• 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.

Stephen Purvis, Wrongfully Accused of Spying and Fraud: Letter to the Economist

From The Economist, August 13, 2013

“Dear Editor,

I enjoyed reading about my misfortunes in the Economist, albeit many months after publication and in the company of fellow inmates in the Cuban high security prison, La Condesa. I would ask you to correct the impression that you give in the May 9th 2012 edition and subsequent articles that I was accused and detained for corruption.

During my 8 month interrogation in the Vila Marista I was accused of many things, starting with revelations of state secrets, but never of corruption. After a further 7 months held with a host of convicted serious criminals and a handful of confused businessmen, most of whom were in a parallel predicament to mine, I was finally charged and sentenced for participating in various supposed breaches of financial regulations. The fact that the Central bank had specifically approved the transactions in question for 12 years, and that by their sentencing the court has in effect potentially criminalised every foreign business investing or trading in Cuba was considered irrelevant by the judges. I am thankful however that the judges finally determined that my sentence should not only have with a conditional release date a few days before the trail thus conveniently justifying my 15 months in prison, but, bizarrely was to be non-custodial. So my Kafkaesque experience at the sharp end of Cuban justice ended as abruptly as it began.

I spent time with a number of foreign businessmen arrested during 2011 and 2012 from a variety of countries, although representatives from Brazil, Venezuela and China were conspicuous in the absence. Very few of my fellow sufferers have been reported in the press and there are many more in the system than is widely known. As they are all still either waiting for charges, trial or sentencing they will certainly not be talking to the press. Whilst a few of them are being charged with corruption many are not and the accusations range from sabotage, damage to the economy, tax avoidance and illegal economic activity. It is absolutely clear that the war against corruption may be a convenient political banner to hide behind and one that foreign governments and press will support. But the reasons for actively and aggressively pursuing foreign business are far more complicated.  Why for example is the representative of Ericsson in jail for exactly the same activities as their Chinese competitor who is not? Why for example was one senior European engineer invited back to discuss a potential new project only to be arrested for paying technical workers five years ago when he was a temporary resident in Cuba?

You interpret the economic liberalisation evident at street level as an indication of a desire for fundamental change. It is true that these reforms are welcomed, especially the dramatic increase in remittance flows that have injected fresh hard currency into the bottom strata of a perennially cash strapped economy. But until the law relating to foreign investment and commerce is revised and the security service changes its modus operandi for enforcing these laws, Cuba will remain extremely risky for non-bilateral foreign business and foreign executives should be under no illusion about the great personal risks they run if they chose to do business there.  As businessmen emerge from their awful experience and tell their individual stories perhaps the real reasons for this concerted attack against business’s and individuals that have historically been friends of Cuba will become a bit clearer. In the meantime your intrepid reporters could usefully investigate the individuals and cliques who are benefitting from the market reorganization and newly nationalized assets resulting from this “war on corruption”.

Yours faithfully, Stephen Purvis”

Stephen Purvis and Family after his return to Britain

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

The complete analysis is available here: “Cuba, the Soviet Union, and Venezuela:  A Tale of Dependence and Shock.”   September 2013

Introduction

Recently there have been several estimates of Venezuelan economic assistance to Cuba—for example by Lopez (2012) and Mesa-Lago (2013). My latest estimates suggest that payments from Venezuela increased rapidly during the first decade of the XXI century and peaked at almost 19% of Cuba’s GDP) in 2009. They declined over the following two years but remained quite large: I estimate Venezuelan assistance in 2011 (the last year for which the required data are available) at just over $7 billion, or 11 % of Cuba’s GDP. These numbers are large, and they have invited comparisons with Soviet assistance to Cuba in the late 1980s. It has been implied that the adverse effect on Cuba’s real GDP of ending Venezuelan aid would be similar in size to the devastating impact of the elimination of Soviet aid in 1990. This is almost certainly wrong.

Conclusion

The analysis presented in this paper indicates that a complete cancellation of Venezuelan assistance to Cuba would cause considerably less damage than the elimination of Soviet assistance in the early 1990s, with the fall in real GDP estimated at somewhere between 7% and 10%, compared to 38% after the breakdown of Cuban/Soviet relations. Moreover, if the Cuban government were to avoid the policies of   subsidization and inflationary finance pursued in the post-Soviet period, the post-Venezuelan contraction would be at the lower end of the range or approximately 7%.

