• 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.

NON-AGRICULTURAL COOPERATIVES IN CUBA: A NEW WAY TO UNLEASH THE FORCES OF PRODUCTION?

Original Essay Here: Cuba Study Group,  http://www.cubastudygroup.org/File_id=9ce1d57b-2598-4c7c-91bf-4a9b135a718a

Full Article Here: Yailenis Mulet Non-Agricultural Cooperatives in Cuba

Dr. C. Yailenis Mulet Concepcion

November 7, 2013:

 Starting in 1959, when Fidel Castro came to power, countryside cooperatives were established as a way of increasing and developing Cuban agriculture. There are currently more than 5,000 such cooperatives, but for the first time in half a century, urban cooperatives have been authorized as part of the economic plan initiated by the adoption of the economic and social guidelines of April 2011.

The upgrading of cooperativism, which is part of a larger effort to update the Cuban economic model, seeks to enhance efficiency and productivity in the country. With this goal—of achieving greater efficiency in economic activity—the Cuban state has been forced to decentralize the operation of state enterprises and to allow new forms of non-state management. In that environment, urban cooperatives are an alternative with certain noteworthy advantages, but also unquestionable weaknesses since experiences with agricultural cooperatives have so far been mixed.

Urban cooperativism is part of a government program aimed at bringing the non-state sector to “contribute” close to 45% of Gross Domestic Product (GDP) by the end of a five-year period, something that is somewhat doubtful in light of the enormous sluggishness of the program. Approvals for private activity and cooperatives across the country need to be accelerated.

The first non-agricultural cooperatives launched operations just a few months ago. It would be premature to speculate on this new form of management and its role within the updating of the Cuban economic model. Nevertheless, some important aspects can be underlined:

Urban cooperativism is part of a government program aimed at bringing the non-State sector to “contribute” close to 45% of Gross Domestic Product (GDP) by the end of a five-year period.

The establishment of urban cooperatives is a special response to the following guidelines for economic and social policy adopted by the Sixth Congress of the Cuban Communist Party:

Guideline 02: “The management model recognizes and encourages socialist state-owned enterprises, which are the primary structure of the national economy, but also the foreign investment entities stipulated by law (e.g., joint ventures and international association contracts), cooperatives, small farming, usufruct, franchising, self-employment and other economic entities that may altogether contribute to increased efficiency.”

Guideline 25:“Grade 1 cooperatives shall be established as a socialist form of joint ownership in various sectors. A cooperative is a business organization that owns its estate and represents a distinct legal entity. Its members are individuals who contribute assets or labor, and its purpose is to supply useful goods and services to society, and its costs are covered with its own income.”

Cooperatives may be established by natural persons, self-employed or salaried workers, and state-run organizations which decide to change the management structure of their entity to that of a cooperative.

The aim is to improve management structures in sectors that directly impact the population and that have been inefficient for years. At the same time, the State can gradually shed activities that are non-essential to economic development or that have been plagued by productive inefficiency been inefficient for years. At the same time, the State can gradually shed activities that are non-essential to economic development or that have been plagued by productive inefficiencies.

 Continue Reading: Yailenis Mulet Cooperatives Cuba

yailenisbilbo00

  Yailenis Mulet is Doctor of Economic Studies at the Center of the Cuban Economy of the University of Havana. She is also Assistant Professor at the University of Havana and holds a Bachelors in Economics from the University of Holguin (2004). She has given several lectures at various institutions, both in Cuba and abroad, including the United States, Spain, Brazil and Norway.

She has completed approximately 32 professional projects related to assessments, consulting and applications in the business sector, with an emphasis on business intelligence services.Ms. Mulet has served as an advisor for 41 theses and seven master’s theses. Currently she advises five PhD theses related to the topics of Decentralization and Territorial Development. She has published over 25 articles in renowned sources in both Cuba and abroad. She has also taught graduate courses in the business sector, which emphasize managerial training on issues related to business intelligence.

Ms. Mulet has directed several business projects related to the implementation and development of business intelligence surveillance systems and management of cooperatives. Since 2010, she has focused her research on “Decentralization and Territorial Policies” and is currently involved in several research projects related to this topic.

Cuba-Mar-2014-139

The 2015 Taxi Rutero Cooperative

New-Picture-6The 1959s Bus Cooperative.

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AMERICAN FOOD PRODUCERS SEE BONANZA IN CUBA, BUT STEEP BARRIERS REMAIN

Karen DeYoung, Washington Post, June 18, 2015

Original here: Us Food Exports: Bonanza In Cuba

Before the U.S. embargo, Cuba bought more American rice than any other country in the world. Now, most Cuban rice comes from Vietnam. Last year, Cuba imported $200 million worth of wheat — virtually all of it from Europe and Canada and none from the United States, the largest global exporter.

Many U.S. agricultural producers thought those facts would begin to change this year, as U.S. relations with Cuba improved.  But in the six months since President Obama announced a new opening to the island, sales of U.S. foodstuffs — among the few U.S. products allowed, with restrictions, under the embargo — have dropped by half, from $160 million in the first quarter of 2014, to $83 million this year.  Even frozen chicken, which has led U.S. food exports to Cuba for years, had lost favor in Havana long before fears of the U.S. bird flu epidemic led this month to a ban on all poultry purchases.

Cuba Nov 2008 009Silver Creek, Seaman’s Orchards Apples from Tyro Virgina, arriving in the “Barrio Chino”, Havana, November 2008, Photo by A. Ritter

As the administration wraps up negotiations with Cuba that are expected to lead to restored diplomatic ties this summer, only Congress can lift the embargo that still prevents nearly all financial and trade relations and severely limits even the few permitted exports.

Obama has said he wants that to happen, and U.S. producers from major agribusiness  companies to small farmers have joined a bipartisan force of farm state governors and lawmakers to help overturn restrictions they say are keeping them out of a $2 billion annual market.

“Opening a new export market means a new source of revenue,” said Devry Boughner, vice president at Cargill Inc., the Minnesota-based agribusiness giant and a co-founder in January of the U.S. Agriculture Coalition for Cuba.

While Cuba’s 11 million people are not the world’s biggest market, Boughner said in an interview, “it’s a market that’s right in our target zone.” With Cuba only 90 miles away, she said, it makes little sense “to be losing out to competitors who take longer to ship it there, who might not even have the same quality” as U.S. products.

Cubans rival Southeast Asians as prodigious consumers of rice. Within two years, Riceland Foods vice president Terry Harris told the Senate Agriculture Committee in April, American rice could be providing up to 135,000 metric tons, 30 percent of the Cuban market. Within a decade, he said, that figure could rise to 75 percent or more.

Doug Keesling, a fifth generation Kansas wheat farmer, told the panel he saw no “compelling reason” for Congress to “restrict the freedom of Americans to engage in commerce, especially for those who are just trying to sell wholesome, American-grown food.” “I can put my wheat in an elevator in Kansas, send it by rail down to the Gulf, put it on a ship that’s a couple days away from Havana harbor,” Keesling said. “But my wheat’s still going to lose out to wheat that has been on a boat for a week from Canada, or even two weeks from France.”

Yet despite a series of hearings, conferences, concerted lobbying and a stream of trade delegations to Cuba from both Republican and Democratic states this year, the embargo remains firmly in place, with little promise of early action.

