The company that former CIA Director Michael Hayden says helps Communist China spy on its people, is headed to Havana. The Latin American Herald Tribune China’s Huawei will partner with the Cuban government to sell smartphones in Cuba. If that is the case, Huawei, if it has not done so prior to this report, will become a part of the Cuban surveillance state that spies on civil society, dissidents, resistance leaders, as well as foreign business persons and foreign political leaders visiting the island.
If you’re wondering why I say Huawei will partner with Cuba to sell devices in Cuba, it is because that is the only way to do business in Cuba. The Cuban government requires all foreign companies to partner with government corporations headed by current or former generals. There is no AT&T, Verizon, Sprint, or any other privately held telecommunications companies. All this business flows through one company, ETECSA, a government-owned and operated telecommunications cartel. It is essentially run today by the Ministry of Interior (secret police) and the military.
American companies engaging in telecommunications transactions in Cuba should learn all they can about ETECSA before signing on the dotted line. Just because the United States has allowed telecommunications companies to engage in Cuba transactions, does not mean it is a risk-free proposition here or in Cuba.
While the Cubans will never tell you this, you should know who exactly you’re doing business with. Here is a breakdown, at least as of 2011, of the key players of this state-run telecommunications cartel:
- Fidel Castro, Raul Castro, and the family own about 25% of ETECSA in a company called Rafin, SA.
- Telefonica Antillana SA (about 50%)
- UTISA, SA (10%)
- Banco Financiero Internacional (6%)
- Negocios en Telecomunicaciones (3.8%)
- Banco Internacional de Comercio with (0.9%)
The source for this data is Juan Juan Almeida. Almeida is the son of a famous Cuban general and he left Cuba, in part, to expose the Communist cartel. Almeida was allowed to leave Cuba in 2011 after staging a hunger strike that almost killed him. If you’re an American corporation engaging in Cuba transactions, could you imagine explaining all of this to shareholders and your board of directors? Or what about this following item reported in 2013 from a leading provider of independent news in Cuba:
Asking not to be identified, a former MININT official stated, “One of the justifications for slowing the growth of phone service in Cuba is that there is a requirement that any increase in private telephone coverage be augmented by an equivalent increase in the monitoring capabilities of the CIN, MININT’s counter-intelligence branch. The systems for telephone surveillance, known as K1 and K2, must have a capability of 100%, as was the case in the former East Germany.” Source: ETECSA: A Bankrupt Monopoly, Diario de Cuba, translation by Translating Cuba (Nov. 18, 2013).
In addition to the spying, there is the issue of slave labor. Even if U.S. law authorizes transactions that allow partnerships with the Cuban government, these laws do not protect companies from future lawsuits that will likely be brought by disgruntled employees for what amounts to modern-day slavery. If you think this will not happen, do some research. There has been one major case decided in U.S. Federal Court in favor of Cubans treated as slave workers. More suits will follow and I expect them to come from the travel sector economy.
So long as the hardliner communists remain in power, for persons subject to U.S. law, Cuba will remain a legal minefield and compliance nightmare. It is no surprise that not one major U.S. financial services provider has accepted the Obama administration’s invitation to facilitate credit and debit transactions in Cuba. Would you blame them?
I guarantee that the more the Obama administration tries to ease sanctions, the higher the risk of political problems in Cuba as well as legal exposure in the United States for companies that partner wit the Cuban government. This will, in turn, will inevitably lead to shareholders and board members raising concerns about the situation in Cuba, especially if U.S. technology is being used to spy on dissidents and others.
In related news, Sprint also inked a contract with the Cuban government this week. You can read about that proposal here.