• This Blog on The Cuban Economy is dedicated to Cuba's Generation "A". Although inspired by Yoani Sánchez' blog "Generation Y" this is not dedicated to those with names starting with the letter "A". Instead, it draws from Douglas Coupland's novel Generation A which begins with a quotation from Kurt Vonnegut at a University Commencement that was brought to my attention by Andrew Johnston of Ottawa: ".. ... I hereby declare you Generation A, as much as the beginning of a series of astounding triumphs and failures as Adam and Eve were so long ago."

    The objective of this Blog is to facilitate access to research resources and analyses from all relevant and useful sources, mainly on the economy of Cuba.

Cubans on the move as new real estate market grows

 

By Jeff Franks

HAVANA | Wed Mar 20, 2013

HAVANA (Reuters) – At an informal housing market on Havana’s historic Paseo del Prado, Renaldo Belen puts the hard sell on a prospective buyer under a tree hung with hand-lettered signs advertising homes for sale.

A house near Boyeros, the avenue to the city’s airport, is being offered for the equivalent of $120,000, with all the amenities.

“The house is beautiful; it has four bedrooms, a pool with a bar and a fountain with a lion’s head on top. Look,” says Belen, pointing to photos on the sign, “water comes out of the lion’s mouth.”

Pausing for dramatic effect, Belen, one of the many touts, or “runners” working at the market, delivers what he hopes will be the coup de grace.

“This place needs no work. It is of capitalist construction,” he says, using a now frequently invoked commendation meaning it was built before Cuba’s 1959 revolution and is therefore of superior quality.

Given that “capitalist” has been a dirty word in communist-run Cuba for the last half century, the description perhaps grates on the nerves of Cuban leaders.

But its widespread usage is a sign of the times on the Caribbean island, where President Raul Castro has loosened things up as he tries to modernize the country’s economy in the name of preserving the socialist system put in place by his older brother Fidel Castro.

HOME SALES REPLACE SWAPPING

In November 2011, the government decreed that Cubans could buy and sell homes for the first time since the early days of the revolution, paving the way for a real estate market that has become an exercise in bare-knuckled capitalism. Previously, Cubans could only do swaps – or “permutas,” in Spanish – with their houses.

“For Sale” signs are now a common sight on homes and apartments across the country, more than 100,000 properties are posted for sale on Internet sites and even state television has gotten in on the act, devoting part of a daily show to sales announcements sent in by viewers.

The government last released figures on the market in September 2012 when it said 45,000 dwellings had changed hands in the first eight months of the year, partly through sales, but mostly through “donations.”

Cubans, accustomed to finding ways around heavy-handed government rules and regulations, say many sales are disguised as donations to avoid paying sales fees and taxes.

The new market, despite its apparent vibrancy, is still sorting itself out and still faces hurdles. The main one is that many people are trying to sell and few Cubans, who receive various social benefits but earn on average the equivalent of $19 a month, have the money to buy.

“With the new law, you can sell your house, but there’s no money, nobody to buy. There’s more being offered than there is demand,” said retired economist and math professor Raul Cruz, who has had his apartment in the Vedado district on the market for five months.

Havana was once considered an architectural jewel with an eclectic mix of colonial homes and modern Art Deco construction, but much of the city outside the touristy Old Havana district is in a dilapidated state after decades of neglect and corrosion from humidity and salty sea air.

A study by a Miami-based group found that asking prices range from the equivalent of $5,000 to $1 million, with a median price range between $25,000 and $40,000. Cuba has two currencies, the peso and the convertible peso, the latter of which is used in most housing transactions and is pegged one-to-one with the U.S. dollar.

FOREIGN BUYERS?

What has developed is a two-tier market, the runners at Paseo del Prado say, with Cubans mostly buying small places for between $5,000 and $10,000 and foreigners with Cuban connections buying the more expensive properties.

Sixty-year-old graphic designer Pepin, who did not want to give his full name, has been trying for six months to sell his nearly century-old Vedado home, two stories and painted blue, for $130,000.

So far almost everyone taking a look has been a foreigner or a Cuban with family abroad providing the money, he said, and all have tried to bargain for a lower price.

“One Chinese man, for example, offered me 80,000, but I’m not desperate or anything. If they give me what I want, fine. If not, I’ll stay here,” he said, relaxing in a chair on his plant-enshrouded front porch.

By law, the market is open only to Cubans on the island or those living temporarily abroad. But foreigners, including Cubans living in the United States or other countries, are buying properties in the names of Cuban spouses, family members or friends.

Companies with offices abroad have sprung up to cater to foreign buyers, posting photographs and descriptions of properties across the country on the Internet. Attempts to speak with one of them, Point2Cuba, went unanswered.

The reasons foreigners buy are varied, said Emilio Morales, president of the Havana Consulting Group in Miami.

“I have heard of people who are buying homes and turning them into businesses,” he said. “Some are looking for an investment, others doing it for their family (in Cuba).”

The Cuban government has laid the groundwork for allowing foreigners to buy property on the island, but only in resort developments for which approval has been pending for years.

It could inject billions of dollars into the cash-strapped economy by opening the real estate market to all in a new foreign investment law, said Morales.

BARGAIN HUNTING

Information on pricing in the real estate market is sketchy, but the general sense among Cubans is that asking prices began high and have come down somewhat.

Most blame the drop on the supply and demand problems, while others point the finger at another Raul Castro reform – a newly liberalized migration law, which took effect on January 14 and makes it easier for Cubans to go abroad.

“Prices have dropped now because there’s a greater incentive after January 14 to sell and abandon the country. Which is to say that people hurry up and want to sell quickly,” said Roberto Perez, who is trying to sell his two-story home near the sea in Havana ‘s Playa district for $200,000.

The prices depend on the necessity of the seller. “Someone who has a visa (to go to another country) and has a house worth 60,000 may sell it for 30,000,” said Belen, the Paseo del Prado runner.

Selling is being driven by Cubans wanting to cash in on the sole major asset most of them have. One of the quirks of Cuban communism is that while most things are property of the state, the vast majority of the country’s 3.2 million homes are owned by the people living in them.

