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ASSOCIATION FOR THE STUDY OF THE CUBAN ECONOMY, PAPERS AND PROCEEDINGS OF THE TWENTY-FIFTH ANNUAL MEETING, JULY 30-AUGUST 1, 2015

ASCE: Cuba in Transition: Volume 25

Papers and Proceedings of the Twenty-Fifth Annual Meeting,  July 30-August 1, 2015

All papers are hyperlinked to the ASCE Website and can be seen in PDF format.

wwwPreface

Conference Program

Table of Contents

Reflections on the State of the Cuban Economy Carlos Seiglie

¿Es la Economía o es la Política?: La Ilusoria Inversión de K. Marx Alexis Jardines

Los Grandes Retos del Deshielo Emilio Morales

Preparing for a Full Restoration of Economic Relations between Cuba and the United States Ernesto Hernández-Catá

Economic Consequences of Cuba-U.S. Reconciliation Luis R. Luis

El Sector Privado y el Turismo en Cuba Ante un Escenario de Relaciones con Estados Unidos José Luis Perelló Cabrera

The Logical Fallacy of the New U.S.-Cuba Policy and its Security Implications José Azel

Why Cuba is a State Sponsor of Terror Joseph M. Humire

The National Security Implications of the President’s New Cuba Policy Ana Quintana

Factores Atípicos de las Relaciones Internacionales Económicas de Cuba: El Rol de los Servicios Cubanos de Inteligencia Enrique García

Entrepreneurship in Post-Socialist Economies: Lessons for Cuba Mario A. González-Corzo

When Reforms Are Not: Recent Policy Development in Cuba and the Implications for the Future Enrique S. Pumar

Revisiting the Seven Threads in the Labyrinth of the Cuban Revolution Luis Martínez-Fernández

La Economía Política del Embargo o Bloqueo Interno Jorge A. Sanguinetty

Establishing Ground Rules for Political Risk Claims about Cuba José Gabilondo

Resolving U.S. Expropriation Claims Against Cuba: A Very Modest Proposal Matías F. Travieso-Díaz

U.S.-Cuba BIT: A Guarantee in Reestablishing Trade Relations Rolando Anillo, Esq.

Lessons from Cuba’s Party-Military Relations and a Tale of “Two Fronts Line” in North Korea Jung-chul Lee

The Military, Ideological Frameworks and Familial Marxism: A Comment on Jung-chul Lee,“A Lesson from Cuba’s Party-Military Relations and a Tale of ‘Two Fronts Line’ in North Korea” Larry Catá Backer

Hybrid Economy in Cuba and North Korea: Key to the Longevity of Two Regimes and Difference Young-Ja Park

Historical Progress Of U.S.-Cuba Relationship: Implication for U.S.-North Korea Case Wootae Lee

Estimating Disguised Unemployment in Cuba Ernesto Hernández-Catá

Reliable Partners, Not Carpetbaggers Domingo Amuchástegui

Foreign Investment in Cuba’s “Updating” of Its Economic Model Jorge F. Pérez-López

Global Corporate Social Responsibility (GCSR) Standards With Cuban Characteristics: What Normalization Means for Transnational Enterprise Activity in Cuba Larry Catá Backer

Bienal de la Habana, 1984: Art Curators as State Researchers Paloma Checa-Gismero

Luchas y Éxitos de las Diásporas Cubana Lisa Clarke

A Framework for Assessing the Impact of U.S. Restrictions on Telecommunication Exports to Cuba Larry Press

Measures to Deal with an Aging Population: International Experiences and Lessons for Cuba Sergio Díaz-Briquets

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The Institutional Structure of Production in the Cuban Economy

Ernesto Hernández-Catá;  January, 2014

The complete essay is here: STRUCTURE OF GDP, 2014. Hernandez-Cata

 This paper presents estimates of Cuba’s gross domestic product (GDP) for the three principal sector of the economy: the government, the state enterprises, and the non-state sector. It estimates government GDP on the basis of fiscal data and derives non-state GDP from a combination of employment and productivity data. The article finds that the pronounced tendency for government output to increase faster than GDP was interrupted in 2010 and as the share of non-state production increased sharply. Nevertheless, the private share in the economy remains very low by international standards, and particularly in comparison to most countries in transition. The paper also derives estimates for gross national income. It finds that income is lower than GDP in the general government sector because of interest payments on Cuba’s external debt, while it exceeds production in the non-state sector owing to remittances from Cubans residing abroad.

New Picture (1)New PictureConclusion

 The various estimates presented in this paper make it possible to reach a number of tentative conclusions.

 ü  The government share of GDP fell during the post-Soviet recession but then increased steadily all the way to 2009. The increase reflected the growth of current government expenditure; government investment—which accounts for the bulk of economy-wide capital formation—fell in percent of GDP. Total investment by all sectors also fell, to a very low level compared with the averages for other country groups and particularly for the emerging market and transition countries. The share of government spending declined from 2010 to 2011 following the financial crisis of 2008.

 ü  The share of the non-state sector GDP rose in the period 1993-1999 from a very low level in the Soviet-dominated period of the 1980’s. It changed little in the first decade of the XXIst century, but surged in 2011-2012 reflecting a transfer of employees form the state sector. Nevertheless, the non-state and private sector shares of the economy remains very small by international standards and notably by the standards of the countries in transition.

 ü  The relative importance of the state enterprises appears to have declined all the way from 1995 to 2009, but it has recovered somewhat since then.

 ü  National income in the government sector is lower than GDP because of interest payments on the external debt and, apparently, because of official transfers to foreigners.

 ü   By contrast, income in the non-state sector exceeds GDP by a growing margin, essentially because of dollar remittances from Cuban-Americans abroad. Thus, in that sector income from domestic production is being increasingly supplemented by income from abroad.

