Tag Archives: Labor Rights

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

By Archibald Ritter

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

The newspaper where the article was published: Trabajadores ;

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

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

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

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

Were further cuts required after these reductions? Apparently so.

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

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

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

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

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

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

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

Cuba Apr 2012 062.jpg AAAA

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

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Cuban Workers, Strikes & the Socialist State: Workers do not strike in Cuba – or so it seems

Rogelio Manuel Diaz Moreno, Havana Times, September 13, 2013 |

HAVANA TIMES — In the years immediately following the triumph of the Cuban Revolution (in January 1959), the island’s trade union leadership undertook to do away with the strike as a mechanism for asserting worker demands.

The Cuban Workers’ Federation (CTC) was absorbed by the State apparatus, regulated by the government and controlled by the single-party system which came into being at the time. The government assumed the commitment of brining economic and social progress to the country.

The CTC did its part, and did it well. Though it is true the revolutionary government helped the majority of the population living in abject poverty, putting behind their deplorable living conditions, it is also true that it lost its direction somewhere down the road. This, at least, is the view expressed by Raul Castro, who went as far as saying the country had been taken to the edge of a precipice.

Thus, we have arrived at a situation in which working people do not receive enough, in wages, to be able to get by. That is another statement made by Cuba’s president. Lacking an institution that can organize and represent them, Cuban workers have no means of making any kind of labor-related demands.

They look on the CTC as a mere appendage of their company’s management and of State institutions. Union meetings, for them, are basically an occasion to express support for government and Party directives, calling for more work, less earnings, accepting a lay-off without protesting, etc.

Defending worker rights or calls for public protests, which earn one the reputation of being a troublemaker and pave the road to unemployment, is, of course, out of the question. The State / government is free to do whatever it pleases.

¿Or is there another side to this?

A responsible and courageous attitude on behalf of the CTC’s representatives and members, and an attitude of respect from the State, would be a means of channeling tensions and difficulties and of working towards a consensus around the solutions ultimately imposed on us by reality.

All societies have a rebellious lot. Cuban construction workers may not have approached the CTC to express their grievances, but they did, at one point, stage a de facto strike. In the 1990s, Cuba’s construction companies were practically left without employees. The State had no choice but to substantially improve wages, accommodations for employees, food, and other conditions, in order to repopulate the industry with part of the lost labor force.

A similar situation arose in connection with another difficult job, that of maintaining public order. The government had to re-locate police officers from the eastern provinces to Havana en masse, as nearly no one in the capital was willing to do such a thankless job for the low wages the State was offering. Once again, the State, faced with an inexorable need, had to give in and began paying police officers more decorous salaries.

State farms in Cuba’s countryside also witnessed an exodus of workers. Here, the State didn’t respond by raising salaries but by distributing idle lands to those willing to make an honest living with the sweat of their brows. In the long run, workers again had their way.

Of course, these aren’t “strikes” in the strictly theoretical or academic sense of the word. The loss of teachers, qualified health specialists and high-performance athletes, who either change professions or countries, also does not fit nicely into the Marxist paradigm of proletarian struggle. The theft of goods, raw materials, fuels and other products from any workplace that isn’t rigorously monitored fits this paradigm even less.

When those at the bottom perceive that the strongest and less scrupulous of the lot are the ones who come out on top, they do what they can, even if it’s not in the textbook and isn’t exactly heroic. The dominant class, at the top, tightens the screws in response, and the result is a kind of arm wrestling match where the one who can hold out the longest wins.

The Party bureaucracy and its servile underlings still find it hard to accept that working people have rights and value. They squeeze as much as they can out of them in every sphere. They try different strategies to ride out the storm or confuse their opponents, depending on the sector: they mobilize workers through the Food Program, launch intensive teacher training courses, re-locate construction workers, police officers and teachers to other regions and tolerate or encourage the broadcasting of alienating and superficial videos through the mass media.

Unfavorable productivity rates are hidden behind a thick curtain of demagogy and flattering figures are extolled without limits. All the while, workers are required to show their unconditional support for the government if they have any hopes of getting ahead, working abroad or earning a very limited bonus.

A string of tiresome political campaigns – as oppressively dense as they can be thrown together – are used so as to drain people of the energy or will to think about changing the (dysfunctional) way in which things work in the country.

At certain points in time, more material incentives are made available in given jobs and, when a more or less precarious stability is achieved, they are taken away. Where none of this can be put into practice, or where it fails beyond any hope of recovering the sector, or where the government cannot afford to lose the profits to be gained there, they liberalize the sector and make concessions to foreign capital.

The CTC is the most conspicuously absent organization throughout these processes. So much so, that it is evident that Cuba suffers from a degeneration of supposedly grassroots organizations, those which ought to organize and defend the workers.

 

A responsible and courageous attitude on behalf of the CTC’s representatives and members, and an attitude of respect from the State, would be a means of channeling tensions and difficulties and of working towards a consensus around the solutions ultimately imposed on us by reality.

This would pave the way towards a possible raise in worker salaries and the implementation of measures and plans aimed at increasing production, improving services, taking better care of the environment, satisfying community needs and other improvements.

One is more likely to see an apple tree sprout oranges than a privileged class give up its benefits willingly. We probably won’t be able to avoid an intermediate stage of chaos in which the country’s productive structures and services infrastructure are worn down, when hard facts will force many to change their way of thinking.

Those who have stifled, or stood by as others have stifled the ability of Cuban workers to self-manage and organize, bear a heavy burden of responsibility for the incalculable damage to the nation and the people this has brought upon us.

I say this so as not to come off as too much of a radical, and affirm that, since we aspire to build a socialist system, where the means of production are controlled by the workers, what we simply need to do is do away with the country’s bureaucracy in one fell swoop and let the workers manage their workplaces, and the country, as they see fit.

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Prison workers used in many Cuban government enterprises

By Juan O. Tamayo, Miami Herald, Posted on Mon, May. 21, 2012

Combinado del Este

 The Cuban government-owned enterprise Provari is known on the island for making everything from bricks and construction blocks to mattresses, tourist handicrafts and the insecticide Lomaté — I Killed It.

What is less well known is that the vast majority of its workers are prison inmates — what dissidents denounce as “slave laborers” who work with few safety protections and receive meager wages or are not paid at all.

Prison labor in Cuba is extensive yet “like the dark side of the moon, not well known at all,” said Elizardo Sánchez Santa Cruz, head of the Cuban Commission for Human Rights and National Reconciliation.

A Provari business prospectus claimed it had 150 production facilities around the island in 2001. Sánchez said it operates in virtually all of the estimated 200 prisons and labor camps in Cuba.

Prison labor is common around the world. In the United States, prisoners make license plates, government furniture and much more. Florida state prisons require inmates to work unless they are exempt for medical or other reasons. Most earn nothing, and canteen workers, barbers and a few others get only $50 a month.

“There’s no objection in principle to companies managing factories in prisons,” said Andrew Coyle of the International Centre for Prison Studies in London. But inmates should have equal salaries and work conditions. “This should not be forced or slave labor.”