This is still a lot, however. To be sure, the danger of a sudden elimination of aid inflows has diminished considerably since the Venezuelan election of April 2013. Nevertheless, the prospect of a more gradual reduction in aid remains likely given Venezuela’s economic difficulties. In that case, the effect would be a reduction in the growth of the Cuban economy spread over several years, rather than a sudden contraction of output. Furthermore, current efforts to obtain financing at non-market terms from other countries, like Algeria, Angola and Brazil, would, if successful, diminish the magnitude of the shock. But it would perpetuate dependence and delay the needed adjustment.

The only way to diminish the pain of reduced income and consumption would be a decisive effort to expand Cuba’s productive capacity by intensifying the reform process. The list of required actions is familiar to all: liberalize prices, unify the exchange rate system, dismantle exchange and trade controls, stop the bureaucratic interference with non-state agricultural producers, continue efforts to downsize employment in the state sector, and increase substantially the list of activities opened to the private sector, including (why not?) doctors, nurses, teachers and athletes. Private clinics and schools would pop up, consultancy services would flourish, and the baseball winter leagues would come back to life.

 Karl Marx (1852) credited Hegel with the idea that history repeats itself twice. Unfortunately for him, he added: the first time as a tragedy, the second time as a farce”. This is not necessarily true. Often the second time is also a tragedy, as when the West gave Eastern Europe to Stalin at Yalta, less than a decade after giving it to Hitler in Munich. And why couldn’t the second time be an epiphany? Cuba’s rulers now have a historic opportunity to allow people to improve their own standard of living, and to stop wasting resources to keep the faded and sinister red banner afloat. Without a doubt, history will absolve them if they take that chance. And then, perhaps, Cuba will be allowed to replace its politically inspired dependence on doubtful friends with free, mutually beneficial trade with all nations.

Ernesto Hernandez-Cata was born in Marianao, Havana, Cuba in 1942. He holds a License from the Graduate Institute of International Studies in Geneva, Switzerland; and a Ph.D. in economics from Yale University. For about 30 years through, Ernesto Hernandez-Cata worked for the International Monetary Fund where he held a number of senior positions. When he retired from the I.M.F. in July 2003 he was Associate Director of the African Department and Chairman of the Investment Committee of the Staff Retirement Plan. Previously he had served in the Division of International Finance of the Federal Reserve Board. From 2002 to 2007 Mr. Hernandez-Cata taught economic development and growth at the Paul Nitze School of Advanced International Studies of the University of Johns Hopkins. Previously he had taught macroeconomics and monetary policy at The American University.

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Yoani Sánchez al 17 ª Conferencia Anual Fórum 2000 del 15 a 17 de septiembre de 2013 en Praga,

Yoani Sanchez Presentation to Forum 2000 in Prague, September 2013

Buenas noches:

Hace ya más de una década cayó en mis manos por primera vez el libro de Vaclav Havel “El poder de los sin poder”. Venía forrado con una página del periódico oficial de mi país, del diario del Partido Comunista de Cuba. Forrar los libros era una de las tantas formas en que escondíamos de la vista de informantes y policías políticos los textos incómodos y prohibidos por el gobierno. De esa manera habíamos estado leyendo en el clandestinaje las historias de lo sucedido con la caída del muro de Berlín, del fin de la Unión Soviética, la transformación checa y todos los otros sucesos de Europa del Este. Sabíamos de todas esas transiciones, algunas más traumáticas, otras más exitosas y muchos soñábamos con que la transición llegaría pronto a nuestra Isla en el Caribe, sometida por más de cinco décadas a un totalitarismo. Pero las transiciones más que añorarlas, hay que construirlas. Los procesos de cambio no llegan solos, los ciudadanos tienen que provocarlos.

Hoy estoy aquí, justo en la ciudad donde nació Vaclav Havel ese hombre que resume como pocos el espíritu de la transición. Estoy además frente a muchas personas que han impulsado, fomentado y personificado el deseo de cambio de sus respectivas sociedades. Porque la búsqueda de horizontes de mayor libertad, es un componente esencial de la naturaleza humana. Por eso se vuelve tan retorcidos y anti naturales esos regímenes que intentan perpetuarse sobre sus pueblos, inmovilizarlos, quitarles el deseo de soñar con que el futuro deberá ser mejor.