 ü  There is a statistically significant tendency for government current spending to crowd out the output of the state enterprises. Non-state output, on the other hand, appears to evolve mainly in response to official decisions to liberalize or to repress the non-state sector

 Finally, there is a major problem whose resolution is beyond the scope of this article but which must at least be noted. The Cuban authorities assume that data for transactions denominated in foreign currency should be translated into local currency at the fixed exchange rate of one peso (CUP) per U.S. dollar. Under this convention (which is retained in this paper) dollar values are identical to peso values. Historically, however, the exchange value of the peso applicable to households and tourists has been much lower and it is currently CUP 24 per dollar.  Clearly, the 1:1 exchange rate assumption introduces major distortions in the national accounts and in the balance of payments. For example, the peso value of exports of at least some goods and services (nickel, sugar and tourism among others) is grossly under estimated, while the dollar value of consumption is grossly over-estimated. In the income accounts, the dollar value of wages (mostly denominated in CUPs) is overestimated while the peso value of private remittances is under-estimated—although this is partly offset by an under-estimation of the peso value of interest payments abroad.

 The task of disentangling all the elements of bias introduced by the use of a 1:1 conversion factor would be daunting. For the time being the corresponding distortions would have to be accepted, although they should be recognized. The good news is that the Cuban authorities are in the process of unifying the existing multiple exchange rate system, too slowly hélàs, but fairly surely. One important result of this change will be to the adoption of a single exchange rate for all transactions and all sectors, as well as for the purpose of statistical conversion.

Ernesto-Hernandez-CataErnesto Hernández-Catá

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Carmelo Mesa-Lago, “Sistemas de protección social en América Latina y el Caribe: Cuba”

Carmelo Mesa-Lago, Documento de Proyecto,  CEPAL, Santiago Chile, 2012

Ensayo original:  Mesa-Lago, Cuba Proteccion Social CEPAL-13

Carmelo Mesa-Lago

Desde el inicio de la República en 1902 hasta 1958 el Estado introdujo sistemas públicos de educación y de salud gratuitos; el primero complementado por escuelas privadas y el segundo por una red de cooperativas, mutuales y clínicas privadas, esquemas de mejor calidad que los sistemas públicos, mientras que el acceso y la calidad de los últimos era muy inferior en el campo que en la capital y otras ciudades. La Constitución de 1940 y la legislación laboral y de seguridad social estaban entre las más avanzadas de América Latina pero, a diferencia del resto de la región (salvo Uruguay), no se creó un seguro nacional de salud, si bien el inusual desarrollo de cooperativas, mutuales y clínicas urbanas en parte  alivió ese vacío. En 1957 el desempleo abierto promediaba el 16% más el 14% de subempleo  (30% en total), bajaba durante la cosecha azucarera que proveía el 25% del empleo y se  duplicaba en el resto del año. Tampoco se creó un seguro de desempleo que era lo usual en la región. Se estableció gradualmente un sistema de pensiones de seguro social que cubría alrededor del 62% de la PEA pero segmentado en 54 esquemas separados, con amplias e injustificadas diferencias entre ellos. No existían programas integrados a nivel nacional de asistencia social ni de viviendas estatales o subsidiadas. Tal como ocurría en el resto de la región, no había estadísticas de incidencia de pobreza y de desigualdad del ingreso, pero la escasa información disponible indicaba que ambas eran substanciales. No obstante, en 1958 Cuba se ordenaba entre el primero y el quinto puesto de la región en sus indicadores sociales nacionales, pero con considerable desigualdad especialmente entre las zonas urbanas y rurales. Por ejemplo, la tasa de analfabetismo nacional era del 23%, pero en las ciudades   41,7% en el campo del 41,7%.
En el período de 1959-1989, la revolución logró avances muy notables en la protección social. El Estado dio prioridad y asignó cuantiosos recursos fiscales para: 1) promover el pleno empleo; 2) reducir la desigualdad en el ingreso mediante la expropiación de la riqueza y la disminución de las diferencias salariales en el empleo que era básicamente público; 3) universalizar los servicios gratuitos de educación y de salud que redujeron de forma substancial las disparidades en el acceso y calidad de los servicios sociales entre la ciudad y el campo; 4) lanzar una campaña de alfabetización, graduar masivamente maestros y médicos, y construir escuelas y establecimientos de salud; 5) acelerar la incorporación de la mujer a la fuerza laboral con políticas de educación y guarderías infantiles;  6) expandir la cobertura y monto de las pensiones de seguro social, financiadas por las empresas estatales y el fisco, sin cotización de los trabajadores; 7) crear un programa de asistencia social nacional y municipal; y 8) convertir a la gran mayoría de la población en propietaria de las viviendas que tenían arrendadas. El gobierno expropió todas las instalaciones de educación y salud privadas y cooperativas, además absorbió, unificó y homologó los 54 esquemas de pensiones. La construcción y mantenimiento de las viviendas, fundamentalmente a cargo del Estado, fue insuficiente y aumentó el déficit habitacional. Coadyuvó al desarrollo social la ayuda de 65.000 millones de dólares por la Unión Soviética en 1960-1990 (sin contar otros países socialistas), 60,5% en donaciones y subsidios de precios más 39,5% en préstamos que virtualmente no fueron pagados. Aunque dicha ayuda no se dio al sector social, liberó recursos internos para financiar la política del gobierno en este campo. En 1989 Cuba se colocaba a la cabeza de América Latina en la gran mayoría de los indicadores sociales.
El colapso de la Unión Soviética provocó en 1990-1994 una crisis económica muy severa: la caída 35% del PIB, la virtual paralización de la industria y de la agricultura por falta de combustible, insumos y piezas de repuesto, y una mengua drástica en las exportaciones e importaciones (incluyendo insumos para servicios sociales). A la crisis contribuyó el “Proceso de Rectificación de Errores”2, y la incapacidad del modelo de desarrollo para resolver los problemas estructurales, generar un crecimiento económico sostenible, expandir las exportaciones y substituir importaciones. Además, la política social adolecía de fallas: el pleno empleo se logró en parte creando empleo estatal innecesario lo que afectó a la productividad; el excesivo igualitarismo y énfasis cíclico en incentivos “morales” (no económicos) indujo una caída en el esfuerzo laboral y alto ausentismo; y el alto costo de los programas sociales se agravó por el envejecimiento demográfico. A pesar del esfuerzo del gobierno para proteger los programas sociales, casi todos sus indicadores se deterioraron y en 1993 Cuba había descendido en su ordenamiento social en la región.
Las modestas reformas orientadas al mercado en 1993-1996 lograron a partir de 1995 una recuperación económica parcial, pero ocurrió una desaceleración en 2001-2003 en gran  medida por la virtual paralización de las reformas y la “Batalla de Ideas”. Este programa, facilitado por la ayuda económica venezolana y centrado en la lucha ideológica incluyó varias políticas: revirtió las reformas de los años noventa, re-acentuó el centralismo, creó una cuenta única de divisas y CUC en el Banco Central de Cuba (BCC), puso énfasis de nuevo en el igualitarismo y la movilización laboral, redujo el trabajo por cuenta propia, intentó universalizar la educación superior, continuó expandiendo el empleo estatal innecesario, y acrecentó el gasto social haciéndolo insostenible. A partir de 2004, el PIB  creció con rapidez y alcanzó una cima en 2006, debido a la ayuda económica de la República Bolivariana de Venezuela, la expansión de los servicios sociales y un cambio en la  metodología internacional para calcular el PIB3. La crisis global de 2007-2009 y los problemas que arrastraba el modelo de desarrollo cubano indujeron otra desaceleración en la tasa del PIB. Aún con oscilaciones, la recuperación en 1995-2006 ayudó a mejorar los indicadores sociales y la mayoría sobrepasó los niveles pre-crisis de 1989, aunque la pobreza y la desigualdad aumentaron. Desde 2007 ocurrió otra regresión en dichos indicadores por la crisis global y las necesarias “reformas estructurales” del Presidente Raúl Castro para corregir los problemas económico-sociales del país, aprobadas por el VI Congreso del Partido Comunista de Cuba (PCC) en 2011 y extendidas en 2012. Este capítulo se concentra en el período comprendido entre 2007 y2012, describe las reformas por sector social y evalúa sus efectos.

