Cuba: The Next Safe Haven for Organized Crime

by Phil Williams, Ph.D.

The resilience of the Castro regime in Cuba has confounded expectations in the United States. Nevertheless, there is a strong sense in Washington that the regime is merely a heart attack away from collapse: without Fidel Castro, Cuba will reject the socialist revolution, revert to a market economy, and develop into a flourishing liberal democracy. The argument here, however, is that one of the main beneficiaries of a collapse of the communist regime in Cuba will be organized crime.

In part, Cuba will follow the Russian pattern and develop an indigenous organized crime problem. The real model for Cuba, however, is a Caribbean one in which trans- national criminal organizations penetrate weak states. While domestic organized crime in Cuba will increase after Castro, the real problem will be from external groups wanting to use Cuba to tranship illicit commodities, to launder dirty money, and to control its burgeoning sex industry.   Cuba, in effect, combines components of both, although it will ultimately approximate the Caribbean model much more than the Russian.

Communist Regimes as Incubators for Organized Crime

Communist states have several characteristics that facilitate the incubation of organized crime and corruption:

Such a system has few safeguards against official corruption and encourages black market networks. At a lower level, black markets operate for subsistence and survival rather than aggrandizement. One consequence of the operations of black markets at any levels, however, is that they undermine respect for law—especially in states such as Castro’s Cuba where the rule of law is subordinated to the rule of the leadership.  

  If such conditions facilitate organized crime and corruption, the strong social-control apparatus that also characterizes authoritarian states establishes clear limits to its development. Similarly, a weakening of these controls enables organized crime to expand significantly—as has happened in many of the former Soviet states. A major difference in Cuba, however, is the absence of a well-established criminal culture of the kind that existed in the old Soviet Union. While those who typically operate in the “black” economy could develop skills that, under less constraining circumstances, facilitate the development and operations of sophisticated criminal enterprises, there is not the same tradition of indigenous criminality as in Russia. Consequently, the foundation for the expansion of domestic organized crime in Cuba is far weaker than it was in Russia. Cuban organized crime might develop, but it is unlikely to become as pervasive or as powerful as the indigenous organized crime in Russia.

The Vulnerabilities of States  in Transition                      

A likely trigger for such a development in Cuba is the collapse of the regime and with it, an enforcement apparatus capable of inhibiting either indigenous expansion or external infiltration by organized crime. The sudden collapse of political power typically leads to the loss of social control and at least a hiatus in the effective operation of the criminal justice system. At the same time, there is usually an opening to the outside world— either because the regime is no longer opting for self-imposed isolation or because external constraints are removed. This offers opportunities for the entry of legal businesses and licit investments but also for illegal business and in partners had a major impact on the Cuban economy, compelling the government to encourage commercial activities hitherto forbidden. Although this “limited liberalization with tight political control” is based on contradictory impulses, it has had some success in reversing the devastating economic trends of the early 1990s.2

Since 1994, Cuba’s gross domestic product (GDP) has increased by about 15 percent.3 Moreover, the government’s approach (emphasizing foreign exchange flows and foreign investment, increasing the supply of goods, reducing government expenditure, and changing incentive structures rather than ownership) has avoided the worst features associated with the Russian transition.4 By eschewing rapid and massive privatization, the Cuban Government has prevented the transfer of large portions of the Cuban economy to corrupt officials and wealthy criminals. Furthermore, by maintaining the coercive power of the state, the Castro regime has avoided transferring power to indigenous organized crime.

Dominance over important sectors of the economy by Mafia-  like groups in Russia was possible because the state dramatically reduced its enforcement capacity. In Cuba, the alliance between government and foreign investment has created market-oriented incentives while keeping out organized crime. Even capitalism needs a state.5

Cuba’s  Increased                                                                                                                                                                                                                                                                                                             Vulnerability

In other words, the inhibitions on the development of indigenous organized crime in Cuba are greater than they were in Russia. Nevertheless, two developments during the 1990s have significantly increased the vulnerability of Cuba to organized crime from outside. These include openness to foreign investment and free-trade zones as well as growing tourism and prostitution.