En la época que le correspondió a Vaclav Havel, a Lech Walesa y a tantos otros disidentes de los regímenes comunistas, fueron efectivos los métodos de la lucha pacífica, sindical, hasta la creación artística se puso en función del cambio. Ahora ha venido en nuestro auxilio también la tecnología. Cada vez que utilizo un teléfono móvil para denunciar un arresto o escribo en mi blog sobre la difícil situación de tantas familias cubanas, pienso cómo habrían ayudado estos artilugios de teclas y pantallas a los activistas de décadas anteriores. Cuán lejos hubieran podido llegar sus voces y proyectos de haber contado con las redes sociales y todo el ciberespacio que se abre hoy ante nuestros ojos. La WEB 2.0 ha sido, sin dudas, un impulso para ese espíritu de transición que habita en el interior de todos nosotros.

Hoy está aquí por primera vez en el Forum 2000 una pequeña representación de activistas cubanos. Después de décadas de encierro insular en que el régimen de nuestro país impedía a muchos disidentes, periodistas independientes y bloggers alternativos viajar al extranjero, hemos logrado la pequeña victoria de que nos abran el cerrojo de las fronteras nacionales. Es una victoria limitada, incompleta, porque todavía faltan muchas otras. La libertad de asociación, el respeto a la libre opinión, la capacidad de elegir por nosotros mismos a quienes nos representen, el fin de esos actos de odio llamados mítines de repudio que aún persisten en las calles cubanas contra los que piensan diferente a la ideología en el poder. Sin embargo, muchos sentimos que Cuba está en transición. Una transición que está ocurriendo de la manera más irreversible y aleccionadora: desde el interior del individuo, en la conciencia de un pueblo.

En esa transición habrán influido muchos de ustedes. Muchos de ustedes que han llegado primero a la libertad y han comprobado que no es el final del camino, sino que la libertad trae nuevos problemas, nuevas responsabilidades, nuevos retos. Ustedes que en sus respectivos países mantuvieron vivo el aliento del cambio, incluso poniendo en riesgo sus nombres y sus vidas.

Como el espíritu de la transición contenido en aquel libro de Vaclav Havel, forrado –para enmascararlo- con las páginas del periódico oficial más inmovilista y reaccionario que puedan imaginar. Como aquel libro, la transición puede prohibirse, censurarse, ser decretada casi una mala palabra, postergarse y satanizarse… pero siempre llegará.

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Oscar Espinosa Chepe

Miriam Leiva and The The Cuba Central Team on Oscar Espinosa Chepe

From The Cuba Central Team, original here:http://www.democracyinamericas.org/blog-post/vigil-in-madrid-some-thoughts-about-oscar-and-miriam/

Dear Friends:

“I expect the end to come soon.”

Miriam Leiva wrote these words about her husband, Oscar Espinoza Chepe, whose long struggle against liver disease seems near its end in Hospital Fuenfría near Madrid in Spain.  As we read her message, we were reminded why we respect this couple so much.

They just like to tell the truth as they see it. 

Their candor made some people in Havana and Miami very uncomfortable.  Three years ago, Oscar referred to hardliners in both cities as “The Taliban.”  This may explain why Oscar and Miriam are rarely mentioned by the embargo’s biggest supporters in Washington, because their views never fit so neatly into the hardliner’s black-and-white definition of what constitutes “dissent.”

Oscar Espinosa Chepe, an economist and independent journalist, fell from grace in Cuba more than once. In the 1960s, after serving as an economist for Fidel Castro, he was sent to work in the fields after he expressed negative views about the economic situation in his country. 

In the 1980s, Oscar, back in favor and working as an economic counselor, served for three years in Eastern Europe with Miriam, then a member of Cuba’s foreign service, just as perestroika was beginning to take hold.  But, upon their return to Cuba for a vacation, they were told they could not go back to Europe.  Instead, Oscar was assigned to work at the National Central Bank of Cuba. 

In 1992, they were called to a meeting where Oscar was called out as “counter-revolutionary.” For the next twenty years, he and Miriam were devoted activists, though, as Oscar said, “We expressed our views in a pacific way.”