“This is one of the things that gave longevity to the Revolution. They have something that most people in Latin America don’t have and wish for,” said Miami lawyer Antonio Zamora, a Cuban American who visits the island frequently.

While some sellers want to sell so they can leave, many simply want the money so they can live better in Cuba. Most said they would use part of the money to buy a smaller house, then live off the rest or use it to open a business.

Need and the low economic standards on the island have created some incredible bargains for people accustomed to paying high housing prices in other countries.

One woman, who did not want to give her name or the location of her residence, said she had recently sold the six-bedroom penthouse with a sweeping sea view she shared with several family members for the equivalent of $130,000. The buyer was a European with a Cuban spouse.

“I know it’s going to be worth a lot more in 10 years but everybody in the family wanted the money now. When we were moving out, a man came running up and told me he would give me 50,000 more than whatever the sale price was, but we had already signed the contract,” she said with a sigh.

Zamora, the Miami lawyer, predicted that Cuba would one day be a big market for Cuban Americas retirees.

“This is going to be huge,” he said, noting that Cuba has low crime and health costs, as well as good airport connections to the United States and a well developed money transfer industry for remittances.

“$750 in social security in the U.S. is nothing here in Miami but it can go a long way in Cuba,” he said.

(Additional reporting by Nelson Acosta and Rosa Tania Valdes in Havana and David Adams in Miami; Editing by David Adams and Claudia Parsons)

Arranging “Permutas” in Havana’s Pre-2012 Informal Housing Market, on Paseo del Prado 

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Venezuela’s Capriles Vows to End Cuba Giveaways

Reuters/By Brian Ellsworth/Mon Mar 18, 2013

CARACAS (Reuters) – Venezuelan opposition presidential candidate Henrique Capriles on Monday vowed to end the OPEC nation’s shipments of subsidized oil to communist-run Cuba, slamming acting President Nicolas Maduro as a puppet of Havana.

Capriles has berated Maduro as a weak imitation of the late Hugo Chavez, whose death two weeks ago convulsed the country and triggered the April 14 vote. The opposition also accuses the government of failing to fight crime and control inflation. “The giveaways to other countries are going to end. Not another drop of oil will go toward financing the government of the Castros,” Capriles said, referring to Cuba’s present and past leaders, Raul and Fidel Castro.

“Nicolas is the candidate of Raul Castro; I’m the candidate of the Venezuelan people,” Capriles said during a speech to university students in the oil-rich state of Zulia.

The election marks the first test of the “Chavismo” movement’s ability to maintain the late leader’s radical socialism after his death, and it will be crucial for regional allies that depend on Caracas for financing and cheap fuel.

A victory for Capriles, 40, would likely give global oil companies greater access to the world’s largest crude reserves and offer investors more market-friendly policies after years of state-centered economics.

Henrique Capriles

Maduro, a 50-year-old former bus driver seen as having the advantage in the vote, has vowed to continue Chavez’s economic model that included frequent nationalizations and heavy regulation of private enterprise alongside generous social welfare programs that underpinned his popularity.

The youthful Capriles, who lost to Chavez by 11 percentage points in 2012, faces a delicate balancing act to highlight the flaws of Chavez’s governance without appearing to be attacking the former president or seeking to tarnish his legacy. He has exchanged furious barbs with Maduro since launching his candidacy and renewed his criticisms from last year’s campaign over day-to-day problems such as unchecked crime, product shortages and high cost of living.

“Every day it’s harder to find food, and every day food is more expensive,” Capriles said. “This model is not viable.”

He said halting cheap oil sales to Cuba would free up resources to boost public employee salaries by 40 percent to make up for inflation that is one of the region’s highest.

VICIOUS CAMPAIGN

Ties to Cuba are likely to remain a central part of the campaign. Capriles for months accused authorities of compromising the country’s sovereignty by letting Chavez govern for two months from a Havana hospital.

Venezuela provides close to 100,000 barrels per day of oil to Cuba in exchange for a host of services including doctors that staff free health clinics in slums and rural areas.

Supporters say it has helped expand access to health care, while critics call it a mere subsidy to the Castro government. Maduro’s frequent visits to the island during Chavez’s two-month convalescence there led opposition leaders to joke that he had picked up a Cuban accent.

The emotional outpouring of affection for Chavez following his March 5 death, along with ample use of government television broadcasts, has helped give Maduro a leg up in the race. Millions of bereaved supporters have lined up before Chavez’s remains to pay respects to a leader who was loved by many of the country’s poor but reviled by adversaries who called him a fledgling dictator.

MADURO LEAD

Two recent opinion polls showed Capriles trailing Maduro. Respected local pollster Datanalisis gave Maduro 46.4 percent versus 34.3 percent for Capriles in a survey carried out before Chavez’s death.

He enraged Maduro by accusing him of repeatedly lying about the late president’s two-year battle with cancer, and of then cynically using his death as a campaign tool. He later apologized to Chavez’s family if his words had offended them.

Maduro last week described a plot by “far right” U.S. elements linked to two senior former members of the George W. Bush administration to kill Capriles. Both officials denied the charges.

(Editing by Andrew Cawthorne and Cynthia Osterman)

Nicolas Maduro and Friend

 

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Cuba to open state-run wholesaler for private companies

Thursday Mar 7, 2013

By Marc Frank

HAVANA, March 7 (Reuters) – Cuba established on Thursday a state-run wholesale company to sell food products, industrial and other consumer goods to private companies and the state sector, a step aimed at meeting a key demand of local entrepreneurs.

The new company was just the latest indication that President Raul Castro plans to create a strong private sector in retail services and farming as part of a broader reform of the Soviet-styled economy.

Since taking over for his brother Fidel in 2008, he has been lifting some restrictions on civil liberties, such as travel and the sale and purchase of private property, as well as revamping the state-dominated economy into a more mixed and market friendly one.

More than 200,000 small businesses have opened since Cuba liberalized regulations on them in 2010 and the number of entrepreneurs and their employees was 370,000 at last count.

