Author Archives: Frank Mark

Cuba pushes ahead on reforms but insists island not for sale

Posted on July 16, 2013 by Arch Ritter

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

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

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

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

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

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

The Havana Cross-Harbor Ferry Chasing a Container Ship

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

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

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

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

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

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

Artesan market, La Rampa November 2008; not state enterprise

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Cuba to Embark on Deregulation of State Companies

Posted on July 9, 2013 by Arch Ritter

By Marc Frank; HAVANA | Mon Jul 8, 2013

Original here:  Cuba to embark on deregulation of state companies

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

CUPET: Out of gas? 

ELIMINATING BARRIERS

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

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

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

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

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

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

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

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

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

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Canadian, British executives face corruption charges in Cuba

Posted on May 15, 2013 by Arch Ritter

By Mark Frank, Havana — Reuters, Globe and Mail, May 15, 2013

Canadian and British executives of three foreign businesses shut in 2011 by Cuban authorities, ostensibly for corrupt practices, have been charged after more than a year in custody and are expected to go on trial soon, sources close to the cases told Reuters.

The arrests, part of a broad government campaign to stamp out corruption, sent shock-waves through Cuba’s small foreign business community where the companies were among the most visible players.

Until then, expulsions rather than imprisonment had been the norm for those accused of corrupt practices.

The charges against the executives involve various economic crimes and operating beyond the limits of their business licenses on the communist-run island, according to the sources, who asked to remain anonymous and who include a close relative of one of the defendants. Some of the foreigners are alleged to have paid bribes to officials in exchange for business opportunities.

Dozens of Cuban state purchasers and officials, including deputy ministers, already have been arrested and convicted in the investigation into the Cuban imports business that ensued.

Cuba has mounted a crackdown on corruption in recent years as part of a gradual reform process to open up the state-run economy to greater private sector activity. Under Cuban law, trials must begin within a month of charges being filed, though small delays are common and postponement can be sought by the defendants’ lawyers.

“There is definitely movement and the trials could begin soon,” a Western diplomat said.

The crackdown began in July 2011 with the closure of Canadian trading firm Tri-Star Caribbean and the arrest of its chief executive, Sarkis Yacoubian.

In September 2011, one of the most important Western trading firms in Cuba, Canada-based Tokmakjian Group, was also shut and its head, Cy Tokmakjian, taken into custody.

In October 2011, police closed the Havana offices of the British investment and trading firm Coral Capital Group Ltd and arrested chief executive Amado Fakhre, a Lebanese-born British citizen. Coral Capital’s chief operating officer, British citizen Stephen Purvis, was arrested in April 2012.

All four men are being held in La Condesa, a prison for foreigners just outside Havana, after being questioned for months in other locations.

A number of other foreigners and Cubans who worked for the companies remain free but cannot leave the island because they are considered witnesses in the cases.

Cuban officials and lawyers for the defendants could not be reached for comment.

The legal limbo of the foreign executives has put a strain on Cuba’s relations with their home countries, where the legal process protects suspects from lengthy incarceration without charges, diplomats told Reuters.

Cuba says the cases are being handled within the letter of Cuban law. Attorney General Dario Delgado told Reuters late last year that the investigation had proved complex and lengthy.

“These cases, which involve economic crimes, are very complicated. They do not involve, for example, traffic violations or a murder,” he said.

Comptroller General Gladys Bejerano has said the length of investigations depended on the behavior of those involved.

“When there is fraud, tricks and violations … false documents, false accounting … there is no transparency and the process becomes more complicated because a case must be documented with evidence before going to trial,” she said.

Transparency International, considered the world’s leading anti-graft watchdog, last rated Cuba 58 out of 178 countries in terms of tackling corruption, ahead of all but eight of 33 nations in Latin America and the Caribbean.

Soon after taking over for his ailing brother Fidel in 2008, President Raul Castro established the comptroller general’s office with a seat on the ruling Council of State, even as he began implementing market-oriented economic reforms.

The measure marked the start of the anti-corruption campaign. Since then, high-level graft has been uncovered in several key areas, from the cigar, nickel and communications industries, to food processing and civil aviation.

