<html><body>American Enterprise Institute January 15, 2008 [Edited transcript from audio tapes] <TABLE cellSpacing=1 cellPadding=1 width="100%" border=0> <TBODY> <TR> <TD> <DIV class=BodyText>8:45 a.m.</DIV></TD> <TD> <DIV class=BodyText>Registration</DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>9:00  </DIV></TD> <TD> <DIV class=BodyText>Panel I:</DIV></TD> <TD> <DIV class=BodyText>Opening up Political and Economic Space Now</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Presenters:</DIV></TD> <TD> <DIV class=BodyText>Kirsten Madison, U.S. Department of State</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Marc Wachtenheim, Pan-American Development Foundation</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Moderator:</DIV></TD> <TD> <DIV class=BodyText>Roger F. Noriega, AEI</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>10:00  </DIV></TD> <TD> <DIV class=BodyText>Panel II:</DIV></TD> <TD> <DIV class=BodyText>Engagement with a New Regime</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Presenters:</DIV></TD> <TD> <DIV class=BodyText>Paul Bonicelli, U.S. Agency for International Development</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>George Dunlop, U.S. Army</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Daniel Erikson, Inter-American Dialogue</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Nilda Pedrosa, Office of Senator Mel Martinez (R-Fla.)</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Moderator:</DIV></TD> <TD> <DIV class=BodyText>Roger F. Noriega, AEI</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>11:30</DIV></TD> <TD> <DIV class=BodyText>Adjournment</DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR></TBODY></TABLE>Proceedings: Panel I:  Opening up Political and Economic Space Now    Roger Noriega:  Okay, ladies and gentlemen, please take your seats and we will get started.  I want to thank you all for coming.  I ask you to do what I just did, which is turn off your cell phones because it does interfere with the program.  I suppose you could put them on vibrate.  Thank you all for coming to discuss a little bit about the ways in which the United States can effectively engage a free Cuba in the future, in terms of economics and in service of the political liberalization on the island.  This morning s session is actually the third meeting sponsored by the American Enterprise Institute for the purposes of exploring how the friends of the Cuban people can best help them reclaim their future.  More than a dozen experts in Cuba and on the economic transitions of Eastern Europe and Asia have contributed their thoughts on this subject over the last several months.  We have sought to keep our discussion on a practical level.  We have resisted the temptation to continue the sterile debate over U.S. policy which has nothing to do with conditions on the island, generally, and has very little positive impact on the plight of the Cuban people.  And we have not spent a great deal of time sifting through the suspect economic data of the regime, as if that will tell us anything about what is really going on in Cuba today.  We have, instead, endeavored to consider the plight of individual Cubans who have struggled to keep body and soul together under a regime bent on keeping those two things very much apart.  This first public session on the subject will continue this dialogue focusing on Cuba today and Cuba tomorrow.  Today, what are the current working conditions with which average Cubans grapple everyday?  And what can we do to help them defend their essential rights in a way that benefits the individual concretely but disadvantages the decrepit regime?  And Cuba tomorrow, what sort of tangible programs can we put in place so that we are able to move with agility, speed and decisiveness to help ensure that individual Cubans can take full advantage of any opening and keep up the momentum of irreversible political change?  It is vital that we sharpen our thinking on these matters because as we look around the corner at the Cuban transition, we will confront two equally troubling hazards.  One is that we move too slowly to help the Cuban people down the road towards sustainable prosperity and freedom, leaving some of them nostalgic for the mythical achievements of the revolution.  And the other is that we move so quickly in our eagerness to help the people that we end up prolonging the status quo for which the Cuban people will pay the terrible price.  We may not all agree on this point, but I think it is wise to underscore my personal belief that now, of all times, we must do nothing that will slow momentum toward a genuine political change.  There will be plenty of time to help the Cuban people rebuild their economy on firm foundations but moving in prematurely to provide a modicum of material benefits to some Cubans may allow what is left of the Castro brothers regime to buy a few more tragic days in power.  I will note that even the U.S. House of Representatives which has voted in the not-too-distant past to make unilateral concessions to the regime has resisted in recent months, tinkering with the policy until they see where that transition is headed today.  We must be generous in supporting the economic recovery of Cuba in my view, but we must recognize that true economic liberalization is not possible, let alone sustainable, without profound political reform that empowers the individual, establishes the rule of law and protects the political liberty and economic rights of every Cuban citizen.  Our first panel will discuss Cuba today.  And we are pleased to have with us two practitioners in the area of Cuba policy coming at it from very different angles who will shed an awful lot of light on the realities of Cuba today and identify some of the challenges that we face in helping Cubans toward their economic and political freedom.  Kirsten Madison became Deputy Assistant Secretary of State in the Bureau of Western Hemisphere Affairs in February 2006.  Her portfolio includes a broad range of issues regarding U.S. policy toward Cuba and the countries of Central America.  At the time of her appointment, she had served as director of Central American and Caribbean Basin affairs at the National Security Council since August 2003.  Ms. Madison previously served in the Bureau of Western Hemisphere Affairs as senior adviser to the assistant secretary.  In 2002, she was senior adviser to the secretary general of the Organization of American States, C�sar Gaviria.  From 1992 to 2002, Ms. Madison worked as a congressional staffer in both the House of Representatives and, later, in the Senate on the staff of the Foreign Relations Committee where she and I worked together.  The bio is longer than it used to be.  It used to be Kirsten Madison, [indiscernible] NRA, and I know her well enough to know that she would say something about loving dogs and guns but it does not.  I will ask Kirsten to go first, make the initial presentation and then I will introduce our other panelist and he will make a presentation and then we will go to questions and answers.  Kirsten. Kirsten D. Madison:  Okay, I assume that you all can hear me.  First of all, I want to thank Roger for convening this discussion.  I personally think that we all need to be thinking a little more creatively than there is a tendency to do on the subject of Cuba.  And looking at the question of how U.S. businesses might one day engage at a time it will reinforce the process of change is actually very productive.  And my personal view is that this is precisely the right time to raise public awareness and debate about the need for public and private actors in the international community to focus attention on how they can, by standing on basic and generally accepted principles, help to ease Cuba s way back into the inter-American system.  And the goal of our policy with regard to Cuba is not simply the end of the Castro regime, but the full reintegration of a democratic and sovereign Cuba into the inter-American system.  There is no single event that will make this happen and making it happen is not about changing policies in Washington, D.C.  It is about the Cuban government fundamentally changing the way it does business, the way it treats its citizens, the means by which it holds power, and the way it engages in the world.  And essential to any process of meaningful change will be the restoration of both economic and political freedoms. And we are not na�ve about Cuba.  We do not think that the definitive departure of Fidel Castro from Cuban leadership suddenly means the end of all of Cuba s deep problems.  And neither should it be met by democratic nations with a free pass for the continuation of a dictatorship under a different leader.  Ultimately, it is only Cubans and Cuba who can define and fully realize the process of democratic change, but as the leadership dynamic in Cuba continues to shift, the international community has an opportunity to support a process of enduring change.  And I think that is really ultimately what this discussion is about. In the Americas, we are working with willing partners, regardless of their place on the ideological spectrum, to build strong democratic states, to ensure social justice, to address poverty and create economic opportunity.  These goals are relevant for every citizen of the Americas.  And ironically, all too often, the champions of these goals in the Americas view Cuba separately and really, frankly, for no good reason because these goals are as relevant to the Cuban people as they are to anyone else in the Western Hemisphere. And frankly, if you look at what democracy activists and Cubans on the island are doing, what they are saying, what they say in polls, what they said in the Unity for Freedom document that the activists agreed to last year, we know that what the Cuban people want is not just political rights or just economic rights.  They want freedom.  They want everything that defines freedom.  So this is not about choosing a China model or choosing some modest segment of reform; this is about freedom writ large.  I think they want to choose who governs them.  I think they want to choose how they should be governed.  They want the rights that Americans and Spaniards and Brazilians and citizens in other free countries have.  And I think it is very, very clear from what the distant community has said in particular, that they believe it is the sovereign right of Cuban people to define their country s future.  And I think that is true. Our policy is guided by laws and policy guidelines that are well-known.  President Bush has clearly stated that changes in our policy will be driven by changes in Cuba.  And just to sort of pre-empt everyone who is gearing up to ask the usual question about why do we not just lift the embargo, I want to underscore that we want our businesses to engage in Cuba at a time and in a circumstance that they will be able to reinforce and support a process of change, not reinforce a repressive state. I think that encouraging respect for the Arcos or other business principles which focus on the promotion of human rights and fair labor and hiring and employment practices can be an important part of the process of encouraging changing Cuba.  And ultimately where such principles to be respected, it would be extraordinarily difficult for change to be rolled back because, really, what you are talking about is people engaging in economic activity independent of their government which, in Cuba, is not necessarily the norm. As you consider on later panels, the question of future engagement, I think it is important to remember that the Americas has already defined, as a group, basic principles and commitments by which the inter-American system will be guided.  Most people here are probably familiar with the Inter-American Democratic Charter, the commitment it makes that the peoples of the Americas have a right to democracy and their governments have an obligation to promote and defend it; and that for the citizens of the Americas to enjoy social, economic and political progress, they must have democracy.  And furthermore, because we are talking specifically about economic engagement, it is worth noting that the Inter-American Democratic Charter goes further to recognize the right of workers to associate themselves freely for the defense and promotion of their interest, is fundamental to fulfillment of democratic ideals, and that the strengthening of democracy requires the full and effective exercise of workers rights and the application of poor labor standards as recognized in the ILO Declaration on Fundamental Principles and Rights at Work and its follow up which was adopted in 1998. So when we talk about human and labor rights in Cuba, I wanted to talk about the charter because I want to underscore that what we are talking about is applying a standard that the democracies in the Americas have already agreed to amongst themselves.  So whether it is the Arcos Principles or another set of business principles, there is a basis, a body of work in the Americas that it logically relates to and I think that we are all familiar with the fundamental contrast between Cuba and its neighbors.  Democracies in the Western Hemisphere are now working to expand economic opportunities for their citizens, while the Cuban government is sustaining a failed system at the expense if its citizens.  The reality is that the Cuban government does not condone and the Cuban economy is not designed to bring development or prosperity to the people; rather, it is designed to fill government coffers and to serve as an instrument of control.  Dissent can mean that a Cuban will lose their job, that their family members lose theirs as well, and that their children may be denied an education or other benefits that are keys to success in free countries but are just leverage for a repressive state in Havana.  Denial of economic rights is, in fact, essential to the survival of the current structure in Cuba and restoration of economic rights is an essential partner to the restoration of political rights if the repressive state is to be fully dismantled. And for Cuba to comport with a vision of democracy set forth in the instruments of the inter-American system will take more than tinkering around the edges of the repressive state or replacing one unelected leader with another.  It will require changing the system itself, ending the practice of holding political prisoners for peaceful political dissent and permitting citizens to engage in economic activity free of the government.  It will take a dialogue among Cubans on the island, between the government and the Cuban citizens which is only possible if Cuban citizens know they can speak without reprisal.  It will also take free and fair elections. It is also worth noting, as we look at this idea of trying to engage on the basis of certain principles in Cuba or as we look at the question of how we deal with the follow-on government to the current one in Cuba, to know that Cuba really is already a party to many agreements that, frankly, it is so far unwilling to implement.  For example, it has objectively an abysmal labor rights record but it is signed up for more than 80 labor courts.  It is not willing to let its citizens make a choice in free elections or to choose among parties, but it signed up for the Vi�a del Mar Declaration, which is part of the Ibero-American Summit process.  It is also a signatory to many UN treaties with which it fails to comply.  And so as we look to a future government, we and the Cuban people should demand that that government honor its agreements already and prove that it is actually worthy of trust. When the time comes for U.S. business to engage in Cuba, if and only if it can be done in a manner that reinforces a process of change, there are accepted business concepts and practices that I believe will be relevant and should inform discussions about business principles whether the Arcos Principles or some other set.  Although there is something particularly unique and special about the Arcos Principles because they are a Cuban-born product, and ultimately this is about Cubans defining a future for their country. But today, the idea of corporate social responsibility is an accepted part of international business operations.  I know the U.S. government has a variety of programs that are designed to reinforce corporate social responsibility, you know, voluntary corporate social responsibility programs.  And I think there is a whole variety of these programs which, if you are interested, I m sure you could go to the State Department website and look at, but we provide, among other things, technical assistance in promulgating responsible corporate practices.  Our Bureau of Democracy, Human Rights, and Labor does a tremendous amount of work with stakeholders in this area.  As we look at the Arcos Principles or other business principles and we look at the future of engagement of U.S. businesses in a free Cuba, this concept of corporate social responsibility and the fact that it is so much a part of mainstreams of multinational business should then form those discussions. There is another relevant point.  I think that when you look to a future of U.S. economic engagement in a different circumstance in Cuba, you also have to consider the standards that any future agreement with a free Cuba would need to meet if we were to look for a trade agreement.  The reality is that recent trade agreements negotiated in the Western Hemisphere like CAFTA-DR have broken new ground on labor rights.  And the USTR fact sheets can tell you this--in the process of negotiating CAFTA, countries agreed to give an unprecedented role to the ILO to benchmark, monitor and verify progress on labor rights.  