HAVANA, Cuba. – At present, Manuel Lopez resides in Panama. Between 2012 and 2016, he lived in Havana and worked as head of engineering projects for the Cuban division of Bouygues Bâtiment International (BBI). In spite of the high level of responsibilities his job entailed and the 12-hours a day he often worked, including week-ends, Manuel earned barely 600 Cuban pesos a month, the equivalent of $24 dollars at the exchange rate, plus another US$ 100 that his foreign boss paid him as an “informal salary”, an amount that was not reported to the employment agency of Gaviota S.A. corporation. Gaviota, S.A. is part of the corporate network of the Cuban Armed Forces, the Corporate Administration Group better known as GAESA.
Manuel signed a contract with an intermediary as the only way he would be able to work for BBI, not so much for the salary he would be paid in Cuban currency, but for the US$ 100 monthly bonus that he would be paid illegally, in violation of the contract with Gaviota, S.A. which prohibits this type of unreported payments, as do similar companies such as ACOREC, SMC, PALCO and BIOCUBAFARMA.
As for BBI, it committed to paying Gaviota, S.A. the amount of US$1400 per month for the services of the Cuban engineer, including an employment fee for renting out his services, although at the time BBI offered Manuel the job, he was not part of the workers reserve of the military corporate consortium.
According to what was agreed between the intermediary Cuban company and the foreign businessmen, behind Manuel’s back, of the US$ 1400 BBI paid Gaviota, S.A. for his services, the Cuban engineer would be paid less than 2% of the salary the French company would have paid him if it had been allowed to hire him directly. Still, that would have been less than 20% of what BBI pays other engineers in Europe or Latin America, or even in the Caribbean region, as per general information the company publishes on the Internet.
There are few details about the outcome of the US$ 1000-plus that Gaviota, S.A. retained for acting as intermediary between Manuel and BBI. About the financial mechanisms used by the Cuban military and other corporate entities of similar make-up and objectives, there are only scant details, general and isolated in nature, available via the testimony of people who were involved in those dealings; foreign companies’ internal reports; or resolutions issued by the Cuban government to address said matters.
In this manner and by comparison with Banco Financiero Internacional documents as well as statements from various sources in the commercial department at the job exchange (pool) that CubaNet consulted, we have established that from labor force rentals alone, Gaviota, S.A. probably earned an average of US$300,000 annually between December 2012 and December 2016. This is shown in the deposits made to the accounts known as Fondos FAR (Armed Forces funds) aka State Reserve Financial Fund, to which we shall refer later on and which we shall analyze in subsequent reports based on a volume of information that is still being classified.
This does not represent significant earnings if we compare it to possible profits of other employment agencies of the Cuban government such as ACOREC S.A. or PALCO Employment Agency. The former is managed by the Ministry of the Interior and the Armed Forces; the latter belongs to the executive committee of the Council of Ministers. AROREC S.A. alone has contracted out an average of 2800 workers per year in its 27-year history, as indicated on its web page.
Shock Therapies and More
Although former head-of-state Raul Castro and his successor Miguel Diaz-Canel have both reiterated that the economic changes in the island will not go hand-in-hand with shock therapies that can affect the citizenry, sources at Cuba’s Central Bank, at Banco Financiero Internacional, and at the Armed Forces Management Group agree that, at least regarding payment of the foreign debt, the Cuban government had used those funds. Since these funds were generated from salaries income, under normal circumstances the workers should have been the recipients of the funds. That would encompass all the capital earned by the various employment agencies that function as intermediaries between the regime in Havana and foreign companies.
While specific journalism research and investigative reports conducted outside the island have alerted about the conditions of exploitation that Cuban medical workers endure as a result of being leased out to foreign countries by the Cuban government through its Medical Services Contracting Company (SMC), with the apparent complicity of the Pan American Health Organization and other international entities, very few people know about other non-medical services that the Cuban government contracts out as very cheap labor. Cuba boasts about such services and promotes them as aggregate value of a national product that in many ways is reminiscent of slavery, especially since workers who break the contracts are punished as deserters, or forced to spy on the foreign companies to which they are leased on behalf of Cuba.
These employment –or intermediary- agencies are totally subordinate to the Ministry of the Interior, the Armed Forces (ACOREC’s case) and the executive committee of the Council of Ministers (PALCO’s case), and as such are exempt from auditing by the Office of the General Comptroller. Like the rest of the state’s corporations, they are not subject to any laws that compel them to operational transparency, not to reveal publicly where their incomes end up. Neither the official press, which is financed and supervised by the Cuban government, nor the independent press is allowed to broach these topics. In fact, they are forbidden from doing so.
However, both the intermediary and the employment agencies are obligated, by their very nature, to establish contracts with the foreign companies. They, in turn, must report periodically to the authorities in the countries where they are registered officially, at the very least, their earnings and investments in the Cuban economy. It doesn’t matter whether the numbers and facts they include in their reports are exact. Accurate or not, they allow for estimates to be calculated that can give an idea of the financial reality.
One can imagine just how inaccurate the financial statements that these companies submit to their governments and fiscal agencies could be if one remembers the scandal involving Meliá’s representative in Cuba, Enrique Martinon. In 2017, Spain’s Treasury department uncovered that Martinon, a good friend of the Castros who had helped them set up several off-shore companies in Panama, had hidden several million € from the Spanish authorities.
