Author Archives: Frank Mark

CUBA URGES CALM AS OVERHAUL OF MONETARY SYSTEM LOOMS

Posted on October 16, 2020 by Arch Ritter

Reuters, October 12, 2020

By Marc Frank

HAVANA (Reuters) – Cuba’s economy minister on Monday urged calm as the government prepares to unify its dual currency system and multiple exchange rates in hopes of improving economic performance.

The Caribbean island nation is undergoing a crisis caused by an onslaught of new U.S. sanctions on top of a decades-old embargo, the pandemic and its inefficient Soviet-style command economy.

Alejandro Gil, speaking during a prime-time broadcast on state-run television, said the country could not overcome the crisis without unification which he said included wage, pension and other measures to protect the population.

“It is a profound transformation that the economy needs that will impact companies and practically everyone,” Gil said.  “It is for the good of the economy and good of our people because it creates favorable economic conditions that will reverberate through more production, services and jobs,” he added.

The monetary reform, expected before the end of the year, will eliminate the convertible peso while leaving a devalued peso, officially exchanged since the 1959 Revolution at one peso to the dollar.  The soon to be removed convertible peso is also officially set at one to 10 pesos to the dollar for state companies and 24 pesos sell and 25 pesos buy with the population.

The government has stated numerous times that residents will be given ample time to exchange convertible pesos at the current rate once it is taken out of circulation and banks will automatically do the same with convertible peso accounts.  President Miguel Diaz-Canel said last week the country would end up with a single currency and exchange rate with the dollar but did not say what that rate might be or the date devaluation would happen.

Foreign and domestic economists forecast the move will cause triple digit inflation and bankruptcies while at the same time stimulating domestic economic efficiency and exports over imports.

The state controls the lion’s share of the economy and sets most wages and prices. Neither domestic currency is tradable outside Cuba.

“There will be no shock therapy here, the vulnerable will be protected. At the same time, it will favor motivation to work and the need to work to live,” Gil said.

Diaz-Canel announced in July that market-oriented reforms approved by the Communist party a decade ago and never implemented, including monetary measures, would be quickly put in place in response to the crisis. He said last week that monetary reform had now been approved by the all-powerful politburo.

Cuba, dependent on food, fuel and other imports has been caught short of cash as sanctions hit its foreign exchange revenues and the pandemic demolishes tourism and undermines remittances, creating food, medicine and other shortages.  Last year, the government began opening better stocked foreign exchange stores for people with access to dollars or a basket of other international currencies from remittances and other sources. However, all transactions must be electronic, for example through debit cards.

Foreign and local economists forecast economic activity will decline at least 8% this year, with trade down by around a third.

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CUBA ON EDGE AS GOVERNMENT READIES LANDMARK CURRENCY DEVALUATION

Posted on September 30, 2020 by Arch Ritter

Government is forced to act as it faces a dire shortage of dollars and collapse of tourism


Marc Frank in Havana. Financial Times, September 30, 2020.

Original Article: Landmark Currency Devaluation

Cuba is stepping up plans to devalue the peso for the first time since the 1959 revolution, as a dire shortage of tradable currency sparks the gravest crisis in the communist-ruled island since the fall of the Soviet Union.

Two Cubans and a foreign businessman, all with knowledge of government plans, said the move to devalue the peso had been approved at the highest level. They said the devastating effect of the coronavirus pandemic on tourism, a fall in foreign earnings from the export of doctors and tougher US sanctions had created the worst cash crunch since the early 1990s, forcing the government to move forward with monetary and other reforms. The sources said preparations for the devaluation were well under way at state-run companies and they expected the measure before the end of the year. They asked not to be identified owing to the sensitivity of the subject.

The government declined to comment. Scarcity of basic goods and long queues at shops have been a feature of life in Cuba since the Trump administration pushed for tighter sanctions against the country in 2019. The shortages have been exacerbated by the pandemic because Cuba imports about 60 per cent of its food, fuel and inputs for sectors such as pharmaceuticals and agriculture.

The Cuban government has yet to provide any economic data this year but the UN Economic Commission for Latin America and the Caribbean predicts the economy will contract 8 per cent after a sluggish performance over the past four years. Most other foreign analysts say trade is down by at least a third. People queue to exchange money at a bank in Havana.

Cuba operates two currencies: the peso and the convertible peso. The government claims both are of equal value to the US dollar, but neither currency has any tradable value abroad and imported goods, when available, are priced with huge mark-ups when they are purchased in the domestic currencies. The Cuban public can buy the convertible peso for 24 pesos and sell it for 25 pesos, although the government sets different domestic exchange rates between the two currencies in some sectors, ranging from one peso to 10 pesos. For example, in the special economic zone at Mariel near Havana, one convertible peso is exchangeable for 10 pesos.

