The Cuban Free Agent Bubble is Ready to Burst

Cuba is a curiosity for most Americans. Located just 90 miles off the coast of Florida, it has been off-limits to American visitors since 1960 when Fidel Castro started to enact his oppressive policies. For Cuban-Americans and Cuban refugees, it is a place of sadness. A place that they love dearly in their hearts, but can’t stand to see being mistreated.

America is still the Land of Opportunity, so Cubans try all sorts of methods to gain entry into the country. Some try to get here on rickety boats during that harrowing 90 mile journey. Others, especially Cuban baseball players, defect through shady backchannels. Cuban baseball player defections are almost course de rigueur at this point, as if someone just happens to turn a blind eye during one of these exhibition series that Cuba plays throughout the world. But other times, as in the case of L.A. Dodger Yasiel Puig, the journey is fraught with danger and threats from getting in the grips of gangsters willing to transport players in return for an exorbitant fee.

Starting about fifteen years ago, Japan was the hot area to procure exotic, unproven talent. Exports such as Ichiro Suzuki, Daisuke Matsuzaka, Hideki Matsui, Tad Iguchi, and Kaz Matsui were just some of the names that teams were clamoring to get on their teams and follow in the footsteps of Japanese pioneer, Hideo Nomo. But now it seems as if the hype has died down. Sure, there’s always that one guy like Masahiro Tanaka with the Yankees last year and Kenta Maeda this year that will generate a bidding war, but some costly flops in recent years seems to have cooled the market.

Now, in an effort to exploit any possible angle to procure talent, the international attention seems to have turned to Cuba. The new Collective Bargaining Agreement that started in July 2012 (for international spending) has implemented a $2.9M international spending pool for all talent not subject to the June draft, which is any country besides the U.S., Canada, and Puerto Rico. There are penalties for exceeding the pool in any given year in the form of additional taxes and inability to sign a player over a certain amount in the following year. Many teams blissfully ignore these penalties, sign who they want, pay the overages, and sit out the big signing game for a year. The key age, though, is talent that is older than 23 is exempt from the international spending pool.

Here’s a table of current Cuban players that were signed as free agent/defectors from Cuba, in chronological order:

Name	Team	Years	Total Value	Date Signed	Age at Signing	Notes
Yasmany Tomas	Diamondbacks	6	$68.5M	Nov 2014	24
Roberto Baldoquin	Angels		$8M bonus	Nov 2014	20
Rusney Castillo	Red Sox	7	$72.5M	Aug 2014	27
Raisel Iglesias	Reds	7	$27M	Jun 2014	24
Daniel Carbonell	Giants	4	$1.4M	Jun 2014	23
Odrisamer Despaigne	Padres		$1M bonus	May 2014	27	*minor league deal
Aledmys Diaz	Cardinals	4	$8M	Mar 2014	24
Erisbel Arruebarruena	Dodgers	5	$25M	Feb 2014	24
Alexander Guerrero	Dodgers	4	$28M	Oct 2013	27
Jose Abreu	White Sox	6	$68M	Oct 2013	26
Miguel Gonzalez	Phillies	3	$12M	Aug 2013	27
Dariel Alvarez	Orioles		$0.8M bonus	July 2013	24	*minor league deal
Henry Urrutia	Orioles		$0.78M bonus	July 2012	25	*minor league deal
July 1st, 2012 Date of New Spending Pool for Under-23 talent
Yasiel Puig	Dodgers	7	$42M	Jun 2012	21
Jorge Soler	Cubs	9	$30M	Jun 2012	20
Gerardo Concepcion	Cubs	5	$6M	Mar 2012	20	*off 40 man roster
Yoenis Cespedes	Red Sox (A’s)	4	$36M	Feb 2012	26
Leonys Martin	Rangers	5	$15.5M	May 2011	23
Roenis Elias	Mariners			May 2011	23	*unknown bonus
Adeiny Hechavarria	Marlins (Blue Jays)	4	$10M	April 2010	21
Noel Arguelles	Royals	5	$7M	Jan 2010	20	*outrighted off roster
Aroldis Chapman	Reds	6	$30.25M	Jan 2010	22
Jose Iglesias	Tigers (Red Sox)	4	$8.25M	Sept 2009	19
Dayan Viciedo	White Sox	4	$10M	Dec 2008	19
Alexei Ramirez	White Sox	4	$4.75M	Dec 2007	26
Kendrys Morales	Angels	6	$4.5M	April 2005	22

As you can see from the table, the deals for the players were relatively minor in nature until Aroldis Chapman’s 6 yr/$30.25M deal in January 2012. It was shocking to see the small-market Reds be the ones to get him. In some sense, Chapman is Patient Zero for the outbreak of Cuban salary escalation.

