Author Archives: Pérez Omar Everleny

Book Review Essay: THE EMERGING NON-STATE SECTOR IN CUBA’S ECONOMY

Carmelo Mesa-Lago, University of Pittsburgh,

Latin American Research Review, July 2017  https://doi.org/10.25222/larr.2

This essay reviews the following works:

Open for Business: Building the New Cuban Economy. By Richard E. Feinberg. Washington DC: Brookings Institution Press, 2016. Pp. vii + 264. $22.00 cloth. ISBN: 9780815727675.

Miradas a la economía cubana: Análisis del sector no estatal. Edited by Omar Everleny Pérez Villanueva and Ricardo Torres. La Habana: Editorial Caminos, 2015. Pp. 163. $5, paper. ISBN: 9789593031080.

Entrepreneurial Cuba: The Changing Policy Landscape. By Archibald R. M. Ritter and Ted A. Henken. Boulder, CO: First Forum Press, 2015. Pp. xiv + 374. $79.95 cloth. ISBN: 9781626371637.

Retos para la equidad social en el proceso de actualización del modelo económico cubano. Edited by María del Carmen Zavala et al. La Habana: Editorial Ciencias Sociales, 2015. Pp. vi + 362. $20 paper. ISBN: 9789590616105.

Soon after current president of the State Council Raúl Castro took over power in Cuba from his brother Fidel in 2006, he started structural reforms to cope with the serious socioeconomic problems accumulated in the previous forty-five years. Some authors, including a few in this review, argue that Cuba is in transition to a mixed economy. Despite the importance of these changes, however, the official view is that central planning will predominate over the market, and state property over private property.1 A main reform goal was to fire 1.8 million unneeded workers in the state sector, which demanded an expansion of the “non-state sector” (NSS) to provide jobs to those dismissed. The four books I review are commendable additions to the growing literature on the NSS (inside and outside Cuba), as they fill some of its existing gaps, to be identified below.2 A few authors rely on surveys to gather data, but surveys are not easy to take in Cuba; hence the majority used interviews of different size and representativeness, as well as in-depth conversations.

Within the NSS, the most dynamic four groups are self-employed workers (507,342), usufruct farmers (312,296), and members of new nonagricultural and service co-ops, NASCs (only 7,700 so far). Altogether these make up 17 percent of the labor force, out of a total 29 percent in the entire NSS.3 Except for the most recent NASCs, the other three forms were legalized during the severe crisis of the 1990s but did not take off until much later. Selling and buying of private dwellings, banned in 1960 and reauthorized in 2011, involve at least 200,000 transactions but still only 5 percent of the total housing stock. The books reviewed in this essay mainly concentrate on self-employment and to a much lesser extent on NASCs.

The main gaps treated by the books are the NSS’s history; size and personal profiles; relations with the state; progress achieved and obstacles faced; the role of variables—age, gender (most treated), race, educa­tion, and location—on growing inequalities; particular issues such as access to raw materials, capital and credit, competition, and taxes; and NSS perspectives. This review discusses the data, method, and evidence that each researcher uses and the major issues and findings, arguing that the size of the NSS remains questionable.

In Entrepreneurial Cuba, Archibald Ritter and Ted Henken combine their economic and sociological exper­tise to produce an encyclopedic, balanced, and laudable volume on the development of the NSS in Cuba. Targeted on self-employment and, to a lesser extent, on NASCs, the book also tackles broader topics like the “underground” economy. It starts with an examination of small enterprises in general, internationally, and its lessons for Cuba. Based on historical and comparative approaches, Ritter and Henken discuss the evolution of self-employment throughout Cuban contemporary history. In the socialist period, they com­pare Cuban policies with those of the USSR and Eastern Europe; furthermore they contrast Fidel’s hostility to the NSS (except for reluctant support in times of economic crisis) with Raúl’s more pragmatic and posi­tive style, which does not exempt the sector from tight controls, restrictions, and taxes. Largely based on my cycles approach,4 the history of self-employment under socialism is divided in three periods (each one covered in a chapter): 1959–1990, trajectories and strategic shifts; 1990–2006, the “Special Period”; and 2006–2014, Raúl’s reforms.

Ritter and Henken conclude that the NSS has grown and achieved substantial progress: for instance, increase in authorized activities and licenses, broadened legal markets, deduction of part of the expenses for tax purposes, micro credits and banking facilities, and rental of state facilities. Conversely they identify limi­tations, like narrow definition of legal activities, exclusion of most professional and high-tech occupations, multiple taxes and taxation at a high level, lack of wholesale markets, bureaucratic resistance, obstacles to hiring employees, and discrimination in favor of foreign firms. They provide suggestions to overcome these problems. Lack of space impedes a more profound treatment of this book, the most comprehensive and profound on self-employment so far. The structure of the book, combining historical stages and current analysis of self-employment and NASC, however, is somewhat complex and leads to a certain overlapping.

Ritter and Henken rely on three series of interviews conducted in Cuba with sixty self-employed workers in 1999–2001, half of them re-interviewed in follow-up visits in 2002 and 2009 and, finally, some revisited in April 2011 to evaluate the impact of Raúl’s reforms. The authors select the three most dynamic, lucrative, and sizeable private activities: small restaurants (paladares), taxis, and lodging. They asked their informants about three issues: (1) ambitions and expectations for the future (whether they expected to become true small- and medium-sized enterprises—SME—in the long run); (2) survival strategies in negotiating with the state (how they responded to the government regulations, licenses, and taxes); and (3) distinctions between licensed and clandestine self-employed workers.

