Cuba's military money machine

Posted on Sun, Aug. 06, 2006

Cuba's military money machine

Under the leadership of defense minister Raul Castro, the country's
military is a powerful political and economic force.
BY FRANCES ROBLES
frobles@MiamiHerald.com

Tourists who sleep in some of Cuba's hotels, drive rental cars, fill up
their gas tanks, and even those riding in taxis have something in
common: They are contributing to the Revolutionary Armed Forces' bottom
line.

The same goes for anyone who has puffed on an exported Cuban cigar,
visited Havana's El Morro castle or hopped a domestic flight in Cuba.

In a post-Soviet Cuba, this military is not a repressive apparatus out
to stifle dissent; it's a money machine that runs not only much of the
tourism sector, but the sugar, naval and retail industries, as well.

Military enterprises now control an estimated 90 percent of the nation's
exports and 60 percent of its tourism revenue, and employ 20 percent of
state workers.

''The military's job is to make money,'' said Frank Mora, a professor at
the National War College in Washington. ``Power in Cuba is not just a
question of who holds the guns, although that helps. More important is
who controls what is profitable.''

In Cuba, that's the men in green.

As nearly 80-year-old Fidel Castro reportedly recuperates from
gastrointestinal surgery and his brother, Defense Minister Raúl Castro,
takes over, the role of the Revolutionary Armed Forces, or FAR, has
never been more critical. The pressure to deliver will be on the armed
forces that Raúl created and transformed.

Cubans who have suffered years of shortages will be looking to Raúl
Castro and his military -- highly respected in Cuba -- to address
crucial deficiencies in housing, transportation, food and medicine.
Experts say the younger class of rising military stars who run Cuba's
commercial enterprises using economic models they learned in European
business schools just might be able to do it.

The government appears to be feeling the pressure. Just three days after
Castro's shocking announcement that he had turned power over to his
brother, the state newspaper Granma featured an article about the
military sprucing up and modernizing its equipment.

The military is also considered more inclined toward reforms and more
qualified to execute them, making them an organization that could help
sustain the socialist government in a post-Fidel scenario, experts say.

''It's the only institution that has legitimacy in Cuba,'' said Armando
Mastrapa, who runs a website about the Cuban military
(www.cubapolidata.com). ``I don't see how Raúl could continue without it.''

Fiercely loyal, the military has never in its 47-year history staged a
coup attempt to topple the Castros and has rarely been directly involved
in cracking down on political dissent.

Raúl Castro created the FAR in 1959 with the guerrilla forces that
toppled dictator Fulgencio Batista. Raúl is credited with transforming
the ragtag revolutionaries into a real army. Dubbed ''the historics,''
some of those original revolutionaries still occupy high-ranking
positions in the military.

NO MORE SUBSIDIES

The military gained experience in combat during its involvement in
African wars in the 1970s. Thousands of Cubans fought and died in
Angola, and many survivors now make up another circle of respected officers.

That was back when the FAR enjoyed massive subsidies from the Soviet
Union. From 1960 until 1990, it received up to $19 billion in Soviet
subsidies, and defense expenses made up 13 percent of the national
budget, according to Mora's research.

With about 150 Soviet-supplied fighters, including MiG Floggers and
Fulcrums, the Cuban armed forces were considered the best-equipped
military in Latin America.

The collapse of the Soviet Union dealt a blow to the FAR. Suddenly, it
had more than 220,000 troops and no money to pay for them.

From 1988 to 1991, its budget was cut nearly in half, Mora said. By
1998, a U.S. Defense Intelligence Agency report described Cuba's armed
forces as one with mothballed equipment, a navy with no functioning
submarines and an air force with fewer than two dozen operational
warplanes. Its troop strength dropped to about 55,000 soldiers.

The Cuban military meanwhile needed to find a way to pay for itself, so
the FAR started experimenting with Western-styled business management
techniques and began running parts of the economy.

Raúl Castro formed GAESA, or Business Administration Group, the FAR's
holding company for the Defense Ministry's economic interests. At the
helm: Col. Luis Alberto Rodríguez, Raúl's son-in-law, known as a Raúl
loyalist and sharp businessman.

Based on the fourth floor of the Armed Forces Ministry, GAESA did $1
billion in business in 2000 alone through a long string of GAESA-owned
companies, experts say.

MILITARY TO POLITICS

The FAR's powers extend well beyond GAESA, however.

Half of the now 20 members of the politburo are active military
officers, and generals are in charge of several ministries, including
sugar and fisheries.

By 1996, Mora said, the FAR was generating enough revenue to pay half of
its own budget.

The military ''enjoyed the best of both worlds,'' Mora said, because it
was able to profit from its businesses while leaving the political
repression to the Ministry of Interior, which runs the police and the
state security agency.

But even within the armed forces, there are potentially problematic
divisions, he added.

'They went to wars abroad. They worked in the fields. These were the
`heroic FAR.' These are the good guys. They have garnered a lot of
respect,'' said Mora. ``But that has begun to change, because now there
are generals who live a little bit better.''

Former military officer Eugenio Yáñez, author of Secretos de Generales
(Generals' Secrets) said the perks obtained through the officers'
connections are not luxurious -- maybe a computer or a trip abroad --
but they are valuable enough to spark jealousies.

''They live a life of privilege,'' he said of the officers. ``I'm not
talking things that would be considered privileges in Hialeah, but they
are in Cuba. Of course there are jealousies.''

Experts say that fissure could cause problems for Raúl in the long run.
On the other hand, they add, those who have benefited have a vested
interest in keeping the status quo.

''These are political animals,'' said Domingo Amuchástegui, a former
Cuban intelligence officer who defected in 1994 and now lives in South
Florida. ``They are not guerrillas. They are professional politicians.
They're just like American generals who retire and become CEOs -- but
these are going to work at state-owned joint ventures.''

He said Raúl Castro and his team -- military and civilian -- are likely
to push reforms forward. Each time Cuba experimented with farmers'
markets where uncontrolled prices drove up production, it was defense
minister Raúl who pushed them -- and Fidel who shut down all but the
current ones.

If Raúl and the military focus on housing, food and jobs, Cubans are
likely to support them, experts say.

''They have been in a situation for 12 to 15 years where their hands
were tied,'' Amuchástegui said. ``Now they are going to feel they'll
have their big chance to put in practice the knowledge they acquired in
the world's best capitalist institutions.''

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