• 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.

CUBA WELCOMES “NORMALIZATION,” BUT ONLY ON ITS OWN TERMS

January 26, 2015

By Eric Hershberg

Original here: ON ITS OWN TERMS

Cuba Apr 2012 069.jpgAADown La Rampa, Photo by Arch Ritter.

Cuban President Raúl Castro is undoubtedly as serious about normalizing diplomatic ties as President Barack Obama is, but the island’s government arguably faces more pressing challenges than working out the details of a rapprochement with Washington. Commentators have observed that after the initial euphoria following the December 17 announcement, officials now speak of a long road ahead. Full normalization, while welcome, is not the foremost concern of Cuban policymakers. The paramount objective of Cuban authorities is the survival of the revolution and the one-party state that it engendered. Top diplomats reiterated on January 23, after the first round of talks in Havana, that there will be no concessions to continued American insistence on changes in Cuba’s domestic political arrangements.

Economic revitalization is imperative. Despite the reforms introduced by Castro, the Cuban economy remains woefully unproductive, incapable of meeting the needs of its citizenry or generating the foreign exchange that any small island developing state requires to import goods that it cannot produce domestically. Growth rates are anemic, reaching only 1.3 percent in 2014, and independent projections call into question last month’s official announcements predicting 4 percent expansion during 2015. Agriculture remains stagnant despite reforms aimed at putting fallow lands to productive use, so imports of food account for $2 billion in the extremely tight state budget put forth for 2015. The severe shortage of cash, moreover, impedes public investment in Cuba’s crumbling infrastructure, which hinders autonomous producers from securing vital inputs for their businesses or distributing what they produce. Ideally, foreign investment would supply resources where domestic sources cannot, but for the most part this is not happening either. A 2013 foreign investment law has to date yielded little fresh capital: European and other investors with experience on the island explain privately that the conditions for conducting business are such that they are reluctant to commit good money after bad. The new changes in U.S. regulations may produce some increase in investment flows – primarily in the form of remittances from Cuban Americans to families and friends – and thus continue to provide some economic oxygen, but the likely scale of these flows should not be overestimated. Washington’s new regulations seem likely to continue blocking investments that could increase the Cuban state’s ability to develop the infrastructure necessary to promote economic growth.

Because the intertwined goals of state security and economic revitalization are paramount, Havana’s engagement with the United States will be conditioned on its compatibility with those objectives. Critics of the American opening who lambast Barack Obama for acceding to a deal with minimal Cuban concessions are right that Havana did not abandon its position that its political system is non-negotiable. If by joining the rest of the western hemisphere in acknowledging the Cuban state Washington embarks on a path that will fuel economic activity in Cuba, the two countries will proceed, however gradually, away from confrontation. The trajectory of U.S. relations with China and Vietnam in recent decades offers an instructive precedent for how this can be achieved and be mutually beneficial. But if the Americans perceive greater engagement with Cuba as a tool for regime change, or strive to limit financial flows exclusively to private actors, their Cuban counterparts naturally will limit the scope of interaction. A new round of State Department solicitations for bids to conduct democracy promotion activities in Cuba, like the U.S. negotiators’ insistence last week on getting a photo-op with dissidents before heading back to Washington, suggest that this message has yet to be absorbed by American officials.

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CUENTAPROPISMO EN CUBA Y LAS IMPORTACIONES DESDE EEUU PARA CUBA

By Nora Gámez Torre

elnuevoherald.com, 22 January 2015

Original here: Cuentapropismo, Importaciones, Normalizacóin

La lista que el Departamento de Estado está confeccionando con bienes y servicios ofrecidos por empresarios cubanos privados que podrán ser importados en los Estados Unidos será amplia para estimular la creatividad de los “cuentapropistas” y el interés del gobierno de la isla por ampliar sus exportaciones, dijo una fuente que ha tenido acceso al borrador del documento.

Las nuevas regulaciones que comenzaron a regir el 16 de enero prevén el apoyo a los pequeños negocios, pero el Departamento de Estado debe decidir quiénes estarán comprendidos dentro de este sector privado y cuáles serían los productos a importarse desde la isla.

Una de las mayores limitaciones de la política económica actual respecto al “cuentapropismo”, como se designa el trabajo privado en la isla, es que de las 201 actividades ahora permitidas por el gobierno de Raúl Castro, la mayoría son oficios que requieren poca capacitación e infraestructura tecnológica —“vendedor ambulante de alimentos”, “rellenador de fosforeras” y “barberos” son algunos ejemplos— y el espacio para el empleo de profesionales es mínimo.

Por eso la fuente consultada por el Nuevo Herald cree que el Departamento de Estado no confeccionará la lista a partir de la legislación vigente, sino que intentará “abrir la puerta lo más amplia posible, para que sea el gobierno cubano el que decida si va a eliminar los obstáculos a los empresarios y, si esto no sucede, que ellos sepan que es por culpa del bloqueo interno”.

En la lista, que iría cambiando a partir de las dinámicas en Cuba, estarían incluidos servicios profesionales de traducción, programación o de construcción que no están autorizados actualmente en Cuba, por lo que se trata de “anticiparse un poco al futuro”, agrega.

Consultado al respecto, el profesor de Sociología de Baruch College, Ted Henken, cree que este enfoque es positivo pero “la gran pregunta es si esto tendrá impacto o si el gobierno cubano permitirá este intercambio”.

El profesor de Economía de la Universidad de Carleton en Canadá, Archibald Ritter, comentó a el Nuevo Herald que uno de los principales obstáculos para que Estados Unidos pueda apoyar a la empresa privada es el monopolio que tiene el estado sobre las importaciones y las exportaciones.

En las nuevas regulaciones, también se autoriza la exportación a Cuba de materiales de la construcción, herramientas y maquinaria agrícola a los cuentapropistas, pero según Ritter “esto requiere cambios en el monopolio del estado sobre el comercio exterior”, pues actualmente no existe un mecanismo que permita que los empresarios privados puedan importar o exportar. Tampoco existe un mercado mayorista donde ellos puedan adquirir sus insumos.

En la nota de la Agencia de Información Nacional sobre las nuevas regulaciones, el único reporte que fue publicado en todos los medios nacionales, no se hace referencia a la posibilidad de exportación de productos cubanos hacia Estados Unidos, provenientes del sector privado.

También se hace notar que “se mantienen las restricciones a las exportaciones de Estados Unidos a Cuba, especialmente de productos de alta tecnología, con excepción de limitadas ventas de materiales de construcción, equipos e implementos agrícolas que se permitirán realizar a particulares, al parecer a través de empresas cubanas”.

Y según la fuente consultada por el Nuevo Herald, el Departamento de Estado estaría considerando utilizar a una empresa estatal cubana como intermediaria, si se ofrecen garantías de que los productos y materias primas llegarán a manos de los cuentapropistas.

