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Tuesday, April 26, 2011

REALITY OF LABOR IN CUBA AND THE SOCIAL RESPONSIBILITY OF FOREIGN INVESTORS

REALITY OF LABOR IN CUBA AND THE SOCIAL
RESPONSIBILITY OF FOREIGN INVESTORS


Jesús R. Mercader Uguina 1

I. Foreign investments in Cuba: Background
Economic data show that starting in 1994 Latin
America became the main destination for direct
investments from Spain’s most important service
companies in its internationalization strategies. In a
few years, Spain attained leadership positions in
some of the main Latin American markets. As a
result, investments in Latin America between 1991
and 1999 accounted for nearly 50 billion dollars. It
is evident that Spanish companies have gone from
being marginal investors in the international realm
to having a growing importance in the services
sector. Thus, while some of the most important
transnational companies in the world attempted to
increase their efficiency through investors in Spain,
Spanish companies were seeking to access Latin
American markets in an attempt to grow in size and
to be able to compete, under the best possible conditions,
with leading companies in increasingly
globalized international markets.2

Within this framework, Spanish investments in
Cuba have, throughout these years, played a noticeable
part, totaling 150 million dollars in 1998. Of
the 600 foreign companies doing business there that
year, around 150 were Spanish companies, including
Argentaria, BBV, Tabacalera, and Sol Meliá. At that
same time, Spain was ranked the number one desti


nation for exports from Cuba’s Free Trade Zones.
The Cuban Ministry for Foreign Investment stated
that by the end of 2002 there were 412 international
joint ventures in Cuba. Fifty percent of the
capital involved came from the European Union.
Of those joint ventures, 336 operate on the Island
and 76 operate abroad. Spain, Canada, Italy, and
France were the first four countries to have companies
of this kind in Cuba.3 The current regulatory
framework of foreign investments in Cuba deserves
to be evaluated in light of its recent history.

Following the expropriations of the 1960s, foreign
investments disappeared in Cuba for over 30 years.4
In 1972, Cuba automatically became a member of
the Council for Mutual Economic Assistance under
the category of “developing country special member”
(COMECON: USSR-Eastern Europe common
market),5 and, therefore, in the so-called international
socialist division of labor and in the system
of economic dependence existing in that complex
structure.

Years later, Legislative Decree No. 50 of February
15, 1982, on Joint Ventures between Cuban and
Foreign Entities, revived investments in Cuba since
the government considered that in certain sectors,
such as tourism, “socialist countries did not possess

1 Professor of Labor Law and Social Security, Universidad Carlos III of Madrid.

2 Data are from E. GIRALDEZ PIDAL, La internacionalización de las empresas españolas en América Latina [Internationalization of Spanish companies in Latin
America], Madrid, CES, 2002, p. 14.

3 As summarized by L. VENACIO in La inversión extranjera directa y la crisis económica cubana [Direct foreign investment and the Cuban economic crisis]. The full
digital version of the text is accessible at www.eumed.net/libros/2005/lv/.

4 For an analysis of this period L. VENACIO, La inversión extranjera directa y la crisis económica cubana [Direct foreign investment and the Cuban economic crisis],
cit.

5 C. MESA-LAGO, Breve historia económica de la Cuba socialista. Políticas, resultados y perspectivas [Brief economic history of socialist Cuba. Policies, results and perspectives],
Madrid, Alianza América, 1994, p. 99.


Reality of Labor in Cuba and the Social Responsibilty of Foreign Investors

the state-of-the-art technologies required for development,
which led to the conviction that, in order
to enjoy a comparative edge, in other words to diversify
and increase the volume of exports and income
in currency, it was necessary to associate with
Western companies.”6 The actual application of the
Law posed numerous problems, so that the first
project developed with foreign funds did not materialize
until 1990,7 the year of the first joint venture
between a state entity and a foreign firm (the Spanish
hotel chain Sol Meliá, owner of 50%) which
resulted in the opening of a hotel in Varadero in
1990.

As a result of the fall of the socialist block in the
first years of the 1990s, Cuba suffered various
shocks. The Cuban economy as a whole “was reduced
between 35 and 50%. Before 1991, the USSR
used 63% of Cuban sugar, 73% of its nickel, 95%
of its citrus and 100% of its electricity exports. In
turn, Cuba received from the USSR 90% of its
machinery and other equipment and 98% of its
fuel. In less than 4 years, Cuba lost 80% of its exchange
capacity.”8 These circumstances led the
Cuban State to seek out larger investments for the
long term, although still in limited sectors of the
economy. In order to facilitate this new strategy, the
State included in the new Constitution, promulgated
in August 1992, certain important changes in
the system of property in Cuba; in particular, Article
23 of the Constitution establishes that: “The
State recognizes the ownership of mixed companies,
corporations and joint ventures incorporated
pursuant to the law.” The use, enjoyment, and disposal
of assets belonging to the patrimony of the

above entities are governed by the law and the treaties,
as well as by their own bylaws and regulations
that govern them.

From 1992 to 1995, the system of foreign investments
had been characterized by the following
features:9 the possibility for the investors to be
owners of up to 49% of the shares of the company,
except in the case of tourism, the mining industry,
or investments in Latin American companies
in which they are permitted to own up to 51% or
more of the shares of the company; exemption of
taxes on gross income and individual income, and
of the tax on the transfer of the company or its
assets; elimination of customs duties on imports of
equipment necessary for the company; repatriation,
without restrictions and in hard currency, of the
dividends and profits and the salaries of the foreign
employees of the company, establishing in labor
matters the freedom to contract foreign personnel
for executive and technical positions, although only
through the state companies that supply personnel;
and, finally, governmental support in technical areas
such as legal, economic, accounting, and computer
services.

Once the path had been selected, which was to attract
this investment,10 the Cuban government
adopted several measures. Specifically, the Ministry
for Foreign Investment and Economic Collaboration

(MINVEC) was created on April 21, 1994, by
means of Legislative Decree No. 147 of the Council
of State. Its functions include promoting Foreign
Investment in Cuba and establishing the legislation
governing the negotiation process for the constitu


6 M. FIGUERAS, Las Inversiones Extranjeras en Cuba [Foreign Investments in Cuba], Cuba, MINVEC, 1997.

7 For an analysis of the shortcomings of this Law, see J. F. PEREZ LOPEZ, Odd Couples: Joint Venturing Between Foreign Capitalists and Cuba Socialists,
North-South Agenda Papers, 1995, n. 16.

8 S. BASDEO and H. N. NICOL, Canada, the United States, and Cuba. An Evolving Relationship. The North-South Center Press at the University of Miami,
2002, p.15.

9 M. F. TRAVIESO-DIAZ, J. F. PEREZ-LOPEZ, La inversión extranjera en Cuba: Pasado, presente y futuro [Foreign investment in Cuba: Past, present and future],
in M. MARTIN, M. GARCIA, F.J. SAEZ (Eds)., La actual economía cubana a debate. Homenaje a Julián Alienes Urosa [Current Cuban economy under debate.
Homage to Julián Alienes Urosa], Granada, Universidad, 2001, p. 129.

10 M. DE MIRANDA PARRONDO, Estado, Mercado y Reforma de la Economía Cubana. Alternativas de Política Económica [State, Market and Reform of the
Cuban Economy. Economic Policy Alternatives], in AA.VV., Ponencia en el Simposio Internacional del Proyecto de Investigación “Reforma económica y cambio social en
América Latina y el Caribe (cuatro casos de estudio; Colombia, Costa Rica, Cuba y México)” [Speech at the International Symposium of Investigation Project “Economic
reform and social change in Latin America and the Caribbean (Four case studies: Colombia, Costa Rica, Cuba and Mexico)], Cali, Colombia, 1999, pp. 22-23.


Reality of Labor in Cuba and the Social Responsibilty of Foreign Investors

tion of Joint Ventures or other forms of Foreign
Investment participation. At the end of 1994, it was
officially declared that the Cuban economy would
be totally open to foreign investment, with the exception
of health, education, and the armed forces.
As of this date, a new wave of mixed companies
arose, principally in the provision of services,
housing construction, real estate projects, and telecommunications.