And implementation of these agreements is being accompanied by a commitment of more than $40 million in labor and environment programs which are designed to ensure that the right things are happening in these areas. So again, you have the standard that has been created in the Americas and in particular on these trade agreements.  And if where you ultimately want to go is the reintegration of free Cuba, and the reintegration both economically and politically of Cuba and the region, then you have to look at these kinds of things, the role that corporate social responsibility plays in our business community and the way that we go about doing trade agreements in the Americas because it is very clear that there is a commitment here to labor rights.  I think that that is important and I hope it is useful contacts for you to continue. I just wanted to tell you a little bit about what I have been doing, what we have been doing in our diplomatic outreach through some of our democracy programs just very quickly.  I have logged a lot of miles to talk about Cuba and so have several of my colleagues.  I have been to Mali to talk to all the democracies, the Community of Democracies.  I have traipsed across Europe, I have traveled through Latin America all to try to have a discussion with other countries, not about the usual we hate your embargo; we love your embargo discussion but a real discussion about what we can do to help create a context conducive to a process of change in Cuba and to really get down to concrete questions of what can countries do through their embassies on the island.  What can countries that have economic engagement with Cuba do to help?  What can countries where leaders have connections into the structures of the Cuban state do to influence the decisions they make at a critical moment?  I spoke with governments from Africa, Asia, Europe, Latin America, and the Community of Democracies and talked to them about the idea that there are certain basic steps upon which we all should be able to agree as democracies, like respect for human and labor rights, like the release of political prisoners, like the need for a national dialogue and reconciliation, like the need for the Cuban government to permit peaceful political dissent.  And we hope that working in concert, we can help define a shared expectation in the international community of what a transitioning Cuba should look like and help create a context in which it is more likely to happen.  We have asked countries to use their influence with the Cuban government to advance steps on which all civilized nations can agree.  The biggest point of convergence that we found across a spectrum of countries is the need for the release of political prisoners, and not just five or ten but the release of political prisoners so they can return to their families, not to exile.  And, more importantly, the end of the practice of holding people for peaceful political dissent because that is the signal to the Cuban people.  It is a very important to signal the international community but more importantly the signal to the Cuban people that their government is actually prepared to permit change to begin.  So that is an area where I think we have had some agreement on principle, not necessarily on the tactics of how to get something done. We have asked countries to engage Cuba in its entirety and with a review to bring about a process of change.  We have told them that they do not have to shun the opposition to continue to talk to the regime and that we hope they will not take that approach.  We have tried to work with more governments to develop and implement creative and concrete ways to help Cubans articulate their desire for change, connect with each other and to begin to occupy more political and economic space in their own country.  Some governments, some private entities are doing things in this area but it is not enough.  I think that solidarity efforts by public and private actors will continue to be essential because as the leadership dynamic in Cuba changes, the Cuban state is really hoping they are going to be given a pass.  And for Cubans open to change their country for the better, it is going to continue to matter that the international community acknowledges their desire for change and end the lengths to which their government is willing to go to not let it happen.  We continue to work with NGOs and other governments and throw a public diplomacy to highlight these issues and we will continue to do that. Having spent ten years on Capitol Hill, I have a special place in my heart for legislators.  And I know that when I travel, when my colleagues travel, we make it a point to reach out to legislators in Europe and Latin America and elsewhere, particularly legislators who serve on things like Human Rights Committees.  We talk to them about the Cuba issue because we recognize that institutions and individuals, legislators including European parliamentarians, many of whom have been very principled on this issue, can play an important role in shaping the decision that their government makes about how to engage Cuba.  So I think if someone is going to do a push on the Arcos Principles, one place to think about, not just NGOs but also legislators which in some respects can embody the conscience of the government on these kinds of issues. I think that we have also talked to governments very specifically about how they might use economic engagement to push for greater economic freedoms.  We have specifically talked to governments about the Arcos Principles, which as I noted was a Cuban-born concept, and asked them to consider how these investment principles or others might be tools to ease the transition.  U.S. businesses did something akin to this in South Africa, and businesses from countries around the world are currently engaged in joint ventures in Cuba and perhaps to our mind, this provides an opportunity for them to use that engagement to open space for the Cuban people.  And we applaud, to be honest, the many businesses that do provide fortuities and other support beyond what the Cuban government allows them to--pays workers on their behalf or beyond what the Cuban government really wants them to do.  But I noted that last week in press reports, the Cuban government is actually now focused on this point and they are planning to heavily tax, track, require reporting of anything that foreign businesses provide above and beyond the meager wages that Cubalse passes to Cuban workers.  So those of you looking for signs of dramatic change are probably looking in vain at this point. We have also talked to governments and institutions like the EU Commission about how they might use their development programs strategically to help Cubans adjust to being able to engage in economic activity.  So if there is a process where things begin to open, we have talked to the European Commission, for example, about whether or not, as they implement their development projects, which I believe are currently stalled because the Cubans are cranky with them, that they look at things like micro-credits or small business inputs that would help sort of ease the process of change.  And just to end with my Western Hemisphere of friends because that is where I started, I think that the countries of the Western Hemisphere will be crucial to any international effort to support a process of change in Cuba.  As a region, the Americas have shown tremendous leadership in recent years in addressing problems in the hemisphere like the WHA-led effort to support democracy in Haiti.  And we hope that countries in the Americas will remember that traditional views about non-intervention did not stop them from acting decisively in Haiti, and they ought not to stop them from taking a principled position at the time it comes for the Cuban government to release political prisoners, open the dialogue with its citizens and take the other steps necessary to come into line with the requirements of the Inter-American Democratic Charter and to come back to the mainstream of the Americas.  And I would also note that there are leaders and political actors in the Americas who are really uniquely positioned to play a role in helping Cuba map its way back towards the mainstream of democratic Americas.  Left of center democratic parties and their leaders often have personal and historical connections to the institutions of the Cuban state that may give them influence that we do not have.  Some are well-positioned to speak about issues like labor rights, human rights and national reconciliation, and we hope that they will have the right public and private message for the Cubans at the critical time.  We do talk to them about this and we cannot control their behavior but we are asking. And in the end, I think that this discussion is a very important one.  I think that there is an enormous body of principles and commitments that we can tap into.  I think the Arcos Principles represent some of the best of that.  And that we need to be creative here and we need to think about, ultimately, what it is that we can do to just help this process.  We cannot run it; it is a Cuban process.  But if we can create a context in which it is easier or more likely for change to happen, then we need to take some steps to do that.  And I think enumerating a set of business principles, talking to governments that are in businesses that are engaged in Cuba now about a set of principles is critical.  And thinking about when the time is appropriate for U.S. economic engagement, which is at a time when it can reinforce a process of change, to be prepared to shape the way our businesses engage in that country.  These are important pieces of the puzzle.  So I ll stop there. Roger Noriega:  Thank you very much, Kirsten, for that presentation.  I ll note that one of your co-conspirators, Caleb McCurry, is standing there.  Caleb, if you would like to have a seat, this would be the time to do it.  He is one of these people that, I think the word, traipsed around the world.   You are not a traipser; you are more of a gallivanter or stomper.  Kirsten Madison:  He does not do it [indiscernible]. Roger Noriega:  Exactly.  Well, thank you again for that presentation and we will ask questions in a bit. I was told a few years ago, maybe 10, I was old enough for someone to tell me this, You know you are getting old when you are working with the sons and daughters of people you used to work with.   And point of fact, Marc Wachtenheim is one of these examples because I worked with his father who had a remarkable career in international development.  I was proud to be associated with him.  Marc Wachtenheim directs the Cuban Development Initiative at the Pan-American Development Foundation, overseeing a multi-million dollar development program.  The initiative brings together hemispheric leaders to implement strategies in collaboration with the Cuban people to advance their democratic, economic, and social development by joining international resources with the Cuban worker, Cuban human resources.  PADF empowers disadvantaged people in the communities throughout Latin America and the Caribbean to achieve sustainable economic and social progress and strengthen their communities and civil society, thereby advancing the principles of the Organization of American States with which PADF is loosely affiliated.  Mr. Wachtenheim has traveled extensively in Cuba and has spoken publicly about his experiences at various international and domestic forums.  Those of us who were watching closely the 2008 presidential campaign may have the mistaken notion that change is a theme that began here with one campaign or another in the United States. In point of fact, 2008 as a year of change actually was born in Cuba where individual Cubans made a simple, pristine, demand for Cambio and wearing these white bracelets that say Cambio which has landed a few of them in jail.  And one of the things the PADF does very well is support those people and spread the word internationally about the plight of these particularly young people who are seeking a better future for their country.  Marc? Marc Wachtenheim:  I agree with Roger and with Kirsten that any discussion on Cuba that focuses on a particular country s policy towards Cuba rather than on conditions in-country will remain superficial.  I also, like Kirsten, would like to address some of the conditions experienced on the island.  I think that it is a timely moment to do that now, especially because there are some discussions, speculations regarding the recent changes, supposed changes over the last year and a half, and speculation on what the impact of those might be.  Although I would prefer to not have to say so, unfortunately, the truth is that Cuba is a communist, one-party, totalitarian, Stalinist regime.  That is the truth.  That has not changed over the last year and a half.  Still today, Cubans cannot travel freely.  They cannot send their children to schools of their choice.  They cannot send their children to a private school or to a religious school.  These do not exist.  All schools are controlled by the government.  They cannot start a business, except in a few exceptional cases, approved by the government, controlled by the government.  They cannot bargain collectively.  They cannot express themselves freely.  There are laws in the books against this, limiting this.  They cannot buy a home.  They cannot access information freely.  All of the mass media are controlled by the government.  The three daily newspapers, fourteen journals that are published somewhat regularly, the four television stations controlled by the government.  In other words, today in Cuba, a year and half after speculation regarding significant change began, there is still a tremendous amount of human suffering; 11.9 more or less million people who today in our hemisphere are living under a system which is not of their choice.  And I think that this is a very important point to make.  Although I wish I did not have to say this, this is the reality and I'm going to try to speak a little bit about what the significance of this may be.  I would like to point out that I'm speaking and I'm expressing my personal views and not necessarily those of my organization. The natural question, which is a smart question anyone would ask as a result of this is, okay, yes.  Since this is the case, then why is it that both the Cuban government and it seems Cuban society support that regime?  Why does the government seem to be monolithic and why does it appear that Cuban people are not rising up, are not protesting or going to government rallies?  And I think that in order to answer this question, I would like to make a small parenthesis and perhaps try to attempt to diagram a little bit the government and Cuban society in very, very rough terms, very broad terms. I think that the government can be divided into at least three groups.  The first we could call them, orthodox.   These are people who have been around since the beginning and perhaps follow alongside Fidel, who are perhaps of the same generation as Fidel and for that same reason, they are a very small group and dwindling and largely politically irrelevant now. There is a second group; we could call them reformers.   These are less to be ideologically committed, more technocratic people that have traveled abroad, people that have studied abroad, people that would like to perhaps move Cuba towards a Chinese or Vietnamese model.  This is often discussed.  In other words, maintain political control but open up the economy. And I think that we can identify a third group within the government, which we could call the radical reformers.   These are individuals who have perhaps not at the highest spheres of the government, but nonetheless, present throughout the regime structure and the bureaucracy throughout the ministries, throughout the local party offices.  And these are people who have realized that that is a failed system, and who would like nothing more but to be able to contribute to transforming Cuba to be a successful market-oriented democracy so that Cuba can once again reinsert itself into the international concert of democratic nations, can once again open up its economy to the world and open up its domestic economy to market-driven forces, in which they can have a better future for themselves and for their children.  But they realize that to say that at this point would imply and would require their losing their jobs or worse.  I think that it is important to note that when from looking at it from the outside, we often may tend to draw the incorrect conclusion, I think, which would be that the government is monolithic. I think that a similar diagram could be drawn among society as a whole.  And when looking at society as a whole, I think that we can identify a first group of people who have supported the revolution from the beginning, who perhaps think that everything that they have they owe to the revolution, who--you know, orthodox are perhaps the same generation as Fidel as well and are also a dwindling, small and becoming less relevant group.  But what happens is that everything that they have represented and that they have fought for in their lives is connected with the revolution.  So to distance themselves from that reality now would imply a break with everything that they have fought for through their whole lives and since they are psychologically tied down to continuing to support that system. There is a much more relevant and a much more important group, which is the vast majority I think of the Cuban society--which is not represented by that group that I just discussed--which we could perhaps call the simuladores or simulators.   