Oscar was arrested with 74 others in Cuba’s March 2003 crackdown.  Sentenced to twenty years, Oscar left prison after twenty months, released on a temporary medical parole; at any time, authorities could have ruled he was no longer sick and returned him to custody.  

Nevertheless, upon leaving custody, Oscar resumed speaking his mind.  While he praised President Raúl Castro’s economic reforms as sensible and rational if incomplete, he was sharply critical of officials inside the system who were obstacles to change, and criticized those who saw private property as incompatible with social justice.  

He chastised the government for failing to reciprocate President Obama’s “gestures,” the reforms on family and people-to-people travel.  He expressed his bewilderment at the imprisonment at Alan Gross and thought he should be set free.

This record of speaking out could have endeared Oscar to sanctions supporters in Miami except for his unshirted contempt for those he called ”Hardliners for Castro.” He believed their support of sanctions kept Cubans hostage to their dreams of returning to power in a Cuba that last existed during Batista’s reign in the 1950s.  He resented their attacks on Cuba’s Catholic Church, which was instrumental in freeing the remaining prisoners arrested in 2003, along with many others. 

In his statement opposing travel restrictions offered by Rep. Mario Díaz-Balart, Oscar said: “If the policies proposed for Cuba by the hardliners had been maintained for Eastern Europe and China, we would possibly still have a Berlin Wall and the heirs of the Gang of Four would still govern China.”

Oscar and Miriam, in their work together, were motivated by a spirit of reconciliation that included everyone; even those who took no personal risks, but sat in air conditioned offices far from Cuba and questioned their credibility as political activists.  Instead, they chose to believe that all Cubans could work together, that families could reunite, and that “all animosity prevailing in our country since March 10, 1952 can be overcome.” 

Earlier this year, a medical crisis led them to depart Cuba for Spain, so Oscar could receive what Miriam then called “urgent” medical attention for his chronic liver failure.

Another truth Oscar never left unspoken was his love for Miriam, especially when he recalled the vigils she organized with other spouses and family members of the 75 detainees.  He once said of her: “She is modest. She is brave, especially as demonstrated by her actions while I was in prison.”  Whether he was in Guantanamo or Santiago de Cuba, “she was there.”

Now, on another vigil, Miriam is there for Oscar again.  By posting updates on Facebook and a blog, Reconciliación Cubana, she has made it possible for us to accompany her on this sad, respectful, journey that she hopes will end soon.

Muy Grave Oscar Espinosa Chepe en Madrid

Oscar Espinosa Chepe, economista y periodista independiente, prisionero de conciencia de los 75, condenado a 20 años de cárcel durante la Primavera Negra de 2003, con licencia extrapenal ¨hasta que recupere su salud¨, 

Chepe llegó a Madrid el 12 de marzo para recibir asistencia médica a su grave dolencia crónica del hígado, exacerbada durante la permanencia en el Cuartel General de la Seguridad del Estado ¨Villa Marista¨, la Prisión Provincial de Guantánamo, Boniatico en la Prisión de Boniato en Santiago de Cuba y la cárcel de máxima seguridad Combinado del Este en La Habana, con estancias en los hospitales de esas provincias por difíciles gestiones de la familia e internacionales.

Su firme propósito era regresar a Cuba tan pronto como mejorara su precario estado físico, para el cual no había mayores tratamientos médicos en Cuba, que los proporcionados durante varios ingresos en el Hospital Manuel Fajardo y en el Centro de Cirugía de Mínimo Acceso en La Habana. Con ese fin, el gobierno de España ha propiciado la atención médica en el Hospital Puerta de Hierro de Majadahonda, con la asistencia del Cardenal Jaime Ortega, a los cuales agradece su apoyo, así como a la Comunidad de Madrid, los médicos y personal sanitario, amigos españoles, de otras nacionalidades y cubanos.

Sin embargo, la especializada atención en el moderno Hospital Puerta de Hierro no ha podido revertir el curso de la enfermedad, por lo que en estos momentos Chepe se encuentra en muy grave estado, con su esposa en Madrid. Lamentablemente, Oscar no ha recorrido la acogedora y bella ciudad, pues la enfermedad mermó sus fuerzas físicas progresivamente y ha permanecido ingresado en el hospital o acostado en la habitación del lugar de residencia. Su cuerpo se apaga con grandes molestias, mientras sus ideas y pensamientos continúan dedicados a Cuba y su pueblo. Espero un desenlace fatal pronto.

