Cuba: catching kleptocrats

Cuba: catching kleptocrats
As soon as the government eases up its controls, company managers tend
to start cooking the books.
Nick Miroff May 5, 2011 06:36
Cuba business 2011 05 02

HAVANA, Cuba — "Centralization" has become a bad word in the Cuban
lexicon lately, blamed by President Raul Castro as the source of the
island's enervating bureaucracy and economic stagnation.

As part of his economic reform push, Castro wants to give more
independence to Cuba's state companies and local governments, freeing
them from the need to obtain Havana's permission for every little
decision and expenditure.

But a series of corruption scandals among Cuban executives in recent
months has been a reminder as to how the island's state-run economy got
so centralized in the first place. As soon as the government eases up
its controls, company managers steeped in graft tend to get even greedier.

Nearly a dozen executives from Cuba's Habanos S.A. tobacco company are
now in police custody, suspected of taking bribes and kickbacks on
millions worth of premium Cuban cigars, The Economist reported last week.

It was hardly the worst recent case of Cuban managers appropriating
"social property" as their own. Rogelio Acevedo, the country's former
top aviation official, was arrested last year for allegedly running a
side business that chartered jets of the national airline, Cubana de
Aviacion, for outrageous personal profit. There are also new reports
this week that executives in the country's lucrative nickel-processing
industry are in custody and facing corruption charges.

The wave of arrests is no fluke. Castro created a special Comptroller
General's Office in 2009 to audit and investigate state companies, and
it's unknown how many crooked administrators have been snared since
then. The closer scrutiny is a key part of Castro's plan to give Cuban
managers more administrative leeway in order to make their state-run
business more profitable, while also adding new layers of oversight.

In his speech to open last month's Communist Party Congress in Havana —
the first major event of its kind in 14 years — Castro described Cuban
administrators as frozen with inertia and unable to make decisions on
their own.

"The lesson taught by practical experience is that an excessive
centralization inhibits the development of initiatives in the society
and in the entire production line, where the cadres got used to having
everything decided 'at the top' and thus ceased feeling responsible for
the outcome of the entities they headed," Castro said.

Still, it's not hard to imagine the temptations faced by Cuba's captains
of socialist industry. While working long hours for miniscule pay, they
are expected to uphold the ideals of self-sacrifice and austerity, yet
their lifestyles and business relationships require them to wine and
dine with fantastically wealthy capitalist counterparts. Many have tens
of millions of government dollars under their management, despite
drawing salaries that — at least officially — amount to not much more
than the average Cuban wage of $20 a month.

The rise and fall of top Cuban executive Pedro Alvarez is a case in
point, and one of the more embarrassing ones for the Cuban government.
As the longtime head of the state food import agency, Alimport, Alvarez
arranged billions' worth of bulk food purchases abroad, much of it from
the United States under a special exemption to the Cuban embargo.

For the U.S. farmers and agricultural executives who did business with
Cuba, Alvarez was the face of the Castro government. In 2008, he
negotiated the purchase of $711 million worth of U.S. foodstuffs, an
all-time high.

Only now Alvarez is reportedly living in Tampa, after fleeing Cuba in
December amid rumors he'd skimmed a personal fortune from the food
deals. According to Miami news accounts, Alvarez left the island by
sneaking through the Havana airport dressed as a woman.

Historically, the Cuban government has promoted military officers to
executive positions at state companies in part to discourage corruption,
but they have hardly been immune to the temptations of high-volume commerce.

Acevedo, the disgraced aviation official, was a Cuban army general who
fought as a guerrilla soldier under the original icon of Cuban workplace
rectitude, Ernesto "Che" Guevara. And Cuba's most notorious corruption
case came in 1989 with the stunning trial of top military commander Gen.
Arnoldo Ochoa, who was convicted of treason and sent to the firing squad
for his role in a drug-trafficking scheme.

On balance, Cuba tends to rank relatively low on corruption indices in
comparison to other countries in the region, rated 69 out of 178 nations
evaluated last year by Transparency International. Among Latin American
states, only Chile, Uruguay and Costa Rica ranked better.

Still, kickbacks and "commissions" are standard practice among Cuban
executives who make bulk purchases abroad on behalf of the government.
They then stash the money in foreign bank accounts or with relatives abroad.

Cuba's Comptroller General Office's is currently engaged in an audit of
750 state companies, sending 3,000 investigators to look into "all
sectors, all organizations and territories" and evaluate "discipline,
legality and economic control," Comptroller General Gladys Bejerano
announced on state television last month. So more managers may fall in
the coming weeks.

http://www.globalpost.com/dispatch/news/regions/americas/cuba/110503/corruption-raul-castro