Cuentapropista: now with access to inputs at wholesale prices?

“This step is long overdue and promises to remove a serious disadvantage faced by small entrepreneurs,” said Phil Peters, a Cuba expert at the Virginia-based Lexington Institute who has closely followed the reforms.

“It is the latest sign that the government wants the private sector to grow and needs it to create jobs for its reform program to succeed,” he added.

At the close of 2012 there were 1,736 private restaurants, 5,000 bed and breakfasts, and thousands of cafeterias, pizzerias and snack shops, according to the government.

Business owners have long complained that they must purchase supplies at state retail shops, while their state competitors purchase at more competitive wholesale prices, a problem authorities have repeatedly promised to remedy.

Thursday’s official Gaceta published an internal trade ministry resolution bringing together a number of companies into a new state holding company, the “Food, Industrial and Other Consumer Goods Trading Company.”

The resolution, which when published became law, stated the company would attend to both the state and “non-state” sectors.

State-run companies control all foreign and wholesale trade in Cuba and have been prohibited from selling to the private sector.

It was not clear how long it would take to set up the new company.

On Tulipan Street in the New Vedado district of Havana, a busy area with many private food vendors, no one knew about the new company, but all agreed it would be welcome.

“This is what we have been waiting for and its good they are finally doing something,” said Ofelia Rodriguez, 45, who sells pastries.

“I guarantee you, that if the prices are reasonable I can lower those I put on my products,” she said.

One woman selling soda, sandwiches and snacks nearby, said she would pass judgment once the company was in operation.

“For me, the issue isn’t if they open a wholesale outlet, but what they are going to sell and at what price,” said Eneida, 50, asking that her last name not be published.

“We have to wait and see if this is to help us meet our needs or pick our pockets of the little we make.” (Editing by Jackie Frank)

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Women’s Work: Gender Equality and the Role of Women in Building Cuba’s Future

The Author: Sarah Stephens of the Center for Democracy in the Americas has just published a study on gender equity in Cuba.

The complete report is available for download  CDA_Womens_Work[1]   The first part of the Executive Summary is presented below.

Ritter’s comment:

While this is an interesting study, the author seems to studiously avoid even the mention of some of the most courageous women in Cuba who are already having an influence on public policy and will likely play a more important role in building Cuba’s future than any of the women cited or interviewed for the study. I am referring of course to the independent journalists, pro-democracy activists, and those who dare to speak up in support of the genuine respect for the basic human rights that Cuba has signed on to in the United Nations Universal Declaration of Human Rights.

How could an organization labelled the Center for Democracy in the Americas not have spoken to individuals such as Yoani Sanchez, Miriam Celaya, the Ladies in White, or Miriam Leiva?

The immigration reform law would not likely have been passed at this time were it not for the unrelenting pressure of Yoani Sanchez and the international publicity this engendered and the shame the travel restrictions brought on the Cuban government.

Arch Ritter

EXECUTIVE SUMMARY

“Women’s Work: Gender Equality in Cuba and the Role of Women Building Cuba’s Future,” a report by the Center for Democracy in the Americas, examines progress made by Cuban women toward gender equality since the 1950s and discusses how that progress can be sustained in the future.

Cuba is highly ranked by international organizations from Save the Children to the World Economic Forum for the health and well being of its mothers and children; the literacy and educational attainment of its population; and for meeting or progressing toward the Millennium Development Goals.

These accomplishments are  met with skepticism even disbelief by some in the U.S., because Cuba has a tiny economy, it is not capitalist or rich and, by U.S. standards, it is not free. Yet, the numbers speak for themselves.

But, the data also demonstrate, and many Cuban women agree, that measured against key objectives of gender equality – do women have access to higher-paying jobs; can they achieve a fair division of labor at work and home; are they acceding to positions of real power in the communist party or government– Cuba has a long way to go.

Now, as Cuba faces an economic crisis driven by fiscal, competitive, and demographic pressures, the government is trying to update its economic model. But, several actions – such as cutting budgets and controlling costs in its public health and education systems, and shrinking state employment rolls and moving workers into private sector jobs – could put Cuba’s gender equality achievements at considerable risk. Many Cuban women are reluctant to make the transition from the state jobs where they found work and received benefits to private sector employment, because they lack training, job security and benefits, and access to capital.

With ample global evidence that broadening rather than constraining participation by women increases economic growth, social wellbeing, and family formation, Cuba can improve its prospects for addressing the crisis by preserving, and indeed, expanding its commitment to gender equality. Cuban women also want to expand their roles, their power, and their ability to participate in the building of Cuba’s future.

CDA believes it would serve the national and humanitarian interests of the U.S. to help Cuban women achieve greater economic success as their nation undergoes a stressful adjustment to a new economic model, and the report offers recommendations for doing so.

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Marc Frank: “Stunned Cuba ponders future without Chavez”

Wed Mar 6, 2013

By Marc Frank

HAVANA, March 5 (Reuters) – A mix of sorrow, self-interest and dread took hold of Cuba Tuesday evening as word spread like wildfire that Venezuelan President Hugo Chavez, who had done so much for the country, was dead.

While the official evening newscast devoted its entire program to events unfolding in Caracas, the government reaction was slow in coming.

Later in the evening Cuba declared three days of mourning, and eulogized Chavez saying his “Bolivarian Revolution” was “irreversible” and that Cuba would continue to “accompany Venezuelans in their struggles.”

Chavez’s resolute ideological embrace of Cuba helped propel the once isolated communist island back into the center of regional politics, and oil-rich Venezuela’s largesse under Chavez proved a life saver for the embargoed and near bankrupt Caribbean island after the collapse of its longtime benefactor, the Soviet Union.

Even so, analysts do not expect Chavez’s death to have any short-term impact for Cuba.

“I’m sure the Cubans are concerned, but I don’t think this will be a game changer for the Cubans. They have weathered worse storms before,” said Frank Mora, former deputy assistant secretary of defense for Western Hemisphere Affairs in the first Obama administration.