Miriam Leiva, Esposa de Oscar Espinosa Chepe,

Activista de Derechos Humanos y Periodista Independiente,

Madrid, 21 de agosto de 2013

Oscar Espinosa Chepe, Arch Ritter and Roberto Robaina,  April 2012

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“From Collision to Covenant: Challenges Faced by Cuba’s Future Leaders”

Lenier Gonzalez of Espacio Laical has written an insightful and challenging analysis of Cuba’s political future. It has been reproduced as a special study “From the Island # 19) by the Cuban Studies Group. it is available here in English: Lenier Gonzalez, From Collision to Covenant: Challenges Faced by Cuba’s Future Leaders.

A Spanish language version is here: Lenier Gonzalez:  De la colision al pacto,desafios del relevo politico en Cuba.

Lenier Gonzalez Mederos

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Association for the Study of the Cuban Economy, Annual Conference 2013

The Association for the Study of the Cuban Economy is holding its Annual Conference for  2013 in Miami on August 1 to 3. It looks like a most interesting conference coming at a time when the economic reform process is solidifying and evolving in new directions.

The program has been put together by Jorge Pérez-López, who has performed this task for the last 23 years! The program includes a large number of Cuban analysts from the Island who are now free to travel from their country when they decide. Among the Cuban invitees are Armando Nova of the Centro de Estudios sobre la Economia Cubana of the University of Havana, and Oscar Espinosa Chepe, an independent analyst.

Jorge Pérez-López

The complete program plus info on registration is available here:

ASCE Conference 2013 Preliminary Program: Reforming Cuba?   ASCE 2013 program.

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Cuba’s “1 Percent” Is Not Who You Think It Is

Origiginal article here: “Cuba’s 1 Percent…..”ext Size

By: Michelle Caruso-Cabrera | CNBC Chief International Correspondent,  Friday, 19 Jul 2013 | 7:00 AM ET

Art and Handicraft Market on the Malecon, 2004

In most parts of the world, artists struggle to make a living. In Cuba, they’re part of the wealthiest 1 percent of the population.  Two quirks of fate have led to an explosion of well-paid artists on the island: an exception to the U.S. embargo on Cuban goods that allows Americans to spend money on Cuban art, and an accident of Cuban history that lets artists keep the money they earn.

Dionel Delgado, 29, is emblematic of financially successful Cuban artists. His new gallery is in an apartment he just bought in a prime ground-floor location in old Havana that gets lots of tourist foot traffic.  As he painted a large, lush landscape of the Cuban countryside, he told CNBC, “A big part about my work is about the landscape. The love of my country, my space, my dream space.”

CNBC’s Michelle Caruso-Cabrera is one of the few business journalists who has been asked to visit Cuba. Why would the socialist government extend the invitation? She has the latest from Havana.

Don’t try to buy the work however—it’s already sold to a Mexican gallery for $10,000. He said that, on average, he sells a painting every two months.

Thousands of Americans travel legally to Cuba every year under what the Treasury calls “people to people” licenses. Remember Jay-Z and Beyoncé’s trip? On such junkets, American tourists are prohibited from buying any kind of souvenir—except for books, music and art.

As a result, as one moves through old Havana, some of the most prevalent items for sale aren’t T-shirts, hats or magnets, but paintings. In fact, the government put up a new building a few years ago expressly for art vendors.

An accident of Cuban history

Vendors there don’t have to be as successful as Delgado to make a good living. Most of the paintings for sale to tourists are $100 or less. Selling just one a month, a painter makes more than double the average Cuban, who earns only $19 in a government job.

Artists have held a special place in the Cuban economy since the early 1990s—an extremely difficult period in which the Soviet Union cut off the billions of dollars in subsidies it had supplied to Fidel Castro’s government. Even food was hard to come by. During that time, the government carved out a special exemption for musicians and artists, allowing them to travel freely in and out of the country and, more importantly, to be self-employed as artists and to keep the money they made.

