Author Archives: Arch Ritter

Juan Triana: “From the submerged economy to micro-enterprise, are there any guarantees for the future?”

Posted on November 27, 2012 by Arch Ritter

Dr.  Juan Triana Cordoví, Universidad de la Habana

November 15, 2012

Submerged economy, merolicos, informal workers, cuentapropistas, self employed, a “necessary evil”, are some of the qualifiers used to describe individuals who work in the independent sector in Cuba closely reflects the fluctuations and reversals to which the non-state run economy has been exposed, and which in a way have been a thermometer for the transformations of the Cuban economy.

Art Market, on the Malecon. Photo by A. Ritter

I. Some history: from the revolution to the rebirth of the independent work in 1993

As a result of the Cuban revolution in 1968, about 58,000 private businesses were nationalized, mostly small family businesses, focused on retail and restaurants. Some other small businesses worked in some kind of craft or industry, but these were generally low-tech. Some estimates put those businesses as employing between three and seven workers each. If we estimate an average of five workers per business, then the sector generated employment for about 300,000 people, out of a total population that exceeded six million.

Self-employment appeared when the different alternatives generated from the State failed to meet the demands of the population for different services and products (On July 3, 1978 Executive Order No. 14 was issued to regulate self-employment activities to be exercised by workers), but after a brief period of expansion, it languished in the absence of stimulus policies and its tacit rejection based on ideological and political considerations.

Self employment was revived in 19931 (Executive Decree 141) in response to the adjustments in the production and employment sectors generated by the crisis. It was accepted as a “necessary evil,” but not as an integral part of a development strategy destined to occupy a legitimate space to contribute to growth efforts 2.

Far from policies to stimulate and insert it in the operating dynamics of the economy, those policies helped to marginalize it, restrict it and prevent a qualitative transformation, which caused the decline of the sector (between 1996 and 2001 by 40%), its geographical concentration (especially in Havana) and concentration on the most profitable activities (food, transport and rentals)

That same policy that limited the access of new workers to the sector caused the generation and appropriation of undue rents, supported by the virtual monopoly in some market segments by those who “had come first,” into the sector and were later “protected” by the State. This was really ironic because the barriers to enter the sector that were created from the institutions that were supposed to “regulate” it, and the restrictive policies established, reduced competition in the “cuentapropista” sector, allowing the accumulation of income, not based on productivity and efficiency, as well as the expansion of informal channels of supply, some of them, hard to quantify, in many cases from state agencies, creating disincentives for improvement and innovation.

There were two big losers: the dynamics of the national economy, as an economic circuit was generated separately from the rest of the economy, and the population (clients) who debated between the government monopoly over some services, and the monopoly that almost unwittingly was exercised by portions of the self-employed over some (most lucrative) activities and services that were “unregulated”.

II. “Cuentapropismo” beyond “cuentapropismo”

 Studies of this sector in Cuba, have often given priority to its importance for the economic liberalization and decentralization, as well as its significance from the point of view of the expansion of market relations. There is another perspective on this issue that also must be addressed. Micro, small and medium enterprises are part of the skein of any economy, regardless of the degree of development. Their contribution to employment is significant, the flexibility and maneuverability that it gives the economies (even developed economies) allowing systematic adjustments is unquestionable, and in some economies, this sector even has innovation capabilities that should not be ignored.

Until not very long ago, the “cuentapropista” sector in Cuba was a marginal sector, but this has drastically changed starting on 2011, and this trend should increase in the coming years.3

Table 1. Employment Dynamics

         2008    2009      2010      2011

Total number of employed  (thousands)     4.948,2   5.072,4  4.984,5  5.010,2

State sector                         4.112,3   4.249,5  4.178,1  3.873,0

            Cooperatives                            233,8      231,6     217,0     652,1

            Private                                      602,1      591,3     589,4    485,1

            Independent workers            141,6      143,8     147,4    391,5

Source: ONEI, Anuario estadístico de Cuba 2011.

A reading of the data reveals some new features of the national economy regarding employment:

a. The total number of the employed fluctuates around five million people and it should grow significantly in the coming years.

b. The participation of the state sector continues to be decisive in total employment, but it has declined in the past two years.

c. In the non-state sector, the number of the employed decreased as a whole4, but the “cuentrapropista” sector was able to generate 244,000 jobs.

A fact that is relevant to the survival of the cuentapropista sector in the medium and long term is that it has become a significant element of employment for the country, since no other sector with so little capital is able to generate that amount of employment, so it is “socially desirable”. It is also the fastest growing sector in female employment in recent years. All these “objective reasons” give certain guarantee in the medium and long term for the existence of “cuentapropismo”. Today it is a functional sector due to the reforms undertaken in 2007 and consolidated in 2011.

A Fine New Restaurant: Paladar “Dona Eutimia”, Callejon del Chorro, Plaza de la Catedral, opened February 2010; Photo by Arch Ritter

 III. Institutionalis m and “cuentapropismo”

 Another perspective of this analysis is associated with the institutional protection that has been created to protect the independent sector.

The “modern legal network” directly associated with the expansion of self-employment was initially contained in two special issues of the Official Gazette of the Republic of Cuba published on October 25, 2011 (numbers 11 and 12, dated 1 and 8 October, respectively). They included five legislative decrees, an executive decree, an agreement of the Executive Committee of the Council of Ministers, and fourteen ministerial decisions.4 Probably due to two factors: the contraction of the foreign companies and the loans and services cooperatives.

With regards to Legislative Decree 141 of 1993, the 2011 modernization of the statute introduced obvious advantages, as it:

• Allowed commercial exchanges between “cuentapropistas” and Government entities.

• Authorized hiring a workforce, automatically converting “cuentrapropistas” into micro entrepreneurs.

• Conferred the status of taxpayers and Social Security recipients.

• Authorized access to bank financing.

