Foundations and Flexibility:
The Keys to Successful Privatization
By Edward Pauker
Introduction: A Coming Change
with growing economic strain,
it is not the goal of this paper to predict or posit what or when any political
or economic change may occur. It is enough to recognize that
recent dash of capitalism added to
unsurprising, despite the recent relaxation of its foreign investment laws,
The half-baked and
ideologically driven nature of the legislation is only partially to blame.
Foreign investors also must factor in politics. The
will most likely only come when the requisite political changes occur. When
they do, the Cuban government should try a different economic tack. Communism
privatization, property is transferred from governmental control to private
individuals or business entities. The essential mechanics of privatization
operate as follows. Prospective purchasers pool together investment to purchase
the assets formerly owned by the state. After paying the determined price, the
new owners receive the assets, usually separate and distinct from any
liabilities and claims levied upon them. The liabilities and claims are usually
resolved by a separate court using the funds generated by privatization in
general. In this way, claimants and creditors of state-owned enterprises
receive a financial remedy, while the assets involved are transferred to new
private ownership. And because there are a variety of private actors which can purchase
these assets, as opposed to a governmental monopoly, privatization creates
competition. This in turn encourages owners to increase efficiency and quality.
Ultimately, privatization allocates assets to the individuals and entities that
use them most efficiently. By distributing assets to efficient users,
productivity increases and an economy should prosper. And if privatization is successful,
By opening up its borders,
embracing the free market principles and a more democratic political system,
Cubans will be able to enjoy the fruits of their labor and will hopefully prosper.
The sine qua non of privatization,
however, is a termination of most government involvement in the economic sector,
enterprise by enterprise, as each one is sold off. When the state dominates the
economy as it does in
The Necessary Groundwork for Privatization: A Summary
Cuban economy will be no easy task.
First, any privatization program must take full account of the intricacies of the economy on which it is built. The architects of any such program must understand not only the economy, however, but also the legal, financial, and social institutions with which the entities most immediately affected by privatization interact. The spectrum ranges from changes required in the Cuban constitution to its property, business, and financial laws. But the required institutional changes need to be beyond mere paper. The state apparatus that ran, planned and anesthetized the Cuban economy must be dismantled, and the apparatuses that support a private economy need to be developed. Any privatization program should include an appraisal and a reformation, if necessary, of the training for lawyers and judges, the enabling of bar associations. Furthermore, the government will need to reform the accounting and banking institutions, create the businesses to appraise the credit-worthiness of new enterprise, and enable independent regulatory agencies to protect creditors’ rights. It is the changes in these institutions, prior to the commercial effects of a privatization program, will be Cubans’ first point of contact with the new economy.
Any plan to change
Yet reforming the Cuban
economy, the institutions that support it, and understanding the changes
necessary to prevent privatization from being hamstrung by Communist ideology
are only two steps towards the creation of a free-market Cuban economy. Those
may be difficult enough, but privatization must also anticipate and plan for
the inevitable initial sputtering of the Cuban economy after privatization. Privatization
should not begin without planning for such difficulties. A failure to do so
could result in the public turning against privatization. If the public outcry
and re-nationalization that has occurred in South America spreads to
attempt at economic liberalization or privatization must deal with the
contentious and important issue of outstanding expropriations claims. The
expropriations issue involves Cubans currently living on the island, those
living abroad (primarily in the southern
these guidelines the support of the international community is needed. Clearly
Creating a Foundation
requires a healthy context for it to be successful. The context of
privatization refers to the legal framework in which the privatization regime
will operate, as well as the economic and social institutions that are critical
in supporting any real push for privatization. The need to strengthen the legal
and institutional foundations for privatization cannot be overstated. For
whatever form privatization takes in
Some of these changes
should come before others. Before privatization, and if
Enshrining democracy is not the
most critical hallmark of the new constitution. In fact, changes to the
property rights regime must be promulgated regardless of how much the Cuban
government democratizes or decentralizes. The language of the new Cuban
constitution also should openly embrace both the free market and private
property. The specific language regarding property rights need not be based off
the U.S. Constitution, but it should guarantee all Cubans similar rights as
those enjoyed by citizens of the
breadth and detail of the new Cuban constitution is not a chief concern of this
Only a strengthening of these property and contract laws will provide the cooperative framework in which the privatization process can operate. Just as importantly, these changes will enable all Cubans, not just those involved with privatization, to understand and benefit from the newly-created free-market system.