 Openness to Foreign Investment and the Creation of Free-Trade Zones. Cuba’s new commercial strategy has involved flirting with as many countries as possible.

In October 1998, the government announced that $6 billion of foreign direct investment would be entering the country, with $1.7 billion committed or delivered by 25 countries in- cluding Australia, Canada, France, Germany, Great Britain, Israel, Italy, Mexico, and Spain....Foreign direct investment has continued to flow into Cuba despite the U.S. embargo: $620 million in 1998 and an expected $700 million in 1999.6

Although most foreign investment comes from illicit businesses, some of it almost certainly comes from criminal enterprises intent on laundering “dirty money” through Cuba. The difficulty is that the Cuban Government, like other states in transition, has neither the desire nor the capability to check the sources and determine if incoming funds are legitimate or the proceeds of crime. For cash-starved economies, “due diligence” is neither feasible nor desirable. The implication is that although the government has protected the economy from domestic infiltration, it is having less success in protecting it from external infiltration.   

Growth of Tourism, the Encour- agement of Sex Tourism, and the Reemergence of Prostitution. In some ways, this is reminiscent of the 1950s when Cuba was a haven for gambling and prostitution, activities controlled by Meyer Lansky and his organized crime associates in the United States. An important difference, however, is that now–

there is no network of brothels, no organized system of bar prostitution....Most  women and girls are prostituting themselves independently and have no contractual obligations to a third party. The sex tourist in Cuba, therefore, typically deals directly with an autonomous prostitute.7

The market for commercial sex in Castro’s Cuba is currently a disorganized market, driven by imperatives of subsistence not the enrichment of criminal enter- prises. Nevertheless, its existence makes Cuba attractive for criminal organizations desiring to reap the benefits of a lucrative trade that will become even more profitable when Cuba is once again a tourist destination for U.S. citizens. The resurgence of prostitution in Cuba during the 1990s is a potential magnet for organized crime.  

The Attractions of Cuba

The emergence of a market for commercial sex in Cuba is only one of the attractions for transnational criminal organizations. Another is Cuba’s location which makes it a valuable transshipment point for illicit commodities being trafficked from Latin America to the United States or Western Europe. The U.S. State Department’s International Narcotics Control Strategy Report on 1998 noted that Cuba is an important (albeit not major) drug transshipment country. Its “location between the United States and the hemisphere’s principal drug-exporting countries makes it a logical transshipment point for traffickers.”8 During 1998, traffickers made increased use of Cuba’s airports, airspace, and territorial waters for transshipment and Cuban authorities seized 3.52 metric tons of marijuana, hashish and cocaine from 1 January to 30 November 1998.9 With the restoration of trade between Cuba and the United States, it will be much easier for drug traffickers to hide drugs illicit exports to the United States—and transshipment through Cuba will increase enormously.

Given Cuba’s proximity to Florida, it could also become an important transshipment state for alien trafficking—and there are already signs of this. In November 1998, the Immigration and Naturalization Service (INS) announced the dismantling of an Indian smuggling network that had brought more than 7,000 illegal aliens to the United States (predominantly Miami), via Moscow, Cuba, and the Baha- mas.10  Even with a tough regime in power and restrictions on trade and travel to the United States, smugglers used Cuba for transshipment. If Cuba after Castro has both a weaker government and the restoration of full trade and travel relations with the United States, it will become even more attractive, displaying the classic attributes of many transshipment states—ease of transit and access to the target or destination state.  

