Yoan Moncada Is Affecting All of International Baseball

Yoan Moncada was declared a free agent by MLB on Saturday morning. I wrote in depth about his situation from almost every angle last Thursday and also wrote about when news broke that he had left Cuba last month. I sent out a number of tweets on Saturday explaining Moncada’s current situation. He still needs to be cleared by OFAC (a U.S. government agency) before teams can offer him a deal or sign him and the timetable for that happening is unclear.

Often, OFAC clearance happens before MLB clears a player, so that indicates it could happen quickly (weeks), but Moncada’s situation is pretty unusual, which most guess will slow the process down (months).  The reason that OFAC clearance timetables vary so much relative to MLB’s clearances is that OFAC clearance is a product of the government (which can be backlogged at times, have political interests to protect, etc.) working with the paperwork that the agent submits.  Moncada should be free to sign within a few months, well ahead of the June/July timeframe when the 2014 international signing period turns over to the 2015 period and a number of factors change.

I said I covered this from almost every angle last week, because there are three things I didn’t mention in my first two articles about Moncada that have recently come to my attention.  The first is all the unsubstantiated chatter and rumors about how Moncada leaving Cuba played out.  I didn’t go into detail on this because I’m still working to get some things confirmed to help fill in these blanks, but the rumors are picking up.  I still have international scouts asking me for any information I have on this topic, specifically the stuff I haven’t written, because teams are getting heavy into their due diligence.  I don’t have anything else to report right now, but I can guarantee you that between now and when Moncada finishes his first pro season, this story will eventually become less confusing, as we learned with Yasiel Puig’s defection.

The second thing I didn’t note was pointed out Friday by Ben Badler.  As I’ve also noted in a recent article on the topic, while teams can’t technically negotiate with players before the July 2nd signing period opens, it’s now commonplace with MLB’s three-year-old rules for teams to have deals done with players 9-12 months before they’re eligible to sign.  This happened before the rule changes, but rarely; more often, early deals for high profile players were done about 3-6 months in advance.  This is a response to soft caps on spending being in place (which most team treat as hard caps); if you can only spend so much money, the best way to find bargains is to offer security to players via a verbal deal even earlier in the process.

Multiple seven figure talents for the 2015 July 2nd period are already locked up and the same teams that are aggressive in this market tend to be the same teams mentioned as those likely to be aggressive on Moncada.  As I noted last month, the Cubs are one team with heavy rumors they will blow way past their 2015 international pool, but they can’t go over $250,000 with any bonus until then; the Rangers (in the same position as the Cubs)  and Blue Jays (free to spend now and in 2015, as are most other clubs) are also believed to be shooting to do the same in the 2015 July 2nd market.

If a team has a high profile 2015 class player lined up for July 2nd but then signs Moncada by June, then they can’t spend over $300,000 on a player in 2015, which would force them to back out of those deals. The good news is that Moncada’s deal likely comes in the winter, allowing those players who had verbal deals and thus stopped working out for clubs plenty of time to re-establish their market.  That said, much of the money will be committed by then and the players’ leverage for what could be their only payday would evaporate.  This would also harm the club’s ability to make an aggressive strike with multiple verbal deals in future years, although with the two-year ban on $300,000+ bonuses after signing Moncada, there may be an international draft in place before they could feel the effects, something I’ll get more into below.

An Important Distinction

The third angle is something I found when I went deep into the rules related to Moncada’s signing.  It’s something that requires some explaining, but most teams don’t know about it and the ones that I’ve talked to about it aren’t happy.

In the draft, when teams go over their bonus pool, that money goes into an account that gets dispersed at a later date to the clubs that receive revenue sharing payments and who didn’t go over their pools.  Since the penalties for going way over your pool in the draft are harsher than in the international market (loss of picks/pool and a tax rather than a tax and temporary ban on big bonuses), no team goes way over their draft pool and thus this pool of money from draft penalties is pretty small.  So small in fact, that most clubs I talked to, including scouting directors and executives that focus on rules, didn’t know every detail of this rule.  Teams tend to not go over their pool in the draft but the stakes are low, so it doesn’t affect strategy very much.

This rule is quite different for the international market.  Here’s the language, straight from the CBA, about where the international bonus penalty money goes:

During the 2012-2013 and 2013-2014 signing periods, any tax proceeds generated as a result of a Club exceeding its Signing Bonus Pool will be used by the Office of the Commissioner, after considering the recommendations of the Committee, to offset the cost of international reforms. Thereafter, unless an international draft becomes operational, the Office of the Commissioner may use the tax proceeds to further the international development of baseball.