Many lawmakers are receptive to Obama’s call to jettison a policy he says has failed for more than a half century to effect change in Cuba. But for most, lifting the sanctions remains just one more unwelcome controversy in a contentious Congress. Others want to retain congressional power to block a White House initiative they deeply oppose. They include GOP presidential candidates Sen. Marco Rubio (Fla.), who has accused Obama of turning his back on Cubans oppressed by their communist government, and Sen. Ted Cruz (Tex.), both sons of Cubans who emigrated before Fidel Castro’s 1959 revolution.  Obama, Cruz charged, had thrown an “economic lifeline” to Cuba just as the embargo and diplomatic freeze had left its communist regime “gasping for air.”

Malnutrition rates in Cuba are “very low,” according to the World Food Program, on par with the United States and the rest of the highly developed world. Staples are guaranteed via government-issued ration cards. But domestic agricultural production rates are abysmal, equipment and farming methods are antiquated, and up to 80 percent of Cuban food is imported.  Subsidies from the then-Soviet bloc helped fill the food gap for decades after the U.S. embargo was first imposed in 1960. The Soviet collapse left Cuba in deep recession in the early 1990s, and Havana welcomed the lifting of some U.S. restrictions on food and medical exports in 2000.

Despite permitting cash-only transactions, U.S. food sales rose to a 2008 peak of $710 million before starting a downward trajectory that appears this year to have gone off a cliff, according to figures compiled by the New York-based U.S.-Cuba Trade and Economic Council.

When current President Raul Castro took over nearly a decade ago he adopted more pragmatic policies than his older brother, and U.S exports increased. But the complication and high expense of buying American in recent years has diminished Cuban zeal. U.S. prices may be competitive and transportation cheaper over the short distance, but the cost of doing business with the United States is high.

Cash-only limits remain, although Obama has eased the restriction somewhat by requiring payment when title to the goods is transferred in Cuba, rather than up-front before goods are shipped.  But Cuba’s lack of cash makes that a rarely used option. Most purchases are made on credit, and the embargo allows no U.S. financing. Instead, Cuba must go through third countries, with Havana obtaining a loan from a foreign bank. That bank then communicates with the bank of a U.S. producer, which arranges the sale with the producer himself. The process is then reversed, with each stage involving lengthy bureaucracy and significant fees.

Cubans “are not going hungry; they’re just buying wheat from other countries,” said farmer Keesling. “That may be more expensive than mine in a free market, but it is now a much better value because there aren’t massive compliance costs accompanying every purchase.”

Some opponents of lifting the embargo maintain that increased U.S. sales will only benefit the Cuban government, since all agricultural imports must go through the state agency, called Alimport.

Boughner and others point out that Cuba is not unique in that regard. Until recently, both Canada and Australia handled all of their wheat imports with state boards. “We’ve had examples through history where states have been involved in trading, but it doesn’t mean we don’t trade with them,” Boughner said. The U.S. food business also sees potential in the eventual lifting of remaining restrictions on American travel to Cuba. In addition to sampling Cuban cuisine, tourists will want to eat and drink what they are used to from home, industry analysts believe.

 

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U.S.-CUBA NORMALIZATION AND MIGRATION POLICY: CHANGING THE CUBAN ADJUSTMENT ACT

Richard N. Gioioso, Assistant Professor of Political Science at Saint Joseph’s University in Philadelphia, focusing on Latin American migration to the U.S.

 Huffington Post, June 18, 2015

Original here: Changing the Cuban Adjustment Act

On a plane ride back from Havana in June 2013, I sat next to a passenger, dressed from head-to-toe in white, and we struck up a conversation. He explained to me that he had lived in Florida for the past five years. He had normalized his status in the U.S. through the Cuban Adjustment Act, which granted him a fast track method to legal residency. For the past year or so, he had been traveling back and forth between Miami and Havana every other weekend to see his fiancé as well as to solidify his religious practice with his spiritual guide and finish his initiation into Santería. He, I thought to myself, certainly did not seem to be a Cuban who feared political persecution on the island and therefore deserved asylum in the United States. He seemed more like a transnational migrant.

On December 17, 2014, President Barack Obama announced a policy change that has reinitiated formal diplomatic relations between the United States and Cuba, begun to open financial and trade opportunities, and expanded American travel to the island. By normalizing relations with Cuba, he has stirred up emotions among both Cuban and non-Cuban Americans, and the person I met on that plane ride comes into mind. Indeed, the migration status of Cubans who enter the United States as political refugees is one of the many policies that will change and bring consequences to both Cuba and the United States when the cold relations between the two countries finally thaw.

In 1960, President Dwight Eisenhower first categorized all Cubans as political refugees. The 1966 Cuban Adjustment Act, passed by Congress and signed into law by President Lyndon Johnson, grants all Cubans an exceptional status compared to other nationalities. It grants eligibility to any Cuban who arrives on U.S. soil permanent residence after a parole period of one year and a day.

For most Cubans, however, leaving Cuba is more about finding economic freedom than about escaping direct political persecution. In fact, many, if not most, Cubans who have left the island since 1991 resemble economic migrants rather than political refugees. The Cuban government is still an authoritarian one-party system under the Partido Comunista de Cuba (PCC). Nonetheless, politics seem to have become at least minimally more inclusionary. The government has relaxed norms for individuals to strictly align with and participate in the PCC. Some non-aligned individuals have been elected to representative positions in government. At the same time, what has surfaced in some recent research, is that perception of and participation in explicit political behavior has changed and continues to change, especially for Cuban youth, such that other concerns and obligations outweigh the expressly political ones. In short, their primary concern revolves around gaining more economic opportunities as opposed to demanding explicit political freedom.

The expanding tourism sector currently provides the bulk of the economic opportunities on the island. Those who are linked to this sector, do, in fact, seem to be prospering. The many new bars and restaurants in Havana, especially, but not exclusively, in the more affluent El Vedado neighborhood and touristy la Habana Vieja, are clear signs of a “middle class” of Cubans who live relatively comfortably on the island.

For many others, migration is the solution to increased economic opportunities. Florida’s proximity and the Cuban Adjustment Act are two factors that motivate Cubans to leave. Some leave the island legally with some variety of visa, then declare their asylum status once they arrive in the U.S. Many other Cubans, however, leave the island through irregular manners and arrive at the U.S. border, over air, land or sea, declare their “Cuban” status to the authorities and begin the parole process on the spot.

The irregular migrant sneaks off the Cuban shoreline at night through some manner of sea vessel, usually in small groups or through a human smuggler. Cuban and U.S. authorities have recognized that irregular departures from Cuba are often treacherous and hazardous and have tightened control and cooperation around unauthorized exits and entries. There are also serious concerns over the notable presence of Cubans who opt to travel first to Mexico, and from there make their way to the U.S.-Mexico border to enter. Ultimately, the incentives to leave Cuba for the U.S. are clear and convincing, but no longer reflect the conditions that led to the Cuban Adjustment Act. This raises doubts about the Act’s continued validity.

