• 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.

Book Review: CUBAN ECONOMIC AND SOCIAL DEVELOPMENT: POLICY REFORMS AND CHALLENGES IN THE 21ST CENTURY

By Archibald Ritter

 Cuban Economic and Social Development: Policy Reforms and Challenges in the 21st Century. Edited by Jorge I. Domínguez, Omar Everleny Pérez Villanueva, Mayra Espina Prieto and Lorena Barberia. David Rockefeller Center for Latin American Studies, USA, 2012. Pp. iii + 333. $24.99 paper.  ISBN: 9780674062434.

This volume is a co-produced University of Havana / Harvard volume edited by Jorge Domínguez, Omar Everleny Pérez Villanueva, Mayra Espina Prieto and Lorena G. Barberia. Its objective is to describe and diagnose some of the central economic and social challenges that Cuba faces and to analyze some policy alternatives for meeting these challenges. The analyses are written by the University of Havana analysts who are among the strongest and most authoritative in their areas. These are accompanied by commentaries from professors at Harvard and the Federal University of Rio de Janeiro. The papers were prepared before the presentation of the government’s preliminary reform program, as outlined in its November 2010 Guide, though Domínguez’s introduction was written on the eve of the April 2011 Sixth Party Congress and draws on the authors’ analyses as well as the government’s proposals. Fortunately, the University of Havana authors present analyses of the key issue areas in an ambitious and long-term frame that goes beyond the discussion in the Guide and therefore does not read as dated.

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The opening chapter by Pérez Villanueva presents a summary overview of Cuba’s economic performance during the “Special Period” to 2010. His analysis leads to the conclusion that, “economic reform should be seen as the first of the structural changes that the country requires. Cuba’s economic problem is that the current economic system cannot serve as a starting point for the country’s development.” (Villanueva 16) He then proposes a variety of policy changes, some of which have in been incorporated into the Government’s policy reform program, for example ending rationing and state regulation rather than direct management of enterprises.

            Two essays on Cuba’s dual monetary and exchange rate system are included from Vidal Alejandro, formerly with the Banco Central de Cuba. The first focuses on the sources, character and cure of the monetary/exchange rate duality. Of special interest is the section proposing a set of policy reforms that provide a strategic approach for the establishment of a single currency.  Vidal Alejandro’s second essay is a more technical analysis of the international economic crisis of 2008-2009 and its repercussions for Cuban monetary policy. 

            Armando Nova González, who by now must be considered the “dean” of agricultural analysts in Cuba, has contributed two essays on Cuban agriculture. The first outlines the reforms of the early 1990s, analyzes and evaluates their impacts, and presents the range of policy changes required to resuscitate agricultural production, some of which have begun already. The second chapter then analyzes the impacts of the 2007-2010 reforms implemented after Raúl’s assumption of the Presidency. His central conclusion is that while the pricing, land redistribution and institutional reorganization reforms have been significant and positive, the reforms “lack a systemic focus” and require further deepening. (p.91)

In chapter six, Anicia García provides a fifty-five page analysis of agricultural production, food availability, and imports and exports of food and agricultural inputs. The sector has been severely damaged by its low policy priority over the last twenty five years, low prices in the state marketing system, minimal investment, a perverse exchange rate, and the strength of foreign competition – notably from the United States since the opening of agricultural exports to Cuba by that country. This is an impressively detailed and comprehensive analysis, clearly the best to appear so far. Following this is a fine chapter by Pérez Villanueva on direct foreign investment extracting insights from the experience of China and Vietnam for Cuba.

            Mayra Espina Prieto and Viviana Togores González contribute a valuable chapter analyzing Cuba’s changing socio-economic structures since the beginning of the “Special Period” in 1990, characterized by greater economic and social differentiation among sectors, regions, social groups and individuals and some exacerbation of inequalities, all of which have been generated by enhanced social mobility for those riding high in emerging economic activities and sectors of the economy, notably the higher end “self-employment” activities such as tourist oriented restaurants and “bed and breakfasts.”  New circumstances require new policy approaches and the authors emphasize the importance of targeting social programs, of focusing at the household level, of enhanced and sustained financial support for social policy and of social program decentralization.

The last chapter, by Lucy Martín Posada and Lilia Núñes Moreno, examines the regional and housing dimensions of inequality in Cuba. Drawing on regional statistical information from the Oficina Nacional de Estadísticas, the work of other analysts, their own analyzes and a survey, they construct a clear portrait of regional, housing and economic inequalities. They also present a range of specific policy recommendations for reducing these inequalities.

All in all, this is a valuable analytical survey of some of the central issue areas in Cuba’s current reform process. However, economic policies in a range of vital issue areas remain to be analyzed in greater depth as part of the process of the actualización of the Cuban economy. One hopes that the next round of major publications on the Cuban economy will investigate some of these specific policy areas more profoundly than was possible in a general volume such as this. Of particular relevance would be analyses of the policies toward industry, energy, infrastructure, the service sector, small enterprise and the private sector, cooperatives, state enterprise, foreign investment and joint ventures, exchange rate and monetary issues, trade policy, policy towards foreign investment, social policies, health and education, labor issues, pensions, demographic issues, cultural areas, etc. The work ahead is daunting.

