Author Archives: The Economist

The Economist: “FIDEL’S LAST STAND”

The Economist, April 29, 2016

Original Article: Fidel’s Last Stand

WHEN Fidel Castro made a brief appearance at the Cuban Communist Party’s seventh congress on April 19th he was greeted with prolonged applause. “Well, let’s move to another subject,” he eventually said, his stentorian voice distorted by age. It was a joke. But he might as well have been turning the page on the historic visit to Havana by Barack Obama in March and the expectations it generated among Cubans of speedy changes. Having reminded his audience that he would soon turn 90 and that death comes to all, Fidel went on: “The ideas of Cuban communists will endure.”

No serious student of Cuba imagined that Mr Obama’s visit and his televised call for free elections would prompt overnight change. But the party congress proved to be a disappointment even by the cautious standards of the reforms that Raúl Castro, Fidel’s slightly younger brother, has set in train since he took over as president in 2008.

The stasis was symbolised by the retention as second party secretary (behind only Raúl) of José Ramón Machado Ventura, an 85-year-old Stalinist ideological enforcer. Even officials had hinted that his powerful post might be passed to Miguel Díaz-Canel (56), the vice-president and Raúl’s putative successor as president in 2018. Five new, youngish members joined the politburo, but none is known to be a reformer. Earlier hopes in Havana that the congress might approve an electoral reform and a bigger role for the rubber-stamp parliament were dashed.

Raúl Castro devoted part of his opening report to the congress to answering Mr Obama. Complaining of a “perverse strategy of political-ideological subversion”—a reference to Mr Obama’s call for the empowerment of Cuba’s small businesses and incipient civil society—Raúl told the delegates that “we must reinforce anti-capitalist and anti-imperialist culture among ourselves.” As for free elections, he twice insisted: “If they manage some day to fragment us, it would be the beginning of the end…of the revolution, socialism and national independence.”

He insisted that the “updating” of Cuba’s economy, to give a bigger role to the non-state sector and remove distortions and subsidies, would continue “without haste but without pause”. In fact, the reforms have all but halted: of the 313 “guidelines” approved at the previous congress in 2011, only 21% have been fully implemented. The government recently reintroduced price caps on some foodstuffs.

Days before the congress Omar Everleny Pérez, the most prominent of the reformist economists advising Raúl, was sacked from his post at the University of Havana. His alleged fault had been to share information with American academics. Mr Pérez has often called for the reforms to go faster.

One hypothesis is that Raúl can afford to move more slowly because of the injection of dollars from Mr Obama’s loosening of restrictions on tourism, remittances and investment. That may be true in the short term. But Raúl himself offered a withering critique of Cuba’s underlying problems, criticising “out-of-date mentalities”, “a complete lack of a sense of urgency” in implementing change and the “damaging effects of egalitarianism” in failing to reward work or initiative. He lamented the economy’s inability to raise wages, which “are still unable to satisfy the basic needs of Cuban families”.

So what explains Raúl’s caution? He said that he had joked with American officials that “If we were to have two parties in Cuba, Fidel would head one and I the other.” Joking apart, that rings true. Many of the Communist Party’s 670,000 members are terrified of change, fearing the loss of security, perks and privileges. They see Mr Obama’s opening to Cuba as an existential threat. Fidel is their reference point. He acts as a brake on reform.

What Raúl, in his neat and tidy way, is doing is to institutionalise the Cuban system, which long depended on Fidel’s whims. He has set out a gradual process of transition to a post-Castro leadership. He is no liberal democrat: he praises the balance between state planning and the market in China and Vietnam. He has initiated both a “conceptualisation” of Cuba’s socioeconomic model and a revision of the constitution to incorporate his reforms. These will be the Castro brothers’ political testament.

But Raúl, unlike Fidel, is a realist. He knows that the system does not work and that the steps he has taken, especially the opening to the United States, have unleashed expectations of change and a better standard of living. Cuban society is evolving fast, even as the political leadership remains as stodgy as a government-supplied lunch. In the medium term, something will have to give.

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CUBAN BASEBALL CRISIS: THE DOWNSIDE OF WARMING RELATIONS WITH AMERICA

The Economist, December 18, 2015

Original Essay: Cuban Baseball Crisis

zzzzThe Havana Sugar Kings of the old International League, circa 1956

LOOK for the Che Guevara mural on a pitch-black street corner in Lawton, a run-down district on the outskirts of Havana. Turn left, walk up the concrete steps and give the password (today it’s “I sell green dwarfs”). Inside, around 20 Cuban men sit silently. Despite the humidity, the ceiling fan is still, allowing puffs of sweet tobacco smoke to hover in the flickering fluorescent light. The newcomers are asked for a “solidarity contribution” of 25 Cuban pesos, or $1. After the customary first drops are spilled to sate the thirst of the saints, a $3 bottle of clear rum makes its way around.

It could easily be a clandestine political gathering. But this group has far more important business: the first game in the Major League Baseball (MLB) semi-final series between the Kansas City Royals and Toronto Blue Jays. For half a century after Cuba’s revolution in 1959, the island’s sports fans knew little of professional leagues beyond their shores. But today, thanks to the internet’s belated arrival and a wave of Cuban players defecting and starring in MLB, in-depth knowledge of American baseball is a badge of honour for baseball-loving Cubans—that is, nearly all the men and plenty of the women, too. “You didn’t know Kansas City won? You’re an embarrassment,” one attendee teased a friend during the ride to Lawton in an exhaust-spewing 1950s taxi, whose shock absorbers were no match for the area’s cavernous potholes.

The easiest way for Cubans to follow MLB in real time is at hotel bars in Vedado, a central Havana district packed with middle-aged American tourists taking advantage of the recent relaxation of travel restrictions. But few Cubans can afford a beer priced in dollars. And if a woman happens to be running a shift at the bar, locals say, there’s always a risk she will put a soap opera on the TV instead. So baseball fans gather in speakeasies like this decrepit flat, whose owner has managed to acquire an illegal satellite broadcast signal and hook it up to his 1980s Japanese television.