The Obama Administration has announced that it has no intention of changing the migratory status of Cubans in the short term. An active “thaw” in the U.S.-Cuba relationship will lead U.S. lawmakers on both sides of the aisle to advocate for ending the trade embargo and bring migration policy to Cuba in line with other countries. Furthermore, efforts to make explicit changes to the Cuban Adjustment Act are currently under way. In short, the realities of normalization will eventually dismantle the law as it currently stands, and Cubans will cease to be an exceptional group of political refugees.

Fears over the elimination of Cubans’ exceptional refugee status and uncertainty over when that will happen will motivate many to contemplate and attempt an exit from Cuba for the United States in irregular ways. Since Obama’s announcement, reports have shown an uptick of Cubans caught at sea by the U.S. Coast Guard.

In the intermediate to long term, ending the Cuban Adjustment Act will hopefully contribute to the type of political change the U.S. government and most Cuban citizens on the island ultimately desire. For decades, presidential administrations, lawmakers, and anti-Castrista activists have tried to ferment discontent among Cubans using a variety of strategies to try and pressure the Castro administration to reform. Past and present tactics include broadcasts by Radio and Televisión Martí, USAID sponsored programs – including the recently uncovered Zunzuneo [Cuban Twitter] scandal, as well as a people-to-people exchange program established in 1999 to enhance cross-cultural relations between Americans and Cubans.

A flaw to the logic of the Cuban Adjustment Act, however, is precisely the wholesale categorization of all Cuban citizens as political refugees, because, if indeed any pressure for change would build through the tactics mentioned above, it could be relieved when Cubans leave Cuba to the United States for good. By removing the Cuban Adjustment Act and no longer granting all Cubans the status of political refugees, the U.S. immigration authorities will instead issue more and more visas – especially for tourism and educational purposes – and increase the amount and quality of exchange between the countries. Cuban travelers, who, for the most part, will no longer be able seek political asylum, will have to return to Cuba to live, with greater demands for change within Cuba having experienced U.S. society.

Nobody wants to lose a special privilege. However, American foreign and migration policy should reflect Cuba in 2015, not in 1960. Changing migration policy to Cubans recognizes those who are truly politically persecuted or fear persecution to become refugees or seek asylum. It will expand the currently small class of Cuban travelers to the U.S. who, as members of and stakeholders in the Cuban polity, will return the island with greater motivation, know-how, and support for more political and economic change. A new official U.S. migration policy for Cubans will be a fresh approach to stimulating the political and economic reforms through openness and exchange that five and a half decades of isolation have failed to achieve.

24327_1371008365655_1545135432_919317_733453_n 24327_1371008405656_1545135432_919318_8061963_n 24327_1371008445657_1545135432_919319_1805493_n balseros18 CUBAN MIGRANTS (FOR RELEASE)

 

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NUMBER OF SELF-EMPLOYED IN CUBA EXCEEDS HALF A MILLION

14ymedio, Havana | Junio 13, 201513, 2015

Original article here: 14YMEDIO  504,613  

At the conclusion of the month of May, the number of self-employed persons in Cuba had risen to 504,613, as shown in a report from the Ministry of Labor and Social Security (MLSS) published Saturday. Of these, at least 17 percent combine their work in the private sector with a government job.

The document also notes that among people with a license to practice an occupation on their own, there are some 155,605 young people, a number that grew by 7,912 during the first quarter of the current year.

Moreover, some 154,756 women are self-employed, while 62,043 retired people have chosen to re-enter working life through this non-State form of employment.

The report also reveals that the provinces of Havana, Matanzas, Villa Clara, Camaguey, Holguin and Santiago de Cuba lead the rest of the country, accounting for 66 percent of workers engaged in these occupations.

The most common activities are still making and selling food, transport of cargo and passengers, renting of housing, rooms and spaces, telecommunications agent, and contract workers, the latter associated primarily with the first two listed activities.

The expansion of the process of self-employment began in October 2010 and the promising initial growth has been overtaken in the last year by a slower increase. Self-employed people complain about the high taxes, the lack of a wholesale market, excessive restrictions on what they are allowed to do, and the lack of permits to import raw materials.

SOME PRIVATE SECTOR ACTIVITIES

Cuba April 2015 032Flamenco Music and Dancers at a State Restaurant.

Cuba April 2015 043Private Transport and Tourist Guide

Cuba April 2015 114At the Arts and Crafts Sales Center

Cuba April 2015 112Arts and Crafts Market

Cuba April 2015 120Food Vendor

Cuba April 2015 168“Cafetera”

Cuba April 2015 179Mobil Phone Repair

[photos by A. Ritter, April 2015]

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FINANCIAL TIMES SPECIAL REPORT ON CUBA, June 16, 2015

Financial Times, June 16, 2015

Document here: Financial Times SPECIAL REPORT on CUBA June 16 2015

Authors:

John Paul Rathbone, Latin America Editor; Geoff Dyer, US diplomatic correspondent; Richard Feinberg, Professor, UCLA San Diego; Marc Frank, Journalist based in Cuba; Cardiff Garcia, FT Alphaville reporter

obama-castroTHAW IN US RELATIONS RAISES EXPECTATIONS; Tentative signs of openness heighten hopes, but is the island ready to do business?

NEW CONNECTION DIVIDES OPINION; President Obama’s overtures play better than expected at home — although not with everyone

STRAITS DEALING BRIDGES MANY GAPS; Retailers in Florida cash in on items needed by customers across the water

GLIMMERS OF GLASNOST BEGIN TO WARM ISLAND; Government retains a firm grip, but there are signs it is loosening a little

NEW PORT ZONE HARBOURS BIG AMBITIONS; A would-be capitalist enclave in a socialist state, the Mariel project is emblematic of change

STATE EXPERIMENTS WITH CO-OPERATIVE THINKING; From garages and restaurants to dealers in exotic birds, co-ops are expanding

CUBA’S NASCENT KNOWLEGE ECONOMY; The island could capitalise on a wealth of expertise in science

US COMPANIES STILL FACE INVESTMENT HURDLES; Bureaucracy, eroded infrastructure and regulatory risk are among hurdles

GOVERNMENT LIKELY TO END TO DUAL CURRENCY; Change would be part of reforms to remove price distortins

COMPENSATION IS KEY TO FUTURE RELATIONS; What now for legal claims by those who lost property in the revolution?

OPINION: WHAT CUBA CAN LEARN FROM VIETNAM; The island has the resources and location to create a balanced economy

 There is a new entry among Cuba’s roll of important dates. Alongside Fidel Castro’s 26th of July movement and the January 1 1959 “triumph of the revolution”, there is now December 17 2014. That was the day when Barack Obama and Raúl Castro, the US and Cuban presidents, announced that they wanted to normalise bilateral relations and end more than 50 years of cold war enmity.

 To be sure, communist Cuba was already changing. After formally becoming president in 2008, Mr Castro began a tentative economic liberalisation process to boost the country’s flagging economy — especially urgent now that Venezuela’s growing crisis jeopardises the $1.5bn of aid it sends every year. But the December 17 announcement lit a bonfire of expectations among US businesses — even if Cuba’s $80bn economy, for all its exotic allure, is much the same size as the Dominican Republic’s. “There is a new sense of excitement, of US companies coming to look and thinking of starting seed businesses,” says one long-established European investor in Havana. “It makes sense. Start small, learn how the system works and then see how it all goes.”

