Cuban Super-Prospect Moncada Could Shatter Bonus Record

I wrote last week about the most recent high-profile Cuban defector (now a free agent) LF Yasmany Tomas after writing last month about the most-recently-signed high-profile Cuban in Red Sox CF Rusney Castillo. I also wrote earlier this week about the next huge prospect in the July 2nd market, so it only follows that I would tell you about the next potential big name amongst the Cubans.

The most recent news on this front is about 2B Hector Olivera, with news of his defection breaking this week. He’s not a shoo-in to be a huge money guy as he’s already 29 and there’s some concern/uncertainty about a potential blood flow condition in his left arm.

Olivera has a live bat and may still be able to play up the middle in the big leagues, but he hasn’t been scouted in years since he hasn’t played in any international tournaments in that period, the only way MLB teams can see Cuban players in person. If he can clear these medical hurdles, Olivera was seen as one of the best players on the island a few years back and, while he may be past his physical prime, could still draw a multi-year deal at some point in the next year.

While Olivera is an interesting case to follow, that isn’t the next superstar type guy that readers keep asking me about. If you’re into that sort of thing, your guy is Yoan Moncada.

The Next Elite Cuban Prospect

Moncada is 19 and packs a lot of tools into his 6’1/210 frame. He’s a plus-plus runner with above average raw power from both sides of the plate and the tools/skills to stick in the infield, possibly at shortstop. Moncada is the quick-twitch type with big bat speed that clubs covet and his track record of hitting at big tournaments and in Cuba’s professional leagues is excellent considering his age.  Ben Badler has even more details about how he’s performed in specific tournaments if you can’t get enough of this stuff.

So, this sounds great. We have a guy that scouts say has talent like Yasiel Puig and he’s a switch-hitting teenage shortstop. Why haven’t I heard more about him yet? Shouldn’t he be the top story on MLB Trade Rumors every day with teams offering over $100 million?

There are two reasons this hasn’t happened yet. First, due to his lack of pro experience and his age, Moncada is subject to international bonus pools, along with the 16-year-old July 2nd prospects you hear about once a year. Secondly, it’s confirmed that Moncada isn’t in Cuba, but nobody knows exactly where he is (Mexico is a common guess).

If you followed Puig’s defection story, you know how shady things can get when human/drug traffickers see a way to make money. It’s assumed by people in the international baseball industry that Moncada is at some juncture in the same process that Puig was in and that Moncada will be “found” once the right people get paid, which could be any day or much longer. It may not be pretty, but this is what elite Cuban baseball players have to do to get paid these days.

Timing Is Everything

Teams have been exploiting a weak point in MLB’s rules that helped set up the international bonus pools in 2012. In the first few years of the system, a handful of teams went over their allotted pool (which varies from $2-5 million per team, assigned in reverse order of the MLB standings like draft picks), paid a 100% tax on the overage and then couldn’t sign a player for over $250,000 for the next season. The reason they did that was because the punishment wasn’t big enough; if you signed two years worth of players in one year, it basically costs the same but you get half of your players a year earlier.

MLB noticed this and upped the penalty before the 2014 period opened, with the same 100% tax, but now with a two-year ban on signings over $300,000. That still wasn’t enough to deter multiple clubs from blowing past their pools this year, including the Rays blowing past their pool for the second time in just the third year under these rules. This 2014 pool-busting trend was headlined by the Yankees, who spent roughly $30 million in bonuses and taxes, double the previous record.

(Side note since people always ask about this: most in the industry assume the Yankees’ blatant exploitation of the rules will lead MLB to move more quickly towards an international draft with hard slots. MLB is not communicating at all with clubs about their intent in this area, but logistically it couldn’t happen until the 2016 period opens in July.)

I explain all of this because when Moncada becomes a free agent will dictate which teams can sign him. The Red Sox were another club that went over their pool this year, along with the Yankees. If Moncada is declared a free agent between now and July 2nd, 2015, then those two clubs have an advantage as they have huge revenues and have already gone over their pool amount and paid the penalty. To sign him, any team would go over their pool and pay the overage, but teams that are under their pool would want their year to go over their pool to also include a full crop of July 2nd players to make up for the two-year penalty.

Conversely, if Moncada becomes a free agent any time from July 2nd, 2015 to 2017, those two clubs have no chance to bid on him because of the two-year penalty. Then, a whole new group of clubs could coordinate their international spending to roll three years of July 2nd signings into one year and also plan to make a run at Moncada, getting the most bang for their buck/penalty. With an international draft looming, this could also be the last opportunity any team would have to acquire a player of consequence under the age of 25 in an open market.

Enter Game Theory

While the timing is an interesting aspect to this, the most intriguing part is the money.  For the sake of the thought experiment that follows, we’ll assume Moncada is a 19-20 year old free agent version of Puig in the infield, though that obviously is skipping way ahead of where we are now.

(As a quick aside, while I’m talking about international bonuses and game theory, when I broke the story about the Yankees blowing past their bonus pool, I wrote about why the Tragedy of the Commons and the Sword of Damocles help explain why clubs didn’t blow out their July 2nd spending until the most opportune times.)

Clubs can’t give major league contracts to players subject to international bonus pools, just like they can no longer give them to draft picks. Clubs can only pay players in lump-sum bonuses, though those bonuses can be paid in multiple installments but the bonus has to be paid in full within 12 months of signing.

The two ways around this are 1) a side agreement to give a big league deal/extension moments after signing the contract and 2) ripping up the deal and giving a new deal to a “minor league free agent” who isn’t bound by international pools anymore. The problem is that #1 is unenforceable and technically illegal (all agreed-to terms at time of signing have to be in the contact) and #2 is so blatantly skirting the rules that MLB wouldn’t allow it. In addition to all this, the bonus would be subject to the tax, which is 100% on every dollar over your pool (which range from $2-5 million, roughly).

Since Moncada would be 19 or 20 when he would sign, with a decent stretch of not playing in games, he’d spend a year or two in the minors. Given the current market, that sort of player would probably draw a 9-year deal for $100 million, although that dollar figure could be a little light. With a bonus-only contract structure, you would only get his six control years (like any draft pick) and would have to pay his three arbitration salaries as you go, rather than pre-negotiating them into the long-term deal.

Here’s the question: with essentially a dollar-for-dollar tax on the bonus for this player, how much would you pay him in an upfront bonus, in what would surely be a fierce bidding war? I feel like $50 million (with a roughly $45 million tax on top of that) is the most you could justify while $30 million seems reasonable enough that multiple teams may be willing to pay that much. For reference, the biggest draft/international bonus of all time is $8 million (Gerrit Cole) and the biggest guarantee (via a major league contract, back when those were legal) is $15.1 million (Stephen Strasburg).

As I noted multiple times above and I’ll note again here, this is getting about 20 steps ahead of ourselves with a player some high-level international scouts haven’t even seen yet.  That said, most of them have seen him, they’re all raving and there’s too much money involved to think Moncada doesn’t reach the free agent market at some point in the next year or two.