 

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Cuba’s New Foreign Investment Law: Amplified Discrimination against Cuban Small Enterprise Operators and in Favor of Foreign Enterprises.

By Archibald Ritter

Cuba’s new Foreign Investment Law was published in the Gaceta Oficialon April 16, 2014.  It is available here:  Ley de la Inversión Extranjera

foreign-investment-law

The objective of the law is to provide an improved legal, fiscal and regulatory framework for foreign enterprises that decide to operate in Cuba.

Cuba has passed this law because of the perceived benefits that such direct foreign investment can generate for the country, namely technological and managerial transfers, access to foreign markets, higher-productivity employment, higher income levels, financial inflows and increased levels of investment. This last factor is of especial importance in view of the very low levels of investment that Cuba has achieved for the last 20 years. Indeed Cuba’s levels of investment have been the lowest in all of Latin America for the last two decades. In 2011 this rate was 10.2% of GDP vis-a-vis 22.4% for all of Latin America. (UN CEPAL, Balance Preliminary, 2013).  

The law certainly seems to have created a more hospitable environment for foreign firms, providing greater security of tenure, greater control over the hiring and compensation of labor, and most of all, through generous tax breaks. Indeed, the tax advantages for foreign investors now seem to me to be overly generous. One might estimate that the new foreign investment regime will be highly successful in promoting foreign investment from a range of sources and perhaps especially from China and Brazil.

However, there is a major element of injustice in the new law, particularly as it relates to taxation. The new tax regime intensifies the discrimination favoring foreign investors operating in “Mixed Enterprises” (Joint Ventures) or “international economic associations” when compared to the tax regime for small enterprises owned by Cuban citizens. This is both unfair and counterproductive. It may also be unsustainable.

The contrast between the tax treatment of foreign enterprises which will usually big private or (in the case of China) state corporations in comparison the tax treatment for small Cuban-owned firms, is summarized in Table 1.

 

Table 1: Comparison of the Tax Regimes for Cuban Small Enterprise and Foreign Enterprise Operating in Mixed Enterprises  after the 2014 Foreign Investment Law

Small Enterprise Sector

Foreign Investors in Mixed Enterprises or “Economic Associations”

Nominal Tax Rates

Personal Income Tax Rate: 15% rising to 50% of income above CuP 50,000 or $2,000 per year

Profits Tax: 15% of Net Corporate Income [perhaps 50% for resources]; Personal Taxes Exempt for those earning profits.

Effective Tax Base

60 to 90% of Gross Revenues; [Maximum of 10% to 40 % allowable d for input costs, depending on activity]

Net Income after deduction of  all production and investment costs from Gross Revenues

Effective Tax Rates

May approach or even exceed 100% of Net Income

15% of Net Income; [perhaps 50% for mining and petroleum]

Tax Holiday

 None

Eight Years Profit Tax Exemption,

Deductibility ofInvestment Costs from Gross Revenues

Deductible only within the 10% to 40% allowable deduction  limits

Fully deductible from Gross Revenues in determining Taxable Income

Deductibility of Input Costs from Gross Revenues

Deductible only within the 10% to 40% allowable deduction  limits

Fully deductible from Gross Revenues in determining Taxable Income

Employee Hiring Tax

Tax exemption for first five employees; Tax required on six or more

Complete Tax Exemption

Social Security Payments

Yes

Yes

Lump-Sum Taxation

Up-front Cuota Fija Tax Payments Necessary

None

Input Importation Rights

Direct Import Purchases Prohibited

Freedom to Import Directly

Profit Expatriation

No

Yes

 The most obvious difference in tax treatment is that Cuban small enterprise operators pay a marginal tax rate of 50% of Gross Revenues (less deductions) on any income exceeding 50,000 pesos per year this being equivalent to about US$2,000.00 per year or about US 166.67 per month. In contrast, the foreign corporations in mixed enterprises pay 15% of Profits in taxes – but only after an eight year tax holiday.

Perhaps more serious, for Cuban small enterprise owners, taxable income is calculated as an arbitrary percentage of Gross Revenues – from 60% to 90%  - depending on the nature of the economic activity. The costs of inputs of materials, labor, rent, utilities, etc. and all costs of investment are not deductible from Gross Revenues in determining Taxable Income – only the arbitrary amounts of 40 to 10% or Gross Revenues. To my knowledge, no other country taxes its own enterprise sector in this way.

On the other hand, foreign corporations can deduct all costs of investment and inputs of all sorts from Gross Income in calculating Taxable Income. This indeed is standard international practice.  

Or in other words, the effective tax base for foreign firms is Gross Revenues minus all costs of production and investment. In contrast, for micro-enterprise the tax base is gross revenue minus arbitrary and limited maximum allowable levels of input costs ranging from 10 to 40 percent depending on the activity, regardless of true production costs.

The result of this is that the effective tax rates for foreign enterprises are reasonable though generous. But for Cuban small enterprises the effective tax rate can be unreasonable and could reach and exceed 100%. Moreover, investment costs are deductible from future income streams for foreign firms this being the normal international convention.

To add insult to injury, foreign investors receive an eight year tax holiday in which corporate profit taxes are exempt from taxation. Cuban citizens operating small enterprises receive no such tax holiday.