 So, how might it all go? Continue reading:  Financial Times SPECIAL REPORT on CUBA June 16 2015

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RETHINKING CUBA: NEW OPPORTUNITIES FOR DEVELOPMENT

THE BROOKINGS INSTITUTION, Washington, D.C., Tuesday, June 2, 2015

 COMPLETE  TRANSCRIPT OF THE EVENT: Brookings, RETHINKING CUBA

PANEL 1: TRENDS IN THE CUBAN ECONOMY IN LIGHT OF THE NEW U.S.-CUBA CONTEXT:

Moderator:

TED PICCONE, Senior Fellow, Latin America Initiative, The Brookings Institution

Featured Speaker:

STEFAN SELIG, Undersecretary of Commerce for International Trade, U.S. Department of Commerce

Panelists:

JUAN TRIANA CORDOVI, Professor of Economics, University of Havana

ARCHIBALD RITTER. Distinguished Research Professor, Carleton University

 PANEL 2: FINANCING CUBA’S GROWTH, DEVELOPMENT, AND TRADE:

Moderator:

BARBARA KOTSCHWAR, Research Fellow, Peterson Institute for International Economics

Panelists:

YAIMA DOIMEADIOS, Professor, University of Havana

RICHARD FEINBERG, Professor, University of California, San Diego

SAIRA PONS, Professor, Center for the Study of the Cuban Economy,  University of Havana

GERMÁN RIOS, Director, Strategic Affairs, CAF Development Bank

 PANEL 3: NEXT STEPS FOR CUBA’S EMERGING PRIVATE SECTOR-CUENTAPROPISTAS AND COOPERATIVES:

Moderator:

RICHARD FEINBERG, Professor, University of California, San Diego

Panelists:

RAFAEL BETANCOURT, Consultant, Havanada Consulting

TED HENKEN, Professor, Baruch College

JOHN McINTIRE, Chairman, Cuba Emprende Foundation

 PANEL 4: A NEW STAGE IN FOREIGN DIRECT INVESTMENT:

Moderator:

HAROLD TRINKUNAS, Senior Fellow and Director, Latin America Initiative, The Brookings Institution

Panelists:

MARK ENTWISTLE, Founding Partner, Acasta Capital

JOSÉ MARIA VINALS CAMALIONGA, Partner and Director of International Operations, Lupicinio International Law Firm

AUGUSTO MAXWELL, Partner, Akerman, LLP

OMAR EVERLENY, Professor, Center for the Study of the Cuban Economy, University of Havana

 CLOSING REMARKS:

TED PICCONE, Senior Fellow, Latin America

 

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BROOKINGS INSTITUTION, EVENT SUMMARY: TIME TO INVEST IN CUBA?

Anna Newby | June 5, 2015

A video of the event is available here.

 800px-11_Tribuna_antiimperialista_(3)

Cuba’s economic future is looking up if Havana undertakes additional reforms. Such was the overall—yet cautious—consensus at this week’s Brookings event titled “Rethinking Cuba: New opportunities for development,” hosted by the Brookings Institution’s Latin America Initiative. The conference brought together a high-level group of experts from Cuba, the United States and other countries to examine the prospects for Cuba’s economy in the context of the historic process of normalization launched on December 17, 2014.

Opening the event, Brookings Senior Fellow Ted Piccone called attention to the gradual but unprecedented progress taking place in Cuba today. Amid “dialogue and confidence-building” between Washington and Havana—including Cuba’s removal from the U.S. State Department’s list of states that sponsor terrorism, an essential step for the full normalization of diplomatic relations—public- and private-sector actors are entering uncharted waters. As the event’s many panelists went on to discuss, financing Cuba’s growth, fostering foreign investment, and engaging the island’s emerging private sector remain enigmas in many ways.

Offering the Obama administration’s perspective, Under Secretary of Commerce for International Trade Stefan Selig pointed to new commercial openings in Cuba, such as the operation of Airbnb in the country and the increasing availability of commercial flights. There is “no denying the speed of these developments,” Selig said, and there is “no denying the excitement.” But the process of normalizing relations, Selig emphasized, will be “evolutionary and deliberative.”

Juan Triana Cordoví of the University of Havana and Archibald Ritter of Carleton University underscored the cautious excitement about Cuba’s economic outlook. Recognizing that the Castro government is revising its fiscal and economic policies, surveys of foreign business leaders show expectations that the ease of doing business on the island will improve. Policy moves, in combination with big investments in infrastructure development, have prompted “an important transformation in the image of Cuba,” in Cordoví’s words. And as Ritter pointed out, despite Fidel Castro’s famous interest in making Cuba a “giant school for socialism,” it has actually become “a giant school for entrepreneurship,” with deficiencies in access to capital and information spurring remarkable creativity among Cubans.

On the issue of financing, Brookings Nonresident Fellow Richard Feinberg acknowledged that Cuba is still mired in a low investment, low growth trap—a disappointment, as all panelists agreed, given Cuba’s potential for growth. As Yaima Doimeadíos pointed out, the large Cuban diaspora has been and will continue to be an essential financer of new investments—particularly in tourism. But the fact that Cuba remains outside the Bretton Woods international financial institutions is a major obstacle, andHavana must decide when (not if) to join those institutions, according to Feinberg. Regardless, as Germán Ríos of the CAF Development Bank pointed out, it will take a while before normal financing will be available to Cuba, given financial restrictions on the island and shortcomings in the banking sector. In the short term, capacity-building projects, technical assistance, and efficiency gains will be key; in the longer term, public-private partnerships are a central goal. As Yaima Doimeadíos of the University of Havana pointed out, the reduction in the number of small-scale, state-managed enterprises amounts to an acknowledgement by the Cuban government that it is poorly-equipped for such tasks. One of the best ways for the Cuban economy to achieve productivity gains, she added, will be through efficiency gains—these are more likely to be discovered in the private sector.

Turning to the issue of self-employment—a relatively new sector on the island—speakers agreed that self-employed Cubans still face many constraints. The field remains strictly controlled, as Ted Henken of Baruch College noted, and hardly allows for much creativity: “self-employment in Cuba—in the official sense—isn’t really entrepreneurial, [rather] it’s medieval, survivalist.” Ownership of capital is unclear, as Rafael Betancourt of Havánada Consulting added, and the centralized approval process means long waits.

Nevertheless, Henken emphasized, there is an apparent directive from the top to make improvements, with Raúl Castro writing to his colleagues that “we all” need to work to end the stigmatization of private enterprise and self-employment in Cuba. He likely recognizes the major advantages to removing the country’s “auto-bloqueo” (self-imposed blockade, in Henken’s words) preventing the inflow of capital and knowledge, which the Obama administration has offered to help provide to Cuban entrepreneurs. Conveniently, self-employment fits within the socialist narrative of capital ownership by the workers.

Concluding the event, Piccone reiterated that in spite of the positive outlook for Cuba, changes on the island will be slow and incremental. Basic economic incentives still do not fully align with market-oriented structures, and technological hurdles to development—particularly internet access—remain high. Moreover, many of the most promising developments are at the microeconomic level and are not likely to have widespread effects. He added that U.S.-Cuba relations are only part of the story and that developments vis-à-vis China, Mexico, Venezuela, Brazil, and elsewhere could also prove consequential.

