An analysis of Cuba’s slave labor policy
Cuba Standard has an article that analyzes the taxation regime proposed by Cuba's Castro dictatorship for foreign firms investing in the refurbished Port of Mariel. However, whether wittingly or unwittingly, their analysis becomes one that clearly exposes the Cuban regime's practice of using slave labor and selling that labor to the highest bidding foreigner.
After listing all the "tax benefits" the Castro dictatorship is offering foreign companies, the analysis get to the real crux of the problem that plagues those who invest in Cuba: The Castro regime's exorbitant slave labor rates.
These provisions should provide a strong incentive for foreign firms to locate in the EPZ. On the other hand, this tax regime in itself will not generate a huge amount of foreign exchange revenues for the Cuban government.
The downside of the tax regime for foreign investors and the major earner of foreign exchange for the government will be the hidden taxation involved in the hiring of labor. EPZ enterprises, like those in joint ventures will have to pay hard currency to a state company to cover the wages and salaries of Cuban workers at a rate around US$1:1 peso (CUP, non-convertible peso), while the relevant rate for Cuban citizens is 1:26. The government can then sell the hard currency (CUC, convertible pesos) at the rate of 1 CUC : 26CUP, meaning a profit on each CUC of 25 CUP. This profit to the government is in effect a 96-percent tax rate. This counterbalances to some extent the generosity of the rest of the tax regime for the EPZ firms.
In the words of Reuters correspondent Marc Frank: “However, one of the main complaints of foreign investors in Cuba has not changed: that they must hire and fire through a state-run labor company which pays employees in near worthless pesos while investors pay the company in hard currency. Investors complain they have little control over their labor force and must find ways to stimulate their workers, who often receive the equivalent of around $20 a month for services that the labor company charges up to 20 times more for.”
Of course, if you have no issues with using slave labor, then your only concern would be the "hidden tax" of 96% on the wages paid the Cuban state for the use of their slaves. In other words, Cuban slaves are being paid .04 cents on every dollar paid the regime for their labor.
Nevertheless, it is apparent that what is really bothering foreign investors is not that they are willing accomplices in the violation of human rights and using slave labor in Cuba, but that the Cuban dictatorship is overcharging them for that slave labor.