Accompanying abundant evidence, deep analysis, statistical tables, synoptic charts, figures, and useful appendices (including a list of the 201 authorized activities for the self-employed and a timetable of the evo­lution of NSS in 1959–2014), the authors intersperse vignettes that allow the reader to better understand the daily life of the self-employed. Occasional jewels in the book brighten our knowledge, such as uncover­ing in fascinating detail the bureaucratic shutdown of El Cabildo, which was the most prosperous private, medium-sized business in Cuba.

Miradas a la economía cubana, a collection edited by well-known Cuban economists Omar Everleny Pérez Villanueva and Ricardo Torres, includes twelve essays that offer a first-rate sample of scholarship on the NSS at the Center for the Study of the Cuban Economy, the best economic think tank in Cuba. The anthology, an excellent complement to the Ritter and Henken book, includes self-employment and NASCs. In the prologue, Juan Valdés Pérez notes that “the new economic model in Cuba is moving [transita] toward a mixed economy, based on a public sector, a mix-capital sector, and a private sector, mostly SME” (14). Most contributors to the volume propose reasonable policies to help the consolidation and further expansion of the NSS.

In the opening chapter, Torres discusses the role of the private sector in a centrally planned economy such as Cuba, which generates an intrinsic conflict. Despite NSS advances, the government still sees it as a supplement to the state sector and imposes clear limits. Hence the NSS role is and will continue to be very minor, if currents trends hold. An important point, among many discussed by Torres, is that its productivity is low, despite the very highly educated labor force (ranked at the top of Latin America), and shows a declin­ing trend due to the low skills of the activities approved. He ends by suggesting, “In a scenario [Cuba] where public enterprises are predominant and mostly inefficient, wealth is not socialized and man is not liberated from alienation, just the opposite” (25). Torres believes that the solution to all existing problems is neither privatization of all public assets nor to insist on old formulas overcome by time, and urges a serious national social debate on these issues.

Pérez Villanueva analyzes and defines self-employment and SME, tracing their evolution and identifying needs such as autonomy, a wholesale market with competitive prices, facilitation of payments through the national banks, and use of highly skilled personnel; he also notes adverse effects like social inequalities (see Zavala et al., below). At the end of his chapter, he asserts that “the Cuban SME would be more viable than the actualization of our economic model and contribute more positive results, providing that the government understands its role and potential” (35).

Camila Piñeiro provides the most comprehensive and deep analysis of NASCs so far. These cooperatives grew 74 percent, from 198 to 345, in 2013–2014, but their tempo slowed to 6 percent in 2015.5 Based on diagnosis and audits done on sixty NASCs in 2014, Piñeiro identifies their achievements (increase in income and motivation, improvement in the locale and working conditions) and problems (complex and delayed creation, insufficient training, and lack of a wholesale market). The most successful NASCs are those cre­ated by the voluntary initiative of a group of persons that share the same goals and values (23 percent of all NASCs), and the least successful are those coming from former state enterprises, without negotiating with their workers so that they accept what is decided from above (77 percent).

Mariuska Sarduy, Saira Pons, and Maday Traba analyze tax evasion and underdeclaration of income among self-employed owners. They report that evasion was 12 percent of total fiscal revenue and 60 percent of registered self-employed contributors in 2013–2014. They carried out 300 interviews with self-employed workers in Havana in 2014 and found that 55 percent omitted income in their declaration for the follow­ing reasons: 95 percent due to very high taxes; 77 percent blamed the complex procedure to pay taxes; 80 percent knew that evasion or underdeclaration are toughly penalized crimes, but half believed that they were necessary to survive, and 20 percent thought that it was improbable that fiscal authorities would catch them.

Expanding her substantial work on geographic inequalities, Luisa Íñiguez uses the 2012 population census to explore the distribution of NSS enterprises in Cuban provinces and municipalities and shows their differences and contribution to social inequalities. She develops various maps of the island, displaying the location of total NSS enterprises, as well as key components such as the self-employed, usufruct farmers, and small private farmers. In addition, she calculates percentages of components of the NSS relative to the employed labor force. The NSS developed much further after 2012, but her work remains valuable and sets a solid foundation for future study.

The role of women in microenterprises is examined by Ileana Díaz and Dayma Echevarría, relying on data from the 2012 population census and Ministry of Labor and Social Security in 2013, and a survey of thirty-five self-employed owners in Havana circa 2014 (63 percent women and 37 percent men). Among other gender inequalities, they find that women are more hurt than men by the lack of a state policy to foster microenterprises, and by poor access to credit as well as to legal and accounting advice. Interviewees answered key questions with a fair consensus: 50 percent noted unfair competition from state and mixed enterprises; most preferred to work as self-employed instead of for the state; public or private financing was judged insufficient; elementary-secondary school didn’t help in their activity but university did; and they noted poor access to wholesale markets, telecommunications, and vanguard technology. Virtually all inter­viewees, but a sizably lower percentage of women than men, said that their success was more than expected. Both genders agreed on the major obstacles: limited demand, excessive state bureaucracy and regulations, too much competition, absence of a wholesale market, and difficulties to get inputs.

Retos para la equidad social, edited by Maria del Carmen Zavala et al., contains twenty contributions, all but one authored by women, focused on socioeconomic inequality under Raúl’s structural reforms. Three chapters of the book deal with expanding inequalities among the self-employed by age, gender, race, educa­tion, and location, and also with their motivation, satisfaction, competition, capital access, obstacles faced, and views of the future.

