• This Blog on The Cuban Economy is dedicated to Cuba's Generation "A". Although inspired by Yoani Sánchez' blog "Generation Y" this is not dedicated to those with names starting with the letter "A". Instead, it draws from Douglas Coupland's novel Generation A which begins with a quotation from Kurt Vonnegut at a University Commencement that was brought to my attention by Andrew Johnston of Ottawa: ".. ... I hereby declare you Generation A, as much as the beginning of a series of astounding triumphs and failures as Adam and Eve were so long ago."

    The objective of this Blog is to facilitate access to research resources and analyses from all relevant and useful sources, mainly on the economy of Cuba.

ALTERNATIVE INSTITUTIONAL FUTURES FOR CUBA’S MIXED ECONOMY

Archibald Ritter                                                                                          

February 1, 2016

Since 2010, Cuba has been implementing a redesigned institutional structure of its economy. At this time it is unclear what Cuba’s future mixed economy will look like. However, we can be sure that it will continue to evolve in the near, medium and longer term. A variety of institutional structures are possible in the future and there are a number of types of private sector that Cuba could adopt. Indeed it seems as though Cuba were moving towards a number of possibilities simultaneously.

The objective of this note is to examine a number of key institutional alternatives and weigh the relative advantages and disadvantages for each arrangement.  All alternatives include some mixture of domestic or indigenous private enterprises, cooperative and “not-for-profit” activities. foreign enterprise on a joint venture or stand-alone basis, some state enterprises (in natural monopolies for example) and a public sector.  However, the emphasis on each of these components will vary depending on the policy choices of future Cuban governments.

The possible institutional structures to be examined here include:

1. Institutional status-quo as of 2016;

2. A mixed economy with intensified “cooperativization”;

3. A mixed economy, with private foreign and domestic oligopolies replacing the state oligopolies;

4. A mixed economy with an emphasis on indigenous small and medium enterprise.

 Option 1. Institutional Status-Quo as of 2016

The institutional “status quo” is defined by the volumes of employment in the registered and unregistered segments of the small enterprise sector, the small farmer sector, the cooperative areas, the public sector, and the joint venture sector, plus independent arts and crafts and religious personnel.  The employment numbers are mainly from the Anuario Estadístico de Cuba together with a number of guesstimates, some inspired by Richard Feinberg (2013). The guesstimate for unregistered employment in the small enterprise sector may seem exaggerated. However, a large proportion of the “cuentapropistas” utilize unregistered workers and a proportion of the underground economy does not seem to have surfaced into formally registered activities.  These employment estimates by institutional area are presented in Table 1 and illustrated in Chart 1, which also serve as a “base case” for sketching the other institutional alternatives.

Table 1 z zz

The current institutional status quo has a number of advantages but also some disadvantages. On the plus side, adhering to the status quo would avoid all the uncertainties and risks of a transition.  It would maintain the possibility of “macro-flexibility,” that is the ability for the central government to reallocate resources by command in a rapid and large scale fashion. However, in view of the numerous “macro errors” made possible by a centralized command economy (the 10 million ton sugar harvest of 1970, the “New Man” endeavor, shutting down half the sugar mills), “macro-flexibility” may be a disadvantage.  There are major advantages for the Communist Party in maintaining the institutional status quo in the economy, namely enabling political control of the citizenry (a disadvantage from other perspectives) and continuing state control over most of the distribution of income (also a disadvantage from other perspectives).  The approach also helps foster good relations with North Korea (I am running out of advantages).

There are also major disadvantages. The centralized planned economy and public enterprise system generates continuing bureaucratization of production; continuing politicization of state-sector economic management and functioning; continuing lack of an effective price mechanism in the state sector and continuing perversity and dysfunctional of the incentive structure. The result of this is damage to efficiency, productivity and innovation.

 OPTION 2. Mixed Economy with Intensified “Cooperativization”

zzzA second alternative might be to promote the authentic “cooperativization” of the economy in a major way.  This would involve permitting cooperatives in all areas, including professional activities; opening up the current approval processes; encouraging grass-roots bottom-up ventures; providing import & export rights; and improving credit and wholesaling systems for coops.

 This approach has a number of advantages. First, it would strengthen the incentive structure and elicit serious work effort and creativity on the part of those in the coops.  This is because worker ownership and management provides powerful motivation to work hard and profit-sharing ensures an alignment of worker and owner interests. This approach would generate a more egalitarian distribution of income than privately-owned enterprises. Cooperatives may possess a greater degree of flexibility than state and even private firms because their income and profits payments to members can reflect market conditions. Perhaps most important, democracy in the work-place through effective and genuine coops is valuable in itself and constitutes an advantage over both state- and privately-owned enterprise.  [Workers’ ownership and control proposed in Cuba’s cooperative legislation is ironic and perhaps impossible since Cuba’s political system is characterized by a one-party monopoly.  On the other hand it may help propel political democratization.]

The “second degree cooperatives” or “cooperative coalition of cooperatives” called for in the cooperative legislation is particularly interesting as it may permit  reaping organizational economies of scale (a la Starbucks, McDonalds, etc. ) for small Cuban coops in these areas.

An emphasis on cooperatives would help to maintain ownership and diffused control and profit-sharing among local citizens, thereby promoting greater equity in income distribution.

But cooperatives also face difficulties and disadvantages.  First, are they really more efficient than state and private enterprises? Generally speaking, cooperatives have passed the “survival test” but have not made huge inroads against private enterprise in other countries over the years.  Perhaps this is because the “transactions costs” of participatory management may be significant.  Personal animosities, ideological or political differences, participatory failures and/or managerial mistakes may occur.  And for larger coops, complex governance structures may impair flexibility.