The group try to keep quiet, lest the neighbours snitch to the local Committee for the Defence of the Revolution (a network of government informants in every town). But they are rooting for the Royals because of the team’s first baseman, Kendrys Morales, who fled Cuba on a raft in 2004 after serving several stints in jail for his seven previous failed escape attempts. Every time he comes up to bat they allow themselves a muffled cheer. A round of high-fives follows Kansas City’s 5-0 victory.

The next day a big game is scheduled in the domestic baseball league, at Havana’s rickety 55,000-seat Latin American Stadium. It pits the hometown Industriales, Cuba’s answer to the New York Yankees, against a visiting club from nearby Matanzas. A few years ago the stands would have been packed. But today the outfield bleachers are empty, and only the rows of seats closest to the action appear even half-full. Bored-looking police drag on cigarettes. A group of hometown fans tries to rouse the crowd by blaring on hand-held air horns, but it is well short of critical mass.

One reason for the apathetic mood is that the government has banned alcohol sales in stadiums to stop fights. A bigger problem is the poor quality of the play. Last year 11 Industriales players left for the United States; Matanzas lost ten. Only the weaker players remain, and they are demoralised: runners seem content to jog around the basepaths, and fielders let the ball skip past them on difficult plays. In recognition of the depleted rosters, the Cuban league now disbands half of its teams at mid-season and shares their players among the eight clubs that are doing best.

Today’s game is painfully lopsided, as the Matanzas hitters pound the Industriales starting pitcher for seven runs. The biggest attraction is Rey Ordóñez, who defected in 1993, played in MLB for nine years and is catching a game on a visit home. Fans pose with him for pictures. “It’s very hard for the team,” says Lourdes Gourriel junior, the 21-year-old shortstop for the Industriales, following his team’s defeat. “It’s weird seeing someone on TV [in MLB], and just yesterday they were here with you. But that’s everyone’s individual decision. We’re still friends with those who left.”

South American football fans are accustomed to their countries’ brightest sporting stars decamping to richer European leagues. But for Cuban baseball fans the exodus is new. Less than a year after the United States and the government of Raúl Castro, Fidel’s younger brother and successor, announced they would re-establish diplomatic relations, this brawn drain is the most visible consequence of rapprochement with the yanquis, and an indication of what might be lost as the Cuban economy liberalises.

BOTTOM OF THE NINETEENTH CENTURY

Although baseball originated in the United States, the sport arrived in Cuba during its infancy in the 1860s. Within a decade of the first recorded match on the island, Cuba had established the first professional league outside America and put its adopted national game at the service of political aims: the league’s organisers funnelled its profits to guerrilla groups fighting for independence from Spain, and the movement’s spies posed as baseball players when shuttling messages and funds to and from supporters in the United States. “Baseball is more Cuba’s national pastime than it is America’s,” says Roberto González Echevarría, the author of a history of Cuban baseball. “It was considered modern, democratic and American, while the Spaniards had bullfighting, which was retrograde and barbaric. It’s as if the American Founding Fathers had been wielding Louisville Sluggers [an iconic brand of bat].”

After Cuba gained its independence in 1902 baseball became one of its principal means of exercising soft power. It was Cuban athletes, not American soldiers, who spread the sport across the Spanish-speaking Caribbean, helping to form a shared cultural identity with the Dominican Republic, Puerto Rico, Venezuela and eastern Mexico, and earning the Cuban players the nickname the “apostles of baseball”. And it was baseball players who became the best-known Cubans in the United States. Of all the MLB players born in Latin America who started playing before 1959, two-thirds were Cuban, even though most of the island’s stars were black and banned from MLB until the league’s colour barrier was broken in 1947. (In 1912, in response to inquiries about the lineage of two olive-skinned Cuban players, the Cincinnati Reds conducted an “investigation” which declared them “two of the purest bars of Castilian soap [that] ever floated to these shores”.) During the same period Cuba was putting black and white talent on the same fields in its racially integrated winter league, establishing the country as an exemplar of moral leadership in sports.

After Fidel Castro (pictured, swinging) took power and became the island’s baseball-fan-in-chief, the sport’s tacit political role became explicit. He proclaimed athletes to be “standard-bearers of the revolution playing for the love of the people, not money”. He banned professional sports and founded the National Series, a wildly popular amateur league in which each province fielded a team of players from its territory. He also established a formidable player-development system, with scouts identifying talented children and academies to train them once they became teenagers.

American fans, who then, as now, paid attention only to MLB, were unaware of the stars Cuba was producing, since they never played for a team in the United States. But Cuba’s athletic assembly line yielded a national team that dominated the weak competition in international events like the Olympics (in which MLB players do not participate): from 1987 to 1997, the squad won 156 straight games. The elder Mr Castro made such successes central to his propaganda strategy. “The only way Cuba could raise its head in the world was in sports,” says Ismael Sené, who ran the sports department of the Communist Youth in the early 1960s. “There was a campaign against us from the outside, saying that we were all needy, that we didn’t have food. Well, look at our athletes!” The fact that baseball, America’s “national pastime”, was Cuba’s strong suit made each victory extra sweet.

Fidel Castro might be proud of Cuba’s ability to export baseball players, were they not going to America

But setting so much store by its baseball players left the government vulnerable to shifting geopolitics. In 1991 René Arocha, a pitcher in the national team, walked out of his hotel room during a tournament in Miami, made his way to his aunt’s house, and never returned, making him the first team member to defect in history. He had not been planning on playing baseball afterwards, because he had assumed that MLB players were far superior to Cuban ones. But after connecting with a Cuban-born agent, he was given an MLB contract with a six-figure salary, and the next year became the St Louis Cardinals’ second-best pitcher.