When this was written, MLB didn’t think teams would blow way past their bonus pools, because they thought they had put in controls with a similar amount of punishment to the draft rules.  Consistent with that line of thinking, this language seems to assume there won’t be much money in the international bonus pool penalty fund.  This money is to be used for expenses (like additional international personnel, uniforms/facilities for official MLB showcases and prospect leagues, etc.) and then, before saying the fund becomes discretionary after all expenses are paid, it mentions a draft.  MLB seems to be saying something like: “this fund won’t have much money in it and it’s unlikely it’ll be a big amount before we get an international draft up and running, but if somehow we’re wrong, the money will just get folded into the general international baseball budget.”

MLB’s Opaque Intentions

The 30 clubs are having a hard time figuring out what MLB’s international intentions are.  The clubs and MLB meet once a year at the Winter Meetings to talk about rules and international personnel don’t think that’s nearly often enough, given the shifting landscape in the market (domestic scouting directors meet twice a year).  In these meetings, MLB doesn’t tip their hand about an international draft and clubs assume this is because the draft is at the top of MLB’s international to do list; Bud Selig has publicly supported the international draft concept many times over the years.

MLB recently enacted a rule that has angered many teams. The positive outcome of this rule change is it will likely crack down some on the 9-12 month early verbal deals that I referenced above, but the cost (making things harder for teams, agents and players) is universally seen as too high. The rule changed what types of players can stay in team academies and barred independent organizations like the DPL and IPL (who organize games between top prospects in order to market under-scouted kids and give scouts more chances to evaluate) from holding workouts in the manner they have for years.  The email announcing the change came in the middle of the week, saying the rule was in effect tomorrow; clubs had hours to kick kids out of their academies, cancel visits for the coming days/weeks and the IPL and DPL were forced to change their plans and move events to worse facilities.

This rule patches a hole that was created by MLB’s rules in the first place, and it solves a relatively minor problem that didn’t concern clubs much.  Scouts want good scouting to be rewarded and early deals increased the degree of difficulty, but still rewarded good scouting.  The new rule lets scouts see players less often and makes more of those looks in heavily-attended, MLB-controlled showcases/games.

Every club I’ve talked to is strongly against an international draft, for literally dozens of reasons.  The main issues, and ones that need a lot of time, money and personnel thrown at them, are getting as many countries as possible to opt-in to a draft, thus avoiding another version of the present Cuba exception, where players from a couple countries not involved in the draft get huge contracts in a free market.  MLB needs resources for dealing with each country’s government (there are more than a few problematic countries that could undermine the whole effort) and, in many cases, helping to work around or solve typical third-world obstacles that it’s taken years for MLB to work through in the Dominican.

I should note that MLB has done a very good job in this area, particularly in the Dominican, of reducing identity/age fraud, PED use and paperwork issues while also running their own showcases and leagues.  Until recently, this list of good things MLB had done included allowing the IPL and DPL to play their league games at MLB team facilities in the Dominican and America without interference.

What This Distinction Means

I point all of this out because this international bonus pool penalty fund had about $10 million in it through the first two signing periods under the new roles.  After the Yankees obliterated bonus records this year, along with less extreme overages by the Red Sox, Rays and Angels, another roughly $23 million was added to the fund.  Given the runaway hype train that is Moncada’s projected bonus, I’d estimate his upcoming deal will add another $40 million to the fund.  That means that a fund that was probably never intended to have much more than $10 million in it will soon have over $70 million in it.  In effect, the leeway around MLB’s international rules will net them over $70 million that some argue should be going to these kids, but instead will presumably be going toward creating an international draft, the one thing nearly no one involved in this market wants to happen.

Teams may not like this, but one marginal team choosing or not choosing to blow past their international pool likely won’t change anything.  In the same way, Moncada is going to get a ton of money regardless of whether one or two teams decide to sit this one out.  If anything, those making the personnel decisions for clubs will see this as a reason to be even more bold in spending money on international players.  Executives seeing 1) this penalty fund expanding 2) a two-year ban on big bonuses for blowing past your pool and 3) a CBA expiring on December 1, 2016 have to assume that, whether it’s via an international draft or harsher penalties that cause a hard cap of sorts, the odds are increasing that there is only one more chance for each team to spend wildly on international prospects.

I had to talk ten executives to find someone that knew where the international bonus pool penalty money was going and how it was supposed to be spent; even that exec forwarded me the rules language didn’t know the complete answer before he looked it up.  From the clubs I shared this information with, none of them were happy and all of them were surprised to varying degrees.  One international scouting director joked that the Dominican kids in MLB’s Prospect League will have really nice uniforms next year.  In light of this news, it looks like the smartest move for a club is to spend lots of money while they still have the chance.