Chavez is viewed in Cuba as an irreplaceable leader of the region and savior of socialism, portrayed day and night by official media as a champion of regional unity, independence and the island.

During his two-year battle with cancer, Chavez had four operations in Cuba and spent months receiving treatment on the island.

“Once again the horizon for all of Latin America has grown dark,” Havana snack vendor, Eric Rodriguez, said.

“I only hope Venezuela can support this blow, but the road ahead for them won’t be easy, nor for Cuba,” he said.

There were tears for the 58-year-old Venezuelan and his family over the tragedy of succumbing to cancer. Then there were the calculations over what events in Caracas might mean for daily life on the Communist-run island, so dependent on the preferential trade relations under Chavez.

There was dread that Cuba would once more lose a strategic ally and be plunged back into a grave economic crisis similar to the scarcity in the 1990s that followed the demise of the Soviet Union.

Soon after Chavez won his first election in 1998, Fidel Castro anointed the young and vitriolic firebrand as his revolutionary successor in Latin America.

President Raul Castro, who replaced his ailing brother in 2008, has strengthened relations with Venezuela even as he forged closer ties with other oil-producing nations such as Brazil, Angola, Algeria and Russia.

ECONOMIC DEPENDENCE

Most Cuban economists point out that the economy has become more diversified over the last 20 years with the development of tourism, pharmaceuticals and increased oil and nickel production. But they say it remains far too dependent on Venezuela.

Cuba and Venezuela have formed more than 30 joint ventures over the years, most of them based in Venezuela.

They range from a fishing fleet, to port and rail repair, to hotels, agriculture, nickel and steel production and just about all of Cuba’s downstream oil industry.

In 2011, Venezuela accounted for $8.3 billion of Cuba’s $20 billion in foreign trade. It pays Cuba an estimated $6 billion or more annually for the services of 40,000 doctors, nurses and other professionals, local economists say. That is around 60 percent of the foreign exchange Cuba earned from services.

Venezuelan banks provide soft credits for dozens of development projects across the island.

Venezuela serves as a guarantor for investment and trade with the island.

While many Cubans fretted, others were more optimistic that Chavez’s hand-picked successor, Vice President Nicolas Maduro, would win the election that must now take place within 30 days.

UNCERTAINTY AND REFORM

Cuba is in the process of lifting some restrictions on civil liberties and revamping the state-dominated economy into a more mixed and market friendly one.

Experts said that regardless of the election’s outcome the pace and depth of reform would most likely pick up.

An opposition victory, viewed as unlikely, would certainly force Havana to scamper, they said, and while a Maduro win would spell no changes for Cuba in the short term, the threat of instability in Venezuela’s future would loom large on local leaders’ minds.

“Assuming that Maduro is elected, Venezuela will continue its critical oil subsidies, but both international credit markets and the Cuban leadership can now more clearly see a future where Cuba will have to bolster its energy self-sufficiency and improve its credit ratings,” said Carlos Saladrigas, head of the Cuba Study Group, a Cuban American business organization that advocates engagement with Havana.

“The pro-reform factions within the Cuban system will have additional arguments in their quiver for moving forward with all deliberate speed,” he said.

Mora agreed that mid-term instability in Venezuela would be Cuba’s biggest challenge.

“I think everyone will try and unite behind Maduro. It’s what becomes of Venezuela after, and whether Maduro can keep all the disparate factions within Chavismo together for a long period of time, especially if the Venezuelan economy runs into macro-economic troubles and it’s not able to continue subsidizing political support (for Cuba),” he said.

(Reporting by Marc Frank; Additional reporting by David Adams.; Editing by David Adams and Lisa Shumaker)

Venezuelan President Hugo Chavez speaks next to Vice President Nicolas Maduro (right) and National assembly president Diosdado Cabello (left) during a national broadcast at Miraflores Palace in Caracas on December 8, 2012.   © 2012 Reuters

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Five years later: Cuba under Raúl: He’s tinkered but it’s the same old machine

By Juan O. Tamayo

Original Here:   Miami Herald, February 24, 2013 Cuba under Raúl

As Cuban ruler Raúl Castro marks his fifth official year in power on Sunday, some Cubans might well be asking, like the U.S. advertising campaign, “Got Milk?”

In his first major speech after succeeding ailing brother Fidel, Castro declared that the government’s highly centralized and inept system for collecting and distributing milk was “absurd” and vowed to fix it.

Today, some towns are indeed getting not just more milk but also butter and cheese, yet others are no better off — mirroring the sharply contrasting assessments of the economic reforms Castro launched to dig the island out of its communism-induced quagmire.

Some Cubans say the newly allowed private economic activity already has made daily life a bit easier for most of the island’s 11.2 million people, with more sellers offering more goods and more buyers finding more of the goods they seek.

“Look, I see a lot of people smiling because there are more ways to make a living and I have more pork to sell,” said Mori, the nickname of a salesman in a Havana butchers’ kiosk. “And people are buying, even though the prices are high.”

“You can’t say that Raúl’s Cuba is the same as Fidel’s Cuba. You just have to go on the streets to see that,” said dissident Havana economist Oscar Espinosa Chepe.

“I am surprised at how fast Raúl has moved, in the context of the previous half-century” added Archibald Ritter, an economist at Carleton University in Ottawa who runs the blog The Cuban Economy.

But Espinosa Chepe, Ritter and other knowledgeable Cuba-watchers say the reforms have been far too slow and too meek to reverse nearly half a century of brutally incompetent central government and its controls, Soviet Union-style, over virtually the entire economy.

Castro’s main reforms are “positive and well-oriented” and have accelerated in the past six months but remain “insufficient to solve the socio-economic problems accumulated in 50 years of centralized socialism … due to obstacles and disincentives,” said Carmelo Mesa-Lago, the dean of Cuba economists and author of the Spanish-language book Cuba en la Era de Raúl Castro.

Just updates

The list of reform initiatives launched since Castro officially succeeded Fidel on Feb. 24, 2008, is long and impressive and points to a strategy of allowing more capitalism but not democracy that looks like the China model —- though Havana insists it’s on its own path.