These are individuals who work in government jobs as everyone else on the island pretty much, unless they work in the informal sector does because all of the jobs, the formal jobs, are controlled by the government.  These are people who will join all of the politically correct organizations: The Association of Communist Youth, The Association of Communist Women and so on, and are people who would go to all of the government rallies and you will see them even on TV waving the flags and so on.  But in the intimacy of their homes, with their families, they secretly lament the reality that their government and their country have become, and they secretly would wish that things would change, that they would have more economic opportunities, perhaps unclear about their path on the road that would lead to that, and definitely, I think, paralyzed by a strong sense of fear--fear of government oppression, fear of speaking out and losing your job, fear of intimidation, but also--and I think this is very important--fear of the unknown, of perhaps through change and the collapse of the current regime, perhaps losing what little social safety net they may perceive that there is today.  And I think that is extremely important to keep in mind because I think this group, which I perceive as the largest segment of society, is going to be a key player in whatever form the transition in the future takes. Then, I would say that there is a third group and this is the group that I would say is the most important group, and those are the civil society, the civil society activists--people associated in churches, the Protestant Evangelical, Catholic churches, Masonic Lodges, independent libraries, human rights organizations, independent political parties, independent journalists associations, independent labor unions and so on.  Relatively, again, a small group as compared with the previous group I was discussing.  But why do I say that they are the most important group?  Because I think that they represent the very best values of the Cuban society and they are openly working to bring about that change which the vast majority, the silent majority also wishes would take place.  In other words, they are acting in a manner in which their external behavior is consistent with their internal beliefs, which is one of the most basic and fundamental definitions of what it is to be free.  These are people who, in spite of living in an oppressive and totalitarian society have, nonetheless, broken that barrier and that is why they are the most important group, I think.  They include people like Oscar Elias Biscet, who recently won the Presidential Medal of Freedom that was given to him by President Bush, who is currently in jail.  People like Marta Beatriz Roque, an educator, an economist.  People like Oswaldo Pay� Sardi�as who threw his Varela Project, gathered over 30,000 signatures several years ago, signatures in a petition, a petition that requested respect for fundamental human rights and some reforms of the government.  The important thing I do not think is Oswaldo Pay�.  You can agree and disagree with some of his politics or even the Varela Project that is a document that can be perfected perhaps.  I do not think that the important thing is even the 30,000 people who put their name down publicly knowing that they assume some risk doing so.  I think that the most important thing is what those people all represent, which is again the desire of the vast majority of the Cuban people for some type of change--fundamental, serious, democratic, economic change.  And given this then, the question that arises naturally, I think is what is it that economic and political engagement means in this context?  I think that is the issue.  That is the crux, the heart of the discussion today.  And to me, given this reality, it seems that the natural answer is that economic and political engagement means supporting these last two groups that I just discussed, and I think that that what it is that we are trying to do.  How?  By providing them material assistance, economic assistance, training, information; by promoting exchanges with civil society leaders, not just in the United States but in Latin America and in Europe; by responding to their projects and trying to get them that material and information assistance that they request based on their own projects.  And I think, very importantly, by providing them with moral support, which is something that we know both from partners in Cuba and in other totalitarian societies as something extremely important in an environment in which you are closed off from being able to travel abroad, from being able to work openly with other organizations, and where the government is sort of constantly telling you that you are a pariah.  That moral support, I think, is essential. Why is it that I think that this is our common objective and that we should go all work together?  When I say we, I do not just mean Kirsten who is sitting here to my left and the State Department.  I mean left, just the physical sense, not the other -- Kirsten Madison:  Geography. Marc Wachtenheim:  Geography, no other innuendo.  But I mean also civil society.  I mean the private sector.  I mean individuals.  I think that the basic answer is one word, which is solidarity, and it is a word whose real meaning I think we only learned in the 1980s, thanks to striking Polish union workers and Gdansk, but I think it is a concept that inspired the founders of this country, which is that the strong and the free should stand by the weak and the disenfranchised, not just within our borders but abroad as well.  And I think that that support, I think that the Cuban people will express tremendous gratitude for that when the day comes that they are able to determine their own destiny, when they are able to travel freely, when they are able to buy a home, when they are able to start a business, when they are able to choose the school that they want to send their children to, when they are able to bargain collectively and express themselves freely and access information from any source that they choose.  I think that this is nothing more--what I just described is nothing more than the spirit and the vision of this little document, which Kirsten has talked about earlier and Roger as well, the Inter-American Democratic Charter, a document which was signed on September 11th of 2001 in Lima, Peru, and gathers the collective vision of all of the democratic countries of the hemisphere, every single country of the hemisphere that is an active member of the OAS.  And in its Article 1 says that, The citizens of the hemisphere have a right to live in democracy and that is a right enjoyed by every citizen of the hemisphere, by any citizen of any country of the free world, of any country of the civilized world.   And I'm convinced that by working together, the spirit of this charter, which, by the way, is also the desire, the vision, the spirit of the vast majority of the Cuban people as I have described earlier, will come to be realized in Cuba.  And I'm very honored to be able to sit at this table alongside Kirsten and Ambassador Noriega, two people who are instrumental in bringing about the realization of this document.  I can tell you that our organization stands ready to continue to see that this vision comes to be realized, and I have absolutely no doubts that soon it will. Thank you. Roger F. Noriega:  Thank you very much, Marc.  I appreciate that, particularly kind words at the end of your presentation.  But I noticed the very straightforward words at the beginning of your presentation referring to the regime and reminding us all that we are talking about a regime that is a Stalinist, totalitarian regime.  And Malcolm X used to tell his introducers, some of you may know what he used to say.  Make it plain.   And I think Marc has made it plain for us this morning.  Thank you very much for that. I would like to ask--we are going to turn this to questions.  We will bring the microphone to you.  But let me ask one question, if you do not mind.  Kirsten, Hugo Chavez clearly wants to be one of those Latin American countries that have an influence on the Cuban transition, but probably in a way that we would find sort of retrograde in as much as he supports the regime now and even wanted to have political union with the Cuban state.  What do you see as a potential impact of his engagement, and would the United States be prepared to tell him to back off rather than try to continue the dictatorship in Cuba? Kirsten Madison:  I ll make just a couple of points.  Venezuela is really not my bailiwick, but we said - those of us who worked in the drafting of the second report of the Commission for Assistance for Free of Cuba that went to the President--that Venezuela is a country is that is currently engaged in Cuba really for the purpose of sustaining the system as it is.  And I think that is accurate.  I mean, if you look at the agreements that Venezuela has signed with the Cuban government, if you look at the kind of investment, the extent of the investment, it is very clear that they have vested themselves in what currently exists.  I actually think that, really, the most important question when it comes to how Venezuela operates in Cuba at a time of change, I think that that question will be answered by the Cubans themselves.  I think that one of the primary things that needs to be understood and acknowledged and recognized as a force in this process is Cuban nationalism.  I think we saw a little bit of Cuban nationalism when the dissident or democracy activists convened and drafted the Unity For Freedom document, where they said they wanted to be able to define a future for their country free from outside interference, and that they did not believe that their rights were the subject of the negotiation with a third government.  That is a reflection of Cubans and their view of their own country.  And I suspect that we will see Cubans themselves have a view of Venezuela engagement in that country in a time of change.  So I actually think that the more important question is how do the Cubans themselves deal with this?  I think more generally speaking, I think that we are--we talk to all countries about what we think the region as a whole should be doing in Cuba, to support the process of change.  And I do not anticipate that we would take any different approach. Roger F. Noriega:  Great, thank you very much.  We have a couple of questions.  We will bring it to this gentleman here, and then please identify yourself and your organization. George Montalv�n:  Well, I'm George Montalv�n.  I'm an independent consultant, so it is Montalv�n and Associates.  But you are looking at Montalv�n and the associates. Roger F. Noriega:  We will be associates here today. George Montalv�n:  Anyhow, I will identify myself further.  I happen to be a co-author of the Arcos Principles with Rolando Casta�eda.  We authored it in approximately 1994, and we did an update last year.  So I have a couple of things to say.  I'm not going to go into all the details.  There is a lot going on in connection with the Arcos Principles in Spain and so on.  One of the things that is very interesting is that some foreign investors in Cuba apparently understand that continued violation of human and labor rights is unsustainable because they have begun to establish funds to pay the Cuban workers eventually, whose rights they have been violating.  So, foreign investors in Cuba, obviously not Americans, are convinced that continued violation of human and labor rights is unsustainable. Let me tell you something else.  You mentioned Marta Beatriz Roque.  Well, it happens that for dissidents in Cuba, including Marta Beatriz, including Vladimir Roca, including F�lix Bonne Carcases, and including Ren� G�mez Manzano went to jail for five and a half years.  You know why?  Because they started sending letters to foreign investors asking them to observe the Arcos Principles.  That is-- Male Voice:  Interesting. George Montalv�n:  Third thing that I want to tell you is that for those who do not know the details of the violation of labor rights, essentially, each person in Cuba has two experientes.  One is the experiente escolar, experiente acumulativo escolar, and the other one is the experiente laboral--life history, okay?  And if you are a foreign investor in Cuba, you have to go through CUBALSE, for example--which is Cuba al Servicio del Extranjero; I do not know whether you know that.  Well, you have to go through CUBALSE.  You cannot hire a worker directly.  And CUBALSE and others--there are two or three others--use those two experientes to see if the person is politically correct enough to go to work for a foreign investor.  But the labor violation does not stop there.  The foreign investor pays CUBALSE $420 a month, and CUBALSE pays the worker $10.  It is a 98 percent tax rate. Now, the final thing that I want to say to give you a little food for thought is the following.  Sad fact is that present-day Cuba, one of the high-profile violators of the Arcos Principles or the labor rights happens to be the United States.  Why?  Because you know that USINT goes through CUBALSE to hire the two hundred-plus workers who happen to be--the embarrassing fact is that they are state security, but that is beside the point.  They go through CUBALSE and they pay CUBALSE the $420 and CUBALSE pays the state security guys that they assigned to the embassy $10 a month.  So my working suggestion to you--I have made this in a published form before--but my working suggestion for you to consider is the following.  Why do you not work with other governments, be they western hemisphere, Spain, and so on, so at least the embassies that they have in Cuba and USINT stop caving to this. Roger F. Noriega:  Great.  I would let you go on a bit because I appreciate the contribution very much.  Well, Kirsten has taken that on board.  Please. Pablo Bachelet:  Pablo Bachelet with the Miami Herald.  As I believe this week the president of Brazil, Luis In�cio Lula da Silva is in Cuba, signed an agreement from press reports I have seen, billion dollars as far as I'm aware--and correct me if I'm wrong, Kirsten--he is not going to meet with dissident leaders or dissident organizations.  So it would seem like a big boost for the Cuban government.  It kind of raises questions over your efforts.  So my question is what is your comment on Lula, biggest country in South America, very high-profile trip to Cuba?  Have you spoken with the Brazilians?  What kind of feedback are you getting?  It would be great if you could sort of fill us in a little bit on what governments are telling you in private, perhaps, that they are certainly not willing to say in public? Kirsten Madison:  Nice try, Pablo, but I'm actually not going to tell you what governments are telling us in private.  That would seem to be a fairly fundamental violation of the word, private.   So I do not think I ll do that.  One and two, I would say that if governments, whether it is the Brazilians or others, are lining up or spending their time with the government in Havana [sounds like] does not really reflect on us.  It reflects on them.  I personally have not seen what the agenda is that the Brazilians have in Cuba.  But let me make a couple points about Brazil.  One, Brazil is a leader in this hemisphere.  They have been the leader in Haiti, and I think that that is extremely important.  They have demonstrated and allowed the hemisphere to demonstrate that as a region it is capable of addressing a serious challenge to democracy.  And in the case of Cuba, it is of course the lack of democracy that we are talking about.  So I think that Brazil is an important country, that it is a country that is capable of showing leadership.  I think that it is, as a government that is of the democratic left in the Americas, I think that they are probably particularly well-positioned to talk to the Cubans and to lay out some basic expectations about what they would like to see.  Labor rights is a particular area where I would think that they would have something to say, and I do not know what the Brazilians private message is for the Cubans.  It would be my hope that it would reflect the values that we have seen in Brazil or frankly any other country in the western hemisphere reflect as they signed up for the charter and as they signed up for other things.  I do not personally know what they are saying to the Cubans, but we are out in Latin America and we are talking to governments, and always our message is that we have all agreed to certain principles and those principles have to be brought to bear as the Americas looks at how to address the last remaining fully undemocratic government in the Americas.  That is about all I have to say. Roger F. Noriega:  Thank you very much.  I'm going to go with one more question.  This gentleman here has had his hand up. John McAuliffe:  John McAuliffe from the Fund for Reconciliation and Development.  The last time I was in this room was for a program on Vietnam, a very warm, supportive, mutually appreciative program with Vietnamese embassy people here and State Department people here and your counterparts.  And I have been puzzled, having worked for thirty years on normalization with Indochina, the total disconnect in terms of the way the U.S. approaches Cuba.  And I have, in the past, assumed that was simply the power of politically domestic political power [indiscernible], but I'm beginning to think that it has more to do with the psychological attitude, whether it is Monroe Doctrine or Platt Amendment or whatever.  I hear that you did a lot of talking, but I do not hear about much listening.  