Rodrigo Malmierca, the minister of foreign commerce, last week delivered a report to the cabinet highlighting “irregularities” in foreign joint venture companies, according to state-run media.

Malmierca blamed “the lack of rigor, control and exigency” of the deals “as well as the conduct and attitudes of the officials implicated,” the reports said.

Castro has been less successful, however, in tackling low salaries and lack of transparency, which contribute to the problem, according to foreign diplomats and businessmen.

There is no open bidding in Cuba’s import-export sector and state purchasers who handle multimillion-dollar contracts earn anywhere from $50 to $100 per month.

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“Private sector bites into Cuban state food sales”

Posted on March 28, 2013 by Arch Ritter

* First wholesale market opens in Havana; State share of food sales declines

By Marc Frank, Reuters,  Wed Mar 27, 2013

HAVANA, March 27 (Reuters) – Cubans are building private food distribution networks from the farm through to retail outlets as communist authorities gradually dismantle the state’s monopoly on the purchase and sale of agricultural products.

The country’s first wholesale produce market is up and running on the outskirts of Havana and across the island farmers report they are selling more of their goods directly to customers, ranging from hotels to individual vendors.

Those involved say the change is speeding the flow of food to market, helping end longstanding inefficiencies that often left crops to rot in fields and putting more money in the pockets of producers.

“We purchased two old trucks this year, in part to deliver produce to our state clients in Camaguey,” said the president of a cooperative near the city in central Cuba.

“A few years ago we had to sell everything to the state, which then sold it to our clients a few days later. Now it arrives fresh and we keep the 21 percent profit that went to the state wholesaler,” he said, asking to remain anonymous.

Private trucks, some dating back to the 1950s and beyond, clatter into cities and towns delivering goods to kiosks and stalls run by private farm cooperatives or their surrogates.

In eastern Santiago de Cuba, the trucks roll into retail markets where private food vendors, who roam the streets with horse-drawn wagons, push and tricycle carts, gather to buy.

With the country importing around 60 percent of its food and private farmers outperforming state farms on a fraction of the land, authorities are gradually deregulating the sector and leasing fallow land to would-be farmers.

At the same time private truckers and vendors are being licensed as part of an opening to small businesses, with 400,000 people, including employees, now working in what’s called the “non-state” sector.

SLOW GOING

It is slow going, with farm output up just a few percentage points since President Raul Castro, who replaced his ailing brother Fidel in 2008, began agricultural reforms as part of a broader effort to “modernize” the Soviet-style economy.

Local farmers and experts say resistant bureaucrats, cautious leadership, the state’s continued monopoly on farm inputs and a lack of financing are holding up growth.

Yet, deregulation is gradually taking hold and private supply chains, whose participants were once labeled “parasitic middlemen” and even criminals by authorities, are emerging, now with the state’s blessing.

“The farmers harvest all this in the mornings, put it in sacks and weigh it, then truckers bring it in,” said purchaser Ariel Gonzales, leaning on his tricycle cart loaded with onions, garlic, carrots and other items at the Havana wholesale market.

“The food arrives the same day, it’s all fresh and at 50 percent or less of retail prices,” Gonzalez, who delivers to three small Havana retail outlets, said.

“Of course, when it rains this all turns to mud. You would think the government would pave it,” he said. “After all, we are feeding Havana.”

Five years ago 85 percent of all food produced in the country was contracted and sold by the state. By last year it had fallen to below 60 percent, according to the government. Within a few years it is expected to bottom out at around 35 percent, mainly root vegetables, grains and export crops.

“These are products not included in any contract with the state. You can sell them freely,” said Homero Rivero, a small farmer turned part time trucker and wholesale vendor as he supervised the unloading of sacks of cucumbers, crates of tomatoes and other vegetables from a vintage Ford truck.

Hundreds of purchasers swarm the area bidding for the goods, often accompanied by strapping young men with tricycle carts hired to move the produce to waiting vehicles.

FOOD NO LONGER WASTED

Rivero’s old Ford was one of many similar vintage vehicles piled with fruit, garden and root vegetables late Tuesday afternoon, even as dozens more waited to enter the makeshift market on an unpaved lot at the edge of the Cuban capital.