II. The current regulatory framework of
foreign
investments in Cuba: General principles
of Law No. 77 of 1995.
1.
Budgets for foreign investment in Cuba
On September 5, 1995, the Cuban National Assembly
approved the Law of Foreign Investment, Law No.
77/1995 (Gaceta Oficial, September 6, 1995), which
came to replace Legislative Decree No. 50 of February
15, 1982, concerning the Joint Venture between
Cuban and Foreign Entities and establishes the fundamental
principles governing foreign investments. Its
preamble states that “it is convenient to adopt a
new legislation which provides better security and
guarantees to the foreign investor,” and further
points out that Cuba can benefit from foreign investment
after the fall of the socialist block and in
view of the “fierce embargo” imposed by the
United Status.11 Law No. 77 was completed with the
enactment of various decrees and resolutions after
its introduction.

Investment regulations establish a complex administrative
system of management headed by the Ministry
for Foreign Investment and Economic Collaboration

(MINVEC) as the agency responsible for coordinating
investment activity, receiving applications
from foreign investors, processing these applications
and distributing them to other agencies for
review, and finally presenting them to the Executive
Committee of the Council of Ministers that was
created by Legislative Decree No. 147 of April 21,
1994, of the Council of State. An essential requirement
for being able to operate in Cuba is for
companies to register in advance in the Register held

by the Cuban Chamber of Commerce. As indicated in
Article 25.5 of Law No. 77, each proposed investment
must be approved by the Executive Committee of
the Council of Ministers or the Government Commission.
Furthermore, Cuban regulations establish a
series of requirements for controlling and monitoring
investments.

The Foreign Investment Law authorizes three different
types of investments:

1. First, there are mixed companies, which include
domestic and international investors. They are
commercial companies that adopt “the form of a
corporation with registered shares, with the participation
as shareholders of one or more domestic
investors and one or more foreign investors” (Article
2 (i) of Law No. 77). The mixed company involves
the creation of a separate legal entity (“artificial
person different from the parties”), which must
register with the Cuban Chamber of Commerce
(Article 13 of Law No. 77).
2. Second, Law No. 77 permits the creation of companies
with exclusively foreign capital, that is, “without
the concurrence of any domestic investor” (Article
2(h) of Law No. 77). This type of company can be
created according to Article 15, either by registration
of the entity with the Cuban Chamber of
Commerce, or by the creation of a Cuban subsidiary
of the foreign entity owned by it in the form of
a corporation with registered shares, recording it
with the Registry of the Chamber of Commerce.
3. Lastly, the Foreign Investments Law defines the
“international joint venture contracts” as pacts between
one or more domestic investors with one or more
international investors in order to carry out activities
together, without forming a separate legal entity
(Article 2 (g) of Law No. 77).
2.
The labor system of the Foreign Investment
Law
2.1. General
principles and applicable
regulations
11 The ILO Committee of Experts took note of the Government’s report for the period ending June 1996. The Government recalls that the circumstances
prevailing in the country since the beginning of the decade have had a negative effect on employment. Among the measures adopted to face
the labor market difficulties, it refers in particular to the reintegration of the economy into world markets by means of establishing mixed companies
or joint ventures, developing activities to generate short-term income (tourism, biotechnologies, pharmaceutical industry, food products), and authorizing
basic units of cooperative agricultural production and self-employment, in CEACR, Individual Observation concerning Convention No. 122, 1998.


Reality of Labor in Cuba and the Social Responsibilty of Foreign Investors

Law No. 77 maintains the system implemented
under Law No. 50, which indicates that the labor
force of each company with foreign participation
must be provided by the State through an employment
agency designated by MINVEC.12 However,
in certain cases, the Law allows a company to hire
all or some of its employees directly, if permitted
by the authorization issued by the Government for
the incorporation of the company or the development
of the corporate project. Law No. 77 defines
a special legal labor system in which the common
labor legislation acts as a secondary regulation: “in
the activity of foreign investments, the valid Cuban
labor and social security legislation is implemented
with the adaptations set forth in this law” (Article
30). The labor system is completed with Resolution
No. 3/96 of the Ministry of Labor and Social Security,
issued on March 27, 1996 (Gaceta Oficial May
24, 1996),13 pursuant to Article 37 of the Law.14

The subjective scope of this special labor system
extends to all “workers who render services in the
activities of foreign investments […] Cubans or
foreigners who are permanent residents in Cuba”
(Article 31.1). However, an exception is made to the
former rule for “the management and administration
entities of mixed companies or of totally foreign capital companies,
or the parties to international joint venture contracts.”
In this case, they themselves would be able
to decide that certain top management positions or
certain technical positions would be filled by persons
who are not permanent residents in the country
and, in these cases, would determine the labor
system to be applied and the rights and obligations
of such workers. Nonetheless, the regulation makes
it clear that persons who are not permanent residents
in the country and are hired will be subject to
the valid immigration and foreigner status provisions.


In turn, Article 32.1 of Law No. 77 establishes that

“mixed companies, the parties to international joint
venture contracts and totally foreign capital companies
may be authorized to create an economic incentive
fund for Cuban workers and foreign permanent
residents in Cuba who work in the activities of the
foreign investments.” In any event, “the contributions
to the economic incentive fund are made from
the profits obtained. The amount of these contributions
is decided upon by the mixed companies,
the foreign investors and the domestic investors
who are parties to international joint venture contracts,
and by totally foreign capital companies, with
the ministry for foreign investment and economic
collaboration.” In turn, MINVEC Resolution No.
127/95 issued on December 15, 1995 (Gaceta Oficial
of January 2, 1996), establishes, concerning the
companies with foreign participation, the rules on
the establishment of a workers’ economic incentive
fund.

2.2. The monopoly of
the Cuban State
in the selection of the workers who
render services to companies with
foreign investment
The Foreign Investment Law authorizes three different
types of investments. In each of them, full
control of the hiring and firing process of the
workers is reserved for entities controlled by the
State. The State reserves for itself the screening and
control of the human resources which, in other
countries, are handled by the management of the
companies, including: employee recruitment, employment
decisions, application of disciplinary
measures, dismissal, and the compensation of the
worker for his achievements. One author has indicated
that “the employment agency transforms the
typical bilateral relationship into an interesting triangle,
in which the worker, apparently in a condition
of double subordination, actually receives better
protection in his individual legal-labor

12 The ILO Committee of Experts noted that the total number of workers employed in foreign enterprises, or in mixed companies, at the end of
1997, represented less than 0.5 per cent of the total number of workers employed. CEACR, Individual Observation concerning Convention No. 122, 2000.

13 Resolution No. 3/96 repeals Resolution No. 18/93 of the former CETSS [State Committee for Work and Social Security] and all provisions with
the same or lower rank opposed to the provisions of this regulation.

14 Under Article 37: “the Ministry of Labor and Social Security is authorized to issue all additional provisions necessary for the best application of
this chapter, especially in matters of labor contracting and labor discipline, and gives certain specifications on the use of workers in the foreign capital
companies that operate in Cuba.”


Reality of Labor in Cuba and the Social Responsibilty of Foreign Investors

relationship.”15 Certainly, the triangular relationship
is clearly assessed, but the fact that it is more beneficial
for the interests of the workers is more debatable,
as will be indicated further on.