Cubans Come Cheap. The Armed Forces Fund
With the leasing-out of just one Cuban engineer in 2016, Gaviota S.A. earned US$ 15,000 net, while BBI saved at least 60,000 € per individual specialized worker, an amount the company could put to good use during the finishing of Hotel Manzana-Kempinski in the hiring of about a dozen workers from India and Pakistan whom they paid between 7,200 and 12,000 € per year, depending on the type of work they performed.
“Good use” could also mean the salary of a highly qualified non-Cuban engineer, as was the case of Peruvian architect Jose Manuel Galfre, employed since 2014 as design and architecture advisor of the “BIM team” (Building Information Modeling) of BBI’s Cuba division.
This is a specialist who presumably would be making much more than the other Manuel –the Cuban engineer- not only for being a prestigious and recognized professional but for being not just an ordinary Peruvian but the grandson of Sixtilo Dalmau, founder of Peru’s International Institute for Administration of the Hospitality and Tourism Industry, and the son of Patricia Dalmau, Director of the Cordon Bleu Institute in Lima (please refer to the interview in Caribbean News Digital magazine of July 11, 2017).
Manuel Lopez theorizes the following: “With the money from a single one, money that didn’t even reach Gaviota, BBI derived the monthly stimulus for all of us.” His estimate is probably right on target.
For Zoraya Medrano, a former accountant with Gaviota’s commercial division with whom CubaNet spoke, up until 2016 –the year she left Cuba and settled in Europe- BBI’s Projects Department in Cuba employed only 12 Cuban engineers, 8 specialized technicians, 4 secretaries, 2 computer operators and 1 translator. The two construction managers received the highest salaries; in the payroll breakdown, it amounted to the equivalent of US$ 400.
Medrano continues: “Stimulus payments did not go through the commercial division of Gaviota, that’s not where the payments were handled. Everyone knew what was going on, but it was prohibited (…). In our department, we handled payroll in Cuban pesos only (…). Bouygues would make deposits in Euros to Gaviota’s account at Banco Financiero Internacional (BFI), but workers’ salaries reached us by way of the Armed Forces Ministry (MINFAR), through MINFAR payroll, (…) later on it was determined that it be done by way of Almest, but the fund was the same (…), I only know that taking into account the hard currency exchange rate, with US$ 400 all the Cubans employed by BBI were paid, while the rest went to what was known at BFI as the Armed Forces Funds (Fondos FAR), which was managed directly by the State Reserve, where not a penny was touched.”
Several sources consulted by CubaNet agree that, at both Banco Financiero Internacional and Cuba’s Central Bank, as well as in the rest of the financial institutions in the island, the so-called Fondos FAR or Fondo Financiero de la Reserva Estatal (Armed Forces Funds or State Reserve Financial Fund), are a catch-all name for the array of account numbers and codes (between number 0300000003025623 and number 0300000005135147 that pertain to Swift code BFICCUHH) which identify the main hard-currency deposits paid up by other accounts set up for that purpose that belong to foreign companies established in Cuba. Other accounts include those of Cuban companies established abroad or registered by foreign individuals or Cuban citizens that reside abroad, and who pay a percentage of their earnings as taxes to the country, in accordance to Disposition number 2 from December 2014 issued by the president of the Council of Ministers and signed by Raul Castro.
According to a high-ranking official at Cuba’s Central Bank, “those are the accounts where foreign companies make deposits, and where Cuba’s own off-shore companies –known colloquially as Fondos FAR (Armed Forces Funds) – make their deposits as well. Those accounts are controlled by the Armed Forces financial system, i.e., by the State Reserve, and they are also accounts where funds are held until they are released to make payments on the foreign debt (…) from 2014 until today.”
The same high-tanking official states: “These accounts have also been enabled, sometimes on a temporary basis, to receive donations and aid from abroad, as happened when the tornado hit Havana. They are also the ones that receive donations from international entities, aid received to assist with economic losses caused by events related to climate change for which Cuba has applied for a decade now. We’re talking about hundreds of millions of dollars annually, a portion of which is used to pay the foreign debt.” He further states that the Cuban government has been reporting as climate-change losses (hurricanes, salinization, droughts) other problems that are due to company mismanagement and errors associated with poor control of investment projects in tourism, mining and social development so that it can apply for considerable financial aid from United Nations programs, from private funds, and from countries with which it keeps medical-collaboration agreements.
And he concludes: “Cuba receives funds from Saudi Arabia in exchange for Cuban health services there; it receives funds also from private donors in Asia and Europe. With Italy, for example, its permanent or temporary residents in Cuba enjoy benefits since early 2015.”
To wit: the monthly report of Cuba’s Chamber of Commerce for March 2015 and those of the Foreign Ministry, indicate that in the early months of 2015, two Italian banking institutions –Sace and Intensa Sao Paulo- signed an 80 million Euros agreement with the Cuban government to “facilitate the issuance of letters of credit to Italians residing in the island” during a high-level meeting in Havana attended by under-secretary Mario Giro, Guido Rosa, president of the technical committee of the Bank Association of Italy, and Licia Mattioli, director of the technical committee for internationalization of the Confederation of Industries, all of whom stressed the importance of the agreement “to launch a new era of bilateral relations and cooperation in the tourism and health sectors.”
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