He has legalized non-agricultural cooperatives, allowed more private businesses and farming, offered them loans and permitted them to hire non-family employees. He has cut the bloated state payrolls, legalized the sale of homes and cars and allowed Cubans to stay in previously tourist-only hotels.

Most importantly, Cubans say, the removal of the much-hated “exit permit” last month for those who want to travel abroad has eased the sense of isolation and entrenchment that prevailed during Fidel Castro’s hardliner search for a socialist utopia.

But Raúl Castro has repeatedly said he’s proceeding apace to “update” the economy — never “reform” it — and his No. 2, José Ramón Machado Ventura, has dismissed those “who demand faster advances, naively thinking they will lead to capitalism.”

As a result, Cuba today teeters somewhere between the promise and realities of the reforms, between his on-the-mark diagnoses of what ails the country and a shortage of the appropriately strong medicine.

Licenses, taxes

Castro has thrown the doors open to more private enterprise but still limits licenses to 181 strictly defined jobs — among them, party clown — slapped steep taxes on them and vowed that central planning will remain the guiding force of the economy.

The decree allowing non-agricultural cooperatives — state-owned restaurants can become employee coops, for instance — is positive, said Ritter. But it requires the coops to accept as full members all employees of more than 90 days, such as a receptionist.

In one of the most critical reforms, Castro decreed in 2008 that nearly five million acres of idle state farmlands would be leased to private farmers to increase agricultural production and cut a food import bill estimated at $1.5 billion a year.

But only 3.7 million acres had been handed out at the end of 2012 and the government retained Acopio, the notoriously bumbling state system for gathering and distributing farm products. That’s what Castro attacked in that first major speech, in 2007, when he detailed the incompetent system for producing, processing and distributing milk.

It also took the government four years to reverse a section in the decree that banned the new farmers from building homes on the land — in effect forcing them to commute and leave their farm animals and machinery exposed to thieves every night.

Perhaps that’s why domestic food production dropped in 2011 to pre-2007 levels, and dropped again in 2012, with pork, a staple of the Cuban diet, down by 18.3 percent. Agricultural food prices spiked by about 20 percent while salaries barely ticked up, and food imports remained stable.

Cuban officials also announced 500,000 state employees would be dismissed by April 2011, and 800,000 more would follow by the end of that year in order to slash government spending. Yet by the end of 2012 the total layoffs reportedly stood at only 365,000.

Castro ordered an all-out attack on corruption, and put his son, Alejandro, in charge of the campaign. Yet bribery appears to be booming in the dark spaces between socialist and capitalist economic activities, and reports of fresh scandals filter out almost every week.

He has repeatedly called for a younger leadership and promoted Foreign Minister Bruno Rodriguez, 54, to the Politburo of the Communist Party and Higher Education Minister Miguel Diaz-Canel, about 52, to vice president of the Council of Ministers.

But Cuba’s leadership remains ancient. Castro is 81, Machado Ventura is 82 and Ramiro Valdes, another vice president of the Council of Ministers and sometimes considered No. 3, is 80. Overall, 10 of the 15 politburo members are in their 70s and 80s.

He has demanded that all state-owned enterprises improve their management and threatened to shutter those that do not turn a profit. Yet the General Comptroller’s report for 2012 said 34 percent of the 234 estate entities audited fell short of their goals.

Ritter noted that industrial output in 2011 stood at a shocking 47 percent of the levels in 1989, when post-communist Moscow halted its subsidies to Havana and the island plunged into economic ruin. The purchasing power of salaries in 2010 was 30 percent lower than in 1989, according to Espinosa Chepe.

Castro’s reforms “are useful and positive and I would applaud them, but in terms of reversing the situation in industry they are not going to go too far,” said Ritter. “The industrial sector is a disaster. Cuba is de-industrializing.”

Plans, illusions

Castro also improved daily life by halting the massive political marches and rallies that brother Fidel so loved, Espinosa Chepe added, and diversifying the programs on the state television monopoly — “though they remain boring and with a heavy political bias.”

But virtually every young Cuban still has “a plan or an illusion” to escape the island, said Michel Matos, executive director of the Rotilla Festival, a privately organized music fest held annually from 1998 until the government banned it in 2011.

Some Cubans paint a dark picture of their future, with more poverty, especially among retirees whose benefits seldom rise above $15 a month. The gap between haves and have-nots has risen as the government has cut back spending on public health and education. Crime and prices continue to rise.

A woman who visits Havana often said a well-off and pro-Castro friend there recently told her that “there is a tension you feel all the time, like it’s going to explode. We don’t know where we’re going.” The woman asked for anonymity to speak frankly.

The specter of Fidel

Castro’s half-measures and stop-and-go reforms have sparked speculation on exactly who or what is standing in his way. The “who” is presumed to be the 86-year-old Fidel, always a sworn enemy of capitalism.

“In general I believe that we have a duty to update and improve it [Cuba’s Soviet-style economic model], but this is a stage where it is essential that we march very carefully. We should not make mistakes,” Fidel said earlier this month when asked about the reforms.

Arturo Lopez-Levy, a former government analyst on intelligence issues and Cuba-U.S. relations now at the University of Denver, said Raúl Castro is “losing time” with the slow pace of reforms “not because of indolence but because there is no agreed-upon vision of the system toward which Cuba is moving.”

The “what” is widely believed to be an entrenched bureaucracy that fears the reforms will take away its benefits and perquisites. Jorge Dominguez, a Harvard University expert on Cuba, has described what Castro now faces as a tough “bureaucratic insurgency.”

Impediment to talks

As for U.S. relations, Castro has repeatedly offered talks with the Obama administration, yet held on to the one clear impediment to improved relations: U.S. government subcontractor Alan Gross, serving a 15-year sentence in Havana for giving sophisticated communications equipment to Cuban Jews in violation of Cuban laws.