Cuban legislation does not contain rules regulating
labor under subcontracting, nor does it define the
concept of brokerage in employment, since Cuba
does not have placement agencies. The employment
function, as explained earlier, is filled by each entity
in its human resources area, through territorial Employment
Offices, or through the information given
by the Offices of the Municipal Labor Departments
of the People’s Power. In the case of foreign
investments, the law indicates with limitations that
the employer must be a state entity and cannot be
an individual. In turn, each investment may have an
employer or may establish that there be one in a
sector or branch that serves several entities with
foreign investment. Concerning personnel, the
public entity is the employer because each of its
workers signs an employment contract with it.16

Both mixed companies and totally foreign capital
companies must use a government employment
entity to hire employees and negotiate their contracts
(Articles 33.1 and 3.33). Indeed, in accordance
with Article 33.1, “The workers in mixed companies
who are Cuban or foreign permanent residents in Cuba,
with the exception of the members of the management or

administration, shall be contracted by an employing entity
proposed by the Ministry for Foreign Investment and Economic
Collaboration and authorized by the Ministry of
Labor and Social Security.” Equally, Article 33.3 establishes
that, “In totally foreign capital companies, the services
of Cuban workers and foreign workers residing permanently
in Cuba, with the exception of the members of the
management and administrative body, shall be hired through
a contract between the company and an employing entity
proposed by the Ministry for Foreign Investment and Economic
Collaboration, and authorized by the Ministry of
Labor and Social Security.” The entities will be proposed
by MINVEC and approved by the Ministry
of Labor and Social Security. The agency designated
in most cases is ACOREC, S.A. (Agencia de
Contratación a Representaciones Comerciales, S.A.),
even though CUBALSE, S.A.17 (Empresa de Servicios
al Cuerpo Diplomático, S.A.), sometimes appears
as the contracting agency designated by the
government.18

Cuban subsidiaries of multinational companies
follow a slightly different process. They must obtain
personnel from a certain agency:19 The Agency for
Contracting Commercial Representations
(ACOREC), which hires about 2,000 workers in
more than 600 companies and which charges a little
more from these multinationals, but pays exactly the
same to the workers. In this case, the foreign company
may establish a trial period of up to two

15 L. GUEVARA RAMIREZ, Tendencias del derecho laboral cubano en los umbrales del siglo XXI [Trends in Cuban labor law on the threshold of the 21st century],
Unión Nacional de Juristas, at www.uniondejuristasdecuba.cu/paginas/index_cubalex.htm.

16 L. GUEVARA RAMÍREZ Agencias transnacionales y la mundialización del empleo [Transnational agencies and employment globalization], Cubalex, 2001, No. 14,
at www.uniondejuristasdecuba.cu/paginas/index_cubalex.htm.

17 Cubalse, whose name comes from Cuba al servicio del extranjero [Cuba in the service of foreign countries], is a Cuban state corporation made up of a
group of companies with various corporate functions. It offers certain products and services to its domestic and foreign clients who have dollars. The
corporation employs 6,200 workers in Cuba, controlling a network of over 170 stores and service units – business centers, supermarkets, boutiques,
restaurants, a golf club, photo and video stores, laundry and dry cleaning stores, cafes, and veterinary clinics – which mainly serve the members of the
diplomatic corps, businessmen, foreigners who live in Cuba, tourists, and Cubans with access to dollars. It also operates in real estate, automobiles, the
financial sector, the legal sector, and land and maritime transportation, and offers special services of photography, design, and advertising. Data are
from A. CARMONA BAEZ, State resistance to globalisation in Cuba, London, Pluto Press, 2004, pp. 168-171.

18 M. F. TRAVIESO, C.P. TRUMBULL IV, Foreign investment in Cuba: Prospects and Perils, George Washington International Law Review, 2003.

19 M. F. TRAVIESO, C.P. TRUMBULL IV, Foreign investment in Cuba: Prospects and Perils, cit. Law No. 77 and its regulations in the labor field are currently
applied according to the following procedure: While the feasibility study is being prepared, the foreign investor and its Cuban partner determine
the number of workers needed. Afterward, they contact an employment agency designated by MINVEC. This agency is usually a subsidiary of a State
company in the activity sector in which the business will be conducted, possibly the same company as the investor’s partner. The employment agency is
fully responsible for all the aspects of hiring, employment conditions, and termination of the Cuban worker’s contract. Each employment agency has a
“labor exchange” with the available workers. When a foreign capital company needs Cuban workers, the agency schedules interviews with the management
of the joint venture and the prospective employees, and the companies have the last word on selecting the workers. It is not clear how broad
the list is from which they can choose or how people are co-opted into the list. The investor can also hire people who are not in the labor exchange. In
this case, the businessman contacts the agency and explains that he has decided to hire a worker who is not on the list. After that, the agency prepares
a dossier on the worker to establish that he does not have a serious criminal record and has “sound principles.” In this case, the employment agency
will contact the worker to hire him on the above terms. The company can never hire him directly.


Reality of Labor in Cuba and the Social Responsibilty of Foreign Investors

months with the worker. If the foreign company is
satisfied with him, it may hire him for more than
five years. The foreign company may decide the
position, responsibility, etc.

In the case of “international joint venture contracts,” the
workers would be hired by the “Cuban party” according
to the terms analyzed above. Since the
Government does not allow private investment, it is
the Cuban investors controlled by the State (Article
2 (a) and (g) of Law No. 77) that are finally responsible
for hiring employees. All this takes place in the
precise terms of Article 33.2, which establishes that
“the persons who render their services to the parties in international
joint venture contracts are contracted by the Cuban
party, in accordance with the current legal provisions in matters
of labor contracting.”

The rules governing selecting and hiring workers
are discussed in Resolution No. 3/96. They establish
that foreign companies must sign “Labor Supply
Contract(s)” with the employer and with the
competent labor union (Article 7 of Resolution No.
3/96). A feature of the Cuban system or legal system
with employment entities is that “there is no
double payroll in the user entity,”20 because it submits
its needs to the employment entity and the
supply contract establishes the details of the supply
of each of the workers. This contract contains all
the clauses for the performance of its object and is
executed with the participation of the union, which
also participates in the signing of a tripartite collective
bargaining agreement, in which the employment
entity and the user company also participate.
Article 8 of Resolution No. 3/96 indicates that the
employer entity is to find and screen personnel for
the company from workers who have the qualification,
ability, skill, professionalism, and experience
required, for the efficient work in the profession in
question, in accordance with current legislation in
the matter.

Consequently, it is important to remember that
there is no labor relationship per se between the
workers and foreign capital companies. Thus, the
State operates as a “Temporary Employment
Agency” that transfers to the foreign user company
the workers in its service. The mandatory use of
Government-controlled employment agencies
leaves workers without the ability to directly negotiate with the business entity their salaries, benefits,
reasons for promotion, and the duration of the trial
period. The official employment entities take on
each of these functions, without allowing the employees
to be freely contracted by foreign investors
(Articles 9, 12 and 14 of Resolution No. 3/96).

From the various reports of international organizations,
it would appear clear that the fact that the
State entity can choose the workers of the foreign
capital companies means that, through it, there is an
ideological screening of the candidates selected.
This is categorically stated by the written statement
submitted to the United Nations Economic and
Social Council by Pax Christi (International Catholic
Peace Movement, a non-governmental organization
in special consultative status) dated January 31,
2001, which indicates that “and like all Cuban
workers, they must be members of the state-
controlled Cuban labor union CTC (Confederation
of Cuban Workers). Those workers who belong to
or even associate with the independent and thus
illegal unions are expelled from their jobs.” Certainly,
the government could, in this way, “reward”
the employees it considers politically more loyal,
placing them in projects with foreign capital. It is
necessary to remember, notwithstanding a more
detailed study afterwards, that the powers given to
the government entity under Law No. 77 and
Resolution No. 3/96 concerning the screening of
the workers by their political affiliation is similar to
the norms established in 1990 for the employment
of workers in joint ventures in the tourist sector;
these norms stressed the personal qualities and the
conduct of the individual instead of his work performance.


Another international human rights organization,
Human Rights Watch, indicates in its report on Cuba
that “under these laws [...] the Government plays a
prominent role in the selection, payment, and firing
of workers, thus effectively barring most employees
from forming unions or even from entering into
independent, direct discussions of labor rights with
their employers. These restrictions on labor
rights—Cuba’s virtual guarantee that no investor
will face any independent union organizing in the
workplace—were created to attract foreign
investors.”21

20 L. GUEVARA RAMÍREZ, Agencias transnacionales y la mundialización del empleo [Transnational agencies and employment globalization], cit.
21 HUMAN RIGHTS WATCH, Cuba’s Repressive Machinery: Human Rights Forty Years after the Revolution, 1999, at www.hrw.org.