The market opens in the afternoon and runs into the late evening.

The scene is chaotic and crude and the trucks and carts decrepit, reflecting the precarious state of the country’s agricultural infrastructure.

“The law is that there is no law, you can do what you want with these products,” said Rivero, who is from the adjoining province of Mayabeque.

Cuba’s capital is home to 2.1 million people, 20 percent of the country’s population and is far wealthier than other cities.

Trucks arrived from all over the island, for example hawking pineapples and oranges at 7 pesos and 2 pesos each from Matanzas, 70 miles (112 km) to the east, compared with the local retail price of 15 pesos and 4 to 5 pesos respectively.

Jaimito Alvarez, who comes into Havana every 10 days from Pinar del Rio, 100 miles (160 km) to the west, said before the produce was often wasted.

“Before, if you produced more than planned, you were lucky if the state picked it up. Private food sales were forbidden and usually some of your crop rotted in the fields or was fed to the pigs,” Alvarez said.

State Sector Retailing circa 2000

State Sector retailing, 1969; Photo by Arch Ritter

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Cuba to open state-run wholesaler for private companies

Posted on March 8, 2013 by Arch Ritter

Thursday Mar 7, 2013

By Marc Frank

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

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

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

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

Cuentapropista: now with access to inputs at wholesale prices?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Marc Frank: “Stunned Cuba ponders future without Chavez”

Posted on March 6, 2013 by Arch Ritter

Wed Mar 6, 2013

By Marc Frank

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ECONOMIC DEPENDENCE

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

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

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

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

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

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

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

UNCERTAINTY AND REFORM

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

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

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

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

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

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

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

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

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

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Foreign executives arrested in Cuba in 2011 await charges

Posted on October 10, 2012 by Arch Ritter

The original Reuters article is here:  Foreign executives arrested in Cuba in 2011 await charges

By Marc Frank; (Editing by Jeff Franks and Jackie Frank)

HAVANA | Tue Oct 9, 2012 2:59pm EDT

HAVANA (Reuters) – Executives of three foreign businesses shut in 2011 ostensibly for corrupt practices have been held by Cuban authorities for a year or more and still have not been charged with a crime, sources with knowledge of the cases said this week.

Their ongoing legal limbo has put a behind-the-scenes strain on Cuba’s relations with their home countries – Canada and Britain – where the legal process protects suspects from lengthy incarceration without charges, western diplomats told Reuters.

Police closed the Havana offices of the British investment and trading firm Coral Capital Group Ltd last October and arrested chief executive Amado Fakhre, a Lebanese-born British citizen.

A month earlier authorities shut down one of the most important Western trading companies in Cuba, Canada-based Tokmakjian Group, after doing the same in July 2011 to another Canadian trading firm, Tri-Star Caribbean.

Cuban authorities say the cases, which are part of a larger crackdown on corruption on the communist island, are being handled within the letter of Cuban law.

The local legal process does call for defendants to be informed of why they were arrested and sets out time limits for charges to be filed, but they can be waved indefinitely in “exceptional circumstances.”

Cy Tokmakjian, head of the Tokmakjian Group, and Sarkis Yacoubian, head of Tri-Star, were arrested and confined to comfortable safe houses when their businesses were closed, but earlier this year both were transferred to La Condesa, a prison for foreigners just outside Havana.

Cy Tokmakjian

Coral Capital’s Fakhre was recently transferred to a military hospital when he fell ill after months in prison.

His company’s chief operating officer, British citizen Stephen Purvis, was arrested in April and is in the Villa Marista prison run by state security, sources said.

A number of other foreigners and Cubans who worked for the companies remain free, but cannot leave the island because they are considered witnesses in the cases.

STILL UNDER INVESTIGATION

Asked at a Havana penal conference last week when charges might be filed against the businessmen, Cuban Attorney General Dario Delgado told Reuters the investigation had not concluded because of the complicated nature of the alleged crimes.

“The cases are in the investigative stage and still have not been presented to the court, but I can guarantee they are proceeding according to Cuban law,” he said.