“The government needs a less confrontational scenario in bilateral relations, but its survival is not dependent on a deal with the U.S.,” said Lopez-Levy. “The optimum scenario for [Castro] is not a sudden lifting of the embargo but a piecemeal dismantling.”

And on the human rights front, Castro freed 52 political prisoners jailed since a 2003 crackdown on dissent but at the same time stepped up repression, with a record 6,200 short-term detentions for political motives reported last year alone.

One bit of certainty

Castro is certain to be elected to a second five-year term as president of the Councils of Ministers and State when the parliamentary National Assembly of People’s Power opens its new session on Sunday. But the country’s future is less certain.

Lopez-Levy said he believes that during his first five years in power Castro carefully laid the institutional foundation for a more mixed state-private economy and a state withdrawal from daily life.

But Venezuelan President Hugo Chávez, whose subsidies to Cuba are pegged at more than $6 billion a year — higher than the aid that Moscow once provided — has cancer and it’s not clear whether a successor would keep the same level of aid.

Havana blogger Yoani Sánchez wrote last month that given Cuba’s myriad and profound problems, it’s difficult for her to believe that the system can “survive the new year, never mind guarantee its long-term viability.”

“But it merits mentioning that the Havana regime has been showing its ability to overcome, including even the most unfavorable predictions, for a long time,” she added. “After all, the Cuban economy has been in a permanent state of crisis for 20 years.”

“It will be much more likely to see our frustrations in the lines outside embassies [in Havana] waiting for a visa,” Sánchez noted, “than in any mass protests.”

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Cuba-Russia Debt Write-Off and Aircraft Leasing: Win-Lose or Win-Win?

By Arch Ritter

Great!  Canadian tourists will once again fly on Tupelov and Ilyushin aircraft on their low-cost snow-bird visits to Cuba – just like in the 1970s to 1990s. I remember one partially half-empty flight in the early 90s when the stewards requested in mid-flight that half the passengers move to the back part of the plane to balance the load, somewhat like I often do in my 14-foot boat.

Cuba looks like the big winner in the debt-write-off and aircraft leasing agreement with Russia reached yesterday, February 21, 2013. But Russia gets a small reprieve for its civilian aircraft sector.

Over and above the massive hidden subsidization provided to Cuba back in the golden age of Soviet-Cuban relations, (amounting to 15 – 30 % of Cuba’s quasi-GDP depending on the year in the 1980s), Cuba also built up a debt to the Soviet Union that amounted to around $28 billion as on 1989.  It looked as if this debt would never be repaid and that Russia had given up all hope of repayment.

The debt write-off deal lets Cuba off the hook, at least in part. Cuba can now claim that it is a responsible economic partner and participant in the international economic system. This should facilitate access to new foreign credit and thus be of some benefit. Cubana also acquires Russian aircraft, presumably at a reasonable price relative to those of the leasers of European, Brazilian and Canadian aircraft, even if of unproven quality and competitiveness. This all looks good for Cuba.

What does Russia get out of the deal? A market for its aircraft. While its military aircraft industry appears to be highly competitive internationally, the civilian aircraft sector has almost disappeared in the face of Boeing, European Airbus, Embraer of Brazil and Bombardier of Canada – and with Chinese aircraft starting to make an appearance. This deal provides a market – albeit a small one– for Russia’s civilian aircraft. Perhaps the Cuban market provides a loss-leader for Russian civilian aircraft into international markets.

At the same time, Russia probably loses nothing in writing off Cuba’s debt as it probably never would have been paid in any case.

Cubana’s New Aircraft, the Ilyushin 94-400 and Tupelov 204SM

The above chart, based on the work of Leogrande and Thomas illustrates the magnitudes of Soviet assistance to Cuba including trade credits.

 

William Leogrande, and J. M. Thomas illustrates the magnitudes of the assistance. My own quantitative estimates placed the value of this subsidization at around 23% to over 36% of National Income in the 1980 to 1987 period.

 

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Pravda: “Russia to write off $35 billion of Cuba’s debt”

Presidents Medvedev and Castro, February 21, 2013

From Pravda, Feb 22, 2013: Cuban Debt to USSR Write-Off

Russia and Cuba have initialed an agreement to settle Cuba’s debt to Russia on the loans that Cuba took from the Soviet Union. In addition, representatives of the two countries signed two agreements on the deliveries of Russian aircraft to Cuba in the amount of $650 million.

The initialed agreement “sets the general direction for further work”, a high-ranking source in the Russian delegation told Itar-Tass. The agreement was signed by Deputy Foreign Minister Sergei Ryabkov and Deputy Chairman of the Council of Ministers, Ricardo Cabrisas.

“This document is like a declaration of political will, and it sets off extensive work, which will consist of three stages,” said the official.

“The document goes through internal procedures and coordination. Afterwards, there will be another agreement signed – the new one will contain all specifications of all the technical details, and then it will have to be ratified,” he explained. According to the official, it is a very substantial amount of debt – $35 billion.

The final agreement on writing off the debts of Cuba will be prepared within six months, Minister for Industry and Trade, Denis Manturov, told reporters after the Russian-Cuban talks.

 ”More than $30 billion – this is the total amount of debt that will be partially written off and partially refinanced, – said the minister. – So today it is still early to talk about the precise proportions. We have to coordinate all procedures inside the countries first before we sign the final agreement, which will take effect and determine the amounts and proportions of restructuring and writing-off the debt.”

The minister assured that it will happen “before the end of the year for sure.” “I think that the term that we have agreed on – six months – will be enough to finalize the formalities,” he added.

The total volume of two agreements about the supplies of Russian planes to Cuba is $650 million, the head of the Russian Ministry of Industry said. “In total, the amount for the supply of aircraft is 650 million dollars, – he said. – This includes two agreements for three Antonov aircraft (AN-158), three Ilyushin (IL-96-400) and two Tupolev airplanes (Tu-204SM).”

Following the talks, an option agreement was signed for the supply of three An-158 airplanes. Manturov explained that these would be delivered to Cuba in addition to those that Cuba would receive this year.