After Mr Arocha had proved that Cuban players were of MLB quality, and the fall of the Soviet Union plunged Cuba into a “special period” of unprecedented poverty, more defectors began to leak out. Two half-brothers, Liván and Orlando Hernández, left the island separately in the 1990s, one at a tournament, the other on a rickety boat. Both played starring roles for World Series champions in their first years in MLB, providing Miami’s Castro-hating exiles with a remarkable narrative about the risks Cubans will take for a taste of freedom and the chance to play America’s game. To reduce the risk of further defections, the Cuban team put its players under tight surveillance whenever they travelled abroad, making their national treasures feel like prisoners and encouraging more defections.

SQUEEZE PLAY

The government responded to early defections with stoicism. “When one leaves, another ten better players emerge,” Fidel Castro once said. But in the past few years, the trickle of defections has become a torrent. As recently as 2007 there were just ten Cubans in MLB. Today there are 27. And whereas some of the early defectors had undistinguished careers, the current crop is aking an impact that, were it to occur anywhere but in the reviled United States, Fidel Castro would probably regard as his greatest accomplishment. Yoenis Céspedes, a burly outfielder with a pronounced uppercut swing, single-handedly powered the New York Mets to the World Series this year. His deadly accurate throws to home plate from distances of 300 feet (91 metres) or more have earned him the nickname the Cuban Missile. José Fernández, who fished his mother out of the ocean after a wave swept her overboard during their escape to Mexico when he was 15, is the toast of Miami’s Little Havana for his unhittable array of blazing fastballs and knee-bending curves. Aroldis Chapman holds the record for the fastest pitch in MLB history at 105 miles (169km) per hour. At the “Esquina Caliente” (Hot Corner), a bench in a downtown Havana park where die-hard fans have gathered daily for decades to talk baseball, the regulars today come prepared with the latest statistics on how Cuban players—and even the American-born children of Cuban exiles—are performing in MLB. They use websites like CubanPlay, a new, locally run site, by connecting their phones to public hotspots accessible with $2-an-hour Wi-Fi cards.

Major-league success has been accompanied by major-league riches: the 27 Cuban MLB players earn an aggregate annual salary of $100m. As the rewards have grown, a sophisticated infrastructure to smuggle more players has built up. Almost all recent defectors have escaped with the help of sinister human-trafficking syndicates. These hire boats to bring players to nearby countries, bribe the Cuban coastguard to let them depart, and Dominican or Mexican authorities to grant residency papers, pay tribute to organised-crime groups for the right to operate on their turf, and hold players hostage until they sign an MLB contract and provide a return on the gangsters’ investment, perhaps from their signing bonus. Yasiel Puig, a star right fielder, was held at a motel in Mexico’s Yucatán peninsula for months while his captors, associated with the fearsome Zetas mafia, argued over payment. Leonys Martín, an outfielder, was held at gunpoint in Mexico and forced to sign a contract in which he promised to pay 30% of his earnings to a front company; his smugglers are now in a Florida jail.

Since Raúl Castro became Cuba’s president in 2006, he has cautiously tried to relax state controls. But the defections have forced the pace when it comes to baseball. In 2013 Cuba said it would allow athletes to play professionally in foreign leagues—if they paid a 20% tax and returned for international tournaments and the winter National Series. A handful have gone to the Japanese league in the summer and earned seven-figure salaries.

Both MLB and the Cuban government now say they want a “normalised” system, in which Cuban athletes can travel to America legally and safely, play for MLB teams on a work visa and return home in the off-season. Antonio Castro, one of Fidel’s nine acknowledged children, an international baseball official and the national team’s doctor, has publicly called for such a change.

In an echo of the 1970s “ping-pong diplomacy” in which table tennis helped restore relations between the United States and China, MLB is encouraging a thaw between Havana and Washington. It has applied for an American government licence to do business in Cuba, is sending former players on a pre-Christmas goodwill tour of the island and is trying to organise an exhibition game in Havana featuring one of its teams next March. Meanwhile, Cuban baseball stars are giving Americans a new perspective on a country many perceive as nothing more than a totalitarian dystopia.

Yet the defections continue, for two reasons. The first is that the Cuban baseball authorities’ proclamations that players are now “free to go” ring hollow. It is the government, not athletes, that determines who can leave and for how long, to which country and team, and how much they will be paid. It generally selects older stars who have shown loyalty to the regime.

The second is the continuing influence of ageing “cold warriors” in the United States. Although Barack Obama has streamlined much of the bureaucracy required to authorise contracts with Cuban players, they must still establish residency outside Cuba and sign an affidavit saying that they “do not intend to, nor would [they] be welcome to, return to Cuba”. And America’s trade embargo, which can only be lifted by Congress, bans transactions with the Cuban government. That precludes any arrangement in which athletes would pay a modest tax on their foreign earnings in recognition of the state’s investment in training them, just as the United States taxes its citizens on their worldwide income. Cuba’s requirement that its players working abroad also participate in the National Series and be available to the national team represents another stumbling block, since MLB clubs would never allow their stars to skip out for an international tournament during the season, or risk injury during a long winter campaign in Cuba.

 

Yet for all the Cuban government’s rhetoric about America’s athletic imperialism, it may have an unlikely ally in MLB on the issues that concern it most. Despite MLB’s reputation as a fiercely capitalist industry worth $9 billion a year, the game’s economic model has much in common with Cuban-style socialist principles. To maintain fans’ interest, MLB needs a competitive balance between its rich and poor clubs. It accomplishes this by levying a tax on teams with high payrolls, and via an annual draft that routes the best young players to losing franchises. Cuban players aged over 23 with at least five years in the National Series are exempt from these rules. That enables them to auction their services to the highest bidder, undermining MLB’s carefully calibrated system of economic redistribution and reducing club owners’ profits. As a result, MLB is likely to advocate a tightly controlled system of acquiring Cuban players, rather than a free-for-all.