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Liberating Cuba’s Long-Suppressed Resource: Entrepreneurship

By Arch Ritter

In early 1996, I visited the home of a high Cuban official with whom I had become acquainted.  While there, a “colero or  “queuer” arrived after having waited in the queue to purchase the family’s rations of cigars and cigarettes among other things. (A source of income for many people in Cuba was to stand in line and purchase short-supply rationed products for other families.)  Although no members of the family smoked, they happily collected their rationed tobacco products for resale on the black market in order to acquire other necessities. My friend the official was as “revolutionary” as anyone that I have known in Cuba, going so far in the early years of the Revolution as to return the “per diems” that he saved from foreign travel to the government rather than buying such things as shoes for his children. However, by 1996, buying and selling on the black market was natural and comprehensible for him and most other people.

I. From “School for Socialism” to “Nation of Entrepreneurs”

During the thirty years or so in which the exercise of entrepreneurship in a market-oriented setting was largely prohibited, Cuba in fact created a nation of entrepreneurs.  Although the intention was to convert Cuba into a “school for socialism,” the reality is that Cuba has also been a school for market-oriented entrepreneurship.  This is one of the more significant paradoxes of the Cuban Revolution.

The nature of Cuba’s planned economy itself inadvertently promoted widespread entrepreneurial values, attitudes, behavior, and savoir-faire as citizens of necessity have had to buy and sell, hustle and “network” in order to improvise solutions to their personal economic problems.  The most important phenomenon in this process was the rationing system, implemented in 1961. This system was designed to provide everyone with a basic supply of foodstuffs, clothing, and household consumables, in order to achieve a minimum level of equality of consumption and real income.  It provided every individual (or household for some products) with fixed monthly quotas of foodstuffs, cigarettes, or household consumables and with annual quotas for clothing and footwear.  Everyone received the same allocations of products at controlled and generally low prices (in relation to average monthly incomes).  (Children and those with special health problems such as diabetics were treated differently and provided with special food rations.)  Because everyone received essentially the same rations, many people would receive some items that they did not want or which were of lower priority than other items.  In the context of generalized shortage and excess demand which existed with varying intensities since 1962, especially after 1989, everyone had an incentive to sell the rationed items they did not want or to trade them for other products they did want.  For example, non-smokers would purchase their cigarettes and cigars through the rationing system and would then give them to other family members or friends, resell them on unofficial markets, or trade them for other products. Thus, the rationing system converted many people into “mini-capitalists.”

The situation of excess demand and generalized shortage, especially after about 1989 when the subsidization from the Soviet Union ceased, also meant that anyone with privileged access to a product at an official price could resell it at a higher free-market price or in the dollar economy.  There was therefore a strong incentive making a profit from exchanging many types of product between the fixed-price official sources and the unofficial or “black market” determined price.  Related to the above phenomenon was “amiguismo” or “sociolismo” or “partner-ism”, that is, the reciprocal exchange of favors.  While such reciprocity probably occurs in all countries and in many different contexts, it took on some important additional forms in Cuba.  Basically, any person with control over resources could exchange access to those resources for some current or future personal material benefit.   Cultivating friends or associates in this way was vital for assuring oneself and one’s family access to the goods and services necessary for basic material well-being.  Complex networks of reciprocal obligations thus became an important part of the functioning of the economy.  Daily life involved continuing endeavors in maintaining the personal relationships necessary to ensure access to necessary goods and services through the unofficial channels or through the official channels unofficially.

In short, citizens in their everyday material lives had to behave in an entrepreneurial manner.  People had to explore and evaluate new economic opportunities, to acquire the consumer goods they and their families needed, to sell some consumer goods (or in some cases outputs of goods and services), to bear uncertainty, face risk and take ultimate responsibility, and to invest in the maintenance of their supply and market networks, all under hard and unforgiving budget constraints.

A second area where entrepreneurial action was necessary was the central planning system itself. In a perfectly functioning planning system, enterprise managers would have little to do besides obeying and implementing orders.  But because the planning system could not and cannot work perfectly especially in the face of continuing disruptions and uncertainty, enterprise managers had to take initiatives in resolving unforeseen problems. Frequently, solutions to such problems were to be found outside the normal channels of the planning system and required improvised responses by the enterprise managers. This often involved enterprise managers obtaining the required inputs through negotiations with other enterprises, with superior officials, or with superiors or inferiors in other sectors or Ministries.  In these negotiation processes, political argumentation, political or Party “amiguismo” or “sociolismo” (i.e. the exchange of favors within the Party for political and material benefit) as well as economic criteria were central, and economic management was therefore highly political. Managers throughout the Cuban economy had to invest large amounts of time and energy in resolving such input-supply problems. Indeed, their performance depended upon their entrepreneurial success in operating “outside the plan.”