According to the sources and recent government statements, the peso will be devalued significantly from its current level on paper of one per dollar and the convertible peso will be eliminated. Economists have long argued that Cuba’s currency system is so unwieldy that it stymies the country’s exports, encourages imports and makes it difficult to analyse corporate profits. Cuba’s government has said it will respect the peso’s current rate for an unspecified period to allow people to exchange convertible pesos into pesos. It will convert bank accounts priced in convertible pesos. As monetary reform becomes a reality Cubans face a shortage of hard currency and will once again be allowed to make purchases in US dollars, though only with a bank card. This was last permitted in 2004.

It is legal in Cuba to own US dollars and other internationally tradable currencies, but until recently they were not deemed legal tender even when paying by card. There is a large black market in US dollars beyond the government’s reach in which the American currency has this year appreciated by more than 30 per cent when valued in the local currencies. According to the government there are now more than 120 official outlets which price goods in dollars, selling everything from food and hygiene products to domestic appliances, hardware and car parts, and the government plans to open more.

Many Cubans queue for hours outside dollar shops to obtain the products they sell. To do so, Cubans first need to open an account in which they can deposit cash or wire transfers in dollars or other hard currencies; they can then use a debit card to pay for goods in dollars. There are already more than a million dollar-denominated cards in circulation, according to local reports.

“Now, on top of everything else, I have to also worry about the value of my money and how to buy dollars on the informal market for the card because the state has none to exchange at the moment,” said Jenifer Torres in Havana, who said she had a good job but was supporting dependent parents at home.

Bert Hoffmann, a Latin America expert at the German Institute of Global and Area Studies, said: “Instead of monetary unification — for many years the government promise — Cuba is moving into an economy with two different monetary circuits.” These were “the dollarised debit card shops and the normal domestic economy, in which the Cuban peso will be under strong inflationary pressures”.

The Cuban economy is largely owned and run by the state, which sets exchange rates and many prices. As the cost of inputs increases due to the currency devaluation, state-run companies are likely to increase their prices — fuelling inflation. Alejandro Gil, economy and planning minister, said in July that the crisis was “exceptional” and announced the government would move towards market-orientated reforms and loosening of the Soviet-style central planning system.

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President Diaz-Canel

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CUBA’S REPUTATION AS MEDICAL POWERHOUSE TESTED

Posted on April 9, 2020 by Arch Ritter

Marc Frank, Financial Times, April 5 2020

Cuba has long been proud of sending thousands of its doctors to work around the world as icons of socialist solidarity — and important sources of dollars.

But the coronavirus pandemic has given a communist government with a reputation as a medical power one of its toughest domestic challenges since Fidel Castro seized power six decades ago.

All but bankrupted by US economic sanctions, the Caribbean island nation is grappling with the threat posed to the oldest population in the Americas, where more than 20 per cent are aged over 60.

A severe outbreak of Covid-19 could also potentially threaten the domestic authority of a government whose comprehensive free healthcare system has been a pillar of the revolution’s success.

But the global outbreak has also created diplomatic opportunities, say analysts. The government has stepped up its overseas medical programme, sending doctors and nurses to help fight the virus in the Chinese city of Wuhan, where the pandemic began, as well as Italy, Andorra and elsewhere.

The strategy had long been a soft power play for the island, said Nicholas Watson, Latin America director at the consultancy Teneo, in a note. “[President Miguel] Díaz-Canel is not just looking to restore revenues that the program used to provide but to drive a wedge between the US and Europe over the medical assistance program.”

Cuba has so far reported close to 250 cases of Covid-19, mostly related to foreign visitors, and six deaths — an Italian and a Russian tourist and four Cubans. On March 20 it shut its borders, banned tourism and began implementing measures to curb the virus. This year’s May Day parade has been cancelled for only the third time since the 1959 revolution. Schools, bars and public transport between provinces have been shut down. Restaurants and stores remain open but with new rules on social distancing and hygiene, and all outside gatherings for festive purposes are banned.

Mr Díaz-Canel has appeared daily in the state-run media since the restrictions were rolled out, co-ordinating measures and urging citizens to take the threat seriously. “We have in our favour a public health system for all, a dedicated scientific community and an effective civil defence system, a party and a government that put Cubans at the centre of their attention,” he said in a nationwide address last month as he announced preliminary measures to contain the pandemic. “Serenity, discipline and collaboration, values ​​that every Cuban has incorporated, can prevent the spread of the virus,” he added.

Paul Hare, a former UK ambassador to Cuba who lectures at Boston University’s Pardee School of Global Studies, said the country’s tight social control over its population would also aid the effort. But, he added, “the strains on the Cuban health service will show in equipment and resources”.