Moreover, under the new legislation, the profits of the foreign enterprises can all be repatriated. In contrast, the infinitely more modest after-tax incomes of Cuban citizens would virtually all be spent within the domestic economy. If their after-tax earnings were to be taken out of the country, they would have to exchange their CUP or Moneda Nacional savings for foreign currency at the rate of about  CUP 26= $US1.00 or about CUP 34.5 = Euro 1.00

Small enterprise owners must make payment of a proportion of their taxes at the beginning of each month. Foreign firms certainly do not have to do this.

Small enterprise owners also must pay a tax on the hiring of more than five employees (not a good mechanism for creating jobs.). Foreign firms are exempt from such a tax.

Foreign firms can import their inputs, equipment and machinery as well as personnel directly from abroad. Cuban citizens with small enterprises must make their purchases from the state Tiendas por la Recaudacion de Divisas (formerly ‘Dollar Stores’)

This differential tax treatment for Cuban citizens operating small enterprises and foreign enterprises represents a surprising type of discrimination against Cuban citizens. One might predict that this type of discrimination will generate major dissatisfaction on the part of Cuban nationalists as well as Cuban small enterprise operators. Before long, political pressures and the climate of public opinion should require greater fairness in the character of taxation.

However, given the seemingly insurmountable difficulties that some countries such as the United States face in constructing fairer tax regimes, perhaps I am naively optimistic. (Who can forget the 15% average tax rate paid by Warren Buffett and the 14.3% paid by Mitt Romney in comparison with the 35% paid by Buffet’s secretary as well as the average US citizen?)

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Cuban Doctors in Eye of Venezuelan Hurricane

Washington Post, April 16, 2014

Original Here: Cuban Doctors in Eye of Venezuelan Hurricane

CARACAS, Venezuela — When Judith Faraiz’s son was near death after a severe motorcycle accident, she put his life in the hands of God and Cuban doctors.

Like many in Petare, a sprawling hillside slum of crumbling brick buildings on the eastern outskirts of Caracas, Faraiz has come to rely on Cuban physicians for free health services in a country where private care is too expensive for the poor and public hospitals have a dismal reputation.

The link is vital for both governments: In exchange for the services of its doctors and other professionals, Havana gets an estimated $3.2 billion in cut-rate Venezuelan oil that is a lifeline for Cuba’s ailing economy. Venezuelan President Nicolas Maduro, for his part, relies on social programs such as these to shore up support among his poor power base even as his approval ratings fall hand-in-hand with a faltering economy.

The Cuban doctors are the most visible symbol of the controversial collaboration between the two countries during 15 years of socialist rule in Venezuela, and increasingly they are a flashpoint for the violent unrest that has rocked the country since February and is blamed for at more than 40 deaths.

The mostly middle- and upper-class protesters who have taken to the streets say their country is following the path of Fidel Castro’s one-party Communist system. They see the doctors-for-oil deal as an intolerable giveaway of Venezuela’s vast petroleum wealth, even as the country suffers from 50 percent inflation and chronic shortages of basic goods like flour, cooking oil and toilet paper, not to mention a homicide rate among the world’s highest.

Unsubstantiated rumors have circulated that Cuban military advisers are helping to crush the anti-government demonstrations. Some allege that Havana is essentially running the Venezuelan military and that the Cuban doctors lack proper training.

 AAANicolas Maduro with Cuban Doctors in Venezuela

For supporters of Maduro’s government, however, the doctors are an example of concrete improvements in their lives delivered under the late President Hugo Chavez and now his hand-picked successor.

Faraiz, a 54-year-old former domestic worker, said doctors at a public hospital wanted to amputate one of her son’s legs, which had been horribly mutilated. He was prescribed a daily dose of antibiotics that the family couldn’t afford and contracted a serious infection.

So she took him to the Cuban doctors, who saved the leg by surgically implanting eight nails and also healed his fractured cranium. The care, and some of his medicine, didn’t cost a cent.

Faraiz fears that if the opposition ever takes power it would follow through on a promise to alter terms of the Cuba-Venezuela relationship, and the doctors would be forced to leave.

“It will ruin the poor,” she said, sitting in her low-ceiling living room in Petare.

While official figures are not public, Cuba is believed to have sent around 100,000 professionals, mostly health care workers but also athletes, engineers and even circus artists, to Venezuela since Chavez came to power in 1999. An estimated 31,000 Cuban health workers, about 11,000 of them doctors, are believed to be working in the country today.

Venezuela pays the Cubans a stipend for living expenses and they sleep in dormitories at the clinics where they work. Havana also pays them $425 a month — about 20 times the average government salary back home.

Cuba has similar programs in developing nations around the globe that help burnish its international image, but none as important as the one in Venezuela. Chavez was long the Caribbean island’s staunchest political and economic ally, and he spent months in Havana in 2013 for cancer treatments before he died.

The South American country sends about 100,000 barrels of oil every day to Cuba that accounts for half the island’s domestic energy consumption, University of Texas energy analyst Jorge Pinon says. Venezuela also ships oil on preferential terms to other poor nations such as Haiti and the Dominican Republic.

When the Cuban doctors arrived in Petare five years ago, residents initially eyed them with suspicion and sometimes slammed the door in their faces, said Yurisleidy Varela, a 29-year-old Cuban physician who directs the local clinic that treated Faraiz’s son.