Presentación de libro sobre cuentapropismo en Cuba

Ritter y Henken son expertos en el tema y publicaron una investigación sobre el cuentapropismo titulada Cuba empresarial: un contexto de políticas cambiantes, que será presentada el viernes en la libraría Books and Books a las 6:30 pm, un evento auspiciado por el Cuban Research Institute de la Universidad Internacional de la Florida.

En el libro, en el que realizan una comparación entre las políticas de Fidel y Raúl Castro sobre la empresa privada, Ritter y Henken hacen un balance del estado de esa actividad en la isla y advierten de los altos impuestos, y la “discriminación” en términos fiscales que favorece a empresas mixtas con capital extranjero.

Si la liberalización del cuentapropismo tenía como objetivo absorber el millón de trabajadores de la economía estatal que Raúl Castro consideró como “redundantes”, a los que se les llama eufemísticamente como “disponibles”, los autores del libro concluyen que esta meta no ha sido alcanzada. Más bien, argumentan, el cuentapropismo ha venido a legalizar muchas actividades que trascurrían en el mercado informal.

Aunque según estadísticas del Ministerio de Trabajo y Seguridad Social hasta septiembre del 2014, el número de empleados en estas actividades aumentó a 471,085 en todo el país, cifras de la capital hasta marzo de ese mismo año indicaban que solo 63 de los cuentapropistas registrados habían perdido sus empleos (“disponibles”). El 15 por ciento de los cuentrapropistas habaneros eran también trabajadores estatales mientras que el 63 por ciento, cerca de 80,000, no tenían “vínculo laboral previo”, según publicó el portal oficial Cubadebate.

Los autores señalan que aunque en la prensa se ha comenzado a eliminar el estigma en torno a la empresa privada, el cierre de negocios exitosos, sobre todo paladares, apunta a que la acumulación de capital todavía no es bien vista por las autoridades.

Ritter y Henken concluyen que aunque la reforma de Raúl Castro ha sido significativa, “no es suficiente” para promover el desarrollo económico a gran escala y que medidas que permitan un mayor protagonismo de la diáspora así como mayores garantías y beneficios a la pequeña y mediana empresa son indispensables.

 More Cuenta Propistas

Cuba Mar 2014 036 - Copy Cuba Mar 2014 040 - Copy Cuba Mar 2014 056 Cuba Mar 2014 080 Cuba Mar 2014 096

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U.S.-CUBA RELATIONS: ENTERING A TESTING PERIOD

Arturo Lopez Levy, University of Denver

 Huffington Post, January 19, 2015

Original here: TESTING PERIOD

In August 2010, Cuban Roman Catholic Cardinal Jaime Ortega went to Washington and shared with many a message he heard directly from Raul Castro:

He repeated to me on several occasions that he is ready to talk to the United States government directly, about every issue.”

This message was music to the ears of many U.S. foreign-policy officials and politicians who were convinced the time had come to bring American relations with Cuba into the post-Cold War 21st century. It took more than four years for the promise of Ortega’s message to be fulfilled.

Last December 16, Raul Castro and Barack Obama had a direct phone call to discuss the general situation of the relations between Cuba and the United States. The two presidents agreed to a spy-swap accompanied by some Cuban humanitarian gestures to release USAID subcontractor Alan Gross and 53 prisoners confined for different reasons in Cuban jails. Most importantly, they also agreed to re-establish diplomatic relations between the two countries. President Obama asked Secretary Kerry to conduct a non-ideological assessment likely to lead to Cuba’s removal from the State Department list of Terrorism Sponsoring Nations. President Obama negotiated with Cuba “chivalrously, not like a shyster” as Henry Kissinger recommended to his diplomats in 1975.

President Obama’s December 17 discourse undermined the basis of the embargo policy. Obama introduced a new American official narrative about Cuba. He discussed Cuba’s situation not as a threat to U.S. national security but as a country in a transition the United States should support. President Obama also acknowledged that “It does not serve America’s interests, or the Cuban people, to try to push Cuba toward collapse.” He discussed several initiatives to help Cuba’s growing non-state economic sectors and wide-range civil-society groups, not only those in the political opposition.

This is a significant departure from the course U.S. policy has followed for almost six decades, but actions must now be undertaken by both countries to make these changes durable and real.

A strategic and realistic view of U.S-Cuba engagement

Cuba and the United States need to develop a strategic view of the process their presidents launched on December 17, 2014. A crucial issue, perhaps the crucial issue, is how to neutralize those opposed to the dismantlement of the hostility structures at both sides of the Strait of Florida. There are powerful spoilers in key positions such as Senator Marco Rubio, who will now chair the Senate Foreign Relations Subcommittee for Western Hemisphere Affairs. Rubio and anti-normalization of relations groups in Miami and Havana are already trying to trigger a crisis to roll back the rapprochement and return to the old patterns of hostility and isolation.

The Obama Administration should not restrain itself from partnering with Cuba to make the agreement stick. Cuban officials have historic reasons to suspect about American intention and see plots everywhere. Good communications from Washington clarifying when plots have nothing to do with the Administration can help to diminish spoilers’ political influence. One big issue to watch is the democracy-promotion program. Washington should not apologize for defending its democratic values but the Secretary of State can provide responsible guidelines to shape these programs into less intrusive practices that are more in line with international law.

On the other side, Cuba has a complex track record of managing thorny provocations by anti-normalization Miami groups. The shooting down of the Brothers to the Rescue planes in 1996 demonstrated the Cuban military’s lack of understanding about the U.S. political debate in that electoral year. Bill Clinton wrote in his memoirs: “I later received word from Castro — indirectly of course — that the shoot down was a mistake. Apparently he had issued earlier orders to fire on any aircraft that violated Cuban airspace and had failed to withdraw them when the Cubans knew the Brothers to the Rescue were coming.”

Cuba needs to be pro-active rather than reactive, not only toward the United States actors but also empowering independent civil-society groups. A vibrant autonomous community, separated from U.S. regime-change policy but independent from the Cuban Communist Party (CCP), would be the best alternative to the pro-embargo small opposition groups who count on a Cuban government’s repressive response to their provocations for derailing the process.

It is important to translate into the two societies’ gains, the opening steps taken by their governments. People-to-people exchanges are the most resilient bond connecting two countries. Economic interdependence, educational programs, travel, religious communities’ contacts, and family ties are building blocks of a durable relationship. Whether American and Cuban policymakers can make the December 17 changes irreversible will depend on how their regulations motivate and empower pressures from different U.S. constituencies to liberalize cross-Strait relations.

The best way to reinforce Obama’s discourse about a Cuba in transition is to advance, as much as it is safely possible, toward a more efficient market-based mixed economy and establish economic ties and trade with the U.S. private sector. One important new development is Obama’s announcement of a license to export U.S. agricultural machinery for Cuba’s private sector. The Cuban government should prepare legislation and infrastructure to eliminate red tape and unnecessary regulations of the private sector’s importation of agricultural machinery.