I do not hear about the two-thirds of Americans that want--[cross-talking].  I know.  I will be shorter than in other questions.  I know it is dissident, so let s hold a little dissident within the [cross-talking] Roger F. Noriega:  -- in terms of time.  [Cross-talking] John McAuliffe:  Let me -- alright I ll -- [cross-talking] Roger F. Noriega:  So if you want to come back in thirty years for your panel, you can do that. John McAuliff:  Well, let me just end up with this, that we have every country in the hemisphere wants us to end the embargo and normalize relations.  A hundred eighty-four countries to four in the United Nations, one has to end the embargo.  Maybe there is a problem that has to do, if you want these changes in Cuba, you should listen to people within Cuba, the dissidents who think that ending travel restrictions and ending the embargo would do far more to reach to that middle group that you are talking about and to provide real space for the dissident group that you are talking about, then essentially compromising them by making them objectively allied with a country that for a hundred years is trying to dominate them.  You cannot escape that reality but--so you get into this total dead end with wanting something, but you do not have any way to get to that other than cataclysm. Kirsten Madison:  I always expected this question, Why don t you lift the embargo?   To be honest with you and this is not--do not take this personally--I think it is a very lazy question.  I think that it is utterly lacking in strategic context.  I do not really--myself, if the rest of the world is sort of freely moving about Cuba and it has not had the impact of breaking apart that regime, I have always been puzzled by why people thought it would magically happen if it was the United States.  The reality is that this is not about us changing.  This is about changing Cuba.  And while people love to make it about our policies, I would urge you to sort of take on board what was said by the gentleman sitting just behind you and my colleague here about the realities of Cuba.  That is not our fault.  That is because there is a government in Havana that has made the decision to deny the rights and aspirations of its citizens.  And again, as I said, I think that question sort of lacks any sort of strategic sense because I have never seen the value in the United States becoming like every other country.  The reality is that we have an embargo as part of a much larger, broader policy on Cuba, that were we to abandon the embargo, we would be like every other country bought into the system in Cuba.  We would have no leverage or we would give up an important tool that might be huge in a process going forward as things start to change.  And you know, I have no expectation and, in fact, we have asked governments, Okay, so we lift the embargo.  What exactly is going to happen?  Are you going to change your behavior?  Is the international community suddenly going to rally behind a set of principles and engage in Cuba in a different way?   No.  I think the answer is that they just want us to be like them.  And again, I do not see the strategic value in just sort of lifting the embargo. Our President has been very, very clear, Changes in our policy will be driven by changes in Cuba.   You know, he said in a speech several years ago and he spoke last year in, I guess, October.  I mean, he talked about the United States responding to real change on the island.  And you know we are prepared to do that.  But to just cast off the embargo to no apparent benefit, to not reinforce anything except the status quo strikes me as irresponsible in terms of U.S. interests and really counterproductive.  I do not know if my colleagues have anything to add. Roger F. Noriega:  Let me just say in conclusion that we can continue this discussion later, but I was not being facetious when I said you can come back in thirty years because you noted that the process of reconciliation with Vietnam is going on, but the war is over.  The war that Castro is waging against his people is going on everyday and when that is over, I think that we can make a significant effort to reconcile.  And what will be most important is the reconciliation with the Cuban people amongst themselves.  If there were ever a credible argument for making unilateral concessions to Castro, I would have thought they had been significantly disproved in the last fifty years when people have--well, really, the last thirty years when people have tried to do that to no avail.  And I certainly do not think it is a particularly credible argument in the current context, where you would want to be making unilateral concessions to the one guy, a gasping regime, the one person who is the biggest obstacle to economic and political change.  And if you ever, with that whatever credible argument, I do not think it would be one now. But in any rate, thanks very much for this panel s contribution.  I hope you will join me in recognizing their presentations. We really are not going to break for very long.  If you want to grab some coffee real quick, you can, but we are going to go right to the next panel.   Panel II:  Engagement with a New Regime Roger F. Noriega:  Ladies and gentlemen, we will ask you to have your seats, including the panelists.  Okay, ladies and gentlemen please have your seats and we will begin.  [No recording from 01:07:54 to 01:08:15] Roger F. Noriega:  Thank you again and we will continue.  Our second panel will discuss the importance of political changes, a pre-condition for economic liberalization, the lessons learned from other transitions, as well as the importance of introducing entrepreneurship as part of any plan for rebuilding Cuba and empowering Cubans. Our first presentor is Paul Bonicelli who was confirmed by the Senate on May 25th, 2007 as Assistant Administrator for Latin America and the Caribbean at the U.S. Agency for International Development.  Prior to this appointment, Mr. Bonicelli served since October 2005 as deputy assistant administrator for the bureaucracy--I m sorry, the Bureau--This is a posttraumatic stress disorder, I have been there--as deputy assistant administrator of the Bureau for Democracy, Conflict and Humanitarian Assistance at U.S. Agency for International Development.  Mr. Bonicelli s previous government service includes serving as professional staff member of the international relations committee of the House of Representatives.  He also served as a consultant for the Department of Labor s Bureau for International Labor Affairs, and in 2001 and 2002 he was tapped by the White House to serve as a private sector delegate to the United Nations.  Before joining the Bush administration and USAID, Mr. Bonicelli served for six years as dean of academic affairs and associate professor of government at Patrick Henry College in Purcellville, Virginia.  Mr. Bonicelli. Paul Bonicelli:  Thank you, Roger, very much.  I would like to thank you and the American Enterprise Institute for the opportunity to be here and talk a little bit about what USAID s experience has been in working with transition environments, in particular, for Cuba, what our plans would be should we be invited to play a role in there.  Cuba is on the verge of profound change and it behooves all of us who care about the Cuban people to be prepared to offer them all assistance that is feasible to rebuild their country politically, economically, socially after five decades of Castro s misrule in each of those areas as much as needed.  In his speech on Cuba policy last October--and Kirsten referred to it--President Bush said that the day of Cuba s freedom is coming soon, but cautioned that the transition from a shattered society to a free country may be long and difficult.  Things will not always go as hoped.  There will be difficult adjustments to make.   And this among many phrases is one that is very important for the kind of work that we would contemplate at USAID.  The U.S. government recognizes the enormous challenges to economic recovery and growth that a new democratically-elected government in Cuba will inevitably face.  Economic planning, if one can call it that under Castro, has outlawed free markets, discouraged job creation and productivity, and wasted and misdirected countless resources and productive infrastructure.  Roads, electricity, telecommunications, water, housing have fallen into disrepair.  Worst of all, the talents and gifts of the Cuban people have been wasted by the foolishness that is Communism.  Fortunately, however, USAID and other U.S. government agencies have considerable experience working with governments that have thrown off the shackles of Communist control and set upon a path of reconstruction and development.  It is not a perfect record but it is one that gives a great running start to those it would help.  What I thought I would do today is a little more boring than the last panel because it is sort of a litany of activities.  But I will try not to grow too long on each one to give an overall picture of the kinds of things that USAID would be prepared to do along with the rest of our colleagues in government, especially talking about the challenges that would have to be addressed by a democratic Cuban government seeking to meet the minds--the needs of the people as they build their own free economy and integrated into the international economy.  My experience at USAID since October of 2005 has been in this bureau only since I was nominated and confirmed.  But I have been dealing with Cuba from USAID since I got to USAID, and prior to that when I worked on the Capitol Hill with Caleb and Kirsten and with Roger as well.  You were old enough to not only have worked with Mark Wachtenheim s father, but you were my mentor when we were on the Hill together.  So all of my [cross-talking].  What has been occurring at USAID regarding planning for Cuba is truly unique for USAID and, I think, for the U.S. government in the sense that there has never been greater coordination among the inter-agency.  There has never been -I am sure this has happened before but probably rarely have there been people who have been working together so long from the vantage points of the bureaucracy, as well as from politics, political appointees as well as career appointees from all of the agencies on a regular basis consulting, discussing everything that is done.  I m an implementor at USAID.  We implement U.S. policy in foreign assistance, and we play our role as the implementor who also contributes to the policy making.  But I have seen in my time at USAID and in my time on Capitol Hill that this is a time when, truly, policy is directing and guiding what each part of the interagency is doing and it helps greatly to have a Cuban coordinator; it helps greatly to have one as talented and as committed as Caleb McCurry.  The results, I think, will clearly be different.  They at least are now in terms of how much is being coordinated at one time.   To begin with, if we were so advising a new Cuban government, the sine qua non of any effort to begin rebuilding Cuba s shattered economy--and this point has been firmly established in the work of the President s Commission for Assistance to a Free Cuba (CAFC and CAFC II)--is the establishment of a competitive free economy that is conducive to private sector-led growth.  Again, if that is the choice of the new government in Cuba--and they appealed to the United States for assistance in this transition--then we would offer support in several key sectors that we would likely see some of the most pressing needs.  And it cannot be emphasized too much that what is being planned is for a transition government that is democratic, committed to democracy according to the CAFC report.  So please do not interpret anything that I m saying on the part of what the USAID would do prior to a democratic government in Cuba; that is very important. First of all is microeconomic stabilization.  It will be imperative that the new democratically elected government move quickly to reform the Cuban economy by removing restrictions on economic activity and eliminating cross-subsidies of industry.  As USAID has done in other transition scenarios, we could offer assistance to help Cuba stabilize and strengthen its macroeconomic situation by reforming its financial institutions, rebuilding its tax policy and administration, overhauling its budget system and strengthening the conduct of a monetary policy.  And we would promote steps to achieve Cuba s integration to the international financial community through a multi-donor trust fund, the Cuban Freedom Fund, which many of you have heard about that the Secretary of Commerce is overseeing.  These are some of the macro things that would need to be done.   Infrastructure:  We can also provide technical assistance and facilitate access to development loans in private sector investment resources to help rebuild Cuba s infrastructure.  This could include support for legal and regulatory reform in the energy, water and sanitation, and telecommunications sectors--I see Juan Belt of USAID is here who has worked very much on those things with us--assistance with urgent roads assessments and maintenance, airport master plans, rail facilities, and key maritime facilities.  We could also assist the new Cuban government in reforming public housing and stimulating, importantly, private ownership and investment in such housing.   Private sector strengthening:  Beyond measures to stabilize Cuba s macroeconomic environment, we would advise that additional steps be taken by the new government to strengthen the enabling government to unleash the private sector to grow Cuba s economy.  Our experience has shown that transition governments should move the public to privatize public enterprises, create and support private sector and business advocacy groups, and, perhaps, establish an enterprise fund similar to the enterprise funds in Poland, Hungary, and Russia to provide a rapid source of investment capital to support private enterprise.  In the context of a true democracy this should and can be done in an open and transparent fashion without resort to political favoritism of any kind; Cuba does not need to replace one set of politically privileged elites with another.   On trade, implementing new trade regimes is another area where we have considerable experience working with our partners.  If a new government is amenable, we would certainly wish to offer assistance to help Cuba qualify for preferential tariff treatment under the U.S. Generalized System of Preferences Program, seeking, when appropriate, a legislative amendment to make Cuba eligible for preferential Caribbean Basin Economic Recovery Act benefits.  We would also hope that the regional allies would include a free Cuba in regional trade arrangements.  USAID also implements myriad programs to build countries capacity to promote trade, and I hope we could engage in a new Cuban government and private sector to assist them in establishing a new regulatory environment, expanding export opportunities and helping build export-oriented businesses in goods and services where Cuba has a comparative advantage.   Business sector development:  As I noted, developing a legal and regulatory framework that is conducive to free enterprise, especially the development of robust small and medium-sized enterprises, is essential for any economy in transition from a centrally planned to a market economy.  USAID will be in a position to offer free Cuba training and credit to SMEs and assistance to strengthen business finance, establish housing finance and develop incentives to encourage commercial banking involvement with key development agencies.   On agriculture and the environment, it is our experience that Cuba will need assistance in developing a regulatory framework and building capacity and market information systems, establishing uniform grades and standards, expanding agricultural credit and market opportunities in promoting privatization.  Perhaps, most importantly, a new Cuban government will need to develop a system to extend land titles and to register and settle land disputes.  And, again, these are initiatives where USAID has a great deal of experience working around the world.  We would also advise that growth in the future Cuba proceed in an environmentally sound manner and that a new government establish and implement sound environmental policies, including regulatory standards and environmental impact standards, ones that are real and true and are actually followed as opposed to just mouthed without any follow-up or enforcement.   Investing in people:  Finally, one of the pillars of this administration s policy in the Western Hemisphere is working with our partners in investing in their own people.  As Cuba transitions from a dysfunctional command system there is no question it will have to address urgent needs in the health, education and labor sectors, despite what you may have heard.  USAID has a long track record in working with partners to initiate reforms to improve health systems and human resources, and maintain health services, coverage and quality.   In education, we provide assistance in developing learning standards, curriculum reform, teacher training, and importantly, the involvement of parents in their children s education, as well as educational exchanges and scholarship programs.  We provide assistance worldwide to help reform and enforce labor laws in accordance with the ILO principles.  In all of these areas, we would hope to engage a new Cuban government.   Lastly before I conclude, I wanted to make one more point about our engagement with transition governments, and that is the absolute necessity that in any reform, that the government s relevant institutions conduct government business in a transparent and accountable manner.  