One audience member pointed out that the glaring weak link in Cuba’s economic picture is political, not economic, i.e., the government’s political will to modernize and integrate its economy. Cuban law technically prevents nationalization, requires compensation if a foreign asset is expropriated, and guarantees that profits can be repatriated. But foreign investors doubt the Castro government’s seriousness about enforcing those laws, given its history of hostility to foreign business.

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CUBA AFTER THE CASTROS: THE LIKELY SCENARIOS

JOSÉ AZEL, June 14, 2015 – The Wall Street Journal -

Original here:   http://www.wsj.com/articles/cuba-after-the-castros-the-likely-scenario-1434319520

RaulMiguelDiaz-CanelPresident Raul Castro and First Vice-President and Probable Successor  Miguel Díaz-Canel

 The 2008 succession from Fidel to Raúl Castro was efficient and effective. But the popular hallucination outside the island—in which Gen. Castro intervenes forcefully to end the communist era and inaugurates a democratic, market-oriented Cuba—is not going to be how the story ends.

Given Raúl’s age—84—there will be another succession in the near future. The critical question is not what economic reforms Raúl may introduce, but what follows him.

José Ramón Machado Ventura, second secretary of the Communist Party, is also 84 years old and Cuba watchers do not see him as the next leader. If Miguel Díaz-Canel, 55, the first vice president of Cuba, ascends to the presidency, he will most likely be a “civilian” figurehead for the generals to present to the international community.

Raúl was head of the armed forces for nearly 50 years and now, as head of the country, he has appointed his military officers and military family members to positions in government and industry. One possible scenario after he is gone would be a reversion to a military dictatorship such as Cuba under Batista, Brazil from 1964-85, or Egypt today. Yet another outcome, equally disquieting, is possible.

By some estimates, including the University of Miami’s Institute for Cuban and Cuban-American Studies, the Cuban Revolutionary Armed Forces controls over 70% of the economy. Enterprise Management Group (GAESA), the commercial holding company for the Cuban Defense Ministry, is involved in all key sectors of the economy. Through government-owned subsidies, the company is heavily involved in tourism, retail sales, mining, farming and energy, and joint ventures with foreign investors.

Raúl, as a matter of survival not ideology, has introduced some tentative economic reforms, while continuing to expand the metamorphosis of his officers into businessmen. Some might present this as a positive development, where warriors exchange their weapons for calculators. But what does it mean for the future of Cuba when the Raúl era comes to an end and military officers are in political and economic control?

In a system where enterprises are state-owned and managed, the military officers-turned-business executives will enjoy the privileges of an elite ruling class. Yet it will not take long for the military elite to realize that managing government-owned enterprises offers only limited benefits—owning the enterprises is a far more lucrative option.

Once the Castro brothers are no longer in the picture, the military oligarchy might decide to champion a far-reaching but phony reform—that is, a manipulated privatization of the industries under their managerial control. Not unlike the rigged privatizations in Russia in the 1990s, an illegitimate and corrupt privatization process would give birth to a new class of government-created oligarchs—instant capitalist millionaires, the new Cuban “captains of industry.”

The Cuban population might not view these ownership changes as particularly undesirable or nefarious, mistakenly viewing them as a positive transition toward free markets and prosperity. The international community would likely also acclaim the mutated generals as agents of change bringing market reforms to Cuba. In the United States, of course, the change in U.S.-Cuba policy introduced by President Obama would be declared a success.

Cuban Communism, to be sure, would come to an end, leaving in its wake generals, new captains of industry and assorted other nouveau riche in charge of country devoid of democratic culture. And like Russia after the collapse of the Soviet Union, Cuba’s economy would be riddled with monopolies and oligopolies whose owners would have the power to stifle any pro-competitive policies or international investors that might threaten their position.

It is often argued that the introduction of economic reforms, even without political reforms, will lead sequentially and inexorably to democracy. As in the case of China after Mao, this is not necessarily, or even probably, the case.

Without profound political reforms, putative economic changes conducted by Cuba’s military will only transfer wealth from the state to a ruling military and party elite. It will not lead to democracy or prosperity.

Mr. Azel is a senior scholar at the Institute for Cuban and Cuban-American Studies, University of Miami, and the author of “Mañana in Cuba” (AuthorHouse, 2010).

Fidel-and-raul-Castro- as múmias do CaribeFather Time:  Always At Work

 

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CUBA’S CHALLENGE: WHAT DID THE CUBAN REVOLUTION ACCOMPLISH AND WHERE CAN IT GO FROM HERE?

BY SAMUEL FARBER, June 10, 2015

Original Essay from “JACOBIN” Here:  Cuba’s Challenge

Samuel Farber was born and raised in Cuba. He is the author of Cuba Since the Revolution of 1959: A Critical Assessment.

When in the 1950s, along with many of my high school classmates, I became involved in the struggle against Cuban dictator Fulgencio Batista, one of our teachers remarked that we had no real reason to criticize the state of our country because so many other nations in the region — such as Bolivia and Haiti — were much worse off than us.

His description of Cuba’s comparative position was accurate, but incomplete. On the eve of the 1959 Revolution, Cuba had the fourth highest per capita income in Latin America, after Venezuela, Uruguay, and Argentina.

And although average per capita income is an insufficient, and sometimes misleading, indicator of general economic development, other indicators support his picture of the pre-revolutionary Cuban economy: in 1953, Cuba also ranked fourth in Latin America according to an average of twelve indexes covering such items as percentage of labor force employed in mining, manufacturing, and construction, percentage of literate persons, per capita electric power, newsprint, and caloric food consumption.

Yet, at that time the country’s economy was also suffering from stagnation and the pernicious effects of sugar monoculture, including substantial unemployment (partly caused by the short sugar cane season of three or four months). Most importantly, the national indexes of living standards hid dramatic differences between the urban (57 percent of the population in 1953) and rural areas (43 percent), especially between Havana (21 percent of Cuba’s total population) and the rest of the country. The Cuban countryside was plagued by malnutrition, widespread poverty, poor health, and lack of education.

For my teacher, it seems, the fact that other people were worse off made him more accepting of his own life circumstances. But he was the exception. To the extent that Cubans compared themselves with the people of other countries, they preferred to look up to the much higher standard of living of the United States rather than console themselves by looking down at the greater misery of their Latin American brethren.

As a 1956 report of the United States Bureau of Foreign Commerce put it: “the worker in Cuba . . . has wider horizons than most Latin American workers and expects more out of life in material amenities than many European workers . . . His goal is to reach a standard of living comparable with that of the American worker.”

This underlines the fundamental mistake of assuming instead of ascertaining that comparisons of economic performance have any meaning to the people who live in those economies. Taken to an extreme, this mistake leads to an “objectivist” analysis that stands outside history as it is actually lived by its actors and is likely, as in the case of my high school teacher, to result in a conservative commitment to the existing social order, as opposed to a questioning of, or opposition to, the existing social order and its ruling group.

For those who are affected by it, economic development has a meaning that goes beyond economic data and requires an understanding of popular aspirations and expectations, which are based in part on the existing material reality and in part on past history.

