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PRESIDENT TRUMP RISKS ALIENATING ALLIES OVER CUBAN AMERICAN PROPERTY CLAIMS

William M. LeoGrande

February 14, 2019

The Trump administration is seriously considering whether to allow Title III of the Cuban Liberty and Democratic Solidarity Act (Helms-Burton) to go into effect in March, according to National Security Adviser John Bolton. On January 16, Secretary of State Mike Pompeo announced that he was suspending Title III for just 45 days instead of the ususal six months while the administration reviews whether its implementation would promote democracy in Cuba. He warned foreign companies doing business on the island that they had better “reconsider whether they are trafficking in confiscated property and abetting this dictatorship.”

Title III allows U.S. nationals to file suit in U.S. courts against anyone “trafficking” in their confiscated property in Cuba—that is, anyone profiting from it. If President Trump allows Title III to go fully into effect, he will open the door to as many as 200,0000 law suits by U.S. nationals, most of them Cuban Americans, whose property was taken by the Cuban government after 1959. U.S. courts would be swamped, the ability of U.S. companies to do business on the island would be crippled, and allies abroad might retaliate for U.S. suits brought against their companies in Cuba. Once the suits have been filed, there will be no way to undo the resulting legal chaos and the tangle of resulting litigation could take years to unwind.

The U.S. Foreign Claims Settlement Commission has certified 5,913 claims of U.S. nationals whose property was seized. These are the claims that Cuba recognizies and that the United States and Cuba had begun to discuss during the Obama administration. But Title III takes the unusual position of allowing naturalized Cuban Americans who lost property to also file suit against alleged traffickers. Normally, international law recognizes the sovereign right of governments to dispose of the property of their own citizens. According to the Department of State, by including Cuban Americans who were not U.S. citizens when their property was taken, Title III creates the potential for an estimated 75,000-200,000 claims worth “tens of billions of dollars.”

Back in 1996, when the law was being debated in Congress, angry opposition from U.S. allies Canada, Mexico, and the European Union, whose companies doing business in Cuba would be the targets of Title III law suits, led President Bill Clinton to insist on a presidential waiver provision in Title III. As a result, the president has the authority to suspend for six months the right to file Title III law suits, and he can renew that suspension indefinitely. Every six months since the Cuban Liberty and Democratic Solidarity Act was passed, successive presidents, Democrat and Republican alike, have continued the suspension of Title III.

U.S. allies have denounced Title III’s extraterritorial reach. Mexico, Canada, the United Kingdom, and the European Union all passed laws prohibiting compliance with it. The European Union also filed a complaint with the World Trade Organization, which it did not pursue after President Clinton suspended Title III. In fact, the principal justification both President Clinton and President George W. Bush offered for continuing the suspension was the need to maintain cooperation with European allies.

If President Trump does not renew the suspension, all these old wounds with allies will be reopened as U.S. claimants try to haul foreign companies into U.S. courts for doing business in Cuba. We already have enough tough issues on our agenda with Mexico, Canada, and Europe without adding another one. At this very moment, Washington is trying to muster their support in dealing with the Venezuelan crisis, support that could be endangered if the administration picks a fight with them over Title III.

U.S. businesses would not be exempt from potential liability. A Cuban American family in Miami claims to have owned the land on which José Martí International Airport was built, so any U.S. carrier using the air field could conceivably be sued under Title III. Another family that owned the Port of Santiago could file suit against U.S. cruise ships docking there.

Moreover, it would be almost impossible for a U.S. or foreign company to know in advance whether a proposed business opportunity in Cuba might become the subject of Title III litigation. “This will effectively end for decades any attempt to restore trade between the U.S. and Cuba,” attorney Robert Muse told the Tampa Bay Times.

When President Trump announced new sanctions on Cuba back in June 2017, senior administration officials said they were designed “to not disrupt existing business” that U.S. companies were doing in Cuba. If the president fails to continue the suspension of Title III, business relations will be disrupted far more severely and irreparably than they would be by any regulatory change.

William M. LeoGrande is Professor of Government at American University in Washington, DC, and co-author with Peter Kornbluh of Back Channel to Cuba: The Hidden History of Negotiations between Washington and Havana (University of North Carolina Press, 2015)

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LA ECONOMÍA CUBANA Y EL SÍNDROME DE CONCHA

Por Juan Triana Cordoví

OnCuba News

Fuente: http://oncubanews.com/opinion/columnas/contrapesos/la-economia-cubana-y-el-sindrome-de-concha/

Plaf… o demasiado miedo a la vida es una película cubana de 1988 y podría decirse que es un metáfora anticipada y muy aproximada de nuestra realidad actual.

