• 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.

Raúl Castro’s unhurried reforms of Cuba economy falter

By John Paul Rathbone, Financial Times, January 17, 2014 11:48 am

Original Here: Raúl Castro’s unhurried reforms of Cuba economy falter

In a dusty Havana parking lot, a group of Cubans examine the prices of the modern cars they can now buy from the state for the first time: $263,000 for a 2013 Peugeot saloon that retails in Europe for $30,000, or $20,000 for a 2002 Fiat Uno with over 100,000km on the clock.

“Who are they kidding? At those prices, they have to give a lifetime supply of petrol too,” says taxi driver Antonyne Carrera as he peers through the lot’s wire fencing. “It’s a bad joke,” adds fellow bystander Mauricio, who works in the tourist trade.

The car sale is the latest in a series of reforms introduced by President Raúl Castro that are supposed to improve the country’s economic lot and bolster the government’s popularity but which, in this case, has made the authorities a laughing stock among Cubans who earn an average state wage of $18 a month.  It also illustrates the hesitancy and contradictions at the heart of the economic transition begun by Mr Castro and that Latin American heads of state will see when they visit Havana for a regional summit on January 28.

“I call it Raúl’s mambo – two steps forward, one step back,” says Ted Henken, a Cuba specialist at City University of New York. “Every measure Raúl announces has great potential, but there is always a dark cloud.”

Since he became president in 2008, Mr Castro has stressed the need to reduce the state’s role in Cuba’s sagging economy and boost growth forecasts of just 2.2 per cent this year. Foreign debts have been restructured and a unification of Cuba’s multiple exchange rates even mooted. Yet even as he introduces reforms, such as allowing small businesses and co-ops to set up, the ruling Communist party’s blocking habits of command and control remain.

 “Raúl is going as fast as he can, or he understands,” says Roberto Veiga, editor of Espacio Laical, an independent Cuban magazine funded by the church. “There is a tension between how slow things need to go given the government’s desire to retain control, and how fast they need to given the precariousness of the economy.”

Continue reading: Raúl Castro’s unhurried reforms

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“Glimmers of change in Cuba as fear and secrecy fade”

By John Paul Rathbone in Havana; January 21 2014; Financial Times

Original Article here: Glimmers of change in Cuba as fear and secrecy fade

Apartment building meetings are no longer what they used to be in Havana. A few years ago, they were thinly attended affairs. Residents stayed away as nobody listened to their concerns and nothing ever changed: the broken lift, the lack of water. Cubans, remarkably, seemed to have lost their desire to criticise.

But today? Cuba can sometimes seem a country in permanent debate. “In my apartment building, the meetings are packed, the conversation voluble, and there is lots of angry finger-jabbing at other people’s chests,” one Havana resident told me. Today, Cubans seem to have regained the ability to speak out, or at least are losing their fear of doing so.

It is a sign of the times. Much has been made of Cuba’s “transition” since Raúl Castro took over the presidency from Fidel, his elder brother, in 2008. That Raúl, a former general, is president is a big transition in itself, especially of style. Meetings now start on time. Fidel’s “Battle of Ideas” and much of its vacuous propaganda have been abandoned. Political decisions are no longer taken on apparent whim.

Instead, steps have been taken by Mr Castro to roll back the state from the economy. Certain restrictions have been lifted, such as allowing travel abroad. There has been a change in tone in US relations. Indeed, when Havana academics travel to the US, they are no longer asked: what will happen when Fidel dies? Now the more common question is: how do I buy a house in Havana? There is also talk of constitutional reform, albeit within a one party system.

Yet perhaps the most striking and progressive difference after visiting the island annually for a decade is psychological: Cubans’ state of fear is lifting.

Continue reading: Glimmers of change in Cuba as fear and secrecy fade

Joyn Paul RathboneJohn Paul Rathbone; also author of . “The Sugar King of Havana: The Rise and Fall of Julio Lobo, Cuba’s Last Tycoon”

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“Reforming the Dual Monetary System”

By Justin Rohrlich. from “VICE”, , 23 January 2014

Original essay Here: http://www.vice.com/read/millions-of-cubans-may-lose-their-life-savings-this-year

“F___ing cops in Cuba are always busting everybody’s balls.”  A man mutters this to me in perfect English as I walk down the once-elegant Calle 23 in downtown Havana. He is the very last customer waiting in a Kafkaesque line that wraps around the block and doubles back on itself twice. The afternoon is stiflingly hot. Two police officers are hassling a nearby teenager because he took off his T-shirt.

“But that’s why things here are so safe,” the man continues, much louder this time. I’m confused until I realize another cop is standing behind me. He wandered over after spotting a Cuban nacional talking to me—an American gusano. “Very safe, very safe. You know, because the police do such a good job!”  The officer gives him a long, hard stare, then wanders away. I take my place at the end of the line next to my new buddy, who says his name is Yaniel.

Along with several hundred other Cubans, Yaniel and I are waiting to get into Coppelia, the iconic ice cream parlor created in 1966 by order of Fidel Castro and named for his then-secretary’s favorite ballet. Located across the street from the Habana Libre hotel, a one-time Hilton from which Fidel directed the revolution for three months in 1959, Coppelia has been called the “ultimate democratic ice cream emporium.” But, as I quickly find out, that isn’t exactly true.

coppelia-lineCoppelia on  la Rampa

When the Cubans around me spot a foreign tourist standing with them in the endless queue, they’re quick to inform me that the line we’re in is for people using Cuban Pesos—which is to say, most Cubans. As a woman in curlers and a tube top explains, people holding Convertible Pesos, the country’s other currency, aren’t forced to endure such Socialist indignities. Foreigners, like me, carry Convertible Pesos. She then points to a tiny building surrounded by a well-kept patio and leafy trees offering respite from the blistering mid-summer sun. There is no line at this Coppelia stand and, sitting in the shade are several happy, relaxed-looking people, enjoying their ice cream.

This, in a nutshell, is what having two currencies has done to the already dysfunctional Cuban economy for the past 20 years. The good news is that the government is finally attempting to fix it. The bad news is that millions of Cubans could lose their life savings in the process.

