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U.S. Business Interests in Cuba and the Rise of Castro

  • Leland L. Johnson (a1)

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Private investment in Latin America by citizens of the United States, as well as in other less-developed areas of the world, is widely regarded as a valuable—if not an indispensable—component of the overall U.S. foreign assistance program. By quickly identifying and exploring promising new business opportunities, and by providing financial resources and human skills required to translate them into going ventures, U.S. investment activities can make a vital contribution to economic development. Recognizing the role of private investment in furthering its national interests, the U.S. government has for a number of years sought to promote the flow of new investment: a rapidly growing investment guarantee program, direct government loans to eligible private investors, and investment information services are some of the instruments employed by the government in pursuing this objective. To provide additional incentives, a bill currently before Congress stipulates that U.S. investors making certain kinds of new investments in eligible, less-developed countries would be permitted to deduct 30 per cent of the cost of the investment from their total federal income-tax obligations.

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1 Direct investment flow is loosely defined to include the flow of equity and loan investments from U.S. residents to foreign firms controlled by U.S. interests. The book value of direct investment enterprises includes the U.S. ownership of equity capital, loan capital, branch accounts, and intercompany accounts in foreign firms controlled by U.S. interests. For more precise definitions and a treatment of methodology, see U.S. Department of Commerce, U.S. Business Investments in Foreign Countries (Washington, D.C., 1960), 7685.

2 U.S. Department of Commerce, Bureau of Foreign Commerce, Investment in Cuba (Washington, D.C., 1956), 10.

3 Wall Street Journal, January 8, 1959.

4 These statements are from Castro's “History Will Absolve Me” speech (October 6, 1953), as quoted in Dubois, Jules, Fidel Castro, Rebel—Liberator or Dictator? (Indianapolis 1959), 7071.

5 The manifesto is reproduced in Gonzalez Pedrero, Enrique, La Revolucion Cubana (Mexico City, Escuela Nacional de Ciencias Politicas y Sociales, 1959). See p. 89 for the relevant passage.

6 Phillips, R. Hart, Cuba, Island of Paradox (New York 1959), 335–36.

7 The government intervenors exercised management functions, while ownership remained unchanged.

8 New York Times, January 13, 1960, 49.

9 Ibid., October 27, 1959, 3.

10 Ibid., February 6, 1960, 1, and March 21, 1, respectively.

11 Ibid., August 21, 1960, Section III, 1. See also June 24, 1960, 1.

12 Ibid., July 8, 1960, 1.

13 Ibid., August 9, 1960, 3.

14 Ibid., August 14, 1960, 1.

15 Ibid., August 25, 1960, 12.

16 Ibid.

17 Szulc, Tad, The Winds of Revolution (New York 1963), 135.

18 Many economists have observed that rates of return to public utilities are typically held to very low levels by Latin American governments. On the one hand, these enterprises face criticism for the poor service they render; on the other hand, they cannot render better service because the rates they are allowed to charge consumers are too low to cover an expansion of investment. (See Cavers, D. F. and Nelson, J. R., Electric Power Regulation in Latin America, Baltimore 1959.) According to one source, the rate of return of the Cuban Telephone Company over a 38-year period was only about 4 per cent—far below the rate generally allowed in the United States. (New York Times, October 13, 1960, 34.)

19 Taber, Robert, M-26: The Biography of a Revolution (New York 1961), 124; Dubois, 154.

20 Dubois, 153.

21 Taber, 125.

22 Dubois, 155–56.

23 For a discussion of these events, see Lincoln, Freeman, “What Has Happened to Cuban Business?” Fortune (September 1959), 110ff.

24 Shapiro, Samuel, “Cuba: A Dissenting Report,” New Republic, September 12, 1960, 12.

25 U.S. Department of Commerce, Office of Business Economics, U.S. Investments in the Latin American Economy (Washington, D.C., 1957), 47.

26 One might argue that in terms of dynamic comparative advantage, as distinguished from the static case, perhaps Cuba's advantage was not so clearly in sugar. But we need not treat the possibility here. Rather the point made below is that even if concentration in sugar was in Cuba's economic interests (measured in terms of aggregate gross national income), it raised political problems and may have worked to the detriment of the United States during the revolution.

27 U.S. Department of Commerce, Bureau of Foreign Commerce, Investment in Cuba (Washington, D.C., 1956), 5.

28 Ibid., 7 and 139.

29 Taber, 303.

30 New York Times, March 5, 1960, 1.

31 Huberman, Leo and Sweezy, Paul M., Cuba: Anatomy of a Revolution (New York 1961), 180.

32 This is true unless, of course, the threat is believed to be so effective that the hostile government would quickly fall and little injury would be inflicted on these U.S. business interests.

33 A brief discussion of this issue appears in a letter to the editor by Professor Kahn, Alfred, New York Times, July 10, 1960, Section IV, 10.

* Any views expressed in this paper are those of the author. They should not be interpreted as reflecting the views of The RAND Corporation or the official opinion or policy of any of its governmental or private research sponsors.

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World Politics
  • ISSN: 0043-8871
  • EISSN: 1086-3338
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