“There isn’t the slightest reason for concern. These cases, which involve economic crimes, are very complicated. They do not involve, for example, traffic violations or a murder,” he said.

Cuban Comptroller General Gladys Bejerano told reporters at the same conference that the length of investigations depended on the behavior of those involved.

“When there is fraud, tricks and violations … false documents, false accounting … there is no transparency and the process becomes more complicated because a case must be documented with evidence before going to trial,” she said.

Western diplomats acknowledged that the cases were being handled within Cuban law, but said there was no due process by western standards.

Cuba’s judicial system has been widely criticized because all branches are controlled by the state and inevitably this leads to tension when foreign nationals are arrested.

“It is not just that they haven’t been charged. They can be questioned without a lawyer present and that lawyer would work for the state anyhow,” one diplomat said.

Under Cuban law a defendant must be represented by a Cuban public defender, though other lawyers can consult on the case, they said.

“There is regular, monthly counselor access and some contact with Cuban defense lawyers, but we certainly would like to see the process proceed more quickly and transparently,” another diplomat said.

Soon after taking over for his ailing brother Fidel in 2008, President Raul Castro established the comptroller general’s office with a seat on the ruling Council of State, even as Cuba began implementing market-oriented economic reforms.

The measure marked the start of the campaign to weed out corruption and reflected concern over graft that followed similar reforms in other communist countries, foreign and local experts said.

Since then, high-level corruption has been uncovered in one sector of the economy after another, from the cigar, nickel, and communications industries, to food processing and civil aviation.

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US-Cuba Relations Make Little Progress

Posted on September 26, 2012 by Arch Ritter

By Marc Frank in Havana; Financial Times; September 25, 2012

Original Article here:  US-Cuba Relations Make Little Progress

             US Interest Section, Havana, with black flags blocking view   of billboard messages emitted at the top of the building

When Barack Obama won the US presidency in 2008, many believed he would make significant progress in Cuban relations, so resolving one of the last conflicts of the cold war.

But four years later, US-Cuba relations remain stuck in much the same time warp, and whether Mr Obama or his Republican challenger Mitt Romney becomes the next US president, few expect a significant breakthrough – although the region’s changing ideological landscape could prompt the beginnings of a shift.

Mr Obama lifted all restrictions on Cuban American visits soon after taking office, and in December 2010 reversed a Bush Administration ban that led to a surge in so-called people-to-people visits, which are for educational purposes rather than tourism. But he has also stepped up financial sanctions under anti-terrorism laws, and this year issued tough new travel guidelines.

“The US position on Cuba continues to undercut our strategic position in the region and a breakthrough would greatly enhance Obama’s foreign policy legacy through solving a problem far simpler than many other global issues,” said Julia Sweig, a senior fellow on Latin America at the Washington-based Council on Foreign Relations.

“There is no question that Obama’s first term disappointed many when it comes to Cuba, but I think it premature to assume this status quo under a second term,” she added.

Mr Romney, if he wins, is, meanwhile, expected to tighten travel and adopt a more aggressive public stance towards Havana, encouraged by powerful Cuban-American legislators in the key electoral state of Florida.

The two countries’ latest, seemingly intractable, conflict is over the fates of jailed US contractor Alan Gross and five Cuban intelligence agents. Mr Gross was arrested in 2009 for participating in a US project to set up an internet platform covertly in Cuba. He is currently serving a 15-year sentence.

The Cuban agents were imprisoned in the US 14 years ago for infiltrating exile organisations and military installations in Florida. Following Mr Gross’ arrest, immigration and mail service talks restarted under Mr Obama were again suspended, and US diplomats say there will be no progress until Mr Gross is released.

Another factor limiting improved US-Cuban relations is the conservative tide that washed over Washington after the 2010 Congressional elections and that brought Florida Republican senator Marco Rubio to office and saw another hard-line Cuban American, congresswoman Ileana Ros-Lehtinen, appointed head of the House Foreign Relations Committee. Both lawmakers oppose contact with Cuba and are particularly incensed by people-to-people exchanges.