But Cuba is a dictatorship, Sánchez argued, where the communist government can do anything and keep it secret. That includes exploiting inmate workers at will and punishing anyone who complains.

He added that he was specially concerned about the safety conditions in prison factories and singled out the Lomaté insecticide, manufactured in Havana’s Combinado del Este and other prisons around the island.

Farm workers seldom get special clothing to protect them from chemicals, and cane cutters rarely get proper boots to protect their feet from their machetes, said Joel Brito, a former safety expert in the island’s lone labor union, the Cuban Workers’ Central.

The Interior Ministry (MININT) and Ministry of the Armed Forces, which own a large number of manufacturing and construction enterprises, do not report industrial accidents to the National Statistics Office, Brito noted.

“There are no protective measures because there’s always a shortage of money. And if that’s the case in the general economy, imagine what it’s like for prisoners,” added Brito, who now heads a Miami group that monitors labor abuses in Cuba.

Questions about prison labor in Cuba arose recently amid reports that the IKEA furniture chain and an East German firm had hired the Cuban state-owned company EMIAT to use prison labor to manufacture tables and sofas in 1987.

One Cuban business report says EMIAT imports supplies and commercializes products for government-owned companies, including Provari. EMIAT and Provari — Enterprise for Various Products — share a Havana address in some of the reports.

A man who answered the phone at Provari’s Havana office, asked if the company uses prison labor, said, “Yes, the work is by prisoners.” He also confirmed the firm is owned by MININT, which is in charge of prisons, but declined further comment.

A Cuban government radio report on Provari’s work last summer said it was established 20 years earlier “principally with the objective of offering work to prisoners … and integrating them into work useful for society.”

Many prisoners work for the chance at fresh air and perhaps better food, and to avoid having their records marked “refused to work,” which would dash any hope for an early release, said Luis Enrique Ferrer, a dissident who spent eight years in prison.

Authorities allow only common criminals to work, fearing that political prisoners would publicize the work conditions, he added. Ferrer, who did not work in prison, was freed in 2010 and now lives in Miami.

But dissidents and independent journalists in touch with prisoners have published several reports over the years alleging problems at Provari’s prison workshops.

Journalists Jorge Alberto Liriano Linares reported in 2010 that 16 inmates suffered serious accidents at a Provari factory for construction materials at the Kilo 8 prison in eastern Camaguey Province, where he served part of his own13-year sentence.

Inmates in “this killer factory” are forced to work without salary, clothes, shoes or gloves, he wrote for the news service Hablemos Press. They work 10 hours a day and handle toxic chemicals “and because of that they suffer respiratory and skin diseases.”

Brito’s International Group for Corporate Social Responsibility in Cuba reported in 2010 that a factory in Prison 1580 near Havana was forcing inmates to work up to 12 hours a day making construction blocks and seldom paying the promised $10 a month.

Its 2009 annual report included complaints that inmates at the Nieves Morejón prison in Sancti Spiritus were paid a mere $2 per month, and that prisoners in Boniato in eastern Cuba were paid $1 per month — plus a promised bonus that was never paid.

Dissident Felix Reyes reported last year that prisoners at the Canaleta prison in eastern Ciego de Avila had complained that the gloves bought for them by the Provari factory there “were rotted and were missing fingers.”

Independent journalist Dania Virgen Garcia, who has written often about prison conditions, told El Nuevo Herald that she knew of prisoners who worked up to 16 hours a day, six days a week, and were paid nothing.

Sanchez and Ferrer said most of the overall prison labor in Cuba involves agricultural work like weeding fields, harvesting vegetables and picking fruit — some for sale, some for the prisons’ own consumption.

Provari uses the prison labor more for manufacturing, said Sánchez and García. It also has subsidiaries that build roads and government buildings, although it is not clear if they use prison labor.

A report last year in the government’s Guerrillero newspaper noted that the Provari branch in the western province of Pinar del Rio had the equivalent of $200,000 worth of sales in 2010, “mostly for products sold locally rather than export.”

The branch’s production included bleach and muriatic acid, beach chairs, cribs and playpens, clay and concrete construction blocks, paint and paint brushes, plastic tubes and ornamental plants, according to the report.

A large shop in a Havana women’s prison sews jeans for export under several brand names, as well as uniforms for the police and the military, García said. Sánchez said the Boniato prison, where he spent time in the 1990s, makes metal chain link fencing.

Other Cuban news reports noted that a Provari unit in eastern Ciego de Avila made 20,000 plastic molds, and that the enterprise and the Ministry of Construction were to provide the materials for a 2010 campaign to step up home construction.

The company also manufactures the Lomaté insecticide as well as lice and tick killers “and other products “for sanitary hygiene,” and was planning to build a 170-liter solar water heater, according to other media reports.

A business prospectus issued in 2001 listed some of Provari’s activities as carpentry using precious woods as well as textiles sold under the OESTE and HERCULES brands and the upholstery of office furniture sold under the brand name of OFIMAX.

The prospectus also said the enterprise was ready to do business “with foreign and national companies,” though the deal with IKEA appeared to have run into trouble.

The first sofas made for IKEA in 1988 reportedly had “quality problems,” and it was not clear if any part of the deal was ever carried out.

 

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Esteban Morales Domínguez, “FRENTE A LOS RETOS DEL COLOR COMO PARTE DEL DEBATE POR EL SOCIALISMO” and Commentary by Juan Tamayo

In his personal Blog, http://estebanmoralesdominguez.blogspot.com/, Esteban Morales presents an analysis of the place of Afro-Cubans in Cuban society entitled .”FRENTE A LOS RETOS DEL COLOR COMO PARTE DEL DEBATE POR  EL SOCIALISMO.”

Though his position and presentation seem to be well within the confines of acceptable discourse in Cuba, his argumentation is challenging. He calls for open analysis of the race issue at all levels, including the National Assembly and the Party Congress. He advocates “Affirmative Action” to rebalance the historic wrongs and injustices faced by Afro-Cuban citizens.

A.R.

Esteban Morales Domínguez

By Juan O. Tamayo

Black Cubans, already with the worst jobs and lowest salaries, will need “affirmative action” as the government tries to slash its inflated payrolls, a black Havana economist and former Communist Party member wrote Wednesday.

Esteban Morales, 68, made it clear in his lengthy essay that he supports Cuba’s “extraordinarily humanist” revolution and believes it took great pains to outlaw racism and provide equal opportunities for blacks over the past 52 years.

An economist who has written previously on race, he also attacked black Cubans who criticize the revolution as racist, saying they have embraced a U.S. strategy for sparking a “political confrontation” that would change the island’s regime.

In unusually direct language, however, Morales also complains that blacks rank at the bottom of several economic measurements, that Cuban schools do not teach courses on race, and that government socio-economic statistics should be broken down by skin color.

He was “separated” from the Communist Party last year for a similarly harsh essay in which he warned that a burgeoning string of corruption scandals was a bigger threat to the country’s stability than “the counterrevolution.”

Morales’ latest essay essentially argues that questions about race must be a priority for the Raul Castro government as it tries to fix the stagnant economy by slashing state spending – on jobs and subsidies — and allowing more private enterprise.