It is a crucial point that I cannot emphasize enough, and it is the only way to truly respect the newly found-freedom of the Cuban people.  In Cuba, in particular, after more than fifty years of repression and lack of rule of law, the Cuban people deserve better than the shady insider deals, influence-peddling, and corruption that have hindered long-term economic growth and democratic consolidation in other governments emerging from Communist regimes.  As in other transitioning countries, the U.S. government can offer assistance with Civil Society with oversight that they provide of public investments, instituting internal controls in ministries, and auditing and transparent procurement reforms.   And this leads me to my final, final point.  It has been USAID s experience that the types of economic recovery programs we are discussing today necessitate broad Civil Society engagement; Mark referred to that, especially.  It is not that our prescriptions are controversial or run afoul of economic orthodoxy; it is that, as I mentioned President Bush s remarks earlier, the rapid and comprehensive reform we are outlining can be painful and disruptive and will require broad domestic understanding and support.  Sequencing reforms and maintaining or establishing appropriate and, possibly, interim safety net programs could be important [indiscernible] shock therapy undermine the legitimacy of a new democratically elected government and the entire reform process.  I ll be the first to admit that what I have outlined here represents an ambitious agenda and one that no country should attempt to pursue on its own.  And it is not one that the U.S. is going to attempt to pursue on its own, nor has it attempted to pursue the diplomacy in the same fashion.  If a new democratically elected Cuban government invited us in to help in their transition, we would gladly accept but we cannot and should not do it alone.  I fully anticipate that the private sector and other donor nations will step up to help Cuba achieve this historic transformation.  Indeed, part of my job is to begin to get them on board as well now, too.  Thank you for your attention.  I would be happy to answer any questions when [audio glitch] are ready for that.  Roger Noriega:  Thank you very much, Paul.  I want to acknowledge, in particular, the importance of your assertion that, repeatedly, these are decisions that Cubans ultimately have to make for themselves and that we are prepared to contribute if we are asked to contribute.  And those are essential points.  George Dunlop is our next presenter.  He serves as principal policy and legislative adviser to the assistant secretary of the Army for Civil Works and supports the assistant secretary in providing policy and performance oversight for the Army Corps of Engineers Civil Works Directorate.  Prior to joining the Bush administration in November 2001, Mr. Dunlop was a business executive involved in natural resources and information technology enterprises, serving as CEO for Century Communications Inc., chairman of MicroBanx Systems.  Previously, Mr. Dunlop served as president of the United Fresh Fruit and Vegetable Association, assistant secretary of agriculture for natural resources and environment in the Reagan administration, and chief of staff of the Senate Committee on Agriculture, Nutrition, and Forestry.  This is a guy who is clearly out of this lane this morning, but really not because he understands the private sector; he understands free market forces.  He has a front seat in our support for transitions, for example, underway in Afghanistan and Iraq.  And he quite explicitly inspired this session in a conversation that we had not quite a year ago--maybe six or eight months ago--where he, because of his vocation to support freedom and abiding commitment with the Cuban people, said, We have got to get this right in Cuba.  So do what you can to help us in that regard.   So we are doing that, George, and so for your sins we have asked you here this morning and appreciate your presentation.  George Dunlop:  Well, thank you very much Roger and, indeed, to all of you.  Let me do all for caveat if I can at the beginning:  What I m going to discuss is the current type of thinking that is going on at the level of our work at the Department of the Army to formulate policy for what we call future stability operations.  This is often called nation building in the lexicon of the public or transition as Paul has described, the transition operations.  None of what I m going to say has any explicit reference to Cuba.  I want to make it very clear that the Department of the Army--insofar as I know the Department of Defense is not engaged in any explicit activities of this sort.  What I m going to talk about will not have anything to do with Cuba. But, of course, we are up to our eyeballs in Afghanistan and Iraq.  The reason that I have been positioned in this space of helping formulate Army policy, and hopefully, policy of other agencies and departments of the government that might be involved in the future--what the Army calls stability operations --is because of our assessment and analysis of what was done in Iraq and Afghanistan and what might, in fact, have been done more appropriately there to have greater success of the American enterprise there.  So if you all will accept that if anything I say relates explicitly to Cuba, you are thinking the wrong way.  Has everybody got that?  All right.  But I do think it is important for the public that is interested in matters relating to Cuba and transition in all sorts of stabilized and destabilized places, failed states.  I think that it is the doctrine or the assessment of the Department of Defense that we are in fact engaged in a long war and a persistent war, and what we see in Iraq and Afghanistan are probably campaigns in a much longer war.  So we need to be thinking very, very cogently about how Army forces--because that is what my area of function is--would operate if, in fact, they were to be deployed either as invitation or in some places there might not be anybody around to invite, so you might have to do what the Army calls forced entry.   So as we engage ourselves and find the Army deployed, exactly what are we going to do is my perspective.  Paul talked about what the government of the United States--what policy makers are doing to address these things from the macro level and even a particular level.  But these things are big-picture, frankly, and would take, possibly, cooperation of many, many government agencies, maybe many, many different governments, and would probably take a long time to implement.  And if you are a battalion commander and you have been deployed and you are in the field and you have got 1500 people under your command, soldiers all, exactly what are you going to do to engage in these transition and stabilization activities?  So we have given some to thought to all of that; all of these are guided, of course, by appropriate policy directives--National Security Presidential Directive 44 and DoD Directive 3000.05.  If anybody is interested in the kind of thinking that is going on at a strategic and policy level, you can read those documents and they will help inform you about the kinds of things that the United States and its coalition allies might seek to do in stability operations from a large policy perspective and, possibly, would have great relevance to Cuba, although not specifically.  The military doctrine itself as it relates to the Department of the Army is undergoing dramatic change; in fact, some of the most interesting and deep intellectual development in policy today relating to this whole space of stability operations and how you grow a country that has failed into a country that could be successful is under way.  The doctrines of the Army are changing rapidly and, I think, very intelligently, driven by the work of General Petraeus.  Prior to his taking command as the multinational force commander in Baghdad, he was the director of the Army intellectual school that does this work.  The Army has rewritten its doctrines, which have basically been rewritten, I guess, around the marginal edges over the years.  But the last major concept of Army operations were developed out of the experience of World War II, that is, maneuver warfare as offensive operations.  The new concept that is being incorporated in the Army doctrine is full-spectrum operations, which takes your maneuver warfare offensive operation against enemy maneuver forces and expands that into defensive and offensive maneuver warfare but adds further opening of the spectrum of operations--full-spectrum--to include these stability operations.  This is not now being trained at the Army; this is not being provisioned at the Army.  But this is the Army doctrine that will then guide future training and provisioning.  This is drawn specifically from an Army doctrine; it is very interesting to read.  Anybody who is interested in seeing how these things might play themselves out in the long war, should go and Google the Counterinsurgency Operations Manual FM3-24, which was co-authored by General Petraeus and General Amos who is a Marine Corps General.  I think you would all--interested in economic development, economic activities and the kinds of things that Paul talked about and, otherwise, that you might have heard already today and may yet hear is dealt with in a general way, much more specific than ever in the past, but not in a entirely specific-enough way to answer my question:  What does a battalion commander, who has been trained entirely in his life in military sciences and in leading people--what is this military guy supposed to do with his 1,500 people to implement stability operations?  The best answer to all of this or put this in perspective--Lieutenant General Peter Chiarelli, who prior to General Petraeus who is multinational force commander in Baghdad recently spoke at the National Defense University.  And he was asked a question about the Surge and these other types of things.  And he said, Let me tell you.  I would rather have 1500 Iraqis employed in real jobs; not make-work jobs, not project jobs that would end but in real sustainable private-sector enterprise jobs.  Then I would have a battalion of soldiers to win this fight in Iraq.   So almost one-for-one, a real employed person in an entrepreneurial living economy, in the stability operations concept and in the real world of a war fight, a counter-insurgency operation in Iraq demonstrates the significance and importance of economic factors as we develop these things.  Now in my thinking, the way I was brought up to think about public policy, it is impossible to think about the types of things that one must do--the strategies and the tasks--without first identifying your principles, the principles that guide these things.  You cannot think of every strategy; you cannot think of every task.  And what if something comes up?  The battalion commander, whoever it would be, would need to have some idea about what are the principals upon which these are addressed.  I m just going to read very quickly the eight principles that I m discussing with generals and coronels and the other people in the Army who think--and the Defense Department who think about these things.  And then I m going to discuss very briefly some specific things that might have more direct relevance. But first of all, principle number one:  There has to be an intelligence imparity and, that is, no cookie cutters; one size does not fit all.  Paul talked about some of the specific analyses that has been done about the things that might particular relate to macroeconomic or institutional at the top level of reforming Cuba.  So you have to have an intelligence imperative to know what is going on. Principle number two:  Most people are sensible people and if we know who to ask to do our intelligence imperative, if there are things that need to be done to help an indigenous economy, an indigenous state, operate differently than it has been at the local level, I think if you just go out and ask people--one of the situations we did in Iraq; we have spent billions and billions and billions of dollars in building infrastructure in Iraq.  And you go and ask people today, Why are you not making use of this infrastructure?   Well, that is a stupid place to put that.  We never wanted any of that stuff.  I do not know why you guys spent a billion dollar on that.  That would not be of any use to anybody.   We did not ask them.  I think the third point is that America s mission has always got to be freedom.  Now whether you are a soldier or a civilian or an NGO or whatever you are, when an American is deployed anywhere in the world, he ought to be noticed or he ought to be known as the freedom man.  I remember back many, many decades ago now when there were Vietnamese people being preyed upon by pirates as they were fleeing Vietnam after the U.S. abandonment of their cause there--and as these people got out in the open sea, sometimes U.S. Coast Guards and Naval vessels would go and try to rescue these people.  And I remember the story being told by one of the sailors is that he approached the little boat full of Vietnamese people.  The Vietnamese guy was trying to get his attention.  He said, Hey, American sailor, American sailor.  Hey, freedom man.   That sent a chill up that sailor s spine that he has never forgotten.  Every time we deploy, we ought to be known as the freedom man; it is a key principle.  If we are engaged in any activity that has nothing to do with freedom then somebody else ought to do that, not us.  Fourth principle: We have to have a basis of the rule of law; that is in all of our doctrine.  Fifth principle: The importance of private property rights and the people to be able to keep the fruits of their labor and not have it stolen from them as we have heard described earlier is absolutely important. Sixth principle is there must be in these types of operations strategies to overcome, leap over the top of, go around the side of, whatever it is, of pandemic corruption which exists in almost every one of these failed states.  The seventh is that there must be fiscal systems in place to fuel economic opportunity.  The eighth is that bottom-up, entrepreneurial capitalism works.  Top-down of any sort, whether it is socialism or the kind of over-regulation that some of us feel we have in our own economy, does not work; they destroy jobs.  If the principles of General Chiarelli with his 1,500 people--real people and real jobs are important we need to understand that the focus needs to be about creating jobs. Now, just to move very rapidly, let me just say that it seems to me that in any type of operation, whether it is of any sort that involves trying to help a failed or a recovering failed state, it is important that there be a synergistic integration of three types of infrastructure.  First is institutional infrastructure; I refer to the point of rule of law.  You cannot have the economic empowerment activity--that is what I m focused on.  Creating a situation where soldiers, as they are deployed, are going to find people employed, people engaged in building their jobs and their families and their livelihood so that they are interested in that, rather than being interested in earning a living by engaging in an insurgency or have a feeling like they have to associate with criminal gangs and other things to sustain themselves.  So the first is institutional infrastructure, rule of law stuff that I ll talk about just a little bit in a second.  The second is physical infrastructure.  People absolutely have to have potable water and they have to have sewerage, which is a function of potable water, or they are sick.  If they are sick, they cannot work.  Most of the poverty in Africa is not caused by having people who are lazy; it is because they are sick.  They do not have decent water.  So focusing on infrastructure--physical infrastructure, electricity and other types of things--you all know what physical infrastructure is.  And the third, which is most often missed, is the importance of capital infrastructure.  There is absolutely no enterprise or business in the world--even people earning a dollar a day are involved in some form of capital infrastructure.  Poor people in failing states get their capital from loan sharks--100 percent interest a day; pay your loan or your knees are broken or your daughter is sold into prostitution.  Very few people in developing countries in the world have access to formal supervised managed capital.  And we are not going to be successful in helping overcome instability in a failed state unless there can be a movement of properly supervised capital.  So you have to have a development of a banking infrastructure.  Some of the institutional infrastructure tasks that I think would be appropriate for soldiers to provision themselves for, which we are working on now, would be basic rule of law tasks.  I m not talking about writing a Constitution or, frankly, Paul, an international trade code; I m talking about is there a criminal code in the area in which this battalion or this brigade is operating?  There might be; there might not be.  But there has to be some basic criminal code, some basic civil codes so people can settle their disputes amongst one another.  There has to be some anti-monopoly codes so that crony capitalists and other people like Paul talked about [indiscernible] in-depth, pretending that that is capitalism when actually it is nothing more than socialism of the crony capitalist class.  