Moreover, MLB clubs and agents are already warning that after so many defections, the Cuban baseball pipeline is running dry and will need to be replenished. At the Premier 12, an international tournament held last month in Taiwan and Japan, Cuba finished an embarrassing sixth. The unique baseball culture Cuba has developed over 50 years of isolation has proved to be a formidable manufacturer of outstanding players. The Dominican Republic and Venezuela serve as providers of raw athletic material for MLB. Ordinary Cubans, by contrast, have grown accustomed to a remarkable closeness to world-class athletes, who play only for their home provinces and for almost no pay. “I’m just another fan,” says Reinier Reynoso, a 27-year-old pitcher for Industriales who is hanging out with the faithful outside the ballpark before a game. Fans and players “party together”, he says.

Since MLB has a keen interest in producing a new generation of Cuban superstars, it is reluctant to meddle with this potent combination of popular encouragement and state support. “We have no interest in going to Cuba and taking all of their players,” says Dan Halem, MLB’s chief legal officer. “We want Cuban baseball to thrive. We’re perfectly happy for Cuba to develop their own stars and keep them for a period of time. If they lose all their stars, fans will lose interest. There aren’t enough countries where baseball is played for this to just be a feeder for Major League Baseball.”

zzzzzzA recent friendly game

zzzzzWorld champions many times over

CASTRO AT BAT 1977

A Cuban baseball star

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CUBA’S ECONOMY: DAY ZERO OR D-DAY?

The tricky task of unifying a crazy system of exchange rates

The Economist, May 16th 2015

Original here: UNIFYING THE EXCHANGE RATES SYSTEM

CUBA has two currencies and a mind-boggling number of exchange rates. So when President Raúl Castro set out four years ago to unify the currency system by 2016, it was not surprising that he gave few details on how he would achieve it. A year in advance, it is still not clear. Nor is there a fixed date. Cubans call the unknown day of reckoning Día Cero (“day zero”).

The main difficulty is not unifying the two currencies per se. They are the Cuban peso, which most people use, and the convertible peso (CUC), worth about $1, which is a dollar substitute used by individuals in tourism, for remittances and in the private sector. It would be relatively easy for the average Cuban to scrap the CUC and conduct all transactions in pesos. Already many goods can be bought with either currency. The exchange rate for the peso is 24 per CUC, a level that has changed little since the CUC was created in 1994.

But for the economy at large what looks like a relatively simple book-keeping exercise could have devastating consequences, because there is a parallel exchange rate, mostly hidden from the public, that is used in accounting by state-owned firms and foreign joint ventures. It is one peso per CUC (or dollar). The massively overvalued rate has been in place since the 1980s, when Cuba was subsidised by the Soviet Union. It creates huge distortions in the economy, allowing importers to buy a dollar’s-worth of goods for one peso, a wheeze that drains precious foreign exchange from the country. Cutting the overvalued rate to the cheaper one would be the equivalent of a 96% devaluation. This could bankrupt many state-owned firms, whose costs have been accounted for at the overvalued rate.

Augusto de la Torre, the World Bank’s chief economist for Latin America, says he doesn’t know of any country that has started unification with such diverse exchange rates, and that it could be “suicidal” to join them in one big bang at 24:1. Vilma Hidalgo, vice-rector of the University of Havana, urges caution. She says many segments of the economy, such as exporters and firms that struggle to compete against subsidised imports, would benefit from devaluation, but others could be devastated.

So Cuba is, typically, treading carefully. The government has started with hotels and the sugar and biotech industries. Though their new exchange rates are far from uniform, the most common is 10:1, which some think may be the target rate for unification. But even if the whole economy were to merge at that rate, it would still represent a 90% devaluation for most.

Typically, a country embarking on such an upheaval would get financial help from the IMF and World Bank. Because of its history of enmity with the United States, Cuba does not have that option. Ms Hidalgo hopes that rapprochement will spur enough trade and financial flows to support the new exchange rate. In the meantime, gradualism will remain the guiding principle, which means the distortions will persist. Expect many day zeroes.

Che Guevara: One of the Architects of Cuba’s Monetary Pathology, immortalized (?) on the three CUP and three CUC bills

CU107Three Peso in Moneda Nacional (CUP),  worth about $US 0.12 in mid-2015. 

Cuban3PesosThree “Convertible Pesos”  (CUCs), now ostensibly worth $US 1.00.

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CUBA’S ECONOMY: PICTURESQUE, BUT DOING POORLY

Despite the thaw with the United States, politics is paralysing the economy.

The Economist, May 16th 2015 | HAVANA

Original here: ECONOMIC REFORMS AND POLITICS

 BY DAY grey-haired Americans trundle through the streets of Havana in pink 1957 Chevy convertibles, klaxons blaring. By night they recline over rum and cigars, tipping generously, listening to hotel salsa and reminiscing about the cold war. Many of the new American visitors to Cuba, whose numbers have surged since a diplomatic detente in December, are old enough to remember life before the internet and relish a few days in one of the world’s last Facebook-unfriendly bastions. What tourists find quaint seems stifling to many Cubans themselves.

For a lucky minority life has improved since “D17” (December 17th), the day Barack Obama and his Cuban counterpart, Raúl Castro, announced that they would seek to end five decades of hostility. Mr Obama’s decision to relax some restrictions on American visitors is expected to push tourism to Cuba up by 17% this year, bolstering foreign exchange by around $500m, or 1% of GDP, estimates Emily Morris, an economist at the Inter-American Development Bank. Visitors spend CUCs (Cuba’s dollar-equivalent hard currency) at a few swanky private restaurants where the quality (and prices) have reached fashionable Florida standards. Cubans are borrowing whatever they can to spruce up accommodation in a city where hotels are now booked up weeks in advance. According to Omar Everleny, a Cuban economist, 18,000 private rooms have become available. That is the equivalent of 31 new hotels the size of the 25-storey Habana Libre.

