Organized Crime in Cuba

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					Organized Crime in Cuba
STRATFOR Global Intelligence
May 16, 2008 | 1109 GMT


STRATFOR’s fourth in-depth look at organized crime focuses on Cuba. In atypical
fashion, organized crime in Cuba is run by the state and stems from a long tradition that
places Cuban military and intelligence apparatus into positions of control over the
island’s industry while both fostering and profiting from drug traffickers and smugglers.

Editor’s Note: This piece is part of an ongoing series on organized crime worldwide.


Raul Castro’s recent liberalizations in Cuba have led many in the U.S. to breathe a sigh of
relief, comforted that the country may finally be moving away from the Fidel-led Cuba
that has persevered for a generation. In fact, Raul has already lifted bans on Cubans
including ones that prevented people from staying in resorts and owning cell phones or
computers. However, liberalization in Cuba may carry some nasty side effects — the
proliferation of domestic and transnational organized crime being one of them.

Unusually, organized crime in Cuba is run by the state. This is a result of the decision to
bolster the Cuban military and intelligence apparatus by granting its top generals control
over the lucrative tourism and hospitality industry. The island nation’s security and
intelligence apparatus, estimated at 20,000 strong, is part of Cuba’s Ministry of the
Interior. This means the Cuban security and intelligence community is also a major
business operator on the island, overseeing the country’s booming tourist industry, cigar
production and distribution of illicit goods.

The Government-Organized Crime Nexus

Control of the tourism industry gives the military and intelligence establishment control
over foreign involvement in Cuba, as well as the foreign currency visitors bring in. The
Cuban government badly needs the hard cash tourists bring in to subsidize Cuba’s
intelligence apparatus, among other government ministries and functions. The
intelligence apparatus in turn brokers the deals that allow drugs to pass through, over and
around Cuba in exchange for money and favors from traffickers for the Cuban state. The
drug money can then be laundered through Cuba’s complex currency exchange system
and the tourism industry.

Cuba acts as a kind of organized criminal state, a corrupt and cash-starved country whose
business is run not by investors, but well-connected senior-level government officials
seeking to supplement their meager state salaries.

This corruption extends to the highest levels of the Cuban state. Testimony from captured
drug traffickers and the Cuban military’s compliance with the drug trade tie Raul Castro,
head of the military during his brother Fidel’s rule, to Cuba’s drug-trafficking operations.

And, according to estimates by Forbes, Fidel Castro himself was worth $900 Million in
2006 in a country with a gross domestic product of around $50 billion.

Organized crime in Cuba began with the Italian-American mafia, which ran Havana’s
entertainment sector in the 1950s. At the time, under the rule of Cuban President
Fulgencio Batista, the country enjoyed strong ties with the United States in a region that
was susceptible to socialist, anti-Americanism.

Cuba was a playground, easily accessible to Americans and inexpensive. Havana had
cheap rum during prohibition and plenty of illicit drugs thanks to ties to the U.S. mafia.
Cuba’s nightlife appealed to middle-class Americans and the rich and famous alike.
Frank Sinatra could often be seen at one of Havana’s many upscale restaurants or bars
catering to foreigners who paid in dollars. Cuba also was a retreat from the U.S. legal
system, where gambling and prostitutes were plentiful. Much money was there to be
made, and organized criminals from New York and Chicago recognized Havana as a
market they needed to control. Meyer Lansky, a prominent member of the U.S. mafia,
oversaw mob activity in Cuba and Lansky operated through Batista. U.S.-born Italian
organized criminals like Santos Trafficante and Cubans looking to become rich like Jose
Miguel Battle also played major roles.

The money in Havana during the 1950s flowed from tourists; mostly Americans who
could escape for a weekend of partying and socializing. In contrast, native Cubans rarely
could afford the kind of lifestyle that their country offered rich foreigners.

From Revolution to Stagnation

Fidel Castro ended U.S. mafia activity in Cuba after he took over the government during
the Cuban Revolution in 1959. Trafficante was arrested, but soon returned to America
where he expanded his criminal empire into New Jersey. Other organized criminals either
fled Cuba or were arrested by Castro. Cuban casinos and cabarets were shuttered. Drug
trafficking and gambling ended. But Castro had ties to the drug trade that predated his
rise to power. While seeking refuge from Batista forces in the hills outside Havana, the
future dictator was sheltered by marijuana farmers. Castro promised the growers
protection for their hospitality.