Blacks and mestizos “have always historically been the least qualified, the most disadvantaged in the workplace, with the worst jobs, the lowest salaries and the lowest retirement benefits,” Morales wrote in his 4,311-word essay, published in his eponymous blog.

Castro himself spoke of the need to increase the number of blacks and women in leadership positions during a speech last month to a Communist Party congress last month. The 2002 census shows 65 percent of Cubans identify themselves as white, and 35 percent as black or mestizo.

Morales went well beyond that, noting that fewer blacks than whites have relatives abroad who can send them cash remittances. He added that black Cubans in Florida also earn less – and therefore can send less to the island – because of U.S. racism.

Blacks and mestizos on the island also have a harder time finding well-paying jobs and tend to “take refuge … in illegal activities, prostitution and pimping, the illegal re-sale of products,” he noted. They make up 57 percent of the prison population, he added.

Morales’ essay notes that Cuba faces many challenges in race relations but adds that he would focus only on four, — starting with the need to create an array of school courses on modern-day racism.

“How is it possible that in a multicolor nation like Cuba … there’s no scientific treatment of those problems” he wrote . University-level education is “especially plagued by prejudices on the racial issue, weak institutional attention to it, ignorance and even fear of studying it.”

Cuba’s National Statistics Office (ONE) should include racial breakdowns when it reports economic and social data such as unemployment, salaries, housing conditions, education levels and life expectancy, Morales noted in his second challenge.

In his third, he urged Cubans to demand equal racial representation in all fields, and in his last he urged Cuba to embrace “the so-called affirmative action” as a way “to balance out the different historical points of departure for the racial groups that today make up our society.”

Cuban government officials have long cringed at the possibility of using affirmative action on the island, arguing that it would explicity admit that the revolution had failed to eradicate race-based discrimination.

Morales’ harshest criticism went to Carlos Moore, a black exile who has attacked Cuba’s leadership as almost exclusively white and argued that blacks were denied the most visible jobs when Cuba opened its doors to foreign tourism in the 1990s.

Morales alleged that some of Moore’s publications were financed by groups that received CIA money. Moore, a black rights activist now living and teaching at a university in Brazil, could not be reached immediately for comment.

Read more: http://www.miamiherald.com/2011/05/12/2213836/black-economist-says-cuba-needs.html#ixzz1MFkcZZ00

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An Overview Evaluation of Economic Policy in Cuba circa 2010

By Arch Ritter

The essay attached and summarized briefly here was presented at a conference at CIAPA, in San Jose, Costa Rica, February 3 and 4, 2009 organized by Paolo Spadonu of Tulane University.

The full essay is entitled An Overview Evaluation of Economic Policy in Cuba, circa 2010, June 30, 2010 and can be seen “HERE”. The Introduction and Conclusion are presented below.

Hopefully, this evaluation will change considerably for the better after the Sixth Congress of the Communist party of Cuba in April.

I. Introduction

The economic development of Cuba has been characterized by high levels of investment in people with successful results, but with weak performance in terms of the production of goods and services generally. Cuba’s achievements regarding human development are well known and are epitomized by the United Nations Development Program’s “Human Development Index” (HDI). On the one hand, this index ranks Cuba at #1 in the world for the Education component (somewhat surprisingly) and #31for the Life Expectancy component. On the other hand, Cuba’s world ranking is for GDP per capita in purchasing power parity terms is #94 with an overall world HDI ranking of #51(UNDP, HDR, 2009, 271.) These rankings underline the inconsistency between the Cuba’s high level of human development on the one hand and its economic underperformance on the other. The strong economic performance of the 2004 to 2008 period appeared to constitute a rapid recovery in terms of Cuban GDP statistics. However, this recovery, while perhaps not illusory, was fragile and unsustainable, based on factors such as support from Venezuela and high nickel export prices, and indeed it has been reversed in 2009-2010.

Given the quality of Cuba’s human resources, the economic performance for the last 15 years should have been excellent. The central argument of this essay is that Cuba’s weak economic performance has been the result of counter-productive public policy. The objective of this essay is to analyze and evaluate a number of central policy areas that shape Cuba’s economic performance, including monetary and exchange rate policy, policy towards micro-enterprise; agricultural policy, labor policy, foreign investment policy, policies towards infrastructure renewal, and the policy approach to self-correction and self-renewal.

In order to present a brief overview of the evaluations, an academic style of grading is employed, with an “A+” being excellent through to an “F” representing “failure”.

This evaluation schema is of course subjective, impressionistic and suggestive rather than rigorous. It is based on brief analyses of the various policy areas. However, the schema is similar to the scoring systems widely used in academia, and is used here with no more apology than is normally the case in the academic world.

Before proceeding with the policy analysis and evaluation, a brief overview of economic performance in the decade of the 2000s is presented to provide the context for the examinations of economic policy.

II. General Economic Performance

III.  Evaluation of Some Central Policy Areas

IV.   Summary and Conclusion:

A summary of the evaluations of the various assessment areas yields an overall evaluation of   “D +”. This is not a strong assessment of Cuban economic policies.

1. Monetary & Exchange Rate Policy                  C-

2. Micro-Enterprise Policy                                    F

3. Policy towards Agriculture                              C-

4. Labor Policy                                                        D+

5. Foreign Investment Policy D+

6. Infrastructure Renewal                                   D

7. Capacity for Self Correction                            D

Overall Grade: D +

The result of such weak policies in these areas is weak economic performance. Badly conceived economic policies nullify the potential efforts of the Cuban citizenry. The major investments in human capital, while fine in their own right, are not yielding strong economic performance. Indeed, misguided policies are undermining, sabotaging and wasting the economic energies and initiatives of Cuba’s citizens.

Major policy reforms amounting to a strategic reorientation of Cuban economic management are likely necessary to achieve a sustained economic recovery and future economic trajectory. So far, writing in June 2010, the Government of Raul Castro has made some modest moves, principally in agriculture, as mentioned earlier. Other policy areas such as those relating to micro-enterprise are reported to be under discussion at high levels in the government. On the other hand, the replacement of the reputed pragmatists Carlos Lage, (Secretary of the Council of Ministers) and Jose Luis Rodriguez, (Vice President of the Council of Ministers and Minister of Economy and Planning) and the replacement of Lage by Major General José Amado Ricardo Guerra of the Armed Forces seems to suggest that the Raul Castro Government may be moving towards a less reformist approach to economic management ( Granma International, 2009.)

The types of policy reforms that would be necessary to strengthen the policy areas discussed above would include the following:

  1. Monetary & Exchange Rate Policy: movement towards realistic and unified monetary and exchange rate systems;
  2. Micro-Enterprise Policy: establishment of an enabling and supportive policy environment rather than a punitive policy of containment;
  3. Policy towards Agriculture: further support for small-scale farmers plus a reinvigoration of the abandoned sugar fields with cane for ethanol, among other policies;
  4. Labor Policy: implement the International Labour Organization approach to fundamental labor rights;
  5. Foreign Investment Policy: establish a clearer and more unequivocal rules-based policy framework;
  6. Infrastructure Renewal: strengthening resource flows towards maintenance, especially for housing, water, and sanitation, and facilitating self-managed and do-it-yourself maintenance on the housing stock by liberalizing the trades and making repair supplies available at reasonable cost;
  7. Capacity for Self Correction: permit an authentic implementation of freedom of expression and freedom of association thereby permitting economic analysis and criticism through a free press and media and the formation of alternate “teams” of potential economic managers – some within political parties.