Concha es uno de los personajes principales de esa película cubana. Mujer divorciada y con un hijo mayor, por demás pelotero. Ella se debate entre la decisión de realizar un cambio drástico (comenzar una nueva vida mudándose con un chofer de taxi, hombre que la ama y al que ella ama) o seguir igual: encerrada en sí misma y en su pasado, soportando una situación interna difícil de sostener y enfrentada a agresiones externas (ataque con huevos) que la acosan sistemáticamente y sobre los cuales no tiene la posibilidad de influir.

Al final Concha muere de un infarto que le produce el sonido de una pelota de goma rebotando en una pared de su casa y que ella confunde con el sonido de otro huevo reventando en algún lugar de su hogar. La verdadera razón de su muerte, sin embargo, fue la indecisión y el miedo al cambio.

Cuba se debate en un problema parecido al de Concha. Es atacada por un enemigo externo que parece insaciable (Trump y los cubano-americanos de Marco Rubio y compañía, que ahora pretenden chantajear al mundo amenazando con poner a funcionar el título 3 de la Ley Helms- Burton); enfrenta una situación económica difícil y está abocada a cambios significativos tal cual anuncia el proyecto de nueva Constitución de la República. A la vez, padece de la permanencia de una testaruda resistencia a los cambios necesarios que de alguna manera ha conducido a idas y venidas en ese proceso de transformación tan necesario que exige nuestra realidad económica, política y social.

“El flamante restaurante Moscú. la calle P entre 23 y 21, ”

Esa resistencia ha generado costos muy grandes. Describo alguno de estos:

  • La tasa de crecimiento sigue siendo muy baja y está muy lejos de la tasa de crecimiento que necesitamos.
  • Las exportaciones de bienes siguen teniendo un comportamiento insuficiente y continúan concentradas en unos pocos bienes.
  • La dependencia de las importaciones se mantiene y no parece que tenga solución de corto plazo.
  • La presión fiscal no permite amplios márgenes de maniobra.
  • El empleo no crece y se ha precarizado.
  • El salario, a pesar del crecimiento del salario medio mensual, sigue siendo insuficiente.
  • El éxodo de personal calificado, especialmente jóvenes y mujeres que desangra a nuestra economía, se mantiene.
  • La tasa de inversión permanece muy baja respecto a las necesidades de crecimiento, prácticamente está a la mitad de esas necesidades y la ejecución de las inversiones sigue siendo insuficiente.
  • La deuda de corto plazo a proveedores y los dividendos no pagados a inversionistas extranjeros son una carga financiera importante, se convierten en incentivos negativos al crecimiento y generan incertidumbre a futuros inversionistas interesados en el país.
  • La empresa estatal socialista, responsable de al menos el 80% del PIB y mayoritaria como fuente de empleo, pilar de las transformaciones emprendidas hace unos años atrás, no alcanza a responder adecuadamente a nuestras necesidades de desarrollo y se ha anunciado será necesario repensar las OSDEs.
  • La inversión extranjera, declarada estratégica para el desarrollo del país no logra despegar y aun cuando ha mejorado su captación respecto a años atrás sigue siendo insuficiente y está lejos de nuestras necesidades reales.
  • Se mantienen brechas importantes –vertical y horizontal– en la infraestructura básica.
  • Existen brechas tecnológicas significativas en buena parte de nuestro sistema productivo.
  • El sector no estatal, cooperativas y propietarios privados en general, arrendadores de tierra y empleados en ese sector, aun espera por un marco legal más proactivo que le permita crecer cualitativamente.
  • Sectores decisivos, como la agricultura y la industria no terminan de encontrar una senda dinámica de crecimiento sostenido.

Esos son en buena parte los costos de esa resistencia. Todos ellos, o la inmensa mayoría, fueron objeto de análisis en la última sesión de la Asamblea Nacional.

Para Continuar: Triana, LA ECONOMÍA CUBANA Y EL SÍNDROME DE CONCHA 2019

Dr. Juan Triana

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CUBA MUST CONTEND WITH A NEW COLD WAR IN THE WESTERN HEMISPHERE

WORLD POLITICS REVIEW, Thursday, Jan. 24, 2019

Cuba faces a much tougher international environment today than it did just a few years ago. Relations with Latin America have cooled as relations with Washington have regressed to a level of animosity reminiscent of the Cold War. In response, Havana is looking to old ideological comrades in Moscow and Beijing to compensate for the deterioration of ties in its own backyard.

These setbacks abroad come at a time when the Cuban economy is vulnerable. Export earnings have been falling, foreign reserves are low, and the debt service burden is heavy, as Cuba tries to retire old debts that it renegotiated. Despite the economic reforms begun in 2011, domestic productivity is still weak, making Cuba dependent on foreign investment for capital to fuel growth.

A decade ago, progressive governments dominated Latin America. Cuba had friendly presidents in every major Latin American country except Mexico and Colombia, and even those two were not actively hostile. In Venezuela, Hugo Chavez saw himself as a protégé of Fidel Castro, promoting “21st-century socialism” in the hemisphere financed by his country’s vast oil wealth. At its peak, Venezuela provided about two-thirds of Cuba’s oil consumption at highly subsidized prices, with the cost offset by some 40,000 Cuban doctors and teachers serving Venezuela’s poor.

