MLB, FCB Announce Posting System to “End Dangerous Trafficking”

JohnWallStreet

Major League Baseball (and the MLBPA) has inked a deal with the Cuban Baseball Federation (FCB) that will “end the dangerous trafficking of Cuban players who desire to play professional baseball in the United States” and provide those players with a regulated and streamlined path to playing in the big leagues; historically, Cuban players had been forced to defect to the United States to sign with a MLB team. The pact pertains to any player at least 25 years of age with 6+ years of service in the FCB. In exchange, the agreement ensures the FCB will be fiscally compensated for Cuban players that opt to sign MLB contracts; between 15-20% of the MLB contract value for players signing major league contracts and 25% for those signing minor league deals. Under the terms of the agreement, Cuban players signed from the communist Caribbean island would receive U.S. work visas subject to government approval.

Howie Long-Short: Financially speaking, Thursday’s announcement doesn’t impact contract negotiations between MLB clubs and Cuban players, it simply requires MLB teams to pay the FCB the 15-25% “release fee” for the player’s services on top of any money owed to the player. It will result in a nice raise for the Cuban player, though; historically he’d pay a “big chunk of his bonus to pay for his passage out of Cuba.”

MLB teams won’t love paying millions on top of the player's contract to sign top-tier talent from Cuba (they had been paying nothing), but they won’t be pushing kids to defect in hopes of saving a few million sheckles either; attempts to defect to another country and then sign with a MLB club could delay the player’s arrival by 2 years and MLB teams would still hold the obligation to pay the player’s release fee.

Back in ’13 the Cuban government announced it would allow players to sign contracts with international leagues, but the United States’ long-held Cuban embargo meant that MLB wasn’t among the options. MLB tried to change that during the final days of the Obama administration when it applied for and received licensure (which remains valid) from the Office of Foreign Assets Control of the Treasury Department to negotiate a posting system with the FCB, but Trump’s election and his decision to tighten sanctions put plans for the partnership on hold. While Thursday’s news has been celebrated as a landmark agreement between the U.S. and Cuban baseball leagues, the excitement may be premature; the Trump administration opposes any agreements that would aid the “Cuban regime’s ability to profit from U.S. business” and insists Cuban players will still need to travel to a 3rd country to apply for a U.S. visa.

Fan Marino: Cuban-born players with MLB ambitions have long been forced to face an “unimaginable fate” to fulfill their dreams. Those that have made it have told stories of being threatened, extorted and kidnapped along the way. Among the most astonishing, Dodgers Star Yasiel Puig was held captive for 2+ weeks by smugglers affiliated with infamous Los Zetas cartel. The newly announced agreement makes it both easier and safer for Cubans to compete in MLB.

I had the chance to connect with Vince Gennaro, the Associate Dean of the NYU Tisch Institute for Global Sport, the author of Diamond Dollars: The Economics of Winning in Baseball and the host of a weekly radio show on SiriusXM (Behind the Numbers: Baseball SABR Style) to ask him how the deal will impact MLB on the field?

Vince: The posting process should create "liquidity", i.e., reduce friction for the free flow of talent. Simply put, the level of talent in MLB should rise. Perhaps by a small amount, but it is destined to rise via a more fluid labor market. This will help re-allocate talent from Cuba to the market that is most capable and willing to pay for it--the US.

Major League Baseball is motivated by the deal’s humanitarian benefits (see: end human smuggling/trafficking) but it’s worth wondering what the FCB’s long-term vision is as it relates to this partnership? As Vince Gennaro explained, the deal enables the FCB to monetize the development of talent. To the extent, they have 5 or 10 highly talented six-year players each year, they can make a profit from "harvesting" and developing this talent. I would expect the Cuban baseball infrastructure to put additional energy into producing and developing elite talent, since there is a tangible ROI for doing so. A $40 million player like Puig (signed a 7-year $42 million) would generate $7.625 million in fees to the FCB.

Fun Fact: Rusney Castillo’s 7-year $72.4 million deal is the largest contract ever awarded by a MLB team to a Cuban born player.

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