Author Archives: The Economist

MUNICIPAL ELECTIONS IN CUBA: FINE, AS LONG AS WE WIN

BUT  THE LOSERS ALSO HAVE SOMETHING TO CELEBRATE

The Economist, Apr 25th 2015

Original here: FINE, AS LONG AS WE WIN

1429453584_150419045159spcubaelecciones624x351reutersTHE most interesting thing about Cuba’s municipal elections on April 19th was not who won. It was who lost, and who did not even turn up.

Four months after a historic rapprochement between Cuba and the United States, for the first time two openly declared dissidents made it onto the ballot among more than 27,000 candidates competing for 12,589 municipal posts around the country. Predictably, they were defeated. But their participation was an unusually open act of defiance, not just by the two men but also by ordinary citizens who proposed them in a show of hands before the elections.

What is more, the turnout on voting day fell by almost six percentage points compared with the previous poll in 2012, to about 88%. Some claimed rising absenteeism was a crack in monolithic support for the Communist Party.

The opposition candidates, Hildebrando Chaviano, a lawyer and journalist, and Yuniel López, a member of the unauthorised Independent and Democratic Cuba party, were labelled as “counter-revolutionaries” in official publicity. On his party’s website, Mr López claims that voters were pressured not to vote for him. Yet both candidates quickly conceded defeat. “The vote was clean. The people don’t want change. They still want revolution,” Mr Chaviano said.

The elections have an air of futility about them. The winning candidates are rewarded with a thankless job. They face a barrage of complaints from residents about crumbling housing and poor public services, without having the power or money to do much about them. But voters know that if they do not show up, it is likely to count against them—in university applications, for instance.

All the same, many did not. Alina Balseiro, head of Cuba’s National Electoral Commission, said the drop in turnout reflected the absence of tens of thousands of Cubans who had gone abroad as a result of Cuba’s relaxation of travel restrictions. But Yoani Sánchez, a dissident Cuban blogger, said that 1.7m potential voters did not appear, or they cast void or defaced ballots. This “demonstrated that support for the government is not as unanimous as it claims.”

Such dissidence comes at a delicate time for Raúl Castro, Cuba’s president. In September huge crowds will gather for the visit of Pope Francis, whose office helped arrange the thaw in relations with the United States. This could further heighten expectations of change.

Yet the Castro government may also feel that elections can be a useful outlet—so long as the ruling party continues to win. Eusebio Mujal-Leon, of Georgetown University in Washington, says it may be learning a warped version of democracy from its socialist ally in Venezuela, convincing itself that it can remain an autocracy while using elections to stay in power. The road ahead for Cuba’s nascent opposition is not an easy one.

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VENEZUELA: THE REVOLUTION AT BAY with major implications for Cuba!

Mismanagement, corruption and the oil slump are fraying Hugo Chávez’s regime

The Economist Feb 14th 2015 | CARACAS

Original here: Revolution at Bay

zzzON A Wednesday evening around 30 pensioners have gathered for a meeting in a long, brightly lit room in a largely abandoned shopping gallery in Santa Teresa, a rundown and overcrowded district in the centre of Caracas. After a video and some announcements, Alexis Rondón, an official of the Ministry of Social Movements and Communes, begins to speak. “Chávez lives,” he says. “Make no mistake: our revolution is stronger than ever.”

Mr Rondón’s rambling remarks over the next 45 minutes belie that claim. Saying Venezuela is faced with an “economic war”, he calls on his audience to check food queues for outsiders, who might be profiteers or troublemakers, and to draw up a census of the district to identify opposition activists and government supporters. “We must impose harsh controls,” he warns. “This will be a year of struggle”.

About this, at least, Mr Rondón is correct. Sixteen years after Hugo Chávez took power in Venezuela, and two years after he died, his “Bolivarian Revolution” faces the gravest threats yet to its survival. The regime is running out of money to import necessities and pay its debts. There are shortages of basic goods, from milk and flour to shampoo and disposable nappies. Queues, often of several hundred people, form each day outside supermarkets. Ten patients of the University Hospital in Caracas died over the Christmas period because of a shortage of heart valves.

Both debt default and the measures that would be required to avoid one pose risks to the regime. It is on course to lose a parliamentary election later this year, which might then be followed by a referendum to recall Chávez’s inept and unloved successor, Nicolás Maduro. That could bring Venezuela’s revolution to a peaceful and democratic end as early as 2016. But there are darker possibilities. Caracas buzzes with speculation that the armed forces will oust the president.

Venezuela is suffering from the combination of years of mismanagement and corruption, and the collapse in the price of oil, which accounts for almost all of its exports. Chávez, an army officer, was the beneficiary of the greatest oil boom in history. From 2000 to 2012, Venezuela received around $800 billion in oil revenue, or two-and-a-half times as much in real terms as in the previous 13 years. He spent the money on “21st-century socialism”.