Since the revolution, the state-controlled economy has lacked the foreign investment and
consumer markets that fuel financial success. Worsening the island’s economic situation,
Castro’s adoption of communism brought about a U.S. economic embargo that continues
today. With the 1991 collapse of the Soviet Union, Cuba’s biggest benefactor, the
country’s economy became particularly desperate for cash.

Besides an unhealthy economy, another major characteristic of the Cuban state is its
mantra of revolution and opposition to the United States. During the 1970s and 1980s, the
Cuban military and intelligence services supported communist movements in Angola,
Ethiopia and Colombia, the third of which proved most important to Cuba’s involvement
in organized crime.

Post-Castro Criminal Opportunities

Despite the government’s involvement in organized crime, the levels of this activity are
relatively low, and controlled. In the case of a power vacuum in Cuba, however,
organized crime would face few limits to expansion. Drug cartels from Mexico and
Colombia would most likely incorporate the island into their pre-existing network to gain
yet another gateway into the United States. The existing hospitality industry would
provide the perfect cover for laundering money gained from illicit activities like drug

And if the intelligence community could be bought, as it was in Russia, cartels would
virtually have their own drug-trafficking state. Not only could they use their signal
collection network to protect their drug shipments traveling throughout the Caribbean
Sea, they could branch out into trafficking counterfeit goods, humans (which already has
a huge market in the region) and weapons. There also would be opportunities for
organized crime with regard to legitimate state assets like sugar, zinc and the tourism
industry. Such legitimate assets offer tremendous potential for economic growth and
corruption. At present only a handful of top generals in the Ministry of the Interior
control them.

The United States is starting to feel the first effects of decreased state power in Cuba.
STRATFOR sources report that high-end auto theft rings are operating in the U.S. and
that the cars are being smuggled to Latin American ports with the aide of Cuba. This
could either be a new fund-raising venture for the Cuban government, or more likely, it
could be a sign that organized criminals operating out of Cuba are targeting the United

Car theft in the United States originating from Cuba would represent only the beginning
of the problem. If organized crime really begins to boom, and transnational groups based
out of Russia and China, or closer to home in countries like Mexico and Colombia, we
would expect to see more professionalism, violence and money in Cuban organized

Like Russia in the 1990s, Cuba faces a situation in which state control over assets such as
sugar production, metals mining and (most importantly) tourism, could shift to oligarchic
control and criminal influence. Whereas in Russia the intelligence community only
played an ancillary role in the Russian economy’s crime-ridden economic conversion, in
Cuba the intelligence and security community makes up a far bigger proportion of the
population. Many generals already are placed in ownership positions over hotel chains
and consumer goods outlets. If the current regime were to completely lose their hold on
power, either by overthrow or by death, the struggle for economic assets would unleash a
free-for-all of domestic and transnational criminal activity.

The Military and Tourism

As mentioned, the Cuban military is well-integrated throughout the tourism industry, one
of the few sectors open to foreign investment. This presents an excellent platform from
which to conduct a wide variety of illicit activities due to the large volume of foreign
visitors who pass in and out of these resorts, providing Cuba with hard currency.

Raul Castro headed the transformation of Cuba’s military into what has become the
driving force of the Cuban economy. Raul founded Grupo de Administracion Empresarial
S.A. (Enterprise Management Group), or GAESA, which is the holding company for the
Cuban Defense Ministry. Raul appointed several of his close confidants and relatives to
positions within GAESA. These included Gen. Julio Casas Regueiro, who is the
Chairman of GAESA; and GAESA CEO Maj. Luis Alberto Rodriguez Lopez Callejas,
who is married to Deborah Castro Espin, Raul’s oldest daughter.

GAESA holds a wide array of companies ranging from the very profitable Gaviota
tourism company to Sasa, S.A., which controls the island’s gas station network. Gaviota,
which Gen. Luis Perez Rospide heads, controls and operates more than 30 hotels and
resorts. It is by far the most profitable company GAESA holds, and leads the nation in
foreign exchange earnings. Since the mid-1990s, Cuba has allowed foreign investment in
the tourism industry to help boost revenue. France-based Club Med can be found on the
Caribbean beaches, along with other foreign companies.

The ever-expanding Cuban tourism industry has allowed GAESA to expand to other
holdings. It controls the Military Counterintelligence Department VI and its support
companies, Empresa de Servicios La Marina, which is run by a counterintelligence
major; and Antex S.A., which provides engineering and technical support to all the
GAESA companies. Antex has served as a channel for introducing Cuban intelligence
operatives into foreign countries, given that it has offices in more than 10 countries.