This activity is expected to boost economic growth from last year’s meagre 1.3%. But there is little sign as yet of the $2.5 billion a year in investment that the government hoped to woo with a new foreign-investment law last year, mostly because it sends mixed signals. It has authorised at most two manufacturing projects at its Mariel port and special economic zone, despite hundreds of applications. It continues to view private business with distaste, and believes socialist state enterprise will remain the core of the Cuban economy. As one economist puts it, “the government wants to create prosperity, but it doesn’t want to create prosperous citizens.”

As a result, it risks creating neither. Some of the 500,000-odd people self-employed in private enterprise—about 10% of the labour force—benefit from earning hard currency, and represent a nascent middle class. Unlike the rest of the labour force, their productivity is improving.

But the majority who work in the state sector earn Cuban pesos, live on ration books and can barely make ends meet unless they receive remittances from abroad or do informal jobs illegally. This produces stark inequality, which is exacerbated by shortages, especially of food. Some of the new restaurateurs admit that they face wrath in Cuban supermarkets when they pull out wads of notes to stock up on scarce beer, milk and cheese, leaving shelves empty and pushing prices higher. They insist it is not their fault; the government has failed to open up well-supplied wholesale markets or allow them to import goods. But that argument counts for little with a hungry public.

What’s more, it exacerbates a vicious circle in which disgruntled government employees slow down at work, further sapping output and causing more shortages. In a bid to counter inequality, the government has raised salaries of favoured state workers such as doctors. It has authorised public entities such as the sugar monopoly to raise pay if productivity improves (this year, sugar production is up 22%). But partly as a result of higher wages, the budget deficit is expected at least to double to above 6% of GDP this year.

All this creates a headache for Mr Castro. He has less than a year before a Communist Party congress next April. There he will have to defend reforms launched at the previous congress in 2011, including a planned unification of Cuba’s two currencies (see article), despite their disappointing results so far. Mr Castro must also worry that a Republican will succeed Mr Obama, who will leave office in early 2017. To forestall a renewed tightening of the American embargo, he will want to show that Cuba is making economic progress.

Next April’s congress could also mark the start of a generational change in Cuba’s leadership. Mr Castro, who took over from his brother, Fidel, in 2008, is expected to step down as president in 2018. He has said that he is keen to promote younger leaders, replacing the “historic generation” of octogenarians who fought under Fidel in the 1959 revolution.

He is grooming Miguel Diáz-Canel, the 55-year-old first vice-president, to replace him. There is a possibility that Mr Castro could step down as head of the party next year. Economists working for the government say some of Mr Diáz-Canel’s peers are receptive to reformist ideas. They are often seen carrying PCs or tablets, suggesting an interest in bringing more internet to Cuba. But they are also reluctant to defend reform publicly, so it is hard to know what they stand for.

Many in the establishment are terrified that change will jeopardise what they see as the main gains of the revolution, such as free education, health care and welfare. “The economy has to become more efficient, but you can’t ignore our principles or you’ll get a tsunami of capitalism washing over the whole island,” says Luis René Fernández of the University of Havana.

Mr Castro may be preparing to take on Communist Party conservatives. The party’s central committee said in February that it would discuss a new electoral law at next year’s congress. It gave no details; no one expects anything like political freedom. The aim may be to pressure mid-level bureaucrats to stop paralysing reform. “Change starts from the top and those at the bottom want it, but it gets stuck in the middle,” says Rafael Hernández, editor of Temas, a social-sciences journal.

Mr Hernández believes that a priority for the government will be a stronger National Assembly that can approve laws to underpin economic liberalisation, such as the right to own a business (currently, private firms, however prosperous, are considered “self-employment”). He also argues that professionals such as lawyers, teachers and doctors should be able to moonlight from their state jobs in private consultancies, consolidating a “socialist middle class” that pushes for further reform. However, he frets that hardship has made ordinary Cubans apathetic about greater political representation. For them “the glass is always half empty.”

Among intellectuals, though, resistance is growing. Dagoberto Valdés, editor of Convivencia, a Catholic journal, says the American thaw has robbed the regime of its ability to cast its neighbour as an “external enemy”, so its own shortcomings have moved into the spotlight.

El Capitolio, a marble landmark in central Havana, modelled on (and with a bigger dome than) America’s Capitol, points to a brighter future. It is being refurbished and is supposed to become the seat of the National Assembly for the first time since 1959. Alberto Pagés, a wiry old man who for 30 years has been operating a homemade box camera for small change on the building’s steps, thinks it will attract more tourists and could become “a symbol of how Cuba and the United States can look more like each other”. But ask him whether it could also become a harbinger of democracy and he clams up. “I know absolutely nothing about politics,” he mutters.

Cuba Mar 2014 002

The Capitolio, Under Repairs.

After 56 years. the prospective home of the National Assembly once again,

Cuba April 2015 212

A rationed food outlet on Calle Jovellar

Cuba April 2015 110.jpg qqqqThe Art and Crafts Retailing Center in a Converted Warehouse, a showcase of Cuban ingenuity and creativity.

 

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REFORMING CUBA: BE MORE LIBRE. The transformation of the economy needs to happen much faster

The Economist, May 16th 2015

Original Here: Reforming Cuba: Be More Libre

IT HAS been five months since Cuba and the United States announced that they would end their long cold war, but Cuba’s president, Raúl Castro, is still basking in the afterglow. On his way home from Russia this week he stopped off at the Vatican to see the pope, and said he might return to the Catholic faith. Later François Hollande paid the first-ever visit to Cuba by a French president; he was granted an audience with Fidel Castro, Raúl’s ailing brother, who led the revolution in 1959 and ruled until 2008.

But beneath the bonhomie lies unease. Cuba’s creaky revolutionaries spent half a century blaming the American embargo for all the island’s woes. Now they resist American capitalism for fear of being overrun. The result for most ordinary Cubans is not too much change but too little (see article). The island is poorer than many of its neighbours. Doctors earn just $60 a month—after a 150% pay rise. Food and other basics are in short supply. Boat people still flee to Florida’s shores.