“This is nothing more than tourism . . . a source of millions of dollars in the hands of the Castro government that they use to oppress the Cuban people,” Mr Rubio charged during congressional hearings last year.

As many as 400,000 Americans visited Cuba in 2011, with as many as 70,000 of them not of Cuban heritage. They may have boosted the government, but were also important clients for the hundreds of small businesses that have opened in Cuba – part of Havana’s broad, if hesitant, market-oriented reforms.

Mr Rubio, according to his office, then blocked the administration’s nominee for undersecretary of state for Latin American affairs, Roberta Jacobson, until it agreed in March to roll back the travel programme. Tougher new regulations quickly followed.

“Under the new guidelines, applications often run to more than 100 pages, compared with just a few when the people-to-people programme began, and they are usually sent back for not meeting vague criteria,” said Bob Guild, vice-president of Marazul Charters, the oldest US company taking people to Cuba.

Although pro-embargo forces are expected to remain a strong influence in Congress even if Mr Obama wins, some advocates of a new Cuba policy hope he will use executive privilege to get round them.

One factor that could change the state of play is if Cuba is taken off the list of state sponsors of terrorism – as the US State Department did with North Korea in 2008 and Libya in 2006 – for helping broker peace talks between the Colombian government and the country’s Marxist Farc rebels. If the Farc lay down their weapons that could help lead to Mr Gross’ release, opening the way for further advances.

 

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Mark Frank: “Cuba broadens economic reforms, plans new measures”

Posted on July 27, 2012 by Arch Ritter

By Marc Frank

HAVANA | Thu Jul 26, 2012 8:07pm EDT

(Reuters) – Cuba adopted a new tax code this week and said it would loosen regulations on some state companies while turning others into cooperatives, as one of the world’s last Soviet-style economies moves in a more market-friendly direction.

The plans were announced at a session of the National Assembly, which passed the country’s first comprehensive tax code since the 1959 revolution on the communist-ruled island. Foreign journalists were barred from Monday’s meeting, only portions of which were later broadcast by the official media.

President Raul Castro, 81, has liberalized regulations for small businesses and farming, and begun leasing small state retail outlets to employees since taking over for his ailing older brother Fidel in 2008. But he now appears ready, says Cuba expert Phil Peters, “to put some meat on the bone.”

Marino Murillo, head of the Communist Party commission responsible for implementing reforms approved at a party Congress last year, characterized the tax law as providing the basis for ““bringing up to date the economic model,” while releasing few details of the code.

The new law takes effect next year and is scheduled for publication next month.

Castro’s point man for reform said it would gradually replace an old Soviet-style system and eventually require everyone to pay income and property taxes for the first time since the 1960s.

Murillo, in a two-hour presentation to the National Assembly, announced that an unspecified number of state companies would be partially deregulated by the end of the year. He said the companies, previously part of various ministries, would be able to make day-to-day business decisions without waiting for government approval, manage their labor relations and set prices. After meeting state contracts, they will also be able to sell excess production on the open market. The companies will be self-financed, including through bank credits, and expected to cover their losses, versus handing over all profit to the state and receiving financing and subsidies from the treasury. Instead of being micro-managed by the ministries, Murillo said the companies would be evaluated by “four or five indicators” such as earnings, the relation of productivity to salaries and their ability to meet the terms of state contracts.

Murillo also announced that 222 small to medium-sized state businesses were preparing to become cooperatives, ranging from restaurants and produce markets to shrimp breeding and transportation. The cooperatives will lease state property and equipment at 10-year renewable intervals, operate on a market basis, pay taxes like other companies and divide profits among members as they see fit, Murillo said.

“SLOW BUT STEADY”

“They have been rolling things out one by one on a slow but steady timetable and my guess is they will continue to do so. It’s a timeline that goes to 2015,” Peters, a vice president of the Virginia-based Lexington Institute, said. “Now they are getting to the things that really have the ability to increase the size of the private sector and create the savings in the state sector that they say are their targets,” he said.

Cuba, with a foreign debt of more than $22 billion according to Reuters’ estimates and still mired in a post-Soviet crisis after 20 years, has no choice but to change its inefficient ways, government insiders say.