While entrepreneurial talents have been developed broadly among the population, their exercise until 1993 was for the most part restricted to the important but low-level everyday tasks of sustenance and survival, often carried out in the underground economy or in “black markets.”  But when the space available for entrepreneurial activity was increased with the liberalization of microenterprise beginning in September 1993, the expansion and diversification of micro-entrepreneurial activity was impressive.

II. Liberating Cuban Entrepreneurship

The advantageous consequences of further policy liberalization towards micro-enterprise have been illustrated dramatically by the arts and crafts market and by the Barrio Chino. The production of arts and crafts, largely for the tourist market, expanded immensely and the quality and diversity of the products has improved greatly after 1993. It is now a major source of foreign exchange for Cuba, though statistics on this do not seem to exist. Similarly, the quasi-private restaurants in the Barrio Chino that enjoyed a cultural exemption from the 12 chair size-limitation emerged some time ago as dynamic, large, diverse and efficient restaurants – perhaps the best in Havana. They are a living example of what many sectors of the Cuban economy could become with further relaxation of restrictions and a reasonable  tax regime were implemented.

The liberalization of licensing and the other policy changes that were introduced in 2010 and 2011 have already born fruit. (The policy reforms are outlined here Raul Castro and Policy towards Self-Employment and here: State Sector Lay-offs then Private Sector Job Creation.) The numbers of micro-enterprises have increased significantly even if the initial objective of 500,000 new jobs in the sector by March 31 2011was not achieved. This is illustrated in the accompanying chart.

Source: Republica de Cuba, Oficina Nacional de Estadisticas (ONE), Anuario Estadistico de Cuba, various issues

While the task of modifying the policy framework for the micro-enterprise sector is incomplete, major improvements have been instituted so far and more are in the process of implementation. In the summary presented in Table 1, it can be seen that advances have been made in a number of areas, notably licensing and “de-stigmatizing”. Progress has been made or promised in other areas. In still other areas, some reforms have been introduced but further action is desirable. And in a few areas there has been no action yet.

It is worth noting again the benefits that a deeper liberalization of policy towards small enterprise would generate. These would include:

  • More productive employment would be created, a vital objective if redundant state workers are to be reabsorbed into the economy.
  • An increase in small enterprise would increase competition, lower prices, improve quality and broaden diversity of the goods and services produced.
  • Incomes would be generated.
  • The average levels of incomes in the small enterprise sector would tend to be driven to the average national level if it were opened up with free entry for anyone wanting to establish a micro-enterprise.
  • Citizens would gain when reduced effort and time was necessary to obtain the goods and services necessary for survival.
  • Improved productivity of small enterprises would permit higher material well-being throughout Cuban society.
  • The massive underground economy would shrink.
  • Tax revenues from the sector would increase as it expanded.
  • Foreign exchange earnings and savings would occur as domestic products replaced imported products and as markets for tourists and for export expanded.
  • Innovation and improvement would be promoted.
  • Urban and rural commercial revival would occur.
  • The general quality of life would be improved.
  • The culture of compliance and respect for public policy rather than regulation avoidance and illegality would in time take effect.

Most important, further liberalization of the small enterprise sector would harness the ingenuity, creativity, industriousness and enthusiasm of a substantial proportion of the Cuban people to more productive economic activities.

Would such an apertura worsen income distribution? In the early stages, as some small enterprises increased in size, this would perhaps occur. But Cuba already has an income tax and an effective administrative system for taxing small enterprise so that this effect could be managed. Opening self-employment and small enterprise to all possible entrants would also increase competition in the sector and push prices and thence incomes towards average levels.

Barrio Chino, November 2008, Photo by Arch Ritter

 

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Centro de Estudios sobre la Economía Cubana, “Seminario Anual sobre la Economía Cubana” 21-24 de junio de 2011

 The Centro de Estudios sobre la Economia Cubana has just completed and publicized its 2011 Annual Report on the Cuban economy. Here are hyperlinks to the main economics articles. A number of essays focussing on enterprise management have not been included here.

Juan Triana Cordoví, “Cuba 2010-2011, del crecimiento posible al desarrollo necessario

Jorge Mario Sánchez Egozcue, “La Relación Crecimiento Económico y Sector Externo, una evaluación de la dinámica

Pavel Vidal Alejandro y Omar Everleny Pérez Villanueva, “Relanzamiento del cuentapropismo en medio del ajuste estructural1
 
Ileana Díaz Fernández y Ricardo Torres Pérez, “Los encadenamientos productivos, un análisis para Cuba

 

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Cuba’s Economic Agenda and Prospects: An Optimistic View!

By Arch Ritter

Published originally in FOCALPoint, April 2011, Volume 10, N0. 3.

The Sixth Congress of the Communist Party of Cuba, taking place April 16-19, 2011, will focus on a comprehensive range of economic reforms, labelled an “updating” of its model, but ostensibly not a movement away from Cuban socialism. This reflects the depth of Cuba’s economic problems as well as the unwillingness of the regime to tolerate discussion of political reform, which is not on the agenda.

The Cuban economy faces severe difficulties, despite purportedly high GDP growth figures. The real state of the economy can be summarized as follows. There has been minimal recovery from the near 80 per cent collapse in the population’s real income levels since 1989. De-industrialization brought 2010 industrial output to 51 per cent of its 1989 level. Sugar production has declined catastrophically, from roughly seven million tonnes in the 1980s to approximately 1.3 million tonnes per year at present. Reduced production of foodstuffs has resulted in major increases in food imports. Investment has been insufficient, at 8.5 per cent of GDP (compared with 21.9 per cent for Latin America in 2008). There are high levels of under-employment in the state sector —an estimated 1.2 to 1.8 million workers, or 20 to 35 per cent of the labour force— compared to the official unemployment rate of 1.6 per cent. These factors are combined with a half-century of monetary pathology, 20 years of the dual exchange rate and monetary systems, and heavy reliance on special trade arrangements of dubious sustainability with Venezuela.