Some went on health care and low-cost housing for the poor, who hailed Chávez as a secular saint. Some has gone on infrastructure: a few new roads and metro lines were built, years behind schedule. Another chunk was given away in the form of cheap oil to Cuba and to other Caribbean countries, assuring Chávez loyal allies. Perhaps the biggest slice was frittered away or simply stolen. Filling a 60-litre tank with petrol costs less than a dollar at the strongest official exchange rate. Unsurprisingly, petrol worth $2.2 billion a year, according to an official estimate, is smuggled to Colombia and Brazil, with the complicity of the armed forces.

Continue Reading: VENEZUELA, THE REVOLUTION AT BAY

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AMERICA AND CUBA: THE NEW NORMAL

The Economist, January 3, 2015

 Original Here: The loosening of the embargo will pay dividends far beyond Cuba

ObamaMARCO RUBIO, a prospective Republican candidate for the White House, called it “a victory for oppressive governments the world over”. Only “the heinous Castro brothers, who have oppressed the Cuban people for decades” will benefit, thundered Jeb Bush, a likely rival, who is also based in Florida. The object of their fury: Barack Obama’s startling decision to loosen America’s 54-year-old embargo on Cuba.

Cuba’s Communist government is indeed oppressive, while the Castro brothers can fairly be called heinous and will probably do all they can to maintain control. Raúl Castro, who took over from Fidel in 2008, has said he will step down in 2018, but that is not a prelude to free elections. Nonetheless, easing the embargo is the right thing to do. The measures that Mr Obama and Mr Castro announced on December 17th—including a deal to restore diplomatic relations and the liberalisation of travel and remittances—will do much to normalise a relationship that has been trapped in the sterile logic of the cold war. But its significance goes beyond that. The embargo warps the United States’ relations with other Latin American countries, as well as their relations with one another.

The Economist has long argued that the embargo is self-defeating. Rather than ending the Castros’ rule, it has provided an evergreen excuse for their failures and so helped maintain them in power. The embargo kept Cuba out of international bodies such as the Organisation of American States, where other countries could have prodded the island towards greater openness. It put the United States at odds with most of its allies and nearly every other country in its hemisphere. It would be much better if the embargo were got rid of entirely, but its partial lifting is a step towards normality for the whole region.

So far most of the attention has been on Cuba. The Castros agreed to release 53 political prisoners (along with an aid worker and an American spy). Cubans will have more access to the internet, which should loosen the regime’s weakening grip on information. As Cuba’s relations thicken with the democratic giant next door, its citizens’ demands for freedom may grow more insistent. There is no guarantee that such engagement will unseat the Castros, but the embargo has manifestly failed for half a century. It has only remained there because of the political clout of a dwindling number of elderly Cuban exiles in Florida (which also explains the outrage of the normally more sensible Messrs Bush and Rubio).

But the biggest prize should be the advance of democracy and open markets in Latin America. The Castros are not the only ones who will be discomfited by the loss of the American alibi. Venezuela leads a loose coalition of countries that uses defiance of the United States as an excuse for policies that stunt economic growth and democratic rights. It has long supported Cuba (and other Caribbean countries) with sales of oil at heavily subsidised prices. Even for robustly democratic countries like Brazil, the American bogeyman makes it easier to justify resistance to trade deals and to cosy up to uglier regimes.

Now this depressing narrative may change. Venezuela’s government, reeling from the drop in oil prices, faces difficult parliamentary elections in 2015. Argentina’s next president is likely to be less prickly towards the rest of the world than Cristina Fernández de Kirchner, who will stand down in 2015. Colombia, an American ally, may end its 50-year war with the leftist FARC guerrillas if peace talks succeed. Dilma Rousseff could be a more pragmatic president in her second term.

The scene is set for a new realism in Latin America. As commodity prices tumble and economic growth stalls, the region needs open markets, trade and regional co-operation—including with the yanquis to the north. With his move on Cuba, Mr Obama has opened the way for the sort of diplomatic engagement that Latin America rarely enjoyed during his first six years in office. But Latin America needs to return the compliment. The time for sulking and striking poses is over—in Brasília and Caracas as well as Havana and Miami.

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VENEZUELA’S CUBA PROBLEM

The Economist, December 19th 2014

In a surprise announcement on December 17th the US president, Barack Obama, and the Cuban president, Raúl Castro, announced a significant thaw in relations between their respective countries. The move has major implications for Venezuela, Cuba‘s main ally.

