. This January, a delegation from the US church groups in Cuba for more than two decades.
Bishop's Conference, including two archbishops, met 25X1
in Havana to discuss aid for the Catholic Church in
Cuba and ways to improve Cuban-US relations, Other groups and individuals in the United States-
according to press reports. In addressing the US journalists, businessmen, politicians, academics-will
delegation, Vice President Rodriguez called for probably also be invited to Cuba in the expectation
"peaceful coexistence" between Catholics and Marx- that they will return home gratified for the'red-carpet
ists and openly admitted the group's propaganda treatment they have received and ready to plead-the
usefulness. In our judgment, Castro's sudden "toler-
ance" toward religion is wholly tactical; it will be
pursued only as it contributes to a positive image of
the regime, as evidenced by his failure to loosen the
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case for a less hostile relationship. Ever since the
Grenada intervention in 1983, Castro has been con-
cerned about improving the US press coverage of
Cuba. He seems determined to create a constituency
in the United States that will serve as a restraining
factor in Washington's Central America policy and
will promote expectation of great economic benefits
for the United States in restoring commercial ties
with Havana.
Elsewhere, we believe that Cuba will try to address its
economic problems directly by increasing its efforts to
export surplus labor for hard currency. Castro's sug-
gestion of years ago that Cuban workers go to Siberia
to cut timber may yet come to fruition. He probably
also entertains hopes that Cuban labor can be export-
ed to Iran and Iraq once the war there ends, and,
despite the odds, he may continue to seek a peacemak-
er role in that conflict as a means of enhancing his
prestige in the Third World as well as for economic
reasons.
A new urgency will probably be added to expanding
the tourist industry in Cuba, which will require
significant investment in hotel construction and relat-
ed facilities. The two Cuban airlines, Cubana and
Aerocaribe, may look for additional aircraft to maxi-
mize the profit from the flow of tourists. In addition
to a drive to boost exports, Havana will also increase
its efforts to sell services abroad; Cuban commercial
representatives in Western Europe, for example, act
as purchasing agents for Angola, and Cuban front
companies do business in more than a dozen countries,
have been hints in recent speeches that the armed
forces will have to share economic cutbacks along
with the civilian bureaucracy.
Implications for the United States
In our judgment, the economic pressures Castro is
now facing will not be sufficient to bring about any
breakthrough on the two key policy issues: relations
with the Soviets and support for foreign revolutionary
movements. Abandoning ties with Moscow would be
suicidal for the Cuban economy and the military
establishment, and abandoning foreign revolutionary
movements would be a betrayal of the very core of the
philosophy of Castroism. Indeed, it is largely Soviet
pressure that is influencing Castro to make the cur-
rent policy shifts, and the direction he is now taking
appears to have gained Moscow's blessing and helped
the bilateral relationship recover from the period of
coolness it experienced in mid-1984. As for halting
arms shipments and other support for guerrillas,
Castro recently told Washington Post editors "if that
is the price for improved relations with the United
States, we cannot pay that price." He has maintained
since the 1960s that these two issues involve immuta-
ble principles of his revolution and thus are not, and
never will be, negotiable. He reaffirmed this position
during his recent lengthy interview on US television,
and his chief of policy toward Latin America, Manuel
Pineiro, bluntly admitted to a visiting US official in
February that Cuba continues to support-with arms,
equipment, and training-insurgents in El Salvador,
Guatemala, and Chile.
Regardless of the exact mix of economic and diplo-
matic moves, if this period parallels the last era of
pragamatist predominance in the 1970s, there will be
a shifting of top military officers to the civilian sector
to bring to the bureaucracy much-needed discipline
and administrative talent. There are already some
tentative indicators that such changes are in the
offing for senior military personnel. We believe they
are intended, at least in part, to make headroom for
young professionals in the military establishment as
well as to increase civilian regimentation-the latter
was a major feature of the pragmatists' policy in the
late 1960s and early 1970s. Although there is no
evidence that the regime is considering military per-
sonnel cutbacks of the magnitude of that era, there
This is not to say that Castro would not take a more
judicious approach to launching new guerrilla opera-
tions in the region if the economic equities in his
relationship with the United States were enhanced.
We believe, for example, that a restoration of trade
with the United States would give him a vested
interest in more acceptable international behavior.
Moreover, popular expectations certain to be fueled
by a resumption of trade would increase the domestic
cost to Castro of taking some precipitate action that
was likely to cause Washington to reinstitute the
"economic blockade." A resumption of trade would
also enhance the position of the pragmatists in the
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leadership and create a constituency that would have
a vital interest in maintaining improved ties. This
almost certainly would not deter Castro from involve-
ment in some especially promising new opportunity
for subversion-against Pinochet in Chile, perhaps, or
Stroessner in Paraguay-that might arise, nor would
it prevent him from meddling in such ways as financ-
ing electoral candidates or training trade union cadres
in how to gain influence; but we believe it would
increase his.reluctance to promote "armed struggle"
where success is uncertain.)
The pressures on Castro will probably make him more
amenable to negotiate solutions to other, less critical
bilateral matters-a new antihijacking agreement,
perhaps-and to be more flexible on multilateral
issues. On Central America, for example, we believe
he now sees negotiations as a means of preserving a
flagging insurgency in El Salvador and buying time
for the Sandinistas in Nicaragua. In addition to
providing him with a veneer of statesmanship, negoti-
ations, in our opinion, are appealing to Castro because
they hold the promise of achieving international legiti-
macy for the Salvadoran insurgents-something they
have not been able to gain through force of arms-as
well as providing at least tacit international approval
of Cuba's self-assumed right to determine which
regimes in the region are fit to govern and which are
not. We see nothing to convince us, however, that the
Cubans, as inexperienced as they are in compromise,
are ready to make any concessions on Central Ameri-
can issues that might threaten the consolidation of the
Sandinistas' grip on power or undermine the political
or military strength of the Salvadoran insurgents.