In terms of its material reality, the Cuba of the fifties was on the one hand characterized by uneven modernity, fairly advanced means of communication and transportation — especially the high circulation, by Latin American standards, of newspapers and magazines — and the rapid development of television and radio. On the other hand, there were abysmal living conditions in the Cuban countryside.

As far as its history, the Cuba of the 1950s was still living the effects of the frustrated revolution of 1933, a nationalist revolution against dictatorship with an important anti-imperialist component and the participation of an incipient labor movement, then under Communist leadership.

Although this revolution had achieved some significant reforms equivalent in the Cuban context to Franklin Roosevelt’s New Deal, it failed to achieve major structural changes in Cuban society, such as real national political and economic independence from US imperialism (beyond the abolition of the Platt Amendment in 1934) or any meaningful agrarian reform and diversification away from the one-crop sugar economy with all it implied in terms of economic instability, large-scale unemployment, and poverty.

These were the economic issues brandished by the Cuban opposition at that time to struggle for more or less radical reforms to the existing order, instead of pondering and celebrating Cuba’s comparative high rank among Latin American economies. Thus Eduardo Chibás, the leader of the reform Ortodoxo Party, of which Fidel Castro was a secondary leader, proposed in 1948 a series of modest reforms to improve the life of the Cuban rural population.

Five years later, after Batista’s coup against the constitutional government, Castro — in his “History Will Absolve Me” speech at his trial for his failed attack against one of Batista’s military installations — proposed a more radical series of measures, including giving property titles to peasants holding up to 165 acres of land, with compensation granted to landlords on the basis of the average income they would have received over a ten-year period. He also added new elements to his reform agenda, such as his radical plan for the employees of all large industrial, mercantile, or mining concerns, including sugar mills, to receive 30 percent of profits.

Fidel, 1956

Fidel and Rebels, 1956

After 1959

Immediately after the victory of January 1, 1959, in response to many Cubans’ pent-up expectations, Castro’s revolutionary government engaged in a vigorous policy of redistribution. There was an urban reform law to substantially reduce rents, a left-Keynesian policy of public works to combat unemployment, and a radical, albeit not a collectivist, agrarian reform law proclaimed in May 1959.

Then, in late 1960, in part in response to the hostility of US imperialism and in part based on the political inclinations of the revolutionary leaders, the large majority of both urban and rural property was nationalized by the Cuban state.

In April 1961, Castro declared Cuba to be “socialist,” and it became, in structural and institutional terms, a replica of the model in the Soviet Union and Eastern Europe. Although Cuba’s one-party state placed more emphasis on popular participation than its equivalents in the Eastern Bloc, its political control was before long just as absolute.

Like the supporters of the Cuban status quo before the revolution, the supporters of today’s Cuban system assert that it is economically superior to other countries, particularly in Latin America. In terms of GDP — which, as previously mentioned, is not by itself a reliable indicator of economic well-being, although the Cuban government relies on it in a modified form — Cuba has fared poorly in comparison with its neighbors.

Whereas in 1950 Cuba ranked tenth in per capita GDP among the forty-seven countries in Latin America and the Caribbean, almost sixty years later, in 2006, it ranked near the bottom of the list, only ahead of Haiti, Honduras, Nicaragua, Bolivia, El Salvador, and Paraguay. GDP has increased little since then with a 2 percent average rate of growth in the last five years.

The government’s supporters point to Cuba’s achievements in education and health (in particular, its low infant mortality) as conclusive evidence for its more progressive economic policies. And indeed Cuba has performed very well in the Human Development Index (HDI), which combines income, health, and education statistics.

But while this index does a good job of measuring critical aspects of well-being in the less developed capitalist countries, it does not adequately capture the shape of state-socialist economies such as Cuba. It does not quantify the hardships that people suffer in countries where the economic problems of underdevelopment intersect with those particular to Soviet-style societies.

Take income, for example. Unlike capitalist societies, in Cuba, access to many luxury or high-cost goods is often obtained by the ruling groups through extra-economic, in kind, political means, rather than through the expenditure of monetary income. Although this situation has become more complicated since Raúl Castro took office in 2006 and expanded private economic activity to cover approximately 25 percent of the labor force, obtaining high-end goods still depends to an important degree on political access.

One example is traveling abroad. For the majority of Cubans who don’t have sufficiently wealthy relatives overseas, it is political access to state-sponsored travel — for example, officially sanctioned attendance to political, economic, cultural, or academic conferences — rather than private income that remains the principal way to venture outside the island.

A similar situation exists in terms of Internet access. In Cuba — a country with one of the lowest levels of web availability in Latin America and the Caribbean — many people can connect to the Internet only at their workplace or school, but only for strictly work-related purposes. Otherwise, they run the serious risk of being reprimanded or even losing their ability to go online.

Privately, they can get on the Internet by paying rates unaffordable to average Cubans, and only at tourist hotels or at the centers sponsored by the state telephone monopoly. However, free access to the Internet is the norm for those who are well-situated in terms of political power or have connections to those who do.

Besides the issue of monetary income, the HDI ignores other factors that make living conditions in Cuba difficult. These include the irregular supply and quality of food, housing, toiletries, and birth control devices for women and men. The same applies to the poor state of roads, inter-urban bus and railway transport (premium transportation services exist but are costly and therefore out of the reach of most Cubans), and the delivery of basic necessities such as water, electricity, and garbage collection.

The HDI does not quantify the hardships of daily life associated with these inadequacies either — for example, the amount of time people have to spend going from place to place and standing in line to obtain a wide variety of goods. Economic indexes can also be deceptive insofar as they don’t take into account the maintenance and upkeep of systems that deliver key services.

Take water, for example. Viewed in one way, Cuba ranks well in that regard, with 95 percent of its population officially having access to drinking water. But serious water shortages are a normal condition of life in Cuba. This is partially due to seasonal droughts in certain regions, particularly in the eastern half of the island. But the most important cause of that shortage is the deteriorated infrastructure — broken pipes and numerous leaks — going back to well before the collapse of the Soviet bloc.

For these reasons, more than half of the water pumped by the country’s aqueducts is lost, especially in the Havana metropolitan area. This is much of the daily material reality Cubans face, and it shapes their aspirations and expectations.

Strong Thumbs, No Fingers

The Cuban government and its supporters claim that most of these economic problems are the result of the criminal economic blockade of the island imposed, for more than fifty years, by the United States and which remains mostly in force despite the resumption of diplomatic relations between the two countries.

There is no doubt that the embargo has been damaging, particularly in the early years of the revolution, as Cuba was forced to reorient most of its economic activity towards the Eastern Bloc. Repealing the 1996 Helms-Burton Act and ending the blockade would be a very welcome development for both principled and practical reasons. Such a move would also considerably increase economic activity in Cuba, most likely in the fields of tourism and, possibly, biotechnology and the production and export of certain types of agricultural commodities such as citrus.

However, the US blockade did not prevent Cuba from trading with industrialized capitalist countries in Asia and Europe, and particularly with Canada and Spain. The principal obstacle to Cuba’s economic relations with those non-US industrial capitalist countries was Cuba’s own lack of goods to sell and thus its lack of hard currency with which to pay for imports, whether capital or consumer goods. Nevertheless, Cuba received more than $6 billion in credits and loans from many of the industrialized capitalist countries until Cuba suspended the service of these debts several years before the collapse of the Soviet bloc.

