The scars of corruption, inherited from its colonial and republican past, as well as from its most recent socialist experience, have left a profound imprint in Cuba’s history. Widespread corruption severely eroded the legal and institutional fabric of the Republic since the early 1900s. The fight against corruption was among the most politically appealing policy objectives, lending a measure of popularity to the Cuban revolution.
Ironically, however, the revolutionary experience, in many respects, served to deepen the roots of corruption in the country. The confiscation of private property under political and ideological justifications demolished the legal and moral bases of property relations. The overwhelming state control of the country’s wealth under socialism gave added impetus to corruption as the nomenklatura appropriated property for their own use and the average citizen began to pilfer or purchase in the black market state controlled goods.
As the national economy entered in 1990 into a severe crisis with the collapse of the socialist world and the end of Soviet subsidies to Cuba, corruption has become even more generalized. With Cuba being forced to accept increasing amounts of foreign investment, there is growing evidence of corrupt behavior among the ranks of the country’s political elite. Moreover, most Cubans perceive corrupt acts as integral to economic survival.
WIDESPREAD CORRUPTION IN REPUBLICAN CUBA
Cuba’s deep-rooted culture of corruption can be traced to the country’s colonial history and to the peculiar economic features that politics and public administration acquired during the Republic’s early years. As Louis Pérez (1995:214-215) has noted:
It was to government that Cubans looked for economic security. State revenues became the principal source of economic solvency as Cubans came to define their material well-being in political terms. Public office, patronage appointments, and civil service became ends; politics and electoral competition were the means. … Vast sectors of the old separatist leadership assumed fully the form of a class given principally to the quest of political office as a function of its social character and economic cohesion. This development underscored the emerging social reality of the early Republic: the origins of a new elite organized around the control of the state and dependent upon control of public administration as the principal source of wealth and as a means of property. Herein was one of the more anomalous features of the Republic. Economic power did not produce political power. Rather, political power created the opportunity for enrichment and offered the basis for the emergence of a new elite. The state thus served at once as source and instrument of economic power.
Neither existing legal sanctions nor moral condemnations were sufficient to encourage the honest conduct of public officials. In fact, corruption in public office was widely tolerated and accepted as a fact of life. In his monumental historical overview of Cuba, Hugh Thomas described the situation in the mid- 1940s in rather startling terms by noting that it was not just presidents and ministers who benefited, but everyone in government positions, whether elected officials or school teachers: “There was no social stigma to graft,” Thomas (1971:740) noted, “it resembled the non-payment of taxes in Italy.” The national lottery and government public-works contracts were especially profitable for corrupt government officials.
With corruption being pervasive, legal sanctions were largely ineffective. Although corrupt public officials were occasionally prosecuted, “indictments were often partisan affairs, especially during a turnover of administrations, for criminal prosecution was one method of forcing out of office incumbent functionaries otherwise protected by civil service regulations, and thereby creating new employment opportunities for the incumbent government ” (Pérez 1995:217).
With the passing of time, as noted by Jorge Domínguez, the nature of corruption became even more embedded in the country’s social and economic institutions, as the number of constituencies intent on advancing their economic interests became more dependent on questionable practices. Within the nation’s cultural context, many acts that nowadays would be characterized as corrupt were perceived as perfectly acceptable; they merely served to protect the interests of vulnerable population sectors in an uncertain economic environment. From the mid- 1930s to the late 1950s, although many officials saw in government a means to personal enrichment (Domínguez 1978:93-94), “purposes other than the profit of the incumbents, many of whom were not corrupt, began to win out. As more groups participated actively in politics, government corruption reflected a broader spectrum of techniques. … Sinecures were another accepted form of corruption, as were subsidies to private enterprises to finance featherbedding or to sustain a near-bankrupt company, a policy that was not corrupt according to prevailing norms and that was understandable in times of high unemployment.”
Corruption became such a notorious political issue that if formed the core of the political platform of the Partido Ortodoxo, the leading contender in the never- held 1952 election. By the late 1950s, in sum, corruption, as described by Salas (1979:112), “had become a way of life. … The problem spread from the top of the government throughout the entire bureaucratic system. Corruption may have been so widespread that most things functioned on this basis. The deviant public official was not the one who stole but the one who did not.”