• Allowed the rental of government or third party premises and assets.

• Authorized the exercise of several trades by the same person.

• Removed the restriction of having to belong to a territory to exercise a trade in it.

• Dispensed with the requirement of being retired or have some employment link to access this form of employment.

• Removed the restriction on the rental of a whole house or apartment, to allow the leasing of rooms by the hour and the use property assigned or repaired by the state in the past decade.

• Allowed the leasing of homes and vehicles to people who have residence abroad or to those living in Cuba, but leaving the country for more than three months, for which they can appoint a representative.

• Increased the capacity to fifty seats in the “paladares”, removed the restriction to employ only family members, and the ban on the sale of food products made with potatoes, seafood and beef.

 As a result, a new regulatory environment has been created that exceeds the direct legal network. As part of the reform, as well as other measures authorizing the sale of houses and cars, for example, allows legal improvement to the facilities of the business, and the sale of cars which can improve the “assets” of new businesses.

In addition, the land lease policy and its recent update could facilitate the increase of supplies for those engaged in food services.

A sign that the sector considerations have changed, and that the current government wishes to convey security and transparency, is the submission to the National Assembly in the summer of 2012, of a new tax law that incorporates some additional benefits for independent workers, which include:

• The tax burden of the self employed is reduced between 3% and 7% for the segments with higher and lower income, respectively.

• A tax rate decrease for the use of labor force in the sector of self-employed workers, from 25% to 5% in the term of 5 years. It also maintains this tax exemption for the self-employed, individual farmers and other individuals authorized to hire up to 5 workers.

 To these considerations we should add the “ideological and political institutionalization” of the sector, whose best expression is reflected in the words of President Raul Castro:

“The increase in the private sector of the economy, far from being an alleged privatization of social property, as some theorists claim, is destined to become a facilitating factor for the construction of socialism in Cuba, as it will allow the State to focus on raising the efficiency of the basic means of production owned by the people and release the management of nonstrategic activities for the country … we must facilitate the management and abstain from generating stigma or prejudice towards them and demonize them” ….. and later added “This time there will be no return”.

 Soon, a new regulation for the operation of cooperatives in the agricultural sector will be released, which will enrich the environment in which the self-employed sector operates, will introduce new competitive challenges and make the economic fabric of the country more complex, generating new production chains.

Certainly, there is still a long way to go. Eventually it will be necessary to formally take the step from “cuentapropismo” to micro, small and medium enterprises. The time has come to consider legislation regulating a negative list (much smaller than the current listing of allowed work) of jobs that cannot be exercised privately. The time has come to incorporate offices and university professionals in jobs directly related to their careers to prevent their loss by emigration or non-use, and/or the waste of human potential unquestionably created in recent years, who have proven to be highly competitive in “other markets “. At some point, it will be necessary to incorporate into the Constitution of the Republic these new realities to begin to delineate a new economic model, but also to begin to draw a new model of development for the country, in which productivity gains and efficiency cannot be expected to only come from the state sector.

1 (*) Professor of the Centro de Estudios de la Economía Cubana, Universidad de la Habana.

(**) Cuentapropista used interchangably with self-employed in translation.

In 1993 it was established who could be self employed: state enterprise workers, retirees, the unemployed who receive subsidies from the State.10 and housewives11, and what activities, especially manual could be included, limiting access to those who could compete with the state.

2 Services that can be offered are limited and are prohibited in some geographic areas, there is no access to bank loans, workers cannot be hired as such (only allowed family work), and a high tax system is applied to independent activities … This regulation determines that the production costs must be assumed by the “cuentapropistas”.

3 In fact, the space gained by some of these “modalities” has ignored certain issues such as the “tourism extra hotels network” always considered inside the state sector but one of the weaker of the government enterprises. Today there are in Havana more than 370 private restaurants and possible more than half of them have appeared since 2011.

Mercado Atesanal, on the Malecon, photo by Arch Ritter

Bibliography.

Castro R. Periódico Granma, 20-12-10

Gaceta Oficial de la República de Cuba, No. 12, Edic. Extraordinaria, 8-10-12.

Vidal P. y Pérez O. Entre el ajuste fiscal y los cambios estructurales: se extiende el cuentapropismo en Cuba, Espacio Laical No. 4, 2010.

Fuentes, I. Cuentapropismo o Cuentapriapismo: Retos y Consideraciones Sobre Género, Auto-Empleo y Privatización, Cuba in Transition, ASCE, 2000

Ritter A. El régimen impositivo para la microempresa en Cuba, Revista de la CEPAL No. 70, 2000, Naciones Unidas CEPAL, Santiago Chile.

Peter P. “Cuban Entrepreneurs: From Necessary Evil to Strategic Necessity” http://www.american.com/archive/2011/january/cuban-entrepreneurs-from-necessary-evil-to-strategic-necessity

Gonzáles A. “La economía sumergida en Cuba” Revista Investigación Económica, No.2, April-June 1995, INIE.

Suárez L. M. “Cuba: nuevo marco regulatorio del trabajo por cuenta propia” en www.evershedslupicinio.com

Cuenta Propista and Artisan, Photo by Arch Ritter, November 2008

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New Tax System Being Introduced in Cuba

Posted on November 26, 2012 by Arch Ritter

On November 21, Cuba’s Gaceta Oficial (No. 53, del 21 de noviembre del 2012) published a new Law on Taxation, that had been approved earlier on July 23 and October 31.The basic outline of the law was approved by the Congress of the Communist party in April of 2011 and then by the National Assembly in 2012.

The complete gaceta version is not yet available “On Line”  though a published version has been distributed within Cuba. A description of the law has been presented in Granma here: Ley del Sistema Tributario   and Granma, 21 de Noviembre de 2012, Ley del Sistema Tributario. The introduction of the Granma article is presented below.