This kind of economic development flies in the face of Cuban revolutionary dogma,
which preaches the equitable distribution of property and emphasizes the vows of poverty
taken by top government officials including Fidel Castro. The social uproar caused by the
expansion of the tourist industry eventually led Raul Castro to lift restrictions that until
April prevented Cubans from staying at tourist resorts on the island. While the law no
longer prevents them from enjoying resorts that for nearly 20 years were off-limits, their
poverty may still do so.

Tourism and the Currency System

Behind the tourism industry is Cuba’s peculiar currency system. Cuba has two official
forms of currency: the national peso and the convertible peso. Basic goods like food are
typically only sold in national pesos. In 2004, Fidel Castro outlawed the use of the dollar
and replaced it with the convertible peso (CUC). This currency officially exchanges at
about $1 per CUC. Only specialty stores, largely owned by the military, deal in

convertible pesos. Given tight government control over the currency, usually only
foreigners or Cubans with access to dollars are able to shop at these stores.

Splitting the currency accomplishes two things. First, the island can become more open to
visitors by supplying more consumer goods and imported foods without totally
undermining the restrictions on ordinary Cubans. Specialty stores that cater only to CUC-
paying customers are cropping up all over Cuba. One such store, TRD, has more than 400
outlets across Cuba. Since the military owns these CUC stores, it enjoys the profits while
the government also makes a profit off selling CUCs to tourists at an inflated price.
Second, selling CUCs to tourists means Cuba can accumulate hard cash in dollars, which
is needed to support the government and maintain the flow of imports.

The CUC was created solely for the purpose of getting dollars into the hands of the
Cuban government while keeping them away from the majority of Cuban citizens.
Essentially, it is play money. It is not accepted anywhere outside Cuba and it is not
considered a tradable currency. Since the stores that accept them are owned by the
military, the CUCs go straight back to the government. Swiss banks, along with
Panamanian and Mexican front businesses, are suspected of holding Cuban government
reserves gleaned off of the tourist industry. They might even hold Fidel Castro’s personal
wealth of $900 million. The U.S. government investigated Swiss investment bank UBS in
2005 for processing $3.9 billion in cash from Cuba.

Drug Trade Complicity and Show Trials

Before the days of Western tourists, during the 1960s, 1970s and 1980s, Cuba enjoyed
financial support from the Soviet Union, which allowed it to pursue interests without
thoughts of profit. Those first marijuana farmers Castro promised protection to in return
for taking care of him during his guerrilla march on Havana set a precedent followed in
the 1970s and 1980s. Colombian drug traffickers used Cuba’s airspace and waters with
the permission of Castro and other top Cuban officials. While money was also involved,
Cuban links to the M-19 guerilla movement in Colombia suggest that another reason for
allowing drug trafficking through Cuba was so that the Castro regime could extract
favors from wealthy, well-connected traffickers.

Once Cuban officials cleared traffickers to send drugs through Cuban waters or airspace,
the traffickers would be asked to purchase and deliver arms to the M-19, a group
sympathetic to Cuba’s socialist revolutionary mission in Colombia.

The list below details other links between the Cuban government and drugs:

      In 1982 a U.S. grand jury indicted four high-ranking Cuban officials for arranging
       a drug smuggling operation through which drugs were brought into the U.S. in
       exchange for smuggling weapons to the M-19 guerrilla movement in Colombia.
       The officers indicted included Adm. Aldo Santamaria, chief of the Cuban navy
       and a close Castro collaborate; Fernando Ravelo, Cuban ambassador to Colombia
       and later to Nicaragua; Rene Rodriguez Cruz, president of the Cuban Institute of