While Cuba still boasts the best health statistics in the region, including number of doctors and nurses per capita, many health facilities are in disrepair and there are scattered pharmaceutical shortages.

Cuba initially did little Covid-19 testing but is now conducting more than 500 a day — a fivefold increase since last month — after a donation of kit from China. The government has not said how many ventilators are available. Community-based doctors and nurses, as well as medical students, have been going door to door asking about recent travel, contacts with visitors from abroad and possible symptoms.

Suspected cases are swiftly quarantined in state facilities. Confirmed cases have been hospitalised and their primary contacts quarantined.

The measures appear to have drawn near unanimous support.

“I approve of the measures, though the government should have taken them earlier, especially closing the border like other countries did,” said Anaida González, a retired nurse from central Camagüey province.

The government is, meanwhile, continuing to promote its narrative of global solidarity. As well as sending personnel to virus-stricken nations, state media have broadcast extensive footage of passengers being rescued from the Braemar, a cruise ship that docked in Havana after being refused entry by other Caribbean nations, and images of a Cuban-run hospital in Qatar and nurses marching into hospitals in seven other Caribbean island nations.

Cuba earned $6.3bn from medical services exports in 2018, its biggest source of foreign exchange and twice as much as tourism, its second biggest export earner. It needs the money more than ever given the tourism shutdown.

“Tourism generates $3bn annually in desperately needed hard currency and keeps most of the nascent private sector in business,” said William LeoGrande, a professor and Cuba expert at American University in Washington.

“A prolonged closure will reverberate across the entire economy, producing a recession not quite on the order of the 1990s Special Period [following the collapse of Cuban ally the Soviet Union], but a close second,” he warned.

“The photos of the Cuban medical brigade arriving in Italy are an icon of the revolution’s epic of international solidarity,” said Bert Hoffman, a Latin America expert at the German Institute of Global and Area Studies.

“But this narrative will only function as long as Cuba can control the coronavirus situation on the island itself.”

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‘REALITY’ BITES: CUBA PLANS MORE AUSTERITY AS FINANCES WORSEN

Posted on January 2, 2019 by Arch Ritter

Marc Frank

HAVANA (Reuters) DECEMBER 28, 2018 / 3:14 PM

Cash-strapped Cuba plans fresh austerity measures and will pressure the sluggish bureaucracy to tighten its belt and cut red tape to address weak growth, falling export earnings and rising debt.

The economy has averaged 1 percent annual growth over the last three years, compared with a 5 percent to 7 percent rate economists say is needed to recover fully from a 1990s depression caused by the fall of its former benefactor, the Soviet Union.

The communist-run country has more recently been hit by the economic collapse of its new sponsor and strategic ally, Venezuela, which began to send fuel and cash its way in exchange for doctors and medicine 18 years ago.

Other external shocks, such as Hurricane Irma in late 2017 and the Trump administration’s tightening of U.S. sanctions, have also weighed on the Caribbean island nation’s economy.

“The 2019 plan is one of adjustment to current realities. We cannot spend more than we earn,” Economy Minister Alejandro Gil Fernandez said at a session of the National Assembly last week. State-run companies account for and control most economic activity, including finances and foreign trade, through a planned economy.

Cuba last reported its foreign debt at $15.8 billion in 2015. It began delaying payments to some suppliers and investors in 2016, with western diplomats and businessmen estimating the short-term debt accumulated since then at more than $1.5 billion.

President Miguel Diaz-Canel told the Assembly that next year the country would slightly reduce the backlog of overdue payments through austerity measures and by drawing on a glut of inventory and emergency reserves.

Diaz-Canel and Gil said plans for the economy to grow 1.5 percent, after an anemic 1.2 percent this year, were based in part on doing away with bureaucratic habits and cutting waste and theft.  “The plan must be executed immediately. We have to review the system to insure there is no room for bureaucrats to maneuver,” Diaz-Canel said, threatening to replace them if they stuck to their old ways.

Venezuelan oil deliveries have fallen at least 40 percent since 2014, forcing Cuba to import from Russia and Algeria. Cuba imports more than half the fuel it consumes.  Gil said fuel consumption would be cut from 91 metric tons per million pesos in gross domestic product this year to 84 tons in 2019.

Foreign trade fell around 25 percent from 2013 through 2017, with annual imports dropping to $11.3 billion from $15.6 billion, according to the government. Gil said trade declined further in 2018, without providing figures. The minister said exports would increase 6 percent next year while imports would be slashed 11 percent compared with the

Western diplomats who met with top officials recently said the Cubans said little about how they planned to surmount the crisis and gave no indication they would allow more private initiative and capital accumulation by citizens.