Today the Cubans who staff “La Urbina” clinic are welcomed as they walk the mazelike streets making house calls and vaccinating children. The clinic offers free emergency, ophthalmology and pediatric care, as well as minimally invasive surgical procedures. Its several dozen staffers also minister to gunshot victims and drug and alcohol addicts.

But outside the slums and poor rural communities of Venezuela, the Cubans have become a focus of anti-government rage.

In February, dozens of people carrying signs saying “Cuba go home” physically harassed a Cuban baseball team playing in a tournament on Margarita Island. More recently, assailants burned down a medical clinic staffed by Cubans in the western city of Barquisimeto.

Some of the Cubans say the violence has them spooked.

“One never knows what can happen,” Varela said. “If they’re attacking their own institutions, imagine how it is with us Cubans.”

There’s no sign that the doctors will decamp anytime soon, and Maduro has vowed the anti-Cuba sentiment will only “bolster our conviction that we must strengthen our brotherhood.”

Miguel Tinker Salas, a professor of Latin American history at Pomona College in California, said that besides domestic political concerns, continuing the Cuba-Venezuela alliance is a way for Maduro to send a message to Washington that has been echoed in recent years by like-minded presidents around the region. “Cuba was a model for this generation” of leftist leaders, Tinker Salas said, “and I think it is, in a way, a way to declare one’s autonomy and independence.”

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Book Review: ¿Quo vadis, Cuba? La incierta senda de las reformas

 

By Archibald Ritter

¿Quo vadis, Cuba? La incierta senda de las reformas . Edited by Pavel Vidal and José Antonio Alonso.  Notre Dame, IN: University of Notre Dame Press, 2011. Pp. xvii + 453. $48.00 paper. ISBN: 9780268029830.

Quo Vadis, Cuba? edited by Pavel Vidal and Jose Antonio Alonso, is a co-production of the Center for the Study of the Cuban Economy of the Universidad de la Habana (CEEC), and the Institute for International Studies at the Complutense University of Madrid  (Instituto Complutense de Estudios Internacionales of the Universidad Complutense de Madrid).[1] The project was financed by the Spanish Agency for International Cooperation.  

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The volume does not attempt to make a comprehensive overview analysis of the functioning of the economy or a complete set of prescriptions for economic reform. Instead, the objective of the volume is “…to make a modest contribution to the search for useful paths for a “renovated” Cuba,” (Vidal and Antonio Alonso p.24.) and in this it succeeds. The Cuban-Spanish team has produced an outstanding set of analyses of a number of the central economic conundrums facing the Cuban economy.  

The analysts at CEEC have been focusing on Cuba’s economic situation now for some twenty years. They have steadily pushed the envelope, arguing forcefully and courageously from within Cuba regarding the need and possible shapes for reforms. They have also “stayed in the game” – in contrast to the dissident analysts such as Miriam Celaya, Dimas Castellanos and the late Oscar Chepe,  among others who work outside the system. While the CEEC analysts have perhaps had only a limited direct role in decision-making, they have been instrumental in moving the discussion forward and supporting the changing climate of opinion regarding economic institutions and policy.

The first chapter by Juan Triana Cordoví and José Antonio Alfonso, focusing on the foundations of economic growth, begins with some discussion of growth theorizing and possible insights from international experience for Cuba. It then analyzes Cuba’s growth performance, and discusses strategic options. The policy recommendations that it arrives at are fairly standard – namely promoting exports and solving the problem of the dual exchange rate and monetary system.  The third recommendation, which calls for the actualización of policy regarding the promotion of direct foreign investment (to complement domestic savings levels and stimulate technological transfer), is perhaps a bit surprising in view of Cuba’s three decades of policy hostility and then another two decades of policy reticence.[2]  

Ricardo Torres and Isabel Álvarez present a strong analysis of technical innovation, including a quick review of some theorizing, some comparative international experience and an analysis of structural changes in industry, trade and employment and the technological dimension thereof during the Special Period. They attribute the technological lag to low savings and investment levels, weak infrastructure, limited access to technology from abroad, and “the inertia and ‘immovilismo’ of Cuba’s managerial systems…” (Torres and Álvarez p.129.)  Among their policy suggestions are higher levels of savings and investment to permit accelerated incorporation of new technologies and structural change and a broadening of the self-employment sector to permit professional activities that would utilize Cuba’s well-educated labor force more effectively.

This volume also includes outstanding chapters analyzing tax reform and enterprise by Omar Everleny Perez, Saira Pons and Carlos Garcimartin; on Cuba’s social challenges and policy targeting by Anicia Garcia, Susanne Gratius and Luisa Íñiguez Rojas, and a chapter on the decentralization of state programs by Santiago Díaz de Sarralde and Julio César Guanche.             The concluding chapter by the editors entitled “Rules, Incentives and Institutions” outlines the “required institutional transformation” that Cuba needs to undergo, namely “the readjustment of the rules, norms, values and organizations inherited from the past:” The precise form of that readjustment is unstated, but “[t]he framework of economic and social incentives within which Cubans functioned in the past is called upon to transform itself and must be progressively replaced by another that will be coherent with the objectives of the reform” (p. 257).