The best chapter in the collection, by Daybel Pañellas, Jorge Torralbas, and Claudia Caballero, relies on a survey taken between October 2013 and March 2014 among 419 persons self-employed in fifty-seven activities and located in three districts of Old Havana. They find that age, gender, education, and location are important factors in the quality of occupation, access to capital, and earnings of the self-employed. In the sample, 76 percent worked by themselves, without employees; 13 percent were employers and 11 percent employees; 64 percent were men and 36 percent women; 48 percent were white and 52 percent nonwhite; 54 percent were middle-aged adults, 30 percent young people, and 15 percent elderly; 54 percent had precollege or university education, 31 percent had a low level of education, and 15 percent had a technical education (a highly trained labor force and NSS, also noted by Torres). Not only are women underrepresented, but their activities reproduced their roles in domestic life, such as work in cafeterias, food preparation, manicure, makeup, and as seamstresses. While women rented rooms mostly in national pesos (CUP), men rented rooms in the more advantageous convertible pesos (CUC = 24 CUP). Combining education, race, and gender, the best-educated white males had better occupations than the lowest trained nonwhite females (e.g., computer programing vis-à-vis seamstress). The self-employed were mainly attracted by these features of self-employment (not exclusive categories): better income (80 percent), easier labor journey (20 percent), and being their own bosses (15 percent). Their level of sat­isfaction ranged from so-so (53 percent), to good/very good (38 percent), to bad/very bad (9 percent)—the higher the educational level the more occupational satisfaction.6 Success in competition was attributed to the quality of product or service (56 percent), business location (24 percent), and low prices (14 percent). Access to capital was mostly by employers that receive remittances, are white, and have higher or mid­dle education, ample social networks, and good locations; conversely, investment is minimal among low-educated nonwhites. Obstacles encountered by the self-employed were lack of access to raw materials (49 percent), heavy taxes (44 percent), lack of financing (35 percent), state control and inspections (33 percent), and legal procedures (23 percent). These proportions varied in the three districts and were influenced by gender, race, and type of activity; for example, controls and inspections were mostly mentioned by workers with low education, nonwhites, and women. On their perceptions for the future, 81 percent believed that the self-employed would prosper—especially if the mentality of the state and the self-employed changes— and 10 percent didn’t think so.

Geydis Fundora expands on the growing inequalities enumerated above, based on a study of fifty-two self-employed residents of Havana Province in 2010–2013, reaching similar conclusions. Out of the 201 activities approved, 65 percent have a male profile; paladar owners mostly hire women because of their sex appeal to clients and because the work is similar to that done at home; other activities are in practice barred to the “weak sex.” Men tend to be employers and women employees, thus resulting in lower decision making and income for women. The elderly are disadvantaged because most activities require physical strength; most young people are hired as employees and in less specialized activities. There is no political will to gather statistics on race, but whites predominate over blacks and mulattoes, opposite to what Pañellas, Torralbas, and Caballero found; nonwhites have less access to capital and hence to success and higher earnings. Those that have a high initial capital—coming from savings, remittances, or hidden foreign investment—enjoy an advantage over the rest not only to establish the business but also to buy inputs, pay taxes, and bribe inspec­tors. Location in more attractive and populous zones are keys to success.

Magela Romero targets self-employed women engaged on infant care, a most-needed occupation to increase female participation in the employed labor force, which was 37 percent of the total in 2015;7 the low proportion is an outcome of resilient traditional gender roles at home and work. Based on eighteen cases in the town of Cojímar (in Havana) in 2013, the study found that all those self-employed in infant care were women, and half of them had previously been informal domestic employees. All said that their main attraction was a higher income, but all also complained of exhausting work and high responsibility with a monthly salary of 200 CUP per infant, with a maximum of five infants, equal to US$40, still three times the mean average salary in the state sector.

Open for Business by Richard E. Feinberg deals mainly with the economic events following the process of normalization between the United States and Cuba that started at the end of 2014, preceded by a summary of the previous state of the Cuban economy and Raúl’s reforms. Feinberg believes that the emerging NSS “offers the best hope for a more dynamic and efficient Cuban economy, especially if it is permitted to partner with foreign investment and with more efficient state-owned enterprises” (132). One chapter on emerging entrepreneurs is based on a monograph he published in 2013, which at that time provided substantial data and analysis on self-employment, preceding the other three books reviewed herein.8 One graph and one table are updated to mid-2015, but most of the text remains unchanged. The author and an assistant had in-depth conversations with twenty-five microentrepreneurs between March 2012 and April 2013, emphasiz­ing financial issues (averages of time open, number of employees, starting capital, and use of domestic and foreign capital). Interesting profiles of self-employed activities are given on paladares, cafeterias and cater­ing, bed and breakfasts, accounting, a shop selling handicrafts to tourists, building construction and house remodeling, electronic repairs, and renting of 1950s cars; from such profiles he extracts useful lessons.9 A stimulating innovation is the selection of twelve young Cuban “millennials” (aged 20–35), one of them the owner of a cafeteria, for appealing interviews based on ten questions.