       Friendship with the People; and Gonzalo Bassols, a Cuban diplomat then assigned
       to Colombia.
      On June 27,1984, Fidel Castro mediated between Panamanian leader Manuel
       Noriega and an international drug cartel over the seizure of a cocaine laboratory
       in Panama that Noriega had allowed to operate in exchange for a payment of $4
       million. According to the indictment, Noriega traveled to Cuba for the mediation
       at Castro’s request. Castro offered to help settle the disagreement between the
       drug cartel and Noriega. Naturally, playing the role of mediator required good
       relations with both parties.
      In 1989, Robert Vesco was indicted by a grand jury during the trial of drug
       smuggler Carlos Lehder in Jacksonville, Fla., for arranging safe passage for drug
       planes through Cuban airspace. According to the indictment, Vesco obtained
       approval from Cuban authorities for this arrangement. Cuban air force Gen.
       Rafael del Pino, who defected in 1987, reported that all the planes flying over
       Cuba that veered off from the approved air corridors for commercial and private
       aircraft had to be cleared with the office of Raul Castro at the Ministry of the
       Revolutionary Armed Forces.
      On April 23, 1989, Reinaldo Ruiz and his son Ruben were convicted of drug
       trafficking. Reinaldo was the cousin of Capt. Miguel Ruiz Poo of Cuba’s Ministry
       of the Interior. Reinaldo and his son Ruben were allowed by Cuban authorities to
       land their plane at the Varadero Beach airport for refueling after dropping their
       drug cargoes off the Cuban coast near the Bahamas. Drug smuggling fast boats
       would come from Florida to pick up the cargoes. Cuban coast guard radar
       monitored U.S. coast guard cutters and helped the fast boats evade them.

All of the Cuban officials above who allegedly helped drug traffickers have been high-
ranking members of the military or Communist Party. By offering their influence and
Cuba’s geographic assets to traffickers (who primarily were Colombian) the officials
gained favors and powerful foreign contacts. At times, however, Cuba has cracked down
— or at least appeared to crack down — on drug dealers, probably to dispel rumors of
government involvement in the drug trade.

To this end, Cuba has held very public anti-narcotic trials. In 1989, Raul Castro ordered
the arrest of Gen. Arnaldo Ochoa, one of the most highly respected and popular generals
in Cuba. In June 1989, a military court found the general guilty of corruption and
assisting drug traffickers. Ochoa was executed the following month. Raul Castro used
Ochoa’s arrest as an opportunity to trumpet his anti-narcotics efforts even as the
government continued its own trafficking operations.

Several possibilities explain Ochoa’s arrest and execution. The most plausible scenario is
that Ochoa — who as army chief was deeply involved in the drug trade with Raul Castro
— was trying to increase his take by establishing his own connections in Colombia. Thus,
Fidel Castro may have been telling the truth when he said Ochoa was aiding drug
traffickers, even though the real reason for eliminating Ochoa may have been unrelated.
Ochoa’s stature in Cuba and his military connections to the Soviet Union made him a
powerful force. The general fought in Angola and Somalia alongside Soviet forces and

was sympathetic to former Soviet leader Mikhail Gorbachev’s liberalization policies,
despite Castro’s condemnation of glasnost and perestroika. Furthermore, Raul Castro (at
that time head of the Cuban military) suspected Ochoa of having established his own ties
with Colombian kingpin Pablo Escobar.

Ochoa may have undermined Raul Castro’s control over Cuba’s role in trafficking
cocaine from Colombia, thus threatening a major financial source for the Cuban regime.
The general’s popularity combined with his control over a steady financial support at
Castro’s expense was too dangerous for the stability of the regime. Raul most likely had
him executed to remove this threat. The timing of this case was also peculiar in that it
came not quite a year after Noriega’s indictment for drug trafficking in 1988, something
that would have allowed Fidel Castro to point to the Ochoa case as proof that Cuba, too,
was fighting drugs.

More recent displays of Cuba’s anti-drug campaign have been publicized over the past
few years. In February 2005, the government incinerated 1,300 pounds of marijuana to
show the advances that Cuba’s Border Guard had made in intercepting a drug shipment
between Jamaica- and Bahamas-based smugglers. This gesture was largely symbolic,
however. The U.S. Coast Guard reported picking up 74,000 pounds of cocaine in the
Florida straights in 2004, twice the amount seized in 2003. That is not to say that all the
drugs came from Cuba, but it did not appear as if Cuba was helping. In March 2002,
Cuba announced that it had arrested Rafael Miguel Bustamante Bolanos, an alleged
Colombian drug trafficker wanted in the United States. Cuba used Bustamante Bolanos
as a bargaining chip to persuade the U.S. government into signing an anti-smuggling
agreement, but was rebuffed.

Both of these cases show Cuba is willing to arrest drug smugglers and seize drug assets,
but they do not prove that Cuba is out of the business of drug trafficking. In the grand
scheme of things, 1,300 pounds of marijuana is not that much. Marijuana is also not as
lucrative as cocaine. The seizure could simply mean those traffickers did not play by the
rules and were trying to use Cuba to transport their drugs without having an agreement
with Castro. The same can be said for Bustamante Bolanos. Certainly he was a drug
trafficker, but his arrest may have resulted from a disagreement or missed payment. By
making these periodic seizures and anti-drug statements, Cuba can claim to be in
compliance with international standards for drug enforcement while simultaneously
profiting from the drug trade.