This challenging chapter discusses the place of institutions in the development process, institutional quality and the process of institutional change in Cuban agriculture, the non-agricultural self-employment and micro-enterprise sector, the cooperative sector, and the direct foreign investment area. It emphasizes the pre-requisites for the functioning of markets (secure property rights, security of contracts, effective competition) and also market failure. It also includes brief analyses of the opposition to current institutional reform (inertia and opposition to change, potential loss of position by vested interests and the social hierarchy, and impacts on income distribution.)  The authors conclude that while reformist gradualism has certain advantages, an activist prioritization of reforms is desirable, such that the first reforms generate clear benefits for broad sectors of the population thereby building support for further reforms. All in all, this book makes valuable contributions to the understanding of the reformist challenges facing Cuba as it resolves some of its most pressing economic problems and moves towards a mixed but more market-oriented economy with major roles for the small enterprise and cooperative sectors.



[1] Six of the seven Cuban authors were from CEEC and five of the Spanish authors are from the Universidad Complutense. The editor on the Cuban side, Pavel Vidal, was at CEEC but is currently at the Pontifica Universidad Javeriana at Cali Colombia.

[2] The authors contrast the highly successful nickel sector, which has had a major role for foreign investment (in the form of Sherritt International) with the autarkic and disastrous sugar sector.

Pavel Vidal.pngAAAPavel Vidal Alejandro

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The Venezuelan Dialogue From a Cuban Point of View

By Yoani Sanchez in the World Post

Posted: 04/14/2014 11:58 am EDT Updated: 04/14/2014 11:59 am EDT

 Original here: The Venezuelan Dialogue From a Cuban Point of View

The dialog between the Venezuelan opposition and Nicolas Maduro is in full swing. Its critics are many, its most visible loser: the Cuban government. For a system that for more than half a century has disqualified and reprimanded its dissidents, this discussion table must present a sad acknowledgement of its own inabilities.

Last Tuesday stunned Cuban viewers could watch a debate between the opposition forces in Venezuela and pro-government representatives. The controversial meeting was broadcast on TeleSur, which is characterized by its tendency to back the work of Chavism with its reporting. On this occasion, however, it was forced to also broadcast the concerns and arguments of the other side.

The requirement that cameras and microphones would be present at the discussion proved to be a magnificent political move by Maduro’s adversaries. In this way the audience is engaged in the dialog and it’s more difficult to publish distorted versions later. The participants on both sides were allowed ten minutes each, an exercise in synthesis that the Venezuelan president, clearly, couldn’t accomplish.

For disinformed Cubans, the first thing that jumped out at us was the high level of the arguments the opposition brought to the table. Figures, statistics and concrete examples expressed within a framework of respect. The next day the most commonly heard comment in the streets of Havana was the popular phrase, “They swept the floor with Maduro.” A clear reference to the crushing critiques of his rivals. The government supporters, however, were notably timid, fearful, and offered a discourse plagued with slogans.

There is no doubt, this discussion table has been a bitter pill to swallow for those who up until a few hours before were accusing their political opponents of being “fascists” and “enemies of the nation.” Venezuela will no longer be the same, although the negotiations end tomorrow and Nicolas Madura will once again take the microphone to hand out insults right and left. He acceded to a discussion and this marks a distance between the path followed by the Plaza of the Revolution and another that recently began for Miraflores.

0010886523Maduro and Caprilles

New Picture (2)President Maduro

biXxJ.St.84The Opposition, Caprilles in the middle

And in Cuba? Is this also possible?

While the broadcast of the Venezuelan dialogue was airing, many of us asked ourselves if something similar could occur in our political scenario. Although the official press presents these conversations as a sign of strength on the part of Chavism, it has also kept enough distance so that we won’t get illusions of possible Cuban versions.

It is less chimeric to imagine Raul Castro getting on a plane and escaping the country than to project him sitting at a table with those he dubs counterrevolutionaries. For more than five decades, both he and his brother have been dedicated to demonizing dissident voices, such that now they are prevented from accepting a conversation with their critics. The danger posed by the impossibility of negotiations is that it leaves only the path to an overthrow, with its consequent trail of chaos and violence.

However, not only do the Cuban regime’s principal figures show reluctance before any negotiating table. The better part of the Island’s opposition doesn’t want to hear it spoken of. Before this double rejection, the agenda of a chimeric meeting fails to take shape. The opposition parties haven’t yet come together on a project for the country that can be coherently defended in any negotiation and look like a viable alternative. We members of the emerging civil society have reasons to feel concerned. Are the politicians now operating illegally in the country prepared to sustain a debate and capable of convincing an audience? Could they represent us with dignity when the time comes?

The answer to this question will only be known once the opportunity arises. Until now the Cuban political dissidence has concentrated more on tearing down than on elaborating foundational strategies; the greater part of their energy has been directed to opposing the governing Party rather than on persuading their potential followers within the population. Given the limitations on disseminating their programs and the numerous material restrictions they suffer, these groups have not been able to carry their message to a significant number of Cubans. It is not entirely their responsibility, but they should be aware that these deficiencies hinder them.