A stable move to a pluralist and open political society is also in line with Cuba’s national interests and international human-rights standards. Cuba’s internal political discussion is today more open than ever since 1961, except on the issue of the one-party system. There is a widely spread civil society of intellectuals, religious communities and second-culture publications, think tanks, and rights advocates interested in responsibly expanding the representation and competitiveness of the political system without opening the door to embargo advocates.

Decentralization — planned by the CCP since 2011 — can be a major democratization step by transferring power from the center to the municipalities and provinces.

There are a few strongly symbolic steps Cuba can take in its foreign policy. Havana could establish diplomatic relations with Israel and South Korea, helping to have a more balanced Latin American attitude toward these two American allies located in key strategic regions. Cuba can also use the Summit of the Americas to join at least some parts of the Inter-American system, such as the Inter-American Committee against Terrorism and the Inter-American Drug Abuse Control Commission. These steps are not an abandonment of any nationalist principle but could demonstrate that Cuba is — to use Kissinger’s words about Iran — “more a country than a revolutionary cause.” A nationalist Cuba, focused on economic development, is not incompatible with a U.S.-led world order.

The time between now and the Summit of the Americas in April 2015 is a critical juncture for rapprochement chances. The immoral, illegal and counterproductive U.S. embargo remains in place, harming Cuba’s chances for economic reform and political liberalization. No one expects that Cuba would become a model democracy overnight. The Cuban Communist Party is not committed yet to the universal human rights as they are written in international conventions. But a Rubicon was crossed by the two presidents in December 17, 2014. U.S.-Cuba relations are still far from optimal, but they have never had a more promising framework since President Carter departed from the White House in 1981.

This post is part of a Huffington Post blog series called “90 Miles: Rethinking the Future of U.S.-Cuba Relations.” The series puts the spotlight on the emerging relations between two long-standing Western Hemisphere foes and will feature pre-eminent thought leaders from the public and private sectors, academia, the NGO community, and prominent observers from both countries. Read all the other posts in the series here.

Cuba Mar 2011 111

A New Day Dawns at the US Interest Section Embassy in Havana

Cuban_interest_section_dcAnd at the Cuban Interest Section  Embassy in Washington

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NOW THAT WASHINGTON HAS BEGUN TO DISMANTLE ITS TRADE EMBARGO, HAVANA MUST END ITS INTERNAL EMBARGO AGAINST ISLAND ENTREPRENEURS

Ted A. Henken, Associate Professor of Sociology and Latin American Studies at Baruch College, New York City, and, Archibald R.M. Ritter, Economics and international Affairs,  Carleton University,  Ottawa

Huffington Post, January 20, 2015

Original Article here: INTERNAL EMBARGO

In scores of interviews conducted over the past 15 years with Cuban entrepreneurs, we often heard the following saying: “El que tenga tienda que la atienda, o si no que la venda” (Whoever has a store should tend to it, and if not then sell it). This pungent adage demands that the government turn over to Cuba’s burgeoning private sector those economic activities it cannot operate effectively itself — many of which are already widely practiced in Cuba’s ubiquitous underground economy.

In other words, the U.S. embargo — recently dealt a near-fatal blow by the joint decision by Presidents Barack Obama and Raúl Castro to reestablish diplomatic relations after almost 54 years — is hardly the principal “blockade” standing in the way of Cuba’s economic revitalization. Though the American “bloqueo” has long been the target of withering and well-deserved international condemnation, on the island Cubans themselves are much more likely to criticize what they bitterly refer to as the “auto-bloqueo” (internal embargo) imposed by the Cuban government itself on the entrepreneurial ingenuity and basic civil and political rights of the Cuban people.

While it is good and necessary for the United States to open up to Cuba and vice versa (to paraphrase the late Pope John Paul II), little economic progress or political freedom will be enjoyed by Cubans themselves until the Cuban government opens up to its own people, ceases to demand their acquiescence as subjects, and begins to respect them as citizens, consumers and entrepreneurs with defensible and inalienable economic and political rights of their own.

In fact, two weeks following the historic mid-December Obama-Castro announcement, the Cuban government received its first public test of whether its internal embargo would now be relaxed in light of the sea-change in U.S. policy. On December 30, 2014, the internationally renowned Cuban artist Tania Bruguera organized a public act of performance art in Havana’s iconic Revolutionary Plaza. Dubbed “#YoTambienExijo,” Bruguera invited Cuban citizens to “share their own demands” on the government for one minute each at an open-mic set up in the Plaza.

Predictably, the government responded by arresting and detaining scores of artists, activists and independent journalists, which amounted to an even more public “performance” of its own typically repressive tactics, as news of the event echoed in the international media on the final day of the year. Thus, while we can celebrate the fact that the U.S. and Cuban governments have finally agreed to begin respectful, diplomatic engagement, the Cuban government’s failure to respectfully engage with the diverse and often dissenting voices of its own citizens makes us wonder with Bruguera whether “it’s the Cuban people who will benefit from this new historic moment,” as she put it in her open letter to Raúl Castro.

Before 2006, President Fidel Castro pursued an economic policy retrenchment that gradually phased out the pro-market reforms of the early-1990s, indicating that he was more aware of the political risks that popular entrepreneurship would pose to his centralized political control than of the economic benefits it could provide. Therefore, he was unwilling to transfer more than a token portion of the state “tienda” to private entrepreneurs. However, his brother Raúl Castro, whose presidency began in 2006, has begun to heed the popular wisdom cited above and deliberatively shrink the state “store,” transferring the production of many goods and services to small private and cooperative enterprises. In fact, the number of Cuba’s licensed self-employed has grown from less than 150,000 in 2010 to half-a-million today.

Still, much more needs to be done so that Cuban entrepreneurs can contribute fully to economic growth. For example, 70 percent of the newly self-employed were previously unemployed, meaning that they simply likely converted their clandestine enterprises into legal ones doing little to absorb the 1.8 million workers slated for layoff from the state sector. Moreover, only seven percent of self-employed are college graduates and most them work in low-tech activities because almost all professional self-employment is prohibited. This acts as an effective “blockade” on the productive use of Cuba’s well-educated labor force.

Effectively “ending the embargo” against Cuban entrepreneurs and facilitating the emergence of cooperative and small-enterprise sectors will require deeper, more audacious reforms. Among these changes is

  • opening the professions to private enterprise;
  • implementing affordable wholesale and credit markets;
  • ending the fiercely guarded state monopoly on imports, exports and investment;
  •  permitting the establishment of retailing enterprises; and
  • relaxing the tax burden on small enterprise, which currently discriminates against domestic enterprises in favor of foreign firms.

 Progress in all these areas would be greatly facilitated by access to U.S. investors and markets, which will soon become possible as Obama’s historic policy changes are implemented during 2015.