Reality of Labor in Cuba and the Social Responsibilty of Foreign Investors

In this context, we should remember Convention
No. 111 that was already analyzed at length. Article
1 establishes that the term “discrimination” includes:
“any distinction, exclusion or preference made on the
basis of race, color, sex, religion, political opinion, national
extraction or social origin, which has the effect of nullifying
or impairing equality of opportunity or treatment in employment
or occupation.” For these purposes, the ILO
Committee of Experts on the Application of Conventions
and Recommendations pointed out that
under Article 1.2 of the Convention, only distinctions,
exclusions, or preferences based on the requirements
of a particular job are not deemed to be
discrimination. Moreover, in the above-mentioned
General Survey, the Committee recalls in paragraph
126 that, “although it may be admissible, in the case
of certain higher posts which are directly concerned
with implementing government policy, for the responsible
authorities generally to bear in mind the
political opinions of those concerned, the same is
not true when conditions of a political nature are
laid down for all kinds of public employment in
general or for certain other professions.”

2.3. The control exercised by the Cuban
State on the labor conditions of the
workers in the service of foreign
investment companies
As we have been saying, it is clear from Article 34
of Law No. 77 that the employment relationship is
established between the worker and the State entity,
and not with the foreign participation company.
The legal rule makes several specifications as to the
following areas: the return of the workers because
they do not meet work requirements; the forms of
compensation; discipline and resolution of labor
conflicts; vacations, social security and labor protection;
and drafting of internal regulations.

The trial period for workers contracted to serve a
mixed or totally foreign capital company is 30 to
180 days, corresponding to the initial stage of the
labor relationship. It allows workers to demonstrate
their ability to do the job under company condi


tions and characteristics. The employment entity, in
agreement with the union organization and the
company, determines, within the limits indicated,
the duration of the trial period for each profession
or job, depending on its complexity and characteristics.
During that period, the company may return
the worker to the employment entity. In turn, Article
13 of Resolution No. 3/96 indicates that the
employer and the company are obligated to instruct
the worker during the trial period in aspects such as
objectives and duration of the trial period, importance,
duties, and obligations of the job or profession
he will fulfill. The worker must also be told
about the amount and payment period of the salary;
work status; and protection and hygiene rules
and the means to be used. The worker also needs to
know the internal regulations and other necessary
aspects. Article 10 of Resolution No. 3/96 indicates
that the company may give, when needed, training
or retraining to its personnel, or agree upon it with
the employment entity.

The state entity is responsible for firing and replacing
workers whose performance is deficient and,
finally, possible claims must be presented to the
state entity, even though the company has the financial
responsibility concerning the cost of resolving
the labor relationship: “When mixed or totally
foreign capital companies consider that a certain worker does
not meet their requirements at work, they may request the
employment entity to replace him by another. Any labor
claim is resolved by the employment entity, which pays at its
own expense to the worker the indemnities to which he is
entitled, as established by the competent authorities; when
applicable, the mixed or totally foreign capital company compensates
the employment entity for the payments, according to
the procedure established, all in agreement with current
legislation.”

Workers may be fired if they engage “in improper
conduct, criminal or otherwise, affecting his/her
prestige as a company employee and contrary to the
standards of conduct” annexed to the resolution
(Article 29 of Resolution No. 3/96). The standards
require workers to maintain social conduct worthy


Reality of Labor in Cuba and the Social Responsibilty of Foreign Investors

of his/her fellow citizens’ respect and trust, by not
allowing any conspicuous signs or privileges, and by
keeping a lifestyle in line with society. (The law also
requires workers to act “according to the best interests
of our society”; “to subordinate his/her acts
and decisions to the best interests of our people”;
and “to neither accept from, nor ask the persons
above or around him/her for any payments, gifts,
handouts or preferential treatment contrary to the
adequate labor and personal behavior expected
from our cadre and workers).”22

2.4. Form of compensation for workers
and its flagrant contradiction with
ILO Convention 95
The protection of the freedom of workers to dispose
of their wages constitutes one of the central
aspects of International Labour Organization Convention
No. 95 of June 8, 1949, which was ratified
by Cuba on September 24, 1959. Article 5 of the
Convention requires that wages be paid directly to
the worker concerned except as may be otherwise
provided by national laws or regulations, collective
bargaining agreement or arbitration award, or that
with the agreement of the worker involved, differ


ent procedures be adopted. Article 6 categorically
prohibits employers from limiting in any manner
the freedom of the worker to dispose of his wages
and, on the other hand, Article 9 reads textually:
“Any deduction from wages with a view to ensuring a direct
or indirect payment for the purpose of retaining employment,
made by a worker to an employer or his representative or to
any intermediary (such as a labor contractor or recruiter),
shall be prohibited.” Article 6 of the Convention reinforces
the concept when it reads: “Employers shall be
prohibited from limiting in any manner the freedom of the
worker to dispose of his wages.” In short, there is no
merit to guaranteeing that the workers receive all
their salaries in legal tender and at regular intervals
if they cannot dispose of these gains as they wish.

This is the context in which we must place Article

33.4 of Law No. 77 which establishes: “Payments to
Cuban workers and foreign workers residing permanently in
Cuba shall be made in national currency, which must be
obtained beforehand from convertible foreign currency.” This
limitation is practically unrestricted if we take into
account that, if Cuban investors wish to pay their
workers in hard currency, they must first obtain
approval from the Ministry of Labor, as established
in Article 18 of Resolution No. 3/96.23
22 Standards of Conduct Applicable to Cuban Staff in International Joint Ventures, cited by Human Rights Watch, 1999, at www.hrw.org. Workers can be
disciplinarily sanctioned if they fail to comply with the resolution’s provisions. If a worker commits an infringement, then he or she could face a penalty
such as public censure or the loss of 25 percent of the monthly wage. Other possible sanctions include transfer to a lower-paying post or dismissal.
The employing entity is charged with applying the penalty after considering factors including the personal qualities of the worker, which potentially
grant it authority to penalize workers for expression or activities completely unrelated to their jobs (Articles 47 and 48, Resolution No. 3/96).
Under the personnel law, any Cuban who independently contracts with foreign representatives risks government fines ranging from 1,000 to 10,000
Cuban or convertible pesos (Articles 10, 11 and 12, Decree Law No. 166). If the individual cannot pay the fine in cash or property, he or she could
face criminal charges (Article 34, Resolution No. 3/96). Foreigners violating these regulations, such as using workers not legally hired, changing the
legally authorized forms of payment, or giving non-authorized material incentives, face the same consequences (with all fines due in convertible pesos)
(Articles 6, 10, 11, 12 and 34, Resolution No. 3/96).

23 In July 1999, the Cuban Committee for Human Class Representation Rights, Inc., and the Federación Sindical de Plantas Eléctricas, Gas y Agua,
two Miami-based organizations, filed a petition with the Court of the Eleventh Judicial Circuit in Miami-Dade County, State of Florida, against 20
foreign companies with investments in Cuba, accusing the companies of colluding with the Cuban government in violation of the human rights of
Cuban citizens, including the system of indirect contracting of workers. The case was set aside because the court did not have jurisdiction over all the
defendants. The text of the petition is reproduced at http://www.cubanet.org/ref/dis/demanda. Although a possible lawsuit in Spanish labor courts
against these companies should not be able to be rejected in limine litis for lack of jurisdiction because Article 19 of Regulation 44/2001 allows the
plaintiff worker to choose whether to sue businessmen domiciled in Spain in Spanish labor courts, or to do so in another Member State if circumstances
that are not found in this case exist, there are serious difficulties for such a lawsuit to prosper in Spain. In this regard, the case of Sol Meliá Group,
which was ruled on by the Baleares Superior Court of Justice on November 26, 2002 (R 376/2002), is paradigmatic: the lawsuit brought by a Spanish
worker hired in Florida to provide services there for the company domiciled in Miami, “The Sol Group Corporation” (subsidiary fully owned by
Spanish parent company “Sol Meliá, SA”) was dismissed in connection with the North American company due to lack of jurisdiction of Spain’s courts
of law and in connection with the Spanish company because it was not a “subject in the work relationship or liable for its outcome” (see also the
Ruling of the Baleares Superior Court of Justice of October 24, 2002, Rec. No. 377/2002, in a virtually identical case, and the Ruling of the Baleares
Superior Court of Justice of December 5, 2003 (R 733/2003), also involving the Sol Meliá Group, although this time involving its Moroccan subsidiary,
“Sol Meliá Marroco SARL”).


