MR. WOODS: We don't have, at least I don't have precise data on the structure, size, etcetera of the Cuban armed forces, compared to where they were in the late eighties, when they were withdrawing from Africa. And in general, returning to Cuba from around the world. In general terms, the forces have been cut in half over the past decade. They have stockpiled most of their heavy equipment, which made them in the mid and late eighties, a somewhat formidable international force. The fact that they could project 50,000 troops into Southern Africa, using their own transportation, with self-supporting artillery, air cover, armor, it was a remarkable operation for a nation that small. Of course, that also represented the culmination of the use of decades of Soviet assistance. But with the Soviet assistance gone, they've had to basically not only cut the size of their armed forces in half, but to change the nature of the remaining force.

And I would say that the current force relies basically on light weaponry, heavy equipment, some of it is still available in caves and other places where it could be used. But their internationalist capability has basically disappeared, and they have a different doctrine, which is, I think, purely defensive, and relying to a large extent upon rallying the civil populace, which has in most localities, received some military or paramilitary training to defend the islands if there's a threat. Of course, the only threat they see is the United States.

So I think the changes have been fundamental. It's half the size, it is no longer an internationalist force, it's a small defensive force, which would fight along side the civil populace in the event of an American invasion.

MR. BAKER: You've had close contact with the Cuban military. At that time, in the late eighties, and then at least to the degree on this trip that we did. I mean, in many Latin American countries, the military doesn't enjoy a very good reputation for professionalism, for integrity. How would you characterize the Cuban military in terms of those measures?

WOODS: Well, it's a very small sample, because my exposure to the Cuban military, as in the negotiations, or in this trip to Havana, has been a few dozen of them. There have been some rather lengthy conversations.

My impression is, then and now, a highly professional, highly motivated military force. And I think they have a high professional ethic, and a sense of honor about their institution. I think their anxieties concern the future of the institution at a time of greatly diminishing resource, and of course, there's also the issue of mission. Because the only serious threat they face is the United States, and they know there that if we should decide to move against them, that they could put up a good fight and make it costly. But there's no way they could prevail. They do have a legitimate mission in defending the9ir coastal waters and the seashore from international criminals, drug smugglers and so on. And they're not well-equipped. We're trying to do that at the present time, and I think that's a source of anxiety. But in general terms, I think this is a professional, well-motivated force with a sense of honor.

How the Cuban people feel about them, I do not know, because, you know, I've never had a chance to ask Cuban people that question. Even if they were free to answer. My assumption is that, and having observed on this trip a lot of interaction between the military members and people of the local communities, there seemed to be an easy and comfortable relationship, based on mutual respect. So my guess is that they're held in fairly high esteem. That independent of the issue of potential resentment of the populace at large, of the security apparatus which keeps control on the island.

BAKER: Let's look at that mission itself. What is going on with the economic role that the military is playing there today? Is there something profound going on here we need to observe?

WOODS: Well, I don't know if the Cuban military's role in the economy could be described as profound. But it's certainly important, and I think needs to be better understood. We do need better data. It was emphasized to us during the trip that, from the perspective of the national leaders, and the military leadership, they feel they've made a very important contribution to the economy, a permanent one, by cutting their forces in half, and still maintaining a military capability. And reducing the military burden, economic-financial burden on the economy to that extent, brining it down to a level that the Cubans could support for themselves, without the Russian subsidy.

In that same vein, they had begun to use their military industries to meet most of their basic force requirements and services, goods and services, from their own defense industrial base. And they have a number of these military-industrial centers around the country, and I think they said 20, although they're basically civil workforce, they are managed and advised by a small group of military people. Mangers and technicians, and they apparently are meeting most of the basic needs of the Cuban armed forces, and showing a profit, which is in turn plowed back into meeting some of the other financial requirements.

So I think those are two interrelated contributions the Cuban military is making. Minimize the financial cost, and then meeting much if not most of that out of its own defense industries. Beyond that, the military has been and apparently is becoming a greater source of skilled manpower, which is moving into the civil sector.

Now, most of these are parastatal enterprises, that perhaps in the future there will be similar movement into what we would characterize as a true private sector, as that develops in Cuba. And so they're providing mid and top-level management, and they're providing technical expertise. So I think that's hard to quantify, but it's certainly an important contribution to the development of the national economy.

Beyond that, there's a murky area, which may turn out to be profound, but I think history will tell. And this was one, an area which frankly caught me by surprise on this trip. I had heard only vague references to this. And this is the use as a policy decision by the top levels of government, to use the military as the instrument to achieve modern management reform.