Once the new Collective Bargaining Agreement was signed in November 2011, teams knew that starting on July 1st, 2012 the spending pool of $2.9M (plus/minus based on your record) would be in place. There were three sizeable deals made in the first half of 2012, two involving under-23 talents in Yasiel Puig and Jorge Soler.

The Cuban players are unproven commodities because their league, Serie Nacionale, is naturally in Cuba. Since Americans can’t travel to Cuba, General Managers and their U.S. staffs can’t go scout them. They have to rely on international exhibitions to see them in person. However, in today’s age and with such an emphasis on finding Latin American talent, it’s hard for me to believe that each MLB team doesn’t have an international contact on the payroll that can get access to Cuba to scout each of these players. The same international scouting director (or staff member that is not a U.S. national) that travels to the Dominican Republic, Aruba, and Venezuela can surely go to Cuba as well.

When players signed in 2012, like Cespedes, Puig, and Soler (in the minors) started producing and showing their talents, it didn’t matter how outsized their contracts looked. If you have a player producing above-average offense and defense for $9M/year like Yoenis Cespedes, that’s a steal in today’s salary structure. Puig for $6M/year is a bargain. Soler won’t make more than $4M/year in any year of his original deal.

That brought about an escalation, of sorts, with recent Cuban defectors of note. Each one, starting with Jose Abreu in October 2013, seems to be trying to top the contract set by the previous Cuban. Rusney Castillo and Yasmany Tomas may be better than Abreu, but it’s not likely considering how hyped Abreu was prior to defecting. This seems like an arms race where every team is just trying to get a Cuban, like it’s a status symbol.

Abreu just won the AL Rookie of the Year and appears to be a fixture in the resurgent White Sox lineup. But what if Castillo and Tomas fall flat? Each of those contracts, albeit at bearable annual values, would still be a drag on a team’s payroll — even a payroll such as the Red Sox and Diamondbacks. To some extent, there are already two potential mid-size busts on the Dodgers in the form of Guerrero and Arruebarruena. With Hanley Ramirez gone to the Red Sox, there is a gaping void to fill at shortstop, yet neither of these two has really been whispered about. Even more shocking is that neither of them have been mentioned as trade candidates, unlike other young middle infielders like Didi Gregorious (recently traded to Yankees) and Brad Miller/Chris Taylor (Mariners). Yes, the Dodgers have a massive payroll, but with new GM Andrew Friedman in charge, I suspect they’re looking to trim the bloat somewhat this offseason.

The Angels got into the act by making a curious move in signing Roberto Baldoquin to a cap-shattering $8M bonus. This means that not only do the Angels have to pay the overages above their cap limit (probably $5-6M), but they also can’t sign an international player above $300K for the next two years. Is it worth it for a 5′-10″ 20-year old that seems destined for 2nd base? I suppose if he can slot in for Howie Kendrick after he leaves via free agency after 2015’s season, it would be. At that point, Baldoquin would just be making $500K for the next three years, so the Angels just paid $8M ($14M total, with penalties) for an expensive lottery ticket. To put that in perspective, the $8M bonus for Baldoquin is the same bonus amount the Pirates paid Gerrit Cole when they drafted him 1st overall in 2011.

But the player that may shatter the whole system is Yoan Moncado. The 19-year old infielder, listed at 6′-2″ and 210, is said to be zeroing in on a $30-40M bonus, which would also include probably $25-30M in tax penalties for the signing team. Moncado is said to have plus tools all across the board — power, speed, arm, defense — and can play any infield position. But still…a team is willing to spend upwards of $70M altogether just to find out if he can hack it in MLB?

There’s a very interesting time element to the Moncado story. Not surprisingly, the Yankees, Red Sox, and Cubs are all over Moncado. But the Cubs can’t sign him until July 2nd, 2015 because they won’t be done with their 2-year ban on not signing an international over $300K until then. But that same date is when the Yankees and Red Sox can’t sign any players over $300K for the next two years. Each side of that equation will be tugging at Moncado to sign either before July 2nd or after it. If he wants to get started in the minors in April, he’ll sign early. If he wants to go to the Cubs, he’ll sign later.

But what if Moncado busts? It will be, without a doubt, the most expensive bust in MLB history, as far as talent acquisition goes. Is that a risk worth taking?

There’s an incredible amount of cash floating around MLB right now, thanks to TV deals, and offense is receding around the league so teams are desperate to find it anywhere they can. It just seems like the market is really due for a correction in the near future, though.