THE SOCIALIST REVOLUTION AND CORRUPTION
Traditional forms of corruption were largely eradicated from Cuba’s political life during the early years of the revolution. Puritanical revolutionary fervor and the nationalization of the economy did away with many of its market economy underpinnings. By the mid-1970s corruption had experienced a notable transformation and acquired a different form, political power becoming its defining element. Because of the socialist model, money was no longer the path to power. “The role of money sharply declined in Cuba,” in the words of Domínguez (1978:231), “partly because there was less for it to buy, and partly because the private sector was much smaller. Power itself became the currency of corruption.”
Under revolutionary rule, as has been amply documented, corruption manifested itself in the ability of the political elite and their relatives to rise above egalitarian distribution of scarce goods and services by gaining access to far more than their share on the basis of their positions and connections (Clark 1992, 1999). Such privileges have included access to housing, scarce imported goods, health services, recreational facilities, automobiles, and foreign trips.
At the same time, with the whole economy virtually nationalized and rationing the order of the day, illicit behavior became the norm partly because of the criminalization of activities that under more liberal, market oriented economic regimes are perfectly legal. Aggravating the situation was economic mismanagement. Central planning institutions, despite ample Soviet subsidies, could not efficiently address the consumption needs of the population. Examples of economic activities illegal under the socialist regime are retail activities and the provision of good and services by small private entrepreneurs. Since they could not legally obtain goods and services, providers and consumers had to rely on the black market, where many state-owned goods were illegally traded.
The black market “became a pervasive element of Cuban economic life almost from the inception of rationing. It spread across all commodities and involved, both as sellers and buyers, a large proportion of the population. As goods became scarcer, the black market became an acceptable means of coping. Even revolutionaries were able to rationalize violations” (Salas 1979:69). The source of many of the items traded in the black market include government property misappropriated through theft, the diversion of government resources, short changing customers by state workers in the distribution sector, and outright corruption by those in positions of privilege (Pérez- López 1995:98-105).
THE SPECIAL PERIOD AND CORRUPTION
The prevalence of behaviors that could be characterized as corrupt appear to have increased significantly during the Special Period—the economic emergency that began in 1990 following the end of Soviet subsidies. Impelled by the country’s dire economic circumstances, and the collapse of the state distribution system, the average Cuban consumer has been forced to utilize any means at his or her disposal to secure the bare necessities of life. In Cuba’s state-owned economy, corruption can be found everywhere, but the officials most prone to be corrupted are those responsible for the distribution of goods, whether wholesale or retail. Illegal slaughtering of cattle has become epidemic, often in connivance with state employees, but even service professionals are prone to bend the rules in return for small bribes, material goods or some service. A Cuban press report, for example, denounced Holguín province physicians for freely dispensing special diet prescriptions in exchange for food and other favors (Salas 1993:242).
During the Special Period, the black market has continued to play its traditional role as one of the principal channels for corruption. Many observers conclude that it is now more widespread than at any time since the early 1960s. For many Cubans, black market activities have become one of the few options to deal with severe scarcities. Managers and employees of state enterprises appropriate for their personal use the goods and services of their enterprises and sell or trade them informally in the black market. This behavior by countless employees of state-owned enterprises has long been attributed to a disregard for ethical standards and accountability norms, together with poor administrative and control procedures (Alfonso 1999b). Control procedures are so lax, according to a 1999 audit report, that in the province of Pinar del Río, only about one-third of State enterprises were implementing proper accounting practices. As a result, there was no certainty about how more than one hundred million pesos had been used (Arroyo 1999).
While the leadership condones corruption among the political elite, there is also growing unofficial corruption in some of the same sectors designated as the preserve of the privileged few. The extent of corruption among the Party faithful, and the popular discontent it generates among the population, seems to be a growing source of concern for the leadership. The seriousness of the matter even led to the publication in Granma, the official newspaper, of an article that described, among other things, the number and type of corruption allegations against Communist Party members. As a result of investigations related to these allegations, according to the article, “an important number of severe political and administrative sanctions were applied,” as well as legal sanctions against those implicated in robberies and other criminal acts (Mayoral 1999; see also Tamayo 1999).