Under Presidents Luiz Inacio Lula da Silva and Dilma Rousseff, Brazil’s state development bank provided $832 million in loans to modernize Cuba’s aging port at Mariel. Pressure from Latin American heads of state at the Sixth Summit of the Americas in Colombia in 2012 contributed to President Barack Obama’s landmark decision to normalize U.S.-Cuban relations.

But in recent years, the progressive “pink tide” of leftist governments has given way to a riptide of conservatism. Chavez is gone and his successor, Nicolas Maduro, presides over an ever-worsening political crisis and an economy in free fall, with 80,000 percent hyper-inflation last year. Venezuela’s oil production is down by two-thirds because of mismanagement and neglect. Oil shipments to Cuba have fallen by 50 percent, forcing the government to ration energy consumption by state entities, stunting economic growth.

In Brazil and Colombia, far-right governments have aligned themselves with Washington’s threatening stance toward Havana. New Brazilian President Jair Bolsonaro’s denunciations led Cuba to end its “More Doctors” program, under which some 8,000 Cuban physicians served Brazil’s poor, earning Havana $250 million annually. In Chile, Argentina, Ecuador, Guatemala, Paraguay and Peru, progressive presidents have been replaced by conservatives. In short, Latin America has become a much less hospitable diplomatic environment for Cuba. It is no coincidence that on his first major international tour, Cuban President Miguel Diaz-Canel’s destination was not Latin America, but Russia, followed by North Korea, China, Vietnam and Laos.

The reversal of Havana’s fortunes in Latin America has been serious, but the reversal of relations with Washington has been disastrous. In the two years after Obama and Castro announced their plans to normalize relations on Dec. 17, 2014, the two governments re-established diplomatic relations, expanded trade and travel, and signed 23 bilateral accords on issues of mutual interest. Some 60 U.S. companies signed commercial deals with Havana, and the number of U.S. visitors jumped 57 percent between 2014 and 2016. Castro’s strategy of opening Cuba to U.S. trade and investment as part of his plan to modernize the economy seemed to be paying off.

Donald Trump’s election changed all that. In June 2017, Trump declared he was “canceling” Obama’s policy of engagement and tightening the embargo. Then the mysterious medical problems that afflicted some two dozen U.S. diplomats in Havana became the excuse for downsizing the embassy, thereby crippling educational, cultural and commercial exchanges. Washington imposed a travel advisory warning Americans not to go to Cuba, and in the first half of 2018, the number of U.S. visitors plummeted nearly 24 percent. However, cruise ship arrivals increased over the next six months, so the total number of U.S. visitors ended the year flat.

Then John Bolton, who targeted Cuba during George W. Bush’s administration with false claims that Havana was developing biological weapons, became Trump’s national security adviser last April. Speaking in Miami on the eve of the U.S. midterm elections, he ratcheted up the threatening, insulting rhetoric, declaring Cuba a member of a “Troika of Tyranny”—along with Venezuela and Nicaragua—and promising more sanctions to come. The administration is reportedly weighing sanctions on individual Cuban officials, imposing more restrictions on travel to the island, and returning Cuba to the Department of State’s list of state sponsors of international terrorism.

But the most serious sanction under review is allowing Title III of the Cuban Liberty and Democratic Solidarity Act—known as the Helms-Burton Act, for its original sponsors—to go into effect. Suspended by every president since the law passed in 1996, Title III would allow U.S. nationals, including Cuban-Americans, who lost property after the 1959 revolution to sue both the U.S. and foreign companies in U.S. courts for “trafficking” in their property—that is, making a profit from it.

During its first two years, the Trump administration continued the suspension of Title III, which has to be renewed every six months. But with a new deadline looming this month, hard-liners in the National Security Council—led by Bolton and Mauricio Claver-Carone, a long-time lobbyist for regime change policies aimed at Cuba—argued against suspension. The result was a short 45-day suspension, giving the Trump administration more time to assess the consequences of letting Title III go into effect.

Activating Title III would open a floodgate of litigation and damage Cuba’s efforts to attract foreign investment since U.S. and foreign firms would be loath to risk getting caught up in costly court fights. It would also prompt counter-measures by European governments unwilling to countenance Washington’s assertion of extraterritorial jurisdiction over their firms.

Faced with this new standoff in the Caribbean, Cuba is rejuvenating relations with its old Cold War allies, Russia and China, both of which are expanding their presence in Latin America. Moscow was the first stop on Diaz-Canel’s first major foreign trip last November, and he came away with $260 million in new economic assistance and $50 million in military aid to refurbish Cuba’s aging Soviet-era arsenal. Diaz-Canel and Russian President Vladimir Putin reaffirmed that their “strategic partnership” extended beyond just economic cooperation. In Beijing, Diaz-Canel met with President Xi Jingping and signed several economic cooperation agreements. China pledged new investments in communications, energy and biotechnology—sectors where U.S. firms had hoped to gain a foothold before U.S.-Cuban relations soured.