If tomorrow the table for a dialog was set, it would be unlikely that we would hear a speech from the Cuban opposition as well articulated as that achieved by their Venezuelan colleagues. However, although negotiation isn’t a current possibility, no one should be exempted from preparing for it. Cuba needs for the people before those possible microphones to be those who best represent the interests of the nation, its worries, its dreams. They may speak for us, the citizens, but please, do so coherently, without verbal violence and with arguments that convince us.

d8b426fb7787a00c41d72006c4bec2013c0a2b4f - CopyYoani Sanchez

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Reordenamiento Laboral: Quién se queda, quién se va?; Labor Force Down-Sizing in Cuba’s Medical System

By Archibald Ritter

On April 7, an article in Trabajadores stated that 109,000 workers in the heath sector were to be declared redundant, generating an expected 2 billion pesos in savings in the national budget, ostensibly without damaging the quality of health care services.

The newspaper where the article was published: Trabajadores ;

The original article is  here: Trabajadores, 7 de abril de 2014, Quien se queda, quien se va

This is  an ambitions action. Indeed, it is draconian. It seems to be well beyond the legendary “shock therapies” or “structural adjustment” programs once promoted by the International Monetary Fund that have been criticized vigorously in Cuba and elsewhere in the past.  

Apparently such a down-sizing is necessary due to the over-staffing of the health care system that seems to have built up over the years. This may be the case, as Cuba continued to judge its medical performance partly on numbers of doctors and medical personnel per thousand population and number of hospital beds – quantitative success indicators that probably contributed to an excessive expansion of the system.

However, the personnel of the Ministry of Health already had been cut back significantly from their peak of 335,622  in 2008 falling to 265,617 in 2011.  This was a personnel reduction  of 23.5%, with a 37% reduction of pharmacists, a 10.5% reduction of nurses, and a 45.4% reduction in auxiliary and technical personnel.  Presumably there are many more employees in the medical system not included in the numbers of the Table, people such as custodians, secretaries, receptionists, administrators, drivers, information technologists and tradesmen, but how many of these were employed in the system is not indicated in the ONE Anuario Estadistico.

Were further cuts required after these reductions? Apparently so.

Personal facultativo, Ministerio de SaludIs the Cuban government expecting that the numerous Cuban medical personnel abroad, and mainly in Venezuela will be returning to Cuba so that cut-backs will be necessary in order to accommodate them in the medical system?  Indeed, with Venezuela teetering on the brink of serious conflagration and economic melt-down, it may well be the case that Cuban medical personnel may not be in Venezuela at current levels for much longer. Is this the expectation of the Cuban government?

It is of interest to note that as was the case with the announcement of the 500,000 target for layoffs in the state sector in 2010, , the announcement of the job cuts were published in the workers’ newspaper, Trabajadores, and the person explaining the cut-backs was a certain Rafael Guevara Chacón, an employee of the Central de Trabajadores de Cuba (CTC), the labour federation. Is this how Cuba’s labour movement defends workers’ interests?

It will not be easy determining who is and who is not redundant in the medical system. What will be the criteria for determining the redundancies? Will favoritism or a person’s political record be significant factors?  What will be the job prospects for the medical personnel that are being poured out of the educational system?

Then there is the question of where the displaced workers are to go. Some will retire, but others will have to be absorbed elsewhere in the system.

Is the cuenta-propista or self-employment sector capable of creating an additional 109,000 jobs without further liberalization of the policy environment within which it operates?

Can personnel cut-backs of this amount actually avoid damaging the medical care system?

All in all, implementing labour force cut-backs in the medical system of this magnitude will undoubtedly be a major challenge for the government.

Cuba Apr 2012 062.jpg AAAA

Maternity Hospital, Avenida G Vedado, in process of reconstruction, 2012-2014; Photo by Archibald Ritter

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As Cuba eases investment rules, many Cuban-Americans turn against the embargo

Apr 5th 2014 | MIAMI |

From the Economist here: As Cuba eases investment rules

AT THE outset of Tom Wolfe’s latest novel, “Back to Blood”, the muscled hero, a 25-year-old Cuban-American cop called Nestor Camacho, seethes when his fat and disdainful Americano (Anglo) colleagues stereotype him as a Cuban. He has never set eyes on the island, he says. His Spanish is poor. At home, his parents’ hatred of Fidel Castro flies over his head. His world revolves around Miami, not Cuba.

Unsurprisingly, the book is not universally liked in Miami (it skewers everyone, from Anglos to Cubans to Haitians to Russians). But in at least one respect it is spot on. Younger Cuban-Americans are less obsessed with Cuba than their exiled elders. Like other Americans, pollsters say, they now think more pragmatically; Cuba is not the only voting issue that they care about.

In fact, they are more likely to be pouring money into Cuba than shunning it. Remittances, as well as travel, have risen since President Barack Obama eased restrictions in 2009 and 2011 (see chart). Much of the money has found its way into restaurants (known as paladares), hairdressers or other small businesses run by relatives in Cuba. That has given Cuban-Americans an increasing, albeit hidden, stake in the island’s economic future.

The laws of both the United States and Cuba have forbidden such money to be treated as investment. But on March 29th Cuba’s parliament approved a new foreign-investment law that for the first time allows Cubans living abroad to invest in some enterprises (provided, according to Rodrigo Malmierca, the foreign-trade minister, they are not part of the “Miami terrorist mafia”). The aim is to raise foreign investment in Cuba to about $2.5 billion a year; currently Cuban economists say the stock is $5 billion at most.