President Raúl Castro has spoken forcefully on the need for economic reform (in contrast with the complacency of his brother Fidel), stating in April 2010:

“We face unpleasant realities, but we are not closing our eyes to them. We are convinced that we must break dogmas, and we undertake with strength and confidence the modernization, already underway, of our economic model.”

The character of socialism has also been redefined under Raúl’s regime as spelled out in the Draft Guidelines for Economic and Social Policy, a document released in November 2010 as part of the lead-up to the Congress: “In the economic policy that is proposed, socialism is equality of rights and opportunities for the citizens, not egalitarianism.” This may be of game-changing significance, suggesting that Cuba is moving toward “social democratic” orthodoxy.

When Raúl succeeded his brother in 2006, there were heightened expectations that he would introduce reforms, given his reputation for pragmatism. However, few significant changes were introduced in his first four years, with the exception of postponement of the retirement age and the granting of 10-year leases on unused state-owned farmlands to private farmers.

In October 2010, Raúl introduced a program to downsize the state sector that would lay off 500,000 redundant workers by March 31, 2011, and ultimately, 1.8 million workers in total by 2015. These workers were to be absorbed in an invigorated small-enterprise and co-operative sector. In order to encourage small enterprise, the licensing process, regulatory system and tax regime were liberalized. These measures were headed in the right direction, but were too modest to stimulate the required expansion of self-employment. By January 2011, some 83,400 new self-employment licenses had been granted —far below the 500,000 target for March 31. Because of this, the implementation of the state sector downsizing was decelerated and indeed appears to be on hold until after the April Congress. Few if any workers have actually been laid off, although some have been told that they are to be let go, prompting informational and procedural discussions in many workplaces.

The Draft Guidelines for Economic and Social Policy document was issued by the government to serve as the basis for public discussion of the reforms and prepare a more definitive strategy to be approved at the Congress. These Guidelines include 291 recommendations for changes in every area of economic and social policy. It is a statement of aspirations, with no indication of policy priorities, sequences or co-ordination. The reforms are to be within the framework of the socialist planning system.

There are a variety of views among analysts regarding the possible outcome of the Congress. Some expect no meaningful policy changes. But others —including some dissident economists and mainstream analysts alike— are optimistic and expect reforms. Indeed, the climate of opinion within Cuba decisively favours reform.

Can Raúl’s administration forge a workable strategy from the Guidelines’ wish list? Given the deliberative and systematic way in which Raúl has proceeded so far, this appears probable. A process of economic —but not political— reform will most likely begin after the Congress. Where it will lead is hard to predict. Presumably Raúl’s regime would like the process to end with a new balance between public and private sectors, with a controlled movement toward the market mechanism in price determination and the shaping of economic structures, and with the construction of a rational configuration of incentives shaping citizens’ daily economic actions so that their private endeavours become compatible with Cuba’s broader economic well-being. This, however, remains to be seen.

Third Congress of the Communist Party of Cuba, Bohemia, 8 April 2011.


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Cuba’s Economic Reform Process under President Raul Castro: Challenges, Strategic Actions and Prospective Performance

The Bildner Center at City University of New York Graduate Center organized a conference entitled “Cuba Futures: Past and Present” from March 31 to April 2. The very rich and interdisciplinary program can be found here: Cuba Futures Conference, Program.

I had the honor of making a presentation in the Opening Plenary Panel.  The Power Point presentation is available at “Cuba’s Economic Reform Process under President Raul Castro.”

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New Publication: Oscar Chepe, Cambios en Cuba: Pocos, Limitados y Tardíos

Oscar Chepe’s recent  work on Cuba’s economic situation and the reform process has just been published and is available on the web site: Reconciliación Cubana, or here: Oscar Chepe, Cambios Cuba: Pocos, Limitados y Tardíos

Oscar continues to be a courageous and  outspoken analyst of Cuba’s economic policies. In this past, this earned for him a period of forced labor in the 1960s and incarceration in March 2003 along with 75 others. Despite this, he continues to express his views openly and honestly. Although his voice is heard easily outside his own country, within Cuba, his views unfortunately are blocked rather effectively by state control of the publications media, the electronic media and by the continuous violation of the right to freedom of assembly.

Below is a Table of Contents followed by an Executive Summary by Rolando Castaneda.

Table of Contents:

Prologo por Carmelo Mesa Lago 1
Resume Ejecutivo por Rolando Castañeda 6
I. Introducción 11
II. Pequeñas y medianas empresas 14
III. Actualización del modelo económico cubano 16
IV. Problemas de orden externo e interno 19
V. La empresa estatal socialista 22
VI. Mercados mayoristas, precios 24
VII. Cooperativas 27
VIII. Política fiscal 29
IX. Políticas macroeconómicas 31
X. Política monetaria 34
XI. Política económica externa 37
XII. Inversión extranjera 40
XIII. Política inversionista 43
XIV. Ciencia, tecnología e innovación 45
XV. Política social 47
XVI. Salud 51
XVII. Deporte 54
XVIII. Cultura 56
XIX. Seguridad social 59
XX. Empleo y salarios 61
XXI. Política agroindustrial 64
XXII. Política industrial y energética 68
XXIII. Política energética 71
XXIV. Turismo 74
XXV. Política de transporte 77
XXVI. Construcciones, las viviendas y los recursos hidráulicos 79
XXVII. Comercio 82
XXVIII. Conclusiones 84
A 20 años de Primer Informe de Desarrollo Humano de ONU 87
Cuba Bordeando el Precipicio 90
La Economía Cubana en 2010 93
Cuba: Un Principio Espeluznante 100

