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latin americaThere are two primary ways to acquire young, amateur talent: the draft and international free agency. The former occurs each year in early June, and the latter occurs, well, throughout the year, but the bulk of it happens in early July.

The next International Free Agency (IFA) period opens up tomorrow, which means a lot of things could happen very soon. So let’s discuss what the IFA period is all about, what the Cubs can and can’t do, and what might happen this week.

The IFA Period

International free agency is the process by which teams can sign amateur talent from countries not subject to the draft in the United States (pretty much anywhere outside of USA (including Puerto Rico) and Canada). Typically, the best talents are signed in the first signing period in which they become eligible, at age 16. Each year, the IFA period opens on July 2, and runs through mid-June of the next year (then there’s a brief quiet period).

IFA Bonus Pools

Beginning in 2012, MLB teams were given a bonus pool they could use to sign international prospects, and, if they exceeded the pool, they would be subject to penalties (not unlike in the draft). Last year, the Cubs exceeded their pool by a huge amount, subjecting them to the harshest penalties: a 100% tax on the overage, and a prohibition on signing any players this year for more than $250,000.

The Cubs can still spend their full $3,962,700 bonus pool if they want, but they can’t spend more than $250,000 on any one player. Obviously you can still find massive future talents for far less than that – it happens every year – but the top prospect bets all receive quite a bit more than $250,000. In other words, don’t expect to hear the Cubs connected to any top names this week.

Trading IFA Bonus Slots

If the Cubs decide not to spend their full pool, they can, instead, try to trade some of it. Each team’s bonus pool is made up of four “slots,” which are tradable. A team may acquire up to 50% of its original pool by trading for those slots (for example, a team with a total pool of $3 million could acquire another $1.5 million in slot value via trade).

The 50% rule is going to be a slight problem for the Cubs. The Cubs’ four slots are worth as follows: $2,288,700, $458,000, $309,300, and $206,700. The latter three slots will be easy to trade, if the Cubs want to, but that big, $2.3 million whopper? Only two teams – the Astros and the Marlins – have a bonus pool large enough that $2.3 million isn’t well over 50% of their pool. In other words, if a team acquired that particular bonus slot from the Cubs, it would very likely not be able to use the full value of it (since it can increase its pool only by 50%). To give an example, if the Yankees – with a bonus pool of $2,193,100 – acquired the Cubs’ top slot, they’d be able to use only about $1.1 million of the $2.3 million they were acquiring from the Cubs. Think they’ll give the Cubs $2.3 million worth of value? No. They won’t.

In any case, you can expect the Cubs to shop their other three slots, even if they can’t trade the big one.

Valuing IFA Bonus Slots

How much are these international slots worth? Well, the Cubs helped set that value last year when they traded infield prospect Roni Torreyes to the Astros for just about $800,000 in IFA pool space. At the time, Torreyes was a borderline top 20 prospect in the Cubs’ system, but he was struggling a bit and was squeezed out of the upper level infield picture. Still, it was a nice get for the Astros for a bonus pool slot they weren’t going to use.

One nice thing going for the Cubs this year? No fewer than four teams – the Yankees, Red Sox, Rays, and Brewers – are already rumored to be spending more than their bonus pool. That means they could be interested in the Cubs’ bonus slots because the slots could help the teams avoid a harsh penalty, or could be converted to straight cash if the team is blowing out their pool regardless (because any amount of extra space a team acquires reduces their 100% overage tax dollar for dollar).

Will Trades Happen This Week?

All that said, you can expect the Cubs to shop around their bonus slots. Indeed, they may have already done so, and the deals will be effectuated tomorrow when the IFA period opens up.

As we saw last year, a number of trades had clearly been agreed to in advance of July 2, so that the deals could go down immediately when new IFAs were eligible to sign. For the Cubs, that meant not only the Torreyes deal, but also a deal involving Carlos Marmol and Matt Guerrier, and … the Scott Feldman trade.

That’s the one you all want to know about, of course, because this year’s version of Feldman seems to Jason Hammel: a solid pitcher having a great year on a one-year, $6 million deal for the last place Cubs. Feldman, together with back-up catcher Steve Clevenger, was traded on July 2 to the Orioles for Jake Arrieta, Pedro Strop, and a small IFA slot.

To be sure, the meat of the deal for the Cubs was not the IFA slot. But the opening of the IFA period and the movement of slots around baseball (coupled with the Cubs’ preference to move Feldman early and Matt Garza late) appears to have been the impetus for getting a deal done on that day. It is not unreasonable to wonder if something similar will happen this year involving Hammel. His next scheduled start is on Friday, July 4, so there will be a couple days of buffer if the Cubs are trying to coordinate a Hammel deal with an IFA deal before his next start. If a starter down at AAA – Tsuyoshi Wada? Dallas Beeler? – is suddenly scratched this week, you’ll have a clue.

All that said, it’s hard to predict how the IFA stuff could interplay with any Cubs trade. Will the Cubs try to spice up a Hammel deal with an IFA slot to get the other team over the edge? Will a third team become involved? Will the Cubs work on their IFA slots entirely separately from any other deals? Will the Cubs do nothing at all tomorrow?

I can’t answer those questions for your right now. All I can do is provide the background, and tee up the issue for tomorrow/this week.

Otherwise, I look forward to seeing what the Cubs do with their slots, and also if they are able to sign some interesting guys that we actually hear a little bit about.

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