In sum, effective economic management requires new ideas, transparency and criticism, and, indeed, a major policy reform process in order to reverse the current wastage of human energies, talents and resources. Policy reorientations in the directions noted above are unlikely to be forthcoming from the Government of Raul Castro, which appears to be deeply conservative as well as “gerontocratic”. Cuba will likely have to wait for a “New Team” or more likely a “generational change” in its overall economic management before such major reforms can be implemented.


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Cuba’s Standings in Social, Political, Economic and Environmental Indices in Comparative International Perspective

By Arch Ritter

In the last week of January 2011, the Heritage Foundation (HF), a conservative US “Think Tank”. published its 2011 Report on Economic Freedom. No surprise: Cuba ranks #175 of the 177 countries included in that report, ahead only of North Korea and Zimbabwe.

The concept or definition used for “Economic Freedom” is:

“Economic freedom is the fundamental right of every human to control his or her own labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please, with that freedom both protected by the state and unconstrained by the state. In economically free societies, governments allow labor, capital and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself.”

The components of economic freedom in the Heritage Foundation’s definition include business freedom, trade freedom; fiscal freedom, government spending, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption, and labor freedom.

What the HF definition misses is the capability to utilize one’s freedom, such as good health, a useful education, and a reasonable income. Presumably the HF types of freedom are more effective when people live longer, have good health so that they can work and appreciate life, and are not mired in poverty. Cuba would score better if life expectancy, health, education and income distributional measures were included in the concept and the index.

Other Measures of Human Achievement or Performance

The HF’s Economic Freedom Index brought to mind some other measures of social, economic, environmental and political performance. A listing of these and Cuba’s place therein is presented in Table 1 and hyperlinks to some basic definitions and methodological sources are summarized in the next section.

Again, it is no surprise that Cuba fares badly on the political and economic freedom rankings, coming at the very bottom in Latin America on the “democracy” and “freedom of the press” rankings.

Cuba’s high ranking for the EIU Political Instability Index – second only to Costa Rica- is unexpected. Cuba would have scored well on “ethnic fragmentation”, labor unrest (no strikes, collective bargaining or independent unions), economic growth in 2009, income inequality (as officially measured), unemployment (at least the official rate) and “status of minorities”.

Cuba’s standing in the “corruption perceptions” listing does not seem unreasonable.

Cuba’s high standing in the Environmental Performance rankings – again second only to Costa Rica-  will be a surprise to those who have spent time inhaling the exhaust of urban traffic in Havana or observing the fumes of the Havana’s thermal electric plant, pictured below.  Indeed, a close study of the Yale-Columbia-World Economic Forum calculations for Cuba would be worthwhile. One suspects some statistical creativity such as has been employed in the area of basic economic measures such as GDP, unemployment and the Consumer price Index.

Data Sources and Methodology

The full sources of the information are hyperlinked below. The methodologies can also be found at these web sites.

UNDP Measures

1, 2, 3, and 4: Human Development Index 2009, HDR 2009 Statistical Tables

Democracy Measures

5.      The Economist Intelligence Unit’s Index of Democracy 2010,  This index is based on electoral process and pluralism; civil liberties; the functioning of government; political participation; and political culture.

6.      The Economist Intelligence Unit’s “Political Instability Index”. This measure is based on   I. Underlying vulnerability: 1.Inequality Measured by Gini coefficient; 2.State history; 3.Corruption; 4.Ethnic fragmentation; 5.Trust in institutions; 6. Status of minorities; 7.History of political instability; 8.Proclivity to labor unrest; 9.Level of social provision; 10.A country’s neighborhood; 11.Regime type; 12.Regime type and factionalism and II. Economic distress: 1.Growth in incomes Growth in real GDP per head in 2009; 2.Unemployment; 3.Level of income per head

7.      Freedom House, Freedom of the Press index an annual survey of media independence in 195 countries and territories. “The index asesses the degree of print, broadcast, and internet freedom in every country in the world, provides numerical rankings and rates each country’s media as “Free,” “Partly Free,” or “Not Free.””  Freedom House, Freedom of the Press, 2010

8. Press Freedom Index 2010, Reporters Without Borders

9. Freedom House, Freedom in the World, 2010, Tables and Graphs measures freedom according to political rights and civil liberties.

(See also Wikipedia’s list of freedom indices.)

10. The 2010 ENVIRONMENTAL PERFORMANCE INDEX, of the Yale Center for Environmental Law & Policy, Yale University and Center for International Earth Science Information Network, Columbia University and the World Economic Forum. This measure includes some 25 indicators in 10 categories including Environmental Health. Air Pollution (effects on humans), Water (effects on humans), Air Pollution (effects on ecosystems), Water (effects on ecosystems), Biodiversity and Habitat, Forestry, Fisheries, Agriculture and Climate Change

11. “Index of Economic Freedom” The Heritage Foundation. (See discussion above.)

12. Transparency International. Corruption Perceptions Index Report, 2010

Havana Thermal-Electric Plant, from Edificio Fochsa, Hotel Capri on the left, 1997, Photo by Arch Ritter

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Micro-enterprise Tax Reform, 2010: The Right Direction but Still Onerous and Stultifying

By Arch Ritter

As part of the policy reforms designed to absorb almost 1.2 million redundant state sector workers into the private sector, the Government of Cuba has modified the micro-enterprise tax regimen. Some of the modifications were positive in the sense that they will reduce the heavy tax burden on self-employment. However, the changes are modest, and the tax system will continue to limit job-creation and the expansion of micro-enterprise.

Bicitaxis, Central Havana

I. The New Tax Regime

The new taxation system, presented in the Gaceta Oficial, número 11, and Gaceta Oficial, número 12 on October 1 and 8, 2010, has five components:

1.      Sales Tax on Goods

2.      Tax on Hiring of Workers

3.      Income Tax

4.      Surtax on Services

5.      Social Security or Social insurance Payments

Taxes generally will now be payable in Moneda Nacional or “old” pesos. For purposes of tax payment, taxes owing in convertible pesos (CUCs) are to be exchanged into Moneda Nacional at the going quasi-official rate (around 22 to 26 “old” pesos per convertible peso, over the 2001-2010 period). There is a special regimen for bed-and-breakfast operations that is not considered here.

1. Sales Tax

This is a 10% tax levied on the value of sales of goods and payable by all micro-enterprises that do not qualify for the Simplified Tax Regime (See 3. below.)  While this tax in principle is reasonable and is used in most countries, the administrative cost of monitoring the value of sales and collecting the tax for the many of the smaller self-employed activities will be high.

2. Tax on the “Utilization of Labor”

This tax on the hiring of employees is set at “25% of 150%” (that is, 37.5%) of the average national wage which was 429 pesos per month in 2009 (ONE, AEC Table 7.4). The tax would thus be about 161pesos per month per employee or 1,932 pesos per year.