More important than the damage caused by the US economic blockade is Cuba’s inadequate capital, as well as other problems typical of economically less developed countries — the export of commodities such as nickel and sugar amid unstable world prices — which in turn interact with the myriad economic shortcomings and contradictions of Soviet-style economies, including the failures of agriculture and the scarcity and poor quality of consumer goods.

In truth, Cuba’s achievements and failures resemble those of the Soviet Union, China, and Vietnam before these countries took the capitalist road, suggesting that systemic similarities are more significant than national idiosyncrasies and variations on the general Soviet model.

Konstantin Chernenko fidel castro cuba ussr Soviet Leonid BrezhnevFidel and Leonid

Cuba shares with the USSR what the political scientist Charles E. Lindblom called “strong thumbs, no fingers.” Having “strong thumbs” allows the government to mobilize large numbers of people to carry out homogeneous, routinized, and repetitive tasks that require little if any variation, initiative, or improvisation to adapt to specific conditions and unexpected circumstances at the local level — precisely the tasks that require subtle fingers rather than undiscriminating thumbs.

This explains how a Soviet-style government can organize a massive vaccination campaign, while at the same time its bureaucratic, centralized administration and lack of “nimble fingers” prevent it from acquiring the necessary precision for timely coordination of complicated production and distribution in all economic sectors — especially agriculture, among the least homogeneous and predictable areas of the economy.

Cuba’s deficiencies, particularly in the production of consumer goods, also stem to a large extent from its principal leaders’ ideological inclinations. While these leaders have clearly favored the production and delivery of certain collective goods like education and health care, they have tended to be indifferent if not hostile to goods normally consumed by individuals or families.

This is rooted in a deeply ascetic strain of some leftist traditions. The most prominent and consistently austere among the revolutionary leaders was Ernesto “Che” Guevara, who as minister of industry in the early days of the revolution shaped many aspects of the Cuban economy.

When serious shortages of consumer goods began to occur in Cuba in the early 1960s, Guevara spoke critically of the comforts that Cubans had surrounded themselves with in the cities, comforts which he attributed to the way of life to which imperialism had accustomed people, and not to a standard of living resulting from the relative economic development of the country and especially to the working class and popular struggles in the pre-revolutionary era.

Guevara argued that countries such as Cuba should invest completely in production for economic development, and that because Cuba was at war, the revolutionary government had to ensure peoples’ access to food, but that soap and similar goods were non-essential. It is clear however, that his hostility to consumer goods was by no means specific to a war economy.

As he put it in his private reflections shortly after he left the Cuban government in the mid-1960s, “in Cuba, a television set that does not work is a big problem but not in Vietnam where there is no television and they are building socialism.” He added that “the development of consciousness allows for the substitution of the secondary comforts which at a given moment had transformed themselves into part of the individual’s life, with the overall education of society allowing for the return to an earlier era that did not have this need.”

Later, after the failure of the grandiose plans for economic growth that Guevara and other revolutionary leaders articulated, these ascetic politics came to be shared by the entire Cuban government leadership. They were soon consecrated in the Cuban revolutionary ideology as hostility to the “consumer society” of the economically developed world, a view that was never part of the ideology of the pre-revolutionary Cuban left, Communist or otherwise.

It was therefore entirely fitting that during the Cuban economic cycles associated with the spirit and politics of Guevara, the emphasis was always on capital accumulation instead of increased consumption. This was the case, for example, with the Guevarist-type economic period of 1966–1970 (shortly after he left the Cuban government).

As the prominent Cuban economist Carmelo Mesa-Lago points out, at this time the national plan called for a sharp increase in national savings that was to be generated by a cut in consumption through the expansion of rationing, the export of products previously assigned for internal consumption, and the reduction of imports considered unnecessary.

Material incentives sharply decreased, and the population was exhorted to work harder, save more, and accept deprivation with revolutionary spirit. Accordingly, the share of state investment going to the sphere of production increased from 78.7% to 85.8% between 1965 and 1970. This was indeed a Cuban high point of what the Hungarian theorists Ferenc Fehér, Agnes Heller, and György Márkus have called the “dictatorship over needs.”

The Special Period

Until the collapse of the Soviet bloc, the Cuban government was able to deliver for the majority of its people an austere standard of living that, on the whole, guaranteed a minimum of economic security and the satisfaction of basic needs, in spite of serious deficiencies in areas such as housing and consumer goods.

Notwithstanding the serious problems and contradictions of a Soviet-style economy, this was made possible by the USSR’s massive economic subsidies, which helped the Cuban government finance a generous welfare state with an extensive education, health services, and social security system. These massive subsidies were the result of Cuba joining the Soviet state as its junior partner in an international alliance that did confront strategic obstacles in Latin America (because the USSR was reluctant to challenge the US in its own sphere of influence), but that ended up being much more viable and successful in Africa despite some tactical differences.

Although overall literacy was at 76.4% before the revolution, it was much lower in the countryside; the government has succeeded in almost entirely wiping out illiteracy. It has also expanded secondary and higher education, promoting a substantial degree of social mobility facilitated by the massive emigration from the island of its upper class and large segments of its middle classes.

The dramatic enlargement of the military also allowed for the rise into officialdom of many Cubans of humble origin. Black Cubans in particular benefited, with the elimination of the informal but substantial racial segregation that had existed in pre-revolutionary Cuba, especially in the area of employment.

Racism was by no means eliminated. The Cuban government, implicitly identifying racism only with its segregationist form, soon declared the problem solved, with policies of “affirmative action” not even considered, in a context where blacks were not allowed to organize independently to defend their interests.

In general, however, Cuba became a more egalitarian society, attaining in the mid-1980s a Gini coefficient of 0.24 (although this measure also suffers from the political access problems discussed above). It was this, along with the growth of a nationalist and anti-imperialist consciousness that ensured a large base of popular support for the government. At the same time, however, critical voices even inside the Castro administration were systematically suppressed, and political dissidents (as well as petty offenders — Cuba has one of the highest imprisonment rates for common crimes) were jailed in large numbers.

The collapse of the Soviet bloc provoked a massive economic crisis, reflected in the quick and sharp 35 percent GDP drop. Cubans went very hungry in the first half of the nineties, the worst years of the crisis, leading to serious nutritional deficiencies that provoked an outbreak of optical neuropathy in 1991 that affected more than fifty thousand people until it was partially controlled in 1993.

Services such as public transportation went into a tailspin, from which they have only partially recuperated. Inequality has grown significantly, particularly between those with and without access to the hard currency provided by remittances from abroad. Real wages in the public sector, which still accounts for at least 75 percent of the labor force, dropped precipitously, and as late as 2013 they had only reached 27 percent of 1989 levels.

The “Special Period” also had a noticeable impact on the health care system, reducing the gains achieved in the previous thirty years. There are shortages of medical supplies and of family doctors and specialists, who are often working abroad as a part of international programs.

Patients have to even bring their own bedding to the hospitals, and “gratuities” to medical personnel have become increasingly common. Teachers have fled the education field in search of higher wages in other sectors such as tourism; at one point the government even tried to replace those educators with television sets and quickly trained high school graduates, with predictably negative results.