Another important consideration is the close link between Cuba and Miami, where Cubans constitute the largest ethnic group. The economic and financial importance of Miami in the Western Hemisphere is difficult to overestimate. The city, according to some estimates, handles more than “a third of all U.S. trade with Latin America and more than half of all U.S. trade with the Caribbean and Central America” and hosts more than “350 multi- national companies” and “many foreign banks.”11 Similarly, Miami is also at the core of the black- market peso exchange system, which is linked to drug trafficking, to the smuggling of contraband to Colombia, and to money laundering. Not surprisingly, the city hosts Cuban and other immigrant groups seeking to enrich themselves through participation in this illicit economy. Most recently, it has become a major location for Russian criminals. As the gateway to the Caribbean and Central and South America, Miami is at the core of a variety of criminal markets and criminal systems. The hostile relationship between Castro and the United States has made Cuba’s full integration into these systems difficult. With Castro’s departure, however, such integration will be rapid.

A related possibility is that Cuba will become an offshore financial center and bank-secrecy haven, something for which there are already many successful models in the Caribbean. To be competitive in a world of deregulation, Cuba will adopt a permissive approach to offshore finance, especially in the early years as it tries to establish itself as a viable alternative to Antigua, the Cayman Islands, and other jurisdictions. For organized crime, this will offer a major opportunity to infiltrate an offshore financial center from the bottom up—an attractive option for any criminal enterprise looking for avenues for money laundering. The prece- dents are clear. Russian and Ukrainian banks with dubious ori- gins and ownership operate in Antigua using the haven to launder money and perpetrate various financial frauds. Cuba could all too easily eclipse Antigua as a “safe haven” for criminal proceeds and activities. Moreover, because of sensitivities stemming from the history of U.S.-Cuba relations, the United States might be reluctant to press too hard for Cuba to clean up its act.12

After Castro

Many criminal organizations are likely to seek a foothold in Cuba. These groups include the Sicilian Mafia, Colombian and Mexican drug traffickers, the traditional Cosa Nostra in the United States, Cuban émigré groups seeking to reclaim parts of their former homeland, and Russian criminal organizations.

The Sicilian Mafia is reportedly intent on establishing itself in Cuba, using its position in Saint Maarten as the springboard. Italian authorities have identified Rosario Spadora, a major casino operator in the Caribbean, as a leading candidate to be “one of the main financial conduits” for the Sicilians.13

Many Russian criminals with a background in intelligence or the military had experience in Cuba establishing connections that they could easily revitalize. Indeed, local knowledge, as well as accumulated experience and expertise in exploiting transitional states, could make Russian organized crime groups particularly powerful participants in the post-Castro carve-up of the Cuban economy.

For their part, Colombian and Mexican drug traffickers are likely to have more limited aspirations, seeking merely to exploit Cuba’s potential for transshipment. Mexican drug trafficking organizations have the advantage of proximity to Cuba, and considerable interest in the diversification of trafficking routes beyond the southwest border of the United States. The Colombians, working closely with Dominican criminal organizations, are using the Caribbean already, but the full integration of Cuba into their drug trafficking routes would expand their repertoire of options and complicate interdiction efforts.

For the Cosa Nostra, Cuba has appeal partly for nostalgic reasons but even more for hard-headed commercial reasons: opening up casinos in Cuba and using casinos, banks, and free-trade zones for money laundering would hark back to the days when Meyer Lansky and the Batista family had a highly collusive and profitable relation- ship. Exploiting Cuba as a base from which to manage Internet gambling and through which to commit a variety of financial frauds would put the “mob” well into the 21st century.

The other players are likely to be Cuban criminal organizations based in Miami. Indeed, the transnational linkages between Cubans in Cuba and Cubans in the United States provides an important resource that could very easily be exploited by various criminal and drug trafficking organizations.

There is a possibility of turf wars as the various candidates vie for control of Cuba and its assets. Yet this is not pre-ordained. Increasingly, transnational criminal  organizations are displaying a significant capacity to work together. Cooperative relationships run the gamut from strategic alliances to one-time cooperative ventures and encompass service, contract, or supplier relations. They are based on the realization that organized crime is more effective when there is cooperation among major organizations. If this philosophy prevails in Cuba, then the country is likely to become host to a highly effective form of criminal cosmopolitanism.