A small island like Cuba has to be integrated into the global economy in order to prosper. Raul Castro clearly recognized that when he sought to repair diplomatic and commercial relations with Latin America and the United States. Historically, Cuba has suffered because of its economic dependence on a series of global patrons: Spain, the United States, the Soviet Union and Venezuela. Cuba’s leaders would prefer to diversify economic ties across a wide range of countries regardless of ideology. But the Trump administration’s renewed hostility, along with the collaboration of conservative Latin American governments, leaves Cuba no choice but to look for allies among Washington’s global rivals.

William M. LeoGrande is professor of government at American University in Washington, D.C., and co-author with Peter Kornbluh of “Back Channel to Cuba: The Hidden History of Negotiations between Washington and Havana.”

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SIXTY YEARS AFTER THE REVOLUTION, IS A ‘NEW CUBA’ EMERGING?

World Politics Review, Monday, Jan. 14, 2019

William M. LeoGrande |

Is the Cuban Revolution reinventing itself at age 60? That was my unmistakable impression during a visit to Cuba last month. Change is in the air as the island celebrates the anniversary of the 1959 revolution.

Last year, Raul Castro stepped down as president in favor of his protégé, 58-year-old Miguel Diaz-Canel, who promised a “new Cuba” — a government more open and responsive to people’s needs. In the ensuing months, three constituencies — the churches, the private sector and the arts community — took advantage of that promise to launch organized campaigns pushing back against government policies they opposed. And in each case, the government backed off.

Continue reading: LeoGrande, Is a New Cuba Emerging

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

Marc Frank

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

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

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

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

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

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

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

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

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

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

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

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

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

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MAJOR LEAGUE BASEBALL, UNION, CUBA REACH DEAL FOR PLAYERS TO SIGN WITHOUT HAVING TO DEFECT

New rules similar to those for players from Japan, South Korea and Taiwan

The Associated Press · December 19

Original Article: Major League Baseball and the Cuban Baseball Federation

[Arch Ritter: Good news.  But I want to see Cuban – and Dominican Republic –  teams in a new international league.]

Major League Baseball, its players’ association and the Cuban Baseball Federation reached an agreement that will allow players from the island to sign big league contracts without defecting, an effort to eliminate the dangerous trafficking that had gone on for decades.

The agreement, which runs through Oct. 31, 2021, allows Cubans to sign under rules similar to those for players under contract to clubs in Japan, South Korea and Taiwan.

“For years, Major League Baseball has been seeking to end the trafficking of baseball players from Cuba by criminal organizations by creating a safe and legal alternative for those players to sign with major league clubs,” baseball Commissioner Rob Manfred said in a statement Wednesday. “We believe that this agreement accomplishes that objective and will allow the next generation of Cuban players to pursue their dream without enduring many of the hardships experienced by current and former Cuban players who have played Major League Baseball.”

Depending on the quality of future players, the agreement could mean millions of dollars in future income for the cash-poor Cuban federation, which has seen the quality of players and facilities decline in recent years as talent went overseas.

The agreement marks a step forward in U.S.-Cuba relations during a time of tensions between Cuba and the Trump administration, which has pledged to undo President Barack Obama’s 2014 opening with the island.

MLB said the deal was allowed by amendments to the Cuban Asset Control Regulations of March 16, 2016, that established the provisions of a general license from the U.S. Treasury Department’s Office of Foreign Assets Control. The league said OFAC confirmed to Major League Baseball in a letter dated Sept. 20, 2016, that an agreement with the Cuban federation would be valid.

“Baseball has always been a bridge between our two nations, facilitating people-to-people connections and larger agreements that have brought our countries closer together,” said Sen. Patrick Leahy, a Vermont Democrat.

the Cuban federation are subject to resolution by the International Chamber of Commerce.

“Establishing a safe, legal process for entry to our system is the most important step we can take to ending the exploitation and endangerment of Cuban players who pursue careers in Major League Baseball,” union head Tony Clark said in a statement. “The safety and well-being of these young men remains our primary concern.”

Only players under contract to the Cuban federation are covered by the agreement, and the Cuban federation agreed to release all players 25 and older with at least six years of professional experience. They would be classified as international professionals under MLB’s labour contract with the players’ association and not subject to international amateur signing bonus pools.

The Cuban federation may at its discretion release younger players to sign minor league contracts with MLB organizations.

A player can decide whether he wants a registered MLBPA agent to negotiate a major league contract. He may use a representative other than an agent to negotiate a minor league deal.