The restructuring of the state apparatus should be wide-ranging, and must encompass both the legal and economic spheres. How great the changes in the social sphere will depend largely on the nature of the political change that precedes privatization.
The redrafting of
Legal and Commercial Institutions
Modernizing Cuban law will only help so much. Two other steps must also be taken in transforming the institutional framework with which privatization interacts. This involves breaking down the institutions and beliefs built up under Communist rule, and replacing them with governmental and civil society groups and institutions that support the new Cuban economy. Regulatory agencies will have to be staffed with professionals competent in many fields requiring specialization in fields in which most Cubans may not be familiar. Thus, during the early stages of the economic transition, the Cuban government should consult frequently with international organizations and foreign specialists who can aid them in developing the necessary expertise in among Cuban nationals.
With the drafting
of a constitution and a change in the organizing principles of its government,
It is the private
sector, however, which is in greater need of legal professionals. In 1992,
there were approximately 1900 lawyers in
Lastly, reform and
training is needed in
An Ideological Shift
on the swiftness of
de-concentrates capital and labor to those that use it most efficiently. It
encourages individualism and competition and through such self-interest,
threatens to stratify and decentralize both the working classes and the
organized social structure. Cuban privatization may not begin with wholesale
capitalist revolution. It may be more closely based on the socially-oriented
market capitalist approach that has transformed
The reason in historical, and while this author does not doubt the zeal and heartiness that individual Cubans will have once private ownership and economic freedom become a reality in Cuba, the residual effects of fifty years of Communism still must be addressed. Castro’s version of Communism mandated that the state control the political, social and economic spheres. And even with the reforms made in the past fifteen years, the two hallmarks of the Cuban economy were bureaucracy and inefficiency. The industries reformed to the greatest extent in the 1990s, the agricultural, artesian, and self-employed restaurateurs, were still strictly regulated by local government ministers. As discussed supra, the legislation allowing for limited joint-ventures is also remarkably inefficient. Each investment and each joint-venture requires individual authorization from the central government. And any local labor required by entities with foreign investment must be contracted through the government.
A Partner for the Transition
Cubans’ taste for
capitalism may not come naturally. Failing to provide a legal, economic and
social framework by which everyday Cubans can access and understand their new
economy would undercut and inhibit its efforts at economic liberalization. In
that regard, the financial and human resources of the international community
will be crucial. Just as critically, the Cuban government must work with the
international community to establish an appropriate entity to organize its
privatization efforts and navigate its inevitable pitfalls. Consultation with
this entity should add to the transparency and competency of
limitation should be the first requirement. The government that administers
this most crucial assistance in the privatization effort should be aware of
But who should
this equal partner be? For political reasons, the
Expropriations: The 500 lb. Gorilla
Even after the
legal and economic restructuring, privatization could still ultimately fail to
resuscitate and transform the Cuban economy. The likely culprit would be a failure
to successfully resolve expropriations claims. Beginning with the revolution in
1959, the communist government seized the private property of foreign,
The claims of
claims should be resolved is open to debate. The first primary concern is
ascertaining a solution which is economically acceptable to the claimants and
politically acceptable to the
Alternative 1: Restitution
There are three remedies most often used to resolve expropriation claims between nations. The first possible remedy, and one which has generated a great deal of debate, is the restitution of expropriated assets to their former owners. A solution to expropriations claims based on restitution, however, is not a one-size-fits-all proposition. The most extreme form of restitution, often called direct restitution, may be appropriate when the identity of the former owners is clearly established, and when the property has not been divided, deteriorated, or transformed in any way. This may be the case with heavy equipment and land that can be salvaged and refitted for use in modern industry. For other property though, or where the assets have been substantially altered in some way, direct restitution may be too difficult a process. It could involve assets deemed indispensable to the public by the Cuban government, or the assets could have already been sold to a foreign investor. If the former owners of such property still demand some form of restitution, then perhaps substitute restitution, using another similar parcel of property or asset would be sufficient. This is the middle of the restitution continuum. Substitutional restitution, however, would only be sufficient for small landowners who, while not receiving their original land, could be assuaged by something similar. For most claimants, however, substitutional restitution would simply be unsatisfactory, and at best, impractical.