An analysis of the implications of the new taxation system must await the availability of the detailed text from the Gaceta Oficial.

Part of the Older Taxation System

Ley del Sistema Tributario
Instrumento decisivo en el camino de la actualización

Ivette Fernández Sosa

La política fiscal cubana deberá contribuir al incremento sostenido de la eficiencia de la economía y de los ingresos al Presupuesto del Estado con el propósito de respaldar el gasto público en los niveles planificados y mantener un adecuado equilibrio financiero, tomando en cuenta las particularidades de nuestro modelo económico. Así se consigna en el Lineamiento 56 de la Política Económica y Social del Partido y la Revolución, aprobado en el Sexto Congreso del Partido, y que a su vez, da paso a otras directrices que deberán desempeñar un papel determinante en la búsqueda de un proyecto social más justo y sostenible.

La ley servirá de acicate para el desenvolvimiento de las esferas y actividades impulsoras del desarrollo socio-económico del país

El Parlamento cubano aprobó la Ley No. 113, del 23 de julio del 2012, del Sistema tributario que acompañada de su Reglamento, el Decreto No. 308, del 31 de octubre del 2012, de las normas generales y los procedimientos tributarios, se publicó hoy en la Gaceta Oficial Ordinaria No. 53, del 21 de noviembre del 2012, de la República de Cuba.

Al aprobar este nuevo instrumento jurídico —cuya aplicación se ha previsto de forma paulatina a partir de enero del 2013—, quedarán derogadas la Ley 73 de 1994, el Decreto-Ley 169 de 1997 y cerca de otras 200 regulaciones emitidas por el Ministerio de Finanzas y Precios para normar la actividad tributaria en el país.

En su intervención en la Sesión Plenaria de la Asamblea Nacional del Poder Popular celebrada el pasado julio, el vicepresidente del Consejo de Ministros, Marino Murillo Jorge, identificó al sistema tributario como una herramienta que contribuye a disminuir las desigualdades entre los ciudadanos dada su capacidad de redistribución de los ingresos.

En su aplicación se tiene en cuenta la capacidad económica de los sujetos obligados a su cumplimiento y las características de los territorios; estableciéndose mayores gravámenes para los ingresos más altos, esclareció.

La Ley establece las normas sobre el pago de impuestos, tasas y contribuciones al Presupuesto del Estado.

 

 

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‘A Different and Diminished Castro’

Posted on November 19, 2012 by Arch Ritter

Original Essay Here: 19 November 2012. BY BRIAN LATELL. The Miami Herald

He spoke on the public record more than any political figure in history. It is a strange and dubious distinction to be sure. But during 48 years in power Fidel Castro elevated public discourse into a form of narcissistic excess unlikely ever to be exceeded.

He holds the record for the longest speech ever delivered at the United Nations. In September 1960 he droned on for four and a half hours, excoriating Richard Nixon and John F. Kennedy then in the final weeks of their presidential campaigns. Kennedy got the worst of it; he was, Castro seethed, “an illiterate, ignorant millionaire.”

Five- and six-hour orations were standard fare during the early years of Castro’s revolution, with him often appearing in public places before vast crowds or in broadcast studios several times in a single week. His longest known speech lasted an astonishing 12 hours.

In Control, 1960

Always in uniform, he spoke in dozens of foreign locales — in a Viet Cong-controlled area of South Vietnam, in the Stalinist North Korean capital, and earlier, on a few American university campuses — as well as nearly everywhere on the island when a small crowd could be gathered.

Anti-American tirades, harsh revolutionary incantations, and surprising policy announcements were standard content. Yet Castro will not be remembered for any single galvanizing performance or memorable passage that is uniquely his own. Unlike many great orators he hoped to emulate, nothing he ever said in public has endured as a defining rhetorical legacy.

By the time he delivered his last two official speeches —in eastern Cuba on July 26, 2006, before requiring emergency surgery a few days later — he had deteriorated into a frail, scarcely coherent caricature of his earlier self. The strident voice that had uttered uncounted billions of public words fell silent except for a few halting and pitiful appearances on Cuban television.

Yet within a few months after provisionally retiring from the presidency, he resorted to a new form of public communication. Signed “reflections” that he penned, dictated, or directed staff members to compose for him began appearing prominently in the state media. The first of these editorials — a ponderous rumination about global food and water shortages — appeared in March 2007.

Another 450 followed, all of them oddly disembodied and reflecting a distinctly different and diminished Castro. In his semi-retirement he pontificated about lofty and esoteric subjects, almost always international in scope, while continuing to attack American “imperialism.”

Characteristically, he was unpredictable. Raúl Castro, his successor, was hardly ever mentioned by name and never complimented or congratulated. On occasion in fact, he was the subject of veiled criticism for the economic changes he implemented. Few other Cuban leaders were named either. That was in contrast, however, to the numerous accolades heaped by Fidel on Venezuelan president and Cuban benefactor Hugo Chávez.

Yet in his new role, the author Fidel was once roused — or induced — to intervene openly in a delicate internal political dispute. In March 2009 two of the regime’s highest ranking leaders were sacked by Raúl Castro. Foreign minister Felipe Pérez Roque and vice president Carlos Lage were ambitious protégés of the retired Fidel, both thought to be top contenders for eventual power.

So, when Fidel flamboyantly condemned them in a published reflection — they had been seduced “by the honey of power” he wrote — their fates were sealed. Raúl’s position was strengthened as a result and Fidel’s lingering influence highlighted. Reading the tea leaves of what Fidel wrote, and did not, was for more than five years an obligatory task for students of Cuba’s revolution.

When the regime recently announced that Fidel had issued his last reflection it was at least in part for reasons of health. But his absence for the first time in nearly 60 years from the revolution’s revealed dialogue suggests that his successors have crossed an historic Rubicon. Raúl now has a freer hand to advance needed economic reforms, and possibly even to seek improved relations with the United States.