U.S. Sen. Jeff Flake, an Arizona Republican, called it a “homerun agreement,” tweeting “This deal will make life better for Cuban baseball players, who will no longer have to risk unsafe passage to the U.S.”

Players have told stories of harrowing crossings on rafts and rickety boats — some later challenged as exaggerations.

“Today is a day that I am extremely happy,” said a statement from Los Angeles Dodgers outfielder Yasiel Puig, who was smuggled out of Cuba by traffickers linked to a Mexican drug gang, according to court testimony. “To know future Cuban players will not have to go through what we went through makes me so happy.”

Cuban-born players have a long history in the major leaguers, led by Minnie Minoso with nine All-Star selections, Tony Oliva with eighth and Camilo Pascual and Tony Perez with seven each. And while Puig, Orlando and Livan Hernandez, Aroldis Chapman and others became stars in recent decades, others have been big-money busts. Outfielder Rusney Castillo agreed to a $72.5 million, seven-year contract with Boston in 2014 and has appeared in just 99 games with the Red Sox while playing 347 in the minor leagues.

“Words cannot fully express my heartfelt joy,” Chicago White Sox all-star first baseman Jose Abreu said in a statement. “Dealing with the exploitation of smugglers and unscrupulous agencies will finally come to an end for the Cuban baseball player. To this date, I am still harassed.”

Any players allowed to sign with big league clubs can do so without leaving Cuba, and the fee paid by the signing team will be covered by the same rules as in MLB’s other posting systems: 20 per cent of the first $25 million of a major league contract, 17.5 per cent of the next $25 million and 15 per cent of any amount over $50 million. There will be a supplemental fee of 15 per cent of any earned bonuses, salary escalators and exercised options.

For minor league contracts, the fee will be 25 per cent of the signing bonus, and there will be a supplemental fee for any foreign professionals who at first agree to minor league deals that include major league terms that later come into force.

A former Cuban federation player under contract to a MLB club may return to Cuba during the off-season. He can play in Cuba during the off-season only with his MLB club’s consent.

Cuban players will need the consent of a series of sports officials in the country before the Cuban Baseball Federation agrees to release them, according to the organization’s president, Higinio Velez. He described the new system as a way of protecting the quality of Cuban baseball while allowing players to head to MLB without resorting to traffickers or breaking ties with their country.

Addressing young players’ families, he said, “This is the legal path, the secure path that we’ve always dreamed of for their children.”  “Today’s contract gives the Cuban player a secure life, a tranquil one, of being able to play in Cuba, be signed by any team in the major leagues, to be able to return, to be with their family, travel with their family, to come and go legally any time they want,” he said.

The departure of young Cuban players to MLB has slowed since limits were placed on signing bonuses for international amateurs starting July 2, 2017.  For 2017-18, outfielder Julio Pablo Martinez got $2.8 million from Texas, and the only other signing bonus over $300,000 for a Cuban-born amateur was $750,000 for shortstop Eddy Diaz (Colorado).

In the current signing period that started July 2, the largest signing bonus for a Cuban-born amateur has been $975,000 for outfielder Jairo Pomares with San Francisco.

“Industriales”

Havana Sugar Kings  of the International League in the 1950s.

Training Ground for Cuba’s baseball genius.

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LETTER FROM HAVANA: THE SUDDEN CIVIL SOCIETY AWAKENING

December 17, 2018

Richard Feinberg, Non-Resident Senior Fellow, Brookings Institution.
Original Article: Brookings Institution,  Letter from Havana

As the Castro brothers fade into history, green shoots of civil society are visibly emerging in Cuba. Make no mistake: The Cuban Communist Party retains its authoritarian hegemony. Nevertheless, and largely unnoticed in the U.S. media, various interest groups are flexing their youthful muscles—and with some remarkable albeit very partial policy successes.

These unanticipated stirrings of civil society present a serious challenge to the cautious new president, Miguel Díaz-Canel, who assumed office this April. In recent weeks, three significant interest groups have pushed back against newly restrictive government regulations issued in the usual way: by government fiat, with few if any opportunities for public input. The new regulations aim to reduce profit margins of independent entrepreneurs, driving some out of business altogether, and to impose new censorship rules on cultural expression.

In response to these threats, the emerging private sector—some 600,000 employers and workers, over 10 percent of the workforce by official count—pressed the authorities to retract proposed limitations on individual capital accumulation. To everyone’s great surprise, the authorities suddenly offered significant concessions. Entrepreneurs will be able to own more than one business, the government agreed, and restaurant and bar owners will no longer face occupancy ceilings of 50 customers each.

Nevertheless, other restrictive anti-business clauses remain on the books. Apprehensive entrepreneurs are waiting to see whether government bureaucrats and inspectors apply their new discretionary powers with a light or heavy hand.

For their part, Cuba’s large army of cultural workers, in music, film, theater, and the visual arts, vigorously pushed back against draft regulations requiring prior approval of public performances and threatening censorship of “unpatriotic” content. At the last minute, again the government stepped back, agreeing to consult with representatives of the arts community prior to implementation.