As petty corruption practices have become more widespread, there have been allegations that the country’s political elite is already practicing or is preparing the ground to engage in large-scale grand corruption at the time of a political transition. The argument being made is that dozens of newly established “private enterprises” financed with national revenues are “owned” by senior government officials, highranking military officers, and Communist party leaders. These companies, with assets valued in millions of dollars, act as national counterparts to foreign firms in joint ventures, have considerable independence, and are allowed to work with international banks abroad. Officials of these firms currently enjoy financial benefits well beyond the reach of the average Cuban, and are also believed to be benefiting from an ongoing but subtle privatization process whereby the country’s patrimony is being appropriated by those politically loyal to Fidel Castro’s government (Alfonso 1999a).
It would appear that corruption for those in charge of Cuban affairs today is a two-way street. It is used to reward the politically faithful at the same as it serves to denounce those fallen from grace.
A CORRUPTION TOLERANT CULTURE
The conclusion that can be reached from the brief review of 20th century corruption in Cuba is that it has been and continues to be a highly widespread practice. Although corrupt acts in Cuba have been and continue to be punishable offenses, from a cultural perspective they have long been tolerated and accepted.
The revolutionary experience added several new dimensions to corruption’s cultural acceptability through the confiscation of private property during 1959 and the early 1960s and the practice, followed for 40 years, of expropriation of the material possessions of those emigrating from the country. The need to rely on the black market also lent cultural legitimacy to corruption. Two Cuban generations have grown under a socialist system in which stealing from the State is regarded as an appropriate material survival mechanism because many market activities legal under other forms of political organization are proscribed. A post-Castro Cuba will be forced to cope with these attitudes and begin to implement appropriate policy measures to gradually diminish corruption.
FERTILE GROUNDS FOR CORRUPTION: DISMANTLING THE OLD, CREATING THE NEW
As a post-Castro transition eventually gets underway, presumably in a market economy direction, opportunities for corruption will abound. Petty corruption is likely to gradually begin to diminish as long as economic conditions improve and as commercial activities repressed under the current system are legalized. As government controls over economic activity are relaxed, the black market, one of the primary drivers of petty corruption in socialist Cuba, will evaporate. Grand corruption opportunities, however, are likely to multiply particularly if, as has been the experience of other former socialist societies, the current political elite plays an active role in the transition. This could occur for three reasons.
First, members of the Communist political elite could attempt to appropriate for their personal benefit part of the national patrimony, thus extending and consolidating what they already may have partially achieved through the establishment of the Special Period “sociedades anónimas.” A second corruption venue will be found in the privatization of Stateowned assets, as well as through the bidding for licenses and permits as the national economic infrastructure begins to be modernized. This conclusion is suggested by the experience of other countries where similar processes have been accompanied by corruption on a large scale as those responsible for privatization and license allocation decisions in collusion with unscrupulous competitors take advantage of their power to select winning bidders. And third, dishonest government officials are likely to take advantage of potential corruption opportunities arising from the resource transfers associated with the economic assistance provided by friendly countries and the international financial community to assist with the country’s reconstruction.
As noted earlier, the government has established “private” enterprises in the guise of “sociedades anónimas” controlled by nomenklatura members. With political change and a transformation of economic relations, these enterprises could effectively become their private property. This is what occurred in the former Soviet Union and the former Eastern European Communist states, despite the fact that in these countries the political elite did not anticipate the sudden collapse of the system and thus had little time to prepare for its eventual demise. After their 1990 electoral defeat, the Sandinistas in Nicaragua likewise transferred title to numerous state properties to well placed political operatives. It is not unreasonable to assume that even among the most committed Castro loyalists, there is fear that the system will not survive his death. Even the most recalcitrant socialist might be considering the inevitability of an eventual transition to some sort of market economy with private property rights. Some of these officials are likely to be pinning their hopes for future economic well being on the eventual personal privatization of State-owned assets.
The privatization of the economy will also present corruption opportunities as State-owned assets are sold to private bidders and international tenders for operating licenses ranging from utilities to hotel services are competed. The privatization record of the international business community has not been stellar. International companies in many countries have competed aggressively against each other, not always relying on the most transparent approaches to gain market advantage. With Cuba’s corruption tradition, the situation is likely to be repeated.
Another fertile soil for corruption will be the post- Communist reconstruction effort. With the national physical and economic infrastructure dilapidated and with the arrival of potentially very substantial capital inflows from friendly countries and the international financial community, major development projects will get under way. Given the only limited national experience conducting international bids and with nonexistent institutional mechanisms to manage the bidding process, dishonest government officials could have a field day.