Feinberg envisages four stages of capital accumulation of microbusinesses: primitive household accumu­lation, early-mover super-profits, growth and diversification, and strategic alliances with state enterprises and with foreign investors (not yet authorized). Like the other authors whose books I review here, he stresses the progress and achievements of self-employment, perhaps more so than other authors. But he also pin­points the many constraints the self-employed face: poor banking and meager credit, serious scarcity of inputs of all sorts (as a visible exception he gives the wholesale market “El Trigal,” temporarily closed in May 2016), shortage of commercial rental space, a very challenging business climate, and government restric­tions including persecution by government inspectors and heavy fines, as well as constraints on capital accumulation and business growth. He provides his own recommendations to alleviate these problems.

One fundamental question left unanswered is the size of the NSS. Unfortunately, there are no official data on the NSS, complete and disaggregated by components. Neither Ritter and Henken nor most Cuban authors provide such a figure (Torres estimates it as 27 percent of the labor force; p. 21). The only elaborated calculation in the four books is Feinberg’s, who states that “altogether, as many as 2 million enterprising Cubans—40 percent of total employment—and possibly even more can be counted within the private sector” and predicts that “in the next three to five years, total private employment could reach 45 to 50 percent of the active labor force” (Feinberg, 132, 139; emphasis added); this exceeds by 10 percentage points Torres’s middle-term estimate of 35 to 40 percent (24).

Feinberg overestimates the NSS’s size. First, an important semantic and substantive issue is that not all NSS participants are private, only most self-employed workers and their employees as well as small private farmers are. Usufruct farmers, NASCs, and other cooperatives’ members do not own their land or buildings; these belong to the state, which leases them to the workers. Second, several figures in Feinberg’s estimates are either questionable or not supported by specific sources; the main query is what he labels “other private activities (estimated),” such as full-time unregistered self-employment and partial self-employment done by state-sector employees, which add up to between 185,000 and 1,185,000, based on guesstimates (while it is true that some government employees work part-time as self-employed workers, it is impossible to know for how many hours, which makes it difficult to estimate average full days of work). Third is the inclusion of 353,000 members of credit and service cooperatives (CCS), because that number exceeds by 65 percent the total number of all co-op members in 2015, including agricultural production (UBPCs, Basic Units of Agricultural Production, and CPAs, Agricultural Production Co-ops), CCSs (Credit and Services Co-ops) and NASCs.10 Furthermore, many private and usufruct farmers are also members of CCSs, thus they are counted twice. Fourth, the category of “land lease farmers” (172,000) is confusing; on the one hand Feinberg does not specifically include usufruct farmers (312,296), and on the other hand the official data on land leasers (arrendatarios) is only 2,843.11 Fifth, employees of self-employed workers are counted since 2011 in the total number of the self-employed, mixed with owners, and we have shown that there is a double counting in the overall figure. In any case, the official statistics on the total NSS share in the employed labor force expanded from 17 percent in 2008, when Raúl officially became president, to 29 percent in 2015.12 In conclusion, there is no doubt that the NSS is important and growing, but certainly not as much as Feinberg estimates.

In summary, the most studied NSS group is the self-employed; NASCs are briefly discussed by Ritter and Henkel and in Piñeiro’s chapter in Zavala et al. Largely excluded from the discussion are usufruct farmers, and totally omitted is the selling/buying of private homes. The historical approach is followed most inten­sively by Ritter and Henken, although several Cuban authors provide summaries of the evolution in their respective topics. The preferred methodology is interviews or conversations combined with research. There is a consensus that the NSS (mostly self-employment) has been successful despite considerable obstacles. We lack a reliable estimate of the NSS’s size.

Missing in the four volumes is an evaluation of the NSS’s macroeconomic effects.13 Ritter and Henken refer to some results of self-employment, such as job creation, noting the nonfulfillment of the official target of dismissing more than one million unneeded state employees. None of the books discuss the impact of usufruct farming on agricultural output, where NASC members are still minute and their impact is even more difficult to assess. It is true that the scarcity of available data hinder the task, but still some estimation could have been done on the NSS’s effect on produce sales, fiscal revenue, and GDP.14

Feinberg and Ritter and Henken are the only authors who explore the future of the NSS. Feinberg provides three broad overall scenarios, which are thought-provoking but touch little on the NSS: (1) “inertia” with little change, without citing potential precedents and projecting self-employment to 750,000, 48 percent higher than the March 2016 official figure of 507,342; (2) “botched transition and decay,” the most pessimistic, similar to former states of the USSR, but with self-employment expanding to 1 million, twice its 2016 size, as some restraints are removed; and (3) “soft landing” in 2030, the most optimistic, under market socialism as in Vietnam, where self-employment really takes off and reaches 2 million employees and 40 percent of the labor force—this is somewhat confusing because he refers to the private sector and had previously predicted, for the entire NSS, 45 to 50 percent in 2019–2021 (203–222).

Ritter and Henken offer three possible alternative routes for the NSS, without predicting its size: (1) reversal to Fidel’s hostile approach, which they judge very improbable because it is totally unfeasible and discredited (“unlikely to be reversed” for Feinberg, 131); (2) stabilization of Raúl’s current (2014) and cautious reform package to self-employment and NASCs, which would remain in place for the rest of his presidency, but with a significant expansion of both and the potential of creating a “mixed cooperative market economy”; and (3) acceleration of the reform and rebalancing among public, private, and cooperative sectors, with medium and large private enterprises advancing at the expense of co-ops and smaller private enterprises; the viabil­ity of this scenario, they say, could be helped by a “serious relaxation of US policy toward Cuba” that could “encourage the Cuban government pro-market openings” (311).