In yet another challenge to government authority, Havana taxi owners and drivers staged an informal strike against a complex set of new rules. The government is seeking to impose burdensome reporting of all revenues and expenditures, higher effective taxes, more rigorous safety requirements for certain vehicles, and on some routes a lower ceiling on taxi fares. In protest and despair, many taxi drivers have turned in their licenses. Moreover, public buses are running less frequently, apparently due to scarcities of gasoline and spare parts. The result: a daily transportation headache for Havana’s work force.

The government has promised to import more buses. Meanwhile, the authorities seem incapable of foreseeing the practical outcomes on daily life of bureaucratic innovations. Intent upon raising tax revenues and imposing order over Havana’s unruly transportation grid, the authorities failed to anticipate the market-driven reactions of the regulated taxi owners and drivers.

In all three cases—the disgruntled business owners, the alarmed artistic community, and the frustrated taxi drivers—the civil protests took similar forms. Brave citizens signed carefully crafted letters, respectful but firm, addressed to ministers and President Díaz-Canel. (Some signatories reported subsequent government harassment, including menacing phone calls.) Spreading social media (on-island and offshore) buzzed with sharp criticisms of government policies. In a few notable cases, intrepid protesters gathered in public spaces, provoking brief police arrests. One prominent state TV program, “Mesa Redonda” (Roundtable), gave voice to some of the popular complaints, politely challenging official guests.

To access social media, most Cubans have had to locate scattered Wi-Fi hotspots. But this month the government has enabled 3G technology throughout the island. This belated entrance into the world of modern telephony may be another game changer. Cuban citizens who sport cell phones will now be empowered to upload immediately content to Facebook, WhatsApp, and Twitter.

These struggles over economic and cultural freedoms between the authorities and civil society come in the midst of a major re-write of the nation’s constitution. The Communist Party submitted a draft document for public comment in innumerable meetings convened throughout the island. Initial skepticism has given way to anticipation that the authorities may prove responsive to citizen suggestions and significantly amend the final draft, even as one-party rule and socialist planning will persist. A popular referendum on the new constitution is scheduled for late February.

Overall, the heated conversations over constitutional reform and the government’s responsiveness to civil society voices, however belated and partial, have raised hopes: Maybe post-Castro Cuba will gradually evolve toward a more responsive governance. Emboldened by cracks in government stone-walling, Cubans may seek to widen the space for civil society expression.

At the same time, while many welcome the young administration’s relative responsiveness to independent voices, some party stalwarts and ordinary Cubans accustomed to authoritarian rulers see only weakness and improvisation. Backsliding is certainly a feasible scenario. Already some anti-government skeptics see only one half-step forward, two steps backward.

Nevertheless, some Cubans harbor this aspiration: That President Miguel Díaz-Canel, who so far has championed continuity over change, will eventually gain the authority and confidence to tackle the other elephant in the room—the long-stagnant economy. For only comprehensive economic reforms could lift the economy from its deepening recession, the root cause of the government’s anxieties and the popular discontent.

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CUBA: PRIVATE, OWNED. New rules make it even harder to do business in Cuba.

The Economist, December 8, 2018

Editor’s note (December 6th, 2018):

Late on the evening of December 5th, after this piece had been edited and fact-checked but before it went to press, Margarita González Fernández, Cuba’s Minister for Work and Social Security, announced last-minute changes to new regulations governing Cuba’s private sector. Happily, the modifications address some of the more unpopular aspects of the new regulations, which were first announced in July. Of greatest significance is the change that will allow Cuban cuentapropistas, or the self-employed, to keep multiple work licences, rather than having to surrender all but one, as previously announced. (Bookshops with attached cafés will no longer be breaking the law.) The percentage of earnings that cuentapropistas must deposit into designated bank accounts has been lowered from 80% to 65% and the rule to prohibit restaurants from seating more than 50 patrons at a time has been dropped. The last-minute modifications are a sign that while the government is far from enabling the private sector to flourish, it is concerned with creating too much discontent and is, if ever so slightly, considering public opinion when making its decisions.

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EIGHT YEARS ago Cuba’s government laid off a tenth of the country’s workforce—some half a million people—and encouraged them to start their own businesses. They did, with gusto. Nearly 600,000 Cubans have become cuentapropistas, or self-employed, opening restaurants, boutiques, repair shops, beauty parlours, bakeries and bars. They have renovated and rented out spare bedrooms in their homes, turned family cars into taxis and poured their savings into design studios, creating an additional 400,000 jobs and a much-needed, if still tiny, tax base. Many now earn much more. The average state wage is 848 Cuban pesos ($33) a month; a taxi driver with a decent ride can make more than ten times that. But new regulations, which run to 129 pages and take effect on December 7th, look likely to damage the country’s nascent private sector. They come at a particularly bad time for Cuba’s economy, which is already suffering from stagnant exports, broke allies and disappointing tourist numbers.