However, does Raúl have the political will to double-down on his reforms? The prohibition of activities the government prefers to monopolize allows it to exercise control over Cuban citizens and impose an apparent order over society. However, this comes at the cost of pushing all targeted economic activity (along with potential tax revenue) back into the black market — where much of it lived prior to 2010. On the other hand, the legalization and regulation of the many private activities dreamed up and market-tested by Cuba’s inventive entrepreneurial sector would create more jobs, a higher quality and variety of goods and services at lower prices, while increasing tax revenue. However, these benefits would come at the cost of allowing greater autonomy, the concentration of wealth and property in private hands, and open competition against long-protected state monopolies.

This post is part of a Huffington Post blog series called “90 Miles: Rethinking the Future of U.S.-Cuba Relations.” The series puts the spotlight on the emerging relations between two long-standing Western Hemisphere foes and will feature pre-eminent thought leaders from the public and private sectors, academia, the NGO community, and prominent observers from both countries. Read all the other posts in the series here.

Cuba Mar 2014 005

Photographer with museum quality camera at the front of the Capitolio

Cuba Mar 2014 038

Restaurant Metropolis, 19 y “L”, Vedado,  with its menu on display  (below)

Cuba Mar 2014 039 Cuba Mar 2014 042

Bicytaxis

Cuba Mar 2014 050

Vegetable and Fruit Vendor, Central Havana

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FACT SHEET: TREASURY AND COMMERCE ANNOUNCEMENT OF REGULATORY AMENDMENTS TO THE CUBA SANCTIONS

U.S. Treasury Department, Office of Public Affairs

EMBARGOED FOR 9:00 AM EST:  January 15, 2015

CONTACT:  Hagar Chemali, Treasury Public Affairs (202) 622-2960                  

FACT SHEET: TREASURY AND COMMERCE ANNOUNCEMENT OF REGULATORY AMENDMENTS TO THE CUBA SANCTIONS

 Amendments Implement Changes Announced by the President on December 17 Related to the Easing of Cuba Sanctions

WASHINGTON – On December 17, 2014 the President announced a set of diplomatic and economic changes to chart a new course in U.S. relations with Cuba and to further engage and empower the Cuban people.  The U.S. Department of the Treasury and the U.S. Department of Commerce today are announcing the forthcoming publication of the revised Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR), which implement the changes announced on December 17 to the sanctions administered by Treasury’s Office of Foreign Assets Control (OFAC) and Commerce’s Bureau of Industry and Security (BIS).  The changes take effect tomorrow, when the regulations are published in the Federal Register.

 These measures will facilitate travel to Cuba for authorized purposes, facilitate the provision by travel agents and airlines of authorized travel services and the forwarding by certain entities of authorized remittances, raise the limits on and generally authorize certain categories of remittances to Cuba, allow U.S. financial institutions to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions, authorize certain transactions with Cuban nationals located outside of Cuba, and allow a number of other activities related to, among other areas, telecommunications, financial services, trade, and shipping.  Persons must comply with all provisions of the revised regulations; violations of the terms and conditions could result in penalties under U.S. law.

To see the Treasury regulations, which can be found at 31 Code of Federal Regulations (CFR), part 515, please see here.  To see the Commerce regulations, which can be found at 15 CFR parts 730-774, please see here.  The regulations will be effective as of Friday, January 16. Major elements of the changes in the revised regulations include:

Travel –

  • In all 12 existing categories of authorized travel, travel previously authorized by specific license will be authorized by general license, subject to appropriate conditions.  This means that individuals who meet the conditions laid out in the regulations will not need to apply for a license to travel to Cuba.
  • These categories are: family visits; official business of the U.S. government, foreign governments, and certain intergovernmental organizations; journalistic activity; professional research and professional meetings; educational activities; religious activities; public performances, clinics, workshops, athletic and other competitions, and exhibitions; support for the Cuban people; humanitarian projects; activities of private foundations or research or educational institutes; exportation, importation, or transmission of information or information materials; and certain authorized export transactions.
  • The per diem rate previously imposed on authorized travelers will no longer apply, and there is no specific dollar limit on authorized expenses.  Authorized travelers will be allowed to engage in transactions ordinarily incident to travel within Cuba, including payment of living expenses and the acquisition in Cuba of goods for personal consumption there.
  • Additionally, travelers will now be allowed to use U.S. credit and debit cards in Cuba.

 Travel and Carrier Services

  • Travel agents and airlines will be authorized to provide authorized travel and air carrier services without the need for a specific license from OFAC.

Insurance –

  • U.S. insurerswill be authorized to provide coverage for global health, life, or travel insurance policies for individuals ordinarily resident in a third country who travel to or within Cuba.  Health, life, and travel insurance-related services will continue to be permitted for authorized U.S. travelers to Cuba.

 Importation of Goods

  • Authorized U.S. travelers to Cuba will be allowed to import up to $400 worth of  goods acquired in Cuba for personal use.  This includes no more than $100 of alcohol or tobacco products.

Telecommunications –

  • In order to better provide efficient and adequate telecommunications services between the United States and Cuba, a new OFAC general license will facilitate the establishment of commercial telecommunications facilities linking third countries and Cuba and in Cuba.
  • The commercial export of certain items that will contribute to the ability of the Cuban people to communicate with people within Cuba, in the United States, and the rest of the world will be authorized under a new Commerce license exception (Support for the Cuban People (SCP)) without requiring a license.  This will include the commercial sale of certain consumer communications devices, related software, applications, hardware, and services, and items for the establishment and update of communications-related systems.
  • Additional services incident to internet-based communications and related to certain exportations and reexportations of communications items will also be authorized by OFAC general license.

 Consumer Communications Devices –

  • Commercial sales, as well as donations, of the export and reexport of consumer communications devices that enable the flow of information to from and among the Cuban peoplesuch as personal computers, mobile phones, televisions, memory devices, recording devices, and consumer software – will be authorized under Commerce’s Consumer Communication Devices (CCD) license exception instead of requiring licenses.

 Financial Services

  • Depository institutions will be permitted to open and maintain correspondent accounts at a financial institution that is a national of Cuba to facilitate the processing of authorized transactions.
  • U.S. financial institutions will be authorized to enroll merchants and process credit and debit card transactions for travel-related and other transactions consistent with section 515.560 of the CACR.  These measures will improve the speed and efficiency of authorized payments between the United States and Cuba.

 Remittances –

  • The limits on generally licensed remittances to Cuban nationals other than certain prohibited Cuban Government and Cuban Communist Party officials will be increased from $500 to $2,000 per quarter.
  • Certain remittances to Cuban nationals for humanitarian projects, support for the Cuban people, or development of private businesses will be generally authorized without limitation.  These general licenses will allow remittances for humanitarian projects in or related to Cuba that are designed to directly benefit the Cuban people; to support the Cuban people through activities of recognized human rights organizations, independent organizations designed to promote a rapid, peaceful transition to democracy, and activities of individuals and non-governmental organizations that promote independent activity intended to strengthen civil society in Cuba; and to support the development of private businesses, including small farms.
  • Authorized travelers will be allowed to carry with them to Cuba $10,000 in total family remittances, periodic remittances, remittances to religious organizations in Cuba, and remittances to students in Cuba pursuant to an educational license.
  • Under an expanded general license, banking institutions, including U.S.-registered brokers or dealers in securities and U.S.-registered money transmitters, will be permitted to process authorized remittances to Cuba without having to apply for a specific license.