Kooks and Coops
Cuba is the only country on earth that prints two currencies. When the Soviet Union fell in the early 90s, Havana’s subsidies from the USSR were cut off. As a result, Cuba suffered a devastating 35 percent drop in its GDP. The situation on the ground was dire. In Con Nuestros Propios Esfuerzos (With Our Own Efforts), a 300-page volume of everyday survival strategies distributed in the early 90s by the publishing arm of the Revolutionary Armed Forces, Cubans were offered helpful instructions for how to make shampoo out of rum and “sausages” made of nylon stockings stuffed with seasoned grapefruit rind.

Desperate for hard currency, Fidel Castro grudgingly legalized use of the US dollar in 1993. People working in the tourism industry were allowed to earn—and keep—tips given to them in foreign currency. In addition, a resolution by the National Bank of Cuba permitted some Cuban citizens to own foreign currency; the list included government officials, artists and athletes paid overseas, airline and fishing vessel crews, and employees of foreign embassies or organizations.

Castro’s ultimate goal was to get greenbacks into the state’s coffers. In order to capture as many of the now-circulating dollars as possible, the Cuban government promptly opened a network of so-called “dollar stores,” which carried otherwise-impossible-to-find goods available only to people who used American dollars to pay for them. The Cuban government would purchase, say, cans of Pringles and bottles of Gatorade from American manufacturers thanks to a humanitarian loophole in the then-30-year-old US trade embargo. Then the government would sell the Pringles and Gatorade to citizens at a 240 percent markup. The state kept the profit.

However, the trade embargo made it all but impossible for the Cuban government to do much with their American dollars, especially after the US Federal Reserve fined Swiss bank UBS $100 million for its dealings with the regime. And so, in 2004, Fidel Castro once again outlawed the US dollar and popularized the Convertible Peso, or CUC, which had been in limited use since 1994. CUCs (pronounced “kooks”) are worth one US dollar, and are used primarily in domestic tourism and foreign trade. Cuban Pesos, or CUPs (pronounced “coops”), are worth 1/24th of one CUC—about four US cents—and are what the government uses to pay Cuban salaries. (The government owns just about everything in Cuba, and so nearly every Cuban is a government employee.) Doctors, who are employed by the national health system, earn a little less than 800 CUPs per month. That’s about $30.

Thus, in theory, a cabdriver who gets tipped by foreign tourists in CUCs can earn a cardiologist’s monthly income in a single shift. And since it’s against the law for anyone with a professional degree—doctors, lawyers, accountants, etc—to ply their trade in business for themselves, a domestic brain drain has decimated Cuba’s educated class.

“Basically, the incentive structure that shapes people’s behavior has become completely perverted and dysfunctional,” says economist Arch Ritter, a professor at Ottawa’s Carleton University who has been studying Cuba for almost 50 years.

People with access to CUCs live far more comfortably than those without. Buses that accept CUCs look like the ones you take to pick up your rental car at American airports. Buses that accept CUPs are Soviet-era, exhaust-belching beaters. Essentials like cooking oil and toiletries are easily purchased with CUCs, while CUP earners like Mario, a parking attendant I met one afternoon behind the Habana Libre hotel, ask tourists if they have extras. After I gave Mario a Right Guard Sport Stick and two bars of Irish Spring, he noted that we both have a 36-inch waist. So he asked for my belt.

Cuban President Raúl Castro has quite rightly called the dual currency “one of the major obstacles to the progress of the nation.” However, he has also said, “I was not chosen to be president to restore capitalism to Cuba. I was elected to defend, maintain, and continue to perfect socialism.” So it’s no surprise that the government has announced plans to split the difference and do away with the CUC while retaining its hold on industry and commerce in the country.

How do you eliminate an entire currency? Castro has released few details about how or even when Cuba intends to begin taking CUCs out of circulation. But Ritter explained it this way: “They’ve got to make people want to hold the CUP, through the forces of supply and demand. You increase the CUP’s demand by letting people use it to buy a wider variety of goods. Then, you also limit how many CUPs are available, so its value goes up. Likewise, you reduce demand for the CUC by increasing supply, which would, in time, bring its value lower.”

In Cuba, however, economic decisions aren’t made based on supply and demand, and “the market” as Adam Smith knows it does not exist. Instead, reforms are made with the stroke of a pen, so the government could simply, say, change the exchange rate between the CUC and the CUP from 24-to-1 to 12-to-1. This would instantly halve the life savings of countless Cubans who’ve spent two decades socking away CUCs, to say nothing of the Zimbabwe-like inflation that could strike the economy after such a move.

Or, the government may just take everyone’s savings outright. “My guess is that when the government does the reform, it will expropriate some part of the population’s wealth accumulated in CUCs,” says economist Daron Acemoglu, co-author of Why Nations Fail. “This is exactly the sort of expropriation that Argentina did.”

In the years following the collapse of Argentina’s economy in 2001, the government nationalized private pension funds, swiping roughly $24 billion of the citizenry’s money. Argentinians’ dollar-denominated bank accounts were frozen, and withdrawals were severely limited before everyone was forced to convert their savings into comparatively worthless pesos. The result were protests, a flood of court cases, violent riots, a worsening economic crisis, and a two-week period in which Argentina had five different presidents.

Raúl Castro has declared that the transition will not hurt holders of either CUCs or CUPs. But the concept of protecting individual wealth has no place in Cuba—a fact specifically stated in the Cuban Communist Party’s Lineamientos (Guidelines). And as Mauricio Claver-Carone, executive director of the right-leaning Cuba Democracy Advocates points out, the Cuban government could really use the money.

“The Castro regime seems to undertake these currency operations when it’s suffering from a hard-currency crisis,” he explains. “The anticipated currency swap is simply another episode in a long series of asset confiscations by the Castro regime.”

Expropriations and nationalizations of private property have occurred repeatedly since the beginning of the Castro era. People leaving the island in the early days of post-Revolutionary Cuba were forced to give up their property and assets in addition to their rights as citizens. Those who stayed were soon relieved of 42 percent of their wealth in a top-down currency revaluation. In recent years, the CUC has been devalued in pursuit of stabilizing government debt, and hard currency accounts have been periodically frozen and restricted when it has suited the regime.