Oscar Chepe and Miriam Leiva, February 2010. Photo by Arch Ritter

Resumen Ejecutivo, por Rolando Castañeda

Planteamiento general
Los instrumentos aprobados por el gobierno para la implementación del trabajo por cuenta propia, el proceso de la reducción de las plantillas infladas, el recorte de los gastos sociales y el Proyecto de Lineamientos de la Política Económica y Social, revelan pocos, parciales e insuficientes cambios, que no solucionarán la crisis socioeconómica existente.
El gobierno sólo actualiza (“le pone parches”) a las fuentes principales de los problemas actuales: el sistema socioeconómico, que no ha funcionado, es irreparable y está mal gestionado, así como el régimen político totalitario carente de libertades civiles fundamentales. Ellos han llevado al desastre, la dependencia externa e impiden la sustentabilidad económica.
La baja eficiencia, la descapitalización de la base productiva y de la infraestructura, el envejecimiento y estancamiento en el crecimiento poblacional, entre otros muchos males, son consecuencias de ese modelo.
El gobierno elude medidas indispensables mientras propone unas pocas medidas insuficientes, llenas de limitaciones y prohibiciones. También reitera sin corregir apropiadamente medidas anteriores que han sido implementadas con muchas limitaciones y sin tener una concepción integral de la economía, tales como: la entrega de tierras en usufructo, el pago por resultado a los trabajadores y los recortes fiscales.
Los Lineamientos definen que primará la planificación y no el mercado, o sea continuará la burocratización de la sociedad, bajo rígidas normas centralizadoras, que imposibilitan la flexibilidad requerida por la actividad económica y la vida en general de la nación. No se reconoce la propiedad privada y se subraya la política de no permitir el crecimiento de la actividad individual.
La seria contradicción de una política con ribetes neoliberales de drásticos recortes, sin que se brinde a los ciudadanos posibilidades reales de ganarse el sustento decentemente, e incluso aportar de forma racional a los gastos del Estado, podría determinar convulsiones sociales, en un ambiente ya permeado por la desilusión y la falta de esperanza.

El despido de trabajadores y el trabajo por cuenta propia
El vital proceso de racionalización laboral, con el despido hasta abril de 2011 de 500.000 trabajadores considerados innecesarios, el 10% de la fuerza de trabajo ocupada, para continuar haciéndolo posteriormente con otros 800.000, que fue postergado por tantos años, ahora se pretende realizar de forma muy rápida. No se ha contado con la preparación apropiada ni la organización para que tenga éxito en un plazo tan breve y se pueda reubicar una cantidad tan grande de despedidos. Ni siquiera se han modificado los artículos de la Constitución Política (i.e. el 21 y el 45) que se contraponen a lo propuesto.
Al desestimulo por los bajos salarios, la carencia de información técnica, el vacío de reconocimiento social y las generalizadas malas condiciones laborables, a las nuevas generaciones de estudiantes se une ahora la incertidumbre de hallar empleo futuro por el despido masivo de trabajadores.
El trabajo por cuenta propia en sólo 178 actividades permitidas que deberá absorber el despedido masivo de trabajadores, enfrenta graves limitaciones, más severas que las existentes para las empresas estatales y las mixtas con capital extranjero. Incluyen los impuestos por seguridad social del 25% que el trabajador por cuenta propia deberá contribuir, así como los trabajadores que se contraten con base en un salario fijado por el gobierno, a un nivel 50% mayor que el salario medio prevaleciente. También están los elevados impuestos sobre los ingresos personales que pueden llegar hasta el 50% cuando excedan de $50,000 anuales, y las restricciones a los gastos de operación que se permiten deducir de los ingresos brutos para fines tributarios, en algunos oficios de sólo hasta el 10% de los ingresos anuales.
A ello hay que añadir algunas prohibiciones arbitrarias, tal como las sobre el número de sillas de los restaurantes (20) y las barberías (3), así como la ausencia de un mercado mayorista de abastecimiento de insumos. Hasta tanto ese mercado no aparezca, continuará desarrollándose la ilegalidad y, sobre todo, el robo de los recursos estatales, estimulado por el extendido descontrol existente y el miserable salario de los trabajadores. ‘
De esta forma el Estado reduce la actividad individual a iniciativas arbolitos bonsái e impide el crecimiento del trabajo por cuenta propia y el surgimiento de pequeñas y medianas empresa. Un mecanismo configurado para mantener el estrecho control del Estado-Partido sobre la sociedad, temeroso de que el fortalecimiento y desarrollo de la actividad privada pueda convertirse posteriormente en un peligro.

Aspectos generales y macroeconómicos

La mayoría de los Lineamientos sobre aspectos generales, macroeconómicos y sectoriales son enunciativos, generalidades que soslayan la grave situación con la continuada acumulación de graves problemas y sin proponer soluciones reales para los mismos. Desafortunadamente, los cambios requeridos no se avizoran. Este conjunto de 28 artículos se refiere a estos temas y por qué considera que su tratamiento es insuficiente para una sociedad estatizada, llena de distorsiones y carente de racionalidad económica
El problema de la descapitalización física es sumamente serio. Desde inicios de los años 1990 se mantienen tasas de formación bruta de capital fijo en relación con el PIB usualmente inferiores al 10%, menores a las tasas de amortización de los medios de producción y la infraestructura, aceleradas por la falta de reposición, actualización tecnológica y mantenimiento adecuado.
Desprovisto el país de la “ayuda” a inicios de 1990, empezó el deterioro paulatino de la salud pública, la educación, la seguridad social, el deporte y la cultura, con una incidencia muy negativa en los salarios, que como indicara el presidente Raúl Castro el 26 de julio de 2007 son insuficientes para vivir. La permanencia de los esquemas sociales con oportunidades de acceso para todos está en peligro debido a la falta de sustentación económica.
Resulta indispensable introducir tasas de cambio reales. Las tasas actuales, recargadas por gravámenes absurdos, que pueden conducir a análisis distorsionados y por consecuencia a decisiones equivocadas. En especial respecto a la política de inversiones, el comercio exterior y otros aspectos vitales para el desarrollo nacional. Una moneda sobredimensionada representa un serio obstáculo para el crecimiento de la llegada de turistas, al reducir arbitrariamente la competitividad del mercado cubano.
Cuba paga intereses bancarios muy altos a los prestamistas extranjeros; sin embargo, a los nacionales se les abonan intereses sumamente bajos, incluso por debajo de las tasas de inflación reales. Es necesario motivar a la población a depositar sus ahorros en los bancos, en especial aquellos en moneda convertible, dándosele las debidas garantías y el pago de intereses estimulantes y acordes con la situación financiera del país.
El gobierno no contempla la participación de la comunidad cubana en el exterior en la reconstrucción nacional. Un sector de nuestro pueblo que, con el otorgamiento de las garantías necesarias, podría ser fuente de importantes recursos financieros, tecnologías avanzadas, conocimiento y experiencia en la gestión de negocios y posibles nuevos mercados. Habría que adoptar una política pragmática e inteligente de acercamiento a nuestros hermanos en el extranjero, muy en especial hacia la comunidad afincada en EEUU, que además podría ser un puente para mejorar las relaciones con ese país, con enormes beneficios para nuestra economía.