Neither do we see anything in Castro's new mood that
suggests a lessening of his basic aversion for and
distrust of the United States. Indeed, the fact that
circumstances-economic problems plus Soviet and
US pressure-have put him openly on the defensive is
likely to reinforce his personal antipathy for the
United States as well as his determination to persist in
what he sees as his historic mission against imperial-
ism. Moreover, he knows he cannot relax his overt
hostility toward Washington without the risk of feed-
ing popular expectations that an imminent improve-
ment in relations with the United States will bring
immediate economic relief, and, in our opinion, he
wants no such internal pressure that might limit his
policy options. In a sense, he is a captive of his own
anti-US bias.)
Indeed, under some conditions, we believe Cuban-US
relations could take a turn for the worse despite the
pragmatists' hopes of eventually gaining access to US
markets. If Castro became convinced that Radio
Marti was playing a key role in inciting the popula-
tion, or if austerity boosted popular dissatisfaction to
a dangerous level, he could unleash another Mariel
refugee exodus. As 1980 proved, Castro is not beyond
undertaking some precipitate action that is detrimen-
tal to Cuba if it helps to satisfy his desire to punish
the United States. Because of his current economic
headaches and the grim prospects for the future,
Castro seems willing to negotiate a more comfortable
modus vivendi with the United States, but we see no
chance that he will permit any fundamental change in
the adversarial nature of the relationship. F_~
At the same time, Castro's relationships with other
countries, particularly in South America, are likely to
improve, and the United States will almost certainly
be faced with greater challenges in maintaining the
effectiveness of its economic denial program against
Cuba. The dissipation of Cuba's diplomatic isolation
would enhance Castro's potential for troublemaking
in multilateral forums, and Cuba's greater interna-
tional respectability would probably provoke criticism
of Washington, even from some of its allies, for not
reacting in a positive way to the "reborn" Castro.
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Appendix
Key Hardline
and Pragmatist Personalities
Hardliners generally are veterans of the 1956-58 guerrilla war against
Batista. They occupy positions of responsibility primarily in the armed
forces, the Interior Ministry, and the ideological apparatus. Their most
influential representatives include the following.
Raul Castro
Former guerrilla leader; has been Armed Forces Minister since 1959;
charter member of the Politburo; second only to Fidel in the party,
government, and military establishment; constitutional successor to Fidel;
bitterly anti-US.
Ramiro Valdes
Guerrilla veteran; charter member of the Politburo; as Interior Minister
(1961-68, 1979 present), controls Border Guard, police, internal security
forces, and foreign intelligence collection agency; Vice President of
Councils of State and Ministers; well-earned reputation for ruthlessness.
Antonio Perez Herrero
Guerrilla veteran; held various military positions and eventually was
appointed chief political officer for the armed forces with the title of Vice
Minister; named party secretary for ideology in 1973; named alternate
member of the Politburo at the Second Party Congress in December 1980;
ousted from both Politburo and Secretariat posts, but not the Central
Committee, at special plenum of the Central Committee on 31 January
1985.
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Abelardo Colome Ibarra
Guerrilla veteran; held several high military posts; in mid-1960s, report-
edly served with guerrilla groups abroad as adviser; now is First Vice
Minister of the armed forces in charge of all Cuban military operations
abroad; served in both Angola and Ethiopia; has rank of division general;
alternate member of Politburo; member of Council of State.
Arnaldo Ochoa Sanchez
Guerrilla veteran; has held many military posts and served in Angola and
Ethiopia; has rank of division general; appointed Vice Minister of the
armed forces in 1980; at present, is reportedly in charge of Cuban military
and security personnel in Nicaragua.
Pragmatists generally are members of the pre-Castro Communist Party or
are technocrats and involved mainly in positions of responsibility in the
economic area. Their most influential representatives include the
following.
Carlos Rafael Rodriguez
Leader of the pre-Castro Communist Party since 1930s; was Minister
(without portfolio) under Batista; joined Castro's guerrillas in August
1958; charter member of the Politburo; Vice President of Councils of State
and Ministers; oversees Cuban foreign and economic policy; plays major
role in Cuban-Soviet relations.
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Blas Roca
Former secretary general of pre-Castro Communist Party; charter mem-
ber of the Politburo; Vice President of Council of State; former president
of the National Assembly; influence now fading due to age and illness.
Armando Acosta Cordero
Member of the pre-Castro Communist Party; former party chief in Oriente
Province; removed from that post in 1967 during Castro's angry reaction
to Soviet pressure but remained on Central Committee; reportedly
complained successfully to Fidel about beatings given publicly to would-be
emigres by police goons in 1980; now heads neighborhood vigilante groups
(Committees for the Defense of the Revolution); alternate member of the
Politburo.
Lionel Soto Prieto
Member of pre-Castro Communist Party; formerly National Director of
Schools of Revolutionary Instruction; former Cuban Ambassador to Great
Britain; member of the party Secretariat; currently is Cuba's Ambassador
to the USSR.
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Roberto Viega
Prerevolution activities unknown; member of the Council of State; alter-
nate member of the Politburo; heads Cuban Central Organization of
Trade Unions (federation of all labor unions).
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