 Second, Cuba’s actual complex co-op approval process is problematic and creates the possibility of political controls and biases. Certification of professional cooperatives is unclear. Also, the hiring of contractual workers is problematic

  • The “Hire or Fire after 90 days” rule may curtail job creation;
  • The 10% limit on contractual labor also may curtail job creation;
  • Governance may be impaired if uncommitted workers have to join.

Finally, what will be the role of the Communist Party in the cooperatives?  Will it keep out of cooperative management?  Will Party control subvert workers’ democracy and deform incentives structures?

OPTION 3. Wide Open Foreign Investment Approach zzzzA third possibility would be to open up completely to foreign investment. This would involve a rapid sell-off of state oligopolistic enterprises to deep-pocket foreign buyers such as China, the United States (in due course), Europe, Brazil, or elsewhere.  The buyers might be the Walmart’s, Lowes, Subways, or Starbucks of this world, wanting to acquire major access to the Cuban market. This is a strong possibility if existing state oligopolies (e.g., CIMEX and Gaviota) were to be privatized in big chunks. The policy requirements for this approach to occur would be rapid privatization plus indiscriminate direct foreign investment and takeovers by large foreign firms.

 This approach does have some advantages.

  • It would generate large and immediate revenue receipts for the Cuban government;
  • It would lead to large and rapid transfers into Cuba of financial resources; entrepreneurship and managerial talent; physical capital (machinery and equipment and structures); most modern technology embedded in machinery and equipment; and personnel where and when necessary;
  • The results would be rapid productivity gains, higher-productivity work and rapid GDP gains.

However, there would also be disadvantages such as:

  • Profits would flow out ad infinitum;
  • Income concentration: profits to foreign owners (e.g. the Walton family of Arkansas who practically own Walmart) and profits to oligopolistic domestic owners;
  • Oligopolistic economic structures would be damaging in the long run;
  • There would be a strengthened probability of lucrative employment and ownership for the civilian and military “Nomenclatura”;
  • Blockages or inhibitions to the development of Cuban entrepreneurship;
  • “Walmartization” of Cuban culture; dilution of Cuban uniqueness;
  • Further reduction of the potential for diversified manufacturing in Cuba (e.g. due to the  Walmart/China  mass-purchaser/mass-supplier symbiosis);
  • Probably a blockage of export diversification.

 OPTION 4: Pro-Indigenous Private Sector in a Mixed Economy

zzzzzA fourth possibility would be for Cuba to promote its own small-, medium- and larger enterprises in an open mixed economy. This would require

  • An “enabling environment” for micro, small and medium enterprise with a reasonable and fair tax regimen; an end to the discrimination against domestic Cuban enterprise (See Henken and Ritter, 2015, Chapter 7);
  •  The establishment of unified and realistic monetary and exchange rate systems;
  •  Property law and company law.

A liberalization of micro-, small and medium enterprise would also be necessary to release the creativity, energy and intelligence of Cuban citizens.  This would involve open and automatic licensing for professional enterprises;  an opening up for all areas for enterprise – not only the “201”; permission for firms to expand  to 50 + employees in all areas; creation of wholesale markets for inputs; open access to foreign exchange and imported inputs;  full legalization of “intermediaries” ; and permission for advertising.

 This approach has some major advantages:

 Oligopoly power would be more curtailed compared to Option 3;

  • The economy would be more competitively structured with all the benefits this generates;
  • It would encourage a further flourishing and evolution of Cuban entrepreneurship;
  • It would permit the development of a diversified range of manufacturing and service activities and also a greater diversification of exports;
  • It would provide a reduced role for the “Nomenclatura” of military and political personnel and their families that would otherwise gain from the rapid privatization of state enterprises;
  • It would decentralize economic and thence political power and reduce the power for government to exert political influence through economic control;
  • It would generate a more equitable distribution of income among Cuban citizens and among owners than Option 3;
  •  Profits would remain in Cuba;
  •  There would be a stronger maintenance of Cuban culture.

There would be some disadvantages with this approach.

  • There would be no massive and immediate cash infusion to Government from asset sell-offs.   Or is this an advantage?  [more effective use of in-coming revenues]
  •  Perhaps there would be a slower macroeconomic recuperation;
  • There would be slower inflows of technology, finance, managerial know-how – but more domestically controlled.

Conclusion

Most likely, Cuban policy-makers in the government of Raúl Castro, the government of his immediate successor, and future governments of a politically pluralistic character will design policies that ultimately will lead to some hybrid mixture of the above four possibilities.  I of course will have little or no say in the process. However, my personal preference would be for an economy resembling the structure in the accompanying chart, with a large “indigenous” private sector, a significant cooperative sector, of course a large public sector for the provision of public goods, a small sector of government-owned enterprises, and a significant private foreign and joint venture sector. zzzzzzSo my bottom-line recommendations for current and future governments of Cuba would be:

  1. Utilize Cuba’s abundant resource — well-educated, innovative, strongly-motivated entrepreneurship — effectively, by further liberalizing the regulatory and fiscal regime for the indigenous micro-, small and medium enterprise sector, thereby also promoting Cuba’s indigenous economic culture;
  2. Use Cooperatives and “Coops of Coops” where possible;
  3.  Avoid “Walmartization” & homogenization of Cuban economy and culture by utilizing an activist policy towards direct foreign investment.