The Venezuelan president, Nicolás Maduro, appeared to be caught unawares on December 17th, right in the middle of a rhetorical campaign against “insolent, imperialist” sanctions passed by the US Congress just one week beforehand. Unlike the decades-old Cuba embargo, the sanctions are targeted at senior Venezuelan government officials accused of committing human rights violations. However, just as members of the ruling Partido Socialista Unido de Venezuela (PSUV) were being invited to burn their US visas in public, Cuba was announcing the restoration of diplomatic relations with the US.

A quiet betrayal?

The process that led to the announcement, it is now clear, began not long after the death of Mr Maduro’s predecessor and mentor, the former Venezuelan president, Hugo Chávez (1999-2013). The Cuban government, which has benefited from billions of dollars in Venezuelan subsidies—including cheap oil under the PetroCaribe oil-financing initiative—needed a “plan B”, given the severe economic crisis facing the Maduro government and the likelihood that it would be unable to resist mounting pressure to divert resources away from foreign aid. However, with an extensive network of Cuban intelligence agents given free rein in Venezuela—particularly in the barracks—Mr Maduro must now be wondering what else has been (or might be) negotiated behind his back.

At the very least, the news of a US-Cuban rapprochement will exacerbate resentment in the military over its subordination to Cuban officials who, it seems, gather intelligence but do not share it. There is also some confusion within the ranks of the PSUV, whose militants find it hard to understand why Mr Obama is allegedly seeking to overthrow Mr Maduro, but is happy to shake Mr Castro’s hand.

Hard choices ahead for Mr Maduro

Anti-imperialism is a handy tool with which to maintain unity against an external enemy. However, it is hard to wield when your best friend is embracing the “empire” (swiftly renamed “the giant of the north” in Mr Maduro’s post-announcement comments). Cuba has for decades played a useful role for Latin American governments of both left and right. “Solidarity” with Cuba has been a convenient, mainly risk-free way to stand up to the US government and beat the nationalist drum.

Now Venezuela faces the prospect of replacing Cuba as the US’s main adversary in the region—just as its economy is imploding and its governability is at risk from internal dissent—or capitulating and losing the support of the already-restive domestic left. The timing could hardly be worse for Mr Maduro.

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THE UNITED STATES AND CUBA: AT LAST, A THAW! HISTORIC STEPS TOWARDS ENDING AN ANACHRONISTIC EMBARGO

The Economist, Dec 17th 2014

Original article here: AT LAST, A THAW

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IT HAS long been one of the great anomalies of American foreign policy. The United States normalised relations with Communist China and even with Vietnam, with which it fought a bitter war costing more than 50,000 American lives. But ties with Cuba, which long ago ceased to pose any threat to America, remained frozen in the Cold War. Maintaining the economic embargo against the communist island first imposed in 1961 was about revanchism and Congressional politics, not foreign policy.

On December 17th Barack Obama announced sweeping changes which go a long way to bring policy towards Cuba into the 21st century. The two countries will start immediate talks on restoring diplomatic relations and re-opening embassies. The president will use his executive authority to loosen the ban on travel to the island; raise the limit on remittances to ordinary Cubans and their small businesses from $500 per quarter to $2,000; and allow exports of building materials, farm equipment and telecommunications gear. Americans will be able to use their credit and debit cards on the island. The administration is also preparing to remove Cuba from its list of states that sponsor terrorism.

These announcements followed 18 months of secret talks in Canada between American officials and the government of Raúl Castro, who replaced his elder brother Fidel as Cuba’s president in 2008. The talks were encouraged by Pope Francis. They culminated with a 45-minute phone call between Mr Obama and Mr Castro on December 16th.

The biggest stumbling block to any change in the embargo was the incarceration of Alan Gross, a worker for the United States Agency for International development, who was jailed in 2009 for handing out satellite-communications gear on the island. Mr Gross, who is in very poor health, was freed on December 17th (he is pictured below with his wife, Judy, after his release). Freed too, and sent to the United States, was a Cuban whom Mr Obama said was “one of our most important intelligence agents”, as well as 53 Cuban political prisoners from a list provided by the United States. In return, the United States has released three Cuban spies serving long sentences after being arrested in 2001 for snooping on exiles and American military bases in Florida.

In seeking to normalise diplomatic relations, the administration recognised what has long been clear to the outside world: the embargo has manifestly failed to topple the Castros. Under Raúl Castro change has slowly started to come to Cuba from within. Private farmers, small businesses and co-operatives now make up around a fifth of the island’s labour force.

The United States’ Cuba policy also put it at odds with the whole of Latin America, which now favours normal ties. Mr Obama said he would attend the Summit of the Americas in Panama in April, to which Mr Castro has also been invited. He said he would continue to press for human rights and democracy in Cuba.