Aspectos sectoriales
En los aspectos sectoriales de los Lineamientos se habla mucho acerca de ejecutar proyectos e inversiones, de potenciar capacidades de diseño y proyección, y fortalecer determinadas capacidades, pero no se define como hacerlo ni como financiarlo.

La esencia de los problemas nacionales, pueden hallarse en la destrucción de la agricultura que ha provocado una extraordinaria dependencia de alimentos importados, incluido azúcar, café y otros muchos que antes Cuba exportaba, mientras, los Lineamientos, reconocen que “ …las tierras todavía ociosas,.. constituyen el 50%…”. El sector está afectado por los precios fijados por el Estado unilateralmente por debajo del mercado, con frecuentes largas demoras en los pagos y las tradicionales deficiencias en la gestión de las empresas acopiadoras oficiales. Las tiendas abiertas para la venta de herramientas e insumos tampoco constituyen una solución, los precios son demasiado altos.
Las Cooperativas de Crédito y Servicios (CCS), donde los productores con muchas dificultades mantienen sus tierras individualmente, con sólo el 18% de la superficie agrícola total (cierre de 2007) han generado tradicionalmente más del 60% de la producción agrícola nacional, así como el más bajo por ciento de tierras ociosas, a pesar de la crónica falta de recursos, el permanente hostigamiento, las prohibiciones y la obligatoriedad de entregar las cosechas total o parcialmente al Estado en las condiciones y a los precios arbitrarios fijados por él.
En este escenario si se continúa con la mentalidad de ejercer estrictos controles sobre los posibles cooperativistas y negando la voluntariedad como concepto básico para la formación de las cooperativas, por muchos “buenos deseos” e indefinidos planteamientos que existan, el movimiento cooperativo no avanzará.
En la industria se refleja con mayor fuerza el proceso de descapitalización generalizado desde principios de la década de 1990. Por ello se requiere con urgencia su modernización y reequipamiento para poder detener la tendencia al actual atraso tecnológico, e incluso la paralización del sector. En 2009 se alcanzó una producción correspondiente al 45% de 1989, incluida la industria azucarera. Si se excluyera esta industria, el indicador sería del 51%. La producción nacional de materiales de construcción es muy baja, con un índice de volumen físico, al cierre de 2009, solo del 27% del nivel de 1989.
El gobierno cubano no publica los ingresos netos por concepto de turismo, por lo cual es difícil evaluar con precisión sus beneficios. Debido al pobre desarrollo de la economía cubana, se importa muchos productos consumidos por los visitantes. Esta actividad podría ser una de las locomotoras que impulse las demás ramas de la economía, pero para ello habría que realizar reformas estructurales, que reduzcan radicalmente la dependencia del exterior.
Conclusión

El aniquilamiento de los sueños de un futuro más justo y próspero para Cuba, podría detenerse si se propiciara un proceso de reconstrucción radical, con el abandono de los dogmas que tanto daño han hecho. Cuba posee significativas reservas productivas inexplotadas y un pueblo que debidamente estimulado, con libertad para crear, podría sacar a la nación de la crisis. Para ello resulta indispensable un nuevo modelo económico, político y social en el cual participarían en paridad de derechos y deberes las iniciativas públicas y privadas, estableciéndose un círculo virtuoso propiciador de desarrollo, que en la medida en que progresen ambas iniciativas se beneficie el país con mayores niveles de eficiencia, así como más y mejores productos, y el incremento del pago de impuestos que haga sostenible la financiación de la educación, salud pública, seguridad y asistencia social, y otros.

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A Major Slow-Down for the Public Sector Layoff / Private Sector Job Creation Strategy