Cuba is always unpredictable, and none of the three scenarios by the above authors completely fit the situ­ation in August 31, 2016, when this review essay was finished. Ritter and Henken’s book was concluded in October 2014, thus this reviewer has the unfair advantage of almost two years that have brought significant changes, such as the evolution of US-Cuba rapprochement in 2014–2016 and the Seventh Congress of the Communist Party held in April 2016.15 In light of those events, their first and third alternatives are implau­sible, at least in the medium and long run; the second might be conceivable if the emphasis is placed on “stability” instead of significant expansion. By August 2016, however, rapprochement, rather than helping the reforms, appeared to have the opposite effect due to dread in the leadership caused by Obama’s visit and it effects, reflected in the results of the Seventh Party Congress. The number of self-employed workers peaked at 504,613 in May 2015, declined to 496,400 in December, and climbed again to 507,342 in March 2016, an increase of 0.7 percent in ten months, substantially lower that the expansion rate in 2014 and 2015 (14 and 3 percent, respectively). Furthermore, at the Congress, Raúl warned that although NSS forms are not antisocialist, “powerful external forces” try to “empower” them as agents of change, and could risk further “concentration of wealth and property” (the latter was not among the agreements of the Sixth Congress in 2011), making it necessary to impose “well-defined limits” on them.16 The Seventh Congress also recom­mended to halt the creation of new NASCs because of their deficiencies, and to concentrate on the existing ones instead.17 Finally, the only existing wholesale market was temporarily closed in May 2016. Feinberg’s book ended in early 2016, much later than Ritter and Henken’s, but his scenarios and predictions don’t cor­relate well with the facts explained above: “inertia” looks optimistic and even more so “decay”—both appear to be short- or middle-term effects—whereas the 2030 “soft landing” would require the drastic changes detailed by him, which are difficult to visualize now.

1 These basic principles of the reforms were set in the Sixth Communist Party Congress of 2011 and ratified in the Seventh Congress of 2016.

2 The pioneer book in the field is Jorge F. Pérez-López, Cuba’s Second Economy: From Behind the Scenes to Center Stage (New Brunswick: Transaction Publishers, 1995).

3 Oficina Nacional de Estadística e Información (ONEI), Anuario Estadístico de Cuba 2015 (La Habana, 2016).

4 Carmelo Mesa-Lago, Market, Socialist, and Mixed Economies: Comparative Policy and Performance; Chile, Cuba, and Costa Rica (Baltimore: John Hopkins University Press, 2000).

5 ONEI, Anuario Estadístico de Cuba 2015.

6 A series of interviews conducted by five authors in 2014–2015, in a much wider part of Havana City, agreed with the predominance of men over women, the highest participation of middle-aged adults, and the important role of education, but found a prevalence of whites and a higher level of satisfaction. Carmelo Mesa-Lago et al., Voces de cambio en el sector no estatal cubano: Cuentapropis­tas, usufructuarios, socios de cooperativas y compraventa de viviendas (Madrid: Editorial Iberoamericana Vervuert, 2016).

7 ONEI, Anuario Estadístico de Cuba 2015.

8 Richard E. Feinberg, Soft Landing in Cuba? Emerging Entrepreneurs and Middle Classes (Washington, DC: Brookings Institution, 2013).

9 These cases are more varied than those discussed by Ritter and Henken, but the latter provided the most comprehensive and profound analysis of paladares.

10 ONEI, Anuario Estadístico de Cuba 2015.

11 ONEI, Anuario Estadístico de Cuba 2014 (La Habana, 2015).

12 Mesa-Lago et al., Voces de cambio en el sector no estatal cubano; ONEI, Anuario Estadístico de Cuba 2015.

13 Valdés notes in the prologue to Pérez Villanueva and Torres’s book the absence of a macroeconomic essay to place all NSS forms in the proper context.

14 The percentage of GDP generated only by self-employment has been estimated as 5 percent by Saira Pons, Tax Law Dilemmas for Self-Employed Workers (La Habana, CEEE), but by 12 percent by Torres (in Pérez Villanueva and Torres, p. 24), a significant gap. For an assessment of some NSS effects see Mesa-Lago et al., Voces de cambio en el sector no estatal cubano.

15 After this essay was finished, the guidelines (lineamientos) for 2016–2021 were published; a rapid browse indicates no significant changes from the guidelines of 2011.

16 Raúl Castro Ruz, “Informe central al Séptimo Congreso del Partido Comunista de Cuba,” Granma, April 17, 2016 (emphasis added), 1–3. Mauricio Murillo mentioned, as examples of the limits to be imposed, the establishment of limits on the number of hectares that somebody may have (“Intervención en el VII Período Ordinario de la Asamblea Nacional,” Granma, July 9, 2016).

17 Carmelo Mesa-Lago, “El lento avance de la reforma en Cuba,” Política Exterior 30, no. 171 (2016): 94–104.155

 

 

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EL LABERINTO DEL SISTEMA IMPORTADOR CUBANO/ CHALLENGES POSED BY CUBA’S LABYRINTHIAN SYSTEM OF IMPORTS

DR. OMAR EVERLENY PÉREZ VILLANUEVA

AUGUST 13, 2015; Published in “From The Island.

Complete document in English here:  Cuba’s Labyrinthian System of Imports

Spanish version:       Sistema Importador Cubano

INTRODUCTION

The international market allows countries with limited internal markets, such as Cuba, to take advantage of economies of scale. That means there is a need to harmonize increases in exports with the substitution of imports. As a result, it is important how leading export items in international trade are supported, while at the same time maintaining the necessary flow to guarantee the import of inputs for that balance.