As for Mr Castro, it is not hard to see why he is interested in closer ties with the United States. For the past dozen years, Cuba’s moribund economy has been propped up by subsidies from Venezuela, mainly in the form of cheap oil. The fall in the oil price has pushed Venezuela’s economy into a deep recession. The approval rating of its president, Nicolás Maduro, has plunged to 25%, casting uncertainty over the durability of Venezuelan aid. Mr Castro said the agreement to restore diplomatic relations “doesn’t mean that the main thing [ie, the embargo] has been resolved”.

Only the United States Congress can repeal the embargo. What Mr Obama has done is remove some of its teeth. The president can count on public opinion in this issue, which in recent years has swung against the embargo. In an apparent attempt to mollify the pro-embargo camp, the administration recently dropped its previous opposition to a bill, approved earlier this month, imposing targeted sanctions against Venezuelan officials involved in repressing opposition demonstrations earlier this year. But none of this will assuage the president’s conservative critics in Congress. Mr Gross considered himself a “hostage” rather than a prisoner, and Mr Obama’s opponents pounced on the swap as endangering American lives, as well as coddling a dictator.

Just how far détente between the United States and Cuba will go is not yet clear. “I don’t expect a transformation of Cuban society overnight,” said Mr Obama. But he is surely right in saying that after half a century of failure in trying to isolate Cuba, it is worth trying to promote change there through engagement.

 

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THE CUBAN QUESTION

December 5, 2014 – The Economist

Original Complete Article: The Cuban Question

HAVING got immigration reform off his chest, will Barack Obama unsheathe his executive-order pen again to tackle another intractable subject on which Congress has blocked change for decades? The United States imposed an economic embargo on Cuba back in 1960 as Fidel Castro was forcing communism on his people. The embargo was meant to topple Mr Castro. Today he enjoys a tranquil retirement in a Havana suburb while his slightly younger brother, Raúl, runs the country.

The embargo has not just failed; it has also given the Castros a potent propaganda weapon. It still has diehard defenders in Congress, which under a law from the 1990s is the only body that can repeal it. Even so, Mr Obama has some scope to change the policy. Indeed, in his first term he lifted restrictions on travel and remittances to the island by Cuban-Americans. There are several reasons why he might now want to do more.

First, support for the embargo across America is crumbling. A nationwide poll taken earlier this year for the Atlantic Council, a think-tank, found that 56% of respondents favoured improving relations, while more than 60% of Latinos and residents of Florida did. Second, Cuba is itself starting to change. Under reforms launched by Raúl Castro, 1.1m Cubans, more than a fifth of the labour force, work in a budding private sector of farms, co-operatives and small businesses. Access to mobile phones and the internet has grown. Opposition bloggers such as Yoani Sánchez, though often harassed, have not been silenced.

The third reason for action is that Cuba is one of the few issues that unites Latin America. The region is unanimous in believing that, notwithstanding its Communist regime, the island should be accorded a normal place in relations in the Americas. That consensus lies behind the decision of Panama to invite Raúl Castro to the Summit of the Americas, a gathering that it is due to host in April. The previous six summits have been restricted to the hemisphere’s democracies.

This leaves Mr Obama with a dilemma. This is not so much over whether or not to attend. He probably will. Rather, it is whether to act between now and then to stop the embargo becoming an issue that dominates the summit. Mr Obama could, for example, issue a general licence for all Americans to travel to Cuba. He could also remove Cuba from the State Department’s list of “state sponsors of terrorism”, on which it sits alongside only Iran, Sudan and Syria. There are no grounds for Cuba still to be there. In October the Financial Action Task Force, an inter-governmental body, removed Cuba from its watch list of countries doing too little to prevent money laundering and terrorist financing.

But the administration has not yet asked the State Department to remove Cuba from its terrorism list. Although Mr Obama has little to lose from loosening the embargo, he also has little to gain. Raúl Castro’s economic reforms have stalled recently; he never intended them to lead to political change. The Cubans show no sign of being prepared to release Alan Gross, an elderly American aid worker jailed for illegally handing out telecoms equipment. They want to swap him for three Cuban spies serving life terms for snooping on hardline exiles in Miami.

Even so, it would be surprising if Mr Obama did not take some action on Cuba before the summit. Oddly, pushback from the defenders of the embargo in Congress may take the form of sanctions on Venezuela, which provides the island with a subsidy (in the form of cheap oil) equal to perhaps 15% of its GDP. A bill to deny visas and freeze bank accounts of Venezuelan officials implicated in the repression of protests earlier this year is stalled in the Senate. Once the new Republican majority takes control in January, it is likely to move forward. Anthony Blinken, Mr Obama’s nominee for deputy secretary of state, told a Senate committee on November 19th that the administration “would not oppose” this—a reversal of its previous stance.