This is a movement which apparently started around 1986, within the military industries themselves, as a result of criticism of those industries by Raul Castro. And after a decade of experimentation, and apparently working it out, including the dispatch of military study teams abroad, and who also, apparently, read the whole of the world literature. Private enterprise, and capitalism, and modern management and so on, and have discovered Peter Drucker and in Japan, the work of Mr. Deming. And have written the manual where they attempt to apply, boil these techniques down and apply them to initially defense industries. But on this trip we were told that that has been so successful, at least in terms of relative success, that the government has made, and is implementing a decision, to use these same techniques for all of the civil parastatals in Cuba— And that this is an ongoing process which will be completed in the next couple of years.

Now, I think the results of that process, we will see in two or three years. But it's interesting that the Cuban military, I guess you could say, potentially profound development, the Cuban military is engaged in introducing modern management techniques, most of them based on capitalist economics, into the Cuban system. And it'll be fascinating to see how far and how fast this proceeds.

BAKER: How would you characterize the Cubans' demeanor towards our visit, towards our investigation into the military role in the economy?

WOODS: Well I've made a number of visits to Cuba, I think this is my sixth, although the first one in about nine years. I thought they were exceedingly open, forthcoming, and welcomed the visit, and I think they take considerable pride in what they've been able to accomplish with very little, actually, in the way of resources. And I think they appreciated, independent of whatever, if you will, subtext of political agenda there might have been, I think they appreciated the interest that we were showing on this subject.

It's a subject I think, as I said before, needs to be looked in more deeply, and I don't think we got enough information on this trip to make any definitive judgments. But I think they're prepared to be reasonably forthcoming, they were on this trip, and I think we should follow up with a request for more data, and have other more specialized people perhaps go down and look at some of the technical aspects of what they're trying to accomplish.

I take a positive view of that, because I think what they are trying to, what they're accomplishing, whether it's their intent or not, is introducing, if you will, free market, gradually introducing many of the techniques which underlie free market economics and private practice. It'll oddly enough, be applied in the parastatals, first, but I think it's bound to spread, and create a model for a free market economy.

BAKER: Let me interrupt right there. You keep referring to parastatals. Is there a more lay-friendly term one can use?

WOODS: I don't know what it would be. State-owned enterprises.

BAKER: That would work better, I think. You mentioned, you‘ve already described for us how they studied Total Quality Management, and that kind of thing, and they came up with their own term, which I can't really pronounce, but, perfeccionamiento.

WOODS: Perfeccionamiento empresarial.

BAKER: Is this, do you know what they mean by this term, and is this something uniquely Cuban, or are they suddenly discovering these principles of free market economy that we've been plying for years?

WOODS: Well, Cuba is a well-read, intellectual, well-traveled, that is, country, at least the leadership, and intellectual elements, academics. I'm sure and they've, they're aware of economic theory, but I think the difference here is that they set out systematically with a government charter in 1986. That is the military, to capture, I don't know if you would say the best, but at least the most relevant aspects of modern management practice and technique. And to try to apply those to the Cuban conditions and circumstances.

The short answer to your question is, we don't know exactly. They have a manual, we asked for it on the trip, and they said they would send it, but of course, as yet we don't have it. So after we get the manual, and have a chance to read it, we'll see more precisely what these rules are.

Some of the things they described to us sound like rather basic principles of economics or capitalism I. If you have excess workers, and you don't need them to produce what you're producing, then you should get rid of some of them. If, well, that you need to keep your books in a way, which will demonstrate the true costs of what you're doing, and the true revenues, and the object of the game is to show a profit for the enterprise. That profit can then be plowed back into, in their case, meeting the needs of the armed forces, meeting then the financial needs of, other financial needs of the government. The bottom line is, you should show a profit, that this is, gets back to if you can't show a profit with the existing workforce, find another product line, get rid of some workers, do something about the weight structure. In other words, all of the things that a capitalist society does to fine-tune its own activities.

So, we don't know in detail what they're doing, but it sounds like what they're doing is adopting, and adapting Mr. Deming's and Mr. Drucker's, and other theoreticians maximus, to meet their own circumstances.

BAKER: What you're talking about, eliminating unproductive workers, and focusing on profits, sounds rather threatening to a traditional socialist economy. Are they threatening their own revolution, with these kinds of tinkerings?

WOODS: Well, I think that potential is there. I would say it's not threatening to the socialist economy, it's probably, promises to breathe new life into a socialist economy, which is in bad shape and getting worse. Because of the inherent, if you will, inappropriateness of socialist economics to work in the modern world. It is a threat to socialist political ideology, and I think in this instance, the reason the military are, have the charter, and are leading the charge on this, is that they can be trusted if any institution in Cuba can, to keep in mind the basic tenets of socialist political aspiration. And I think they will be careful not to bump up too hard against those limits, or try to break through them.