The most devastating new rule is one that makes it illegal for individuals to hold more than one licence to engage in private business. Cuba issues licences in only 123 categories—and if a licence for a job does not exist, neither does that job, at least officially. There is little logic to the system. A single licence does the trick for any computer-related business, allowing a cuentapropista to provide everything from software to online marketing services. Separate licences for massages, manicures and braiding have been consolidated into one, to the delight of salon owners. But other categories are narrower: selling hardbacks and brewing coffee require two separate licences, effectively making bookshops with cafés illegal. Restaurants that double up as bars face the same fate.

Officials at the Ministry of Labour and Social Security say that the new regulations are meant to discourage black-market trading and tax evasion, while also reducing inequality. The expansion of private businesses over the past few years has indeed contributed to these problems. But the government’s proposed solutions will either have no real effect—business-owners will acquire licences in the names of friends or family—or exacerbate them.

Take wholesale markets. There is only one on the island. Most businesses must rely on state-run shops, which offer a limited range of goods, or acquire products on the black market. The government’s answer is to require cuentapropistas to open bank accounts so that it can track where they spend their money. Drivers of almendrones—ride-shares that substitute for a functioning public transport system in Havana—will be given magnetic cards with which they are expected to buy a set quantity of “subsidised” petrol every month. But since subsidised fuel costs more than the black-market stuff, many drivers are simply handing in their licences.

Cubans who rent out rooms or run other small businesses, such as restaurants or repair shops, must deposit 80% of their income in a designated bank account. They are understandably loth to do so in a cash-based economy where simple transactions at the bank can take hours. They can withdraw money from this account to cover business expenses and will be given a card that entitles them to small discounts when they buy items for business. But few stores accept cards.

The state has also found a novel way to tackle the concentration of wealth: restaurants are now limited to seating only 50 patrons at a time, ostensibly to keep owners from consuming too many resources. And under a new tax scheme, any cuentapropista who wants to hire more than 20 workers must pay onerous wages for each additional employee. The government is happy for people to start businesses, so long as they do not make too much money.

A few helpful new rules have snuck in among the enterprise-throttling ones. Employers will be required to have formal contracts with their workers. They face the suspension of their licence if they are found to be discriminating on the basis of race, sexuality or disability. And business-owners no longer need to close up shop if they fall sick or have a family emergency; they can appoint an interim manager and take some time off.

Yet the overall effect of the new regulations will be to slow the budding private economy. “Being a cuentapropista is the only opportunity we have at a better life without leaving the country,” says the owner of a modest craft shop in central Havana. Her monthly taxes will triple this week; the new rules impose higher taxes on certain businesses in central Havana. “If they take that away from us, what’s left?”

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LA ECONOMÍA CUBANA EN 2018: OTRO AÑO SIN COLAPSO Y SIN PROGRESO

Por Pavel Vidal Alejandro, Diciembre de 2018.

Este año el crecimiento económico nuevamente quedará por debajo del plan oficial. Desde el tercer trimestre el gobierno cubano ajustó la meta de 2 por ciento a 1 por ciento, después de obtenerse un crecimiento de 1,1 por ciento en el primer semestre. Se sabía que este iba a ser un año complicado para sectores claves como el turismo y la industria azucarera, y para el sector exportador en general. Se sabía que este año el entorno económico iba a ser desfavorable y que iba a ser difícil encontrar impulsos al crecimiento debido a las secuelas que dejó el huracán Irma en la agricultura, a los problemas por los que sigue atravesando Venezuela (a pesar del aumento en el precio del petróleo), y debido al efecto de las medidas de la Administración Trump sobre el arribo de visitantes. A ello se le une una situación financiera nacional que todavía no se recompone y que obliga a mantener contraídas las importaciones.

Los últimos datos de la Oficina Nacional de Estadísticas e Información (ONEI) confirman la complicada situación por la que atraviesa el comercio exterior cubano, evidenciando que los shocks internacionales (la crisis venezolana y las nuevas restricciones en la política de Estados Unidos) y los atrasos en las deudas comerciales, tienen una alta responsabilidad en lo que sucede con el PIB. Las exportaciones de bienes y servicios presentaron un crecimiento nulo en 2017 (medidas a precios contantes), lo que lleva a acumular cuatro años sin aumento real de los ingresos externos. Ello exige ajustar las importaciones y limita la disponibilidad de insumos para el sector productivo. Las importaciones reales cayeron un 1,6 por ciento en 2017, en 2016 también habían caído (-10,6 por ciento) y en 2014 (-1,5 por ciento).