Bibliography

Feinberg, Richard E., Cuba’s Economic Change in Comparative Perspective, Brookings Institution, 2013

Oficina Nacional de Estadísticas, Anuario Estadístico de Cuba, 2014

Ritter, Archibald and Ted Henken, Entrepreneurial Cuba, The Changing Policy landscape, Boulder Colorado: Lynn Rienner, 2015

 

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CUBA’S EMERGING STARTUP SCENE GIVEN A CANADIAN TECH BOOST

Jacob Serebrin

Special to The Globe and Mail, Monday, Feb. 01, 2016 5:00AM EST

Few countries are as technologically isolated as Cuba. Home Internet is rare, data plans are non-existent and, in a country where doctors make the equivalent of around $70 a month, paying almost $3 an hour for government-run WiFi is too steep for many.

Yet, even here, tech startups are beginning to emerge and they’re getting some help from Canada. Montreal technology hub Notman House has launched a program to give Cuba’s nascent startup scene a boost.  The idea of Develop Cuba is to create a seed fund and a way to support and educate the community on how to build an ecosystem,” says Noah Redler, the campus director at Notman House and the initiator of the Develop Cuba project. “The major obstacle they have isn’t around talent, it isn’t around want or desire, it’s literally just that basic seed capital.”

In Cuba, a little money can go a long way. So far, Develop Cuba has raised a few thousand dollars to rent space for startup groups to meet in Havana and bought a projector – a rare piece of equipment in a country where even basic supplies can be hard to find.

The next step will be to send a group of mentors from Montreal to visit Havana and work with local startups. If that goes well, Mr. Redler wants to help open Cuba’s first co-working space. The goal is to build capacity for Cuban startups, he says. While Canadians may be helping to get the project off the ground, it will be led by local people.

Internet usage has grown rapidly since the Cuban government lifted an almost total ban on Web access in 2008. By 2014, the country had more than three million Internet users, a little more than one-quarter of the population, according to Cuba’s national statistics agency. By now, that number is almost certainly higher.

On a Thursday afternoon in mid-January, about a dozen people are gathered in a public square in downtown Havana, looking at their phones. A couple more sit on nearby benches with laptops. It’s a scene that would be unremarkable in Canada, but was extremely rare in Cuba until just a few months ago.

In June, Etecsa, Cuba’s state-owned telecommunications monopoly, cut the price of Internet access in half and opened dozens of new WiFi access points in parks and public squares across the country. More have opened since then. Before that, getting online usually required waiting to use a computer at an Etecsa outlet or a post office; WiFi was rarely found outside of hotel lobbies. Free WiFi is still almost unheard of, and Cubans have to prepay and show ID to get online.

For startups, “the most difficult part is accessing the Internet,” says Martin Proenza, the founder of YoTeLlevo, a website for booking taxis. While his business is generating revenue, it’s not profitable enough for Mr. Proenza to afford home Internet. Instead, he relies on his day job at a government-owned software company for Internet access.

The lack of mobile data means that Cuban apps are generally built to work offline. AlaMesa, an app for finding restaurants, is fully functional without an Internet connection. Its restaurant directory and map are downloaded onto a user’s phone. If a user opens the app when they do have an Internet connection, the database is updated. “Considering the insufficient connectivity infrastructure and cost of Internet access in the country, an offline solution was mandatory,” says Alfonso Ali, AlaMesa’s lead programmer.

But they also face a uniquely Cuban challenge. “Due to U.S. blockade restrictions, we are unable to use PayPal or Stripe,” Mr. Ali says. “So standard operations like online booking, coupons, etc., are very difficult and costly to implement.”

The Cuban government appears to have taken little notice of the country’s growing startup community, but there are fears about what will happen if they do. While economic reforms that began in 2008 have opened the door to an increasing number of private businesses, there are no provisions for tech startups, making them illegal.

“You have to keep yourself under the radar,” Mr. Proenza says. “But is it a big concern? No. Really, the state is not running after people for creating online businesses.”  He does think the government will allow startups to operate legally in the future, and says that’s a view shared by others in the startup community.

In Montreal, Mr. Redler says he sees some hopeful signs – accommodation-rental site Airbnb was allowed to enter the Cuban market earlier this year; there are now over 2,000 listings. But he says he doesn’t expect change to come rapidly.

Despite the challenges, Cuban business owners say they’re optimistic about the future. “The Cuba education system is very good, so it’s very easy to find talented people to work on any field of innovation,” Mr. Ali says.  “We used to say ‘need is the mother of invention,’ so people in Cuba have good talent, skills and the mindset to find solutions to almost any problem.”

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THE LEADING CANADIAN EXPERT ON CUBA, MARK ENTWISTLE, FORMER AMBASSADOR TO CUBA, ON LATE-NIGHT CHATS WITH FIDEL, THE HARPER YEARS OF DIPLOMACY AND HOW TO DO BUSINESS IN HAVANA

RICHARD BLACKWELL

 The Globe and Mail Last updated: Friday, Jan. 29, 2016 2:52PM

Original: How to Do Business in Havana

When Mark Entwistle was Canada’s ambassador to Cuba in the mid-1990s, a knock on the door of his Havana residence might mean Fidel Castro was dropping by for a chat.

“He had a house that was maybe half a kilometre up from the official residence of the Canadian ambassador,” Mr. Entwistle said. “He used to stop by all the time. By himself. There would be a knock. It would be this big hulking figure, and he would ask if he could come in and say hi and have a gin and tonic. We’d talk in the backyard, we would talk in the living room. It was a quite remarkable thing. I kept pinching myself because … love him or hate him, he is one of the historic figures of our lifetime.”

Mr. Entwistle has parlayed his deep connections into a consultancy practice that helps Canadian and American companies prepare to do business in a Cuba increasingly open to foreign corporate involvement. His work with American firms has exploded since Dec. 17, 2014, the day U.S. President Barack Obama and Cuban President Raul Castro announced an unprecedented thaw in relations after more than five decades of distrust and detachment.