The economy of Cuba’s main benefactor, Venezuela, is thought by many economists to be in the midst of collapse. Just as the Soviet Union’s was 20 years ago.

Mucho Resolver
Carlos, like 4.6 million of the 5 million people in Cuba’s labor force, works for the state. A lighting and set designer who lives in the “upscale” Vedado section of Havana, the 74-year-old has accompanied traveling Cuban theater and dance productions all over Latin America and Eastern Europe. The government pays Carlos relatively well for his work; he earns roughly what a doctor earns. Yet even though he is relatively privileged by comparison, Carlos’s monthly salary covers perhaps half a month’s worth of expenses. And so, displaying the optimistic, opportunistic trait known in Cuba as resolver, Carlos makes up for the shortfall by earning CUCs on the side.

Carlos runs a small bed-and-breakfast—known in Cuba as a casa particular—out of his art-deco townhouse. He rents out two rooms—he could rent more, but the government imposes limits on how many rooms can be occupied at once—and charges 30 CUCs a night per room (the authorities also set maximum room rates). On paper, this means Carlos can multiply his monthly salary several times with just a handful of bookings. The reality, however, is another story.

Over the course of the three nights I stay with him, Carlos explains how it works. He pays about 300 CUCs a month to the government for the right to run his casa, whether or not he rents a single room. In other words, Carlos needs to fill one bed for 10 nights a month just to break even with the government, to say nothing of his own expenses. Still, the fact that he’s even still in business means Carlos is ahead of the game. One woman I met selling salsa CDs along Calle 12 in Vedado told me she’d set up her home as a casa particular, but was forced to shut down after just two months because she’d gone broke paying the government fees.

Attracting guests presents a whole other set of challenges. Advertising in Cuba is against the law, and few people are permitted Internet access in their homes, making it all but impossible to attract tourists looking for accommodations. Carlos is among the lucky Cubans who has internet access in the form of an old HP laptop and creaky dial-up connection, allowing him to maintain a web page to market himself to tourists.

First legalized in 1997, casas particulares generate intense competition among Cubans eager for precious CUCs. Mercedes, a rheumatologist who rents me a room in her perfectly preserved colonial mansion in the touristy hamlet of Trinidad, has to contend with dozens of other nearby casas. But in addition to going head to head with each other, small-business owners like Mercedes and Carlos must also compete against Gaviota S.A., a government-run tourism operation overseen by members of Raúl Castro’s inner circle.

A division of the Cuban Revolutionary Armed Forces, Gaviota’s tens of thousands of hotel rooms across the island generate the equivalent of almost a billion dollars a year. The money goes directly to the government.

But the big hotels that divert business away from people like Carlos and Mercedes also give other people—housekeepers, bellhops, bartenders—the chance to obtain CUCs for themselves. And state-run entities (particularly ones with bars, restaurants, and plenty of cash on hand) offer opportunities for all manner of graft, theft, and other types of financial chicanery that make up a robust underground economy in Cuba. It’s impossible to put a dollar value on the amount of money that’s stolen or hidden from the state, but economist Arch Ritter estimates that at least 95 percent of Cubans do it.

Isoyen worked at a Soviet-built, Gaviota-run beach hotel on Cuba’s Caribbean coast until he was furloughed earlier this year. When I met him, he told me it wasn’t the loss of his CUP salary that he missed—it was the CUC tips he received from tourists. A college graduate, Isoyen can only use his accounting degree to work for “the people,” making self-employment in his chosen field an impossibility. Living with his parents makes running a casa impossible, so he plans to use his resolver—and the CUCs he socked away—to open an ice cream stand.

For the elderly docents working at Havana’s Museum of the Revolution, resolver means engaging in a bit of basic arbitrage. After showing me Che Guevara’s gun in a glass display case, one of them tries to sell me a three CUP note bearing Che’s likeness as a souvenir. She asks one CUC for the bill. That’s a tidy 88 percent profit.

The Long Con
Resolver can mean a lot of things.

“My friend! My friend!” someone calls out as I walk down Calle E my first morning in Havana. “Where you from, my friend?”

His name is Rafael, and he says he’s a medical student, though he seemingly fails to understand my English only when I ask about the specifics of his education. He’s bald and wiry, and he has a homemade 13 tattoo on the webbing between his right thumb and forefinger. I like him immediately.

Rafael claims to be a licensed tour guide. He even has an official-looking ID card pinned to his shirt. He charges me 20 CUCs—the equivalent of a month’s salary at a typical government job—for a two-hour walking tour in which he listlessly points out a few local sites like the Plaza de la Revolucion and the clinic where soccer legend Diego Maradona supposedly kicked his cocaine addiction in the early 2000s.

We then go to lunch (I pay for it) at a local cafe where Rafael manages to triple his tour fee. For starters, he collects a commission from the restaurant manager for bringing in foreigners with CUCs—and, as I find out later, Rafael’s clients are charged five CUCs for a mojito instead of the usual 24 CUPs, a 500 percent markup. Rafael also sells me a bundle of cigars that he describes as “special, only for Cubans,” for 35 CUC. He’s telling the truth—they aren’t for export. However, I also come to learn they sell to locals for 25 CUP per bundle. (That’s about 1/35th of what I paid.) For his final trick, Rafael gently talks me out of the Everlast speed bag and hand wraps I brought to donate to a local boxing gym, explaining that he would walk them over for me, as the place is “very hard to find.”

As we part ways, Rafael turns to me with an earnest look on his face. “My friend, please don’t tell anybody else this is your first day in Cuba,” he says. “They will take advantage of you.”

Trusting Raul
Cuban citizens hope that Raúl Castro will tackle financial reform as artfully as Cuban citizens tackle financial survival. But the historically awful performance of the Cuban economy under the tutelage of the Castros doesn’t inspire much confidence. Nonetheless, Ernesto Hernández-Catá, former Deputy Director of the International Monetary Fund, has hope.

“This is part of a reform movement orchestrated by a few brave people in the Cuban government,” Hernández-Catá tells me. “It has been accepted by Raúl, who is not a saint, to be sure. But whereas Fidel was a crazy ideologue, Raúl wants to leave behind an image of a guy who is sober, is reasonably intelligent, and wants to improve the lives of his countrymen.”