A “Minimum” requirement for the hiring of employees for tax determination purposes is set at two employees for paladares and one for other food vendors and a few other activities. There appears to be no exception or adjustment of the tax for part-time employees.

(Note that some 74 self-employment activities are prohibited from hiring employees and another 7 can hire one employee only.)

3. The Income Tax

There are two tax income regimes, a simplified regime for lesser self-employment activities and a more complex regime for larger activities.

The Simplified Tax Regime applies to some 91 activities. In place of the income tax, sales tax, tax on public services, they instead pay a consolidated tax, constituted by the monthly licensing fee which ranges from 40 to 150 pesos per month, payable in the first ten days of each month. (It is unclear whether overpayments would be refunded – they were not under the previous system.)

Other enterprises fall under the general tax regime, and pay all of the individual taxes discussed here. These activities pay the up-front monthly tax/license ranging from 40 to 700 pesos per month.

For the determination of the tax payment, the “tax base” is defined as total revenue less a fixed amount for deductible expenses. The maximum amounts allowed for deductible expenses range from 10% for 10 activities, 20% for room rental operations, 25% for 40 activities, 30% for 10 activities and 40% for 6 food and transport activities. (Bed and breakfast operations have their own specific regimen.)

The income tax rates rise progressively from 0% for the first 5,000 pesos, through 25% for additional income between 5,000 and 10,000, 30% for income increments from 10,000 to 20,000, 30% for 20,000 to 30,000, 40% for 30,000 to 50,000 and 50% for additional income exceeding 50,000.00 pesos. This rate is high but not unreasonable in international comparison.

4. Sales Tax on Services

A 10% additional sales tax is levied on services provided by micro-enterprise. Those enterprises qualifying for the Simplified Tax Regime are exempt from this tax.

5. Social Security Payments

These payments are destined ultimately for old age support, maternity leave, disability and death in the family. They are determined according to a scale that the self-employed worker selects, and may range from 25% of 350 to 2000 pesos per month depending on the choice of the self-employed person. This is a social insurance scheme though the payments are similar to taxes.

II. Evaluation of New Tax Arrangement

This new tax regime represents a minor improvement over the previous regime. The main improvement is that it permits the deduction as costs of production of more than a maximum of 10% of total revenues as was the case previously. This is a reasonable adjustment to the tax base as most of the self-employed activities generate costs that are higher than the maximum allowable 10% of total revenues.  This is especially beneficial for activities such as gastronomic, transport and handy-craft or artisan activities for which input costs are far beyond 10% of total revenues.

The progressive structuring of the income tax regime is reasonable though stiff.

However there are a number of flaws in the taxation regimen which will continue to stunt the development of small enterprise and will prevent the absorption of the redundant workers being displaced from the public sector.

1. The Blocking of Job-Creation

First, the tax on employment is problematic as it adds to the employer’s cost of hiring a worker. The obvious impact of this tax will be to limit hiring and job creation. Or employment will be “under the table”, unrecorded, and out of sight of officialdom.

2. Onerous Overall Tax Levels

The overall tax level is punitive. The sum of the income tax, employee hiring tax, and public service surtax is high- and as noted below can help create effective tax rates exceeding 100%, as is explained on Section III. This will continue to promote non-compliance. It will discourage underground enterprises from becoming legal. The establishment of new enterprises will be discouraged.

3. Erroneous and Unrealistic Base for the Income Tax

The most serious shortcoming of the income tax regime involves the tax base which is not “net revenues” after the deduction of input costs, but an arbitrary proportion of total revenues.

The tax regime limits the maximum for input costs deductible from total revenues to 10 to 40% depending on the type of enterprise involved. When the actual micro-enterprise input costs exceed the maximum allowable, the tax rate on true net income can become very high. In the example below, the effective tax rate (defined as the taxes payable as a percentage of true net income) can exceed 100%. Obviously this would kill the enterprise and promote cheating and non-compliance. It will discourage underground economic activities from becoming legal and block the establishment of new enterprises.

4. Continued Discrimination versus Cuban Enterprise in Favor of Foreign Enterprise

The minor reforms of the micro-enterprise tax regime do relatively little to reduce the fiscal discrimination favoring foreign enterprise. (See Table 1.) The main difference is the determination of the effective tax base which is total revenues minus costs of production for foreign firms but for micro-enterprise is gross revenue minus an arbitrary and limited allowable level of input costs. The result of this is that the effective tax rates for foreign enterprises are reasonable but can be unreasonable for Cuban microenterprises. For Cuban micro-enterprises, the effective tax rate could reach and exceed 100%.

Moreover, investment costs are deductible from future income streams for foreign firms this being the normal international convention. But on the other hand, for Cuban micro-enterprise, investment costs are deductible only within the 10 to 40% allowable cost deduction levels.

III. Example: Three Taxation Cases for a Paladar or Restaurant

To illustrate the character of the tax regime, a case of a “Paladar” is examined below. It is assumed that the total revenues or gross earnings of the Paladar are 100,000 pesos per year (Row 1) or a modest 280 CUP or about $US 10.50 per day.

It is imagined then that there are three costs of production cases: Case A, B and C where costs of production are 40%, 60 and 80% of total revenues respectively. A situation where input costs for a Paladar are 80% of total revenues is reasonable, given the required purchases of food, labor, capital expenses, rent, public utilities etc. On the other hand, the 40% maximum is unreasonably low.

The differing true input cost situations (Rows 2 and 3) generate different true net income (Row 6). The tax base however is determined by the legal maximum allowable of 40,000 (Row 4 and 5) and is 60,000 pesos in all three cases (Row 7). The income tax payable is determined by the progressively cascading scale noted above and is 19,750 in all three cases (Row 8, based on calculations not shown here). The tax on hiring the legal minimum two employees is 25% of 150% (that is, 37.5%) of the average national wage which was 429 pesos per month or 161 pesos for 12 months for two employees = 3,864 pesos per year (Row 9). A guess for the surtax on use of public services is 1,200 pesos per year (Row 10). The total taxes then are the sum of Rows 8 t0 10 and are 26,614 per year (Row 11).

The effective tax rate is then calculated as Tax Payment as a percentage of Actual Net Income (Row 11 divided by Row 6). For the third case where true costs of production are 80% of total revenues, the effective tax rate turns out to be well over 100% (124.1%). This is due to fixing the maximum allowable for costs in determining taxable income at an unrealistic 40% while the true costs of production were 80% of total revenues.

The chief result of this example is that effective tax rates can be much higher than the nominal tax rates for all the activities where true input costs exceed the defined maximum. In some cases, taxes owed could easily exceed authentic net income – assuming full tax compliance.  This situation likely occurs for all activities not covered by the simplified tax regime.

Such high effective rates of taxation of course could destroy the relevant microenterprise, and block the emergence of new enterprises. While under the previous policy environment for microenterprise, this was perhaps the objective of policy. However, the objective of the new policy environment is to foster and enable micro-enterprise and to create jobs.