Under the second agreement, Cuba will receive three Il-96-400 planes. The planes will be redesigned from the cargo to the passenger version. In addition, Cuba will receive two Tu-204SM airplanes when tests and certification procedures are complete.

In addition, the agreements, according to Manturov, stipulate for the delivery of complete sets of spare parts to maintain the operation of the aircraft, which Cuba uses already. Manturov added that all aircraft would be delivered as part of financial leasing procedures.

The Russian delegation, led by Prime Minister Dmitry Medvedev, arrived on a work visit to Cuba from Brazil, where the head of the Russian government held talks with the leadership of the republic and took part in the meeting of the bilateral high-level commission on cooperation.

Following the results of Medvedev’s official meetings in Cuba, a number of bilateral documents is expected to be signed. On Friday, the Prime Minister will visit the 22nd Havana International Book Fair, which takes place in the Cuban capital every year.

The current fair is dedicated to the 160th anniversary of the birth of Cuban revolutionary Jose Marti. Medvedev will lay flowers to his monument as part of the traditional protocol ceremony.

The flight to Cuba marked the middle of Medvedev’s Latin American tour. The prime minister crossed seven time zones on the way from Moscow to Brasilia, making a technical refueling stop in Cape Verde. As a result, Medvedev spent more than 14 hours in the air. The trip to Cuba added two time zones to this route and a seven-hour flight.

Due to the nine-hour time difference between Havana and Moscow, even morning events in Medvedev’s Cuban work schedule fall for the evening time in Moscow.

 

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Cuba Study Group, “Restoring Executive Authority Over U.S. Policy Toward Cuba “

A major analysis of US policy towards Cuba has just been published by the Cuba Study Group. A brief Introduction and Executive Summary are presented below. The complete study is available here: Cuba Study Group, Restoring Executive Authority, Feb 21, 2013

 “Supporting the bill was good election-year politics in Florida, but it undermined whatever chance I might have if I won a second term to lift the embargo in return for positive changes within Cuba. It almost appeared that Castro was trying to force us to maintain the embargo as an excuse for the economic failures of his regime.” —President Bill Clinton

  “To make matters worse, the economic fence has helped to fuel the idea of a place besieged, where dissent comes to be equated with an act of treason. The exterior blockade has strengthened the interior blockade.” —Yoani Sanchez

 Opening Statement

The U.S. embargo toward Cuba is a collection of prohibitions, restrictions and sanctions derived from several laws that has been in effect for more than 50 years. Taken together and compounded with the designation of Cuba as a “state sponsor of terrorism,” they result in the most severe set of sanctions and restrictions applied against any current adversary of the United States. This collection of sanctions was first codified into law by the Cuban Democracy Act of 1992 (“Torricelli”), severely tightened by the Cuban Liberty and Democratic Solidarity Act of 1996 (“Helms-Burton”), and modified by the Trade Sanctions and Reform Act of 2000 (“TSRA”), thus transferring almost absolute authority over U.S. policy toward Cuba from the Executive Branch to the U.S. Congress.

The codification of the U.S. embargo against Cuba has failed to accomplish its objectives, as stated in Helms-Burton, of causing regime change and restoring democracy in Cuba. Continuing to ignore this obvious truth is not only counterproductive to the interests of the United States, but also increasingly damaging to Cuban civil society, including the more than 400,000 Cubans now working as licensed private entrepreneurs, because it places the burden of sanctions squarely on their shoulders to bear.

At a time when Cuba seems headed toward a path of change and reforms, albeit slower than desired, and a real debate seems to be emerging within Cuba’s elite regarding its future, the inflexibility of U.S. policy has the ironic effect of hurting and delaying the very changes it seeks to produce by severely limiting Cuba’s ability to implement major economic reforms and strengthening the hand of the reactionaries, rather than the reformers, within the Cuban government.

Moreover, Helms-Burton and related statutory provisions in Torricelli and TSRA deny the United States the flexibility to address dynamic conditions in Cuba in a strategic and proactive way. They effectively tie the President’s hands in responding to developments on the Island, placing the impetus for taking advantage of the processes of change in Cuba in hands of hard-liners among Cuba’s ruling elites, whose interests are best served by the perpetuation of the embargo.

The Cuba Study Group is publishing this whitepaper to acknowledge that a Cuba policy fundamentally based on blanket unilateral sanctions and isolation has been grossly ineffective for more than half a century; it disproportionately hurts the Cuban people and is counterproductive to the creation of an enabling transitional environment in Cuba where civil society can prosper and bring about the desired social, political and economic changes for which we long.

Thus, we call for the repeal of the Helms-Burton Act, its related statutory provisions in Torricelli and TSRA, and for the restoration of authority over U.S.-Cuba policy to the Executive Branch. It is our belief that we can no longer afford to ignore the failure of this legislation.

Executive Summary

Seventeen years after its enactment, the Helms-Burton Act—which further codified the sanctions framework commonly referred to as the U.S. embargo against Cuba and conditions its suspension on the existence of a transition or democratic government in Cuba—has proven to be a counterproductive policy that has failed to achieve its stated purposes in an increasingly interconnected world.

Helms-Burton has failed to advance the cause of freedom and prosperity for the Cuban people, to encourage free and democratic elections in Cuba, to secure international sanctions against the Cuban government, or to advance the national security interests of the United States. It provides a policy framework for U.S. support to the Cuban people in response to the formation of a transition government in Cuba; yet, the all-or-nothing nature of its conditions for suspension undermine that very framework by effectively placing control over changes to embargo sanctions in the hands of the current Cuban leadership. Simply stated, it is an archaic policy that hinders the ability of the United States to respond swiftly, intelligently and in a nuanced way to developments on the island.

Worst of all, the failures of Helms-Burton have more recently produced a tragic paradox: Policies once designed to promote democratization through isolation are now stifling civil society, including an emerging class of private entrepreneurs and democracy advocates whose rise represents the best hope for a free and open society in Cuba in more than 50 years.