I think when they talked about adapting, I'm assuming that there is a fundamental process at work in this military approach to management— To try to make sense of, within the Cuban context, of economic principles and practices which were intended for a much freer industrial place, and marketplace, and so on. And I think, again, I think the jury is out as to how well this will work in the state civil enterprises.

BAKER: Is there, I mean, do you think the fact that it is the armed forces of the revolution, that's spreading these Western-style business practices, that helps make it "safe" to do them? In other words, if these ideas were coming from the university, or some academic, would it be branded as counterrevolutionary and dangerous, but the fact that it's the military, gives it cover?

WOODS: Yes. I think that the fact that the Cuban military are in the lead on this gives it a much higher chance of success, at least as an experiment. If I were a manager of a state-run commercial enterprise, be it a hotel or a shoe factory, and some academic came to me with a theory on how I could revamp my management style, let a few workers go, maximize profits and so on, I think I would be rather nervous about embracing that. But if I'm visited by the military management team, on instructions of the highest levels of the government, to make this same experiment, I have great confidence that I have cover. If it goes well, I get the credit; if it doesn't go well, I guess I can blame the military management team and their techniques.

So yes, I think this is of fundamental importance, in allowing this experiment to go forward. The fact that the military are, if you will, the transmission agent of this kind of social and economic change. They're viewing it as economic change, but I think inevitably, it will transform itself in various ways into social, political change as well.

BAKER: Do you think the fact that the military is the one carrying it out makes pulling the reins in, or putting the brakes on, on those social repercussions easier, as well?

WOODS: Initially, I think the fact that the military, who are presumably, I think, the presumption would be that the military are overwhelmingly loyal, and what they're recommending, they're recommending on the basis of entirely technical advice. Trying to improve managerial and economic performance, and the financial bottom line.

I think the inevitable repercussions of these kinds of changes, some of which will be negative, at least in the short run— I think it makes it much easier for the political leadership to absorb than if the same activities were being stirred up by outsiders, by intellectuals within the academic community, or whatever.

I think as the process unfolds, and if it gathers steam, and the changes become more profound, and the change proceeds more quickly, then you begin to get these rippling side effects, and it could precipitate, I think not a security crisis, but an ideological crisis. Because I think it gets somewhat to the soul of the socialist revolution. My guess is at that point, that the camp will divide into hard-liners who need to hold on to dogma and doctrine, because without it they feel exposed and vulnerable-- Versus pragmatists, who say the real core of the revolution is the wellbeing of the people, and if we can preserve that and advance it, then let's adapt our practices to do that. So I think at that point, the fact that, whether or not, you know, whatever the change agent, I think the cat is out of the bag, and there will be more concern with where the society is headed, then who started it.

BAKER: According to what you heard down there, how far along are they in this process of transmitting these entrepreneurial innovations from the military to the civilian sector?

WOODS: If I understood what we were told, if I got it right, they have, claimed to have done about 20 percent of the civil government-owned enterprises. I understand there are about 3,000 of those. And that they would have the rest of them done within two years. But again, we didn't get that in writing, and I'm not sure— Some of our questions were not, probably would have been better written out in advance, so that we could have had prepared answers. But it sounds like they're on an accelerated track, which would complete at least the first run process in a couple of years.

Now it seems to me, at the end of that cycle, where they introduce these management reforms, they probably need to regroup and start all over, because the issue will then be, all right, we've put them in, we've run them a couple of years, now how is it working? Where is it producing good results, where is it not, and why, and, you know, and this becomes a continuous process.

The other thing is I would expect the process at some point fairly early on, if it's going to go ahead, to run off the printed page, and go into uncharted waters, and then the issue will be who has the authority to make recommendations, or to implement additional reforms— Or let's not call them reforms; additional changes, which again, might threaten socialist doctrine or practice as it has evolved in Cuba up to this point.

So I think, you know, in a few years, if this thing continues, it'll be a much livelier enterprise, and much looser, and I suppose more threatening to those within the communist bureaucracy who are afraid of change.

BAKER: Have you any kind of gut feeling as to the likelihood of that happening, of it going that far?

WOODS: No. No, I think we might have another feel in two, maybe three years. I don't think the process has advanced far enough yet to get a sense of that.

BAKER: We have seen --kind of changing gears a little bit here, we've seen US dollars start flowing in greater amounts into Cuban society, both in terms of remissions, and through tourism, primarily. What impact is that having on Cuban society?

WOODS: I don't feel I got enough of a sense on this visit of the impact of the dollar economy in particular, certainly in the parts of Havana we were in, and for that matter, in our visit to the Barredera (phonetic) Peninsula. The dollar is everywhere and almighty. Since my last visit of nine years earlier, the economy is obviously recovered to a considerable extent from where it had bottomed out in the late eighties. I'm sure that this infusion of mainly tourist capital, not much of it American, has been fundamental, and I think it is beginning to trickle down. People look better fit, better dressed, and there are more new vehicles on the streets and so on, but these are gross generalizations. I don't have the background to answer your question in any technical sense.