Whether it turns out to be a failure or a success, the general consensus in the West remains that, while monetary reform is a positive development, Cuba needs to overhaul its entire financial system from top to bottom before real change can take place. While Secretary of State John Kerry called Cuba’s latest slate of reforms a good start—on top of the economic liberalizations, Cubans can now travel outside the country without an exit visa—he said Havana must do more.

And, not surprisingly, Mauricio Claver-Carone of Cuba Democracy Advocates doesn’t see life improving much for Cubans. “The Castro regime will always end up capturing income made in Cuba, one way or another,” he says. “That’s the nature of totalitarianism.”

cadeca

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CELAC Summit in Cuba, the Challenges of Regional Integration

cumbre_celac2014

Original Havana Times translation from BBC Mundo: http://www.havanatimes.org/?p=101429

January 23, 2014 |

Fernando Ravsberg*

HAVANA TIMES — The Presidents of the Community of Latin American and Caribbean States (CELAC) meet in Havana Jan. 28-29 and, paradoxically, the meeting coincides with the 50th anniversary of the mass breaking off of diplomatic and economic relations of countries in the region with Cuba.

“It’s very symbolic ,” says Luis Suarez, a Cuban specialist in Latin America. He explains that “the restoration of relations with all nations of the region and the presence in this gathering of their Heads of State demonstrates clearly that the US failed in its policy of isolating us.”

To continue with the symbolism, coming to the event as a guest is the Secretary General of the Organization of American States (OAS), José Miguel Insulza. It will be the first official visit by a senior official of that entity to Cuba after his expulsion in 1962. “It is the first time in 200 years, the countries of Our America founded an organization at this level without being convened by the United States or Europe.”

Suarez points out that, despite this, Cuba “was the first country in Latin America that included the goal of integration in its Constitution. That vocation comes from the war for independence, when we had the support of citizens of several countries on the continent.” He explains the magnitude of the CELAC noting that “no other entity in the history of the region has joined so many nations,” adding that “it is the result of the existence of leftwing governments that seek to solve social problems and achieve more autonomy. In another context this would have been very difficult.”

Suarez said “the worst external and internal enemies of the CELAC are those who do not want us to have an organization of our own that allows us to reach out to the world with an consensus position. And the closest is the U.S. Pan-American policy.”

Suarez believes “the future of the regional organization will depend on the political consensus achieved for concrete actions that reach the ordinary citizen, in areas such as health or education, for example.” Luis Suarez “No other body in the history of the region has joined many nations” as CELAC.

In these and other subjects, such as coping with natural disasters, Cuba could play a key role. “The country has a vast experience in these areas and also has the necessary human resources to support such initiatives.”

“We even have a Latin American School of Medicine for Latin Americans; the Operation Milagro eye treatment program that has restored vision to millions of people of the continent, and we created the literacy teaching method “Yes I can” that has taught more than 3 million persons read and write,” explains Suárez .

The agenda of the Havana summit falls squarely on social issues but it remains to be seen what agreements are reached and which governments join them, because their application is not mandatory, “because CELAC is just a mechanism for dialogue and intergovernmental cooperation.”

It also aims to declare Latin America a “Zone of Peace”, an agreement that the Cuban specialist considered “extremely important because it implies that governments undertake to seek political and negotiated solutions, avoiding the use of force in the region.”

CELAC-2-Luis-SuarezProf. Luis Suarez

“The future of the regional organization will depend on political consultations that are achieved for concrete action to reach the ordinary citizen with social action.”

Furthermore, CELAC “can prevent others from using our conflicts to divide us, as they have done many times in the past.” If such an accord is reached it remains to be seen what would happen with the foreign military bases that exist today in Latin America.

Suarez believes that to achieve greater practical effectiveness CELAC should “integrate regional institutions such as SELA, the Latin American Economic System, ALADI, the Latin American Energy Organization, dedicated to integration, the Pan American Health Organization, and ECLAC.” He explains that “the institutional map of cooperation and integration is a swarm of interlocking agreements, overlapping and sometimes conflicting. The great contribution of CELAC is that everyone could now converge in the same forum.”

Luis Suarez reminds me that with the establishment of the Community of Latin American and Caribbean States “is the first time in 200 years, the countries of the Americas founded an organization at this level without being convened by the United States or Europe.”

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HUMAN RIGHTS WATCH, World Report 2014: CUBA

New Picture (10)

In 2010 and 2011, Cuba’s government released dozens of political prisoners on condition they accept exile in exchange for freedom. Since then, it has relied less on long-term prison sentences to punish dissent and has relaxed draconian travel restrictions that divided families and prevented its critics from leaving and returning to the island.

Nevertheless, the Cuban government continues to repress individuals and groups who criticize the government or call for basic human rights. Officials employ a range of tactics to punish dissent and instill fear in the public, including beatings, public acts of shaming, termination of employment, and threats of long-term imprisonment. Short-term arbitrary arrests have increased dramatically in recent years and routinely prevent human rights defenders, independent journalists, and others from gathering or moving about freely.

Arbitrary Detentions and Short-Term Imprisonment

The government continues to rely on arbitrary detention to harass and intimidate individuals who exercise their fundamental rights. The Cuban Commission for Human Rights and National Reconciliation—an independent human rights group the government views as illegal—received over 3,600 reports of arbitrary detentions from January through September 2013, compared to approximately 2,100 in 2010.

The detentions are often used preemptively to prevent individuals from participating in events viewed as critical of the government, such as peaceful marches or meetings to discuss politics. Many dissidents are beaten and threatened when detained, even if they do not try to resist.

Security officers virtually never present arrest orders to justify detentions and threaten detainees with criminal sentences if they continue to participate in “counterrevolutionary” activities. In some cases, detainees receive official warnings, which prosecutors may later use in criminal trials to show a pattern of delinquent behavior. Dissidents said these warnings aim to discourage them from participating in activities seen as critical of the government.

Victims of such arrests may be held incommunicado for several hours to several days. Some are held at police stations, while others are driven to remote areas far from their homes where they are interrogated, threatened, and abandoned.