Cuba deserves a proper democracy and a robust market-based economy. Sadly, that is unlikely to happen soon. Some things are changing. Private guesthouses, restaurants, barber shops and the like have begun to flourish, creating the kernel of an entrepreneurial middle class. But if Cubans are to benefit from the opening with America, their rulers need to reform more boldly and quickly than they have done so far.

A cocktail of reform

Where to start? Cuba should begin by opening up many more sectors to private enterprise. Currently, Cubans can be “self-employed” in 201 activities (including reading Tarot cards), but few that require a university degree. In place of a “positive list” of permitted private activities, the government should publish a negative one that reserves just a few for the state. All others would then be open to private initiative, including professions such as architecture, medicine, education and the law. The new bourgeois are potential customers for professional services; catering to that demand would in turn expand the middle class.

Liberalisation is urgent in wholesale markets. Today enterprises such as restaurants are forced to buy supplies from state-run supermarkets where ordinary people shop, which exacerbates shortages. This undermines popular support for the emerging private sector.

The climate for foreign investment must also improve. Cuba woos foreign investors for the expertise, jobs and currency they bring, but treats them shabbily. Under a supposedly friendly new law, they must still recruit workers through state agencies, to which they pay hard currency; the agencies then pay out miserly salaries in pesos. Imported inputs pass through bureaucratic state-run enterprises. Worst of all, legal codes are vague and their application is arbitrary. In recent years several foreign businessmen have been imprisoned (and later released) with little explanation.

How much of this thicket Mr Castro is prepared to clear away is uncertain. The party’s leadership has hinted that its congress would strengthen the National Assembly, a rubber-stamp body. A proper legislature that could write laws would give security to enterprise. Cuba is also bracing for a painful currency unification, which will end a huge subsidy to state companies.

For many of the revolution’s ageing leaders reform and privatisation are yanqui-inspired dirty words. The regime looks to China and Vietnam, where communist governments have embraced capitalism without yielding power. The Cuban communists are wary: they fear that, if they give up too much economic control, they will be obliterated just like the communists of eastern Europe. Yet the bigger risk would be merely to tinker with a system that keeps Cubans poor at a time when their aspirations are rising.

Cuba April 2015 228A Symbol of Santeria, the meaning of which I do not understand.

Not entirely relevant to this Economist editorial. Photo taken in April 2015 on Calle Animas

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MUNICIPAL ELECTIONS IN CUBA: FINE, AS LONG AS WE WIN

BUT  THE LOSERS ALSO HAVE SOMETHING TO CELEBRATE

The Economist, Apr 25th 2015

Original here: FINE, AS LONG AS WE WIN

1429453584_150419045159spcubaelecciones624x351reutersTHE most interesting thing about Cuba’s municipal elections on April 19th was not who won. It was who lost, and who did not even turn up.

Four months after a historic rapprochement between Cuba and the United States, for the first time two openly declared dissidents made it onto the ballot among more than 27,000 candidates competing for 12,589 municipal posts around the country. Predictably, they were defeated. But their participation was an unusually open act of defiance, not just by the two men but also by ordinary citizens who proposed them in a show of hands before the elections.

What is more, the turnout on voting day fell by almost six percentage points compared with the previous poll in 2012, to about 88%. Some claimed rising absenteeism was a crack in monolithic support for the Communist Party.

The opposition candidates, Hildebrando Chaviano, a lawyer and journalist, and Yuniel López, a member of the unauthorised Independent and Democratic Cuba party, were labelled as “counter-revolutionaries” in official publicity. On his party’s website, Mr López claims that voters were pressured not to vote for him. Yet both candidates quickly conceded defeat. “The vote was clean. The people don’t want change. They still want revolution,” Mr Chaviano said.

The elections have an air of futility about them. The winning candidates are rewarded with a thankless job. They face a barrage of complaints from residents about crumbling housing and poor public services, without having the power or money to do much about them. But voters know that if they do not show up, it is likely to count against them—in university applications, for instance.

All the same, many did not. Alina Balseiro, head of Cuba’s National Electoral Commission, said the drop in turnout reflected the absence of tens of thousands of Cubans who had gone abroad as a result of Cuba’s relaxation of travel restrictions. But Yoani Sánchez, a dissident Cuban blogger, said that 1.7m potential voters did not appear, or they cast void or defaced ballots. This “demonstrated that support for the government is not as unanimous as it claims.”

Such dissidence comes at a delicate time for Raúl Castro, Cuba’s president. In September huge crowds will gather for the visit of Pope Francis, whose office helped arrange the thaw in relations with the United States. This could further heighten expectations of change.

Yet the Castro government may also feel that elections can be a useful outlet—so long as the ruling party continues to win. Eusebio Mujal-Leon, of Georgetown University in Washington, says it may be learning a warped version of democracy from its socialist ally in Venezuela, convincing itself that it can remain an autocracy while using elections to stay in power. The road ahead for Cuba’s nascent opposition is not an easy one.

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VENEZUELA: THE REVOLUTION AT BAY with major implications for Cuba!

Mismanagement, corruption and the oil slump are fraying Hugo Chávez’s regime

The Economist Feb 14th 2015 | CARACAS

Original here: Revolution at Bay

zzzON A Wednesday evening around 30 pensioners have gathered for a meeting in a long, brightly lit room in a largely abandoned shopping gallery in Santa Teresa, a rundown and overcrowded district in the centre of Caracas. After a video and some announcements, Alexis Rondón, an official of the Ministry of Social Movements and Communes, begins to speak. “Chávez lives,” he says. “Make no mistake: our revolution is stronger than ever.”

Mr Rondón’s rambling remarks over the next 45 minutes belie that claim. Saying Venezuela is faced with an “economic war”, he calls on his audience to check food queues for outsiders, who might be profiteers or troublemakers, and to draw up a census of the district to identify opposition activists and government supporters. “We must impose harsh controls,” he warns. “This will be a year of struggle”.