BAKER: Is there anything else you want to address about the Cuban military and its economic role? To do with the joint ventures, or the management techniques, or anything at all?

WOODS: There was one area in which the Cuban military seems to be deeply involved in the economy, and we did not get much information at all on this trip. Whether that was deliberate, I'm not sure, but this concerned the military investment in commercial activities.

The hotel industry is a particular case, because we know, or are told, that the Cuban military is a major investor/owner through again, what I would call a parastatal organization, Gaviota. In the hotel, international hotel business. And there are other, apparently, sectors in which the Cuban military is becoming an investor.

Now, how they become an investor, percent of ownership, what degree of control that gives them, what they do, how much of the profits they get, what they do with the profits— I think these are very interesting aspects, and I felt we got no information on this visit.

If there are to be future visits, I think this is an area where we should ask more questions about it. The questions should be asked in advance, and see if we can get a response, because I think this in the long run is a very important area, and as is the military role in running certain industries. We got, in this case, a lot of short term information on what they were doing, but I didn't get a good feel, perhaps there is no good answer, as yet, even from the government side, as to where they would like these enterprises to be ten years out. Will there be more of them, will they be operating at a larger scale, or will they put a lid on them and say you're meeting our force requirements, and generating a small profit, that's good enough— Let's not compete with the civil sector, which is run by the government, the parastatals, or the private sector, as it's allowed to develop. I just don't think we know if the Cubans have a game plan, they did not reveal it to us.

BAKER: That's all I have. Do you feel comfortable making comments about US policy towards Cuba?

WOODS: That, I take, is not a question.

BAKER: No, that's, this is off—

WOODS: Would you like to go into-?

BAKER: Well, I mean, seeing as how they're moving towards some areas—

WOODS: Well you didn't ask about cooperation. You skipped over that.

BAKER: Well, right, right.

WOODS: No, I have no problem with that.

BAKER: Let me ask that. I mean, are there areas of cooperation with Cuba that you think would benefit the United States?

WOODS: There are some potential areas of cooperation with the Cuban security forces, including the military, that I think would be of mutual benefit. If the practical needs can overcome the political estrangement on both sides.

One of these, obviously, is dealing with the increasing menace of international narcotics trafficking. There are those in the United States who accuse the Cuban government itself, or elements thereof, of being complicit in the international narcotics trade coming into Florida, and along the Atlantic and South Atlantic coast of the United States. The Cuban government vigorously denies that, and says to the contrary, it would like to cooperate more fully with the United States in dealing with these, particularly fast boats which are dumping the drugs. And which in some cases, wash up on the Cuban shore, perhaps intended to be held for another fast boat pickup mission later, at a later date.

There is a good bit of information sharing, and a degree of cooperation, and I think it would make sense to expand that. I think there needs to be, again, this is very political, I think there needs to be greater cooperation on the issue of illegal immigration. I think there needs to be much stricter control of that; otherwise I think it's going to develop just as the Cubans told us, into more and more fast boats running from Cuba and other locations in the Caribbean— And charging seven, eight, nine thousand dollars per passenger to dump them in the surf off of Miami, and hoping they can wade ashore before the Coast Guard gets them. And I don't think this is a way to run an immigration policy.

Well there are obviously several areas in which the two governments could cooperate to their mutual benefit. Cooperate more fully. One would be in addressing international narcotics trafficking, particularly by fast boats, many of them running out of Cuba now. Or at least out of Cuban waters.

Secondly, I think there needs to be joint action to address the problem of illegal immigration, before we have lots of fast boats dropping Cubans and others in Miami surf, or dumping them at sea if they're intercepted. Because this is becoming a lucrative racketeering opportunity.

And finally, there's the broader issue of international organized crime, but I see that as not a military to military cooperation issue, but rather one between the police organizations, the US and international INTERPOL, and international, if you will, intelligence and information sharing. The key question will be doubts on both sides about the sincerity of the other side, and I say, the best way to answer those doubts would be to attempt to cooperate and see what happens.

BAKER: What is your opinion of the US trade embargo of Cuba?

WOODS: Well, I understand the— moral basis on which the US trade embargo is founded, and also there are some commercial considerations by aggrieved parties who've lost properties and so on. I think on balance, it's a counterproductive policy, and I think we need a policy of commercial engagement, and private sector engagement. And I think we would make much more progress in eventually getting to the point where it could resolve the old agenda problems, through a policy of engagement than through the existing policy of embargo. But to do that is going to need a change of law, and we're going to have to have new attitudes in the Congress.

BAKER: Great.