“Obtaining inputs and credit on the international market will be more difficult in 2019,” Vidal said.

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DISASTROUS CUBAN SUGAR HARVEST MAY FORCE IMPORTS – AND REFORM

Posted on May 25, 2018 by Arch Ritter

Marc Frank

HAVANA, May 24 (Reuters) – Rainfall has shuttered all but a few of Cuba’s 54 sugar mills, with output down nearly 40 percent to the lowest level in more than a century, which could force the island to import, official media and industry sources say.

While inclement weather played a big role in this season’s disastrous performance, local experts and officials also blamed inadequate reforms and decapitalization, reflecting more broadly the socialist country’s struggle to update its economy.

The Communist Party has already tasked President Miguel Diaz-Canel, who replaced Raul Castro last month, with carrying out a series of reforms aimed at making the state-dominated economy more efficient, according to party insiders.

The Cuban sugar ministry was eliminated in 2011 and Azcuba, a state-run monopoly, formed after output declined to a similar low comparable only to the first decade of the 1900s. Production is far below the 8 million tonnes produced in 1990 before the collapse of the Soviet Union, Cuba’s former benefactor.

The Caribbean island nation, where sugar was once synonymous with its name, planned to produce 1.6 million tonnes of raw sugar this season, compared with 1.8 million the previous harvest due to damage from Hurricane Irma in September.  It then reduced that figure to 1.3 million tonnes due to rainfall as the harvest began, but production is now pegged at 1.1 million tonnes of raw sugar.

The decline is more bad news for Cuba, which is struggling with a cash shortage due to ally Venezuela’s economic collapse, a hostile and sanctions-wielding Trump administration, a drop in tourism and its own inertia.

The sugar industry also contributes to electricity production and derivatives such as rum and animal feed.  Cuba consumes between 600,000 and 700,000 tonnes of sugar a year and has an agreement to sell China 400,000 tonne

Not quite the 10 million tons of sugar that Fidel attempted to produce by 1970.

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CHINA PILES INTO CUBA AS VENEZUELA FADES AND TRUMP LOOMS

Posted on February 15, 2017 by Arch Ritter

Reuters, Tue Feb 14, 2017 | 8:17 PM EST

Original Article: China piles into Cuba

CUBA ISN’T WAITING AROUND FOR U.S. WHEN IT’S GOT CHINA

By Marc Frank | HAVANA

From buses and trucks to a $500 million golf resort, China is deepening its business footprint in Cuba, helping the fellow Communist-run state survive a crisis in oil-benefactor Venezuela and insulate against a possible rollback of U.S. detente.

Cuban imports from China reached a record $1.9 billion in 2015, nearly 60 percent above the annual average of the previous decade, and were at $1.8 billion in 2016 as the flow of oil and cash slowed from Venezuela due to economic and political turmoil in the South American country.

China’s growing presence gives its companies a head start over U.S. competitors in Cuba’s opening market. It could leave the island less exposed to the chance U.S. President Donald Trump will clamp down on travel to Cuba and tighten trade restrictions loosened by his predecessor Barack Obama.  A deterioration in U.S.-China relations under Trump could also lead Beijing to dig in deeper in Cuba, some analysts say.

“If and when the Trump administration increases pressure on China … China may decide to double down on its expanding footprint in the United States’ neighborhood,” said Ted Piccone, a Latin America analyst at the Brookings Institution think tank.

China, the world’s second largest economy, sells goods to Cuba on soft credit terms. It is Cuba’s largest creditor and debt is regularly restructured, though amounts and terms are considered state secrets.  While Cuba does not publish investment data, the state press has been abuzz with news of Chinese projects lately, covering infrastructure, telecoms, tourism and electronics.

Yutong (600066.SS) buses, Sinotruk (3808.HK) trucks, YTO (600233.SS) tractors, Geely (0175.HK) cars, Haier (1169.HK) domestic appliances and other products are prominent in Cuba, where the main U.S. products on display are cars dating back to the 1950s, thanks to the ongoing economic embargo.

Cubans flock every day to hundreds of Huawei supplied Wi-Fi hot spots and the firm is now helping to wire the first homes.

“Business is really booming, more than we could have ever imagined,” said the manager of a shipping company which brings in Chinese machinery and transport equipment and who asked not to be identified.

The foreign ministry in Beijing described China and Cuba as “good comrades, brothers, and partners,” and said the relations “were not influenced by any third party,” when asked whether U.S. policy was encouraging China to deepen its presence.  “We are happy to see that recently countries around the world are all expanding cooperation with Cuba. I think this shows that all countries have consistent expectations about Cuba’s vast potential for development,” Chinese Foreign Ministry spokesman Geng Shuang told reporters.

