All things come to an end, eventually, even John F. Kennedy’s ban on U.S. trade with Cuba. Sensing impending change, we headed to Havana in March to see how bribery works there, as compared to in Russia or India or Mexico. We were startled at how little evidence of commercial bribery we found.
Billboards everywhere exhorted citizens to “defend the revolution”: Patria o Muerte! Fatherland or Death! The government seemed to count on slogans more than salaries to motivate the workers. Everyone works for the State and the salaries the state pays range from US$16 to US$20 per month, whether you earn it by pumping gas or by transplanting hearts. The government ensures that salaries are equal, even if they are not adequate. No one can live on such wages, and no one, not even the government, pretends that they can. Even with free health care and education and subsidized rations of rice, beans, eggs and cooking oil, no one makes ends meet on US$20 per month (One heart surgeon decorates cakes on the weekends).
The government knows that its citizens supplement the income it provides and for the most part looks the other way while they do. Pilferage (though not bribe-seeking) seemed practically universal. Those whose jobs give them access to a car siphon gas to sell on the side. Those whose jobs take them to an office take offi ce supplies to distribute. Bartenders save the good rum to trade and serve drinks that are thin and watery. Waiters grab food to barter and blatantly pad the checks they present to foreigners.
What does this mean for employers? Well, in Cuba, the state is the employer, so constant low-grade pilferage of goods to sell on the Black Market is just another way to redistribute the wealth. Cubans we spoke to didn’t seem to consider this stealing exactly, because, well, everything belongs to everyone, right? People in Cuba shrug a lot and turn up their hands.
Foreign businesses have another way to reward their employees. These companies have to pay their employees’ US$20 per month wages directly to the state, but they are permitted to pay a “top up” directly to the employees. This is called a “gratifi cation.” This isn’t legal in Cuba; in fact it is a violation of the stated national value of egalitarianism. But the Cuban government looks the other way until tax time, then requires employees to declare their “gratifi cations” and be taxed, so the state benefi ts in hard currency. One company pays the offi cial rate of US$20/month and an unofficial “top up” of US$2000/month.
A foreign business ready to pay “gratifications” should have no trouble hiring, but the government makes the hiring process difficult. A company can find someone and then ask the government employment agency to vet and approve them, but they will wait a long time. Alternatively, they can ask the government employment agency to send over two or three people to choose from. Reject all three and they will wait a long time for another candidate. One employer that got itself crosswise with the government has waited several years to fill 35 open spots. A company that attempts to dismiss someone will wait, yes, a very long time for a replacement.
For Cuba’s highly educated population, there is little cost to losing a job; the government will assign another. Jobs in industries with scarce portable goods bring opportunities for “slippage” of inventory. Soap is rationed in Cuba and very scarce; working in a soap factory is a plum job. A chance of travel abroad is attractive, although such travel rarely materializes. The approval process is long by design. In a recent speech, Raul Castro announced that international travel for business would be cut dramatically.
Companies enjoying any success in Cuba have partnered with savvy locals who guide them through the dense, opaque bureaucracy. Such companies must convince the government that they are there for the long haul. They cultivate relationships and, invariably, they sponsor charity cigar auctions or kids’ “go-kart” rallies. But, by all reports from many sources, they don’t pay bribes.
This was surprising. Robert Klitgaard says that a centralized government with a great deal of discretion and a low level of accountability will be a playground for bribe seekers. We went to Cuba expecting rampant bribery, but we didn’t find it.
We did hear about widespread, low-level, non-threatening demands from policemen and officials, but they sounded more wistful than threatening: “I haven’t had a cup of coffee yet today…” one policeman said. Some people pay and others decline. Declining seems to bring no consequences. Middle level employees of state-owned joint ventures had reputations that were a little worse. As for bribery higher up the chain, we heard it was rare.
The party, it seems, really does pay homage to “revolutionary consciousness.” Schoolchildren sing “We will be like Ché,” and apparently one cannot “be like Ché” and demand bribes. Moreover, the party believes that corruption toppled the Soviet Union, so it is reported to move swiftly and severely against bribe takers. The Cuban Penal Code stiffens the penalties as one climbs the hierarchy of government officials, something we haven’t seen elsewhere.
We spoke to a European businessman with responsibility for Latin America and asked him how Cuba compares to other countries for transparency. He quickly placed it above Mexico, all the countries of Central America and Venezuela. Then he added Ecuador, then Brazil and Argentina, then Chile, South America’s transparent golden child. Slowly, and with apparent surprise, he declared it “among the best in the region.” But he added that he didn’t quite understand why.
Near the end of the trip, I asked a Cuban businessman what would happen if U.S. sanctions were lifted and U.S. companies started arriving with money to spread around. “Oh no, tell them not to do that. That won’t help at all. But they’ll need the money. Patience is the key, and patience can be very expensive.”
This article was originally published by Alexandra Wrage in Ethisphere magazine in Q1 2009.