Reality of Labor in Cuba and the Social Responsibilty of Foreign Investors

The employment agency designated by MINVEC
and the joint venture establish a monthly salary in

U.S. dollars for each category of workers, which will
be paid to the agency. In the example cited by M. F.
TRAVIESO and C.P. TRUMBULL IV in their rigorous
investigation entitled Foreign investment in Cuba:
Prospects and Perils, they mention the case of a company
that agreed to pay to the employment agency
US $460 monthly for each mechanic, US $500 for
each sales agent, and US $550 for the general manager.
This salary is increased by 25% in employment
taxes, which are paid directly by the company to the
agency, also in U.S. dollars.24 The employment entity
pays the salary of the Cuban workers in Cuban
pesos, at a ratio similar to the equivalent salary in
Cuba for each category. Thus, each mechanic receives
about 200 pesos monthly, the commercial
agent about 300 pesos, and the general manager
about 400 pesos. In any case, regardless of the form
of contracting, the Cuban worker receives in pesos
less than 4 cents on the dollar paid by the investor.
The practice of the Cuban government is “harmful,”
it has been said, “not only because it confiscates
the salary of the workers, but also because it
negatively affects the economic performance of the
companies with foreign capital.” The salary “is one
of the crucial factors affecting the productivity of
the workers. A worker who is not paid enough is
unhappy and must spend his time trying to improve
his economic condition. Inadequate salaries tend to
cause, among other evils, unjustified absenteeism,
lack of punctuality, theft of products or supplies

and unauthorized use of equipment or other goods
of the company.” Equally, it has been indicated that
“the use of salary supplements in convertible currency
– be it in cash or in kind – helps increase
productivity.” However, “the capacity of the companies
to grant this additional compensation is limited,
because the Cuban government requires the
payment of relatively high salaries for the labor
force, in addition to social benefits, which raises the
cost of the operation, reduces profits and makes
the products of the companies less competitive in
the market.”25

The use of this form of payment has been criticized
by certain International Organizations. As
indicated in the already cited report of Pax Christi:
“The Cuban State also dictates the wages of the
local personnel employed by foreigners and retains
90% of their salaries, leaving the Cuban worker
with a minimum salary in Cuban currency. This is a
clear violation of the right of workers to dispose
freely of their salaries.” In turn, Human Rights Watch
has indicated that “although Cuban workers receive
peso salaries from state-controlled employment
agencies, the jobs often offer access to dollar tips or
bonuses and scarce consumer goods, such as shampoo
and soap. The Cuban government profits from
this arrangement as well, not only from the long-
term value of international investment, but also
because the state-controlled employment agencies
receive convertible foreign currency payments for
all workers’ wages. The government has not revealed
what percentage of a worker’s wages ulti


24 The work cited in the text indicates that a Canadian investor said that his investment project was rejected because he insisted on paying a mechanic
250 pesos/month, instead of the established 129 pesos/month. It also states that one of the criticisms against this system is that sometimes the Cuban
employment agencies exaggerate the position of Cuban workers in order to raise the salary to be collected from the investor. Thus, a warehouse employee
becomes “warehouse director.”

25 Quotes added are from M. F. TRAVIESO-DIAZ, J. F. PEREZ-LOPEZ, La inversión extranjera en Cuba: Pasado, presente y futuro [Foreign investment in
Cuba: Past, present and future], cit., p. 148.


Reality of Labor in Cuba and the Social Responsibilty of Foreign Investors

mately reach him—in Cuban pesos—and what
portion remains in government coffers.”26

These and the previous circumstances involved in
this particular legal system have made a certain
author affirm the nullity of the investment contract
executed under these conditions. Thus, it has been
said, with arguments that were rather weak legally,
that “the investment contract is null. The investor,
the Cuban State and/or the company designed by
the Cuban State to create a simulation, do not have
standing to sue each other. The party that has
standing to sue is the worker, since he is the innocent
party. Even though the employment contract
with the Cuban worker (intended to be covered
through the brokerage company) is also null, the
innocent party has the right to claim what he delivered,
in other words his work, at a fair price.”27 The
situation, as explained, may be more than questionable
from the viewpoint of international legality,
but in our opinion this contradiction does not impact
in any way the legality of the contract executed
by the foreign investor.

3.
Labor peculi arities of the labor system
in Free Trade Zones
3.1. Free Trade Zones in Cuba: General
Ideas
Law No. 77 created a framework for the Executive
Committee of the Council of Ministers to designate
locations in the national territory where it was possible
to establish Free Trade Zones or industrial
parks and stipulated that tax benefits would be
given to the companies established in them. By
Legislative Decree No. 165 of June 3, 1996, the
Council of State approved the establishment of
these zones in Cuba. On October 24, 1996, MIN


VEC regulated the process for applying to establish
companies with foreign capital in the Free Trade
Zones and for creating a register of Free Trade
Zones and companies located in them. In turn,
MTSS Resolution No. 10/1997 establishes the
Regulations of labor relations in Free Trade Zones
and industrial parks.

Free Trade Zones are considered “those in which,
by decision of the Executive Committee of the
Council of Ministers, it is possible to apply a special
system in customs matters, exchange, tax, labor,
immigration, public policy, capital investment, and
foreign trade, and where foreign investors may participate
for the purposes of financial operations,
importing, exporting, storage, productive activities
or re-exporting.” Free Trade Zones allow foreign
investment “for the purposes of financial operations,
importing, exporting, storage, productive
activities or re-exporting.” Industrial parks allow
“the development of productive activities with the
participation of foreign capital.” (Articles 51.1 and
2 of Law No. 77). The law creates an executive
committee of State institutions --including the
Ministry of the Revolutionary Armed Forces and
the Ministry of the Interior --charged with granting
free zone concessions and recommending measures
to develop the zones and industrial parks (Articles

6.2 and 4 of Decree Law No. 165).
3.2. Special features of
the legal labor
status in Free Trade Zones
In terms similar to those set forth in Law No. 77,
Article 43 of Legislative Decree No. 165 of June 3,
1996, establishes the principle of territoriality as the
main principle of contracting workers in these
zones. “Workers who render services to the concessionaires
and operators in free zones would be, in

26 An example of the benefit that the Cuban State may obtain is found in M. F. TRAVIESO-DIAZ, J. F. PEREZ-LOPEZ, La inversión extranjera en
Cuba: Pasado, presente y futuro [Foreign investment in Cuba: Past, present and future], cit., p. 149: “Assuming, for example, that the average salary collected from
a business is that of the sales assistant identified in the table, i.e., $382.01 per month, the Cuban government receives income of more than $21 million
net per month, or approximately $256 million per year, which is more than the average annual flows of new foreign investment on the island during
the 1993-1998 period (approximately $225 million). In other words, the Cuban State profits more from the salaries paid by the foreign investors to the
Cuban workers than from the value of the new investments that enter the country.” Another example of this plan can be found in J. BRITO, La inversión
extranjera en Cuba características de una forma de discriminación [Foreign investment in Cuba, characteristics of a form of discrimination], at
www.cubasindical.org./grscc. “The maximum salary paid by foreign companies is 700 Cuban pesos, and the investor must pay an average of 2.3% of
the payroll scale salary for the personnel it will use. 2.3% of the salary is itemized as follows, according to the Salary Department of the Ministry of
Labor and Social Security: 100% scale salary; 30% additional payments, industry coefficient, travel and nighttime work allowance; 30% for the intensity
of the work; 60% social benefits received by the labor force; and 10% for the service rendered by the Cuban employment entity = 230%. To understand
in essence the method of calculation of the salary to be paid by the foreign partner in dollars, suffice it to apply 2.3% to any scale salary on a
payroll approved for the company which will work with foreign capital.”