claimants, however, restitution remains an attractive option. It restores
claimants as the owners of the expropriated assets, or similar ones. Furthermore,
restitution results simultaneously in the privatization of the transferred
properties, engaging new investors immediately in the new economy. Restitution
provides claimants with an economic stake in the new
But restitution has
many downsides. Specific property may not be available for restitution for the
reasons described above. There may be a dispute as to who the actual owners
are, and there will surely be difficulties in displacing the individuals and
entities that are the current occupants of the property. Because all claims to
such property have to be adjudicated before title could move from the current
owners to the new ones, restitution will end up being a long and difficult
Such a process, while attractive to the claimants for reasons both political
and economic, would end up hurting the new Cuban economy more than it helps.
Resolving these expropriations claims is only a necessary first step towards
revamping the Cuban economy, but if over-emphasized as a remedy, restitution
may stall the new economy before it even gets a chance warm up. While
acknowledging that some restitution may be inevitable for political reasons, the
legal and bureaucratic brambles that accompany restitution are something that
the planners of
Alternative 2: Vouchers
The resolution of expropriations claim should get the new Cuban economy moving. Claimants for whom direct restitution may be too complicated a task and for whom substitutional restitution is unacceptable, vouchers may be the ideal remedy. This remedy would require the Cuban government to issue state-sponsored financial instruments to expropriations claimants for use in the Cuban economy. Claimants would receive neither land, nor cash. Vouchers could be issued by the new Cuban government, to claimants in proportion to the loss suffered, and could have any number of uses. Vouchers could be used, for example to purchase formerly state-owned entities in the privatization program, to purchase other investments instruments in Cuba, as collateral for loans, or redeemed for cash. The voucher system could be the incorporated into expropriations solution that emphasized restitution, or vouchers themselves could be the main emphasis of an expropriations solution. They would be an appropriate solution for many of the small and medium size claims.
providing state-sponsored instruments like vouchers would provide immediate
opportunities for investment and could be used to spur on the privatization
program without economically hamstringing the new government the way a lump sum
payment would, or stalling a fledgling economy as a restitution-based system
threatens to do. Vouchers would not be a total panacea for a new government in
need of fluid capital and fast growth. Vouchers would provide little compensation
to a Cuban government in need of funding. Another obvious danger of an
expropriations solution based on vouchers is that given their flexibility,
vouchers may fluctuate greatly in value if the economy falters. Yet given the
likely broad acceptance of a Cuban government once relations are normalized,
and if the legal and institutional recommendations discussed above are followed
and steady domestic leadership and foreign support are provided, vouchers could
play an integral part in
Alternative 3: A Lump Sum
alternative, a negotiated lump sum payment from
of resolving expropriations through this method is that a large lump sum could
cripple the new Cuban government, whether it was paid at once or over time.
Thus, it is argued that while a lump sum payment might be the quickest choice
to resolve expropriation claims, it could severely damage the Cuban
government’s prospects for growth, thereby failing to meet the second
requirement of successful resolution agreement. But this possible pitfall of a
lump sum payment is more imagined than real. While the detractors of a lump sum
payment are correct to point out that the payment of a large lump sum could
effectively bankrupt the Cuban government, it is doubtful that the
The Mechanics of Cuban Privatization
expropriations dilemma and beginning to lay the foundation for governmental and
economic change are not enough. It is only with a successful privatization
program that the Cuban economy can be transformed. Privatization has the
possibility of empowering an entire new generation of Cubans, and it will put
the legal, sociological and economic foundations of
Privatization has such
a broad effect because it is a process that Cubans will interact with everyday.
Privatization can reach into one’s wallet, head, heart and household and can
provide individual Cuban’s with a sense of hope and a power to change their
lives. On the other hand, privatization can also rupture an individual’s understanding
of government, of one’s economy, of how one make a living and feeds one’s
family. Privatization can be put stress on the fabric of society and a family. Thus,
if privatization is executed poorly, it can devalue any institutional changes
already made and undercut Cubans’ belief in their government. Such an alternative
The keys to building on the foundation will be to create a privatization authority that has the vision, the authority, the manpower, and the flexibility to manage the complexities of privatization. The Cuban government should move to privatize quickly. Rapid privatization would generate capital for the transitional government and provides greater opportunity for Cubans to participate in privatization. To do so, the government first must enact the legislation governing the privatization process. With that in mind, one of the initial steps taken by the government should be the establishment of independent privatization agency tasked with the development, management, and completion of a full privatization of the Cuban economy. The entities subject to privatization should include almost all state-owned enterprises. Having a state agency to manage the privatization of such entities would allow the government to maintain control of some enterprises as it deems necessary for the public good, and would provide a discrete entity with the authority and expertise to wind up the affairs of the former SOEs and ready them for sale to private owners.
