President Raul Castro is matching his free market economic changes with a zealous battle against entrenched corruption on this Communist-run island, much of it involving Cuban officials at major state-run companies and ministries as well as the foreigners they do business with.
Cuba says the crusade is essential to save the socialist system. Others wonder at the timing of a crackdown that has sent a chill through the small foreign business community, just when the cash-strapped economy needs international financing to push the reforms along.
Cuba has battled corruption before, even executing a former revolutionary war hero on drug trafficking charges in 1989. But past arrests have been largely limited to Cubans. Analysts say the current crackdown seems different, with Canadian, French, Czech, Chilean and English citizens jailed or sentenced for their alleged roles, and scores of small South American and European companies kicked out of the country.
The sale of Korean cars and car parts slowed this year as two top distributors, both Canadian, became ensnared. Meanwhile products like Chilean wine, juice and tomato paste temporarily disappeared from supermarket shelves, replaced after a few months by other brands.
One thing is clear. The rules of doing business in Cuba have changed dramatically under Raul.
"This is not a campaign, what is happening in the fight against corruption," Attorney General Dario Delgado told journalists this month. "This is permanent. This is systemic. There is a will on the part of the state ... that corruption cannot be permitted."
While the nonprofit Transparency International says Cuba ranks better than average worldwide in a measure of corruption and is third best in Latin America and the Caribbean, graft here can be more corrosive because the state controls nearly the entire economy.
Companies wanting to do business with Cuba must present their cases directly to midlevel government officials who may make about $20 a month. There is no open bidding for contracts and decisions go unexplained, which businessmen say opens the possibility of graft.
A South American importer with a decade of experience selling food products to Cuba before he was expelled for alleged corruption in 2009 said the payoffs can take many forms: from the gift of a bit of gas money, a free meal or a computer pen drive for a relatively junior "international purchaser," to free trips abroad, computers, flat-screen TVs or large deposits of cash in foreign bank accounts for senior officials.
"The forms of persuasion -- let's call it that -- are nearly infinite," he said, adding that the system is so pervasive that "a businessman must always have a wad of cash to stuff the pocket of a guayabera," the loose-fitting traditional Cuban dress shirt.
Cuban officials have not said what impact the crackdown will have on the island's economy, but they have warned repeatedly that widespread graft has the potential to destroy it.
"The fight against corruption is vitally important," said Comptroller General Gladys Bejerano, a stern, poker-faced official who is spearheading the investigations. "It doesn't produce fatalities and there are no bombs or blood ... but it is the only thing that can bring down the revolution because it destroys our values and morality and it corrodes our institutions."
Castro has thrown his full weight behind the project since taking over from his ailing brother in 2006. In 2007, he signed a law imposing stricter rules on public officials. When he put Bejerano in charge of the Comptroller General's Office in 2009, he altered the chain of command so that she would report directly to him and the Council of State, Cuba's supreme governing body.
Even the Cuban leader has joked that Bejerano was not the most popular at government parties.
"Comrade Gladys Bejerano was not well liked by some, and there was always someone complaining" that her investigations are "demoralizing," Castro told legislators in a December 2010 speech. "They said `Gladys is very unforgiving, she can be very stern.' That is what we want. That is what I constantly demand."
The arrests and raids also have sent a shudder through Havana's small foreign business community, a collection of risk-takers who always have accepted a high degree of uncertainty doing business with a Marxist country that is subject to a 49-year U.S. trade embargo, and which has a mixed track record of payment. Some now see themselves as targets.
Moves against them began in earnest in 2009 when more than 150 foreign business owners and operators were expelled, according to businessmen and a confidential Foreign Trade Ministry list obtained by The Associated Press. But the pace of closures and number of arrests have grown in recent months.
"It's like an earthquake," said a foreign business adviser who counsels companies looking to enter the Cuban market. He said the crackdown is coming just when Cuba is becoming more attractive because of Castro's free-market opening, with rising demand for building supplies, car parts and other products used by entrepreneurs and the state-run tourism sector. Despite the arrests, he said, many new potential business partners continue to visit Cuba in hopes of entering the market.