The U.S. State Department and White House did not immediately respond to requests for comment.

INCREASED INVESTMENT

Over the past two decades, China has become a major player in Latin America and the Caribbean, second only to the United States in investment flows and diplomatic clout.  But the Asian giant was reluctant to invest in Cuba because of the poor business climate and fear of losing opportunities in the United States, according to Asian diplomats in Havana.

That began to change after Obama moved to normalize relations two years ago and Cuba sweetened investment rules, sparking new interest among U.S. businesses and competitors around the world.  China was well placed because the local government preferred doing business with long-term friends offering ample credit to work with state-run firms.

In return, Cuba has shared contacts and knowledge about the region, and taught hundreds of Chinese translators Spanish.

A report on the government’s official Cubadebate media web site last month said the two countries agreed to strengthen cooperation in renewable energy and industry, with 18 Chinese firms taking part in a three-day meeting in Havana.

Plans for several projects were signed, including a joint venture with Haier to establish a renewable energy research and development facility, the report said.  A few weeks earlier, Cuba opened its first computer assembly plant with Haier with an annual capacity of 120,000 laptops and tablets, state media reported.

Other projects include pharmaceuticals, vehicle production, a container terminal in eastern Santiago de Cuba, backed by a $120 million Chinese development loan, and Beijing Enterprises Holdings Ltd. (0392.HK) venture for a $460 million golf resort just east of Havana.  Shanghai Electric (601727.SS) is providing funds and equipment for a series of bioelectricity plants attached to sugar mills.

Barrio Chino, La Habana

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VENEZUELA’S ECONOMIC WOES SEND A CHILL OVER CLOSEST ALLY CUBA: Warnings of rationing revive memories of post-Soviet austerity in Havana

Posted on July 27, 2016 by Arch Ritter

Financial Times, July 25, 2016

Marc Frank in Havana

The crisis in Venezuela has spread to its closest ally Cuba, with Havana warning of power rationing and other shortages that some fear could mark a return to the economic austerity that traumatised the island nation after the collapse of the Soviet Union.

Only a year after the euphoria that followed the re-establishment of diplomatic relations with the US, hopes of an economic rebound in Cuba have faded and an undercurrent of concern and frustration is evident on the streets of the capital.

“Just when we thought we were going forward, everything is slipping away again,” says Havana retiree Miriam Calabasa. “I am worried people are going to decide enough is enough: then what?”

Government offices now close early, with open windows and whirring fans in lieu of air-conditioners. Already scant public lighting has been reduced further, and traffic in Havana and other cities is down noticeably.

“Nothing will get better any time soon; it can only get worse,” worries Ignacio Perez, a mechanic. “The roads won’t be paved, schools painted, the rubbish picked up, public transportation improved, and on and on.”

President Raúl Castro outlined the scale of the problem this month, telling the National Assembly that “all but essential spending” must cease. He blamed “limits facing some of our principal commercial partners due to the fall in oil prices … and a certain contraction in the supply of oil contracted with Venezuela.”

Fuel consumption has been cut 28 per cent between now and December, electricity by a similar amount and imports by 15 per cent, or $2.5bn, in a centralised economy where 17 cents of every dollar of economic output consists of imports.

But crippling shortages, rampant inflation and an economy that is expected to shrink 10 per cent this year have forced Venezuela’s president Nicolás Maduro to cut back. According to internal data from state oil company PDVSA seen by Reuters, oil deliveries to Cuba are down a fifth on last year.

Venezuela has for 15 years supplied unspecified amounts of cash and about 90,000 barrels per day of oil — half of Cuba’s energy needs. Havana in return sold medical and other professional services to Caracas. Venezuelan aid helped to lift Cuba out of an economic black hole after Soviet subsidies ended in 1991.

“Under current conditions, [Cuban] gross domestic product will dip into negative territory this year and decline 2.9 per cent in 2017,” says Pavel Vidal, a former Cuban central bank employee who is now a professor at Colombia’s Pontificia Universidad Javeriana Cali. “If relations with Venezuela fall apart completely, GDP could decline 10 per cent.”

Although Venezuelan aid is a fraction of Soviet help, mention of the “special period” that followed the fall of the Berlin Wall provokes traumatic memories in Cuba, with many remembering shortages so severe they ate street cats. Karina Marrón, deputy director of the official Granma newspaper, this month warned of possible street protests similar to 1994.

“A perfect storm is brewing … this phenomenon of a cut in fuel, a cut in energy,” Ms Marrón told the Union of Cuban Journalists. “This country can’t withstand another ’93, another ’94.”

So-called rapid response brigades, formed in the 1990s to quell social unrest, are back on alert, according to one brigade member who asked not to be named.