On August 25, 2013, more than 30 women from the Damas de Blanco (Ladies in White)—a group founded by the wives, mothers, and daughters of political prisoners and which the government considers illegal—were detained after attending Sunday mass at a church in Santiago, beaten, forced onto a bus, and left at various isolated locations on the city’s outskirts. The same day, eight members of the group in Havana and seven more in Holguín were arbitrarily detained as they marched peacefully to attend mass.

Political Prisoners

Cubans who criticize the government may face criminal prosecution. They do not benefit from due process guarantees, such as the right to fair and public hearings by a competent and impartial tribunal. In practice, courts are “subordinated” to the executive and legislative branches, denying meaningful judicial independence. Political prisoners are routinely denied parole after completing the minimum required sentence as punishment for refusing to participate in ideological activities, such as “reeducation” classes.

The death of political prisoner Orlando Zapata Tamayo in 2010 after his 85-day hunger strike and the subsequent hunger strike by dissident Guillermo Fariñas pressured the government to release the remaining political prisoners from the “group of 75” (75 dissidents sentenced to long prison terms in a 2003 crackdown). Yet most were forced to choose between ongoing prison sentences and forced exile. The overwhelming majority accepted relocation to Spain in exchange for their freedom.

Dozens of political prisoners remain in Cuban prisons according to local human rights groups, which estimate that there are more political prisoners whose cases they cannot document because the government prevents independent national or international human rights groups from accessing its prisons.

Luis Enrique Labrador Diaz was one of four people detained in January 2011 for distributing leaflets in Havana with slogans such as “Down with the Castros” and was subsequently convicted in May 2011 for contempt and public disorder in a closed, summary trial. He was still in prison at time of writing.

Freedom of Expression

The government controls all media outlets in Cuba and tightly restricts access to outside information, severely limiting the right to freedom of expression. Only a tiny fraction of Cubans are able to read independent websites and blogs because of the high cost of and limited access to the Internet. A May 2013 government decree directed at expanding Internet access stipulates that it cannot be used for activities that undermine “public security, the integrity, the economy, independence, and national security” of Cuba—broad conditions that could be used to impede access to government critics.

A small number of independent journalists and bloggers manage to write articles for websites or blogs, or publish tweets. Yet those who publish information considered critical of the government are sometimes subject to smear campaigns, attacks, and arbitrary arrests, as are artists and academics who demand greater freedoms.

After jazz musician Roberto Carcasses called for direct elections and freedom of information in a nationally televised concert in Havana in September 2013, officials told him that his words benefitted “the enemy” and that he would be barred from performing in state-run venues. The government lifted the ban—widely reported in the international press—a week later. In May, the director of the government-run Casa de las Americas cultural institute, Roberto Zurbano, published an article in the New York Times highlighting persistent inequality and prejudice affecting Afro-Cubans. He was subsequently attacked in the government-controlled press and demoted to a lesser job at the institute.

Human Rights Defenders

The Cuban government refuses to recognize human rights monitoring as a legitimate activity and denies legal status to local human rights groups. Meanwhile, government authorities harass, assault, and imprison human rights defenders who attempt to document abuses.

Travel Restrictions and Family Separation

Reforms to travel regulations that went into effect in January 2013 eliminate the need for an exit visa to leave the island, which had previously been used to deny the right to travel to people critical of the government and their families. Nearly 183,000 people traveled abroad from January to September 2013, according to the government. These included human rights defenders, journalists, and bloggers who previously had been denied permission to leave the island despite repeated requests, such as blogger Yoani Sanchez.

Nonetheless, the reform establishes that the government may restrict the right to travel on the vague grounds of “defense and national security” or “other reasons of public interest,” which could allow the authorities to deny people who express dissent the ability to leave Cuba. The government also continues to arbitrarily deny Cubans living abroad the right to visit the island. In August, the Cuban government denied Blanca Reyes, a Damas de Blanco member living in exile in Spain, permission to travel to Cuba to visit her ailing 93-year-old father, who died in October before she could visit him.

The government restricts the movement of citizens within Cuba through a 1997 law known as Decree 217. Designed to limit migration to Havana, the decree requires that Cubans obtain government permission before moving to the country’s capital. It is often used to prevent dissidents traveling there to attend meetings and to harass dissidents from other parts of Cuba who live in the capital.

Prison Conditions

Prisons are overcrowded, unhygienic, and unhealthy, leading to extensive malnutrition and illness. More than 57,000 Cubans are in prisons or work camps, according to a May 2012 article in an official government newspaper. Prisoners who criticize the government or engage in hunger strikes and other forms of protest are subjected to extended solitary confinement, beatings, restrictions on family visits, and denial of medical care. Prisoners have no effective complaint mechanism to seek redress.

While the government allowed select members of the foreign press to conduct controlled visits to a handful of prisons in April, it continued to deny international human rights groups and independent Cuban organizations access to its prisons.

Key International Actors

The United States’ economic embargo of Cuba, in place for more than half a century, continues to impose indiscriminate hardship on the Cuban people and has done nothing to improve the country’s human rights. At the United Nations General Assembly in October, 188 of the 192 member countries voted for a resolution condemning the US embargo.

In 2009, President Barack Obama enacted reforms to eliminate restrictions on travel and remittances by Cuban Americans to Cuba put in place during the administration of President George W. Bush in 2004. In 2011, Obama used his executive powers to ease “people-to-people” travel restrictions, allowing religious, educational, and cultural groups from the US to travel to Cuba.

The European Union continues to retain its “Common Position” on Cuba, adopted in 1996, which conditions full economic cooperation with Cuba on the country’s transition to a pluralist democracy and respect for human rights.

Former US Agency for International Development contractor Alan Gross remained in prison despite a UN Working Group on Arbitrary Detention report in November 2012 that called for his immediate release. Gross was detained in Cuba in December 2009 and later sentenced to 15 years in prison for distributing telecommunications equipment to religious groups. The working group said Gross’s detention was arbitrary and that Cuba’s government had failed to provide sufficient evidence of the charges against him.

In May, Cuba underwent its second Universal Periodic Review at the UN Human Rights Council. Several countries expressed concern with repression of human rights defenders, increased arbitrary detentions, and lack of freedom of expression. Cuba rejected many of these recommendations on the grounds that they were “politically biased and built on false premises, resulting from efforts to discredit Cuba on the part of those who, with their hegemonic ambitions, refuse to accept the diversity and the right to freedom of determination of the Cuban people.”