The exemptions made them rich compared with other members of Cuban society, as well as more cosmopolitan.

http://thumbnails.cnbc.com/VCPS/Y2013/M07D16/3000183240/3ED2-KR-EBlock0716.jpg

Play Video

 

Abel Barroso Arencibia, 46, who specializes in wood carvings, agrees that artists are lucky to hold a special place in the Cuban economy.

Barroso is in the middle of a major renovation on his apartment. Two museums in New York—the Whitney Museum of American Art and Museum of Modern Art—hold his pieces in their collections. He has traveled all over the world, from the U.S. to Japan, and was able to do so long before other Cubans, who received that right only at the beginning of this year.

Critical of the government? It’s up to the viewer

Also remarkable is that the Cuban government seems willing to tolerate art that could be interpreted as critical of it. Barroso, for example, is working on a woodcut of a tablet computer. It obviously doesn’t work, but the “apps” on the wooden machine are all related to emigrating from Cuba.

Barroso makes many woodcuts of communication devices. He calls the work an “ironic” commentary on technology. When asked if it’s a criticism of the government—given that most Cubans don’t have a cellphone or access to the Internet—he responds, “How it’s interpreted is up to the viewer.”

Besides landscapes, Delgado has created a series of large-format paintings that depict fake magazine covers. He said he was inspired by Norman Rockwell, famous for painting real magazine covers that portray an idyllic American life.

One of Delgado’s magazine cover paintings shows people preparing to jump over the Malecon—the famous seawall in Havana—in inner tubes. It’s a scene repeated by thousands of Cubans who, desperate to leave, took to the open ocean.

When asked if the painting is intended as a criticism of the government, Delgado said no, adding that “it talks about the troubles of Cuba.”

“It’s normal for all the Cubans to have this constant on our minds,” he said. For a Cuban, the sea means “one way to take his dreams out there, the American dream,” he added. “It’s a reflection of … how many people take this option, you know? For finding a way, you know?”

My Venture into Cuban Art: “Caridad del Cobre,” by Natacha Chaviano

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Cuba pushes ahead on reforms but insists island not for sale

By Marc Frank in Havana, Financial Times,  July 15, 2013 1:29 pm

Cuba’s efforts to build a more market-driven economy are moving from lifting prohibitions on personal property, travel and minor economic activity to reform of larger state companies. But one of the most powerful men in the land had bad news last week for those who might harbour hope of owning a piece of the Caribbean island.

 “Life has demonstrated that the state cannot occupy itself with the entire economy, that it must cede space to other forms of administration,” Marino Murillo, the man appointed to head President Raúl Castro’s reform efforts, told journalists visiting the country last week. But Mr Murillo, a member of the politburo and vice-president of the Council of Ministers, emphasised that it was a transfer of administration and not a “property of the people” reform.

Since Raúl Castro took over from his ailing brother Fidel Castro in 2008, and first began to institute austerity measures and reforms, the country’s current account has run a surplus, but economic growth has stagnated at just over 2 per cent annually. The Cuban Communist Party and government adopted a more than 300 point plan in 2011 to “update” the country’s economic and social model, “but the party made clear the changes were to take place within the limits of socialism”, Mr Murillo said.

Asked repeatedly about foreign investment opportunities, the officials offered nothing new at all, repeating stock lines about investment being complementary to their development schemes and that existing regulations were flexible and adequate.

Mr Murillo said the government was developing a list of offers that should be ready by 2014 and were planned to stimulate investment. The implication was that drawn-out negotiations over control of joint ventures, duration of the agreements, tax breaks and labour relations are unlikely to be resolved soon. The possible exception is a special economic zone in western Cuba expected to open next year and which is awaiting publication of its rules and regulations. None of the 190 companies managing and temporarily in joint ventures in Cuba own any property outright, nor do they have the right to sell shares except with the authorisation of their partner, the state.

The Havana Cross-Harbor Ferry Chasing a Container Ship

Mr Murillo said agriculture represented more or less what authorities envision for minor and secondary sectors of the economy.  The country has leased fallow state land to nearly 200,000 would-be farmers in recent years, loosened the regulation of co-operatives that were already leasing state land and freed up all agricultural actors to sell more of their produce (currently 47 per cent) on the open market, bypassing the state’s wholesale and retail outlets. “Eighty-one per cent of the land is social property owned by the people, and 70 per cent of the land is administered by co-operatives and small farmers,” he said. Twenty per cent is owned by small farmers and their private co-operatives.