Third-Country Effects

  • U.S.-owned or -controlled entities in third countries, including banks, will be authorized to provide goods and services to an individual Cuban national located outside of Cuba, provided the transaction does not involve a commercial exportation of goods or services to or from Cuba.
  • OFAC will generally authorize the unblocking of accounts of Cuban nationals who have permanently relocated outside of Cuba.
  • OFAC is issuing a general license that will authorize transactions related to third-country conferences attended by Cuban nationals.
  • In addition, a general license will authorize foreign vessels to enter the United States after engaging in certain trade with Cuba.

Small Business Growth –

  • Certain micro-financing projects and entrepreneurial and business training, such as for private business and agricultural operations, will be authorized.
  • Also, commercial imports of certain independent Cuban entrepreneur-produced goods and services, as determined by the State Department on a list to be published on its website, will be authorized.

 “Cash in Advance” –

  • The regulatory interpretation of “cash in advance” is being redefined from “cash before shipment” to “cash before transfer of title to, and control of,” the exported items to allow expanded financing of authorized trade with Cuba.

 Supporting Diplomatic Relations and USG Official Business –

  • The President announced the reestablishment of diplomatic relations with Cuba.  To facilitate that process, OFAC is adding a general license authorizing transactions with Cuban official missions and their employees in the United States.
  • In addition, in an effort to support important U.S. government interests, an expanded general license will authorize Cuba-related transactions by employees, grantees, and contractors of the U.S. government, foreign governments, and certain international organizations in their official capacities.

Support for the Cuban People –

  • Exports and reexports to provide support for the Cuban people in three areas:  improving living conditions and supporting independent economic activity; strengthening civil society; and improving communications – will be eligible under Commerce’s SCP license exception.
  • To improve living conditions and support independent economic activity, SCP will authorize: (1) building materials, equipment, and tools for use by the private sector to construct or renovate privately-owned buildings, including privately-owned residences, businesses, places of worship, and building for private sector social or recreational use; (2) tools and equipment for private agricultural activity; and (3) tools, equipment, supplies, and instruments for use by private sector entrepreneurs.
  • To strengthen civil society, SCP will authorize export and reexport of donated items and temporary export and reexport by travelers to Cuba of items for use in scientific, archaeological, cultural, ecological, educational, historic preservation, or sporting activities.  SCP will also authorize exports and reexports to human rights organizations, individuals, or non-governmental organizations that promote independent activity intended to strengthen civil society.
  • Travelers will also be able to export temporarily items for use in professional research in the traveler’s profession or full time field of study under SCP.  The activities or research must not be related to items on the United States Munitions List or items controlled for sensitive reasons on the Commerce Control List.
  • To improve communications, SCP will authorize exports and reexports of items for use by news media personnel and U.S. news bureaus.
  • SCP will not authorize the export of items on the Commerce Control List for sensitive reasons such as national security, nuclear proliferation, regional stability, missile technology, and other reasons of similar sensitivity.

Gift Parcels –

  • Consolidated shipments of gift parcels will be eligible for the same Commerce license exception that authorizes individual gift parcels.

Liberalizing License Application Review Policy –

  • Commerce will set forth a general policy of approval for applications to export or reexport items necessary for the environmental protection or enhancement of U.S. and international air and water quality or coastlines (including items that enhance environmental quality through energy efficiency).
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The US Tourism Tsunami to Cuba Begins! U.S. WILL EASE RESTRICTIONS ON TRAVEL TO CUBA

New York Times, JAN. 15, 2015 Original here: TOURISM TSUNAMI By PETER BAKER

New Picture (3).bmpAAA Arriving at Jose Marti International Airport,  June 1966, Photo by Arch Ritter

hav-terminal-3-arrivals-1_26835.jpgaaa Arrivals, José Martí International Airport, 2013

W ASHINGTON — The United States government on Friday will begin making it easier for Americans to travel to Cuba than it has been for more than half a century, opening the door to a new era of contact between neighbors that have been estranged longer than most of their citizens have been alive.

The Obama administration announced on Thursday a set of new regulations to take effect on Friday easing decades-old restrictions on travel, business and remittances, putting into reality some of the changes promised by President Obama last month when he announced plans to resume normal diplomatic relations with Havana.

Under the new regulations, Americans will now be allowed to travel to Cuba for any of a dozen specific reasons without first obtaining a special license from the government. Airlines and travel agents will be allowed to provide service to Cuba without a specific license. And travelers will be permitted to use credit cards and spend money while in the country and bring back up to $400 in souvenirs, including up to $100 in alcohol or tobacco.

The new regulations will also make it easier for American telecommunications providers and financial institutions to do business with Cuba. Americans will be allowed to send more money to Cubans, up to $2,000 every three months instead of the $500 currently permitted.

“These changes will have a direct impact in further engaging and empowering the Cuban people, promoting positive change for Cuba’s citizens,” Treasury Secretary Jacob J. Lew, whose department oversees sanctions policy, said in a statement. “Cuba has real potential for economic growth,” he added, “and by increasing travel, commerce, communications, and private business development between the United States and Cuba, the United States can help the Cuban people determine their own future.”

The administration moved to ease the restrictions after obtaining confirmation that 53 incarcerated people it deemed political prisoners had been released in accordance with the agreement Mr. Obama and President Raúl Castro of Cuba struck last month. Cuba has also released an American held prisoner for years, Alan P. Gross, and a Cuban who had worked as a spy for the United States. Mr. Obama released three Cuban spies who had been held for years and were considered folk heroes in Havana.

The broader trade embargo first imposed by President Dwight D. Eisenhower after the Cuban revolution that brought Mr. Castro’s brother Fidel to power will remain in place unless Congress decides to lift it, as Mr. Obama has urged it to do. But the moves announced on Thursday go further than any president has gone in 50 years to facilitate travel and trade with Cuba.

Critics, led by Senator Marco Rubio, a Cuban-American Republican from Florida, have argued that Mr. Obama is playing into the hands of the Castro brothers by relaxing sanctions without obtaining any meaningful commitment to change on their part. Cuba remains one of the most repressive countries in the world, according to human rights groups and the State Department, which have catalogued the many ways freedom is restricted on the island nation.

Mr. Obama argued that the approach of the last 50 years had not worked and that it was time to try something new. The president is sending an assistant secretary of state, Roberta S. Jacobson, to Havana next week to discuss migration and other issues in the relationship as he moves toward re-establishing a full-fledged embassy with an ambassador.

Americans for years have found ways to circumvent travel restrictions to Cuba. Many simply fly to another country like Mexico first and then head to Cuba from there. According to the Cuban government, 98,000 American citizens visited Cuba in 2012, a year after Mr. Obama previously loosened the restrictions, twice as many as traveled there five years earlier. That does not include perhaps hundreds of thousands of Cuban-Americans who travel there each year but are not counted by the Havana government because they are still considered Cubans.