27 A. LUZARRAGA, La nulidad de los contratos de inversión extranjera por causa ilícita: defraudar al trabajador cubano [The nullity of the foreign investment contracts
due to an illicit cause: defrauding the Cuban worker], at http://www.futurodecuba.org.


Reality of Labor in Cuba and the Social Responsibilty of Foreign Investors

general, Cubans or foreigners who are permanent
residents in Cuba.” Since the regulation on foreign
investments also exempts from the above rule the
“technical occupations or top management positions,”
in these cases free zone concessionaires and
operators are able “to contract directly individuals
who are not permanent residents in the country,
and in these cases, determine the applicable labor
system and the rights and obligations of these
workers, after first obtaining the corresponding
work permit.”

Article 44 entrusts to the Ministry of Labor and
Social Security the determination of the minimum
salaries for jobs to be drawn by Cuban workers and
foreigners who are permanent residents in the
country and who render services to free zone concessionaires
or operators.

Pursuant to Article 45.1, “the concessionaire with Cuban
or mixed capital contracts directly Cuban workers and
foreigners who are permanent residents in the
country and also works as an employment entity
concerning the workers required by the operators.”
Such employment entity “contracts individually the
workers in question, pays them their salaries and
maintains the labor relationship with them” (Article
45.2). In any event, it is the task of the Ministry of
Labor and Social Security to establish the rules to
be followed by the concessionaire, in its capacity of
employment entity (Article 45.3).

The law obligates investors with full foreign capital
to contract employees through the employment
entities approved by the competent ministries. For
these purposes, Article 45.4 establishes that “in the
case of the Cuban workers and foreigners who are
permanent residents in the country, they render
their services to free-zone concessionaires and operators

28 The text is found at http://www.cubaminrex.cu.

whose capital is fully foreign, through a contract executed
by them with an employment entity proposed
by the Ministry for Foreign Investment and Economic
Collaboration and approved by the Ministry
of Labor and Social Security.”

In addition, the law allows the Executive Committee
to ignore other labor rules and to establish special
labor regulations. Thus, Article 46 establishes
that “notwithstanding the provisions contained in
the preceding sections of this chapter, the Executive
Committee, in the decision ordering the creation
of a free trade zone, may determine to establish
special labor regulations concerning it and exceptionally.”


Resolution No. 10/97 of the Ministry of Labor and
Social Security, currently in force,28 completes the
content of Legislative Decree No. 165 of June 3,
1996, and establishes various specific rules concerning
the labor system in the Free Trade Zones.29

4.
Codes of conduct and ethics: Special
features of the labor system in the
tourist sector; Resolution 10 of 2005 of
the Ministry of Tourism
4.1. Ethical
control of workers in the
tourism sector: Background
For Cuba, analyzing the globalization process in the
realm of tourism takes on a special meaning: first,
because some of the strongest worldwide tour operators
immersed in this globalization process are
present in the development of Cuban tourism; and
second, because tourism currently constitutes and
will continue to constitute in the long-term, according
to forecasts, the main economic activity on
the island and an essential factor for reviving other

29 The first action consists of the labor supply contract signed between the concessionaire and the operators. To contract workers, an agreement is
entered into with the employment entity and the union organization. Personnel are obtained from among those with qualifications, skill, professionalism,
and experience required for the efficient performance of the job in question, in accordance with current legislation in the matter. Legislation
indicates the compensation, the signing of an individual employment contract to establish the work relationship, and the causes for its termination.
The workers contracted in the Free Trade Zones earn their salary based on the rates in national currency approved centrally and referring to a daily
work schedule of 8 hours and 190.6 hours as a monthly average. The annual paid vacation, social security, and labor protection are also regulated
matters, so that these workers will be subject to the current legislation of the country. If necessary, aside from the salary per unit of time, payment
systems may be applied in accordance with the results of the production or services, as well as payment for overtime. As to labor discipline and conflict
resolution, the precepts of the labor code and internal regulations are taken into account, and complaints in this matter and concerning labor
rights are resolved by the employment entity, according to the current procedures of labor justice. In each free trade zone and industrial park, the
employment entity and the parties to the contract, along with the corresponding union organization, sign collective bargaining agreements and their
internal regulations, according to current legislation.


Reality of Labor in Cuba and the Social Responsibilty of Foreign Investors

economic sectors.30 By the end of 2000, there were
29 mixed companies, with a capital of over 1 billion
dollars. They include 26 hotel companies with
15,600 rooms, of which 3,700 are operating, and
the remaining are in project or construction phase;
17 foreign managements from 8 countries with 52
hotels under foreign administration, with 16,120
rooms; 93% of the hotels are 4-and 5-star. In five-
year tourist projections until 2010,31 “there are three
possible scenarios in which the number of visitors
would be between 5 and 10 million tourists.”

The economic relevance of the tourist sector for
the Cuban economy has brought with it intense
control by the State as employer over the workers
who render services in said activity sector. The
powers granted to the government entity under Law
No. 77 and Resolution No. 3/96 to select workers
who work for companies with foreign capital
reached its highest degree with the norms established
in 1990 for the employment of workers in
joint ventures in the tourist sector; these norms
stressed the personal qualities and conduct of the
individual instead of his performance at work. By
Resolution No. 15/90 of September 5, 1990, of the
State Labour and Social Security Committee
(Gaceta Oficial September 15, 1990),32 which appeared
in the heat of the first legislation on foreign
investments, a clear and defined choice was made in
favor of a type of worker ideologically defined. In
short, it is legislation that stresses personal qualities
and the conduct of the individual instead of the
assessment of his work. The resolution gave broad
powers to foreign investors to suspend, transfer, or
fire the employee who was not satisfactory. In a
certain way, the Cuban state takes responsibility for
the quality of the persons it sends to work.

4.2. Resolution No. 10 of
February 19,
2005: Control over the moral and
social image of the workers in international
tourism
The above ideas have again come up in Resolution
No. 10 of February 19, 2005, which establishes the

“Regulation for the Relations with Foreign Personnel in the
Tourism System.” The interest of the company to
maximize the control and the efficiency in the operation
of the organization has been supported, as
we indicated, in the duty of fidelity of the worker
to the company. The work relationship appears, in
this Resolution, as an eminently personal relationship,
based on mutual trust and loyalty, which unites
all collaborators of the company in a community of
interests and purposes, all of them feeling solidarity
in a common work of national and collective interest.
This leads to the understanding of the employment
relationship as a fiduciary relationship in
which there is no room for an opposition of interests
between employers and workers.

With regards to the Resolution under analysis, the
loyalty and fidelity owed by the worker to the company
where he works cannot be reduced to the
narrow limits of a simple execution of the task
entrusted, since it represts a true moral obligation
requiring rectitude towards the employer’s interests;
and outside of the workplace, in the case of approved
private activities related to those that constitute
the object of the employment contract, they
become spiritual duties that must be enforced with
even more rigor if the worker is in a trusted position,
in which case there is no doubt that the
ethical-legal profiles of these duties exceed the
exclusively financial field. This is clearly found in
Article 1 of the Resolution, which indicates: “Tourism
workers in their relations with foreigners while
meeting in and outside the country shall limit those
relations to those that are strictly necessary, and
should keep in mind the following ethical, moral,
and professional principles: A) Maintain conduct based
on loyalty to the nation, respect for the Constitution of the
Republic, socialist legality, and government policy. B) Practice
austerity, refrain from seeking power and making unauthorized
use of resources placed at their disposition. C) Always
place social interest above any personal interest. D) Practice
modesty and straightforwardness and maintain a personal
and family lifestyle deserving of respect and confidence both
in work and in social settings. E) Maintain permanent
vigilance against all acts or attitudes damaging to the interests

30 M. PEREZ MOK, A. GARCIA, Globalización y turismo. Política de desarrollo del turismo e inserción internacional de Cuba [Globalization and tourism. Tourism
development policy and international insertion of Cuba], in M. DE MIRANDA PARRONDO (Comp.), Alternativas de política económica y social en América Latina y el
Caribe (Cuatro casos de estudio: Colombia, Costa Rica, Cuba y México) [Economic and social policy alternatives in Latin America and the Caribbean (Four case studies:
Colombia, Costa Rica, Cuba and Mexico)], Cali, Editorial Javeriano, 2002, p. 250.