"It is a time of opportunity, but also great risk because of what is happening: the arrests, the closures," he said, insisting on anonymity out of fear that speaking publicly would damage his standing with the government. "Everybody is nervous. Everybody is looking over their shoulder to see who will be next, who is the next victim."
Authorities have acknowledged at least six sweeping corruption investigations involving foreigners in the past two years, with at least 52 people sentenced to prison. And for every confirmed probe, rumors of others abound. Cuba's state-controlled media seldom report on the investigations, particularly those involving foreigners. Cubans are used to the lack of transparency, which has turned Havana into a swirl of whispers and intrigue.
[to top of second column]
Delgado defended the practice of giving few details on the investigations.
"There exists all the transparency in the world," he said. "But in Cuba as in other countries, investigations have rules and details are given when the moment is right."
Those whose arrests have been acknowledged include Alejandro Roca, a former food industries minister who was sentenced in May to 15 years in a case involving Rio Zaza, a Cuban-Chilean company run by Max Marambio, a close friend of Fidel Castro who for years enjoyed access to the inner circle of power.
The government has never revealed details of what Roca did, other than to say he was sentenced for "continuous bribe-taking." Marambio, who spent most of his time in Chile, was sentenced in absentia to 20 years. A lawyer for Marambio declined to comment.
A separate case involving Marambio's brother, Marcel, ensnared 14 executives at Cuba's civil aviation authority and led to the firing of its president, Rogelio Acevedo, a comrade-in-arms of the Castros since their rebel days.
A dozen executives at cigar maker Habanos SA also have been jailed since 2010, including company vice president Manuel Garcia, according to three sources close to the company, a joint venture between the Cuban government and a subsidiary of England's Imperial Tobacco Group PLC. The sources refused to be identified for fear of angering authorities.
In recent months there have been widespread reports of arrests at national phone company Etecsa, which is run by the military, and of two senior Telecommunications Ministry officials. A Western diplomat confirmed the ministry arrests and two people close to Etecsa said several senior executives were detained. The sources, who spoke on condition of anonymity, said the case is linked to alleged corruption involving a multimillion-dollar project involving Paris-based Alcatel-Lucent and Cuban and Venezuelan state telecoms to lay an undersea fiber-optic cable linking Cuba to Venezuela.
Officials boasted for months about the cable, which was expected to increase Internet speed 3,000-fold. But the government fell silent as its July launch date came and went, and there has been no appreciable change in Internet speed. Etecsa and the government declined requests for comment.
The government has given no information on probes of Tri-Star Caribbean and Tokmakjian Group, the two car dealerships run by Canadians, as well as investment firm Coral Capital Group, led by a Briton. The foreign business adviser and another businessman who spoke on condition of anonymity said all three cases sprang from a probe into graft at the Moa nickel mine, where several Cuban officials and a Czech reportedly have been detained. The project is a joint venture between Cuba and the Canadian mining company Sherritt.
Tri-Star was shuttered in July and its president, Sarkis Yacoubian, detained. Tokmakjian was raided in September, and president Cy Tokmakjian placed under house arrest.
Tri-Star is listed on an Internet business registry as having an address in Nova Scotia where a similarly named company, Tri-Star Industries, is located. But the owner of the latter, Keith Condon, told AP there was no corporate relationship between the two companies, though he did some business with Yacoubian more than a decade ago. He said his company had taken legal action.
Yacoubian's brother Greg in Toronto declined to comment. Several messages were left for representatives of the Tokmakjian Group in Ontario.
A spokesman for the Canadian government, Jean-Francois Lacelle, said Ottawa was "aware of the detention of two Canadian citizens" but would not give details, citing privacy concerns.
Several foreign businessman applaud the crackdown, saying it is important to level the playing field for honest companies, but even they refused to speak on the record.
Their sentiment was echoed by Omar Everleny Perez, lead economist at Havana University's Center for Cuban Economic Studies, who has argued that the government must encourage foreign investment to keep the reforms from foundering. Still, he said eradicating graft is vital even if it discourages some investment.
"If you are going to undertake a profound change in the Cuban economy," he said. "You must take this problem on with great force."
Press; By PAUL HAVEN]
Paul Haven can be reached at
Associated Press writers Andrea
Rodriguez and Peter Orsi contributed to this report.
Copyright 2011 The Associated
Press. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.