Cuba has been busy fostering development of small businesses in retail services, transport, construction and minor production, and allowing market forces to govern their activities, along similar lines to the agricultural sector. The government is leasing taxis and thousands of state shops, with up to five workers, to its former employees or any takers, and this month began to transfer larger enterprises with 6 to around 50 workers to co-operative administrations, 124 to date, with another 71 approved.

Currently, 4m people out of the country’s 5.1m-member labour force work for the state, the remainder occupied in what is called the “non-state” sector, Mateu Pereira, an adviser to the minister of labour and social security, told the journalists. An estimated 1m Cubans of working age do not seek employment. The co-operatives are the first outside of agriculture since all businesses were nationalised in 1968. The government says many more establishments will follow, beginning in 2014.

The co-operatives function independently of the state on the basis of supply and demand, divide their profit among members and receive better tax treatment than individually owned businesses, according to Cuban officials. A decree law published in December allows for an unlimited number of members and use of contracted employees on a three-month basis.

Cuba will also begin deregulating state-run companies in 2014 as reform of the Soviet-style command economy moves from retail services and farming into its biggest enterprises, the head of the Communist Party’s reform efforts said. Mr Murillo said the 2014 economic plan included dozens of changes in how the companies, accountable for most economic activity in the country, did business.  The reforms will affect big state enterprises such as telecommunications company Etecsa, tourism corporations, trading company Cimex and sugar monopoly Azcuba.

Mr Murillo said changes include granting managers more autonomy and permission to sell excess products after meeting state obligations on the market, and allowing companies to retain half of their profits after taxes for such things as minor investment and wage increases.

Artesan market, La Rampa November 2008; not state enterprise

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Cuba to Embark on Deregulation of State Companies

By Marc Frank; HAVANA | Mon Jul 8, 2013

Original here:  Cuba to embark on deregulation of state companies

HAVANA (Reuters) – Cuba will begin deregulating state-run companies in 2014 as reform of the Soviet-style command economy moves from retail services and farming into its biggest enterprises, the head of the Communist Party’s reform efforts said.

Politburo member and reform czar Marino Murillo said the 2014 economic plan included dozens of changes in how the companies, accountable for most economic activity in the country, did business. He made the comments in a closed-door speech to parliament deputies on Saturday, and some of his remarks were published by official media on Monday.

“The plan for the coming year has to be different,” Murillo was quoted as saying by Communist Party daily newspaper Granma. He said that of 136 directives for next year “51 impact directly on the transformation of the companies.”

The reforms will affect big state enterprises like nickel producer Cubaniquel and oil company Cubapetroleo and entail changes like allowing the firms to retain half of their profits for investment and wage increases and giving managers more authority. The plan also threatens nonprofitable concerns with closure if they fail to turn themselves around.

“Murillo’s empowerment of state-run companies is a milestone on the road toward a new Cuban model of state capitalism, where senior managers of government-owned firms become market-driven entrepreneurs,” said Richard Feinberg of the Washington-based Brookings Institution and an expert on Cuba’s economy.

“But only time will tell whether the government is willing to truly submit the big firms to market discipline – to let the inefficient ones go bankrupt,” he said.

Murillo cited the Communist Party’s reform plan, adopted in 2011, which he said called for freeing productive forces to increase efficiency and reducing how companies’ performance was measured to a few indicators such as profit and productivity.

Already this month, 124 small to medium state businesses, from produce markets to minor transportation and construction concerns, were leased to private cooperatives which, with few exceptions, operate on the basis of supply and demand and share profits.

Hundreds more were expected to follow in the coming years as the state moves out of secondary economic activity such as retailing and farming in favor of individual initiative and open markets under reforms orchestrated by President Raul Castro, who took over for his ailing brother Fidel in 2008.

Cuba’s economy was more than 90 percent in state hands up until 2008 and almost all of the its labor force of 5 million workers were state employees.

Cuba began laying off hundreds of thousands of state workers and deregulated small retail services in 2010, simultaneously creating a “non-state” sector of more than 430,000 private businesses and their employees as of July and leasing land to 180,000 would-be farmers.