For Mr Castro, the slowdown is a serious blow to the limited market-orientated reforms begun under his leadership, especially the long-planned liberalisation of the peso, which requires a comfortable foreign reserve cushion.

But foreign businesses hope it may speed economic opening. “Venezuela’s problems increase the chance of Cuban reforms. This government only acts when it has to,” says one Spanish investor on the island.

One complication lies in how the government apportions resources.  Cuba relies heavily on tourists, most of whom expect hotels with electricity and air-conditioning. Meanwhile, some 500,000 people, or 10 per cent of Cuba’s workforce, are employed at restaurants, lodging houses and other recently allowed private businesses which need power to ply their trade.

Mr Castro insists residential users will be spared power cuts, for now, while Marino Murillo, who heads the reform commission of the ruling Communist party, says hard currency earning sectors such as tourism and nickel would be spared.

Another problem is that the other countries Cuba exports medical services to, such as Algeria, Angola and Brazil, are also expected to reduce spending. In 2014, medical services earned Cuba about $8bn, or 40 per cent of exports.

“We cannot deny there will be some impact, including worse than currently, but we are prepared,” Mr Castro has said.

Analysts suggest Mr Castro’s warning may in part serve to deflate expectations following the easing of US sanctions. Certainly, a full return to special period-style austerity looks unlikely as Cuba has more diversified income streams, from increased remittances, medical services, tourism to a nascent private sector.

However, “a majority [in Cuba] are still very dependent on state salaries that are now worth a third of what they were in 1989 in real terms”, said Prof Vidal. “[They] are in a situation of extreme vulnerability.”

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CUBA BACKTRACKS ON FOOD REFORMS AS CONSERVATIVES RESIST CHANGE

Posted on May 3, 2016 by Arch Ritter

Reuters, HAVANA, Fri Apr 29, 2016 5:56pm EDT

By Marc Frank

 Original Article: Cuba backtracks on food reform

Cuba decided at a secretive Communist Party congress last week to reverse market reforms in food distribution and pricing, according to reports in official media, reflecting tensions within the party about the pace of economic change.

President Raul Castro unveiled an ambitious market reform agenda in one of the world’s last Soviet-style command economies after he took office a decade ago, but the reforms moved slowly in the face of resistance from conservatives and bureaucrats.  At the April 16-19 congress, Castro railed against an “obsolete mentality” that was holding back modernization of Cuba’s socialist economy. But he also said the leadership needed to respond quickly to problems like inflation unleashed by greater demand as a result of reforms in other sectors.

In response, delegates voted to eliminate licenses for private wholesale food distribution, according to reports over the past week in the Communist Party daily, Granma, and state television. Delegates said the state would contract, distribute and regulate prices for 80 to 90 percent of farm output this year, compared to 51 percent in 2014, according to debates broadcast in edited form days after the event.  Reuters reported in January that Cuba had begun a similar rollback in some provinces, increasing its role in distribution again and regulating prices. The decision at the congress will extend that program.

Data released in March showed that Cuba’s farm output has barely risen since 2008, when Castro formally took over from his brother Fidel, contributing to a spike in food prices blamed on supply-demand mismatch.

Cuba imports more than 60 percent of the food it consumes.

The Union of Young Communists’ newspaper, Juventud Rebelde, reported late last year that the price of a basket of the most common foods increased 49 percent between 2010 and early 2015.  There are no government statistics on food inflation.

While hurricanes and drought have played a part in poor farm output, some experts and farmers say Cuba did not go far enough in allowing farmers freer access to seeds and fertilizers to increase production.

BACKTRACKING

But demand is rising fast. Relaxation of restrictions on self-employment has led to a boom in small restaurants, at a time when Cuba’s detente with the West is leading to record numbers of tourists and an emerging consumer class.

According to the reports, there was no discussion at the congress of moving ahead with plans to allow farmers to buy supplies from wholesale outlets, instead of having them assigned by the state.  Nor was there mention of another reform, also adopted five years ago and never implemented, to have cooperatives join forces to perform tasks currently in state hands, for example ploughing fields.

The state owns nearly 80 percent of arable land in Cuba, leasing most of it to cooperatives and individual farmers. It has a monopoly on imports and their distribution.

“They never fully carried out the reforms and gave them time to work. They stopped half way and appear unable to come up with any other solution than backtracking,” said a local agriculture expert, who asked to remain anonymous.  He said farmers often had no equipment and few supplies such as seed.

The government reported leafy and root vegetable output at 5 million tonnes in 2015, similar to 2008, and unprocessed rice and bean production of 418,000 tonnes and 118,000 tonnes, compared with 436,000 tonnes and 117,000 tonnes eight years ago. Cuba produced 363,000 tonnes of corn last year, just 3,000 more than when Castro took office.