IV. Conclusion

Can the Micro-enterprise sector generate about 500,000 new jobs by April 2011 and 1.2 million in the next year? On the positive side, there have been some measures of a non-tax nature (e.g. the stigmatization has been relaxed, licensing has been liberalized; there has been a minor increase in legal activities; prohibitions and regulations have been eased somewhat; and improved access to inputs will likely be possible.) But on the negative side, a narrow definition of legal activities will limit enterprise and job creation; the prohibition of professional activities remains; restrictions and prohibitions on hiring workers remain; and restrictions and prohibitions remain.

The timid revisions of the tax regimen will not facilitate job creation in the microenterprise sector.

  • The high level of taxes generally will limit enterprise creation and legalization.
  • The underground economy will continue to be encouraged.
  • The tax on the hiring of employees will discourage the absorption of labor into microenterprise activity.
  • Microenterprises will remain stunted by the high effective tax rates that are incurred when costs of production exceed the minimum deductible for tax determination purposes.
  • The tax discrimination favoring foreign firms in joint ventures continues.

In order for the micro-enterprise sector is to expand so as to absorb the 1.2 million redundant public sector workers in the process of being fired, further reform of the tax system is necessary.

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State Sector Lay-offs then Private Sector Job Creation: Has Raul Got the Cart before the Horse?

On Monday September 13 2010, the Cuban Labour Federation announced a new government policy on lay-offs in the state sector and expansion of self-employment and cooperative sector employment.( Pronunciamiento de la Central de Trabajadores de Cuba.) As is now well known, the policy calls for the lay-off of some 500.000 workers, about 10% of Cuba’s entire labor force and their re-incorporation into self-employment activities mainly, but also some co-operative activities. This of course marks a major strategic re-orientation of Cuba’s economic structure. The economy already was a “mixed economy” though with a small self-employment sector outside of agriculture, but it will now shift further towards a “marketization.” Raul basically is asking the small and harassed self-employment to come to the rescue of the Cuban economy by generating productive employment because the state sector ostemsibly has failed to do so. Many questions can be and have been raised by outside observers as to how this new approach will be implemented. A couple of questions are noted here. I. Has Raul Got it “Bass Ackwards”? 1.      Prior to any state sector lay-offs, would it not be wise to redesign the framework within which small enterprise operates so that it will be in a position to expand and absorb the laid-off state sector workers? Firing state sector workers and hoping that they somehow will be reabsorbed somewhere sounds distinctly un-socialist. 2.      If workers’ efforts and productivity are low, is this due mainly to sloth and laziness? Or is it instead due to a dysfunctional incentive structure in which workers are paid very little in Moneda Nacional, but somehow have to acquire  “Convertible Pesos” to survive with purchase in the Hard Currency (formerly dollar) stores? As the old saying goes:  “They pretend to pay us and we pretend to work.” Maintenance Workers at the Australia Sugar Mill, November 1994; Certainly working hard, but probably laid off in 2002 when the Mill was converted to a museum;  visited with Nick Rowe who “blogs”  at “Worthwhile Canadian Initiative” and Larry Willmore, who “blogs” at “Thought du Jour” (Photo by A. Ritter) 3.      Is low productivity also due to mismanagement that wastes human effort? Is inefficiency also the result of low capacity utilization in enterprises  for example, in state stores that have little to sell, in offices with little to do, or in industrial enterprises idled through poor maintenance, insufficient imported inputs, breakdowns etc.? (Note the diagram below that illustrates the reduction in non-sugar industrial output since 1989. Despite allegations of record economic growth in the late 2000s, industrial output remains around half of its 1989 level.) II.   Who will be laid off and how will it be done? 1.      Will those who are laid off be good candidates for creating their own self-employment small businesses? 2.      Will those laid-off be offered “severance packages” or “buy-outs” that would provide them with an amount of capital to begin their own small businesses? 3.      Will older workers be offered “early retirement packages” that would assist them in starting a small business or co-operative? 4.      Will workers be free to self-select – with a “severance package” – so that they can start a small business? 5.      Will those who are laid off be the truly redundant and unproductive workers, in which case they may not have the aptitude to start their own small business? 6.      If laid-off workers can self-select, will the state sector enterprises or bureaucracies then lose their more capable and industrious workers? 7.      How generous will the unemployment benefits be and how long will they last while workers look for new jobs or attempt their own job-creation? In any case, the process of laying people off will be most difficult. The anxieties generated among the population must be intense and the Workers Assemblies now discussing these issues must be acrimonious. III.   Creating an “Enabling Environment” for Micro, Small and Cooperative Enterprise Since 1995, public policy has been aimed at containing small enterprise – after liberalizing it in 1993 – by licensing limitations, tight and vexatious regulations, onerous taxation, harassment by inspectors and negative political and media stigmatization. This has not been an easy environment for the functioning of self-employed to operate. Major changes will be necessary if the small enterprise sector is to expand in order to be able to absorb the lion’s share of the displaced state workers. How can this be done? A previous Blog outlined some possible measures: Raul Castro and Policy towards Self-Employment: Promising Apertura or False Start? Here are some of the key policies that would be necessary to generate a flowering of the micro, small, and cooperative enterprise sector. Additional policies regarding advertising and vending 1. Liberalize Licensing: Let anyone and everyone open a small enterprise ( Result: competition will push prices downwards and quality upwards); 2. Permit All Types of Self-Employment, including Professional and High-Tech while maintaining state medicine and health systems intact; 3. Raise the limit on employees to 5, 10 or 20; 4. Provide legal sources for the purchase of Inputs; 5. Permit access to imported inputs (outside TRDs and at the exchange rater available for the state sector); 6. Eliminate silly and vexations restrictions; 7. Make microenterprise taxation simpler and fairer; 8. Establish micro-credit institutions; 9. Establish a “Ministry for the Promotion of Small Enterprise.” Photographer, at the Capitolio circa 1996, (Photo by A, Ritter)

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Fidel’s Phenomenal Economic Fiascoes: the Top Ten

Fidel Castro recently clarified an allegedly erroneous quotation and stated something to the effect that “Yes the Cuban Model does indeed work”. It would have been difficult for Fidel to do a “Mea Culpa” and agree that half a century of his own management of the Cuban economy had been erroneous and counter-productive.

However, as the grand economic “strategizer” as well as the micro-manager of many issues that captured his attention President Fidel Castro was responsible for a long list of economic blunders. Here is my listing of Fidel’s most serious fiascoes.

Next week I will try and produce a listing of Cuba’s Greatest Achievements under President Castro. Unfortunately I find this more difficult than to identify the failures.

Top Ten Economic Fiascoes

Fiasco # 10     The Instant Industrialization Strategy, 1961-1963:

Fiasco #9        The 10 Million Ton Sugar Harvest Strategy, 1964-1970

Fiasco #8        The “New Man”

Fiasco #7        The “Budgetary System of Finance”

Fiasco #6        The “Revolutionary Offensive” and the Nationalization of Almost Everything

Fiasco #5        Revolucion Energetica

Fiasco #4 Shutting Down Half the Sugar Sector

Fiasvco #3 A Half Century of Monetary Controls and Non-Convertibility

Fiasco #2        Suppression of Workers’ Rights

Fiasco #1        Abolition of Freedom of Expression


Fiasco # 10     The Instant Industrialization Strategy, 1961-1963:

Cuba’s first development strategy, installed by the Castro Government in 1961, called for “Instant Industrialization”, the rapid installation of a wide range of import-substituting industries, such as metallurgy, heavy engineering and machinery, chemical products, transport equipment and even automobile assembly.