Thus far he has only cautiously departed from the sacred Fidelista policies of the past, constrained by hard liners devoted to his brother and by corruption and bureaucratic intransigence. But as Raúl speaks of eliminating the regime’s history of “paternalism, egalitarianism, and idealism” he means Fidel’s dogmatic policies that now seem likely to be more systematically discarded. After six years at the helm, with his hand-picked team of military and civilian leaders at his side, General Castro can feel more secure.

So, silenced and sidelined for the second time, Fidel will likely now be unable to decisively influence the course of Cuba’s failed revolution. With no fanfare, he will drift into the dark recesses of history.

Brian Latell is senior research associate, Cuba Studies, University of Miami and author of Castro’s Secrets: The CIA and Cuba’s Intelligence Machine.

After almost half a century, out of the game, 2012

 

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Cuban health care: Nip and tuck in

Posted on November 16, 2012 by Arch Ritter

Cuban health care: Nip and tuck in

Nov 17th 2012, The Economist

SET in a former naval academy overlooking the Florida Straits, the Latin American School of Medicine (ELAM) is supposed to symbolise Cuba’s generosity. Founded by Fidel Castro in 1999, the school’s mission was to provide free training to medical students from all over the world. But these days, visiting foreign dignitaries are given a sales pitch along with their campus tours.

As part of President Raúl Castro’s attempt to stem his brother’s spending, many nations that send students to the school are now expected to pay. Just how much isn’t entirely clear, but the rates are high enough to cause embarrassment to some of the customers. John Mahama, Ghana’s new president and a staunch ally of Cuba, has been obliged to defend what looks like a pricey deal he signed with ELAM as vice-president.

Cuba’s government has never been coy about the sale of its medical services abroad. Official figures show that professionals working overseas—largely in medicine—bring in around $6 billion a year (though the doctors themselves receive only a small fraction of the revenue). Most of that comes from Venezuela, which trades subsidised oil for legions of Cuban health workers. But reports in Namibia suggest that prices for services there are rising, too.

In Cuba itself, meanwhile, private medicine is readily available to paying foreigners and well-connected locals. The two best hospitals in Havana, Cira García and CIMEX, are run for profit. Both are far better than normal state hospitals, where patients are often obliged to bring their own sheets and food.

But health care is now also available on the buoyant black market. A current vogue for breast implants is providing extra income to many surgeons (whose state salary is around $20 a month). The director of one of Havana’s main hospitals was recently detained for running a private health network on the side. Alongside the new restaurants that are opening in the capital, as a result of Raúl Castro’s partial easing of economic restrictions, doctors are now less shy about selling their services. One private dental practice in the Vedado district is notably well-equipped with a snazzy dentist’s chair and implements.

These medical entrepreneurs run the risk of prosecution. If caught, they may be tempted to argue that they are simply following the government’s example.

Cira Garcia (Hard-Currency) Hospital, Mainly for Foreigners

Latin American School of Medicine

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Cuba oil dreams on hold as drill rig set to depart

Posted on November 14, 2012 by Arch Ritter

By Peter Orsi,  November 13, 2012; Associated Press,

Original Article here:  Cuba oil dreams on hold

Scarabeo 9

The only rig in existence that can drill in deep waters off Cuba is preparing to sail away from the island, officials said Tuesday, after the third exploratory well sunk this year proved nonviable in a blow to government hopes of an oil bonanza.

While production was always years off even in the event of a big discovery, analysts said the Scarabeo-9’s imminent departure means Havana’s dreams of injecting petrodollars into a struggling economy will be on hold indefinitely.

“Bottom line: This chapter is finished. Close the book, put it on the shelf,” said Jorge Pinon, a Latin America oil expert at the University of Texas’ Center for International Energy and Environmental Policy. “But do not discard. Maybe there is a good ending to this story … someday.”

Geological surveys indicate that between 5 billion and 9 billion barrels of oil may lie in deep waters off Cuban shores, but finding it has turned out to be trickier than officials hoped.

The Scarabeo-9, a 380-foot-long (115-meter), semisubmersible behemoth that leases out for prices approaching a half-million dollars a day, steamed all the way from Asia at tremendous cost to arrive in Cuba in January. That was the only way companies could avoid sanctions under Washington’s 50-year-old embargo against Cuba. The Scarabeo is the only rig of its kind built with less than 10 percent American parts — an extreme rarity in an industry where U.S. technologies play a major role.

An exploratory well sunk early this year by Spanish company Repsol turned out to be commercially nonviable. After Repsol declined an option to try again, the Scarabeo passed to a group led by Malaysia’s Petronas, which drilled its own dud. Cuban officials announced Nov. 2 that Venezuela’s PDVSA had also missed the mark.

For this baseball-mad nation, it was strike three. Cuba’s Ministry of Basic Industry, which oversees oil matters, confirmed Tuesday that the rig is on its way out, with no word on when it might return.

“The Scarabeo-9 will leave Cuba soon,” it said in a brief statement emailed to The Associated Press.

It referred questions about the platform’s destination to owner Saipem of Italy. Saipem’s parent company Eni declined to comment, but various reports have had it bound for Africa or Brazil.

Oil’s existence off Cuba is not in doubt. Russian company Zarubezhneft is contracted to use a different rig to drill in shallower waters off Cayo Coco, a key Cuban tourist destination, later this month. But the more promising deposits lie in the deep waters of the west.

The only way to get at them is to bring back the Scarabeo or build an entirely new rig, and the three failed holes plus the ongoing hassle of avoiding sanctions from the U.S. embargo will likely make companies think twice.

Pinon noted that the Repsol and Petronas wells were not dry holes, only that exploiting the oil there was not currently commercially viable due to the structure of the ocean floor and the porosity of the rock.