Mr. Entwistle is in a unique position to understand the subtleties of the change in U.S.-Cuban diplomatic relations. He spent years in Canada’s foreign service, with postings in Israel and the Soviet Union. He then served as spokesman for the department of external affairs and press secretary to prime minister Brian Mulroney, before being sent to Cuba as Canada’s ambassador from 1993 to 1997.

After 15 years running his own consulting firm, he teamed up in 2012 with former Onex Corp. executive Tony Melman, and former politician and Magna International Inc. executive Belinda Stronach, joining their merchant bank Acasta Capital. There, he runs the Cuban advisory arm – a division called Acasta Cuba Capital.

Mr. Mulroney describes Mr. Entwistle as “the leading Canadian expert on Cuba” whose combination of diplomatic and business skills gives him a unique perspective. As ambassador, he was a “sure pair of hands” with a “problem-solver bent,” the former prime minister told me in a brief phone chat. While Cuba is still somewhat archaic with a Byzantine political structure, “Mark is the kind of guy who can guide Canadian and American companies through these different layers of difficulty,” Mr. Mulroney said.

Indeed, Mr. Entwistle has a sophisticated and nuanced take on Cuba and its moves to open up relations with the United States. But I have to admit that his personal anecdotes are what grab my attention most during our three-hour lunch at Sassafraz in Toronto’s Yorkville area. I’m so captivated that by the time I finish my Arctic char and he polishes off his nine-spice roast chicken breast (him much later, as he is doing most of the talking), the restaurant – which had been packed and noisy – is completely empty.

Mr. Entwistle’s close relationship with Fidel, and the degree of access he had to the Cuban government when he was ambassador, was mainly a result of Canada’s unwavering support during the depths of the U.S. chill. “We were players in many ways,” he said. “That is not the case now. There are so many competitors, and now that the Americans have arrived it is sucking up all the oxygen.”

But during Mr. Entwistle’s time as ambassador it was not unusual to get a call in the middle of the night and be summoned to Fidel’s office. “He would ask questions … he was very interested in Canadian politics … what it was like living beside the United States.” Sometimes Fidel would come to the Canadian ambassador’s residence for formal dinners, especially if Pierre Trudeau – then long retired – was in town. Mr. Trudeau was “one of the very few people that I ever saw Fidel sit and listen to, in true listening mode, not interrupting [or] formulating what he was going to say next,” Mr. Entwistle said. “It was not a mentor role, because Fidel Castro would never have a mentor. It was as an inadvertent confident. It was personally very important to Fidel.”

As a former diplomat, Mr. Entwistle is hesitant to use harsh words, but he is unequivocal about Canada’s weak efforts to take advantage of our long-standing warm relationship with Cuba. “I think it has been squandered,” he said, although “it is not gone. It is still there. The Cubans, in a way, are waiting for us to come back.”

Aside from mass tourism, and the operations of Toronto-based mining giant Sherritt International Corp., “there is effectively no major Canadian [business] play in Cuba. Against the backdrop of history, of what we used to share together, the Cubans find it odd.”

Some, but not all of the blame, can be placed on the Stephen Harper government, which was leery of appearing to be too close to a communist regime, Mr. Entwistle said. The relationship “has never been hostile, even in the glacial period of the Harper years. It was just benign neglect. The relationship is in sort of an auto-pilot mode, with the exception of all our tourists, who drink the mojitos.”

With a new government in Ottawa, and the Americans ready to descend on Cuba, it is time for us to refresh the relationship and take advantage of an economy poised for takeoff, Mr. Entwistle said. “Canada has been gifted an asset, which is years of unbroken diplomatic relations. It is to this day recognized in Cuba. We get given space that we probably don’t deserve. We are given a hearing … But the goodwill has a half life [and] it has been ticking away for a long time.”

It may not be too late to take advantage of the relationship, but if Mr. Entwistle’s business in the United States is any indication, we need to get moving, and soon.

American business sees Cuba as a potential gold mine since the re-establishment of diplomatic relations and the lifting of some sanctions, he said. Havana is “humming and buzzing” with Americans ready to take advantage of the new relationship – but the U.S. trade embargo is still in place and it is unclear how the complex web of restrictions can be lifted without support in Congress.

Some potential U.S. investors are trying what Mr. Entwistle calls “crazy stuff” such as attempting to buy up beachfront property – even though it is owned by the state. But many others are making more cautious overtures.

The real game changer, he said, would be a further climb-down in travel restrictions, to allow general tourism from the U.S. – letting average Americans see the place for themselves. Some estimates suggest four million Americans would go in the first year after the ban is lifted – a tsunami of visitors Cuba could not handle at the moment.

Despite the U.S. business curiosity, Cubans are intent that a renewed domination of their economy by Americans will not occur, Mr. Entwistle said, and they are not prepared to revamp their political structures at the behest of the United States. Cubans are, psychologically, much more independent than they were before the revolution, he said. “They have discovered the value of their own assets, which they didn’t truly understand before.”

There will likely be some further political reforms after Raul Castro steps down as president in 2018, Mr. Entwistle said, including a move to a more representative government. But that will happen on Cuba’s own terms, and not in response to U.S. pressure. Indeed, he said, awkward U.S. efforts to use intelligence programs in Cuba to push for regime change – such as a recent attempt to get Cuban hip-hop artists to put anti-government content in their lyrics – is counterproductive.

In the meantime, Americans – or Canadians – who listen carefully to what the Cubans want in terms of economic development, and are patient in nurturing relationships on the island, could do very well there, he added.