The program proved unviable as it was import-intensive, requiring imported machinery and equipment, raw materials, intermediate goods, managerial personnel, and repair and maintenance equipment. Because the sugar sector was ignored, the harvest fell from 6.7 million tons in 1961 to 3.8 in 1963 generating a balance of payments crisis. The end result was that Cuba became more dependent than ever on sugar exports, on imported inputs of many kinds and on a new hegemonic partner, the Soviet Union.

The strategy was aborted in 1964.

Fiasco #9        The 10 Million Ton Sugar Harvest Strategy

The failure of the “Instant Industrialization” strategy led to an emphasis on sugar production for export with a guaranteed Socialist Bloc market for 5 million tons per year at a price well above the world price – from 1965 to 1970. The over-riding preoccupation became the 10 million ton goal, which according to President Castro was necessary for “defending the honor, the prestige, the safety and self-confidence of the country” (February 9, 1970.)

Fidel seemed happiest when conducting a campaign military style as he did during the effort to produce 10 million tons of sugar.

If it had been implemented in a measured way, a strategy to increase export earnings from sugar would have been reasonable. However, as 1970 approached, the implementation of the 10 million ton target became increasingly forced. Other sectors of the economy were sacrificed as labor, transport capacity, industrial inputs, energy, raw materials and national attention all focused on sugar.

This strategy was aborted in 1970.

Fiasco #8        The “New Man”

In order to mobilize human energies for the 10 million ton harvest a radical “Guevaraist” approach was adopted involving the construction of the so- called  “New Man.” The idea behind this was a vision of the Cuban Nation as a guerrilla column marching behind Fidel – somewhat like his marches down the Malecon in 2000-2006 – single-mindedly pursuing a common objective, willingly sacrificing individual interests for the common good and with the esprit de corps, discipline and dedication of an idealized guerrilla band. To promote this revolutionary altruism, the government used public exhortation and political education, “moral incentives” instead of material incentives and proselytizing and enforcement by the Party and other “mass organs” of society.

By 1970, it was apparent that people could not be expected to sacrifice their own and their family’s material well-being and survival for some objective decreed and enforced by the Party. The approach was dropped in 1970.

Fiasco #7        The “Budgetary System of Finance”

In a simultaneous experiment, a so-called “budgetary system of finance” was installed under which enterprises were to operate without financial autonomy and without accounting, neither receiving the revenues from sales of their output nor paying for their inputs with such revenues – somewhat like University Departments.

Without a rational structure of prices, and without knowledge of their true costs or the value of their output, neither enterprises nor the planning authorities could have an idea of the genuine efficiencies of enterprises, of sectors of the economy, or of resource-use anywhere. The result of this was disastrous inefficiency.  In President Castro’s words:

“..What is this bottomless pit that swallows up this country’s human resources, the country’s wealth, the material goods that we need so badly? It’s nothing but inefficiency, non-productivity and low productivity.” (Castro, December 7, 1970)

This system was also terminated in 1970.

Fiasco #6        The “Revolutionary Offensive” and the Nationalization of Almost Everything

In the “Revolutionary Offensive” of 1968, Fidel Castro’s government expropriated most of the remaining small enterprise sector on the grounds that it was capitalistic, exploitative, and deformed people’s characters, making them individualistic instead of altruistic “New Men”. The result was true living standards were impaired, product quality, quantity and diversity deteriorated, enterprises were pushed into the underground economy,  theft from state sector and illegalities become the norm and citizen’s entrepreneurship was suppressed. This policy was changed in 1993, then contained by tight regulation, licensing and taxation after 1985,.

Again in September 2010, the government of Raul Castro appears ready to expand the small enterprise sector in hopes that it will absorb most of the 500,000 workers to be laid off from the state sector.

Fiasco #5        “Revolucion Energetica”

President Castro’s “Revolucion Energetica” included some valuable elements such as conservation measures, re-investment in the power grid and the installation of back-up generators for important facilities such as health centres. A questionable feature of the plan is the replacement of large-scale thermal-electric plants with numerous small generators dispersed around the island. But the use of the small-scale generators likely constitutes a major error for the following reasons:

  • The economies of large scale electricity generation are lost;
  • Synchronizing the supply of electricity generated from numerous locations to meet the minute-by-minute changes in electricity demand is complicated and costly;
  • Problems and costs of maintaining the numerous dispersed generators are  high;
  • Logistical control and management costs escalate as the national grid is replaced with regional systems.
  • Expensive diesel fuel is used rather than lower cost heavy oil:
  • Diesel fuel has to be transported by truck to the generators around the island;
  • Investments for the storage of diesel fuel in numerous supply depots are necessary;
  • Problems of pilferage of diesel fuel may be significant, and costs of security and protection may be high.

No other country in the world has adopted this method of generating electricity, suggesting that it does not make sense economically.

The energy master-plan also ignores a possible role of the sugar sector in producing ethanol and contributing to energy supplies. The experience of Brazil indicates that at higher petroleum prices, ethanol from sugar cane becomes economically viable. The shut-down of some 70 out of Cuba’s 156 sugar mills in 2003, the moth-balling of another 40 and the contraction of the whole sugar agro-industrial service cluster is also a major loss for electricity generation.

Fiasco #4        Shutting Down Half of the Sugar Sector

In 2002, Castro decided that there was no future in sugar production, a decision prompted by low sugar prices at the time and undoubtedly the continuing difficulties in the sector. He decreed the shut-down of 71 of 156 sugar mills, taking some 33% of areas under sugar cane out of production and displacing about 100,000 workers. It was hoped that land-use would shift to non-sugar crops, that remaining mills would become more productive, and that displaced labour would be reabsorbed elsewhere.

In any case, sugar production has continued to decline which is unfortunate given high prices in recent years. There has not been a shift into ethanol production. The physical plant has continued to deteriorate. The cluster of activities surrounding sugar must be near collapse.  The sugar communities are left without an economic base and some face the prospect of becoming ghost towns.

Fiasco #3        A Half Century of Monetary Controls and Non-Convertibility

Responsibility for Fiasco #3 is shared in part with Che Guevara, who as President of the Banco Nacianal de Cuba, presided over imposition of monetary controls and implementation of the policies that made Cuba’s peso non-convertible for half a century.

Cuba’s monetary system has been and is a serious obstacle to the freedom of Cuban citizens. Citizens’ incomes have had purchasing power outside the country only when permitted to be exchanged for a foreign convertible currency and then only at a discount for some decades. As is well known, the official exchange rate for Cuban citizens has been in the area of  22 pesos (Moneda Nacional) to US $1.00, so that the purchasing power of the average monthly salary – 415 pesos in 2008 (Oficina Nacional de Estadisticas, 2009, Table 7.4) is about US$20.00.