Conclusion

As Cuba rejects the principles and precepts of socialism, this will offer enormous opportunities for transnational criminal organiza- tions. The growth of indigenous organized crime in Cuba is likely to be less pronounced and less pervasive than in Russia, but Cuba will become both a host state for organized crime—as it was for the U.S. Mafia during the Batista years— and a major transshipment state for drug trafficking. Finally, if Cuba follows many of its Caribbean neighbors in developing an off- shore banking sector, it will become an important service state for organized crime. In short, the post- Communist transition in Cuba will provide major opportunities for transnational criminal organiza- tions and Cuba will almost certainly join the ranks of Caribbean states with endemic corruption and collusion between governments and criminal organizations. Such a situation might be preferable to a continuation of the communist regime, but it is not an outcome that many in the U.S. Government will find very palatable.  

The author would like to thank Al Cooper of the National Drug Intelligence Center for his helpful comments on an earlier draft of this paper.  

Endnotes

1. The Council for Mutual Economic Assistance (Comecon, also referred to CMEA or CEMA) dates from a 1949 communiqué agreed upon by Bulgaria, Czechoslovakia, Hugary, Poland, Romania, and the Soviet Union. Comecon served for more than three decades as framework for cooperation among the planned economies of the Soviet Union, its allies in Eastern Europe, and Soviet allies in the Third World.

2. Manuel Pastor, Jr., “Cuba’s Second Economy: From Behind the Scenes to Center Stage,” Latin American Research Review, Volume 31, Number 1, June 1996, pages 218-235.

3. Ana Julia Jatar Hausmann, “What Cuba Can Teach Russia,” Foreign Policy, Number 113, December 1998.

4. Ibid.

5. Ibid.

6. Ibid.

7.Julia O’Connell Davidson, “Sex Tourism in Cuba”, Race and Class, Volume 38, Number 1, 1996, page 40.

8. International Narcotics Control Strategy Report 1998, (Washington, D. C.: Department of State, March 1999).

9. Ibid.

10. Immigration and Naturalization Service, “International Anti-Smuggling and Money Laundering Investigation,” Backgrounder, 20 November 1998.

11. Jan Nijman, “Globalization to a Latin beat: the Miami Growth Machine,” The Annals of the American Academy of Political and Social Science, Volume 551,  May 1997, pages 164-178.

12. I am grateful to Surratt Williams for this observation.

13. Bob Drury, “Big Trouble in Havana,” Gentlemen’s Quarterly, May 1999, pages 204-211 and 239.

Dr. Phil Williams is the Director of the University of Pittsburgh’s Ridgway Center for International Security Studies and Professor of the Graduate School of Public and International Affairs. He has taught at the British Universities of Aberdeen and South hampton. During the last six years, his research has focused on transnational organized crime and drug trafficking and has written extensively on these subjects. He is the editor of the journal Transnational Organized Crime. Dr. Williams co- wrote (with Ernesto Savona) the background papers for the World Ministerial Conference on Transnational Organized Crime held in 1994 and is a consultant for the both the United Nations Crime Prevention Branch and the United Nations Drug Control Program (UNDCP).  He has prepared papers on organized crime and drug trafficking in Belarus and Central Asia for the UNDCP. In 1996, Dr. Williams presented evidence on transnational organized crime to the House Committee on International Relations and was among a small group of specialists which met with the National Security Council to discuss international organized crime. He has a Bachelor of Arts degree from the University of Wales, Swansea, a Master of Science degree in Economics from the University College, Aberystwyth, and a Doctor of Philosophy degree in Political Science from the University of South- hampton. Readers can reach Dr. Williams via E-mail at ridgway1+@ pitt.edu.