Many Americans Mr. Entwistle takes to Cuba for the first time are “bug eyed” about what they see. “They have big saucer eyes, and they are usually quite nervous going in because they have been brought up believing it to be a prison camp,” he said. “Then they say ‘This a normal county. There are no tanks on the street.’ ”

Eventually, the American entrepreneurial instinct kicks in, Mr. Entwistle says. “The business guys’ antennas start bouncing like crazy. They say: ‘Oh my God … the opportunities here!’”

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Gary McMahon (IDRC), Ambassador Mark Entwisle, Francisco Leon, UN CEPAL) and Lourdes Tabares U de La Habana). at the inauguration of the Carleton University – University of Havana Masters Program in Economics, Havana, November 1993

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U.S. DEPARTMENT OF COMMERCE CUBA LICENSING POLICY REVISIONS

Wednesday, January 27, 2016

Agencies: and Department of Commerce and Bureau of Industry and Security

Dates: This rule is effective January 27, 2016.

The complete document is available here: Cuba Licensing Policy Revisions

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Summary

This rule amends the exceptions to the general policy of denial in the Export Administration Regulations (EAR) for exports and reexports to Cuba by identifying additional types of exports and reexports that are subject to a general policy of approval: items for safety of civil aviation and safe operation of commercial aircraft engaged in international air transportation, certain telecommunications and agricultural items, items to human rights organizations or individuals and non-governmental organizations that promote independent activity intended to strengthen civil society in Cuba, and items for use by U.S. news bureaus.

This rule also amends the exceptions to the general policy of denial in the EAR for exports and reexports to Cuba by identifying types of exports and reexports that will be reviewed to determine, on a case-by-case basis, whether such transactions meet the needs of the Cuban people, including exports and reexports for this purpose made to state-owned enterprises and agencies and organizations of the Cuban government that provide goods and services to the Cuban people. BIS is making these changes to further implement the Administration’s policy of empowering and engaging the Cuban people. This rule retains the prohibition on the export or reexport of items subject to the EAR to Cuba without a license or applicable license exception.

PART 746—[AMENDED]

 (2) Exports and reexports that generally will be approved. Applications for licenses to export or reexport the following generally will be approved:

(i) Telecommunications items that would improve communications to, from, and among the Cuban people;

(ii) Commodities and software to human rights organizations or to individuals and non-governmental organizations that promote independent activity intended to strengthen civil society in Cuba;

(iii) Commodities and software to U.S. news bureaus in Cuba whose primary purpose is the gathering and dissemination of news to the general public;

(iv) Agricultural items that are outside the scope of agricultural commodities as defined in part 772 of the EAR, such as insecticides, pesticides and herbicides, and agricultural commodities not eligible for License Exception AGR;

(v) Items necessary to ensure the safety of civil aviation and the safe operation of commercial aircraft engaged in international air transportation, including the export or reexport of such aircraft leased to state-owned enterprises; and

(vi) Items necessary for the environmental protection of U.S. and international air quality, waters, or coastlines (including items related to renewable energy or energy efficiency).

(3) Exports and reexports that may be authorized on a case-by-case basis. (i) Applications for licenses to export or reexport items to meet the needs of the Cuban people, including exports and reexports of such items to state-owned enterprises, agencies, and other organizations of the Cuban government that provide goods and services for the use and benefit of the Cuban people may be authorized on a case-by-case basis. This policy of case-by-case review includes applications for licenses to export or reexport items for:

(A) Agricultural production, artistic endeavors (including the creation of public content, historic and cultural works and preservation), education, food processing, disaster preparedness, relief and response, public health and sanitation, residential construction and renovation and public transportation;

(B) Wholesale and retail distribution for domestic consumption by the Cuban people; and

(C) Construction of facilities for treating public water supplies, facilities for supplying electricity or other energy to the Cuban people, sports and recreation facilities, and other infrastructure that directly benefits the Cuban people.

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HUMAN RIGHTS WATCH, 2016 WORLD REPORT 2015: CUBA

Original Report:  World Report 2016,  Cuba

zzzzzzzzzzCuban security personnel detain a member of the Ladies in White group after their weekly anti-government protest march, in Havana, on September 13, 2015.  Human Rights Watch, World Report: Cuba  2016

The Cuban government continues to repress dissent and discourage public criticism. It now relies less on long-term prison sentences to punish its critics, but short-term arbitrary arrests of human rights defenders, independent journalists, and others have increased dramatically in recent years. Other repressive tactics employed by the government include beatings, public acts of shaming, and the termination of employment.

In December 2014, President Barack Obama announced that the United States would ease restrictions on travel and commerce and normalize diplomatic relations with Cuba. In exchange, the Cuban government released 53 political prisoners and committed to allow visits by international human rights monitors. The two governments restored diplomatic relations in July 2015.

Arbitrary Detention and Short-Term Imprisonment

The government continues to rely on arbitrary detentions to harass and intimidate people who exercise their fundamental rights. The Cuban Commission for Human Rights and National Reconciliation, an independent human rights group that the government views as illegal, received more than 6,200 reports of arbitrary detentions from January through October 2015. While this represented a decrease from the number of detentions during the same 10-month period in 2014, it was still significantly higher than the number of yearly detentions prior to 2012.

Security officers virtually never present arrest orders to justify the detention of critics. In some cases, detainees are released after receiving official warnings, which prosecutors can use in subsequent criminal trials to show a pattern of delinquent behavior.  Detention is often used preemptively to prevent people from participating in peaceful marches or meetings to discuss politics. Detainees are often beaten, threatened, and held incommunicado for hours or days. Members of the Ladies in White (Damas de Blanco)—a group founded by the wives, mothers, and daughters of political prisoners and which the government considers illegal—are routinely harassed, roughed up, and detained before or after they attend Sunday mass.