One additional source of concern is suggested by what has happened in other former socialist countries where ex-security officials have become the core of home-grown criminal organizations. Often suspected of being linked to international criminal rings, they are engaged in drug trafficking, money laundering, and other illicit activities. With Cuba’s history and its geographic position, the country will be an inviting target for these criminal mafias to flourish.
WHAT IS TO BE DONE?
Facing such a dismal corruption history and assuming that the most important priority should be to create the conditions to ensure a political and economic transition, there are few grounds to believe that a future post-Castro government will have the capacity—or will—to clamp down on opportunities for grand corruption. To begin with, those most likely to manage the post-Castro transition are the same who currently are among his closest associates. Their political and economic future will be closely tied to how well they position themselves in a post-socialist Cuba. Thus, widespread corruption among the current political elite might well be an inevitable price Cuba will have to pay to avoid chaos and bloodshed, at least over the short term. Nicaragua offers a glimpse of what Cuba is likely to see in the future.
Fortunately, for Cuba to begin to integrate into the world economy under a post-Castro government, it must accept some international rules. In the absence of other feasible alternatives, the implementation of these rules over the short term may help reduce the incidence of corruption. A more lasting and effective approach will require far more drastic initiatives by future governments (when will this happen and under what type of political regime is unpredictable) that must be sustained for many years if they are to eventually bear fruit. Among these are the eventual enactment and implementation of legal and financial procedures to prevent, detect and punish corrupt behavior, as well as educational initiatives designed to counteract and gradually undermine Cuba’s corruption culture.
The Short Term
Since the international community will likely play an important economic role in Cuba’s eventual transition, particularly by providing reconstruction and emergency assistance, we must direct our attention at what they can do in the short run to help minimize corruption.
In the absence of internal official mechanisms to curb corruption and facing the prospects of widespread corruption among the political elite, the international community must take the lead in establishing anticorruption procedures. These procedures include some that while unable to stamp out corruption, can help minimize its incidence as long as they are properly implemented, count with a minimum of political support, and are backed with abundant international pressure. These efforts are more likely to succeed in the prevention of the corruption that is often associated with the disbursement of international financial assistance and can also be of help when privatizing state owned assets. Since bilateral assistance programs are customarily conditioned on strict management guidelines that place a premium on transparency and accountability, we may expect them to place strict limits on malfeasance opportunities.
The international lending institutions (International Monetary Fund, the World Bank, the Inter-American Development Bank) are increasingly concerned with corruption and are taking steps to prevent it (see, for example, Langseth et. al. 1997; World Bank 1999). Once a post-Castro Cuba qualifies for their programs, the international financial institutions could assist a future Cuban government develop the proper framework and institutional infrastructure to closely monitor the process whereby the economy is privatized. As a rule, these transparency procedures are implemented under the auspices of and with technical input and oversight from the international lending institutions. This would entail setting clear and transparent bidding rules, including providing assistance with property valuations, the preparation of tender documentation, and with how to make the privatization process transparent. A sine qua non of these efforts will be how to make them as agile as possible with a view to reducing onerous and unnecessary procedures whose only purpose is to breed corruption.
The Medium to Long Term
Once the initial stage of the economic transition has been completed, Cuba would need to begin implementing profound legal, judicial, and management reforms in order to become a modern state.
These transformations must be accompanied by massive public education campaigns to educate the public about their rights and responsibilities if the end goal is that of developing an efficient, transparent, and well-managed state to serve the people. A massive public education effort will be necessary to undo the false perceptions about a market economy that four decades of government-led indoctrination have created in the Cuban population, while at the same time instilling among the country’s public servants a culture of service, honesty, transparency and probity.
The first step in this quest will be to create a transparency and accountability framework in the public sector as part of a much larger effort of legal and judicial reform. The beneficial impact of the reform effort will be facilitated and multiplied several-fold if in parallel and taking advantage of modern computational technologies, Cuba were to adopt a modern integrated financial management system coupled with an independent audit institution.
Transparency and Accountability Framework: The constituent elements of an effective transparency and accountability framework are well known (see, for example, Rose-Ackerman 1999; Schedler et. al. 1999; U.S. Agency for International Development 1999); in countries with the political will to combat corruption and where civil society organizations provide strong support for the implementation of measures to do so, the effects have been encouraging.