This new Cuban privatization agency should have broad, but not unchecked, power. The agency, led by a team of Cuban and foreign nationals, should have the power to transform state-owned enterprises into private ones, and should maintain the authority to manage the enterprise in any way in order to protect or improve the value or viability of the entity. Neither the managers nor the current employees should have any formal power to initiate privatization. This authority should include any power that a CEO or Board of Directors would have over a private enterprise. In its administrative role, the agency should do a proper accounting of the financial state and a physical review of each enterprise under its jurisdiction. The agency should be authorized to maintain the structure of the former SOE, to restructure the SOE, to transform it into more than one enterprise or subsidiary ones, merge it with enterprise, or to liquidate the SOE altogether. Such a decision will be based primarily on the profitability of the SOE as it’s currently structured and prospects that it will be attractive to private investors.
After the assessment and administration period during which the agency sorts out the affairs of the SOE and prepares the enterprise for privatization, the agency should put the former SOE up for sale. The watchword for this tendering process should be one of transparency. Whomever the buyer and whatever the method of sale, the privatization agency should bend over backwards to disclose and publish all information regarding the entity being sold, its possible purchasers, the amounts offered, and on what basis the agency made its decision. Almost all aspects of the bidding process and, quite obviously, the agency’s ultimate decision as to whom the SOE will be sold, should be made public. Further, with so much money flowing in and out of the agency’s control, and with it having the ultimate authority in the development of the new Cuban economy, the agency should engage in a vigorous public relations campaign encouraging trade, investment, and participation in the new economy.
The privatization agency must also determine who has the right to bid on an SOE. If the agency permits only Cuban nationals to invest and purchase SOEs, they would be severely limiting the price which the state could get for a given enterprise. The overriding goal of privatization should be to attract foreign investment. On the other hand, selling simply to the highest bidder, with such a bidder often times being foreign, could create some political backlash. If privatization is mostly externalized, Cubans may feel that they’re losing their country to a foreign presence and that the ongoing political and economic modernization is going on largely without them. The agency may therefore require some national involvement for each bidder, thus making an attempt to maximize profit along with the need to make privatization more palatable at home. On the other hand, the agency could simply alter the bidding requirements given the nature of the enterprise. For example, if the SOE is a well-established hospital or a firm in an industry near and dear to the Cuban identity, the agency could require that any bidder is comprised of a majority of Cuban investors. When the SOEs tendered are more ordinary businesses or undeveloped real property, any such restrictions on bidding should be minimized.
While the agency
should make private investment in
Reacting to Contextual Changes
But the privatization of the Cuban economy will not happen in a vacuum. There will be enormous stress on the social fabric of Cuban society as well as a myriad of political difficulties. Therefore, the aim of the privatization agency in modernizing the Cuban economy must be balanced by other socio-political needs. This should not be seen as reigning in privatization, but instead, as understanding privatization as it truly happens. Similarly, the Cubans and internationals running the privatization agency should not interpret an accounting for political and social considerations as an encroachment on their turf. The mechanics of the privatization process, the transformation of the SOEs, the manner of their sale, and to whom they will be sold, will still be handled by the agency.
The reality is that privatization is an attempt at transforming an economy in a a country already in transition. Taking account of socio-political considerations may appear to temper or slow down the privatization process. In fact, such considerations will make it easier to sustain the new economy, and will ultimately make its chances of success more possible. The development of legal and financial institutions, a free-market mentality and an entrepreneurial class will continue to develop concurrent with and following privatization. These factors will affect the impact and effectiveness of the privatization, no matter how well-planned the program.
Thus, one of the keys
to a successful privatization process, whatever form it takes, must be
responsive to the needs, though not the whims, of the Cuban people. The
reaction on the Cuban street and the changing political landscape will impact
privatization whether the architects of the agency’s policies like it or not.