Lazaro Yuri Valle Roca, a blogger and videographer who often covers the Sunday demonstrations of the Ladies in White, wrote that police arbitrarily detained him on June 7 and drove him 30 miles from Havana, where they took him from the car at gunpoint, made him kneel on the grass, and put the gun to his neck, telling him he was “on notice” to stay away from the demonstrations.

The artist Tania Bruguera was arrested on December 30, 2014, hours before her planned performance art piece in Havana’s Revolution Square, in which she was to have invited passersby to walk up to a podium and express themselves at a microphone for one minute. Security officials confiscated her passport and computer. Bruguera was released the following day but was detained and released twice more during the next two days. Cuban dissidents and independent journalists who had planned to attend the event—including Reinaldo Escobar, Eliecer Avila, and Antonio Rodiles—were also arrested on December 30. Bruguera was again detained in May during the 12th Havana Biennial Art Exhibition. She was released the same day.

On August 9, a few days before US Secretary of State John Kerry was to attend a ceremony to mark the opening of the US embassy in Havana, 90 people—including an estimated 50 Ladies in White—were arrested and detained after Sunday mass in the Havana neighborhood of Miramar during a peaceful march against political repression.

During the visit of Pope Francis in September, police detained some 100 to 150 dissidents to prevent them from seeing him. Miriam Leiva, a freelance journalist and blogger and a founder of the Ladies in White, was invited by the Papal Nuncio in Havana to greet the Pope twice, on September 19 and 20, but was detained for several hours each time, preventing her attendance.

Political Prisoners

Despite the release of the 53 political prisoners in conjunction with the agreement to normalize relations with the US, dozens more remain in Cuban prisons, according to local human rights groups. The government prevents independent human rights groups from accessing its prisons, and the groups believe there are additional political prisoners whose cases they cannot document.

Cubans who criticize the government continue to face the threat of criminal prosecution. They do not benefit from due process guarantees, such as the right to fair and public hearings by a competent and impartial tribunal. In practice, courts are subordinated to the executive and legislative branches, denying meaningful judicial independence.

Graffiti artist Danilo Maldonado, known as “El Sexto,” was arrested in December 2014 and charged with “contempt for authority” for attempting to stage a performance involving two pigs painted with the names “Raul” and “Fidel”—a satire of the current and former heads of state. He was released on October 20.

Freedom of Expression

The government controls virtually all media outlets in Cuba and restricts access to outside information, severely limiting the right to freedom of expression.

A small number of journalists and bloggers who are independent of government media manage to write articles for websites or blogs, or publish tweets. However, the government routinely blocks access within Cuba to these websites, and those who publish information considered critical of the government are subject to smear campaigns and arbitrary arrests, as are artists and academics who demand greater freedoms.  Only a fraction of Cubans are able to read independent websites and blogs because of the high cost of, and limited access to, the Internet. In July, Cuba increased Internet access by opening 35 Wi-Fi hot spots in parks and city boulevards nationwide. The US$2-an-hour Wi-Fi connection fee is expensive in a country where the average wage is approximately $20 a month.

Travel Restrictions and Family Separation

Reforms to travel regulations that went into effect in January 2013 eliminated the need for an exit visa to leave the island. Exit visas had previously been used to deny the right to travel to people critical of the government—and to their families. Since then, many people who had previously been denied permission to travel have been able to do so, including human rights defenders and independent bloggers.

Nonetheless, the reforms gave the government broad discretionary powers to restrict the right to travel on the grounds of “defense and national security” or “other reasons of public interest.” Such measures have allowed the authorities to deny exit to people who express dissent. For example, José Daniel Ferrer, the leader of the Patriotic Union of Cuba (Unpacu), was denied the right to travel abroad in August for “reasons of public interest,” authorities said.

The government restricts the movement of citizens within Cuba through a 1997 law known as Decree 217, which is designed to limit migration to Havana. The decree has been used to prevent dissidents from traveling to Havana to attend meetings and to harass dissidents from other parts of Cuba who live there.

Prison Conditions

Prisons are overcrowded. Prisoners are forced to work 12-hour days and punished if they do not meet production quotas, according to former political prisoners. Inmates have no effective complaint mechanism to seek redress, and those who criticize the government or engage in hunger strikes and other forms of protest are subjected to extended solitary confinement, beatings, restrictions on family visits, and denial of medical care.  While the government allowed select members of the foreign press to conduct controlled visits to a handful of prisons in April 2013, it continues to deny international human rights groups and independent Cuban organizations access to its prisons.

Labor Rights

Despite updating its Labor Code in 2014, Cuba continues to violate conventions of the International Labour Organization that it has ratified, specifically regarding freedom of association, collective bargaining, protection of wages and wage payment, and prohibitions on forced labor. While the formation of independent unions is technically allowed by law, in practice Cuba only permits one confederation of state-controlled unions, the Workers’ Central Union of Cuba.

Human Rights Defenders

The Cuban government still refuses to recognize human rights monitoring as a legitimate activity and denies legal status to local human rights groups. Government authorities harass, assault, and imprison human rights defenders who attempt to document abuses.

Key International Actors

In January, a month after announcing plans to normalize diplomatic relations with Cuba, President Obama called on the US Congress to lift the economic embargo of Cuba imposed more than four decades ago. The United Nations General Assembly has repeatedly called on the United States to end the embargo, most recently in October by a vote of 191 to two.