“If oil continues at over $100 and if the industry continues to learn and develop new technologies, they could probably come back to Cuba … and go for a second round,” he said.

Cuban drilling in the Gulf of Mexico had raised fears in the United States that a big spill could slick U.S. shores from the Keys to the Carolinas. It also attracted heated criticism from anti-Castro exiles in Florida’s Cuban-American community.

“The (U.S.) administration must finally wake up and see the truth that an oil rich Castro regime is not in our interests,” Florida Rep. Ileana Ros-Lehtinen said in a recent statement.

Some cited Cuban oil exploration to argue for strengthening the embargo, which bans U.S. companies from doing business with Cuba and threatens sanctions against foreign firms if they don’t play by its rules. Others said it demonstrated the opposite: a need to ease the embargo so U.S. companies could more smoothly participate in disaster response to any spill.

Cuba has long campaigned for an end to the embargo, which remains in place despite 21 consecutive U.N. votes against it — most recently on Tuesday when the world’s nations voted 188-3 to condemn the sanctions.

Off-Shore Petroleum Exploration Concessions

On-Shore Petroleum Extraction Rigs, Matanzas, 1996, Photo by Arch Ritter

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Hurricane Sandy: Cuba struggles to help those hit

Posted on November 13, 2012 by Arch Ritter

12 November 2012. By Sarah Rainsford. BBC News, Santiago province, Cuba

Siboney was a pretty town on the Caribbean coast of Cuba before Hurricane Sandy tore through. Now, it is a disaster area. In some spots there are piles of rubble in place of houses. Many of those buildings still standing have gaping holes in their walls; most are missing all, or part of, their roofs.

Residents are still struggling to come to terms with the destruction more than two weeks after the passage of the storm which killed 11 people in eastern Cuba and razed 15,000 homes.

“We have had cyclones before, but nothing like this devastation,” says Trinidad, a pensioner whose house was drenched and possessions washed away when waves up to 9m (30ft) high smashed through Siboney.

The sick and infirm had been evacuated from the town, but everyone else was at home.

They talk about having watched a state TV forecast defining Sandy as a tropical storm; then the power went out. The next morning they were hit by a Category Two hurricane.

Trinidad tells me: “I stayed to try to protect my things, because I am poor. But I couldn’t. I had no time to save anything.” “I want to leave here now,” she confesses, starting to cry. “I’m afraid.”

The damage further up the coast is even worse. One house has concertinaed to the ground, as if hit by an earthquake.

Joaquin Variento Barosso leans on the squashed ruins of his home and remembers the storm’s arrival. “The sea was furious. It carried off everything: bed, fridge, mattress.” “We had to run, but we watched the destruction from higher ground.”

No electricity

Many people have moved in with relatives. Others are now sheltering in state workers’ holiday homes where basic food is being provided. But by Friday, 16 days after the storm, Siboney still had no electricity. Teams of electricians were deployed to Santiago province from all over the island within hours of the hurricane hitting. They have been working late every night to repair thousands of lamp posts and reconnect power lines.

The lights came back on in Cuba’s second city, Santiago, late last week. But restoring power to everyone is a huge task.

“Cuba had not seen anything like this at least in 60 years.” Barbara Pesce Monteiro, UN co-ordinator.

“We’ve got no money, not even a spoon to eat with. There’s nothing left,” Joaquin Barosso shrugs, contemplating the destruction of his house, and his hometown. “I don’t know what we’ll do now.”

The situation is particularly tough for a poor country like Cuba, which is still struggling to re-house those caught up in the last major storms four years ago.

Subsidies

This time, the government has announced a 50% price cut for construction materials and interest-free loans to repair the damage. That aid will be means-tested, in line with the new Cuban thinking. Further subsidies are promised for the poorest or hardest hit. There are already supplies of usually scarce building materials in a street in Siboney, including corrugated iron sheets, metal rods and cement.

Nearby, local officials are compiling data from families about the damage they have suffered. They have recorded 178 total house collapses in this small area alone. A blackboard advertises the cost of building materials, halved by a government subsidy

Housing officer Susen Correa is helping the effort and she assures me: “People were pretty depressed at first, but the mood has lifted since we’ve been offering support.” “They are traumatised, but we are trying to address as many of their problems as we can.”

Across the province, other military and civilian teams were mobilised quickly to clear the streets of rubble and an estimated 6.5m cubic metres (230m cubic feet) of felled trees. This once lush, green region now looks bare. And it is not just the small or coastal towns like Siboney that have suffered.

Santiago city itself is a jumble of missing roofs, flattened street signs and smashed windows. Bizarrely, the giant replica bottle above the original Bacardi rum complex has survived.

Aid arrives

By Friday, 18 planeloads of humanitarian aid had arrived in the region from countries including Venezuela, Russia and Japan as well as the International Red Cross and UN.

The resident UN co-ordinator, Barbara Pesce Monteiro, is visiting the hurricane zone. “This [situation] is extraordinary. Santiago de Cuba had not seen anything like this at least in 60 years. It goes far beyond what they’re used to,” she explains. “It has affected a large population and all the livelihoods that go around it. It is obviously on a major scale and needs to be given attention.”

None of those many tonnes of foreign aid – food, clothes, and construction materials – have made it to Siboney yet, or its newly homeless. But Maria Louisa Bueno of the Ministry for Foreign Trade and Investment denies that the government is being excessively slow to deliver aid. “Institutions like hospitals, homes for the elderly and schools are favoured,”

She points out that storage warehouses need re-roofing after the storm to protect the aid.

“The hurricane victims will be looked after by the government, you can be clear on that,” she insists.

On Friday, the Red Cross made the first delivery direct to the population, taking cookery and hygiene packs to the picturesque, but now battered Cayo Granma, a few minutes ferry-ride from the mainland. The aid had arrived in Cuba the day before. Its delivery, via a long human chain of volunteers, was applauded by residents still picking up the pieces in the wake of Hurricane Sandy.