Fiasco #2        Suppression of Workers’ Rights

Thanks to the regime implanted by President Castro, Cuban workers do not have the right to undertake independent collective bargaining or to strike. Unions are not independent organizations representing worker interests but are official government unions. Independent unions and any attempts to establish them are illegal.

Cuba has signed the Universal Declaration of Human Rights and is a member of the International Labor Organization.  The basic United Nations Declarations support freedom of association for labor. The International Labor Organization’s Declaration on Fundamental Principles and Rights at Work includes, as the first fundamental right of labor, “freedom of association and the effective recognition of the right to collective bargaining”

The central function of independent labor unions is to provide countervailing power to oligopolistic or monopolistic employers in wage determination and in the setting of the terms and conditions of work. Unions have been successful in western countries in raising wages, improving the equity of income distribution and improving work conditions.

In the Cuban case, workers have confronted a monopolistic employer – the state – that also controls their unions which are in effect “company unions.” By controlling the unions and containing their wage demands, wages have been held down. The absence of independent unions has permitted the government to implement counterproductive economic policies year after year and has muted the urgency of undertaking economic reforms.

Fiasco #1        Abolition of Freedom of Expression

An important requirement for the sustained effectiveness of an economic system is the ability to freely, openly and continuously analyze and criticize its functioning.  Open analysis and criticism in a context of free generation and diffusion of information provide a necessary spur for self-correction, exposing illegalities, flawed policies and errors.  Free analysis and criticism is vital in order to bring illicit actions to light, to correct errors on the part of all institutions and enterprises as well as policy makers and to help generate improved policy design and implementation. This in turn requires freedom of expression and freedom of association, embedded in an independent press, publications systems and media, independent universities and research institutes, and freely-functioning opposition political parties.

Unfortunately this has been lacking, thanks to the Castro regime.  The media and the politicians have largely performed a cheerleader role, unless issues have been opened up for discussion by the President and the Party.

The near-absence of checks and balances on the policy-making machinery of the state also contributes to obscuring over-riding real priorities and to prolonging and amplifying error.  The National Assembly is dominated by the Communist Party, meets for very short periods of time – four to six days a year – and has a large work load, so that it is unable to serve as a mechanism for undertaking serious analysis and debate of economic or other matters. The cost for Cuba of this situation over the years has been enormous.  It is unfortunate that Cuba lacks the concept and reality of a “Loyal Opposition” within –the electoral system and in civil society.  These are vital for economic efficiency, not to mention, of course, for authentic participatory democracy.

NOTE: For additional articles on various aspects of Fidel Castro’s presidency, see:

Fidel Castro: The Cowardice of Autocracy

Cuba’s Achievements under the Presidency of Fidel Castro: The Top Ten

Fidel’s No-Good Very Bad Day

The “FIDEL” Models Never Worked; Soviet and Venezuelan Subsidization Did

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An Analysis of Cuban Democracy and the Potential Roles of Diplomats in its Promotion, from the “DIPLOMAT’S HANDBOOK” for Democracy Development Support


The “Diplomat’s Handbook for Democracy Development Support” project of the “Community of Democracies” has just released a study of democracy and democratization in China. It also includes an older Case Study on Cuba that I had never seen and that may be of broad interest.

The Web site of the Diplomat’s Handbook is  http://www.diplomatshandbook.org/

The complete case study on Cuba can be seen on an Adobe file accessed at the above web site.

Below is the Introduction to the study.

Cuban Exceptionalism

INTRODUCTION

This Handbook presents individual country case studies in order to record the practical activity that diplomats from democratic countries have performed there in support of civil society, democracy development, and human rights. Situations can and often do resemble each other in some recognizable respects, and our aim is to enable diplomats and civil society partners in the field to obtain insights and guidance from actions taken elsewhere, without, however, suggesting that the experiences in one country can simply be transposed directly to another, since the trajectory of each country’s development is singular.
The case of Cuba is extreme, and in many ways unique. Cuban history since the late 19th Century is intertwined in a relationship with one country, the United States. The mutual enmity between the two governments for much of the last 50 years has had a direct impact on conditions inside Cuba. Anything that diplomats of democratic countries can do in support of Cuban democracy development pales in significance to the potential effect of placing US-Cuba relations on a normal basis, possibly for the first time.
The only country in the western hemisphere that does not practice some form of electoral democracy, Cuba’s government remains in principle a Marxist-Leninist throwback and a resolute holdout more than two decades after the abandonment of communism in Europe and adoption of the market economy in China. Expectations that Cuban communism would be merely the last domino to fall failed to recognize a signal difference with Eastern Europe where the regimes were judged to be collaborating with an outside oppressor, the USSR. The Cuban government presents itself as the patriotic defender against an outside threat.
The regime has from the outset been symbiotically identified with its Comandante en jefe who led the revolution that propelled it into power on January 1, 1959. Descriptive labels scholars employ to capture its essence range from “extreme paternalism” (Prof. Carollee Berghdorf, Hampshire College, UK) to “charismatic post-totalitarianism” (Prof. Eusebio Mujal-León, Georgetown University, Washington, DC). Exile adversary US Congressman Lincoln Díaz-Balart, has called it “the Fidel Castro regime,” pure and simple. Although an orderly succession has obviously occurred as Fidel Castro retired from public office in July, 2006 and ostensibly turned power over to Raúl Castro, the question arises whether anything significant has changed. Fidel Castro’s moral influence over the country remains, though he is without direct control of all details as before. Having described himself in 1961 as a “Marxist-Leninist until I die,” he recast himself in post-retirement writings as a “utopian socialist,” adding that “one must be consistent to the end.”
The regime he built over the decades, “is not the German Democratic Republic,” as one diplomat in Havana phrased it, but it is an authoritarian one-party state that has used an Orwellian security apparatus to rein in and quash democratic impulses over five decades, often citing the threat from the US as the rationale. Much of the world acknowledges the ability of Castro’s Cuba to have stared down and survived determined efforts by successive US governments to end the regime, by invasion, attempted assassination, a CIA program of subversion, and a punitive economic embargo.
But increasingly, democrats rebuke the regime for its invocation of these real threats to Cuba’s sovereignty to justify the continued and even tighter suffocation of human and civil rights of Cuban citizens.
60
The case study that follows attempts to identify activities by diplomats and democracies in support of Cubans’ efforts to secure rights at home, including discussion of a more open and democratic system. But the study reports the view that these efforts tend to bounce off a tightly controlled and controlling regime that veers between self-confidence and paranoia, and discounts the pertinence of mutual leverage.
Diplomatic efforts meant to support democracy development are in consequence especially challenged in today’s Cuba. Diplomats have to manage seemingly competing professional obligations of non-interference, official engagement, a long-term developmental perspective, and immediate democratic solidarity.
This challenge, familiar to diplomats and international NGOs working in other authoritarian and repressive states, is made especially vexing in Cuba by an authoritarian government that is fearful of change. But some signs of change are present in Cuba. Coming years will engage democrats in support of efforts by the Cuban people to pursue aspirations for more significant change that is theirs alone to accomplish

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