Cuba’s foreign trade sector, which currently maintains trade relations with more than three thousand foreign companies, possesses the characteristics of an open economy. It is thus greatly relevant that trade policy be designed to contribute to a necessary improvement in productivity and to increase economic efficiency. To that end, it is essential that the methods applied match the goals of economic policy.

The international environment, the national economic structure and the regulatory framework are factors with notable impact on the performance of foreign trade. In particular, the role of institutions is especially important to the effectiveness of regulations in this sector of the economy. In the Cuban economy, it should be noted, the only entities that import products into the country belong to the state, despite the stated intent of Cuban authorities of having the non-state sector occupy a larger portion of the economy.

In Cuba, new Resolutions issued by the General Customs of the Republic (Aduana General de la República or AGR) that took effect on September 1st, 2014 have raised a number of concerns among the Cuban people. The following is a brief overview of this controversial issue.

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CONCLUSIONS

The weakness that currently persists in Cuba’s productivity, such as obsolete technology, insufficient quality, and logistical problems; combined with complexities in the international arena, highlight the urgency to act on domestic conditions and on improving adaptability to external conditions.

It is imperative that the new dynamics of the international context and their impact on the country’s economic and social performance be considered in the gradual changes made to the Cuban economic model.

The development of trade regulations should not lose sight of the significance of achieving the greatest possible consistency between what is required and what the priorities are for the economy, generally, but for the citizens in particular.

The state itself has made it evident that there is a set of activities that should not be administered by the state, but rather in a cooperative way or through the private sector, and it has created the mechanisms to develop it, though in a restricted manner. Thus the question that could be asked of the state is, if these non-state entities create wealth for everyone, why can’t they gain access to inputs through imports that are so necessary for their productivity or services? No doubt the answers they’ll be able to raise are about the lack of foreign currency loans to carry out said imports. Another question could be, why not allow those imports to enter the country with natural persons, and then use the tax system to collect revenue once those services or goods have been provided?

These contradictions should lead to reflection on the part of those who formulate policy. In an economy like the Cuban economy, it is vital to increase imports so that they facilitate the creation and growth of national wealth, independent of the type of property involved. That, in turn, will lead to an improvement in everyone’s well-being.

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OMAR EVERLENY PÉREZ VILLANUEVA

 

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REFORMANDO EL MODELO ECONÓMICO CUBANO

Mauricio A. Font y Mario González-Corzo, Editores, Con la asistencia de Rosalina López

New York: Bildner Center for Western Hemisphere Studies, The Graduate Center, The City University of New York, 2015

Documento Completo: Reformando el Modelo Economico Cubano

 New Picture (12)

CONTENIDO

Introducción, Mario González-Corzo

Del ajuste externo a una nueva concepción del socialism Cubano, Juan Triana Cordoví

La estructura de las exportaciones de bienes en Cuba 29, Ricardo Torres

Relanzamiento del cuentapropismo en medio del ajuste structural, Pavel Vidal Alejandro y Omar Everleny Pérez Villanueva

Las cooperativas en Cuba, Camila Piñeiro Harnecker

La apertura a las microfinanzas en Cuba, Pavel Vidal Alejandro

Hacia una nueva fiscalidad en Cuba, Saira Pons

Bibliografía

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ANALYSIS OF THE PORTFOLIO OF OPPORTUNITIES FOR FOREIGN INVESTMENT IN CUBA

Completer article is located here: From the Island #25, Investment in Cuba  

From the Island #25, Cuba Study Group  December 22, 2014

An analysis by Rafael Betancourt and Omar Everleny Perez (Centro de Estudios sobre la Economia Cubana, Universidad de ka Habana) of the portfolio of opportunities created by Cuba’s new Foreign Investment Law No. 118

 CONCLUSIONS

The Portfolio of Foreign Investment Opportunities suggests that the Cuban government has adopted a proactive posture and is clear as to where it wants to direct and promote investments. It is much easier to stimulate the influx of foreign capital when there are precise ideas of what they are looking for. But the legal framework per se is not enough. It is necessary to organize / adjust (poner a punto) the entire environment for doing business in the country, which includes the banking system, customs and the tax system, as well as telecommunications, domestic trade and the real estate market. The potential for exporting TIC services, for providing consulting and other professional services, in association with various national investors including cooperatives, could attract a significant amount of FDI and provide well-paid jobs to an important number of professionals in the country.

The Portfolio underscores mainly large investments, to the detriment of small and medium ventures, when they—in fact—are not mutually exclusive. The international practice demonstrates that medium enterprises tend to be more active in FDI that large multinationals, which have other interests associated with global value chains. In subsequent editions there should be greater number of opportunities for infrastructure projects, especially design and construction of highways and bridges, currently very deteriorated, together with telecommunications, to employ global technologies of e-commerce and messaging, among others.

The Portfolio prioritizes production for export, which will have a large import component. The country will need to guarantee the necessary facilities and flexibility of related institutions and mechanisms related to both. The excessively centralized form of planning that prevails today will need to be adjusted to the new times. 

Nor does the Portfolio encompass all possible foreign investments with the State sector: negotiations continue for projects under consideration before the Portfolio was published, others that stem from bilateral and multilateral agreements signed between Cuba and other nations, and still others such as those associated with the rehabilitation of the Havana Harbor, which changes function and morphology with the transfer of many of its industrial and port activities to Mariel and other areas.