Whether or not Cuba will join these countries in the future depends on many unknowns. Perhaps the most crucial is the type of government a post-Castro Cuba will have. In terms of corruption, there is no certainty that the emergence of democratic governance will necessarily lead to less corruption: Cuba’s own historical experience during the 1940s attest to this fact, as does the experience of other countries, such as Venezuela, where despite a strong democratic tradition, corruption was rampant. Some authoritarian countries, like Singapore, have managed to virtually eradicate corruption. The feeling is, nevertheless, that corruption can most effectively be dealt with in countries with democratic institutions in which citizens take an active role in governance and in which official transactions are conducted transparently and government officials are held responsible for their actions.
Assuming a future in which democratic institutions and governance rules gradually take hold, then it is relatively simple to identify at the conceptual level the measures that must be implemented to ensure the proper management of state resources. These include the development and use of clear, predictable and transparent procurement mechanisms for the purchase by the state of the goods and services it consumes while serving the public; sun shine laws and procedures in budgetary decisions; and freedom of information legislation, among others. There are also a vast array of measures that must be implemented, first, to allow public officials to conduct their business ethically and sheltered from political pressures, and to ensure that if these measures fail, the public and the state will have the means to detect and punish corrupt behavior.
Foremost among the former are civil service rules whereby career government officials receive proper and on-going training and other incentives so they could dedicate their professional lives to a career of service to the public, while receiving adequate compensation to attend to the needs of their families. Sustained economic growth will be essential for such policies to be successfully implemented. To ensure that ethical standards are lived up to, senior public officials must be asked to periodically submit verifiable personal financial statements and civil servants should be afforded the security of whistle-blower protection. Citizens should be invited to fight corruption by denouncing such practices through hot lines and other public disclosure mechanisms.
Legal and Judicial Reforms: A post-communist Cuba will be faced with a massive rule of law and legal reform task. This task must include pertinent legislation that takes into account the moral and economic costs of corruption. This legislation, while attuned to the growing international preoccupation with corruption, as expressed in the Inter-American Convention Against Corruption and other comparable instruments, must be grounded on a realistic and sensitive understanding of Cuba’s social reality. This realization suggests that it will take many years to undo the attitudes most Cubans have acquired towards corruption throughout their history, particularly over the last four decades when dishonesty became—by necessity—almost a virtue.
This means that legal frameworks inspired on a desire to stamp out corruption overnight from the national psyche will be doomed to fail even before the ink with which they were written dries out. Grand corruption should be the primary object of anti-corruption legislation. This legislation should be equipped with sufficient teeth to gnash hard at corrupt politicians and high-level government officials. For these sanctions to be effective, of course, it will be necessary to have an independent criminal court system, and ideally, separation of powers.
The punishment of these corrupt officials should alert the general public to the consequences of corruption while helping raise the honesty bar among citizens used to the habit of helping themselves by taking for them what belongs to others. The focus of legal sanctions against petty corruption must essentially, but not only, be educational. As noted earlier, the expectation should be that as the economic system changes and the economy improves, petty corruption should cease to be a major national preoccupation.
Integrated Financial Management System: Integrated financial management systems, aside from increasing efficiency, are among the most powerful technical tools than can be deployed in the fight against corruption. They consist of management system that rely on the use of modern computing technology (hardware and software) that allow for the systematic entry, tracking and verification of financial transactions. They encourage transparency by permitting the tracking of financial data from the moment revenues are collected, to the time when they are budgeted, allocated and spent. Expenditures can be traced through the various levels of government once financial information is entered into the system, thus minimizing opportunities for corruption. Transparency is also encouraged by the use of clear management and decision-making rules that make public officials accountable for their actions.
The effectiveness of these systems is predicated on the development of relevant accounting norms, continuous staff training, and oversight provided by an independent audit institution. The most ambitious integrated financial management systems are being designed to eventually link most of a country’s government financial management transactions into a single system. The intent, as is the case in some Latin American countries, is to be able to trace financial flows and the use of a country’s patrimony across all levels of government.