Second, when we talk about institutional infrastructure, there absolutely has to be confirmation of property rights whether that involves securing existing records, property registrations, use registrations if, in fact, maybe in the situation in Cuba where actual deeds and titles are not practical or possible or would feed an insurgency if you went in and tried to--and then contracts of registrations so that people can engage in agreement amongst themselves, in effect, that they would be supported in law.  And then you have to have civil legitimacy tasks.  I would maintain if you operate on that freedom principle that just announcing or otherwise carrying out that the Universal Declaration of Human Rights is operative in this area of operations.  Everybody gets that message right on top and that would be an important type of thing; certain communications capabilities, having working relationships with local authorities, and of course, undertaking certain humanitarian activities right at the outset to make sure that there are no people starving or, otherwise, you have cholera or something.  The physical infrastructure tasks are vitally important, but the big mistake that NGOs and governments and USAID and everybody else has made is that we think we can do this top- down.  We think that a lot of these infrastructure things that people find absolutely necessary are by necessity government functions.  And in point of fact, it takes years; they are too expensive.  And why should we set up all of that stuff anyway when in point in fact, providing useful and valuable goods and services to people such as potable water, sewerage, shelter and housing, food distribution and marketing and even production--electricity production--and certain transportation and communications--the private sector can do all of that stuff.  And keeping in mind that I m focused on what it does if you are a battalion commander in a relatively small area of operations.  You are not going to rebuild the electricity grid of a country but you can absolutely make sure that every family has access to electricity through low and high-tech but low-input technologies that either use solar panels or solar mirrors or things like that.  Every person in Iraq today for about $140 a family could have access to all the electricity they would need; no effort has been made to try to put in these high-tech but low-input things.  And the government does not have to do that; if you have adequate provision of capital, you can feed capital entrepreneurs who could start up little businesses like that.  Same with potable water.  I mean, there are technologies; you can go to websites and see all of the stuff where this high tech, low-input thing is absolutely available.  For $12 a family could put together a water purification system to make sure they had all the potable water they needed.  With that put in place, a sustainable big government run from the center that would have a modern water system--no.  But for the near term, while they are deciding how to organize their society and write their constitutions and all that stuff, everybody could have access to potable water for a few millions of dollars.  Everybody in Iraq today could have access to potable water for $60 million using these little devices that I have just described.  And yet as we sit here today, most people in Iraq do not have any access to potable water.  No wonder they are upset.  And finally, I think that the capital infrastructure is the third--institutional, physical, and capital infrastructure.  People do not realize in our government the power, the force of entrepreneurial capitalism.  I have come out of the microfinance business; I am still engaged in it and I m able to do that with my post as an officer in a corporation I helped found.  And I m here to tell you that there are tens of thousands of microfinance institutions, cooperativas, other types of what we call SMEs--small to medium enterprises--loan institutions that operate as banks or non bank/banks, or any kind of transactional things.  People all over the world are engaged in the massive amount of entrepreneurship all from the bottom up.  There is only one thing they need, and that is provision of well-managed risk capital.  Going in and giving somebody a loan from the government--well, they are not dumb; everybody is sensible.  They know they do not have to pay a government loan back.  I mean, come on.  Whoever pays a government loan back?  Hardly anybody.  You would be regarded as a fool if you did that.  But if you are dealing with an enterprise, a bank that is a functioning enterprise that is actually provided [inaudible] for a capital, and these people know that if they pay their loan, they can get another one; if they do not pay their loan, they are out of the business of access to capital.  The record of the microfinance industry is that the performance level--that is the terminology bankers use for people who repay loans--exceeds 98, 99 percent.  The only people who do not pay are people who died or something.  Everybody wants access to capital and they do not need a lot of capital.  So those are some of the principles and concepts that we are trying to put in places as we formulate Army policy. Just to conclude, I would say then there are five steps that are necessary; maybe these would apply to Cuba, maybe they would not.  You all would be more informed about that than I am.  But first you have to prioritize what are the fundamental principles involved.  I need to see some articulation of what are the principles because we cannot know in advance absolutely every circumstance we are dealing with.  Step two is there must be intelligence.  We have to know exactly what is going on; no cookie cutters, please.  Every site, situation, circumstance is specific.  Third, we have to have a clear idea of the institutional infrastructure.  Fourth, a clear idea of the physical infrastructure opportunities to empower creative entrepreneurship.  And fifth is capital infrastructure for the bottom of the pyramid.  That is the way our thinking is being developed now and I hope it might have some utility for your consideration about what might be in prospect for Cuba and other places that have an opportunity to rebuild after suffering under failed states.  Roger Noriega:  Thank you very much, George.  I want to echo what he said because I do not think it is possible to say this too much.  We are not talking about an Army sort of role in Cuba but he is bringing the software this morning, not the hardware.  And I think you have teased out some of these really universal issues in this framework for considering the challenges in the Cuban transition.  And we thank you for that, for being the freedom man this morning.  Nilda Pedrosa -- George S. Dunlop:  I do not like to think that I was the freedom man [inaudible]. Roger F. Noriega:  Actually, I knew I was going to get in trouble if I said that.  So even Dan, you know [laughter] so honorary freedom man this morning.  I should have--it was a joke. Nilda Pedrosa serves as senior policy adviser to Senator Mel Martinez, Republican of Florida, and I apologize for the man part to the freedom person.  She has been on the senator s staff since the beginning of his term in January of 2005, first serving as his state policy director.  Miss Pedrosa advises the senator on various policy issues with an emphasis on Cuba, Latin America and immigration.  She also manages the Senator s South Florida Regional Office in Miami.  Prior to joining the senator s staff, Miss Pedrosa served as political director of the successful, obviously, Martinez campaign for the Senate.  Prior to returning to Florida, Miss Pedrosa served the Bush administration as director of the Office of Intergovernmental Affairs at the Department of State, as director of Public Policy in Governmental Relations at Miami s Children s Hospital and as regional director for former Senator Connie Mack of Florida.  Nilda?  Nilda R. Pedrosa:  Thank you, Roger.  Good morning everyone.  And Roger, I definitely want to thank you for putting this forum together and we continue to appreciate your leadership on this important issue.  I think the first thing you all have noticed is that we do have a team here that has worked together on Cuba policy for many years in different aspects of our jobs, but definitely there is a lot of camaraderie.  There is definitely a lot of teamwork among all of us.  Speaking after George, I was trying to figure out how to segue into what Roger asked me to cover this morning.  And I picked on one of his principles of America s mission has to always be freedom.  And, obviously, Roger picked up on that as well.  So that will allow me to segue into what Roger has asked me talked about, which is the need for political reform before we can even begin to talk about economic changes in Cuba. So let s begin with the first premise.  First and foremost it is U.S. law, and that is the first condition that we have for engagement.  I think I can be very clear in saying that that is unlikely to change anytime soon.  So leaving that aside, why is political reform important?  We have several reasons why we can get into that; I m sure we will continue discussing them.  But our geopolitical interest is one where we have got to focus on, with respect to this one little document that I think Mark also brought up, the Inter-American Democratic Charter.  The importance of this document, the importance that it merits--the U.S. government needs to continue to be the voice for this document.  Why?  We see right now what Chavez is doing.  What is he trying to do?  He is trying to dismantle democratic institutions.  Well, that is exactly what this is trying to protect against and that is exactly what we want for Cuba and for Cuban people.  This is our first line of defense and we cannot lose sight of that.  So as we think about the future of Cuba, as we think about--we have all these conversations about economic engagement and we see so many people trying to find these opportunities and these ways to wedge us and wedge our policy.  We cannot lose sight of--again, political change is first and foremost in our discussion.  Political change is necessary before we can have a true discussion of economic opportunities for the Cuban people.  The entrepreneurial spirit is there; we know it.  We see it every day.  We see it with many of the things that you sent reports back to us.  But political reform is the first thing that we need to see.  When you talk about--from a historical standpoint one of the things that we need to always remember is that economic reform does not always guarantee political reform.  We have seen that in China.  I think [indiscernible] alluded to--you know, we get into the discussion of the China model for Cuba and all that.  That is not what we are talking about here; we have seen how that has not worked.  So let s be clear.  I mean, very simply stated, without political change economic reform is purely cosmetic.  There are no guarantees for the Cuban people.  Why?  Because the Cuban regime, all they want to do is stay in power.  And we saw with the change in the 90s and the brief opening it was basically at their whim and that whim--they left a little bit of opening and what happened?  They pulled it back the moment that they felt that they had enough control and enough power to stay where they wanted to stay.  So without the rule of law, without democratic institutions we have no guaranties, and the Cuban people have no guarantees, that any minor economic opening is going to lead to anything else.  We know that they want change.  Mark talked about it.  Chris talked about it.  Everybody has talked about the fact that the Cuban people want change.  But they also recognize that in order to see that change, in order to see those changes, we cannot turn a blind eye to political reform being right up there with economic opportunities for the people.  What is [indiscernible] in that regard?  I think everybody has alluded to it--due process of law and democratic institutions.  I m not going to--you know, I had all these notes of things that I wanted to cover; it has basically been covered.  My colleagues have addressed it.  We have talked about how all of these interplay together but at the end of the day we just always need to remember. If there is one message that I can convey from Senator Martinez s standpoint, political change is the first thing that we need to see in Cuba.  We need to see a commitment from that government to actually change its ways for the benefit of the Cuban people.  Once we see that, then we continue the discussion.  Thank you.  Roger F. Noriega:  Thank you very much.  Thank you very much, Nilda, for a very precise presentation.  Dan Erikson is a senior associate for U.S. policy and director of Caribbean programs at the Inter-American dialogue, where his work focuses on U.S. foreign policy challenges in the region.  His articles have appeared in The Brown Journal of World Affairs, Cuba in Transition, Current History, the Journal of Democracy, the L.A. Times, the Miami Herald, the National Interest, and other obscure publications like The Washington Post.  He is coeditor of Transforming Socialist Economies: Lessons for Cuba and Beyond, a 2005 publication.  Mr. Erikson frequently speaks on radio and television, and is often cited by U.S. and international press.  He has been a contributor to our private discussions, and an important contributor to our private discussions on this very subject, and has agreed to help us here this morning.  His past positions include research associate at Harvard Business School and Fulbright scholar in U.S.-Mexican business relations.  Dan?  Daniel Erikson:  Great.  Thank you very much, Roger.  I want to join the panel in thanking you for bringing these discussions together and also Meg Davy who played an important role here at AEI.  And while you were in the government, we had the pleasure of hosting you several times in Inter-American dialogue.  So I m happy to be here today and also, I m happy to be an honorary freedom man.  I should, in the interest of full disclosure say that the Inter-American dialogue has a [audio glitch] policy position on Cuba.  It was formulated long before I arrived at the dialogue in 1992.  We had a task force chaired by Elliot Richardson and Oscar Arias, who came up with a policy proposal of eliminating barriers to communication exchange, travel, et cetera, between the U.S. and Cuba and having the trading and investment embargo be a subject of discussion between the two governments.  That was about sixteen years ago that that was originated, so we are halfway through the thirty years that were alluded to earlier.  But my role here today really is not to discuss U.S. policy, but I think I earned my seat on the panel by editing the book that Roger mentioned on Transforming Socialist Economies: Lessons for Cuba and Beyond, and trying to tease out what the situation is with the Cuban economy today and also what can be learned from other transition experiences.  The book that I worked on and co-edited with Javed Burki who is a former vice president for Latin America at the World Bank, and also directed the World Bank s affairs in China for many years, reviewed transition experiences in Russia, Eastern Europe, China, Vietnam, and the Central Asian Republics.  And we try to really examine this debate that exists in economic circles around shock therapy as is described where there is really a radical restructuring of institutions to move towards a market economy, which is what happened in Russia and Eastern Europe.  Then a more gradual approach which is described typically as market socialism.  Or these days the shorthand is the China model, although China and Vietnam practice very similar models.  The first thing that should be pointed out is after the collapse of the Soviet Union, the Cuban economy basically collapsed as well.  The GDP shrunk by one-third, and Cuba entered what Fidel Castro called a special period and a time of peace.  We often say that Cubans feel like they have had the shock without the therapy.  While today the Cuban economy fifteen to sixteen years later has perhaps matched more or less the GDP levels what it was in 1989, if you look at the status of the individual and how individuals live in Cuba, most independent economists there suggest that the current standard of living is about half of what it was in 1989 in terms of access to food, basic services, in terms of health and education, and so forth.  Now, today Cuban officials estimate made around 10 to 12 percent rate of growth where they factor in a lot of social issues as well; a lot of people go to these numbers and decide they do not make much sense.  However, most outside analysts from the economic intelligence unit and elsewhere estimate around a 6 or 7 percent rate of growth in the Cuban economy.  However, most of this growth rate is really based on the oil-for-doctors swap with Venezuela, which has been alluded to earlier, and also mineral trade with China.  Cuba has really done very little to increase the productive capacity of the economy or of the Cuban people.  It has been about eighteen months since Raul Castro took over in July of 2006.  Since then he has alluded several times to economic reform, opening up a debate on the economy, and so on.  But on a practical level we have just seen very, very few policy changes.  There is really almost nothing to suggest that Cuba is moving towards economic reform at this point.  With that as a backdrop, let me just go over some of the top lessons that we saw from other countries in transition.  