Raul Castro and the Council of Ministers, Granma, March 1, 2011

By Arch Ritter I had been looking in vain for any concrete information on public sector redundancies and the granting of self-employment licenses since December 2010.  After some searching in the Cuban press, the foreign press and various blogs, I came up empty handed. I was starting to think that the program had been aborted. Then yesterday, Raul announced in a publicized meeting of the Council of Ministers a major slow-down of the program, noting, in the words of the journalists, that “the up-dating of our model is not the work of a day or even a year but because of its complexity, it will require not less than a five year period to unfold its implementation” (Granma, 1 de Marzo de 2011) As far as I can determine, there have in fact been virtually no lay-offs yet in the public sector, although the original March 31 target for 500,000 fired workers is close at hand. Or at least, none have been clearly reported. The latest numbers for license-granting for the end of December 2010 indicated that some 75,000 new licenses had been issued with another 8,340 still in process – a slow start towards the March 1 target date. Granma, 7 de enero de 2011 The slow-down and delay in implementation is understandable.  Although the original proposal was in the right direction, it was seriously flawed and excessively hurried. The most obvious weakness of the strategy was that it called for lay-offs first, followed by or concurrently with job creation in the micro-enterprise sector which was only slightly liberalized in October 2010. As various critics quickly observed, this was placing the “cart before the horse”. The original time frame for the lay-off process – from July 20, 2010 to March 31, 2011 – became even more condensed as months of inactivity followed months. If implemented, this approach would have amounted to a draconian type of shock therapy. The process of firing workers is not easy under any circumstances. Though the Government stressed repeatedly that those made redundant would be supported by the state, the prospects of being laid off and having to establish one’s own micro-enterprise in a policy environment that is still difficult if not hostile must be unnerving for many people. It was to be implemented during the Cuban recession – (though Cuba is now appears to be in a process of recovery, due to higher nickel prices, increased tourism including US tourism, higher remittances.) Moreover, workers have no independent Unions to defend their rights during such a process of redundancies. (It was the Central de Trabajadores de Cuba that announced the lay-off strategy.) There was a potential for irregularities and perversions in the firing process as well, with redundancy being determined by factors such as Party faithfulness, personality issues,  or friendship with the relevant officials, rather than labor effectiveness, which is usually difficult to determine in any case. Moreover, the strategy, which was to be a defining component of economic reform and structural change, was adopted before the public discussions around the Proyecto de Lineamientos de la Política Económica y Social del Partido y la Revolución,” There had been no public input or discussion in the media or public forums before this strategywas sprung on the Cuban people. Furthermore, it was clear from the start that the liberalization of self-employment was insufficient for the necessary level of job creation. (See Perez and Vidal, Ritter and Mesa-Lago for example.) There are some measures that are supportive of micro-enterprise expansion. These include a small increase in the permitted range of activities, minor relaxation of regulations and a small modification of the tax regime. More significant and positive are the liberalization of licensing and the “de-stigmatization” of the self-employed by the media and politicians. However, a variety of policies continues to constrain the activities of micro-enterprises and will prevent it from expanding as envisioned by the Government: –        Exceedingly onerous taxation continues. –        The tax on hiring workers will discourage job creation. –        A narrow definition of legal activities will limit enterprise and job creation. –        Exclusion of virtually all high-tech and professional activities blocks development of knowledge-intensive enterprises and wastes the training of the highly educated. –        Bizarre restrictions remain (such as a 20 chair limit on restaurant chairs). –        Restrictions and prohibitions on hiring workers remain. –        Taxes and regulations result in the stunting of enterprises which prolong inefficiencies and promote the underground economy. –        Unreasonable restrictions and heavy taxes breed contempt and non-compliance for the law. Under these circumstances, the necessary expansion of Small Enterprise will be slow and in fact probably would not occur. In this case, the Government will have two basic choices: either it can abort the structural change process or it can further liberalize the micro-enterprise sector in order to permit it to generate jobs for redundant state workers. In order to establish an “enabling environment” for micro-enterprise, here are some of the types of policy modification that would be necessary:

  1. Modify the tax regime: Eliminate the tax on hiring workers and permit all costs to be deductible from gross revenues for calculating taxable income;
  2. Broaden of permitted activities, including professional and high-tech activities;
  3. Relax vexatious regulations;
  4. Liberalize hiring restrictions;
  5. Establish microcredit institutions (international assistance is available for this)
  6. Improve access to wholesale input purchase – not done yet;
  7. Legalize “intermediaries” (permitting specialization between producers and venders)
  8. Permit Advertising
  9. Establish a “Ministry for Small Enterprise”!!!

 

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Economic Analyses Published by Espacio Laical, CONSEJO ARQUIDIOCESANO DE LAICOS DE LA HABANA

Perhaps surprisingly, Espacio Laical, the journal of the CONSEJO ARQUIDIOCESANO DE LAICOS DE LA HABANA, has become a most interesting medium for economic and political and religious analyses and exchanges. Its circulation in digital format within Cuba via the “Intranet” is unclear. However, it has produced a variety of works by some of Cuba’s leading economic analysts including those in the main Research Institute focusing on the on the domestic Cuban economy, namely the Centro de Estudios sobre la Economia Cubana, (CEEC), ttp://www.ceec.uh.cu/. Many of the analysts in CEEC publish their work in Espacio Laical or other sources outside their own institution, which unfortunately has a rather minimalist web site at this time, .

Here is an Index of Economic Articles that have appeared in Espacio Laical, with most of them  hyperlinked to the original source.

Barbería, Lorena – Remesas, pobreza y desigualdad en Cuba. (Año 4 / No.14)

Calvo, Cristina – X Semana Social Católica: Globalización y desarrollo integral inclusivo. (Año 6 / No.23)

Espacio Laical – Economía cubana (portada) (Año 4 / No.14)
Economía cubana: retos y opciones. (Año 4 / No.14)

Everleny Pérez, Omar – Se extiende el cuentapropismo en Cuba. (Año 6 / No.24)

Laborem , boletín del Movimiento de Trabajadores Cristianos (MTC)  – Sin quitarle una letra. (Año I / No.1)

La Quincena. – Textos para la reforma social. (Año I / No.4)

Mesa, Armando – Mercado y solidaridad: ¿un debate intergeneracional? (portada) (Año 4 / No.14)
Mercado y solidaridad: ¿un debate intergeneracional? (Año 4 / No.14)

Mesa-Lago, Carmelo – Posible restablecimiento de relaciones económicas entre Cuba y Estados Unidos: Ventajas y desventajas. (Año 4 / No.14)
La crisis financiera mundial y sus efectos en Cuba (Año 4 / No.16)
¿Se recupera el mundo de la crisis económica global? (Año 5 / No.20)
– X Semana Social Católica: Implicaciones sociales y económicas para el sistema de seguridad social en
El desempleo en Cuba: de oculto a visible. (Año 6 / No.24)

Monreal González, Pedro – El problema económico de Cuba. (Año 4 / No.14)

Pérez Villanueva, Omar Everleny – X Semana Social Católica: Notas recientes sobre la economía en Cuba. (Año 6 / No.23)

Robles, Reydel – X Semana Social Católica: Presentación al panel sobre economía y sociedad. (Año 6 / No.23)

Veiga González, Roberto – Propiedad privada en Cuba: una percepción de futuro. (Año I / No.4)

Vidal Alejandro Pavel – Redimensionando la dualidad monetaria (Año 3 / No.11)
Los salarios, los precios y la dualidad monetaria. (Año 4 / No.14)
El PIB cubano en 2009 y la crisis global. (Año 5 / No.18)
Los cambios estructurales e institucionales. (Año 6 / No.21)
– X Semana Social Católica: La actual crisis bancaria cubana. (Año 6 / No.23)
Se extiende el cuentapropismo en Cuba. (Año 6 / No.24)

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