For anyone who wants to see change in Venezuela, this is depressing. The plunging oil price and economic mismanagement are weakening President NicolásMaduro’s elected authoritarian regime. The crucial issue is ensuring that a legislative election next year is free and fair. Sanctions, however limited, will boost MrMaduro’s declining popularity and give him an excuse to crack down, as some opposition leaders recognise. The lesson of Cuba is that pressure from Washington does not lead to democratisation. It would be a sad irony if the beginning of the end of one futile embargo coincided with the birth of another.

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As Cuba eases investment rules, many Cuban-Americans turn against the embargo

Apr 5th 2014 | MIAMI |

From the Economist here: As Cuba eases investment rules

AT THE outset of Tom Wolfe’s latest novel, “Back to Blood”, the muscled hero, a 25-year-old Cuban-American cop called Nestor Camacho, seethes when his fat and disdainful Americano (Anglo) colleagues stereotype him as a Cuban. He has never set eyes on the island, he says. His Spanish is poor. At home, his parents’ hatred of Fidel Castro flies over his head. His world revolves around Miami, not Cuba.

Unsurprisingly, the book is not universally liked in Miami (it skewers everyone, from Anglos to Cubans to Haitians to Russians). But in at least one respect it is spot on. Younger Cuban-Americans are less obsessed with Cuba than their exiled elders. Like other Americans, pollsters say, they now think more pragmatically; Cuba is not the only voting issue that they care about.

In fact, they are more likely to be pouring money into Cuba than shunning it. Remittances, as well as travel, have risen since President Barack Obama eased restrictions in 2009 and 2011 (see chart). Much of the money has found its way into restaurants (known as paladares), hairdressers or other small businesses run by relatives in Cuba. That has given Cuban-Americans an increasing, albeit hidden, stake in the island’s economic future.

The laws of both the United States and Cuba have forbidden such money to be treated as investment. But on March 29th Cuba’s parliament approved a new foreign-investment law that for the first time allows Cubans living abroad to invest in some enterprises (provided, according to Rodrigo Malmierca, the foreign-trade minister, they are not part of the “Miami terrorist mafia”). The aim is to raise foreign investment in Cuba to about $2.5 billion a year; currently Cuban economists say the stock is $5 billion at most.

The law, which updates a faulty 1995 one, is still patchy, says Pavel Vidal, a Cuban economist living in Colombia. It offers generous tax breaks of eight years for new investments. However, it requires employers to hire workers via state employment agencies that charge (and keep) hard currency, vastly inflating the cost of labour. It enhances the right to establish fully owned foreign businesses, although existing private firms, such as paladares, are still forbidden from taking foreign capital. Much, including whether or not Cuban-Americans can invest, will depend on how the government implements the law. “It’s still very discretionary,” Mr Vidal says.

Despite their failings, Cuba’s new rules are a reminder of how inflexible United States law remains. Because of the 53-year-old embargo against Cuba, some Cuban-Americans fear they will be left behind as investors from Brazil, China, Russia and Europe move in. Already Tampa, on Florida’s west coast, is vying for a greater share of Cuban business when the embargo is lifted. “Every day we’re missing opportunity,” says Bob Rohrlack, head of the Greater Tampa Chamber of Commerce.

20140405_AMC657In Miami people talk of a tipping point. Alberto Ibargüen, a former publisher of the Miami Herald, says demographic trends that began decades ago have finally softened the mood towards Cuba (though “absolutely not” towards the Castro regime). If American restrictions on all tourism to the island were lifted, “you’d get a couple of letters to the editor.”

Some Miami Cubans have managed to squeeze through cracks in the embargo. Hugo Cancio, who left the island in the Mariel boatlift of 1980, owns a website and magazine, OnCuba, written mostly by Cubans, which plays down repressiveness and plays up commerce and culture. He has a newsroom in Havana but despite his entreaties, American law forbids him from paying its staff. Tony Zamora, a semi-retired Miami lawyer who was jailed in Cuba for taking part in the 1961 Bay of Pigs invasion, has also recast himself as a promoter of investment in the island. After 40 trips to Cuba, he calls the embargo “almost a total failure”.

Many Cuban-Americans put their faith in Mr Obama to soften the embargo, even if Congress will not lift it. They note that more than 60% of Miami-Dade County, where they predominate, voted for the president in 2012, many more than in the previous election, even after he eased policy towards Cuba. If Charlie Crist, a Republican-turned-Democrat who is running for a second turn as Florida governor and supports lifting the embargo, wins in November, it will help their cause.