The agency should therefore not be afraid to alter its strategy. If they
believe the developing economy requires a broad and direct infusion of capital,
then it should not hesitate to issue vouchers. If the agency plans for and
prepares for such possibilities, they can either structure the privatization
process to anticipate them and deal with them from the start, or simply have their
responses ready and shape privatization as the economic and social landscape
changes. But however privatization goes, the agency must remain flexible and
Getting Off the Blocks
One of the key determinants of whether a successful free market economy can be implemented is the engendering the support of the majority of the Cuban population. The agency must start privatization off on the right foot. If the goal is to free up assets and privatize the economy as rapidly as possible, the agency should choose its first targets carefully. It could start by selecting small SOEs, either pieces of land or business that ordinary Cubans could bid on and successfully operate. Targeting middle class Cubans and focusing on privatizing these smaller assets could spread an understanding that the new privatization process would work for everyone, not solely wealthy Cubans or foreign investors. Another, competing, possibility is that the agency tender some of the larger SOEs first, in particular focusing on businesses or a high-profile industry that would offer employment opportunities to many Cubans. An initial step such as this would be a high visibility example of how privatization works.
Either choice would be fine, with the latter perhaps offering great opportunity to market privatization across the island. The agency can either start with small or large SOEs, building momentum for privatization incremental steps or opting for a big bang, but either way, the first enterprises should involve mainly Cuban investors. Given the possibility that there will be lingering effects of communist ideology and perhaps a distrust of the new regime, demonstrating the benefit of privatization early on, and to as many Cubans as possible, will help generate the required national support for the program so that it can start off with an injection of enthusiasm it needs to take hold.
Managing the Critics
matter how well planned a privatization program is, there is no guaranteeing
its success. An effective initial wave of privatization will woo both foreign
and ordinary Cuban investors and promote support for the government’s new
policies. But there will be collateral damage as well. Successful privatization
will displace old owners, managers, and lifelong anti-capitalist beliefs, all
of which is sure to breed resentment. The mistrust of the government’s leadership
could spread to the privatization agency. Any rumors of corruption or undue
influence could effectively hamstring privatization. This backlash to the
economic and social displacement caused by privatization could boil up into
social unrest and a political challenge. Or simmer at a manageable level. The
former of the two possibilities is a real threat. All over
agency, however, should administer privatization in such a way that accounts
for these political tendencies. Clearly, agency should seek to limit criticism
of its own management of the privatization process. Again, transparency and
public relations will be paramount. The agency’s operating budget should be available
to the public, its central and regional offices and staff accessible. Every
Cuban doesn’t have access to the agency’s website or offices, and some critics
will not be swayed by any assurances. The structure of the agency’s management
should do as much as it can to keep any accusation of corruption to a minimum.
The assumption is that the foreign advisers, with less familial and economic
ties the Cubans bidding on privatization, would be less susceptible to any
bribes or undue influence. The existence of foreigners in the leadership of the
privatization agency is not without its disadvantages. The appearance of too
much foreign involvement in the agency’s power structure may cause some Cubans
to think that foreign investors will the main beneficiaries of privatization.
In effect, such critics may come to see privatization as an avenue for foreign
investors to buy up Cuban land on the cheap and as a more general threat to
One way to stem this possibility is for Cuban national to retain a reasonably high level of control over the privatization agency. It would a grave mistake, however, if the privatization agency was viewed by the public as anything but a distinctly Cuban program. . At the very least, the agency’s Cuban staff should be the most active in meeting with local investors and promoting privatization to the public. Ideally, the agency should be staffed and managed by a combination of Cuban nationals and foreign advisers. Thus, by actively promoting privatization and vesting much of its power in the hands of respected and trusted local leaders, the privatization agency will itself be an example of how the new economy can benefit Cuban interests most of all.
Unfortunately, whatever the agency’s management plan, and however smooth a transition seems, a Cuban privatization program will not be immune to political influences, be they local, regional, or global. Thus, the agency should plan for how it might deal with the growing dislike of the free-market system that has plagued economic reformers in hemisphere’s recent past. There are primarily two ways by which the privatization agency could cool down any reactionary anti-capitalist fervor.