Finally, agility in the decision-making process is an essential component in order for foreign capital to arrive with the swiftness that the Cuban economy requires, even though it has been a very gradual process to date. But the undercapitalization and accumulated needs require a quicker pace than has been adhered to until now.

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Centro de Estudios de la Economía Cubana; Presentations from Seminar on the Cuban Economy, 2013

New Picture (16).bm AAaThe CENTRO DE ESTUDIOS DE LA ECONOMIA CUBANA  has recently redone its web site. It has also published the Power Point presentations from its 2013 Seminar.  Here is a list of the presentaions, hyper-linked on the author’s name.

 

PONENCIAS SEMINARIO 2013

Saira Pons Pérez, HACIA UNA NUEVA FISCALIDAD EN CUBA

Ricardo Torres Pérez, El desarrollo industrial cubano en un nuevo contexto

Juan Triana Cordoví, Cuba:un balance de la transformación.

Betsy Anaya Cruz , Cadenas productivas con impacto económico y social: el caso de los cítricos en Cuba

Aleida Gonzalez-Cueto, La Innovación y la administración de riesgos en las empresas cubanas en la actualidad

Orlando Gutiérrez Castillo, Reflexiones sobre los ambientes de innovación en las empresas cubanas

Anicia García y Betsy Anaya, Gastos básicos de una familia cubana urbana en 2011. Situación de las familias “estado dependientes”

Omar Everleny, Luisa Íñigues y Janet Rojas, Las escalas subnacionales de la macroeconomia cubana (pp.1-45)

Yailenis Mulet Concepción y Alejandro Louro, Las reformas económicas en los territories cubanos. Reflexiones para el diseño de políticas.

Jorge Ricardo Ramírez, Empresa cubana: Innovación, mejora continua de la calidad e  integración

Dayma Echevarría León, Innovación social: experiencias desde un proyecto interasociativo en Camagüey

Humberto Blanco Rosales, GESTIÓN DE LA INNOVACIÓN (GI) : ESTUDIOS DE CASOS Y PROPUESTAS DE MEJORAMIENTO

Ileana Díaz Fernández, Desafios de la innovacion empresarial en Cuba

 

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

New Picture (4)

Ensayo original: Monetary Reform Cuba 2016

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

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

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

New-Picture-8

Pavel Vidal y Omar Everleny Pérez

 

 

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Omar Everleny Pérez Villanueva: “The Current Deregulation of Cuban Enterprises”

The complete document is available here:  Omar Everleny Pérez Villanueva, The Current Deregulation of Cuban Enterprises. Oct. 3 2013

Introduction

We cannot examine the last 50 years of Cuban economic activity without casting a critical eye. Even if we are clear about future goals, which are certainly full of challenges, an awareness of the pitfalls, errors, mistakes and misunderstandings from the past period may help to correct the future perspective.

 Cuba is undergoing changes directed at achieving efficiency and increasing the productivity of the state-run enterprises (the plan), where efficiency depends, among other factors, on productivity. Productivity can be increased from different sources, but the important factor is that although a company may be proactive in the search for solutions, it is not possible to be proactive while being heavily regulated.

 Various academic analyses show a decrease in the majority of state-owned economic sectors in the last 20 years, between the early 90’s and 2010, as well as in virtually all sectors, with the exception of a few, such as telecommunications, mining and construction, sectors that have received a strong injection of foreign capital since the early 90’s. Another study on skilled labor force shows low motivation, due to unsatisfactory wages, few moral and material incentives, organizational problems, over-qualification and, of course, technical materials problems.1

……….

Concluding Comment

On January 29, 2012, at the closing of the First National Conference of the Communist Party, Raul Castro stated that:

“The only thing that can lead to the defeat of the revolution and socialism in Cuba would be our inability to eradicate the mistakes made in the 50 years since January 1, 1959 and those that we incur in the future.”

 Following this thinking, it is clear that the challenges posed by the transformation at a relatively short term of the existing structural distortions in the Cuban economy. If we want Cuba to become a land of opportuni­ties and to achieve a sustained increase in the standard of living for all Cubans, then the time to make such decisions is not very far away, and the measures to take must be more pragmatic than those taken under the current government. At the same time we cannot forget to take into consideration the harassment that Cuba is subject to in its external transactions by the U.S. government.

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DR. OMAR EVERLENY PEREZ VILLANUEVA

Professor at the University of Havana. Former director of the Centro de Estudios de la Economia Cubana at the University of Havana. Doctorate in Economic Sciences of the University of Havana in 1998. Masters in Economic and International Relations from CIDE, AC Mexico City, Mexico in 1990. Bachelors in Economics from the University of Havana in 1984.

Dr. Perez Villanueva has presented at conferences in various Cuban institutes as well as internationally, includ­ing in the United States, Japan, France, Canada, Spain, Brazil, Puerto Rico, Mexico, Dominican Republic, Venezuela, China, Malaysia, Argentina, Peru, Jamaica, Barbados, Trinidad and Tobago and Norway. He has served as a visiting professor at Universities in the United States, Japan and France and has published over 70 research papers in a variety of areas of the Cuban and global economy.

Dr. Perez Villanueva has also published over 75 articles in publications and has co-authored several books in Cuba and abroad, including “Cuban Economy at the Start of the Twenty-First Century,”  with Jorge Dominguez and Lorena Barberia (Harvard University. ISBN 0-674-01798-6, 2004), the second edition of “Reflections on the Cuban Economy” (Editorial Ciencias, Havana. ISBN 959-06-0839-6, 2006) and “Outlook fo the Cuban Economy I and II” (ISBN 978-959-303-004-5). His last book is “Fifty Years of the Cuban Economy” (Editorial Ciencias Sociales. Havana. ISBN 978-959-06-1239-8).