Intelligence Capabilities and a Potential Threat

The Cuban intelligence apparatus is one of the best in the world. Trained by the KGB
during the Cold War and fueled by the paranoia of an imminent U.S. attack, foreign
intelligence is one of Cuba’s strongest assets. For a country as small and financially
strapped as Cuba, possessing such a world-class intelligence community is doubly
impressive. Its agents have experience supporting rebels in Angola and Ethiopia in the
1970s and the Colombian M-19 in the 1980s. Currently, the Cubans talk to many of
America’s main adversaries, including Iran, North Korea, Venezuela and Russia. The

Direccion General de Inteligencia (DGI) is essentially in the business of selling
intelligence it collects on the United States to less technically capable or strategically
placed countries. DGI has trained Iran in radar construction and signal reading. Its
reputation and connections with the rest of the world make the DGI a very powerful force
within Cuba.

Because of the Cuban intelligence establishment’s involvement in assisting drug
traffickers, some background of its capabilities and activities is in order.

Cuba’s primary intelligence attribute is its proximity to the United States. Located a mere
90 miles off of the southern tip of Florida, Cuba can pick up signal intelligence, monitor
naval traffic entering and exiting the Gulf of Mexico and quickly transport deliverables to
the United States. Upon the collapse of Cuba’s benefactor, the Soviet Union, the United
States overcame the fear of a nuclear armed Cuba, but its proximity still poses a number
of indirect threats. As suggested by the Castro regime’s tolerance of drug smuggling
through the island, Cuba offers itself as a springboard into the United States. While it
may not always serve as a staging ground for drugs, it can offer a landing strip for drug
planes to refuel or it can offer Cuban waters as a safe haven for drug runners. Of course,
these are offered only if the government receives favors or cuts from the sales of

Additionally, the well-outfitted radar installations along Cuba’s coast operated by the
intelligence agencies of the Interior Ministry can monitor U.S. Coast Guard patrols, thus
helping traffickers make the 90-mile hop across the Straits of Florida. If Cuban
intelligence operatives were to align themselves with organized criminals and drug

cartels, Cuba’s geography could be manipulated into a highly efficient drug trafficking
node for the entire Western Hemisphere.

The DGI is the component that makes organized crime in Cuba such a dangerous
potential threat. By assisting drug traffickers cross the Straits of Florida and monitoring
U.S. Coast Guard traffic, they are already using their resources and expertise in an
unconventional manner as far as intelligence agencies go. The DGI’s connections in
business domestically via the Cuban tourist industry and internationally would make it a
potent force for organized crime in the future.

After the fall of the Soviet Union, the KGB turned to business and organized crime as
sources for income while the state was unable to pay it enough. During the 1990s, as the
Soviet Union was breaking apart, Miami became a node in the Russian criminal world
that saw the trafficking of drugs and sale of high powered weapons. Considering that the
Soviet Union was on the other side of the world, it is reasonable to believe that a Cuban
intelligence agency reconfigured to carry out private, illegal business could wreak much
more havoc. Given the nature of modern, transnational crime that is focused on amassing
huge amounts of money from the sale of drugs, weapons and people, the relatively
innocent times of the mafia in Havana during the 1950s would surely not return. Instead,
the United States could find itself facing a criminal semi-state to its south, one with very
effective smuggling abilities, a complex system of money laundering and an oligarchic
class of criminals and ex-government officials overseeing it all.

Ultimately, coining the illicit activities in Cuba “organized crime” is problematic given
that the main actors are the island nation’s ruling elite. Strictly speaking, this makes their
activities corruption. But the extent these activities have spread and the level to which the
state is dependent upon them makes it meaningful to label it organized crime.

That the activities of the military, intelligence apparatus and the highest officials in the
Cuban government are so blurred and that their financial sources are so unorthodox is an
omen of what could come after the current regime falls. The reliance on outside sources
for support — some of them highly dubious, like drug dealers — and funds means that if
a centralized Cuban government were not there to keep the situation more or less under
control, the individuals involved certainly would find the transition to outright crime an
easy one. The centralized state that holds it all together is already weak right now. As the
Castro government comes to an end, there is reason to believe the Cuban economy could
become ruled by transnational criminal activity and supported by the very components
that make Cuba a state.