About this, at least, Mr Rondón is correct. Sixteen years after Hugo Chávez took power in Venezuela, and two years after he died, his “Bolivarian Revolution” faces the gravest threats yet to its survival. The regime is running out of money to import necessities and pay its debts. There are shortages of basic goods, from milk and flour to shampoo and disposable nappies. Queues, often of several hundred people, form each day outside supermarkets. Ten patients of the University Hospital in Caracas died over the Christmas period because of a shortage of heart valves.

Both debt default and the measures that would be required to avoid one pose risks to the regime. It is on course to lose a parliamentary election later this year, which might then be followed by a referendum to recall Chávez’s inept and unloved successor, Nicolás Maduro. That could bring Venezuela’s revolution to a peaceful and democratic end as early as 2016. But there are darker possibilities. Caracas buzzes with speculation that the armed forces will oust the president.

Venezuela is suffering from the combination of years of mismanagement and corruption, and the collapse in the price of oil, which accounts for almost all of its exports. Chávez, an army officer, was the beneficiary of the greatest oil boom in history. From 2000 to 2012, Venezuela received around $800 billion in oil revenue, or two-and-a-half times as much in real terms as in the previous 13 years. He spent the money on “21st-century socialism”.

Some went on health care and low-cost housing for the poor, who hailed Chávez as a secular saint. Some has gone on infrastructure: a few new roads and metro lines were built, years behind schedule. Another chunk was given away in the form of cheap oil to Cuba and to other Caribbean countries, assuring Chávez loyal allies. Perhaps the biggest slice was frittered away or simply stolen. Filling a 60-litre tank with petrol costs less than a dollar at the strongest official exchange rate. Unsurprisingly, petrol worth $2.2 billion a year, according to an official estimate, is smuggled to Colombia and Brazil, with the complicity of the armed forces.

Continue Reading: VENEZUELA, THE REVOLUTION AT BAY

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AMERICA AND CUBA: THE NEW NORMAL

The Economist, January 3, 2015

 Original Here: The loosening of the embargo will pay dividends far beyond Cuba

ObamaMARCO RUBIO, a prospective Republican candidate for the White House, called it “a victory for oppressive governments the world over”. Only “the heinous Castro brothers, who have oppressed the Cuban people for decades” will benefit, thundered Jeb Bush, a likely rival, who is also based in Florida. The object of their fury: Barack Obama’s startling decision to loosen America’s 54-year-old embargo on Cuba.

Cuba’s Communist government is indeed oppressive, while the Castro brothers can fairly be called heinous and will probably do all they can to maintain control. Raúl Castro, who took over from Fidel in 2008, has said he will step down in 2018, but that is not a prelude to free elections. Nonetheless, easing the embargo is the right thing to do. The measures that Mr Obama and Mr Castro announced on December 17th—including a deal to restore diplomatic relations and the liberalisation of travel and remittances—will do much to normalise a relationship that has been trapped in the sterile logic of the cold war. But its significance goes beyond that. The embargo warps the United States’ relations with other Latin American countries, as well as their relations with one another.

The Economist has long argued that the embargo is self-defeating. Rather than ending the Castros’ rule, it has provided an evergreen excuse for their failures and so helped maintain them in power. The embargo kept Cuba out of international bodies such as the Organisation of American States, where other countries could have prodded the island towards greater openness. It put the United States at odds with most of its allies and nearly every other country in its hemisphere. It would be much better if the embargo were got rid of entirely, but its partial lifting is a step towards normality for the whole region.

So far most of the attention has been on Cuba. The Castros agreed to release 53 political prisoners (along with an aid worker and an American spy). Cubans will have more access to the internet, which should loosen the regime’s weakening grip on information. As Cuba’s relations thicken with the democratic giant next door, its citizens’ demands for freedom may grow more insistent. There is no guarantee that such engagement will unseat the Castros, but the embargo has manifestly failed for half a century. It has only remained there because of the political clout of a dwindling number of elderly Cuban exiles in Florida (which also explains the outrage of the normally more sensible Messrs Bush and Rubio).

But the biggest prize should be the advance of democracy and open markets in Latin America. The Castros are not the only ones who will be discomfited by the loss of the American alibi. Venezuela leads a loose coalition of countries that uses defiance of the United States as an excuse for policies that stunt economic growth and democratic rights. It has long supported Cuba (and other Caribbean countries) with sales of oil at heavily subsidised prices. Even for robustly democratic countries like Brazil, the American bogeyman makes it easier to justify resistance to trade deals and to cosy up to uglier regimes.

Now this depressing narrative may change. Venezuela’s government, reeling from the drop in oil prices, faces difficult parliamentary elections in 2015. Argentina’s next president is likely to be less prickly towards the rest of the world than Cristina Fernández de Kirchner, who will stand down in 2015. Colombia, an American ally, may end its 50-year war with the leftist FARC guerrillas if peace talks succeed. Dilma Rousseff could be a more pragmatic president in her second term.

The scene is set for a new realism in Latin America. As commodity prices tumble and economic growth stalls, the region needs open markets, trade and regional co-operation—including with the yanquis to the north. With his move on Cuba, Mr Obama has opened the way for the sort of diplomatic engagement that Latin America rarely enjoyed during his first six years in office. But Latin America needs to return the compliment. The time for sulking and striking poses is over—in Brasília and Caracas as well as Havana and Miami.

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VENEZUELA’S CUBA PROBLEM

The Economist, December 19th 2014

In a surprise announcement on December 17th the US president, Barack Obama, and the Cuban president, Raúl Castro, announced a significant thaw in relations between their respective countries. The move has major implications for Venezuela, Cuba‘s main ally.