The law, which updates a faulty 1995 one, is still patchy, says Pavel Vidal, a Cuban economist living in Colombia. It offers generous tax breaks of eight years for new investments. However, it requires employers to hire workers via state employment agencies that charge (and keep) hard currency, vastly inflating the cost of labour. It enhances the right to establish fully owned foreign businesses, although existing private firms, such as paladares, are still forbidden from taking foreign capital. Much, including whether or not Cuban-Americans can invest, will depend on how the government implements the law. “It’s still very discretionary,” Mr Vidal says.

Despite their failings, Cuba’s new rules are a reminder of how inflexible United States law remains. Because of the 53-year-old embargo against Cuba, some Cuban-Americans fear they will be left behind as investors from Brazil, China, Russia and Europe move in. Already Tampa, on Florida’s west coast, is vying for a greater share of Cuban business when the embargo is lifted. “Every day we’re missing opportunity,” says Bob Rohrlack, head of the Greater Tampa Chamber of Commerce.

20140405_AMC657In Miami people talk of a tipping point. Alberto Ibargüen, a former publisher of the Miami Herald, says demographic trends that began decades ago have finally softened the mood towards Cuba (though “absolutely not” towards the Castro regime). If American restrictions on all tourism to the island were lifted, “you’d get a couple of letters to the editor.”

Some Miami Cubans have managed to squeeze through cracks in the embargo. Hugo Cancio, who left the island in the Mariel boatlift of 1980, owns a website and magazine, OnCuba, written mostly by Cubans, which plays down repressiveness and plays up commerce and culture. He has a newsroom in Havana but despite his entreaties, American law forbids him from paying its staff. Tony Zamora, a semi-retired Miami lawyer who was jailed in Cuba for taking part in the 1961 Bay of Pigs invasion, has also recast himself as a promoter of investment in the island. After 40 trips to Cuba, he calls the embargo “almost a total failure”.

Many Cuban-Americans put their faith in Mr Obama to soften the embargo, even if Congress will not lift it. They note that more than 60% of Miami-Dade County, where they predominate, voted for the president in 2012, many more than in the previous election, even after he eased policy towards Cuba. If Charlie Crist, a Republican-turned-Democrat who is running for a second turn as Florida governor and supports lifting the embargo, wins in November, it will help their cause.

Even so, the old guard cares more about keeping the embargo than younger Cuban-Americans do about getting rid of it. Most Cuban-American congressmen in Washington, DC, remain avid backers of it. Mauricio Claver-Carone, who heads a pro-embargo lobby group, argues that all foreign investment still goes to monopolies run by the Castro regime, which helps prop it up. The stakes have been raised by the jailing of Alan Gross, an American citizen convicted in Cuba of smuggling communications equipment to dissidents. Few believe the Obama administration would risk a bold move without his release.

The embargo’s days are nonetheless numbered, not least because Raúl Castro, the 82-year-old president, and his brother Fidel, 87, will not live for ever. In the meantime, it increasingly seems like a relic, as outdated as the Castros’ Cuba.

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A Belated Brief Review: Samuel Farber’s “Cuba Since the Revolution of 1959: A Critical Assessment”

Review by Arch Ritter

Cuba Since the Revolution of 1959: A Critical Assessment. By Samuel Farber. Chicago, IL: Haymarket Books, 2011. Pp.ix + 369. $24.00 paper. ISBN: 1608461394.

book-cover-reduced-best

Samuel Farber’s volume on Cuba, as its title indicates, “attempts to present a historical analysis and evaluation of the Cuban Revolution since 1959.”  He approaches his analysis from “the left” but a democratic socialist left espousing genuine participatory democracy, with popular “self-mobilization fully respecting human and minority rights” (p. 4.)

Farber considers his work as “a form of advocacy and normative in its orientation”: 

“a political reflection on history and a search for a usable past which hopefully will support the new voices emerging in Cuba advocating a progressive transition toward a revolutionary and democratic form of socialism” (p. 5.)

While Farber’s work of course is not totally comprehensive, he takes a broad view, and includes national sovereignty, nation building and democracy, economic growth and social welfare, foreign policy, race and gender issues, the place of dissidents and critics from left to right, within and outside Cuba and then a summary and conclusion. Although Farber analyses the various issues over the life of the Revolution and also draws on pre-Revolutionary experience regarding the various issue areas, he brings each area into the 2000s and the 2010s. He also up-dates his work with an “Epilogue” on the Sixth Party Congress of April 2011 and comments on the reform process of the 2010s.

            Farber’s volume is thoroughly researched and documented. Indeed it includes 53 pages of footnotes that frequently include important substantive insights as well! His work draws on his own research and deep knowledge acquired over many years study, a comprehensive range of Cuban primary sources and the work of others analysts inside and outside Cuba.  Many observers and analysts of various aspects of Cuba’s historical experience since 1959 will be to some extent familiar with much that he writes about. However, it is enlightening and enjoyable to review in detail Farber’s well-written and well-organized discussion of these central dimensions of Cuba’s experience.