31 MINTUR, Proyección de largo plazo para el turismo cubano [Long-term projection for Cuban tourism], 2000, p. 5.

32 See the analysis of the labor system in the tourist sector and its comparison to the Cuban Labor Code contained in J. F. PÉREZ-LOPEZ, Cuba´s
Thrust to Attract Foreign Investment: A Special Labor Regime for Joint Ventures in International Tourism, Inter-American Law Review, 1992-93, vol. 2, n. 2, pp.
221-279.


Reality of Labor in Cuba and the Social Responsibilty of Foreign Investors

of the State.”

From this perspective, it is not strange that the duty
of fidelity is interpreted not as a mere duty of diligence
or accuracy in performing the service, but as
a specific fiduciary submission which imposes the
personal adhesion of the worker and which interprets
the mutual confidence and loyalty as the basis
of the relationship and its possible continuation.
This duty of intercommunication between the employer
and the worker appears in various precepts
of the Resolution, especially in connection with the
possible contacts with foreign embassies: “Invitations
to foreign diplomats for social events and invitations of any
type to embassies will be processed by a vice minister of
Tourism and the Ministry, which will also establish the rules
of behavior”; equally, it is established that “the attendance
in social events at embassies or invitations for foreigners to
visit Cuban officials in their homes must be the object of
consultations and approved in writing.”

The fact that the state entity may select the workers
of companies with foreign capital means that the
entity may select the candidates it considers most
suitable from the viewpoint of their loyalty. So far,
working for a foreign capital company is very much
desired by the Cubans, because generally such work
allows the employee to receive certain income in
hard currency (such as tips) even though the salary
is paid in pesos. The Resolution we just commented
on submits to severe controls the receipt of any gift
or accessory benefit by the worker during the performance
of his services. Thus, it is established that
“the receptions or meals of personnel commissioned abroad
must be authorized in writing by the minister or the head of
the delegation,” and also, “any worker of the sector at any
rank will report in writing to his superior any gift in kind
received by him from a foreigner with whom he has labor
relations (including checks, cash or credit cards),” or, finally,
“institutional gifts to foreigners will be approved by the Minister.”


As indicated above, the various manifestations of
this duty of loyalty may be grouped in positive or
active behavior obligations on the one hand and in
negative or abstention obligations on the other
hand. Among the latter, we must indicate those that
limit the possibility of obtaining gifts (when a foreigner
wishes to make a gift, it must be suggested to him to
give it to the health or education sectors) or the use of
vehicles of foreign citizens (“No worker or executive
may use, for work or personal purposes, vehicles owned or
rented by foreigners, nor enter vehicles with diplomatic license
plates”).

The truth is that the current labor relations in a
globalized world are rather far removed from these
ethical conceptions of the labor relationship which
go into the professional profiles of the worker. This
aspect, in addition to the fact that it has been overcome
in the modern organizational structure by
links or motivations of a different nature (participation,
commitment, mere economic interest, or
social prestige), forgets the facet of the worker as a
citizen, and, when assessing the play of competing
interests in this matter, it is necessary to identify the
obligations assumed by the worker-citizen and
those attributed by the company to the worker in
order to determine which of them prevails on the
others. The central dilemma in this atmosphere is
not, therefore, loyalty vs. disloyalty, but loyalty to
whom and under what circumstances. Indeed, when
the organization violates the legal and/or moral
rules of society, and when the violation may cause
damage to third parties, the contractual obligation
of loyalty of the employee loses its moral grounds.

On the other hand, in the Cuban tourism industry,
racism in the workplace has become, as some investigations
conducted in this field have concluded,
a growing problem. Although Cuban laws prohibit
labor discrimination for reasons of race, the great
majority of Cuban employees in tourist companies
are light-skinned, as pointed out by various investi



Reality of Labor in Cuba and the Social Responsibilty of Foreign Investors

gations. As in other foreign investment sectors, the
State employment entities hire for the tourist
industry.33

III. Codes of
conduct or good practices and
international commitments undertaken by
foreign companies investing in Cuba
The world of economy – personified in companies

– must collaborate on the project of building ethics,
just like real people must do. Each of us has to collaborate
by paying our taxes, just as companies do,
but also it appears that companies are not exempt
from that obligation. Companies have the same
ethical duties as real people do – the duty to be
compassionate, to fight pain, to help the weak, to
defend dignity, and to support justice.34
Business ethics is a relatively recent event. The purpose
of a company’s ethical reflection is to give
reason to the moral premises that make up and
support the legitimacy of the company, its reason
for being in the eyes of society and its claim to validity
or justice. In other words, the basic task of corporate
ethics consists of dealing with the conditions for the
possibility of the company having social credibility and,
therefore, being trusted by all groups that contribute to or are
impacted by its activity.35 It has been said that “the
most effective organizations are based on communities
of shared ethical values. These communities

do not require extensive contract and legal regulation
of their relations because prior moral consensus
gives members of the group a basis of mutual
trust.”36

The foregoing ideas have a specific bearing on the
business activity of foreign companies in Cuba.
That is why some business Codes of Conduct have
been created which attempt to outline the path for
business activities. In essence, they are the Arcos
Principles and the Principles for the Participation of
the Private Sector in Cuba.

In 1994, the Cuban Committee for Human Rights,
the International Society for Human Rights, and
Solidarity of Cuban Workers prepared the Arcos
Principles, in honor of Gustavo Arcos, an outstanding
Cuban human rights activist. The Arcos
Principles also urged companies to hire workers
directly, prohibit revision of the labor records, and
allow affiliation to governmental or independent
unions.37

The Arcos Principles are intended to promote respect
for and compliance with human rights and
fair labor hiring and employment practices in Cuba.
As such, they are not immutable. They are subject
to periodic review to ascertain if, by following them,
Signatories will in fact be contributing effectively to
the improvement of the human and labor rights

33 As indicated in Cuba’s Special Period, Cuba Briefing Paper Series, The Caribbean Project, Georgetown University, 1998, pp. 6-7, one manager in a tourist
corporation explained, “There is no explicit policy stating that a person has to be white to work in tourism, but it is regulated that people must have a
pleasant appearance (aspecto agradable), and blacks do not have it.” It has been indicated that increased foreign investment in tourism was worsening the
job situation for Cubans with darker skin, starting from the premise that Cuban officials were conceding to the wishes of tourist operation managers
who preferred lighter-skinned employees. These ideas are included in HUMAN RIGHTS WATCH, Cuba’s Repressive Machinery: Human Rights Forty Years
after the Revolution, 1999, at www.hrw.org. As indicated by J.A. ALVARADO RAMOS, Relaciones raciales en Cuba [Race relations in Cuba], Cuba Transition
Project, “a quick visit to the country’s tourist installations shows the high representation of white people in the direct service to tourism […], while in
the indirect jobs, the presence of blacks and mestizos is more obvious” […] “this reality is very closely related to the well-known fact of the overrepresentation
of whites in managerial and control jobs in all spheres of the country, from which tourism does not escape, but rather in this sector the
problem has increased. It is very rare to find among the main managers and administrators of these companies people who are not white. Everything
seems to indicate that the existence of negative stereotypes and prejudice in connection with the black and mestizo population has found in this sector
an outlet to become concrete acts of racial segregation and discrimination.”

34 J.A. MARINA, La creación económica [Economic creation], Bilbao, Deusto, 2003, p. 123.

35 D. GARCIA-MARZA, Ética empresarial. Del diálogo a la confianza [Corporate ethics. From dialogue to trust], Madrid, Trotta, 2004, p. 23.