At time of writing, Cuba had yet to allow visits to the island by the International Committee of the Red Cross or by UN human rights monitors, as stipulated in the December 2014 agreement with the US.

The European Union continues to retain its “Common Position on Cuba,” adopted in 1996, which conditions full EU economic cooperation with Cuba on the country’s transition to a pluralist democracy and respect for human rights. After a meeting in April 2014 in Havana, EU and Cuban delegates agreed on establishing a road map for “normalizing” relations. A fifth round of negotiations towards an EU-Cuba Political Dialogue and Cooperation Agreement took place in Havana in September 2015, and a sixth round was scheduled for late November.

In November 2013, Cuba was re-elected to a regional position on the UN Human Rights Council, despite its poor human rights record and consistent efforts to undermine important council work. As a member of the council, Cuba has regularly voted to prevent scrutiny of serious human rights abuses around the world, opposing resolutions spotlighting abuses in North Korea, Syria, Iran, and Ukraine. However, Cuba supported a landmark resolution the council adopted in September 2014 to combat violence and discrimination based on sexual orientation and gender identity.

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WHY THE U.S. SHOULD EMBRACE THE RISE OF CUBA’S ENTREPRENEURS

Huffington Post 01/25/2016;

Original Article here: Cuba’s Entrepreneurs

Ted A. Henken, Former President of the Association for the Study of the Cuban Economy (ASCE) and Baruch College (CUNY) Professor

Cuentapropista (a Cuban entrepreneur) is a term that up until a few years ago would not have been used to describe a large sector of Cuba’s centralized and still heavily planned economy. But despite heavy odds, I have recently witnessed the proliferation of Cuban entrepreneurship and its positive effects on the Island. As a Yuma (a Cuban term of endearment referring to visiting Americans), I’ve seen Cuba’s “non-state” sector expand considerably, giving testimony to the entrepreneurial successes that everyday Cubans are achieving, and hunger to expand upon.

Engaging directly with Cuba’s entrepreneurial sector — while we push for an end to our pernicious trade embargo — allows us to remove the U.S. as the Cuban government’s bête noir and empower more Cubans to be the masters of their own fates. Some hardliners in the U.S. would argue that engaging any sector in Cuba is helping the monopolistic and undemocratic Cuban government consolidate its power. However, the last 50 years have shown that isolation has only aided the Cuban government in strengthening its monopolies while deflecting blame for its failing economy onto the U.S. embargo. Engagement with cuentapropistas, on the other hand, gives us the chance to begin to build relationships of trust and mutual benefit with the Cuban people.

In the face of constant economic instability and state control, cuentapropistas are the defining social and economic catalyst for Cuba’s future. They are men and women who display incredible motivation and creativity in their business ventures, and are willing to take risks, often at great personal cost. As a result, the burgeoning private sector is now one of the most productive areas of an otherwise failing economy.

In a fact sheet I recently released in partnership with Engage Cuba and the Cuba Emprende Foundation, we found that while Cuba has the most educated, low-cost labor force in the world, private sector opportunities for Cuban professionals continue to be severely limited. As a result, entrepreneurial Cubans have taken their fate into their own hands and are now estimated to be one-third of Cuba’s total workforce. The rate of self-employment has surged to new heights in the last five years, rising from just under 150,000 to over half a million cuentapropistas by mid-2015.

A surprising area of self-employment growth is in telecommunications. The chronic scarcities and bottlenecks caused by the lethal combination of state socialist planning and the U.S. embargo have resulted in the incubation of a true “maker” culture. Highly trained but underemployed computer programmers and telecom agents have started launching innovative start-ups like AlaMesa and Conoce Cuba or designing “lean” software and offline mobile apps for both a Cuban and international clientele. Aiming to encourage this dynamic phenomenon, new U.S. regulations issued by the Obama Administration during 2015 now allow the contracting of Cuba’s private sector IT and other professionals.

But don’t be fooled. There are still drastic internal barriers for motivated, business-minded Cubans. The tax structure is burdensome, the private sector is legally cut off from international trade (apart from imports and exports via “suitcase commerce”), and cuentapropistas enjoy little reliable access to wholesale goods, rental space, credit, or foreign investment. Basic infrastructure is woefully outdated, and Internet access — the driver of any modern business — is still very limited and costly. Perhaps this is why despite unprecedented growth over the past five years, the cuentapropista sector contracted for the first time in the second half of 2015, falling to 496,400 by January 2016.

There are also serious structural workforce issues. For example, every year over 4,000 information technology engineers graduate across the country, but there are a limited number of state positions available to them. Therefore, many of these graduates are forced to join the historic exodus of young professionals abroad in order to find an economic return on their educations.

The possibilities for these young entrepreneurs will be virtually limitless once the island is equipped with a modern telecommunications infrastructure — something that can be made possible with the help of American investment. But in order for U.S. telecommunication services and other businesses to help bring meaningful change in Cuba, Congress needs to lift the trade embargo.

Because while American entrepreneurs and businesses await an end to the embargo, both Americans and Cubans are missing out. It is estimated that the U.S. is currently forgoing 1.6 billion in potential sales to Cuba annually due to current policy. Americans from across political parties have duly noted this fact. According to a Pew Research Center report, 72 percent of Americans, including 59 percent of Republicans, favor ending the Cuban trade embargo.