Given the complexity of the endeavor, it could well take from 10 to 15 years to implement a fully functioning integrated financial management system. However, since the constituent parts must be gradually designed and introduced, over the medium term they could begin to have some impact by providing some controls over the most vulnerable components of the national financial system. Funding for a national integrated financial management system will likely be available from the international financial institutions.
The international financial institutions have accumulated a wealth of experience regarding how such a system should be designed and implemented. Future Cuban governments will be likely to assign priority to the establishment of integrated financial management systems since they are seen as instrumental for the efficient and transparent management of a modern state. Integrated financial management systems and the culture of transparency they promote also contribute to a more hospitable foreign investment climate as a growing number of nations adopt foreign anti-corruption legislation.
Civic and Business Education: The success of anticorruption initiatives is ultimately predicated on the degree that political will is brought to bear. To ensure that a government’s commitment to fight corruption endures, it is essential to mobilize citizen support as well as to enlist the business community on the anti-corruption effort. International experience suggests that some of the most successful anticorruption initiatives have benefited by enlisting citizens to be vigilant about and take action against corrupt behavior whenever it comes to their attention. Citizen support is also crucial to ensure that government anti-corruption efforts stay on course.
In other transitional situations it has been found that the mobilization of civil society institutions plays an important role in the fight against corruption. Civil society institutions can keep the anti-corruption pressure on by acting as primary interlocutors between citizens and their governments. They can also intensify popular demands for transparency by educating the public about their rights and responsibilities. Civil society organizations are ideally suited to raise public awareness about the social, economic, and political costs of corruption. In several Asian countries (Singapore, Hong Kong) this has been achieved via public relations campaigns conducted through the print and electronic media. These efforts at times have included the sponsorship of training workshops for journalists on corruption investigation techniques and public outreach campaigns to educate the public on the use of hot lines to denounce corruption. Civil society organizations can also act as national advocates for the adoption of international anti-corruption treaties.
Enlisting the private sector in anti-corruption initiatives is also an effective approach. Business firms are often victimized by, or act in connivance with, corrupt government officials. Corruption is often flagrant in the procurement of government contracts, securing licenses and permits, and in a myriad of other government transactions. Transparency International, one of the leading global organizations fighting corruption, focuses its international activities in working with the business community to have it embrace anti-corruption practices by, for example, adopting business ethics codes and making a commitment to only engage in transparent bidding procedures.
Cuba’s long history of corruption and the weakening of ethical values that has accompanied the country’s revolutionary process over the last forty years does not bode well for the future. The eventual political and economic transition will most likely be accompanied by large-scale corruption. There is evidence, in fact, that this may already be happening through the establishment of “sociedades anónimas” and other ventures with foreign investors. As the role of the state in the economy diminishes in the future, the economy is privatized, and Cuba opens to the outside world, corrupt officials will identify multiple opportunities for corruption and malfeasance. As suggested in this paper, corruption in a grand scale may be one of the prices that Cuba may have to pay to achieve its post-Castro transition.
While the measures that could be instituted in the short term to minimize the incidence of corruption are limited, there are some specific steps that could be instituted with and under the auspices of international financial institutions. These institutions can be expected to be important players in the country’s reconstruction since they will provide much of the needed financing to reconstruct the national infrastructure and reactivate the economy. Officials in the international financial institutions have given much thought to how to limit corruption in their projects by closely monitoring disbursements and by requiring as a condition for the release of funds that borrowing countries utilize transparent procurement mechanisms.
The contribution of the private sector to Cuba’s reconstruction will be of paramount importance. As suppliers of badly needed capital, foreign investors will be ideal corruption targets, whether as bribe victims or as sources of under-the-table payments for special favors. Private sector programs similar to those designed by Transparency International and other non-governmental organizations may deter some of the most egregious incidents of corruption. Also, an important counterbalance to official corruption will be provided by the legal claims made by private parties whose properties were expropriated during the early years of the revolution as they seek financial redress or restitution. Legal challenges to wrongful decisions will act as dampers to corruption.
An eventual solution to the corruption problem, if there ever is one, will depend on sustained efforts over many years to develop appropriate institutional mechanisms to manage the country’s finances and to instill a culture of honesty, integrity and probity. These developments, in turn, will very much depend on the success future Cuban governments have in promoting the country’s political, social and economic development.
1. The authors are grateful to Olga Nazario for comments on an earlier version of this paper.