 Cuba April 2015 044Still the Best Cigar Tobacco in the World:Vinales, above and a Tobacco Farmer near Vinales.  (Photo by A. Ritter, April 2015)
Cuba April 2015 053

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CUBANS LOOK TO COMMUNIST PARTY CONGRESS FOR EVIDENCE OF REFORMS; A month after Obama’s historic visit disenchantment over reforms is setting in.

Posted on April 16, 2016 by Arch Ritter

Financial Times, April 15, 2016 10:38 am

Marc Frank in Havana and John Paul Rathbone in Miami

Original article: Communist Party Congress

Oslavi Ramirez wistfully imagines the day when he can freely buy the cheese, tomato paste and disinfectant he needs to run his two cafés in a poor neighbourhood on the outskirts of Havana.

“They made the reforms but forgot the conditions to make them work,” complains Mr Ramirez of Cuba’s missing wholesale markets where restaurateurs in other countries normally buy their food. “It’s as if they made a [toy] doll and forgot the head.”

A month after the euphoria of US President Barack Obama’s historic visit to Cuba — which raised hopes of an easing of economic sanctions and greater freedoms — disenchantment and frustration are setting in.

Cubans are now looking to the Communist Party Congress, which begins on Saturday, for evidence of a deepening of economic reforms, and for signs the party’s “historic generation” will begin to hand over the baton of power to younger counterparts.

Few, though, have high hopes.

“There is a lot of discontent,” says Omar Esteban, a 30-year-old Havana taxi driver. “There’s scarcity and it’s getting worse, in the entire economy, in everything you need. I doubt the congress will do anything to improve our situation.”

The four-day congress, the first in five years, comes at a critical juncture for the Caribbean island nation.  It will probably be the last presided over by a Castro brother: President Raúl Castro, 84, has said he will retire in 2018; his predecessor Fidel, aged 89, stepped down in 2006. Many expect the gathering of 1,000 party members will elect a new politburo, rejuvenating the current 14-strong body, which has an average age of 70.

“The historic generation is passing its biological capabilities . . . It has to renovate,” says Reinaldo Escobar, news editor of 14ymedio.com, an independent news website. “But which new faces will appear? They are the new wave. That’s why this Congress is important.”

The congress will also set Cuba’s economic course over the next several years. Reform hopes rose after the last meeting in 2011 liberalised some aspects of Cuba’s Soviet-style system, such as allowing small businesses. Detente with the US has further boosted expectations.

 But economic growth has averaged just 3 per cent since then — well below the more than 5 per cent growth rate the government seeks. One reason for the underperformance is the drop in commodity prices. This has squeezed the sale of Cuban professional services, such as doctors, to countries hit by the commodity price slide such as Venezuela, Brazil, Angola and Algeria. Lower revenues have, in turn, forced Cuba to cut its imports, according to diplomats, leading to growing domestic scarcities.

“Nothing has changed. They say produce more, but there are no resources,” says Ramon, a small farmer in the town of Artemisa, west of Havana. “It’s worse than five years ago.”

During last month’s visit, Mr Obama laid down a gauntlet when he spoke publicly of how Cubans “should not fear change [they] should embrace it.” “Even if we lifted the embargo tomorrow, Cubans would not realise their potential without continued change in Cuba,” the president added.

But worryingly for Cubans who struggle to feed their families on average state wages of $25 a month, the government has recently back pedalled on liberalisation. It now wants to increase, instead of reduce, its role in food distribution, likely worsening the shortages of supplies small restaurateurs such as Mr Ramirez face.

“Everyone knows that will not work . . . There are already reports of food rotting,” says a Cuban party member and agricultural expert. “It worries me.”

Some blame the reforms’ timidity and slowness on the tension between allowing economic but not political liberalisation. “They [the government] fears a Yeltsin free-for-all,” says one European businessman with long experience of Cuba, referring to the chaotic period following the collapse of communism in Russia. “They are much more impressed by China.”

Others cite stiff bureaucratic resistance to liberalisation.

“Too many people are used to administrating the system in the old way,” says Rafael Hernández, editor of Temas, a reform-orientated cultural magazine. “Too many people have become comfortable in their positions. They do not want to let go, they do not want to change, they do not want to cede their positions.”

Whatever the case, the public mood has soured. A few days after Mr Obama’s visit, the official newspaper of Cuba’s communist party printed a front-page editorial which argued increasingly vocal public dissatisfaction is “a sign of the democracy and public participation that are the intrinsic characteristics of the socialism we are constructing”. It also acknowledged that only 21 per cent of the 2011 reform programme had been implemented.