 

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Policy Options for Cuba’s Development: Preparing for the Post-Embargo Era

Below are hyperlinks to presentations at a conference in Havana in April 25-26 on policy possibilities for the Cuban economy and potential insights from the experiences of other countries including Sweden, Brazil, Vietnam and China. The original links are at the web site of NUPI, the , here: Policy Options for Cuba.

Policy Options for Cuba’s Development: Preparing for the Post-Embargo Era

This project aims at supporting the work of Cuban economists and social scientists – those living in Cuba and abroad – who have argued for substantial economic reform and new socio-development strategies.


Deltakere

Fulvio Castellacci1
Morten Skumsrud Andersen2
Vegard Bye3
4

Claes Brundenius, Professor, Lund University


The final conference of phase 2 of this project took place in Havana on April 25th and 26th 2013. All presentations from this conference can be downloaded below.

Presentations:

Conference programme5

1. Welcome Remarks (eng) – Castellacci6

2. The updating of the Cuban Economic Model (spa) – Pérez Villanueva7

3. Economic Development in Cuba (eng) – Torres Pérez8

4. Reforms in Cuba in light of experiences from China and Vietnam (spa) – De Miranda Parrondo9

5. Entrepreneurship, Innovation and SMEs: Can the Cuban Reform Process Learn from Vietnam? (eng) – Brundenius10

6. Innovation and Entrepreneurship: The Case of University Start Up Companies in China (eng) – Li11

7. Innovation, Absorptive Capacity and Growth Heterogeneity: Cuba in a Latin American Perspective (1970–2010) (eng) – Castellacci and Natera12

8. Institutions and innovation in the process of economic change (eng) – Alonso13

9. Challenges for an Efficient Cuban Economy in Times of Increasing Heterogeneity and Uncertainties (eng) – Fernández Estrada14

10. Towards a new taxation in Cuba (spa) – Pons Pérez15

11. The key to inclusive economic groth in Cuba (spa) – Sagebien16

12. The politics of Science, Technology and Innovation in Cuba (spa) – Núñez Jover17

13. Main problems for innovation in Cuban enterprises18

14. Innovation and Entrepreneurship: Challenges for Local Development in the university centers of Santiago de Cuba (eng) – Sayous and Soler19

15. Structural change in Brazil – A Latin American Experience (spa) – Vasconcelos20

16. The Swedish Innovation System: The Role of Government and its Support to SMEs (eng) – Schwaag Serger21

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Omar Everleny Pérez and Pavel Vidal, “Relanzamiento del cuentapropismo en medio del ajuste estructural”

Below is a Power Point Presentation prepared for the “Seminar on Prospects for Cuba’s Economy” at the Bildner Center, City University of New York, on May 21, 2012 by Pavel Vidal Alejandro and Omar Everleny Pérez Villanueva. Unfortunately Omar was unable to make the CUNY session himself due to visa and flight delays and complications.

The full presentation can be found here: Pavel y Omar Relanzamiento del Cuentapropismo en medio del ajuste estructural

Pavel Vidal Alejandro and Omar Everleny Pérez

 

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Presentations from the Bildner Center, (CUNY) “COLLOQUIUM ON THE CUBAN ECONOMY” May 2012,

On May 12, The Bildner Center at City University of New York, under the leadership of Mauricio Font organized a one-day conference analyzing the recent experience of the Cuban economy in its process of transformation.  All of the Power Point presentations from the  “COLLOQUIUM ON THE CUBAN ECONOMY” have been posted on the  Center’s Web Site. The presentations of the Cuban participants, all from the Center for the Study of the Cuban Economy, namely Omar Everleny, Pavel Vidal, Camila Piñeiro, and Armando Nova, are especially valuable and informative as they provide up-to-date and inside analyses of major issue areas. Mauricio, Mario González-Corzo, and the team are certainly to be congratulated for organizing this event

All of the presentations can be be accessed at the Bildner Web Site via the hyperlinks listed below in the form of the program of the conference.

Session #1: Cuban Updates on Actualización

1. Cuentapropismo y ajuste estructural
Omar Everleny, University of Havana

2. Microfinanzas en Cuba
Pavel Vidal, University of Havana

3. Non-state Enterprises in Cuba: Current Situation and Prospects
Camila Piñeiro, University of Havana

4. Impacto de los Lineamientos de la Política Económico y Social en la producción nacional de alimento
Armando Nova, University of Havana

Moderator: Mauricio Font, Bildner Center for Western Hemisphere Studies

Session # 2: Strategic Initiatives: Agriculture

1. Measuring Cuba’s Agricultural Transformations: Preliminary Findings
Mario González-Corzo, Lehman College, CUNY

2. U.S. Food and Agricultural Exports to Cuba – Uncertain Times Ahead
Bill Messina, University of Florida

Moderator: Emily Morris, Economist Intelligence Unit in London

Session # 3: Revamping Socialism: Perspectives and Prospects

1. Actualización in Perspective
Mauricio Font, Bildner Center for Western Hemisphere Studies

2. Cuban Restructuring: Economic Risks
Emily Morris, Economist Intelligence Unit in London

3. Prospects in a Changing Geo-Economic Environment Archibald Ritter, Carleton University, Canada

ROUNDTABLE: Implications and Future Agenda


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