First, the agency could limit the scope of privatization, specifically by maintaining state control over the industries that stir Cuban jingoism. If Cubans begin to get leery about whether privatization really benefits them and not solely foreign investors, then some state involvement could reassure them. Particular candidates would most likely be in the energy, utility, or health industries. The reasons for limiting the amount of privatization in these industries are solely political. Attracting the highest bidder with the most experience and operational aptitude in those industries must still be the clear main goal of the privatization agency. And though this strategy could undercut that in some way by closing businesses off to foreign bidders, the political mechanics of privatization seem to council for a strategy that accounts for the possibility of dissatisfaction.
Tempering privatization in such a way has its drawbacks. If the agency decides that the state should retain complete control in certain industries, or that only Cubans could bid, foreign investors may become wary of whether the economy will be a free market in earnest. Retaining state control or limiting the pool of bidders also could eliminate from bidding the investment team most likely to make the new enterprise a successful one. Maintaining state control of businesses goes a step to far, however, and limiting bidding to only Cuban nations would continue privatization while providing comparable political reassurance. With that in mind, the leasehold option, whereby the state retains ownership but leases a business to the highest bidder, should be eliminated. Thus, the agency should select a few industries not to be sold to the highest, and presumably foreign, bidder. For such enterprises, the agency should require any investment team to be more than 50% Cuban. This requirement should apply to very few businesses. Such joint ventures would sustain the capital flow from foreign investors while thwarting any fears among Cubans that they are selling their country away.
There’s also danger if the agency completely fails to plan for a negative reaction and imposes these limitations only when they’ve become politically necessary. If privatization progresses without any limits as to potential bidders or without retaining any state control, then any change of course, especially one in which the state reasserts itself in the economy, will be taken as a warning by future foreign investment. Foreign investors would fear that politics was causing the economic tide to turn once again. Waiting for internal politics to determine the scope of privatization would be unwise. Thus, even though limiting potential bidders for key industries or retaining state control could reign in privatization before it truly begins, a preemptive decision is preferable to a reactionary one. Hopefully, by announcing and initiating full privatization with one strategic limitation, the agency will broaden support among Cubans, and encourage foreign investors to invest in a privatization process that is closely attuned to the economic and political realities that may impact it.
The second of the
two possibilities for winning over a hesitant public involves a small bit of
The issuance of vouchers should be limited however to a very specific group of employees so as not to unduly complicate the privatization process. The agency should only issue vouchers to employees involuntarily displaced by privatization. The first requirement is that such an employee would have to have been employed by the privatized SOE at the date of privatization. The employee also must not have voluntarily quit his job after privatization. All such employees must not be above any mandatory retirement age. If the employee meets these requirements, then the amount of vouchers they receive would be determined by the period of time they worked for the SOE in question. The longer a terminated employee worked for a now-privatized SOE, the more vouchers such an employee would receive. The vouchers could then be used in any manner of ways, as cash for example, or to invest in a bid for a SOE.
The only individuals to receive these vouchers
would be those employees who were laid off by the private management or because
a former SOE was liquidated, though some employees who worked for SOE may
continue to work for the same business, though under new private ownership.
Such a provision would hopefully ease any economic growing pains of
voucher system and a strategic limitation on privatizing selected industries
are two small steps that could ease any difficulties caused by the economic
restructuring. They should be effective enough to make privatization more
palatable to its Cuban critics. Enacting any further measures could make
privatization overly burdensome to possible investors. It would be foolish,
however, to think that even the best privatization system would work perfectly.
No matter how well prepared its leaders are, political and economic realities
may change, and the needs of a privatization program should change with them.
Some rough patches are inevitable. Yet just as Cubans shouldn’t fear the risk
that comes with the free-market, the agency leading privatization should not be
afraid to make the difficult decisions regarding its operational policies.
Privatization should proceed swiftly, and by accounting for
Some Necessary Oversight
promulgation of new laws and a transformation of its economy,
As mentioned earlier, privatization will not pass without any challenges. Some will be political, some economic, and some based on legal argument. It is the task of the privatization tribunal to only deal with the latter. The first rule of any privatization tribunal should be to do no great harm to the overall privatization process. The tribunal, therefore, should decide cases quickly but judiciously. It must understand that while its secondary role may be to demonstrate the correct operation of rule of law principles, its primary obligation is to shepherd the privatization process along while making sure it abides by Cuban and international law. With responsible oversight and a clear vision of its place in the process, the tribunal can ensure privatization continues smoothly and withstands any legal challenges. If the court accomplishes this task, then privatization will succeed in transforming and modernizing the Cuban economy.