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FOTOS del VII Congreso del Partido Comunista de Cuba,

16 de marzo de 2016 (Radio Rebelde)

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POPE FRANCIS FACES DIPLOMATIC TEST ON CUBA TRIP

Posted on September 18, 2015 by Arch Ritter

Marc Frank in Havana, James Politi in Rome and John Paul Rathbone in London

As a parish priest in poor areas of Buenos Aires, Jorge Mario Bergoglio was so struck by Pope John Paul II’s 1998 trip to Cuba that he wrote a book about it. The work, Dialogues between John Paul II and Fidel Castro, was published in Argentina shortly after he became archbishop of Buenos Aires.

Almost 20 years later, the book’s author, who has now become Pope Francis, will make his first visit to Cuba, arriving in Havana on Saturday for a four-day visit before heading to the US.

For the 78-year-old Argentine pontiff, the trip will cap his role helping to broker the thaw in US-Cuban relations, which could lead to an end to the half-century trade embargo. The visit will also test the pope’s diplomatic skills: he will seek to proselytise a universal message of helping the poor, while pushing the socialist government of President Raúl Castro to increase its reforms and give a greater role to the Church.

“In the fast-approaching era of no US embargo, Castro can no longer argue that the revolution needs its restrictive laws,” said Paul Hare, former UK ambassador to Havana, now professor of government at Boston University. “Pope Francis helped to usher in this new era and it is one where the Church will ask increasingly probing questions . . . He wants to launch a new battle of ideas.”

The subtlety of that battle of ideas is foreshadowed by the pope’s early Cuban thoughts. Although, as pontiff, he has criticised capitalism and the unfettered pursuit of money as “the dung of evil”, in his book he called for “corrupt, dictatorial and authoritarian governments” to be replaced by democracy.

Francis, a Jesuit, also harshly criticised socialism and, by extension, Fidel Castro’s atheist revolution for denying individuals their “transcendent dignity”.

“Castro may have become a Marxist, but don’t forget he was educated by Jesuits before that, so you may need a Jesuit to bring him round,” said Jimmy Burns, a former Financial Times correspondent and author of a new biography of Francis, The Pope of Good Promise.

Still, few expect strong criticism during the pope’s sermons, which are expected to be live-streamed on state-controlled media. “These matters can be dealt with without doing so in a big way; discretion can be more effective,” said Father Federico Lombardi, a Vatican spokesman.

Late last week, as a “humanitarian gesture”, the Castro government pardoned 3,522 prisoners, although it does not appear that these included any political detainees. Havana made similar moves before John Paul II’s trip and Pope Benedict’s 2012 visit.

Samantha Power, US ambassador to the UN, signalled this week that the Obama administration was unhappy with Havana’s progress on human rights. “#Cuba sending exactly the wrong signal in advance of @Pontifex visit by detaining @DamasdBlanco for marching in street,” she tweeted, referring to the dissident group Ladies In White.

Dissidents have asked to meet the pope, but no meetings are currently on his agenda.  Mr Burns believes that the pope will make “some reference” for Cuba to “respect human rights”. If not, it could damage his image, even before he lands in the US.

Although Cuba remains a one-party state, much has changed for the Church since John Paul’s visit. Christmas and Good Friday are again national holidays, and believers are no longer stigmatised. Today, the Church is the island’s only leading institution outside state control.

One price paid for this greater space, though, is criticism for being too accommodating with the government. Raúl Castro is expected to be at Francis’s side during the trip; although a self-professed atheist, the 84-year-old leader was so impressed by Francis during a May visit to the Vatican that he said he was considering returning to the Church.

Francis will lead his first service on Sunday in Havana’s Revolution Square at an altar flanked by images of revolutionary heroes including Che Guevara.  His trip will end in eastern Cuba at the shrine of Our Lady of Charity, Cuba’s patron saint.

In the build-up to the trip, Cuban cardinal Jaime Ortega gave a 45-minute TV interview, and state TV on Thursday night ran a video message to the Cuban people from Francis.

Meanwhile, in the central Camagüey province, Cuba’s most Catholic community, pictures of the pope have been posted on doors, and the Communist party has been helping to organise bus transport to masses.

“Everything . . . is well-organised,” said retired nursing professor Anaida Morales.  “People have a lot of expectations and hope because every time a pope comes there is some positive change . . . Look, they have freed some prisoners,” she added.

Most Cubans have more realistic expectations about what Francis might achieve. He can fix some “little things here and there”, said Nuris Lopez, the 23-year-old owner of a beauty salon in Granma province.

 zApostolic Nunciature of the Holy See (Vatican City) in Havana, Cuba

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 The Cathedral

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