Beginning with Russia, Russia is really, of course, the most interesting and dramatic case because you had the Soviet super power for almost seventy years collapse almost overnight in early 1990s and moved towards a form of capitalism that was often described as Wild-West capitalism.  There was rampant asset stripping of state-owned enterprises; you had high-level officials known as the nomenklatura who basically used their positions in government to secure privileged positions and sweet spots in newly privatized industries as you did not really see a full privatization process.  I was pleased earlier when Paul Bonicelli spoke to the issue of transparency and needing to have--when you do privatize as transparent and open a process as possible.  In Russia, many ordinary citizens were simply shut out of the process, and I think almost everyone agrees that whatever type of privatization process Cuba experiences, that there are many lessons from Russia that should be avoided.  Joe Stiglitz of the World Bank, or formerly of the World Bank, noted that during Russia s privatization a few friends and associates of Yeltsin became billionaires, yet the country was unable to pay its pensioners around $15 a month.  And, of course, that really eroded public support for the transition as well.  You also had fraying social safety nets and a sharp decline in life expectancy.  And today, of course, if you look at the political dividend, you see Putin really moving towards a return to authoritarianism.  So Russia, which might have potentially been seen as a model several years ago, really is not so much one today.  Now we move on to Eastern Europe.  I think you have a much more promising set of circumstances.  In the Eastern European countries, the region s GDP dropped initially by 15 percent as opposed to about 50 percent in Russia.  They experienced a shorter economic decline of about three to four years.  Still, there are really divergent paths followed within the Eastern European countries.  The star performers are the Czech Republic, Hungary, and Poland who moved to quickly liberalize their economies, dropped price controls, and managed to attract millions in foreign direct investment, which also came with foreign expertise and know-how that really helped them to get their economies on the right track very quickly.  You also had several laggards in the eastern European group; Bulgaria, Romania, Slovakia, and the former Yugoslavia, are all countries where they proceeded much more slowly and, in part, because there was some of this residual affection for Communism, which Roger referred to at the beginning of the talk today.  Also, corruption was an important factor and the reality is in almost all of these countries there is a greater amount of incidences of reported corruption during transition.  However, this is also due to a greater expansion of freedom of the press, greater political actors because, obviously, corruption was so endemic under the old Communist model.  And this is something that needs to be paid attention to in the future.  The central Asian republics was another group of countries we looked at, including Kazakhstan, Turkistan, Uzbekistan, Tajikistan, and Turkmenistan.  I will not dwell too long on those.  They are interesting for Cuba in two respects.  One is that these are the countries that were most closely tied, other than Cuba, to the fate of the Soviet Union.  And so they experienced a very severe drop in economic output.  And the second is they really show a wide range of paths away from the top-down Communist model, some of them more positive and others more negative.  You have Kazakhstan and Turkistan that embrace some economic reform and managed to move their economies ahead.  Uzbekistan pursued a mixed model, where it retained some of its old policies but had a more gradual approach.  Then Tajikistan nearly collapsed into civil war, and Turkmenistan that continued an almost Soviet-like dictatorship.  So there is a wide array of issues that occurred there.  And then moving on to China and Vietnam, both China and Vietnam really began economic reforms as small steps in the agricultural sector.  And then they engaged in a deliberate economic reform process set up by the leadership.  In Vietnam, it is known by the term Doi Moi.  They both, as part of their reform process, normalized relations with the United States and joined the IMF and World Bank.  In the case of China, which joined in 1980 or normalized relations in the case of Vietnam in 1994, which the Republic of Vietnam had actually been a World Bank-IMF member in the 1950s.  And then that relationship froze basically during and after the Vietnam War until 1994.  However, I think, as Nilda and others have pointed out, the China and Vietnam model does not say much for political liberalization.  These have basically been an example of Communist parties trying to maintain their control through creating some environment for economic growth, while at the same time balancing the mix of political factors that allows a single party to remain dominant.  And so while there is a great argument at the time and now--obviously, the United States has fully normalized economic ties with China and a lot of those decisions were made talking about the need to bring information to the Chinese people and to help liberalize other political system over time.  It looks like it will be a long, long wait.  In any case, both China and Vietnam just have dramatically different internal and external environments than Cuba.  And it strikes me as very unlikely that the Chinese model would be successful in Cuba, or that the Cubans really show much interest in pursuing, frankly.  Many people would say that if China is a ten-step model, Cuba is at half a step on the ladder and is trying to step down, not up.  So to just conclude--I do not want to go on too long and leave time for questions--I think that when you look towards economic reform in Cuba, it is clear that Cubans need less shock and more therapy.  I think there are several common lessons that we have drawn out from other countries that have undergone different forms of economic transition.  The first is the restoration of property rights, which ties into the rule of law.  Property rights are absolutely essential for free market economy; it will be essential for Cuba in the future.  And the reality is that any attempt to have a socialist or socialized system of property simply does not work.  The privatization process needs to be as transparent, equitable, and fair as possible.  And that really means letting the average ordinary Cuban citizen find a mechanism to buy into this privatization process so you do not end up with a Cuban version of nomenklatura, basically seizing state-owned enterprises during a transition period.  Social policy needs to be sustained and built on, particularly, because this is one of the things that many people in communist or socialist systems tend to value, even if they value it more than what the services actually deliver.  I think that in the case of Cuba we have a system--what is admittedly a fairly weak social system collapses that will undermine support for the transition.  Unbalanced countries that have more linkages with the West tended to fare better in their transitions; if you look at the countries in eastern Europe that did the best, they tended to be the Czech Republics, the Polands.  And if you look at the ones that did the worst it tends to be not only Romania but you could move on to the Central Asian republics like Turkistan, Kazakhstan, et cetera, which really has not worked that well.  The next lesson is institutions do matter.  There are some institutions from a social system that can be transformed to manage market reforms and others that cannot.  And so there really needs to be decisions about which institutions should be dismantled and which institutions can be kept or somehow modified, but without either trying to keep them all because they are not all going to work and some will be true obstacles.  Or, conversely, get rid of them all because there are some that can be very helpful through a transition period.  And then the last thing that I think is important to point out--and particularly, when you talk about economic reform in Cuba there is this great temptation that we all indulge in and I have indulged into--compared Cuba to countries that are really very far away from its environment; you start to look at the Chinas, the Vietnams, the Czech Republics, the Polands.  And the Cuban economy is going to have a Caribbean future.  This is going to be a future that relies greatly on tourism, probably some light manufacturing, perhaps some mining; it will be largely a service economy.  Sometimes, I think the debate should not be Poland versus Vietnam but Jamaica versus the Dominican Republic when you look at the economic prospects Cuba will have in the future.  So I will end there.  Thank you.  Roger Noriega:  Well, thank you very much.  You made very effective use of your time there, Dan, and I appreciate that very much.  We are going to go to questions.  This gentleman right here.  Frank Fletcher:  Yes, Frank Fletcher.  Thank you very much.  I do research in the private sector.  I have two questions for George Dunlop and Mr. Erikson.  Micro credit--I was thinking of things like sewing machines and other things so people can start producing clothes; that is a very practical thing.  But how do you avoid people using the micro credit for consumption of consumer goods that maybe are not really essential but they would really like to have, like televisions and things like that, it being wasted?  And then for Mr. Erikson or anyone else who would like to comment, what is the role that you found of the former security services?  We know in Russia the KGB, though not called that, is still very strong; perhaps in Poland they will marginalize those people.  I do not know what it would be like in Cuba, but I do not think they would go away.  George Dunlop:  Well, in terms of the micro credits or other types of small business lending, you have to be careful I guess in your definitions and know what you are doing.  I suppose you could open credit windows that would lend money to people to buy televisions and stuff, but that is not what micro finance or cooperativa-type in South America is all about. Basically, a micro loan as differentiated from any other kind of loan is perceived to be in the lexicon of it and all the institutions that exist to support it as an uncollateralized business loan.  I mean, it is intended to be for the establishment of business.  You mentioned sewing machines and stuff; I mentioned high-tech, low-input potable water systems, whatever it is, that somebody can provide a useful good and services, they would be getting a business loan.  And the concept is that if they get a relatively small loan as their portal loan and they pay that within a reasonable period of time, whatever the terms of the loan is, well, then they can get a second loan and then a third loan.  And therefore, they can expand their business or expand their enterprises.  And if they do not pay their loans, well, then that credit window is shut to them.  And so, actually, most people in the Third World that are--there are probably about 100 million of these micro loans out extant right now; there are more than 10,000 microfinance and cooperativa institutions in South America and Central America alone.  You find that these people who are a good credit risk for a business loan, other people might perceive that they are good credit risk for a commercial loan.  So you are not necessarily restricted in a growing economy to just one type of thing.  The reason that the performance rate on these micro loans is so high is that people know that if they can get a loan like this, they can double their income.  Double their income?  Now, they are still poor people; do not get me wrong.  But double their income?  Now my kids can go to school because they can afford a uniform.  Or now I do not have to live in a wicker house; I can live in a house that has got a tin roof under it or something.  Or now I can have access to potable water and I will not be sick all the time.  So these loans as business loans, I think, create employment for them and their family and everything else, greatly increase their productivity.  But most important for a growing economy, they supply goods and services.  And as we know, or at least the supply-siders among us know, that supply creates demand, not the other way around.  The Keynesians are wrong; Reagan was right.  And if we can create more supply of goods and services that people need at the local bottom-up indigenous level, this sets forth an enterprise mania that takes place and everybody wants to participate in that stuff.  And I guarantee you sooner or later those folks are going to start buying TVs and air conditioners and other stuff, too.  But, first, they will repay their micro loans so they can get another one.  Daniel Erikson:  Thank you.  That is an excellent question.  I think that in security service, I m also going to include just a couple of comments on the military.  I think one thing that we have seen in Cuba, certainly, is the military playing an increasing role in the economy in ways that have been both for I guess you could say positive and negative reasons.  I mean the negative reason is, basically, they want most of the state-owned enterprises to be controlled by officials there as close to the regime as possible.  And so that is where you see a big transition in recent years for ministries that used to be under civilian people into the military.  And then the second reason is that Cuba is not a country that has a great deal of managerial talent.  One of the few institutions that has shown some minimal capacity to manage has been the military.  And I think that when you look at Cuba in the future or even some of these other governments that we have discussed, how to manage the military and how to manage the security services is a huge problem.  And it is not just an economic problem but a political one because on the one hand, there is a need to sustain some level of social peace.  And there have been policies--de-Baathification is one you could set forward in Iraq, for example--which people have debated the wisdom of afterwards.  But at the same time, obviously, you have the military that has been in many cases the perpetrator of abuse within the government.  And I think that the best way to echo some words that were left earlier is the best way to probably manage this problem is to leave it in the hands of the Cuban people in the sense that if there is a way to really enable the country to push along more fully to the rule of law and try to build up accountability within the Cuban system itself, that might help resolve the problem.  I mean one very interesting case is, of course, the one of Augusto Pinochet in Chile who, initially, when he stepped down from power in 1990, was granted all sorts of immunities and amnesties and protections.  And then as he lived on and on and Chile became more and more a democratic society, he saw many of these being stripped away and ultimately was brought to some sort of legal rendering.  And so that is something to keep in mind with Cuba as well that this is probably going to be a long term issue that will be resolved over years, not months.  Nilda Pedrosa:  I just have one quick comment.  I know George addressed kind of the broader aspect of micro credit.  But, Frank, to go to your question in Cuba right now, honestly in terms of making that decision between the sewing machine or the television, the Cuban people do not have either and those things are not available to them.  So that is the short and easy answer.  When we talk about micro credit opportunities, we need to talk about them once we see political change.  Thanks.  Paul Bonicelli:  No.  I think George aptly described microfinance, micro credit; it is very much as a development activity, a grassroots bottom-up activity.  But at the risk of people, maybe, misunderstanding what USAID is up to and has been doing, I do not think there is so much disagreement between what George said and I said, as this chance of misunderstanding.  Microfinance and micro credit is so prevalent and successful as it is today in large measure because the U.S. government through USAID has promoted it.  This is something that has been due to--when Roger and Kaila [phonetic] and I were in Congress, working for Congress--I should be quite clear--we were--we all lost our elections.  We were very much a part of this, pushing this through legislation to be sure that more of this was done in our government.  And it has been a tremendously successful activity, something that would be combined with everything else to get at all sectors.  Because the key would be the freedom of the individual in Cuba; that they should have not only to vote, to speak their mind, but to engage in whatever economic activity they want to.  Frankly, waste their money and buy TV if they really need a sewing machine--that would be their privilege; I would highly doubt that is what would happen, though.  I think they would be as industrious as you can imagine. One thing that relates to that--I want to underscore and emphasize what Nilda said.  I could not agree more.  The charter itself says that it is impossible to contemplate democracy as it should be had for the people of the hemisphere without economic liberty going hand in hand.   They are interdependent, they require each other, and that is something that we are moving our government more and more to in emphasizing, particularly, in our development organization.  Roger Noriega:  Great.  Thank you very much.  Let s go to the lady right there.  Female Voice:  Yeah.  I refer to what Mr. Dunlop said about what one could do for a failed state.  