It is ironic that many embargo supporters rightly critique the Cuban government for restricting the free market inside the Island while simultaneously supporting an embargo that unfairly restricts American businesses abroad and any benefits they could bring to Cuba’s struggling entrepreneurs and its people. By allowing Americans to bring business and investment to the Island, we will grow our own economy while supporting the Cuban people, including cuentapropistas, in the process.

henkenteaching_001_jpgTed A. Henken, Ph.D., is the President Ex-Officio of the Association for Study of the Cuban Economy (ASCE) and co-author of the book “Entrepreneurial Cuba: The Changing Policy Landscape.” Henken is a member of the Policy Council of Engage Cuba, a bipartisan organization dedicated to mobilizing American businesses and non-profit groups to support the ongoing U.S.Cuba normalization process.

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MORE AND MORE CAPITALIST CRACKS IN CUBA

Havana Times, Havana, January 20, 2016

Rogelio Manuel Diaz Moreno

Original article here: http://www.havanatimes.org/?p=116209

Cuba April 2015 213 Cuba April 2015 222

HAVANA TIMES — At the close of 2015, a journalist for Cuba’s Juventud Rebelde newspaper reported that a slight decrease in food product prices had been seen the previous year. The regular contributors and readers of Havana Times then expressed their bewilderment, what with all of the evidence against such a claim.

Many media sites – with greater or lesser candor, depending on their nature – continue to address Cuba’s soaring living costs. Concerns have reached such extremes that a decision to adopt emergency measures was made at the last parliamentary session. This was done when Cuba’s official media sought to deliver the good news that the island’s GDP had grown by 4 %.

Readers will likely recall the oft-repeated government promise that increased production would bring about a drop in prices. No few of us have criticized such claims for their total lack of objectivity.

Personally, I find most statements on the subject made in the news, and the attitude of members of parliament, rather depressing. The reason is simple: the fact they beat around the bush on this matter and show no willingness to acknowledge its true nature. We are encouraged not to become informed about or study the issue, which, to be sure, isn’t that complicated. It’s capitalism, plain and simple.

Though lacking in the talents of the great experts in political economy, we have pointed to a number of basic truths about this situation in previous posts. Those who boast of being Marxists ought to know these well, and they have been confirmed time and time again. As long as such realities aren’t acknowledged, the tired spiels of politicians, the beating of chests by leaders and the appeal to the conscience of workers will be for naught.

I don’t question the growth figures offered by the authorities. Given certain, positive external conditions, an economy based on liberal market mechanisms can indeed grow in macroeconomic terms. And that’s what we’ve had here: cheap imported raw materials, financial arrangements and favorable credit and a considerable softening of the US embargo/blockade. In the case of tourism, this is reflected in the 30% rise in number of visitors. Throw a domestic policy of deregulation into the mix and you’ve got an excellent recipe for growth…capitalist growth, that is.

Because of its very nature, the benefits afforded by this type of growth cannot reach working people, which make up the majority of the population. This is the first point we’ve drawn attention to.

Production has grown and supply has grown with it. They have grown because the policies implemented have lifted certain restrictions that had hitherto been applied. These same policies, however, have produced a specific type of supply side growth, the type that accompanies the growth of demand. More money has flowed into Cuba and a privileged class capable of paying higher prices (and thus raising the standard of living) has flourished.

Have a look, for instance, at Havana’s neighborhood of Miramar. The nouveaux riches have taken up all vacant spaces with their bourgeoning mansions. A good many restaurants have been established, where a single meal costs everything I make in a month (which is twice the average salary). Those restaurants aren’t aimed at people like me, but they have regular customers.

The products and services offered by the State also do not favor a decrease in prices. An employee of ETECSA – Cuba’s telecommunications monopoly – told a journalist that many customers, particularly young ones, ask for cutting-edge equipment, those that cost eight or ten Cuban salaries put together. I walk by these people in public outdoor Internet navigation areas. Despite the many shortcomings of the service, they pay two to three days of my wages to use it. Other basic products have circulation and added value taxes that prove prohibitive.

There’s more money in circulation thanks to remittances, foreign investment, tourism and the new entrepreneurial class. The State itself now has more resources, but its control mechanisms are as inadequate as always – in other words, there’s more to be misappropriated. There isn’t more social justice, there’s just more solvency.

To remain objective and avoid neglecting the positive side to this, the health sector carried out wage adjustments (mostly nullified by inflation). I am also aware of other investments aimed at improving medical services, albeit with many internal deficiencies. These measures, however, are far from satisfying all of the people’s needs, and most people do not spend their entire week at the hospital. As another Havana Times contributor reports, there are other, parallel measures aimed at cutting back on activities, spending and wages.

Thus, within the space of the private economy, the law of supply and demand simply establishes a price balance. We are flooded with complaints about the hoarding of goods, speculation, and monopolistic maneuvers by entrepreneurs to optimize profits at the expense of customers. These are all natural mechanisms inherent to the market and the blessed supply and demand system. We must set aside naivety. Quite simply, that is the explanation offered us by the whole range of political economy theories. You don’t play “nice” in capitalism.

In this context, to say that “Cuba is a socialist country and cannot function that way” constitutes a naive abstraction. What determines the functioning of a socio-economic system are its productive forces and its relations of production, not mere words. “The State has to intervene, regulate prices and fine infractions” – these are calls to return to measures that have been proven to be ineffective time and time again. Popular discontent has again bubbled up to the surface and politicians have revisited the demagogic attitudes of claiming to protect them from the demon they have set lose with their reforms.

What were the consequences of the lastest attempt to regulate food prices? Understocking, which is music to the ears of the black market. If there’s something that’s worse than the “free” market, it is intervention by a bureaucratic apparatus and corruptible officials (inspectors and their underlings).

In short, Cuba’s growth is visible, but this growth is not for everyone, not even the majority. The new game has new rules and the winners walk away with everything. The most painful thing will be the growth of inequality and the impoverishment of the working majorities without access to the new sources of wealth.