But this is short-term emergency relief. A massive recovery task lies ahead.

“We have got nothing left but the clothes we were wearing,” Roberto Salazar tells me, amidst the flattened ruins of his home. The enormous rock responsible now stands in what used to be a bedroom. It was thrown through the house by a raging sea.

“I need to find some way of rebuilding it all,” Roberto says, quietly. “But it won’t be easy.”

Impacts of Hurricane Sandy on Santiago de Cuba

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Antonio Romero “Cuba: Reformulación del Modelo Economico e Inserción Externa”

Posted on November 5, 2012 by Arch Ritter

From the Cuba Study Group, Desde la Isla, 5 de Noviembre de 2012

Antonio Romero, Universidad de la Habana

From the Island, Issue 13, November 5, 2012

 I.              Economic Growth and Development in Cuba: some conceptual challenge s.

 The set of economic and social guidelines adopted at the Sixth Congress of the PCC (Havana, April 2011) cover a wide range of policies, sectors and areas of action. The application of these guidelines will determine substantive changes for the country’s economic, social and political life. However, it is convenient to think of an analysis that defines strategic foresight—from the experience gained and the economic and social problems currently facing Cuba, which are the basis of the transformation process—a medium and long term vision for the country that is wanted and can be built. It should consider the restrictions on existing national political space, and the basic political consensus, economic and social rights of the Cuban nation.

Such a medium and long term view would necessarily have to include in economic terms, the requirement to achieve high and sustainable growth rates in Cuba. This is key to guarantee expanded reproduction, increased living standards and the welfare of the population, a necessary condition, although not exclusive, for development.

Considering the growth rate of gross domestic product as an indicator of little relevance in economic terms—as it was believed by some in recent periods in Cuba’s economic history—reveals serious limitations in understanding the processes that lead to the development of a country. The development is always a path of sustained growth in the context of the dynamic interaction of capital investment, the accumulation of knowledge applied to production, structural change and institutional development. Key in this strategic vision—in economic terms—would be the discussion and definition of the spaces needed in that process of change:

i)                    the non-government property sector and within it, the private sector;

ii)                  monetary-commercial relationships and their link to national economic development;

iii)                decentralization of the management and direction of the national economy, and what degree of autonomy derived from it would be allowed to economic agents;

iv)                the role of economic stimulus to encourage production and reward the efforts and social contributions of people and the institutions in which they work; and

v)                  the degree of acceptable distributive inequity—and buffer policies—under such a scenario in the medium and long term.

Obviously, such a strategic vision would include other elements, but the five dimensions outlined above would be central to the understanding and to consistency of the process of transformation of the development model for the country.

Progress in terms of development, also involves in the case of small economies like Cuba, the adoption and implementation of a strategy of specialization relatively concentrated in a limited number of export activities that will ensure the country international insertion and that would be beneficial to sustained expanded reproduction.

This is so because small island economies are not able to establish a “closed loop” for operation, since they cannot internally guarantee all conditions that are required for economic growth.

The limited size of the domestic market, the requirements of economies of scale that characterize contemporary technology, and the limitations on labor and financial and productive resources, determine a relatively narrow specialization in the case of small economies like Cuba.

The complete essay:  Antonio Romero, Cuba, Reformulation of the Economic Model  and External Insertion

Antonio Romero, CIEI, Universidad de la Habana

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National Geographic, November 2012: “Cuba’s New Now”

Posted on October 31, 2012 by Arch Ritter

After half a century under Fidel, Cubans feel a wary sense of possibility. But this time, don’t expect a revolution.

 By Cynthia Gorney

 Original Article here: Cuba’s New Now

Photo Gallery for Article: Cuba Photos

Onions for Sale, Spring 2010 

“I want to show you where we’re hiding it,” Eduardo said.

Bad idea, I said. Someone will notice the foreigner and wreck the plan.

“No, I figured it out,” Eduardo said. “You won’t get out of the car. I’ll drive by, slowly, not so slow that we attract attention. I’ll tell you when to look. Be discreet.”

He had borrowed a friend’s máquina, which means “machine” but is also what Cubans call the old American cars that are ubiquitous in the Havana souvenir postcards. This one was a 1956 Plymouth of a lurid color that I teased him about, but I pulled the passenger door shut gently, the way Cubans always remind you to, out of respect for their máquinas’ advanced age. Now we were driving along the coast, some distance from Havana, into the coastal town where Eduardo and nine other men had paid a guy, in secret, to build a boat sturdy enough to motor them all out of Cuba at once.

“There,” Eduardo said, and slowed the Plymouth. Between two peeling-paint buildings, on the inland side of the street, a narrow alley ended in a windowless structure the size of a one-car garage. “We’ll have to carry it out and wheel it up the alley,” he said. “Then it’s a whole block along this main street, toward that gravel that leads into the water. We’ll wait until after midnight. But navy helicopters patrol offshore.”

He peered into his rearview mirror at the empty street behind him, concentrating, so I shut up. Eduardo is 35, a light-skinned Cuban with short brown hair and a wrestler’s build, and in the months since we first met last winter—he’s a former construction worker but that day was driving a borrowed Korean sedan and trying to earn money as an off-the-books cabdriver—we had taken to yelling good-naturedly and interrupting each other as we drove around La Habana Province, arguing about the New Changing Cuba. He said there was no such thing. I said people insisted there was. I invoked the many reports I was reading, with names like “Change in Post-Fidel Cuba” and “Cuba’s New Resolve.” Eduardo would gaze heavenward in exasperation. I invoked the much vaunted new rules opening up the controlled economy of socialist Cuba—the laws allowing people to buy and sell houses and cars openly, obtain bank loans, and work legally for themselves in a variety of small businesses rather than being obliged to work for the state.