The Cuba Study Group believes that the most effective way to break the deadlock of “all-or-nothing” conditionality and remedy the ineffectiveness of current U.S.-Cuba policy is to de-codify the embargo through the repeal of Helms-Burton and related statutory provisions in Torricelli and TSRA that limit the Executive Branch’s authority over U.S. foreign policy toward the Island (hereinafter collectively referred to as “Helms-Burton and related statutory provisions”). De-codifying the embargo would allow the Executive Branch the flexibility to respond strategically to developments in the Island as they take place; using the entire range of foreign policy tools at its disposal—including diplomatic, economic, legal, political and cultural—to advance the cause of human rights and incentivize changes in Cuba.

The primary consequences of Helms-Burton and related statutory provisions have been to isolate the United States from Cuba and to serve as a political scapegoat for the Cuban government’s many failures. It has become a “Great Crutch” to all sides of the Cuba debate. First, for ordinary Cubans, their struggle has fallen hostage to an international dispute between their government and the United States, which they see themselves as powerless to affect. For the Cuban leadership, it has become easier to blame the embargo than to adopt the difficult reforms needed to fix their economy. Lastly, for defenders of the status-quo within the Cuban-American community, it has become easier to wait for the United States to solve our national problem rather than engage in the difficult and necessary processes of reconciliation and reunification.

Helms-Burton indiscriminately impacts all sectors of Cuban society, including democracy advocates and private entrepreneurs, causing disproportionate economic damage to the most vulnerable segments of the population. Conditioning our policy of resource denial on sweeping political reforms has only served to strengthen the Cuban government. The scarce resources available in an authoritarian Cuba have been and continue to be allocated primarily based on political priorities, thereby increasing the state’s relative power and its ability to control its citizens.

The majority of American voters, Cuban-Americans and Cuban democracy advocates in the Island have rejected isolation as an element of U.S. policy toward Cuba and have called on the U.S. government to implement a policy of greater contact and exchange with Cuban society.  As Cuba undergoes a slow and uncertain process of reforms, the continued existence of blanket U.S. sanctions only hinders the types of political reforms that Helms-Burton demands.

Instead of maintaining a rigid policy that ties our hands and obsesses over hurting the Cuban leadership, U.S. policy-makers should adopt a results-oriented policy that focuses primarily on empowering the Cuban people while simultaneously pressing the Cuban government to cease its repressive practices and respect fundamental human rights. Repealing Helms-Burton would also free civil society development and assistance programs to be implemented outside of a contentious sanctions framework.

Furthermore, the Cuba Study Group believes that any forthcoming congressional review of current legislation relating to Cuba, such as a review of the Cuban Adjustment Act, must require a review of the totality of the legislative framework codified in Helms-Burton and related statutory provisions so that the United States may finally develop a coherent policy toward the Island.

While we wait on the U.S. Congress to act, the Executive Branch should continue to take proactive steps through its limited licensing authority to safeguard and expand the free flow of contacts and resources to the Island, encourage independent economic and political activity in Cuba, and increase the relative power of Cuban private actors. The U.S. should pursue these courses of action independent of actions taken by the Cuban government so as not to place the reigns of U.S. policy in the hands of Cuban proponents of the status quo.

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Miriam Celaya: “I Don’t Want Siblings Like These”

Once again Miriam Celaya said it best.

From her Blog, Sin Evasion/ Without Evasion

Miriam Celaya

The recent ascent of the Cuban President-General to the head of the Community of Latin American and Caribbean States (CELAC) and the silent tolerance or evident indulgence of thirty democratic nations, even before the arrogance that permeated his speeches, highlights the political cross-dressing of “our America”.

Some specific details on the speeches of Castro II, like lessons he offered his… counterparts(?) with regard to drug trafficking and consumption, based on the Cuban experience, on the strategic utility of the death penalty and the egregious disrespect he demonstrated against  the will of the majority of the Puerto Rican people – who recently endorsed their sovereign decision to remain a commonwealth – when he expressed his regret at the absence of that island nation at the conclave, and his wish that one day it would serve on the CELAC, are just an example of how we need to advance the region’s democratic culture.

The General’s blunders were welcomed by undaunted representatives of Latin-American democracies attending the meeting, who even applauded the rudeness of the old former guerrilla, wearing a civilian costume for the occasion. So we attended, among smiles, compliments, and handshakes, the alliance of democratically elected governments in the region – whose countries have multiparty systems, freedom of movement, of expression and of the press, freedom of association and other civil advantages that embellish democracies – with the ancient Antillean satrapy, thus legitimizing his dictatorship. The new Latin-American principle was explicitly made: gloss over what they have termed “our ideological and political differences in order to consolidate “the unity of our sister countries” and maintain “the respect to self-determination” of each peoples.

Obviously, the thirty-plus Latin American governments meeting in Santiago de Chile decided that the totalitarianism imposed on Cuba is not only an “ideology”, but has long remained in power thanks to the self-determination of the Cuban people (though we have to admit that they may have a point in the latter). Perhaps Chavez’s oil, the subtle detail that the new capital of Venezuela is located in Havana or that the investments of certain Latin-American enterprises in Cuba might have had something to do with such regional empathy.

Another thing that was not clear to me was what commitments the Cuban government might have entered into with the CELAC chairmanship, what advantages Cubans could expect from those commitments and what the projections are for the medium and long terms as far as the progress of the Latin American and Caribbean countries. At least from what they aired in Cuba, the speeches were geared more towards historical references that would justify our supposed common identity, towards the need to overcome poverty, and the command to create a common front in the presence of powerful economies of the developed nations of the First World. Too many clichés in the speeches. As is customary, there were also many “what’s” but few “how’s”.

In this vein, while in Cuba’s interior the dictatorship does not give one iota about civil liberties, it flaunts the presidency of the umbrella organization of democratic nations in the region. The General’s aggressive speech, presenting the violence of the Cuban experience as the legitimate letter of the government, seems to enjoy the complicity of those attending the regional event while the loneliness and helplessness of the Cuban people escalates. The dictatorship’s summit has ended, and, as for me, if those governments exemplify our siblings, then I’d rather be an only child.

 

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