In November, Cuba was re-elected to a seat on the UN Human Rights Council, defeating Uruguay for a regional position despite its poor human rights record and consistent efforts to undermine the council’s work to respond to human rights violators.

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Publication of the Papers from the 2013 Conference of the Association for the Study of the Cuban Economy

 

The proceedings of the Association for the Study of the Cuban Economy’s 23rd Annual Meeting entitled  “Reforming Cuba?” (August 1–3, 2013) is now available. The presentations have now been published by ASCE  at http://www.ascecuba.org/.

The presentations are listed below and linked to their sources in the ASCE Web Site.

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 Preface

Panorama de las reformas económico-sociales y sus efectos en Cuba, Carmelo Mesa-Lago

Crítica a las reformas socioeconómicas raulistas, 2006–2013, Rolando H. Castañeda

Nuevo tratamiento jurídico-penal a empresarios extranjeros: ¿parte de las reformas en Cuba?, René Gómez Manzano

Reformas en Cuba: ¿La última utopía?, Emilio Morales

Potentials and Pitfalls of Cuba’s Move Toward Non-Agricultural Cooperatives, Archibald R. M. Ritter

Possible Political Transformations in Cuba in the Light of Some Theoretical and Empirically Comparative Elements, Vegard Bye

Las reformas en Cuba: qué sigue, qué cambia, qué falta, Armando Chaguaceda and Marie Laure Geoffray

Cuba: ¿Hacia dónde van las “reformas”?, María C. Werlau

Resumen de las recomendaciones del panel sobre las medidas que debe adoptar Cuba para promover el crecimiento económico y nuevas oportunidades, Lorenzo L. Pérez

Immigration and Economics: Lessons for Policy, George J. Borjas

The Problem of Labor and the Construction of Socialism in Cuba: On Contradictions in the Reform of Cuba’s Regulations for Private Labor Cooperatives, Larry Catá Backer

Possible Electoral Systems in a Democratic Cuba, Daniel Buigas

The Legal Relations Between the U.S. and Cuba, Antonio R. Zamora

Cambios en la política migratoria del Gobierno cubano: ¿Nuevas reformas?, Laritza Diversent

The Venezuela Risks for PetroCaribe and Alba Countries, Gabriel Di Bella, Rafael Romeu and Andy Wolfe

Venezuela 2013: Situación y perspectivas socioeconómicas, ajustes insuficientes, Rolando H. Castañeda

Cuba: The Impact of Venezuela, Domingo Amuchástegui

Should the U.S. Lift the Cuban Embargo? Yes; It Already Has; and It Depends!, Roger R. Betancourt

Cuba External Debt and Finance in the Context of Limited Reforms, Luis R. Luis

Cuba, the Soviet Union, and Venezuela: A Tale of Dependence and Shock, Ernesto Hernández-Catá

Competitive Solidarity and the Political Economy of Invento, Roberto I. Armengol

The Fist of Lázaro is the Fist of His Generation: Lázaro Saavedra and New Cuban Art as Dissidence, Emily Snyder

La bipolaridad de la industria de la música cubana: La concepción del bien común y el aprovechamiento del mercado global, Jesse Friedman

Biohydrogen as an Alternative Energy Source for Cuba, Melissa Barona, Margarita Giraldo and Seth Marini

Cuba’s Prospects for a Military Oligarchy, Daniel I. Pedreira

Revolutions and their Aftermaths: Part One — Argentina’s Perón and Venezuela’s Chávez, Gary H. Maybarduk

Cuba’s Economic Policies: Growth, Development or Subsistence?, Jorge A. Sanguinetty

Cuba and Venezuela: Revolution and Reform, Silvia Pedraza and Carlos A. Romero Mercado

Mercado inmobiliario en Cuba: Una apertura a medias, Emilio Morales and Joseph Scarpaci

Estonia’s Post-Soviet Agricultural Reforms: Lessons for Cuba, Mario A. González-Corzo

Cuba Today: Walking New Roads? Roberto Veiga González

From Collision to Covenant: Challenges Faced by Cuba’s Future Leaders, Lenier González Mederos

Proyecto “DLíderes”, José Luis Leyva Cruz

Notes for the Cuban Transition, Antonio Rodiles and Alexis Jardines

Economistas y politólogos, blogueros y sociólogos: ¿Y quién habla de recursos naturales? Yociel Marrero Báez

Cambio cultural y actualización económica en Cuba: internet como espacio contencioso, Soren Triff

From Nada to Nauta: Internet Access and Cyber-Activism in A Changing Cuba, Ted A. Henken and Sjamme van de Voort

Technology Domestication, Cultural Public Sphere, and Popular Music in Contemporary Cuba, Nora Gámez Torres

Internet and Society in Cuba, Emily Parker

Poverty and the Effects on Aversive Social Control, Enrique S. Pumar

Cuba’s Long Tradition of Health Care Policies: Implications for Cuba and Other Nations, Rodolfo J. Stusser

A Century of Cuban Demographic Interactions and What They May Portend for the Future, Sergio Díaz-Briquets

The Rebirth of the Cuban Paladar: Is the Third Time the Charm? Ted A. Henken

Trabajo por cuenta propia en Cuba hoy: trabas y oportunidades, Karina Gálvez Chiú

Remesas de conocimiento, Juan Antonio Blanco

Diaspora Tourism: Performance and Impact of Nonresident Nationals on Cuba’s Tourism Sector, María Dolores Espino

The Path Taken by the Pharmaceutical Association of Cuba in Exile, Juan Luis Aguiar Muxella and Luis Ernesto Mejer Sarrá

Appendix A: About the Authors

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La reforma monetaria en Cuba hasta el 2016: entre gradualidad y “big bang”

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Ensayo original: Monetary Reform Cuba 2016

Dr. Pavel Vidal Alejandro, Universidad Javeriana Cali y Dr. Omar Everleny Pérez Villanueva, Centro de Estudios de la Economía Cubana, Universidad de la Habana

 In La Reforma Monetaria en Cuba Hasta el 2016: Entre Gradualidad y “Big Bang (Monetary Reform in Cuba Until 2016: Between Gradualism and the “Big Bang”), Pavel Vidal Alejandro and Omar Everleny Pérez Villanueva analyze the benefits and costs of the eventual devaluation of the official exchange rate for the Cuban peso, the main measure the Cuban government will employ to achieve the goal of monetary unification in 2016. Possible policy responses and alternatives regarding devaluation of the exchange rate are evaluated. The authors conclude that, as far as is possible, the best strategy for the Cuban currency reform is a gradual devaluation and not the application of a “big bang” approach. However, given the huge gap between the multiple exchange rates, sharp depreciation in the value of the Cuban peso will be required at times.

