2. A Framework for Cuba Privatization: Foundation and Flexibility

3. The Goal of Privatization How to Transform this:

4. Into THIS…. The Goal of Privatization

5. Ok, Not Really Privatization is not an attempt to:  Usurp the sovereignty of the Cuban government  Sell off all Cuban resources to outsiders  Promote Capitalism and win a final cold war battle  Turn Cuba into the 51 st State Privatization is part of an attempt to:  Modernize the Cuban economy by making it more efficient  Empower everyday Cubans by allowing them to own and enjoy the fruits of their labors  Promote democratic value  Fully integrate Cuba into the global community

6. Privatization will only likely come to Cuba after the following occurs:  The Cuban Economy Gets Worse - efforts at privatization since 1991 have failed to spur growth  Regime Change - political and economic  Resolution of Expropriations Claims - by Restitution, Vouchers, Negotiated Settlement  Ending of U.S. Trade Embargo  It’s a Mix of Law and Politics But it won’t be easy

7. Privatization of the Cuban Economy The Basic Structure Step 1. Set up an independent government agency - staffed by locals (first-hand) and internationals (anti-corruption) Step 2. Give it jurisdiction over all formerly state-owned enterprises - applies to almost all. Joint ventures should be negotiated Step 3. Empower it to act as if it were the managers of the enterprise - They can sell, merge, liquidate the SOE, etc. Step 4. Prepare an enterprise/assets for privatization - Get its books in order Step 5. Sell, sell, sell - Tender the new corporations in open bidding  Transparency and Marketing will be critical throughout

8. Functional and Focused Oversight Competent Judicial Body Temporary and of Limited Jurisdiction Only hears cases regarding Privatization Applies new Cuban law and int’l standards Staffed by Internationals  Whatever the structure and jurisdiction of a Privatization Court, it must be aware of its place in the process.  Shepherding and validating privatization is its first priority. Establishing rule of law comes second.

9. But to ultimately be successful, Privatization needs a Foundation Legal changes are needed: The Basics: A new Constitution – first step of Transition Period Decentralize power away from the Executive Empowering local officials, the legislature and judiciary Modernizing Commerce: Commercial Code, Business Organizations, Foreign Investment Law Financial Restructuring: Reformed Central Bank, New Tax Code, Stricter Accounting Standards

10. But to ultimately be successful, Privatization needs a Foundation (cont’d) Institutional changes are needed: Government: Encourage local involvement in government and accountability of government officials Business: Change the management practices of business leaders, labor unions, and individuals Law: Educate more lawyers and retrain current lawyers to operate effectively in new system Reform the judicial branch – empowerment and objectivity  Establishing an independent prosecutor

11. But to ultimately be successful, Privatization needs a Foundation (cont’d) Ideological changes are needed : Strip Socialist doctrine from all the laws Clearly embrace the free market and democratic principles Eliminate bureaucratic thinking Encourage Entrepreneurship, risk-taking Promote Chambers of Commerce Investment by Cubans in Cuba  A tough road: A respected partner is needed

12. This Foundation will be laid concurrent with Privatization. A whopper of a task… PowerPointdoesn’t =Reality

13. Privatization Only Works in Context: The Agency and Institutional Partners Leading Privatization Must Plan for the Real World Make Privatization Acceptable to the Public Local leadership promoting in the agency Transparency to limit claims of corruption Stop the American Anti-Privatization Tide Perhaps limit potential bidders in key industries Require 51% ownership to be domestic Cuban Benefits beyond the Upper Class Win over the Cuban masses by involving them Issue vouchers to terminated SOE employees

14. 1. Take advantage of what Cuba has to offer - tourism, educated workforce 2. Create a local/int’l team to run Privatization - a transparent agency and court 3. Build a Foundation for Privatization - legal, institutional, ideological - work with other institutions and NGOs 4. Anticipate Problems - Market to the Masses - Maintain Flexibility if situation demands No matter the method of Cuban Privatization its architects must do the following:  Privatization operates at the intersection of law and politics. Understand this and plan accordingly  Win the long term battle and successfully transform the economy.

15. Gracias por su atención.