Under previous rules, Americans wanting to travel legally to Cuba had to justify their trips under 12 categories and then obtain a specific license from the Treasury Department to do so. Among those categories are family visits; journalistic, religious, educational, professional and humanitarian activities; artistic or sports performances; and “support for the Cuban people.” Private firms arranged “people to people” programs to allow Americans to travel under those categories.

Under the new regulations, Americans will not need licenses to certify that they fit those categories. As a practical matter, experts say that will make it possible for many more Americans to travel without having to use such firms or satisfy government agents about the specific purpose of their visits.

Moreover, travelers will be allowed to spend money in Cuba, which was previously restricted.

Havana_Airport_departure_Lounge_(3214814919)

 Departures, José Martí International Airport, 2013

Jose marti, Airport, 1966 001

José Martí International Airport, 1966

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CUBA’S LATEST REVOLUTIONARY TREND: FINE DINING

By Tim Johnson

McClatchy Foreign Staff, January 13, 2015

Original here: Cuba’s Culinary Revolution

Cuba Mar 2011 038The “Dona Eutimia” Paladar, by the Plaza de la Catedral (photo by A. Ritter)

HAVANA — Private restaurants in Havana are exploding in number and soaring in quality, providing a treat for visitors and a surprising bright spot in a nation better known for monotonous food and spotty service.

Havana now boasts nearly 2,000 private restaurants offering a range of cuisine from traditional Cuban to Russian, Spanish, Vietnamese and other ethnicities. From caviar to lobster bisque and on to pizza, everything seems to be available. Usually set in private homes, some of the restaurants offer Old World charm with starched white tablecloths and real silverware. Heirlooms fill shelves. Other restaurants hunker in basements or peer from walk-up seafront buildings, sometimes with funky or retro décor.

“Gastronomy is on the rise in our country,” said Jorge Luis Trejo, son of the proprietors of La Moraleja, a restaurant in Havana’s Vedado district with wild rabbit flambé and chicken confit on the menu. His family’s restaurant opened in January 2012. Donning the chef’s apron is a cook who once worked in France, the Netherlands, Greece and England, Trejo said.

“We try to make traditionally Cuban dishes with fusion sauces to entertain our clients,” he said.

At the end of each meal, waitresses carry a humidor to diners and offer them a choice of complimentary hand-rolled cigars.

Private restaurants first arose in Cuba in 1993 amid the collapse of the Soviet Union, Cuba’s longtime patron, only to be reined in as authorities worried that small eateries were relying on pilfered supplies and surpassing the legal limit of 12 chairs, essentially three tables. The restaurants were known as paladares, a Spanish and Portuguese word that means palates, a moniker taken from the establishment of a food vendor in a popular Brazilian soap opera. For periods in the 1990s, small restaurants could offer neither seafood nor beef, which were needed for the official tourist industry. Owners were ordered to buy at retail prices in official stores. Most employees had to be family members.

Those rules drove most restaurants out of business, choking them with a web of taxes and arbitrary enforcement that underscored how wary Cuba’s communist officials were of private enterprise. By 2010, state media reported that as few as 74 private restaurants were operating in Havana.

Then things began to change. Fidel Castro’s brother, Raúl, who’d taken control of the government, ordered more flexible rules for restaurants at the end of 2011, raising the limit on chairs to 50 and issuing new licenses. There are still rules to be skirted, and supplies can be hard to come by, but a rebirth is taking place.

“There’s undeniably a boom, a significant increase in both the numbers of people who have licenses in the food service area and the emergence of a haute cuisine, or as they say in Cuba cocina de autor,” or creative nouvelle cuisine, said Ted Henken, a Cuba expert at Baruch College in New York who’s written about the phenomenon.

Today, Havana is dotted with private restaurants with elaborate menus, identifiable only by single small signs on the outsides of buildings.

In Cuba’s moribund economy, bad service is the norm in most offices, hotels and state-run businesses, but not in the private restaurants, which often have the cozy feeling of private dining since they occupy what once were people’s homes.

“You feel like, ‘Oh, I’m in someone’s old living room, and sipping a mojito,’ ” Henken said.

It’s a feeling that more Americans may experience. On Dec. 17, President Barack Obama and Raúl Castro announced the re-establishment of diplomatic relations, broken in 1961. Obama also said he’d further relax restrictions on U.S. citizens’ travel to Cuba without lifting the long-standing trade embargo, which only Congress can do.

The easing of U.S. rules will include permitting U.S. banks to accept credit card transactions conducted in Cuba. Many Cuban restaurateurs await a growing flow of American visitors.

At Paladar Los Mercaderes, which sits on a bustling pedestrian street in renovated Old Havana, handsome waiters in crisp black uniforms buttoned to the neck take orders in a multitude of languages. Modern Cuban art adorns the walls. Musicians croon Cuban ballads as breezes waft through the high-ceilinged rooms. Among the entrees, one could pick from smoked pork loin in plum sauce ($15.75), filet mignon in mushroom sauce ($18), shrimp risotto ($17) or a grilled seafood platter with lobster tail (variable price), among other dishes.

“We built a restaurant like one we’d like to go to,” said Yamil Alvarez, one of three owners of the business, which opened in December 2012. “We bet on hiring young people who are well educated but without any experience.” “We’ve got boats fishing for us, so we always have fresh fish. We’ve got a contract with a farm for fresh produce,” said Alvarez, an engineer who was once a guide at a cigar factory.

While Alvarez aims for a bit of glam, or what he labels a “unique experience,” other restaurants shoot for different diners, mostly foreign but also some Cubans with access to hard currency.

El Litoral, a trendy spot on the seaside boulevard in Vedado, is filled nightly with diplomats, artists, well-heeled tourists and a smattering of Cubans. Opened a year ago, the restaurant offers a high-end menu that includes a soupçon of molecular cooking (foams), puff pastry entrees, a roasted seafood platter, and a kebab of shrimp and bacon in the fresh split-pea soup, among other offerings.

A different clientele comes to Nazdarovie, mainly those with connections to the former Soviet bloc but also those drawn by Soviet kitsch. The name is a toast to one’s health.  “This restaurant is inspired by the memories and nostalgia felt by the thousands of Cubans who spent many years of their youth studying in the USSR,” the menu notes.

A bust of Lenin peers out from the bar. Copies of Sputnik, a magazine, and matryoshka dolls fill shelves. In a decidedly modern touch, big red art deco lamps shine above deep black tables. A terrace looks out on the sea. The food, far from bland, includes borscht, stroganoffs, chicken tabaca and the shashlik kebabs popular in Eastern Europe.

“The chef is Cuban but he studied at the Cordon Bleu school in Miami,” said Yansel Sergienko, a 22-year-old bartender sporting a visorless Soviet naval cap.