The Venezuelan president, Nicolás Maduro, appeared to be caught unawares on December 17th, right in the middle of a rhetorical campaign against “insolent, imperialist” sanctions passed by the US Congress just one week beforehand. Unlike the decades-old Cuba embargo, the sanctions are targeted at senior Venezuelan government officials accused of committing human rights violations. However, just as members of the ruling Partido Socialista Unido de Venezuela (PSUV) were being invited to burn their US visas in public, Cuba was announcing the restoration of diplomatic relations with the US.

A quiet betrayal?

The process that led to the announcement, it is now clear, began not long after the death of Mr Maduro’s predecessor and mentor, the former Venezuelan president, Hugo Chávez (1999-2013). The Cuban government, which has benefited from billions of dollars in Venezuelan subsidies—including cheap oil under the PetroCaribe oil-financing initiative—needed a “plan B”, given the severe economic crisis facing the Maduro government and the likelihood that it would be unable to resist mounting pressure to divert resources away from foreign aid. However, with an extensive network of Cuban intelligence agents given free rein in Venezuela—particularly in the barracks—Mr Maduro must now be wondering what else has been (or might be) negotiated behind his back.

At the very least, the news of a US-Cuban rapprochement will exacerbate resentment in the military over its subordination to Cuban officials who, it seems, gather intelligence but do not share it. There is also some confusion within the ranks of the PSUV, whose militants find it hard to understand why Mr Obama is allegedly seeking to overthrow Mr Maduro, but is happy to shake Mr Castro’s hand.

Hard choices ahead for Mr Maduro

Anti-imperialism is a handy tool with which to maintain unity against an external enemy. However, it is hard to wield when your best friend is embracing the “empire” (swiftly renamed “the giant of the north” in Mr Maduro’s post-announcement comments). Cuba has for decades played a useful role for Latin American governments of both left and right. “Solidarity” with Cuba has been a convenient, mainly risk-free way to stand up to the US government and beat the nationalist drum.

Now Venezuela faces the prospect of replacing Cuba as the US’s main adversary in the region—just as its economy is imploding and its governability is at risk from internal dissent—or capitulating and losing the support of the already-restive domestic left. The timing could hardly be worse for Mr Maduro.

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THE UNITED STATES AND CUBA: AT LAST, A THAW! HISTORIC STEPS TOWARDS ENDING AN ANACHRONISTIC EMBARGO

The Economist, Dec 17th 2014

Original article here: AT LAST, A THAW

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IT HAS long been one of the great anomalies of American foreign policy. The United States normalised relations with Communist China and even with Vietnam, with which it fought a bitter war costing more than 50,000 American lives. But ties with Cuba, which long ago ceased to pose any threat to America, remained frozen in the Cold War. Maintaining the economic embargo against the communist island first imposed in 1961 was about revanchism and Congressional politics, not foreign policy.

On December 17th Barack Obama announced sweeping changes which go a long way to bring policy towards Cuba into the 21st century. The two countries will start immediate talks on restoring diplomatic relations and re-opening embassies. The president will use his executive authority to loosen the ban on travel to the island; raise the limit on remittances to ordinary Cubans and their small businesses from $500 per quarter to $2,000; and allow exports of building materials, farm equipment and telecommunications gear. Americans will be able to use their credit and debit cards on the island. The administration is also preparing to remove Cuba from its list of states that sponsor terrorism.

These announcements followed 18 months of secret talks in Canada between American officials and the government of Raúl Castro, who replaced his elder brother Fidel as Cuba’s president in 2008. The talks were encouraged by Pope Francis. They culminated with a 45-minute phone call between Mr Obama and Mr Castro on December 16th.

The biggest stumbling block to any change in the embargo was the incarceration of Alan Gross, a worker for the United States Agency for International development, who was jailed in 2009 for handing out satellite-communications gear on the island. Mr Gross, who is in very poor health, was freed on December 17th (he is pictured below with his wife, Judy, after his release). Freed too, and sent to the United States, was a Cuban whom Mr Obama said was “one of our most important intelligence agents”, as well as 53 Cuban political prisoners from a list provided by the United States. In return, the United States has released three Cuban spies serving long sentences after being arrested in 2001 for snooping on exiles and American military bases in Florida.

In seeking to normalise diplomatic relations, the administration recognised what has long been clear to the outside world: the embargo has manifestly failed to topple the Castros. Under Raúl Castro change has slowly started to come to Cuba from within. Private farmers, small businesses and co-operatives now make up around a fifth of the island’s labour force.

The United States’ Cuba policy also put it at odds with the whole of Latin America, which now favours normal ties. Mr Obama said he would attend the Summit of the Americas in Panama in April, to which Mr Castro has also been invited. He said he would continue to press for human rights and democracy in Cuba.

As for Mr Castro, it is not hard to see why he is interested in closer ties with the United States. For the past dozen years, Cuba’s moribund economy has been propped up by subsidies from Venezuela, mainly in the form of cheap oil. The fall in the oil price has pushed Venezuela’s economy into a deep recession. The approval rating of its president, Nicolás Maduro, has plunged to 25%, casting uncertainty over the durability of Venezuelan aid. Mr Castro said the agreement to restore diplomatic relations “doesn’t mean that the main thing [ie, the embargo] has been resolved”.

Only the United States Congress can repeal the embargo. What Mr Obama has done is remove some of its teeth. The president can count on public opinion in this issue, which in recent years has swung against the embargo. In an apparent attempt to mollify the pro-embargo camp, the administration recently dropped its previous opposition to a bill, approved earlier this month, imposing targeted sanctions against Venezuelan officials involved in repressing opposition demonstrations earlier this year. But none of this will assuage the president’s conservative critics in Congress. Mr Gross considered himself a “hostage” rather than a prisoner, and Mr Obama’s opponents pounced on the swap as endangering American lives, as well as coddling a dictator.

Just how far détente between the United States and Cuba will go is not yet clear. “I don’t expect a transformation of Cuban society overnight,” said Mr Obama. But he is surely right in saying that after half a century of failure in trying to isolate Cuba, it is worth trying to promote change there through engagement.

 

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