 Este ensayo fue preparado para ser presentado en una serie de talleres de expertos sobre el cambio económico Cubano visto desde una perspectiva comparativa, organizado por la Iniciativa Latinoamérica en el programa de Políticas del Exterior de la Institución Brookings, y el Centro de Estudios de la Economía Cubana y el Centro de Investigaciones de la Economía Internacional en la Universidad de la Habana. Fue presentado inicialmente en un seminario de expertos en Havana, Cuba el 26 de septiembre del 2013 y fue revisado posteriormente. Los ensayos preparados por esta serie serán recopilados y publicados por Brookings en el 2014. Este ensayo refleja solamente las opiniones de los autores.

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Pavel Vidal y Omar Everleny Pérez

 

 

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Exchange Rate Unification: The Cuban Case

New Picture (5)Exchange Rate Unification: The Cuban Case

By: Alain Ize and Augusto de la Torre

 In Exchange Rate Unification: The Cuban Case, Augusto de la Torre and Alain Ize take an international perspective in examining the challenges Cuba faces in unifying its exchange rate, and compare various options to meet this objective.

Since 2011, the Cuban authorities have placed exchange rate unification as one of their top policy priorities. Indeed, the current dual exchange rate system—whereby a one-to-one exchange rate for the “convertible peso” coexists with a twenty four-to-one exchange rate for the “Cuban peso” (both against the U.S. dollar)—introduces severe and pervasive distortions with costly consequences for resource allocation and the growth potential of the Cuban economy. At the same time, the unusually large (by international comparison) spread between the two exchange rates exacerbates the transition costs and thus constitutes one of the main reasons delaying their unification.

De la Torre and Ize argue in favor of a fast unification approach, cushioned during a pre-announced transition period by lump-sum taxes and subsidies applied on an enterprise-by-enterprise basis. By allowing for relative price changes to operate in full from the start, the immediate unification would maximize efficiency gains. At the same time, by cushioning the Cuban economy from potentially large transitional pains—including fiscal revenue losses, productive dislocations, inflationary outbursts and distributional effects—the lump-sum taxes and subsidies (to be gradually phased out) would ease the transition, thereby boosting policy credibility. However, to ensure the viability of the scheme and the rapid materialization of the efficiency gains, important habilitating reforms would be needed, particularly regarding the governance of state enterprises.

Este ensayo fue preparado para ser presentado en una serie de talleres de expertos sobre el cambio económico Cubano visto desde una perspectiva comparativa, organizado por la Iniciativa Latinoamérica en el programa de Políticas del Exterior de la Institución Brookings, y el Centro de Estudios de la Economía Cubana y el Centro de Investigaciones de la Economía Internacional en la Universidad de la Habana. Fue presentado inicialmente en un seminario de expertos en Havana, Cuba el 26 de septiembre del 2013 y fue revisado posteriormente. Los ensayos preparados por esta serie serán recopilados y publicados por Brookings en el 2014. Este ensayo refleja solamente las opiniones de los autores.

 

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Reforms in Cuba: Seat belt, mirrors, brake; The road to capitalism does not run smooth

Reforms in Cuba

The Economist., Jan 11th 2014 | Havana

Original here: http://www.economist.com/news/americas/road-capitalism-does-not-run-smooth

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’52 Dodge  going down La Rampa;alongside the Havana Libre Hotel, Photo by Arch Ritter, 2011

WHEN the Cuban government said in December that it intended to let the population buy modern cars without requiring permits, many suspected there would be a catch. They were right.

The cars, which can only be bought through state-owned suppliers, cost a fortune. A 2013 Peugeot 508, marketed in Europe as an affordable saloon car costing around $30,000, has a price tag of more than a quarter of a million dollars at a rundown showroom in Havana. A Chinese Geely, with more than 80,000 kilometres (50,000 miles) on the clock, is on sale for around $30,000. The average salary in Cuba is less than $20 a month. “What do they think they are selling? Aeroplanes?” jokes Erik, a handyman, as he looks at the price-list. “They don’t want to sell any cars. It’s all a show,” agrees Ernesto, a mechanic.

The prices certainly seem designed to deter purchasers. Some even wondered whether there had been a clerical error and prices had been listed in Cuban pesos, Cuba’s local currency, which is worth 24 times less than the dollar-pegged convertible peso (CUC). Another theory is that the high prices are a preview of a widely predicted devaluation of the CUC as part of the government’s commitment to unify the island’s two currencies.

A further explanation may lie in the immediate effect of the reform: the elimination of a thriving black-market trade in the permits to buy new cars. For decades these have been awarded to valued individuals such as exceptional party workers, sports stars and artists. But they had more recently become a currency themselves, swapping hands for around $12,000 each. The government says that those with permits will be first in line to buy new cars—a dubious benefit given that many have quadrupled in price since the reform.

“There could hardly be a stronger signal that this remains a controlled economy,” says one Havana-based diplomat. Since taking over as president from his brother Fidel in 2008, Raúl Castro has taken some steps to reduce the state’s economic role. He has allowed small-scale self-employment, permitted Cubans to buy houses and given private farmers more autonomy to grow and sell their produce. But he has always insisted such reforms will be “without haste”. Now there are signs that he is deliberately slowing things down.

On January 1st, the 55th anniversary of the revolution, Mr Castro gave a speech in Santiago, Cuba’s second-largest city. He made no mention of further reform, instead castigating unnamed foreign groups for attempting to introduce “neoliberal” and “neocolonial” thinking.