In view of Farber’s somewhat iconoclastic approach to his work, which is unabashedly “in a classical Marxist tradition” but also social democratic – or as he would undoubtedly prefer, “socialist democratic” – one might expect that he may come under s criticism from both the right and the left. But Farber’s work in fact seems uncontroversial, “mainstream” and “social democratic” in character. His analyses and evaluations are well balanced, objective and convincingly supported with painstaking and comprehensive presentation of evidence. This is a volume well worth reading for the “old Cuba hand” as well as for anyone wanting an objective analysis of Cuba’s experience since 1959.

imagesSamuel Farber

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ETECSA: un monopolio creciente

Original here: ETECSA

Por Emilio Morales, Miami (The Havana Consulting Group).

13-companhia-cubana-de-telefono-435x650.jpg aaaEdificio ETECSA, formerly the US-owned Compania Cubana de Telefono

El crecimiento de los servicios de telefonía celular en Cuba se ha convertido en uno de los más prósperos y rentables negocios que controla el gobierno de Raúl Castro.

El papel imprescindible del desarrollo de las telecomunicaciones para la economía cubana y las necesidades de capital del país han transformado este sector en un exitoso activo financiero durante los últimos seis años. Para ello, el gobierno cubano ha implementado un plan de inversiones que le ha permitido renovar las plantas telefónicas, extender la red de telefonía celular a casi todo el territorio nacional, y preparar y formar a personal técnico y de marketing en el exterior. Actualmente el monopolio estatal cubano ETECSA está valorado en alrededor de $3,000 millones de dólares.

Desde que fuera liberada la contratación de los servicios de telefonía celular en el 2008, el número de líneas arrendadas alcanza los dos millones, lo cual le ha permitido a ETECSA ingresos de alrededor de $2,000 millones de dólares solo en la modalidad de telefonía celular prepagada, que es la que utiliza la población cubana.

Continue Reading: ETECSA March 2014

Año

Líneas

Facturación

2008

431,861

$146,223,512

2009

785,324

$257,403,045

2010

1,127,985

$280,473,300

2011

1,431,589

$340,095,000

2012

1,792,345

$450,100,465

2013E

1,912,340

$561,278,780

emilio-morales-dopicoEmilio Morales

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Richard Feinberg: “Cuba’s New Investment Law: Open for Business?”

Richard Feinberg, April 1, 2014 1:30pm

We are still awaiting the publication of Cuba’s new foreign investment law, passed by the National Assembly on Saturday March 29 2014. In the meantime, here is a brief outline and discussion from Richard Feinberg in a Brookings Blog.

Original here: Cuba’s New Investment Law

 Dateline Havana: The Cuban legislature has approved a new foreign direct investment law (FDI), and the detailed follow-on regulations will be issued within the next 90 days. From my informal conversations in Havana, Cubans on the street seem to accept with enthusiasm the government’s dual message: that the new guidelines will not compromise Cuban sovereignty – a key gain of the 1959 revolution – but will encourage badly needed inflows of foreign capital and technology.

In a shift from past practices, government messaging has emphasized the importance of foreign investment worldwide, with the Communist Party daily, Granma (March 31, 2014), quoting a government commission declaring that “no country today has successfully developed without foreign investment as a component of its political economy.” President Raúl Castro asserted that “we must take into account the absolute necessity to stimulate and attract foreign investment, to add dynamism to our economic and social development.”

Experienced commentators have noted, however, that many of the more positive paragraphs in the new law could also be found in the previous 1995 FDI regulations, which were outweighed by more restrictive clauses and by a recalcitrant bureaucracy that in recent years has approved very few major new foreign ventures.

Several of the more promising sections of the new law echo recommendations in the 2012 Brookings monograph, The New Cuban Economy: What Roles for Foreign Investment?:

·         A strong official recognition that FDI must be integral to Cuba’s development strategy, if the country is to depart from its sluggish economic path.

·         Majority foreign ownership is an option (although this was also the case, if ignored in practice, under the 1995 regime).

·         The project approval process should be streamlined and made more transparent.

·         Firms should have more flexibility with regard to wage scales, such that remuneration can be a stimulus to productivity. In addition, the much anticipated currency unification will likely reduce the extraordinarily heavy tax on wages paid by foreign investors.

Other noteworthy aspects of the new law include reductions in certain taxes, and the promise of just compensation in the event of expropriation. But some existing obstacles to investment appear not to have been adequately addressed. For example, the new law continues to press investors on local content requirements, even as it also notes the importance of firm integration into global value chains.

The proof will be in the pudding, and investors will be watching closing for the fine print in the new regulations and, most importantly, for the implementation of the approval process. The new law recognizes that Cuba badly needs foreign investment in many sectors of its economy, including but not limited to agriculture and sugar, energy, bio-technology, construction, and tourism. Will the government establish an investment climate that attracts foreign investments, and a truly transparent bureaucratic process that vets proposals in a prompt timeframe competitive with international standards?

U.S.-based businesses, of course, will not be able to take advantage of any new investment opportunities, as a result of long-standing and comprehensive commercial sanctions. Other foreign businesses, however, are likely to get a head start soon

 Cuba Canada

Former Sherritt International CEO, Ian Delaney and Raul Castro, Captivated!

melia-cohiba-aerial-view-98The Melia Cohiba Hotel, Havana

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