36 F. FUKUYAMA, La confianza [Trust], Barcelona, Ediciones Grupo Zeta, 1998, p. 44.

37 R.H. CASTAÑEDA and G.P. MONTALVÁN, Los Principios Arcos [The Arcos Principles], the Cuban Committee for Human Rights, the International
Society for Human Rights and Solidarity of Cuban Workers, 1994.


Reality of Labor in Cuba and the Social Responsibilty of Foreign Investors

situation in Cuba. Adjustments may be made to the
Arcos Principles when and if it is felt that doing so
will further encourage the government of Cuba to
adhere to international human rights standards, as
established in the Vienna Declaration approved by
the World Conference on Human Rights on June
25, 1993, as well as workers’ rights related to employment
and occupation established in International
Labour Organization (ILO) Convention No.
111 concerning Discrimination of the Worker for
Various Reasons, Convention No. 87 concerning
Freedom to Form Labor Organizations, Convention
Nos. 29 and 105 concerning prohibition of
work that does not arise from free contracting between
workers and employers, and other relevant
agreements and conventions.

In July 1997, the North American Committee of
the National Policy Association published the
“Principles for the Participation of the Private
Sector in Cuba,” which implied: a secure and
healthy workplace, fair labor practices, direct contracting
of the workers, the right of the workers to
collective bargaining, freedom of expression in the
work centers, and reinforcement of legal processes
in Cuba. These principles are similar to those mentioned
above and are further detailed in the Arcos
Principles.

In the “Principles for the Participation of the Private Sector
in Cuba,” together with the aspects already indicated,
the companies were urged, among other
things, “to work to obtain the right to recruit, contract,
pay and promote the workers directly, without
going through government intermediaries; respect
the right of the employees to organize freely in the
workplace; and maintain a corporate culture which
does not accept political coercion in the workplace.”
Under these principles, the National Policy
Association constituted a task group of the international
private sector, made up of persons from
various origins and with various visions and opinions
of Cuban reality.38 The task group agreed on
the need to urge investors in Cuba to voluntarily

adopt in their activities in Cuba internationally accepted
socially responsible corporate practices.39

On the above theoretical basis, it is possible to ascertain
a series of ethical standards that are expressly
manifested in the various generally accepted
declarations, regulations, and guidelines we have
analyzed. These principles, as we have said above,
are based on four values that inspire: 1) equality of
all human beings in dignity and rights; 2) right to
life and safety, not to be treated in a degrading
manner or subjected to inhumane punishment; 3)
personal freedom; and 4) the right to economic,
social, and cultural freedom as conditions for the
realization of individual personality.

Cuban legislation suffers from an obvious lack of
consistency with these principles. In fact, the right
of union organizations to form and affiliate with
federations and confederations and the right of any
federation or confederation to affiliate with workers’
international organizations recognized in many
national regulations and in particular in ILO Convention
Nos. 87 and 98 are severely limited in Cuba. This
is obvious in light of the permanent calls for attention
made by qualified international entities and, in
particular, an entity such as the ILO’s Committee
on Freedom of Association characterized by its
impartiality and objectiveness.40 In the various complaints
resolved by said entity, the Cuban Government
has been urged to adopt “without delay” new
provisions and measures to recognize fully in law
and in practice the right of workers to establish
organizations that they consider necessary at all
levels (in particular, organizations independent from
the current union structure), and the right of these
organizations freely to organize their activities, or
those in which said Committee “urges the Government,
in future, to comply with the principle of
non-intervention or interference by the public
authorities in the trade union activities embodied in
Convention No. 87, Article 3.” These affirmations
point out the clear weakness of said fundamental
right, without the possibility to use as arguments to

38 The National Policy Association has the following members: AFL-CIO American Center for International Labor Solidarity (ACILS), American
Chamber of Commerce of Cuba in the United States (AmCham Cuba), Consejo Mexicano de Comercio Exterior (COMCE), Conference Board of
Canada, Florida International University, Instituto Tecnológico Autónomo de México (ITAM), National Policy Association, Pax Christi Netherlands,
Prince of Wales Business Leaders Forum, United States Chamber of Comerse, US Cuba Business Council, and Confederation of Netherlands Industry
and Employers (VNO-NCW).

39 A.C.E. QUAINTON, Toward best business practices for foreign investors in Cuba, Cuba on Transition, pp. 301-304.

40 In recent years, complaints have been lodged by several international union organizations with the ILO. For a more detailed study of these complaints,
we refer to our study entitled La realidad laboral en Cuba y la responsabilidad social corporativa [Reality of labor in Cuba and corporate social responsibility],
Valencia, Tirant lo Blanch, 2006.


Reality of Labor in Cuba and the Social Responsibilty of Foreign Investors

moderate the above conclusion the existence of
significant external actions that may guide and support
the action of independent union association,
since the establishment of measures of depravation
of freedom against union members or the search of
the meeting places, inter alia, are acts that blatantly
infringe the dignity of the person.

We must add that both the Committee of Experts
on the Application of Conventions and Recommendations
and the Conference Committee on the
Application of Conventions and Recommendations
of the ILO have endlessly repeated the need that
“the explicit reference to the ‘Confederation of
Workers’ in the labor legislation should be removed
to enable all workers in law and in practice to establish
and join organizations of their own choosing
outside the established trade union structure, in
accordance with Article 2 of the Convention.” In
its 2003 conclusions, the last of the entities cited
firmly urged “the Government to modify national
law and practice in the near future in order to recognize
the right of workers to establish organizations
of their own choosing in conditions of full
security, including organizations independent of the
established structure, if they so wished.”

We can add to the above a clearly distorted collective
bargaining. This character stems from the fact
that collective bargaining agreements are based on
guidelines established by the government and the
competent ministries, and, in the case of companies
with foreign capital, the collective bargaining
agreement is established between the employment
agency and the corporate administration, in the
presence of the state union. The above conclusion
is reinforced by the ILO Committee on Freedom of
Association, which urged the Government to take
measures to amend legislation with regard to collective
bargaining, to ensure that collective bargaining
in labor centers can take place without recourse
to binding compulsory arbitration prescribed
by the legislation and without interference by the
authorities, organizations at a higher level, or the
Confederation of Cuban Workers.

Similarly, the ILO Committee of Experts on the

Application of Conventions and Recommendations
has referred in various comments to a series of
legal and regulatory texts under which the access to
training and employment, as well as the evaluation
of the workers for labor selection and placement or
to define the labor merits and demerits, depend in
Cuba, among other factors, on political attitude.
Aspects such as the selection of administrative staff
in the educational system have made the Committee
express its desire that the Cuban Government take
the measures necessary to eliminate all forms of
discrimination, both in access to training and to
employment. Equally, observations have been made,
both by said Committee of Experts and by the
Conference Committee on the Application of Conventions
and Recommendations of the ILO, on
aspects such as the requirement from the inspectors
of the Ministry of Education to show political and
moral conduct in line with the principles and objectives
of the socialist State; the dismissal of certain
members of the personnel of higher education
establishments due to conduct contrary to socialist
morality, including the worker’s ideological conduct
among the merits in his labor file; the criteria to
evaluate the performance of journalists; or, finally,
the scope of the personal control file established by
certain companies, including information on the
moral aptitude and social conduct of the worker. It
is obvious that such accumulation of premises in
which ideological freedom is denied may generate a
well-founded suspicion that there are situations of
discrimination in the allocation of jobs for ideological
reasons or other related reasons. It is clear that
such actions are in obvious contradiction with the
principles established by Convention No. 111 concerning
Discrimination (Employment and Occupation),
1958, and by Convention No. 122 concerning
Employment Policy, 1964.

In short, the ample powers of the Cuban Government
over the rights of the worker in the sector of
foreign investments actually frustrate the companies
that support “better corporate principles,” such as
the respect of the right to association of the workers
and non-discriminatory hiring practices.

The complete book: “Reality of Labor in Cuba and the Social Responsibility of Foreign Investors” can be purchased at:
www.tirant.com


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