Even so, the old guard cares more about keeping the embargo than younger Cuban-Americans do about getting rid of it. Most Cuban-American congressmen in Washington, DC, remain avid backers of it. Mauricio Claver-Carone, who heads a pro-embargo lobby group, argues that all foreign investment still goes to monopolies run by the Castro regime, which helps prop it up. The stakes have been raised by the jailing of Alan Gross, an American citizen convicted in Cuba of smuggling communications equipment to dissidents. Few believe the Obama administration would risk a bold move without his release.

The embargo’s days are nonetheless numbered, not least because Raúl Castro, the 82-year-old president, and his brother Fidel, 87, will not live for ever. In the meantime, it increasingly seems like a relic, as outdated as the Castros’ Cuba.

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Time to hug a Cuban

Source:    http://www.economist.com/news/americas/21596532-rush-embrace-fading-outpost-communism-time-hug-cuban

A rush to embrace a fading outpost of communism

20140215_AMD000_0The Economist; Feb 15th 2014 |

HOW best to speed change in Cuba? The past few weeks have brought three different answers to that question, from the United States, the European Union and Latin America.

For more than 50 years the official American answer has been to try to asphyxiate Cuban communism through an economic embargo, and to encourage internal dissent. It was policy as tantrum, a counterproductive failure. Change is coming to Cuba—but from the top, not below. Since replacing his elder brother, Fidel, as Cuba’s president in 2008, Raúl Castro has unleashed economic reforms which, while officially aimed at “updating socialism”, are in practice introducing elements of capitalism. Some 450,000 Cubans work in a budding private sector of farmers, co-operatives and small firms.

Across the Florida Straits, the changes are causing long-monolithic support for the embargo to crumble. A poll taken in the United States for the Atlantic Council, a think-tank, published on February 11th found that 56% of respondents favoured normalising relations with Cuba. Days earlier Alfonso “Alfy” Fanjul, the patriarch of a pre-revolutionary sugar dynasty and long a pillar of anti-Castro Miami, told the Washington Post that he had made two trips to his homeland, talked to Cuban officials and would invest in Cuba “under the right circumstances”.

Barack Obama, who briefly shook Raúl’s hand at Nelson Mandela’s funeral in December, has lifted some restrictions on travel and remittances to the island. Many observers expect him to take further steps in that direction and to revoke Cuba’s anachronistic designation as a state sponsor of terrorism—once November’s mid-term elections are out of the way. But only the United States Congress can fully dismantle the embargo.

On February 10th the European Union, whose members maintain economic ties with Cuba, announced that it wants to start talks on a “political dialogue and co-operation agreement”. In practice many of its members have already sloughed off a “common position” adopted in 1996, a kind of embargo-lite that predicated closer links on promoting a transition to democracy. The EU was at pains to stress that this was not really a policy change, but it is.

One thing the EU will keep doing is to complain about the lack of human rights in Cuba. Latin America has already stopped bothering. Last month Raúl hosted a gathering of the Confederation of Latin American and Caribbean States (CELAC), a body set up in 2011 explicitly to include Cuba and exclude the United States. In Havana the bloc’s leaders signed a declaration that stated that regional integration should “respect…the sovereign right of each of our peoples to choose its own form of political and economic organisation”.

Many Latin American leaders see being friendly to the Castros as a cost-free way of showing that they no longer take political direction from Washington, DC, let alone Miami. (A handful would like to go further and be like the Castros.) Yet their declaration was a cavalier disavowal of the democracy clauses inserted into many regional agreements over the past two decades. It smacked of double standards: so quick to condemn dictatorships of the right, today’s crop of centre-left leaders are happy to give the Castros a free pass.

Oddly this rush to hug a Cuban comes as reform shows signs of stalling. The pace of private-sector job creation has slowed. The government has shut down private cinemas; it has ejected several Western businessmen. A special economic zone at a new Brazilian-built port at Mariel has yet to attract foreign investors, because of the restrictions they still face. Many Cubans felt insulted when they were granted permission to buy new cars—at astronomical prices.

The aim of the reforms is to allow the private sector to create the wealth that the state can’t. But the Communist bureaucracy still resists the notion that this has to involve creating wealthy people. If Raúl were to die before the reforms have created a broad coalition of winners, there would be a risk of backsliding.

In fact, the key to speeding change in Cuba probably lies in Caracas. Thanks to an alliance forged by Fidel and Hugo Chávez, Venezuelan aid accounts for around 15% of Cuba’s GDP. Years of misrule have brought Venezuela to the verge of an economic implosion. It is the fear of losing Venezuelan petrodollars, as well as apprehension about the “biological factor” (as Cubans call the death of the elderly Castros), that drives the island’s halting process of change. For other powers the best way to help is through efforts that support Cuba’s budding capitalism without offering the Castros any political endorsement.