The system of social security, which made great advances in the 1960s with universal coverage and the unification of the previously existing patchwork of pension and retirement plans, went into a sharp crisis as the peso-denominated pensions fell to a fraction of their previous purchasing power.

Most importantly, during the quarter century that has elapsed since the fall of the USSR, the support of the regime has fallen quite substantially, particularly among young people. This does not mean that they have begun to openly oppose the government. They are far more likely to look for individual ways to resolve these problems. They would rather leave the island than politically confront a government that despite having released most political prisoners and allowed for a significant degree of social liberalization (for example, in terms of religion and emigration) still maintains a one-party state and an apparatus of repression. (Although it typically employs close monitoring, harassment, and frequent short-term arrests of dissidents instead of the long prison terms that were the norm under Fidel Castro’s rule.)

The Critique from the Left

Supporters of the government, especially abroad, continue to defend the system as if nothing happened during the last twenty-five years, and keep pointing to poor countries such as Haiti — which were worse off than Cuba before the 1959 Revolution — as evidence of how better off Cuba is. But for the most part, the Cuban people are not comparing their standard of living to those of other less developed countries.

Older Cubans are much more likely to compare their current hardships with the greater security and predictability they experienced before the Special Period, and remember nostalgically the early 1980s when the opening of the farmers’ markets, after the mass exodus from the Port of Mariel in spring 1980, allowed Cubans to reach perhaps their highest living standards since the 1960s.

For many Cubans, and particularly for the disenchanted young who are keenly aware of contemporary cultural trends in fashion, music, and dance, the existence of a large Cuban-American community in South Florida has also become a major standard of comparison.

And the nascent critical left in Cuba — like the oppositionists of the 1940s and 1950s — does not celebrate, in the manner of the official Communist party press and foreign supporters, Cuba’s good performance in the HDI. Instead, it is trying to organize under extremely difficult conditions, on behalf of the political liberties necessary to defend the standard of living of the Cuban people and open up the possibility for a popular and democratically self-managed economy and polity.

sam-farberSamuel Farber

 

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MAKING SENSE OF TODAY’S CUBAN ECONOMY: PROMISES IN THE MAKING

Jose Gabilondo, The Huffington Post, 8 June 2015

Original Here: Making Sense of Today’s Cuban Economy

 The exact path remains uncertain, but Cuba’s economy is on the move. Bright-eyed capitalists have been thumping their tails since President Obama gave the nod last December to restoring diplomatic relations, but the island’s economic model was already in flux. In 2011, the Sixth Congress of the Communist Party outlined its own tropical perestroika in the Lineamientos, a forward-looking blend of goals, strategies, and values intended to adapt the island’s socialist project to the contemporary global order.

 As normalization looms, thought leaders like Brookings and the Bildner Center have been taking up economic questions about Cuba. For most of us, though, this topic remains a black box because the U.S. embargo — intendedly so — also blocks understanding the fascinating amalgam that is Cuba. A tiny loophole lets academics visit and study the island, so I have discussed its Central Bank, its quirky currencies, Cuban-American identity, recent reforms to its economy, and the impact of Cuban-Americans on U.S. policy towards the island.

 To promote wider understanding of this crucial moment in the Cuban economy, let me emphasize three important aspects: macroeconomic structure, microeconomic institutions and economic culture. This post looks at some of the island’s macroeconomic challenges, i.e., the big picture issues that frame the economy as a whole. The work of markets is done not at this level but, instead, mostly by microeconomic institutions like the price mechanism, more so in a capitalist than in a command economy. So later posts will take up that issue, as well as the question of culture since it is real people and not abstractions that bring an economy to life. I speak not in the neo-Plattist spirit of the Helms-Burton Act or with the unsetting hubris of ‘regime change’ advocates, but as a child of the island who wishes the very best for it and intends to make it my home one day.

 Rightsizing the state sector.

 Consistent with the liberalization mandates of the Lineamientos, Raul Castro has sustained a steady pace of incremental reforms to state structure, including laying off public workers and facilitating micro-entrepreneurship, but the state still doles out economic freedom by the thimbleful, be it to cuentapropistas or the Benetton store in Plaza Vieja.

 Front and center is the issue of whether and how the state will marketize the military-run conglomerates that control key sectors. More is needed to free up even the pinkie of the invisible hand, though I dread the horror of a Starbucks in the Parque Central.

 Unifying the Cuban peso.

A Cuban friend once quipped, “Cuba’s system is not socialism — it’s surrealism.” Nowhere is this more true than in its balkanized currency system. It has two official currencies — the “soft” national peso (CUP) and the “hard” currency pegged to foreign currencies (CUC) — neither of which trade off the island.

 And different exchange rates exist. Intra-governmental accounts use a fictional 1 CUP to 1 CUC ratio that leads to implicit subsidies and taxes and makes it hard to identify profit and loss centers. Elsewhere, legal and grey markets perform price discovery that result in a rate of 25 CUP to 1 CUC. In the end, the CUP will trump the CUC, but whether this will happen slowly or all at once remains to be seen.

 Clearing political risk.

 The U.S. has certified several thousand expropriation claims against the island and Cuba estimates the value of its claims against the U.S. for embargo losses to be over one trillion dollars. Until the two countries resolve these dueling claims, political uncertainty haunts the economy. Cuba has many bilateral investment treatments that give foreign investors the right to arbitrate investment disputes, but more expansive remedies against political risk might enhance investment.

 Creating infrastructure for financing the state.

 To make good on its substantial promise, the island would benefit from more multilateral, domestic, and foreign financing. Long overdue (what are we still waiting for?) is Cuba’s membership in the Bretton Woods institutions, e.g., the International Monetary Fund and the World Bank group. Their resources would help with currency reform and what is, in effect, the island’s voluntary structural adjustment program. Though foreign creditors seem to be increasing their willingness to lend, the island may want to mend fences with the Paris Club and its private creditors. Cuba’s financial system would benefit from an interbank funding mechanism and a local public debt market, but those pieces may have to wait.

 Boosting exports.

At present, Cuba imports much more than it exports, so increasing exports would give the island more foreign exchange and improve its terms of trade, something that is possible only after the embargo ends.

 Building a banking system.

 Havana may have some dual-currency ATMs, but it would behoove the island to have more robust banking networks that let Cubans and foreigners settle payments, save money, and borrow.

Building legal infrastructure.

Both the state and the non-state sectors in Cuba would benefit from a more developed legal system. Strictly speaking, this is neither a macro- nor micro- factor. It’s more of a meso-level issue of institutionality that bridges the two. No knee-jerk patriot, I do admire the way that U.S. legal system has built a federal judiciary with the independent power to block both executive overreaching and mob mentalities doing business as ‘democracy’. A robust tradition of judicial review could really help the long-term interest of the Cuban economy.

Because it is the land that neoliberalism and its spawn the Washington Consensus forgot, the island is a real-world laboratory for testing economic theory, especially efforts to modify capitalism and socialism by learning from recent history. Here I’ve sketched some macroeconomic issues only in a very impressionistic way. If you’re interested, consider attending the Association for the Study of the Cuban Economy’s annual conference in Miami. It’s a welcoming place where folks expound, challenge, and build out ways of thinking about these issues.

 

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