That day the government also enacted a law banning the resale of clothes imported from abroad. The trade of “tailor and dressmaker” is one of around 200 private occupations that were officially permitted in 2010. Since then thousands of entrepreneurs have stretched its definition, setting up small clothing stores stocked with brands from Europe and the United States.

The clothes are often imported in suitcases by Cuban travellers taking advantage of another reform, which eliminated the requirement for a permit to travel. Eva, a 27-year-old from Havana, says that since 2011 she has been flying to Madrid every two months to stock up her fashion store in the back of her apartment. Now she says she will close her business. “Every time we start to breathe a little, we know the government’s grip will soon tighten.”

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Claes Brundenius and Ricardo Torres Pérez (Editors), No More Free Lunch: Reflections on the Cuban Economic Reform Process and Challenges for Transformation.

Claes Brundenius and Ricardo Torres Pérez have recently produced a volume of essays on Cuba’s economic reform process entitled  No More Free Lunch: Reflections on the Cuban Economic Reform Process and   Challenges for Transformation and published by Springer; Publishers. (2014. Hardcover: pp. 250;  ISBN-10: 3319009176 )

This note does not constitute a Review of the book as one of the chapters was written by me. Instead, this is meant as a Presentation of the volume. As can be seen from the Table of Contents, the book includes analyses on a number of the central issues confronting Cuba’s economic reform process.

The publisher’s Web Site and the page for the book are located here: http://link.springer.com/book/10.1007/978-3-319-00918-6#

The Front Matter is available here: http://download.springer.com/static/pdf/355/bfm%253A978-3-319-00918- 6%252F1.pdf?auth66=1389296888_83e5a5a86df2ed875567195285979ec2&ext=.pdf

 Table of Contents

 Chapter 1        Introduction, Claes Brundenius Lund University and Ricardo Torres Pérez, University of Havana

Chapter 2        Structural Problems and Changes in Cuba’s Economic Model, Ricardo Torres Pérez, University of Havana

Chapter 3        The Economic Transformation Process after 2011, Oscar Fernandez Estrada University of Havana

Chapter 4        Current Problems in the Cuban Economy and Necessary Reforms, Mauricio de Miranda, Pontifica Universidad Javeriana Cali, Colombia

Chapter 5        Monetary and Financial Challenges in Cuba: Lessons from Vietnam, Pavel Vidal, University of Havana

Chapter 6        Food Production and Import Substitution in the Cuban Reform Process, Anicia García, University of Havana

Chapter 7        Cuba’s ‘Apertura’ to Small Enterprise,  Archibald Ritter, Carleton University

Chapter8.        Innovation,  Entrepreneurship and SMEs: What Cuba can Learn from the Vietnamese Reform Process, Claes Brundenius, Lund University and Le Dang Doanh, University of Hanoi

Chapter 9.       Science, Technology, Innovation Policies and the Innovation System in Cuba: Assessment and Prospects, Jorge Nunez Jover and Luis F. Montalvo Arriete, University of Havana

Chapter 10      Foreign Direct Investments in Cuba and Vietnam: Lessons Learned, Omar Everleny Perez Villanueva, University of Havana

Chapter 11      Non-State Socially Responsible Enterprise: Local Development: The Key to Inclusive Economic Growth in Cuba, Julia Sagebien, Dalhousie University and Rafael Betancourt, University of Havana

Chapter 12      Concluding Reflections on the Current Reforms,  Ricardo Torres Pérez, University of Havana

Chapter 13      Moving from Reacting to an External Shock: Towards Shaping an new Conception of Cuban Socialism, Juan Triana Cordovi, University of Havana

Chapter 14      Without Sugarcane there is No Cuba: What Should We Do Now?, Pedro Monreal Gonzalez, UNESCO, Jamaica

Chapter 15      Reflections on the Cuban Model and the reform Process, Claes Brundenius Lund University

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From the Back Cover

In September 2010, the Cuban government decided to embark on an economic reform program, unprecedented after the Revolution in 1959. This opened up opportunities for Cuban economists and scholars to participate in the development of the reform program. Thanks to grants from SSRC (Social Sciences Research Council, New York) and the Norwegian Ministry of Foreign Affairs, several researchers from the Cuban think tank CEEC (Center for Studies of the Cuban Economy, Havana) got an opportunity to visit countries that could be of interest for the reform process, notably Vietnam, but also Brazil, South Africa and Norway.

The result of these field visits and a subsequent workshop involving contributions from Cuban as well as non-Cuban scholars, this volume showcases unprecedented new insights into the process and prospects for reform along many dimensions, including foreign direct investment, import substitution, entrepreneurship and business creation, science and technology development, and fiscal policies. The resulting analysis, in a comparative perspective, provides a framework for future research as well as for business practice and policymaking.

About the Authors

Claes Brundenius is Honorary Professor at the Research Policy Institute (RPI), Lund University, Sweden. He holds a PhD in Economic History from Lund University. Before joining the staff at RPI he was attached to the OECD Directorate for Scientific Affairs in Paris. He has been a Guest Professor at Pittsburgh University (1984) and Smith College (1987), USA. Between 1997 and 2003 he was Senior Researcher at the Centre for Development Research in Copenhagen. His main interest is research and policy studies on the role and impact of Science, Technology and Innovation policies and strategies in developing countries. His current work has focused on policy analysis of technological change and knowledge based development in developing and transition economies, notably in Latin America and the Caribbean, East Asia, and Southern Africa (SADC). His latest book (co-editor with Bo Göransson) is Universities in Transition – The Changing Role and Challenges for Academic Institutions (Springer, New York, 2011).

Ricardo Torres Pérez holds a PhD in Economic Sciences from the University of Havana. He is currently associate professor with the Centro de Estudios de la Economía Cubana (CEEC) at the University of Havana. He was a government scholar at Hitotsubashi University in Japan (2007-2009) and visiting researcher at Harvard University and the Ohio State University (2012). He has published in the Harvard International Review and has chapters in several books, including “Cincuenta años de la economía cubana” (Editorial Ciencias Sociales, Havana, 2010) and “Cuba: hacia una estrategia de desarrollo para los inicios del siglo XXI” (Editorial Universidad Javeriana de Cali, 2012).

 

 

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