There still is a Wild West feel to Havana’s private dining scene. Many restaurateurs must skirt the rules to keep their larders filled, employing “mules” who travel to Mexico, Spain and Florida to bring back supplies and more exotic ingredients. Until the Castro government gets out of the way of the growth and clarifies regulations, the Havana restaurant scene won’t truly take off, experts say.

“You have to be partly a wily rule bender” to keep restaurants in business, Henken said, “and that needs to be solved before Havana becomes a tourist draw for people on the culinary circuit. . …….. . Now it’s more of a curiosity than an eater’s paradise.”

Cuba Mar 2011 066

Quasi-Paladar Restaurant in the Barrio Chino

Cuba Mar 2011 030Hotel Inglaterra Bar: Great State Sector Restaurant Decor (Photos by A. Ritter)

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TED HENKEN “EL YUMA” CONOCE BIEN A LOS CUENTAPROPISTAS CUBANOS

Ted Henken appeared on he Maria Elvira Salazar television show in Miami discussing our new book Entrepreneurial Cuba: the Changing Policy landscape.

The full discussion can be seen here: https://www.youtube.com/watch?v=BvKS3tb8_Ds&feature=youtu.be

New Picture.bmpaaaMaria Elvira Salazar

New Picture (2)Ted and Maria Elvira

New Picture (1) Ted Henken

  Maria_Elvira_Salazar-CNNL

Maria Elvira

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DESPITE CHANGES, U.S. BUSINESSES STILL FACE A MINEFIELD OF SANCTIONS IN CUBA

Washington Post,  January 11, 2015

By Joshua Partlow and Nick Miroff

Original here: MINEFIELD      

MEXICO CITY — To the Cuban government, it is “The Blockade,” and sometimes, “The Genocidal Blockade,” as if U.S. Navy gunboats had circled the island and cut off its inhabitants.

The “Cuban Embargo,” as it’s known in the United States, has failed for 54 years to push the Communist government from power. The U.S. economic sanctions have left Cuba neither fully isolated nor able to conduct completely normal business relations with other countries and foreign companies.

Now, as President Obama plans to poke new holes in the patchwork of financial, commercial and travel restrictions first imposed by the Eisenhower administration, American businesses are eagerly awaiting new opportunities on the island. But a maze of regulatory obstacles remains, and the embargo may endure as the defining feature of U.S.-Cuba relations long after an American embassy reopens in Havana.

For American companies, the sanctions look “like a scary forest of monsters,” said Robert Muse, a Washington lawyer who specializes in Cuba trade issues. It is also not clear whether the Cuban government will truly be open for business and ready to allow U.S. firms to regain a foothold on an island where American brands and products are revered but the government remains deeply wary of steamrolling Yanqui capitalism.

With only 11 million people and a gross domestic product about the size of West Virginia’s, Cuba isn’t exactly a grand prize for corporations. But it represents pure potential for the U.S. tourism industry, as well as agriculture companies, firms that can overhaul its rudimentary telecommunications infrastructure, and many others.

The top State Department official focused on Latin America, Roberta S. Jacobson, is scheduled to arrive Jan. 21 to begin laying the groundwork for the reopening of a U.S. Embassy on the island. She will be followed by Commerce Secretary Penny Pritzker and a U.S. business delegation on a “commercial diplomacy mission.”

The Obama administration has proposed a few basic changes to the Cuba rules, such as allowing U.S. companies to export building materials for private homes, agricultural equipment for farmers, and telecommunications equipment. The U.S. government will allow new relationships with Cuban banks, and limited imports of Cuban goods such as rum and cigars.

Raúl Castro and other Cuban officials have been quick to temper enthusiasm on the island for Obama’s moves with reminders that the sanctions remain a formidable obstacle to truly normal relations. They can be lifted only by the U.S. Congress.

According to Havana, the sanctions have inflicted $1.1 trillion worth of damage on the island’s economy over the decades — a figure that will almost certainly enter into future negotiations over the billions of dollars’ worth of pending claims by U.S. litigants whose property was seized after Fidel Castro’s 1959 revolution. Cuba claims the sanctions hurt its citizens by depriving them of U.S. medical technologies and pharmaceuticals, although U.S. officials say such sales are generally allowed with export licenses from the Treasury Department.

Though the restrictions block most U.S. commerce with the island, the Castro government, which has a virtual monopoly on foreign trade, does business with other nations all over the world, though not always smoothly. On the streets of Havana, new Hyundai and Kia sedans from South Korea dart among the old Soviet Ladas and battered Chevrolet Bel Airs from the Eisenhower years. Cuban resort kitchens are stocked with Spanish wine, Chilean salmon and filet mignon flown in from Canada. There’s a Lacoste store selling polo shirts under the colonnaded archways of Old Havana.

With shipments of subsidized petroleum, Venezuela, Cuba’s top trading partner, keeps the island’s lights on. From China, the Cuban government can get just about anything. These competitors have eaten away at whatever small beachhead certain American companies gained in Cuba over the past decade or so. After a series of devastating hurricanes in the island nation, Washington made it easier for Cuba to take advantage of exceptions to the embargo, allowing for the purchase of American food on a cash-only basis.

Within a few years, the United States had become one of Cuba’s top 10 import partners. U.S. food sales peaked at more than $700 million in 2008. Today, state-run supermarkets still stock cornflakes, Heinz ketchup and American oatmeal. Apples from Virginia show up in big white boxes at holiday time. Sales have slowed, though, as Cuba has boosted trade with ­Brazil and European countries that can offer financing and credit. American companies sold an estimated $300­­ million worth of food to Cuba last year, nearly half of which consisted of frozen chicken parts.

“We’ve lost a lot of market share over the years, and we want to get that back,” said Mark Al­bertson, director of strategic market development at the Illinois Soybean Association. His organization, and American producers of poultry, soy, pork, corn, milk and other goods, have banded together in a new coalition to try to lobby Congress to end the embargo. Obama’s proposal, although a good step, Al­bertson said, “doesn’t go far enough.”

Even with the new changes, companies expecting to do business in Cuba say they are going to be hamstrung by U.S. restrictions on financing and credit. There are “so many exemptions and hoops we have to jump through that make it not competitive,” Albertson said.

Banking is a big problem. The Obama administration has hit foreign financial institutions with more Cuba-related fines than any previous administration, according to Cuba’s Foreign Ministry. In July, the French bank BNP Paribas agreed to pay an $8.9 billion fine from the U.S. Treasury Department for Cuba-related violations. The German financial ­giant Commerzbank said last month it will pay $1 billion in a similar settlement. The banks broke the law because they routed the transactions through U.S. territory, regulators said.

Muse, the trade attorney, said American banks remain skeptical that Cuba is worth the trouble. The confusing overlay of U.S. laws — from the USA Patriot Act to money-laundering statutes — convinces some that it is easier to avoid the island entirely.

These hurdles, as well as the Communist-ruled island’s difficult business climate, have led some to conclude that the current excitement over the U.S.-Cuba rapprochement is mostly hype and wishful thinking, and that little will change for American businesses seeking to invest in Cuba.