Now larger enterprises, from communications, energy and mining to metal works, shipping, foreign and domestic trade, are being tweaked as the country strives to avoid bankruptcy and boost growth, which has averaged around 2 percent annually since the reforms began.

John Kirk, one of Canada’s leading academic experts on Latin America and author of a number of books on Cuba, summed up the changes announced by Murillo: “Cuba maintains its path towards a mixed economy.”

“It appears as if government determination to modernize the economy is slowly overcoming the profoundly rooted inertia of the bureaucracy,” he said.

 

CUPET: Out of gas? 

ELIMINATING BARRIERS

Murillo said companies would keep 50 percent of profits for recapitalization, minor investments, wage raises and other activities, instead of handing over all profits to the state and then waiting for permission to spend the money.

“The plan is designed so that a businessman from whatever sector does not have to ask permission to make minor investments to ensure production does not stop,” Murillo was quoted as saying.

“It eliminates administrative barriers to salary payments, which directors of companies can decide on, always and when they have sufficient profits to cover them,” he said.

Companies, which in the past were assigned hard currency for imports, will now be able to use the money to purchase local products.

“If an institution has … $200 million to import, and a local producer can produce what it plans to import, this body can directly pay that local producer with the approved funds,” Murillo said.

At the same time state firms that have reported losses for two years or more will be expected to turn a profit or they will be downsized, merged with others or closed.

“We can’t make a plan that includes companies like these … because the phenomena of having to finance these losses will persist,” Murillo said.

Cuba has already implemented some measures to set the stage for state company reform.

Most companies have been moved out of government ministries in favor of operating as “independent” holding companies and in some cases, such as in tourism, allowed to keep a percentage of revenues.

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Cuban Gov. Presents “Favorable” Stats

July 7, 2013

HAVANA TIMES — The Cuban government said on Saturday it is satisfied by the “favorable performance” of the island’s economy in the first half of the year, despite a “slowdown” overall and increased unemployment.

An optimistic minister of the economy, Adel Yzquierdo, painted a “favorable” picture of developments in the island’s centrally planned economy, but pointed to a general decline and reduced growth estimates for this year, in an address to the Cuban parliament.

Yzquierdo presented the legislature with economic performance figures for the first half of 2013. President Raul Castro was also present.

According to the figures, employment in the emerging private sector in Cuba continued to grow in the first half of 2013 while the state sector fell.

Unemployment is expected to grow by 4.2 percent in the state sector in the first half of the year, compared with a growth figure of 8.8 percent in the private sector, according to Yzquierdo’s report.

The forecasts, however, point to a general increase in unemployment because the expected growth in the self employed sector was not reached “, noted Prensa Latina.

The island currently has 400,000 people working in the private sector, the so-called “self-employed”. Over recent years, the government of Raul Castro is implementing a program of economic reforms with market elements that have allowed for an opening of some less specialized trades to private work.The medium-term goal is the progressive reduction of half a million jobs in the bloated state sector, as announced by the government in 2010.

Many of the “self-employed” registered so far, however, are retired or keep their jobs in the state sector while trying to obtain a little other income.

The economy showed an overall a “favorable performance”, said Yzquierdo. Almost all sectors recorded growth, “including trade, transport, communications and manufacturing,” he noted.

Yzquierdo said the Cuban trade balance was positive at the end of the first quarter and pointed to a similar trend for year-end. At the same time, he spoke of a “slowdown” in the global economic situation.

Cuba recently reduced its forecasts for annual growth in 2013 from the 3.6 percent initially estimated to somewhere between 2.5 and 3.0 percent. He emphasized that the evolution of gross domestic product (GDP) has been influenced by the crisis in the international arena.

In the first semester, the island’s economy grew 2.3 percent, according Yzquierdo, despite “external stress”, the “internal weaknesses” and the effects of Hurricane “Sandy”, which swept across the east of Cuba in October 2012.

“Sandy” affected 11 provinces and caused losses of almost 7 billion dollars, according to the minister.

The inaugural session of the eighth legislature of the National Assembly of People’s Power closes on, Sunday. Raul Castro is expected to pronounce in a speech to the parliament.

In a Communist Party Central Committee meeting last week, Castro came down hard on what he called “indiscipline and illegalities” in the State apparatus. He will most likely refer to the fight against corruption, one of the banner efforts of his administration.

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