Conclusion: Selling the System
successful privatization depends on more than just a solid foundation, a
well-planned privatization program, and an effective tribunal. It is only the
individuals directing the privatization effort and, more importantly, the
leaders of the Cuban government, that can make the transition to a free market
a smooth one.
If the leaders of
the new economy fail to integrate a plan for privatization with
 Christy M. DeMelfi, Nothing But the Facts: An In-depth Analysis of the Effects of Economic Sanctions Against Cuba [hereinafter Nothing But the Facts]. 5 J. Int’l. Bus. & L. 137, 159 (Spring 2006).
 For comparison, the GDP per capita in the
Dual Economy Could Trouble Cuban Peso, The
H. Castañeda, Key Lessons Learned From
the Transition to a Market Economy in Asia, Europe, and Latin America Over the
Last 15 Years: Application to
 Key Lessons, at 294.
 See Surprising Experts,
 See A Party Without
 See Larry Cata Backer, Cuban Corporate Governance at a Crossroads: Cuban Marxism, Private Economic Collectives, and Free Market Globalism [hereinafter Cuban Corporate Governance], 14 Transnat’l L. & Contemp. Probs. 337, 366-367 (Fall 2004).
F. Travieso-Diaz, The Laws and Legal
System of Free Market Cuba: A Prospective for Business [hereinafter Free Market
 Cuban Corporate Governance, at 366-367
 Free Market
 Cuban Corporate Governance, at 367.
 Free Market
 Carmelo Mesa-Lago, The Cuban Economy in 2004-2005. [hereinafter Mesa-Lago], Cuba in Transition, Volume 15: Papers and Proceedings of the Fifteenth Annual Meeting of the Association for the Study of the Cuban Economy (ASCE) Miami, Florida August 4–6, 2005, p. 12.
 Mesa-Lago, at 12.
 Cuban Corporate Governance, at 369.
 See 22 U.S.C. 6021-91. The Cuban Liberty
and Democratic Solidarity Act of 1995, also known as the Helms-Burton Act
reaffirmed and strengthened the U.S. embargo of Cuba. It pledged to support a
democratically-elected transition government and most importantly, imposed
sanctions and penalties on foreign companies trading with
 See generally Cuban Corporate Governance, 385-404.
 Free Market
 See http://pdba.georgetown.edu/Constitutions/Cuba/cuba2002.html, last visited on November 6, 2006.
generally, Matias F. Travieso-Diaz, Legal Foundations for a Successful
Privatization Program in
 Cuban Corporate Governance, at 374.
 Key Lessons, at 300.
Jorge, Privatization, Reconstruction and Socio-Economic Development in
Luis P. Salas, The Maintenance of Internal Order in
 Salas, at 256.
 Free Market
 Id, at 54.
F. Travieso-Diaz and Armando A. Musa, Courts of Limited Jurisdiction in a
 Free Market
 See Article 121, http://pdba.georgetown.edu/Constitutions/Cuba/cuba2002.html, last visited on November 6, 2006
 See generally, Travieso-Diaz and Musa, 136-141.
 See Constitucion De La Republica de Cuba,
art. 14. “En la Republica de Cuba rige el
sistema de economia basado en la propriedad socialista de todo el pueblo sobre
los medios fundamentales de produccion y en la suppression de la explotacion
 See generally, Cuban Corporate Governance at 390-392.
 Cuban Corporate Governance, at 368.
J. Fernández, Continuity and Change in
 Fernández, at 53.
 For a brief description of the legal foundations for such seizures, see Matias F. Travieso-Diaz Esq., Alternative Recommendations for Dealing with Expropriated U.S. Property in Post-Castro Cuba [hereinafter Alternative Recommendations], Cuba in Transition, Volume 12: Papers and Proceedings of the Fifteenth Annual Meeting of the Association for the Study of the Cuban Economy (ASCE) Coral Gables, Florida August 1–3, 2002, page 103-104.
 See Free Market
 Alternative Recommendations, at 105.
 Free Market
 See E.
Hernández-Catá, Institutions to Accompany the Market in
 Hernández-Catá, at 15.
 Free Market
 See Free Market
 Legal Foundations, at 1043.
 See Free Market
 Legal Foundations, at 1007.
 See generally The World: Latin America Looks Leftward Again, Juan Ferrero, The New York Times, December 18, 2005.