But no. More eye rolling. “All that is for the benefit of these guys,” Eduardo said to me once, and tapped his own shoulder, the discreet Cuban signal for a person with military hardware and inner-circle political pull.

What about Fidel Castro having permanently left the presidency four years ago, formally yielding the office of commander in chief to his more flexible and pragmatic younger brother, Raúl?

“Viva Cuba Libre,” Eduardo muttered, mimicking a revolutionary exhortation we’d seen emblazoned high on an outdoor wall. Long live free Cuba. “Free from both of them,” he said. “That’s when there might be real change.”

Cuba, New Now, National Geographic

Private Parking Agent for City Parking Authorty 

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“Euphoria” in Cuba as Raúl Castro Loosens Travel Policy

Posted on October 18, 2012 by Arch Ritter

By Juan O. Tamayo, Miami Herald, October 17, 2012

Read more here: http://www.miamiherald.com/2012/10/17/v-fullstory/3054779/euphoria-in-cuba-as-raul-castro.html#storylink=cpy

The Cuban government’s bombshell decision to drop the widely hated exit permits required for citizens travelling abroad has unleashed “euphoria” on the island as well as concerns abroad over a possible mass exodus.
A decree published Tuesday made it clear the communist government will continue to decide who can leave the island, as it has since Jan. 9, 1959. It repeatedly noted that any Cuban could be kept from travelling “when the proper authorities so decide.”
“But there is an incredible euphoria here because what 1 million or more people here really want is to leave” for good or just to visit relatives or friends abroad, dissident economist Oscar Espinosa Chepe said from Havana.
University of Miami professor Jaime Suchlicki warned of a “legal Mariel.” And a pro-Cuba activist urged Washington to avert a possibly massive increase in the number of Cubans arriving by ending its wet-foot, dry-foot policies and the Cuban Adjustment Act.
State Department spokesman William Ostick said Washington welcomed the changes because they favor human rights, but warned Cubans not to “risk their lives” crossing the Straits of Florida and noted that they still need visas to enter most nations.
“Now the question is where, where can we go to,” said Katarina Ponce, a recently laid off government secretary, trying to figure out if any countries do not require Cubans to obtain visas in advance of their arrival. “Russia? Cambodia? Any place.”
Havana blogger Yoani Sanchez, who has been denied exit permits more than 20 times, wrote on Tweeter that “The devil is in the details of the new migration law” and called the decree “gatopardista” — a situation where change is more apparent than real.
The new rules appear likely to allow more average Cubans — those without political or other issues pending with the government — to travel abroad more easily, stay out longer and return with fewer complications, costs and paperwork.
They also may help ease some of the social and financial pressures ballooning inside Cuba under Raúl Castro’s decisions to reform the economy by laying off nearly 1 million state employees and cutting subsidies to the food, health and education sectors.
More than 1 million Cubans now live abroad, mostly in the United States, and about 7,400 islanders without visas arrived in the United States in the one-year period that ended Sept. 30. All Cubans who step on U.S. soil can stay permanently.
The decree noted that as of Jan. 14, Cubans will no longer need the exit permits, which cost $150 in a country where the average monthly wage stands at $20. They also will not need letters of invitation from their foreign hosts, which cost $200 to process.
The changes also extend from 11 to 24 months the amount of time that Cubans can spend abroad before they are ruled to have officially migrated and lose benefits such as health care. Further extensions are possible.
But the government retains final say on who gets passports because U.S. migration policies that favor Cuban migrants “take away from us the human resources that are indispensable to the economic, social and scientific development of the country,” according to a report Tuesday in the Granma newspaper announcing the changes.
Supervisors must approve the issuance of passports to government and military officials, professionals, physicians and other medical personnel, top sports figures and others whose work is deemed “vital” to the state, according to the decree.
Passports also can be denied to any Cuban “when it is so determined by the appropriate authorities for other reasons of public interest,” the decree added, or when “reasons of defense and national security suggest it.”
“If that’s the way it is, then I have to believe that the government will be as arbitrary as always,” said Wilfredo Vallín, a Havana lawyer who heads the non-government Cuban Judicial Association.
Also barred from obtaining passports — whose price rose from about $60 to about $110 — are those who are subject to the military draft or have other unspecified “obligations” to the government.
“The government continues to regard migration not as a right of all Cubans but as a gift that it gives to people according to its own interests,” said Juan Antonio Blanco, a Florida International University professor who has studied Cuba’s migration regulations.
The decree also abolishes the reentry permit required for Cubans who live abroad and wish to visit the island, and extends the time they can visit from one month to at least three months per visit.
Not all will be welcomed back, however. Blocked are those who “organize, encourage or participate in hostile actions against the political, economic and social basis of the state,” and any others “when reasons of defense and national security call for it.”
Also on the don’t-come list, according to the decree, are those with criminal records for terrorism, money laundering or weapons smuggling, and those “linked to acts against humanity, human dignity (or) the collective health.”
“This continues the government effort to control the conduct of citizens inside and outside the island, through an opaque system that rewards and punishes at its own discretion,” said Blanco, a former analyst for the Communist Party’s Central Committee.
The migration reforms were the most anticipated of all the changes that Raúl Castro has been talking about and putting in place since he took over from older brother Fidel Castro, temporarily in 2006 and officially in 2008.
The exit permit was required in 1959 initially to block the escape of officials and supporters of the Batista government toppled by the Castro revolution just nine days before. The re-entry permit was required beginning in 1961, to try to control the return of radical Castro opponents.
But Raúl Castro told the nation’s legislature last year that Cuban migration policies needed an update because those leaving the country nowadays are “émigrés for economic reasons” rather than hostile exiles.
Suchlicki, head of the Institute for Cuban and Cuban American Studies at UM, on Tuesday reissued a column he wrote on May 3 warning that Castro was planning a mass exodus to relieve pressures inside Cuba. The column was titled, “Is Cuba planning a legal Mariel?”
John McAuliff, a New York activist who has long opposed the U.S. embargo on the island, also predicted that with more Cubans free to travel abroad, more will wind up in Mexico and Canada and will step across the U.S. border.
The Obama administration should therefore immediately end the wet-foot, dry-foot policy and the Cuban Adjustment Act, which allows any Cuban who sets foot on U.S. territory to stay permanently, and to remain, McAuliff wrote in an email.
Mauricio Claver Carone, executive director of the pro-embargo U.S.-Cuba Democracy Political Action Committee in Washington, remained skeptical.
When Cubans start jamming foreign diplomatic missions in Havana in search of visas and come up empty handed, he said, the Castro government will tell them, “Well as you can see, other countries also don’t want you to travel.”
Even more skeptical was Blanco. “When all this blows over, the Cubans and the media will realize that not much has changed in the tight control system,” he said. “Stalin can continue to sleep in peace.”