Marino said as much during the National Assembly meeting. “We are not calling for turmoil … but the reality of life shows we cannot maintain (a command economy),” he said.

The five-year reform plan calls for moving from government administration of just about the entire economy to managing it through “”indirect” means such as taxes and bank credits.

Most retail services and minor production and farming are scheduled to go over to a “”non-state” sector that will account for more than 40 percent of the labor force, compared with the current 15 percent.

At the same time, the Communist Party plans to move away from a paternalistic state system of collective work and consumption to one where individual effort is better rewarded. Across the board subsidized goods and services are to be replaced by targeted welfare.

Castro, who closed the National Assembly meeting, said the new measures would “”permit the state to forget about the administration of a set of secondary services and productions and concentrate on improving the management of the basic means of production which will remain as socialist state companies.”

Murillo also announced that the government would lease to its employees more than 1,000 small cafeterias, following in the footsteps of barbershops, hairdressers and a host of other minor services let go over the last few years. The former state establishments now must compete head to head with a burgeoning small business sector of more than 300,000 mom-and-pop operations, including restaurants and other small companies.

Murillo said the new tax code would cut small business taxes on average by between 3 and 7 percent and provide other benefits for start-ups, such as eliminating the labor tax for those with five employees or less. The new law will also benefit small farmers, he said.

 

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Mark Frank on Cuban Access to Internet and Telephone Technology

Posted on June 15, 2012 by Arch Ritter

By Mark Frank, (Reuters) – June 15, 2012

The original article is here: More Cubans have local intranet, mobile phones

The number of Cubans linked to the country’s state-controlled intranet jumped more than 40 percent in 2011 compared to the previous year and mobile phone use rose 30 percent, the government reported, even as Cuba’s population remained largely cut off from unfettered access to the Internet.

Communist-run Cuban monopolizes communications in the state-controlled economy. There is no broadband Internet in Cuba and the relatively few Internet users suffer through agonizingly long waits to open an email, let alone view a photo or video, which also hampers government and business operations.

The National Statistics Office said the number of ?Internet users reached 2.6 million last year, up from 1.8 million in 2010, although almost all were likely on the local intranet through government-run computer clubs, schools and offices.

Some of Cuba’s Intranet Users

Cuba reports intranet use as Internet use even though access to the Internet is banned without government permission.

The number of mobile phone users increased to 1.3 million in 2011, up from 1 million in 2010, the government said. Cubans do not have Internet connectivity on their phones. Cuba’s population is 11.2 million people.

Cell phone usage has grown by leaps and bounds since 2008, when the government first allowed all Cubans to buy the phones. That first year there were 330,000 users. Mobile phones are available only in a local dollar-pegged currency and sending even a Twitter message from a mobile phone can cost more than the average daily earnings of many Cubans.

There were 783,000 personal computers in the country, or 70 per 1,000 residents, though around 50 percent of those were in state hands, according to the report available at www.one.cu/ticencifras2011.htm

During a recent tour of Cuba by a Reuters reporter, no Internet users were found, though a few people said they occasionally accessed the Web using black market passwords or hotels.

WORST IN LATIN AMERICA

Cubans who want to leave the country often cite local telecommunications, rated as the worst in Latin America by the United Nations International Telecommunications Union, as one of the reasons.

Officials say that data detailing individual use of Internet and ownership of computers and telephones is misleading and argue the country’s technological priorities are on encouraging social use at government-operated computer clubs and through services that provide professionals access to literature in their fields.

Cuba blames the United States embargo for denying access to underwater cables, saying it must use a satellite system and is limited in the space it can buy. In February 2011, a fiber optic cable was laid fromVenezuelato Cuba to provide download speeds 3,000 times faster than Cuba’s current Internet and capable of handling millions of phone calls simultaneously. To date there is no evidence the cable is operational and the government and state-run media have remained mum on the matter.

Cuba has around a million fixed telephone lines. The country has a total telephone density of just 22.3 percent.

Access to satellite television is also severely restricted. Satellite TV access in Cuba is illegal without special permission from the government and authorities regularly raid neighborhoods and homes in search of satellite dishes.

 

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