“They’re believing what they hope will be,” said John Kavulich, senior policy adviser at the U.S.-Cuba Trade and Economic Council, a nonprofit group that includes major American businesses. “And they’re forgetting that the Cuban government is not about to say: ‘We’re going to accept everything that you want to do to us, knowing that your goal is to change us.’ ” “The Cuban government will allow only what it believes it can control,” he added.

In an interview, Commerce Secretary Pritzker highlighted travel, agriculture and telecommunications as areas of opportunity for U.S. firms.

Though many are skeptical that Cuba will allow the U.S. government to fiddle with its Internet or cellphone services, given Communist officials’ concerns about spying, Pritzker said there were still opportunities created by the president’s opening. With relatively few Cubans owning cellphones, and even fewer with Internet access, she said, “there’s enormous telecommunications infrastructure that needs to be put in.”

“We have to respect the fact that by statute the embargo is still in place,” Pritzker said, but that “commercial engagement can change the diplomatic relations between our two countries.” And, she added, “the president is encouraging us to go.”

Gabriela Martinez contributed to this report.

Joshua Partlow is The Post’s bureau chief in Mexico. He has served previously as the bureau chief in Kabul and as a correspondent in Brazil and Iraq.

Nick Miroff is a Latin America correspondent for The Post, roaming from the U.S.-Mexico borderlands to South America’s southern cone. He has been a staff writer since 2006.

 OLYMPUS DIGITAL CAMERA Manzana_Gomez-Interior,_Centro_Habana_-_April_2003Above two photos: Manzana de Gómez (Gómez Block), Parque Central, Havana’s first shopping mall, converted to apartments, probably on the way back to its original function.

Cuba, Havana  Plaza Carlos III Shopping Mall

Plaza Carlos III Shopping Mall, Central Havana

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UNEXPECTED CUBA

By Emily Morris

Complete article here: New Left Review 88, July-August 2014

Introduction:

What is the verdict on Cuba’s economy, nearly a quarter of a century after the collapse of the Soviet bloc? The story generally told is a simple one, with a clear message. It describes a cyclical alternation of government policy between moments of pragmatic capitulation to market forces, which account for any progress, and periods of ideological rigidity and re-assertion of state control, which account for all economic difficulties. [1] After the dissolution of the Comecon trading bloc, us Cuba watchers were confident that the state-socialist economy faced imminent collapse. ‘Cuba needs shock therapy—a speedy shift to free markets’, they declared. The restoration of capitalism on the island was ‘inevitable’; delay would not only hamper economic performance but would inflict grave human costs and discredit Cuba’s social achievements. Given his stubborn refusal to embark on a course of liberalization and privatization, Fidel Castro’s ‘final hour’ had at last arrived. [2]

The problem with this account is that reality has conspicuously failed to comply with its predictions. Although Cuba faced exceptionally severe conditions—it suffered the worst exogenous shock of any of the Soviet-bloc members and, thanks to the long-standing us trade embargo, has confronted a uniquely hostile international environment—its economy has performed in line with the other ex-Comecon countries, ranking thirteenth out of the 27 for which the World Bank has full data.

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Conclusion: An alternative?

Raúl Castro’s second and final presidential term will end by 2018 at the latest. By 2016, when the five-year process of ‘updating’ under the current Guidelines comes to an end, the aim is for the economy to have a broader productive base and a larger private sector, while retaining universal health, education and welfare provision. To achieve this, the rate of investment will need to rise. Given Cuba’s success in cultivating official relations with new partners, including China, Brazil and Russia, the aspiration to increase the flow of foreign investment seems feasible. The trickier task will be to raise efficiency and dynamism within the domestic economy, while preventing widening income gaps and social divisions that threaten the state-socialist project.

Before writing off Cuba as a spent force, the magnitude of its achievement to date should be acknowledged. While conceding that market mechanisms can contribute to a more diversified and dynamic economy, Cuban policymakers have not swallowed the promises of full-scale privatization and liberalization, and have always been mindful of the social costs. This approach, shaped not least by exceptionally difficult international conditions, has been more successful in terms of both economic growth and social protection than Washington Consensus models would predict. Comparing Cuba’s experience with that of the former Comecon countries in Eastern Europe—or indeed with China and Vietnam—it is possible to identify some distinguishing features of its path.

First, Cuba was able to maintain a social safety-net during the crisis, in sharp contrast to the others. In the context of the island’s uniquely severe exogenous shock and hostile external environment, a commitment to universal welfare provision undoubtedly served to limit social hardship. Linked to this has been the process of extensive popular consultation, particularly at three critical moments—the onset of the crisis, the stabilization process, and the prelude to Raúl Castro’s new adjustment phase. Third, by retaining control of wages and prices during the early period of shock and recovery, it was possible to restore stability relatively quickly by restraining an inflationary spiral. Although fixed wages and prices created the conditions for a flourishing informal economy, they also served to minimize disruption and limit the income gap within the formal economy. Though the two are quite distinct, the strategy bears comparison with China’s ‘dual track’ system, in which the ‘planned’ track is maintained while a ‘market’ track develops alongside, providing opportunities for experimentation and learning. For all its inefficiencies and confusions, Cuba’s ‘bifurcation’ and ‘second economy’ played a part in adjustment to the new conditions.

Fourthly, the state retained control of the process of economic restructuring, allowing it to channel the very limited hard-currency resources to selected industries, achieving a remarkable recovery of foreign-exchange earnings relative to the amount of capital available. These enterprises also served as ‘learning opportunities’ for Cuban planners, managers and workers to think through how to adapt to altered international conditions. The export base created by this approach may be too narrow to drive sustainable growth over the long term, but it was an efficient way to restore capacity after the crisis period. Finally, Cuba’s rejection of the mainstream ‘transition-to-capitalism’ route allowed space for a process of adjustment—described by one official as ‘permanent evolution’ [57] —that has been flexible and responsive to Cuba’s changing conditions and constraints. This contrasts sharply with the more rigid recipes for liberalization and privatization pedalled by the hordes of transition consultants in other former Comecon countries. Cuba is a poor country, yet its health and education systems are beacons in the region. Its approach has shown that, despite contradictions and difficulties, it is possible to incorporate market mechanisms within a state-led development model with relatively positive results in terms of economic performance and social outcomes.

This raises the next question: why should we assume that the state will withdraw from its dominant role within the economy, or that the current approach to policy must eventually give way to a transition-to-capitalism path? A fundamental assumption of transition economics has been Kornai’s claim that ‘partial alteration of the system’ cannot succeed; efficiency and dynamism will only be maximized when the transformation from a ‘socialist planned’ economic system to a ‘capitalist market’ one is complete, because the former is too inflexible to survive over the long term. But the experience of former Comecon countries has demonstrated that success is far from guaranteed and that social costs can be high. Viewed without preconceptions, the Cuban case suggests that another way might be possible, after all.

untitledEmily Morris

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