Read more here: http://www.miamiherald.com/2012/10/17/v-fullstory/3054779/euphoria-in-cuba-as-raul-castro.html#storylink=cpy

 

 

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The Economic Implications for Cuba of Relaxing Restrictions on the Freedom of Movement

Posted on October 17, 2012 by Arch Ritter

By Arch Ritter, October 16, 2012

Cuba’s relaxation of its much-loathed travel regulations, to come into effect on January 14 2013,  is welcome news as it will improve the freedom of movement for Cuban citizens considerrably– one hopes .  It is certainly to be welcomed warmly.

The new policy abolishes the requirement to have a foreigner make an invitation and pay $224.00 (CDN in 2009) for an exit visa (non-refundable even if the permit is refused.) It also permits Cubans to remain outside the country for 24 months, extendable, rather than the current 11 months, without having their property in Cuba confiscated.

There are a number of unknowns in the new policy however.

  • Restrictions or controls apparently will remain on professionals . How broad these are is not clear.
  • Will the restrictions still apply to independent professionals such as pro-democracy critics such as Oscar Chepe or Yoani Sanchez?  Will they still require exit permits?  Will they then be free to return to Cuba?

Dimas Castellanos, Miriam Celaya, Reinaldo Escobar and Yoani Sanchez; Will Cuba’s Pro-Democracy Bloggers now be able to exit Cuba freely and – one hopes – to return freely as well?

 TheEconomic Consequences of the New Travel Regulatoions

 Increased Emigration?

Easier exit and 24 months – extendable – absence may lead to more emigration and the  loss of “human capital.”  Already annual net emigration is high, reaching 38,165 in 2010 (ONE 2011 Table 3.21). Those who emígrate are disproportionately better education and entrepreneurial and ready to face the challenges of starting over in a new country. Such population loss is especially onerous in view of Cuba’s declining population and the prospect of accelerated decline as an aging population becomes a dying population .

Or Decreased Emigration?

Greater freedom to exit and re-enter Cuba may in fact reduce emigration as Cubans in Cuba are able to leave more freely.

Perhaps increased numbers of Cubans will remain in Cuba if they are free to visit abroad for lengthy periods ot time and also to return.

For some Cubns such as musicians oir major league Cuban baseball players in the United States and Canada,  spending part of the year in the US but returning for some months to Cuba each year would be an ideal situation. Would some such professionals ultimately  return to live in Cuba part-time?

Declining or Increasing Revenues for the Government?

The Cuban Government will lose the revenues from the very high exit permit fees. (These were an extortionarte $ US 224.00 for each person in 2009 when I tried to invite two  Cubans, Miriam Celaya and Yoani Sanchex to visit Canada in a prívate capacity. The payments were non-refundable.)

But will increased foreign travel lead to higher government tariff revenues from the increased volumes of products imported by air passengers?

 Increased Remittance Payments from Migrants?

Will more Cubans leave Cuba to work abroad but support their families at home in Cuba and revisiting often? The result would then be increased inflows of hard currency to Cuba.

In summary, the economic implications of the relaxation of the travel restrictions are ambiguous and not yet clear – as is the detail of the legislation itself at this time.

However, the government perhaps is to be congratulated for renouncing some easy forms of hard currency income from the elimination of the exit permit fee and facing the risk of increased emigration.  Over time, the crass monetary aspects of the improvement in peoples’ freedom of movement should be more positive in terms of government revenues and National economic gains.

 Currency Inconvertibility and Monetary Dualism as Limits on Freedom of Movement

The most serious violation of the freedom of movement of Cuban citizens results from Cuba’s monetary and exchange rate system.  Cuba’s currency has been inconvertible for 50 years and the dual monetary and exchange rate system has prevailed for the last 20 years. Currency inconvertibility means that citizens can not routinely change their earnings for foreign currencies in order to travel freely. Instead, from 1961 to 1992 they have had to get permission from the Government to exchange their earnings in Moneda Nacional pesos into a foreign currency. This meant that for the average citizen travel was highly restricted unless one could find a foreign sponsor to pay the bills.

The economic powerlessness of most Cuban citizens was further intensified when the dual monetary system came into play in the early 1990s,. With the collapse of the value of the “old peso” (Moneda Nacional) vis-a-vis the US dollar (and then the convertible peso or “CUC”) the purchasing power of earnings in the official economy also collapsed.

At the exchange rate for Moneda Nacional to the US dollar at around 26 to 1, the average monthly income is somewhere around US$ 20.00. It is not easy to travel outside – or inside – Cuba independently with this level of income!

In sum, Cuba’s exchange rate and monetary systems impoverish Cuban citizens in terms of the international transferability of their earnings from work.

Only when Cuba establishes a normal exchange rate and monetary system will greater freedom of movement become a realistic possibility for the average Cuban citizen.

 

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