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Venezuela and Argentina: The party’s over; [ time for Cuba to partner with Brazil ! ]

Latin America’s weakest economies are reaching breaking-point

Feb 1st 2014 | BUENOS AIRES AND CARACAS

Original essay here: http://www.economist.com/-latin-americas-weakest-economies-are-reaching-breaking-point


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Nicolás Maduro and Cristina Fernández de Kirchner at the CELAC Cumbre, Havana

WHEN the euro crisis was at its height it became commonplace for struggling European economies to insist that they were not outliers like Greece. Whatever their woes, they declared, Greece’s were in a class of their own. In Latin America, by contrast, the unwanted title of outlier has two contenders: Argentina and Venezuela. Both have been living high on the hog for years, blithely dishing out the proceeds of an unrepeatable commodities boom (oil in Venezuela; soya in Argentina). Both have been using a mix of central-bank interventions and administrative controls to keep overvalued exchange rates from falling and inflation from rising. Both now face a come-uppance.

High inflation is a shared problem. Argentina’s rate, propelled higher by loose monetary and fiscal policies, is unofficially put at 28%. Argentina’s official exchange rate is overvalued as a result, fetching 70% more dollars per peso than the informal “blue” rate in mid-January. Venezuela’s prices are rising faster still. Last year, during an awkward political transition after the death of Hugo Chávez to the presidency of Nicolás Maduro (pictured with Cristina Fernández de Kirchner, the Argentine president), the Central Bank stepped up money-printing to finance public spending, pushing inflation to 56.2%. A dollar fetches 75-80 bolívares on the black market, up to seven times the official rate.

Both countries have dwindling arsenals with which to defend their overvalued currencies. Venezuela’s reserves of gold and foreign currency, which stood at nearly $30 billion at the end of 2012, were down to just over $21 billion by last week. Only about $2 billion of that is in liquid assets. Ecoanalítica, a research firm, estimates that the government can also dip into around $13 billion of opaque, off-budget funds. Argentina’s reserves have also been tumbling (see chart).

Something had to give, and late last month it did. Argentina first allowed the peso to plunge, by more than 15% in the week starting January 20th, and then announced a relaxation of the government’s ban on buying foreign currency for saving purposes. Argentines making over 7,200 pesos ($900) monthly are now able to change 20% of their salary into dollars at the official exchange rate so long as they get approval from AFIP, Argentina’s tax agency. The dollars are transferred to their bank accounts, not released in cash, and hit by a 20% fee if withdrawn before a year. If that sounds complicated, it is still cheaper than buying dollars in the illegal market.

The government’s objective seems to be to close the gap between the official and blue exchange rates, alleviating the need to spend more of those precious reserves to prop up the official rate. Although the gap has closed a little, fear that devaluation will lead only to yet higher inflation explains continued high demand for dollars, even at the less favourable exchange rate. So too does the fact that only a third of Argentine workers meet the declared-income threshold for buying dollars, according to analysis by IARAF, a think-tank.

Guido Sandleris of the University Torcuato di Tella says the plan is doomed to failure unless the government becomes more open about its intentions and adopts a genuinely restrictive set of policies to battle inflation. Although the Central Bank this week raised one of its interest rates by a full six percentage points, rates remain below inflation, giving Argentines little reason to hold pesos.

On the fiscal front the government needs to reduce subsidies and remain unyielding in the face of workers’ demands for pay rises. Miguel Kiguel of EconViews, a consultancy, says wage increases to be negotiated in March and April must remain under 30% if they are to serve as an anti-inflationary anchor. That will be hard given lavish pay awards handed out to striking policemen last year.

Whether the government is willing to put prudence before politics is not clear. On the day that her government let the peso’s slide turn into a slump, Ms Fernández announced a plan to fund education for unemployed 18- to 24-year-olds that could cost 11 billion pesos. Her only reference to the currency’s fall was a tweet accusing banks of helping favoured investors to speculate on the peso. There are some people, she wrote, who “want to make us eat soup again, but this time with a fork.”

20140201_AMC257At least Argentina’s partial liberalisation of currency controls is a halting step towards normality. Venezuela, where the situation is even more perilous, is heading in the other direction. On January 22nd the government unveiled new rules under which a higher rate for non-essential transactions is set weekly (it stood at 11.36 bolívares to the dollar this week). The old rate of 6.3 still applies for government imports and basic items such as food and medicine, so reserves will keep falling as the government defends the currency.

Venezuela is running out of dollars to pay its bills. Although payments to its financial creditors of around $5 billion this year do not appear to be at risk, the country’s arrears on non-financial debt are put at over ten times that sum. These include more than $3 billion owed to foreign airlines for tickets sold in bolívares, and around $9 billion in private-sector imports that have not been paid for because of the dollar shortage. “Under the current economic model, and with this economic policy,” says Asdrúbal Oliveros of Ecoanalítica, “this [debt] looks unpayable.”