I know you said it does not apply to Cuba.  What I would like to ask all of you--whether you consider Cuba as a failed state or you are rather worried that it may become a failed state at the end of the present regime?  George Dunlop:  Well, let me address just the doctrine about that a second.  Because if one thinks about it a moment, when we talk about failed states we talk about states that are inherently unstable.  Would that be a fair--you know, from our perspective, at least from the Defense Department, the Department of the Army, we are concerned about bad guys taking over failed states that would then use the apparatus of these states to cause harm, such as Hugo Chavez and other people like that are doing now.  The very definition of instability is the Soviet top-down Communist system.  I mean, if you look at Iraq Saddam deliberately developed the government of Iraq to be a model of the Communist and the National Socialist systems.  He was a great admirer of Adolf Hitler and a great admirer of Joseph Stalin, and all of that ilk.  And by definition, these regimes are unstable.  Saddam had to employ murderous gangs; Hitler had to employ a Gestapo; Stalin had 10,000 Gulags; Mao had to murder 63 million people; Castro has got his version of these Gulags operating now.  So by definition, any of these states like this are inherently unstable or they would need to have these massive security apparatuses and other things we have heard about today to maintain their governance of their population.  Paul Bonicelli:  As a recovering academic, I m aware of the academic definition of failed state.  And, technically, Cuba is not because it controls its territory.  It is able to withstand lots of threats it might receive in the regions; certainly not all of threats it could receive in the region should it come to that.  But it is--as far as development work is concerned--as far as its neighbors are concerned, all of what George has said is exactly right.  When the right straw is laid on the camel s back then there is collapse and all the problems that you would have with any failed state such as Liberia, states in Asia, Africa, or Latin America that have been dealt with.  Catherine Shiffler:  Hi, my name is Catherine Shiffler.  I m with Marketplace.  I was wondering if anybody on the panel would like to comment about the upcoming elections in Cuba of the Council of State and if there are any predictions or best-case scenarios for the U.S.  Roger Noriega:  I think real clear politics has a page on this and Castro is at 99.9 percent.  Paul Bonicelli:  The chart is up.  Roger Noriega:  The chart is with the bullet, but I think this is short shrift.  Daniel Erikson:  Yeah, I mean, I could I jump in and I think--I mean it is very hard to say much about the elections.  I mean, obviously, there is very little competition; most people are selected on the basis of the loyalty to Communist party.  The one maybe interesting thing to watch is, obviously, what is happening with Fidel Castro.  I mean, he said a couple of times, I m going to pass on to the younger generation.   Then he was renominated to his seat from the Santiago district in the eastern Cuba.  He is obviously going to be on the ballot and in the national assembly again, and it is from that pool of people that you pick the president of Cuba.  And so I think if I were you I would probably pay less attention to January and more attention to March.  When the National Assembly meets it is going to set, perhaps, a new group of ministers.  There may be the same role as head of, basically, everything for Fidel Castro or there may be some division of labor.  And if there is anything interesting to merge out of that process, that is going to be in March.  Roger Noriega:  I would just comment that if Castro--it will be significant if Castro runs a more vigorous campaign than Fred Thompson.  So watch for those indicators.  Up here, please.  The last comment is off the record.  Male Voice:  [Indiscernible] I have a question on the economic freedom, sort of, aspect of all of this.  And the goal that we have seen around the world is to move countries towards--and help countries to move themselves towards a functioning market economy.  Now, people talk about market economy very readily without really talking about what you need in order to have a functioning market economy.  And that really is three things: It is really protection of property rights; it is trade liberalized open trade regime, and primarily and perhaps most importantly, an internally competitive market i.e. an absence of government distortions and absence of market distortions.  What we have seen in Russia--you talked about, Dan, the Russian example--what you saw in Russia was the absence of that and it is the absence of that that they gave rise to the oligarchic power that was exercised by those who essentially corrupted the privatization process.  So what you want is the privatization but you also want competition.  So in that context, how do you apply that in a Cuban environment and what do you see--assuming that we go forward with some measure of political freedom, how do you see that playing out in a country like Cuba?  George Dunlop:  If I may just address that very quickly in a generic sense--and that is that, you know, because of the need to address the issue of exactly what you are asking a question and not applied to Cuba.  But what I did, I went and I looked just at all the recent literature that has been published about what have governments done for thirty or forty years to address the exactly what?   And the testimony of almost all the new publications--these have all been published in the past year, six months--The White Man s Burden: Why The West s Efforts to Aid The Rest Have Done So Much Ill and So Little Good; The Bottom Billion: Why The Poorest Countries Are Failing and What Can Be Done About It; The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, and Stuart Hart s book, Capitalism at the Crossroads: The Unlimited Business Opportunities in Serving the World s Most Difficult Problems.  And of course, the great grandpappy of all the intellectual thought on all these, Hernando de Soto [audio glitch] Paul Bonicelli:  [Audio glitch] put on the map by USAID, supported by the USAID for 12 years. George Dunlop:  Indeed.  And what I m saying is that the testimony of all of this is that almost everything that every institution of government--with all respect--I mean, you know, I do not pick fights with people--is top-down, focused on government driving decisions.  And the testimony of all these books--not only the U.S. government, the World Bank, and the United Nations, and every other group of people who seemed to work for governments is that they do it wrong.  And these people are saying, It has got to be bottom-up; it has got to be in the communities, in the villages, in the individuals, in the enterprise creation.  And if you focus on empowering, in provisioning capital to the people at the bottom of the pyramid, you will unleash an economic prosperity and growth that will be absolutely astounding.   Now, that is a general answer; I do not know how that would apply specifically to Cuba.  But, for heaven s sakes, let s take the testimony of the people of the very recent past and address these questions that way and maybe pay a little bit less attention to the longer-term stuff.  Somebody needs to be thinking about, But it is not going to happen in the first six months or the first twelve months because it takes longer than that to put in these macro things.   Let s start empowering the people at the bottom of the pyramid. Paul Bonicelli:  I think your comment and question are right on, obviously, because we had talked earlier about economic liberty and political liberty.  For us, they are indivisible.  And Hernando De Soto, especially, is one that has been supported very much so.  His ideas represent I would say half of the people who do economic growth at USAID; the rest fall differently on the spectrum, if you will.  Mr. Easterly is one that I think several of them--gosh, this is hard for a conservative Republican.  I tend to agree with them largely, except for one thing:  I have not seen them around USAID doing research one-on-one finding out exactly what is going on.  It is not your grandfather s USAID and this is not a plea or an apology for USAID; it is the entire U.S. government s attitude and approach is very different.  Again, since the late 1990s when several of us were involved in this there has been a fundamental difference in attitude by those who are looking at it, especially if you compare a previous--both Democrat and Republican administrations to the last six years.  The future--if those of us who think that way--can achieve it will be strategy and policy documents that are very clear;  nothing is sustainable  unless it is based on good governance and good governance does not exist unless it is democratic.  And it is a bigger definition of democracy as you pointed out.  It is more than elections; it is about property rights; it is about freedom to engage in the market, quite generally.  So in general I m in very much agreement with that.  I think both have to be done--the long term, the short term.  And without revealing things that I m not supposed to regarding our preparation should we be asked by the Cuban people to help, there is no shortage of those in the inter-agency that are involved in this from every angle, from top-down, from bottom- up.  It is as whole as it can possibly be--every department, every agency. Roger Noriega:  That was a very able answer, Paul.  And an easier one might have been to point out that the person that you acknowledged as a central contributor on the Cuba picture within AID, Juan Belt, always wears an Adam Smith tie.  So you two need to get together because I think you will feel a little bit better.  Please, up front here.  I should ask one to stand up and show everybody -- Male Voice:  Please do. Roger Noriega:  He has got his Adam Smith tie. I do not know whether he is just cheap and does not want to buy another tie or -- Nadia Martinez:  Good morning.  Nadia Martinez from the Institute for Policy Studies.  I have two questions, one for Ms. Pedrosa who mentioned--both of you actually talked about China but, specifically, for Ms. Pedrosa about China not having the kinds of political reforms that you would expect to see from economic reforms.  And so, would you and, by extension, Senator Martinez advocate for disengagement with China economically because of that, until we see political reforms happen there? And, secondly, for anybody on the panel, I have a feeling that we talked to different people but when I talked to people in Latin America, I hear that the region is worse off today economically than it was twenty-five years ago.  After twenty-five years of economic reforms of the types that you are advocating here for Cuba, inequality has grown to the levels that--it has made Latin America the most unequal region in the world in terms of the gap between the rich and poor.  And a lot of the conditions that people, I think, associate those conditions with very favored or backed U.S. policy in the region for the last twenty-five years.  So as a result, the likeability of the U.S. is at an all-time low in Latin America; I m sure that you know that.  Therefore, the discourse and the kind of anti-U.S. positions of people like Hugo Chavez and Morales and Correa and even Kirchener and Lula and just--I mean, should I keep going?  What do you foresee then or who do you foresee are going to be your allies in carrying out the kinds of very traditional reforms that you are calling for in Cuba were there a space in the future for you to implement those? Paul Bonicelli:  I am going to do my best to speak as Paul the professor here.  I m not trying to speak for USAID, although I think USAID agrees with me because I try to be the voice of USAID when it is Latin America and the Caribbean.  Twenty-five years of economic reform have failed is not a sentence that has a lot of support to me in the sense that I think you mean economic reform, meaning capitalism or liberty.  I do not think liberty has been tried in Latin America for twenty-five years; I do not think capitalism has been tried.  I would point people to Alvaro Vargas Llosa, people like that who have been talking about nothing has really changed for 400 years; it is still the masses are left out while we just change up who the elites are at any given moment, including elites as I think what the Chavez movement represents; it is a new set of elites who are running everything, while everybody is still left out.  So if that is what is meant by twenty-five years of economic reform have failed, I would say, yeah, they failed because they were not really based on liberty; they were not really based on economic freedom. Roger Noriega:  I m writing a paper right now and I wish I had it with me.  I would hand you a copy of it and, actually, I finished the paper, thank God, finally.  But I would agree wholeheartedly with this; you know, I m really weary of Latin Americans blaming all of their problems on us.  Because an essential ingredient is the rule of law and a manifestation of the lack of that is corruption.  Corruption takes many forms, not the least of which--perhaps the most important--which is state-sponsored privilege.  In that regard, the same elites who take a dim view of the United States--truly breaking my heart--are the ones who are propagating this interest, these entrenched interests in Latin America.  So they will see the benefits of capitalism when they try it and give up their state-sponsored privilege.  I think the prescriptions that have been enunciated here for Cuba really need to be tried in some of the other economies in the region.  But I just am really concerned that the lessons have not been learned.  There are people complaining in Latin America that we do not pay attention to the region.  I think they need to pay attention to us, which is how do you have a successful economy.  The essential elements--representative government, the rule of law, independent courts--all of these things that are too, too weak in the region now.  That does not mean I want to cut them loose and not help them perfect these institutions but they first have to admit that the solutions have to be homegrown, not imposed by Washington or, least of all, the IMF.  But we are willing to be good partners where the engine of growth--and have been and are and probably will continue to be.  We have taken 10 percent of Mexico s labor force off their hands.  The largest source of foreign capital that a lot of these countries have is from the United States, people that are working here.  But putting that capital to work for the interest of most of their people is something that requires institutional change that countries can only adopt for themselves.  So when they recognize that they can work themselves out of this conundrum.  I know that is precisely the kind of thing that makes the United States unpopular, is when people like me say what I just said.  But, again, I have no trouble sleeping nights.  Did you remember the question on China?  Nilda Pedrosa:  I do.  Roger Noriega:  Oh, yes.  Yeah, that is --  Nilda Pedrosa:  Thank you.  With China, the only thing that I m going to comment on is the reason we use it as an example and the reason we talk about it is because we had an opportunity with China and we missed that.  I m not going to get into any advocating or anything on behalf of the Senator, or myself.  I think our positions on all of these issues are very clear.  Actually, that is all I m going to add on that.  Thanks.  Paul Bonicelli:  And this is not to advocate any change in anything, but I m always amazed and have been, since I was in graduate school and a professor--is when people bring that up, I never hear them explain to me all the ways in which Fidel Castro has prepared himself to be Deng Xiao Ping.  It is apples and oranges, so I do not understand why that is always brought up as, See, there you have it.  It would fix it.  Roger Noriega:  We have time for one more question.  We really do not but if somebody is--oh, yes, sir.  And just very briefly because you are on everybody else s time here.  George Montalvan:  Yeah.  I do not think that the panel answered the lady s question.  You challenged the premise but I think that her question, if I interpret it correctly is--I will put it in my phrase:  If the United States standing in Latin America at present is not good, then how does the United States expect to get support for its policies in a Cuban transition?  I mean that is the interpretation that we made, not the standing of the United States.  Paul Bonicelli:  Well, there seems to be an assumption that what leaders like Chavez say represent the opinion of everyone in detail, and I do not agree with that at all.  Secondly, I just think there is no way to know what Cuban people will think.  People in Cuba will think about anything that U.S. does because, number one, they are not free to talk about it, period.  Two, we have no idea what we are going to do because we have not been asked to do anything.  So I think it is a very difficult question to answer.  If I had to guess, my heart would say as a universalist all people want to be free.  Cuban people will like what they hear about freedom that will be extolled, hopefully, by democratic government in Cuba and people would want to support that.  Roger Noriega:  Well, thank you very much.  I want to acknowledge our panel s contribution and I think, you offered your excellent questions and your attendance.  Take care. 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