The effects are already apparent. Foreign airlines have placed tight restrictions on ticket sales; some have suspended them altogether. Many drugs and spare parts for medical equipment are unavailable. Car parts, including batteries, are increasingly hard to find; newspapers are closing for lack of paper. The country’s largest private firm, Empresas Polar, which makes many basic foodstuffs, is struggling to make some products. In a statement Polar said the government owed it $463m and that production was “at risk” because foreign suppliers of raw materials and packaging were threatening to halt shipments.

The government blames the crisis on private businesses and “irresponsible” use of hard currency by ordinary Venezuelans. It has ordered drastic cuts in dollar allowances for travellers, especially to popular destinations like Miami. Remittances to relatives abroad have also been slashed. In a bid to curb runaway inflation, it has introduced a new law restricting companies’ profits to 30% of costs. Long jail sentences await transgressors. Without a big injection of dollars from the state oil company, Petróleos de Venezuela, which brings in 96% of foreign earnings, the crunch will continue. Better terms for foreign investors in the oil industry would bring in much-needed cash and boost stagnant production. But unless the government abandons its antipathy to private capital, the prospect of new investment is dim. Shortages of goods are only likely to worsen. If Argentina is an outlier, Venezuela risks straying into a different category entirely.

cristina-fernandez-raul-castro-nicolas-maduro-foto-estudios-revolucionRaul, Cristina and Nicolás 

Raul and DilmaRaul and Dilma Rousseff

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Reforms in Cuba: Seat belt, mirrors, brake; The road to capitalism does not run smooth

Reforms in Cuba

The Economist., Jan 11th 2014 | Havana

Original here: http://www.economist.com/news/americas/road-capitalism-does-not-run-smooth

 Cuba Apr 2012 069.jpgAA

’52 Dodge  going down La Rampa;alongside the Havana Libre Hotel, Photo by Arch Ritter, 2011

WHEN the Cuban government said in December that it intended to let the population buy modern cars without requiring permits, many suspected there would be a catch. They were right.

The cars, which can only be bought through state-owned suppliers, cost a fortune. A 2013 Peugeot 508, marketed in Europe as an affordable saloon car costing around $30,000, has a price tag of more than a quarter of a million dollars at a rundown showroom in Havana. A Chinese Geely, with more than 80,000 kilometres (50,000 miles) on the clock, is on sale for around $30,000. The average salary in Cuba is less than $20 a month. “What do they think they are selling? Aeroplanes?” jokes Erik, a handyman, as he looks at the price-list. “They don’t want to sell any cars. It’s all a show,” agrees Ernesto, a mechanic.

The prices certainly seem designed to deter purchasers. Some even wondered whether there had been a clerical error and prices had been listed in Cuban pesos, Cuba’s local currency, which is worth 24 times less than the dollar-pegged convertible peso (CUC). Another theory is that the high prices are a preview of a widely predicted devaluation of the CUC as part of the government’s commitment to unify the island’s two currencies.

A further explanation may lie in the immediate effect of the reform: the elimination of a thriving black-market trade in the permits to buy new cars. For decades these have been awarded to valued individuals such as exceptional party workers, sports stars and artists. But they had more recently become a currency themselves, swapping hands for around $12,000 each. The government says that those with permits will be first in line to buy new cars—a dubious benefit given that many have quadrupled in price since the reform.

“There could hardly be a stronger signal that this remains a controlled economy,” says one Havana-based diplomat. Since taking over as president from his brother Fidel in 2008, Raúl Castro has taken some steps to reduce the state’s economic role. He has allowed small-scale self-employment, permitted Cubans to buy houses and given private farmers more autonomy to grow and sell their produce. But he has always insisted such reforms will be “without haste”. Now there are signs that he is deliberately slowing things down.

On January 1st, the 55th anniversary of the revolution, Mr Castro gave a speech in Santiago, Cuba’s second-largest city. He made no mention of further reform, instead castigating unnamed foreign groups for attempting to introduce “neoliberal” and “neocolonial” thinking.

That day the government also enacted a law banning the resale of clothes imported from abroad. The trade of “tailor and dressmaker” is one of around 200 private occupations that were officially permitted in 2010. Since then thousands of entrepreneurs have stretched its definition, setting up small clothing stores stocked with brands from Europe and the United States.

The clothes are often imported in suitcases by Cuban travellers taking advantage of another reform, which eliminated the requirement for a permit to travel. Eva, a 27-year-old from Havana, says that since 2011 she has been flying to Madrid every two months to stock up her fashion store in the back of her apartment. Now she says she will close her business. “Every time we start to breathe a little, we know the government’s grip will soon tighten.”

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