Probablemente a finales de diciembre se anuncie un dato oficial de crecimiento del PIB algo mayor que cero, que otra vez contrastará con una realidad que se sigue pareciendo más a una recesión. Los enormes problemas para cumplir los compromisos financieros con proveedores e inversionistas, la escasez de productos básicos, y la dinámica de los precios de los bienes de consumo, cada vez coinciden menos con las estadísticas oficiales del PIB y del Índice de Precios al Consumidor.

El crecimiento económico cubano se mantiene en una media de 1,7 por ciento en los últimos cinco años, según unos registros oficiales (que probablemente esconden una ligera recesión). Pero, así y todo, es meritorio ver cómo las autoridades cubanas han logrado mantener a flote una parte de la actividad productiva mientras el principal socio comercial (Venezuela) ya ha perdido la mitad de su PIB. Con la dependencia que aún mantiene Cuba de Venezuela para la exportación de servicios profesionales (médicos, principalmente) y para la importación de petróleo, sigue pareciendo increíble el resultado.

Ciertamente, esta es una capacidad que han desarrollado las autoridades económicas después de tres décadas de funcionamiento bajo restricciones financieras casi constantes. Las estructuras económicas monopólicas y controladas centralmente, las cadenas de suministros administradas por el Estado, los mercados racionados, y las regulaciones financieras y cambiarias se activan al máximo bajo el mando político en épocas de crisis, y se ponen en función de distribuir y en tratar de repartir prioritariamente los escasos ingresos.

Se debe reconocer que es un sistema que ha mostrado ser efectivo para manejar las crisis y evitar el colapso económico, como también ha sido “efectivo” en limitar la iniciativa privada, la innovación y el despegue de la productividad. Es un sistema que tiene el récord de mantener al país con las menores tasas de inversión de América Latina. Y así lleva casi 30 años ya el aparato productivo cubano: no colapsa del todo, pero tampoco hay progreso económico.

Dos amortiguadores del shock venezolano

 En estos últimos años la economía cubana ha logrado, además, encontrar otras dos vías para amortiguar el shock venezolano. En primer lugar, el impulso que alcanzó desde 2015 el arribo de turistas. Un crecimiento promedio de 16 por ciento por tres años ayudó a obtener otras fuentes de ingresos externos (aunque no alcanzó para hacer crecer el total de las exportaciones), y dinamizó al sector privado y a la inversión extranjera directa.

Por eso ha sido tan preocupante que en 2018 el sector turístico se haya desacelerado. Las restricciones de viaje para los ciudadanos estadounidenses y la mala publicidad que generan los supuestos “ataques sónicos”, han tenido un efecto prolongado en el mercado turístico cubano. Desde 2015 hasta 2017, el arribo de visitantes desde Estados Unidos (incluyendo cubanoamericanos) había venido creciendo a una tasa promedio anual de 44 por ciento y había duplicado su participación en el total de visitantes a la Isla (en 2017 llegó a representar un 22 por ciento del total de la demanda). Sin embargo, en el primer semestre de 2018 los visitantes desde Estados Unidos acumulaban una caída del 24 por ciento en comparación con igual período de 2017.

Se puede estimar que, de no ser por la nueva política estadounidense, Cuba podía haber llegado a la cifra de los 5,7 millones de visitantes en 2018, bastante por arriba de los 4,9 a los que se debe llegar este año. Así, el empeoramiento de las relaciones con Estados Unidos, ha implicado recibir alrededor de 785,000 turistas menos en 2018, lo que tiene un costo para la economía cubana de alrededor de US$557 millones, por concepto de ingresos no recibidos (ver Cuba Standard Economic Trend Report, 2018 tercer trimestre). Este es un impacto incluso mayor que el estimado de US$300 millones que se dejarían de recibir por la cancelación del programa médico cubano en Brasil.

Afortunadamente, la tendencia de los últimos datos mensuales de arribo de visitantes internacionales evidencia una significativa recuperación en la demanda por el mercado turístico cubano. Gracias a esta tendencia positiva, ya en el tercer trimestre de 2018 la cantidad de visitantes fue un 5 por ciento mayor que los recibidos en igual período de 2017. Tal resiliencia de la demanda por el mercado cubano es un excelente dato para la economía de la Isla, dado que el turismo será clave para la dinámica de 2019.

En segundo lugar, ha funcionado también como amortiguador la política fiscal expansiva. En 2017 el gasto de gobierno fue el componente de la demanda agregada que más creció a precios constantes: un 2,2 por ciento. Desde 2015 viene aumentando el gasto del presupuesto del Estado y el déficit fiscal como proporción del PIB. Después de años de austeridad fiscal, el gobierno echó manos del gasto fiscal para amortiguar los efectos de la crisis venezolana.

Para reducir los efectos inflacionarios de esta política fiscal expansiva, el Ministerio de Finanzas y Precios ha venido estrenando en grande los bonos públicos. Es decir, ya no se imprime dinero nuevo para financiar el gasto fiscal que no tiene respaldo en ingresos, sino que lo financian los bancos comerciales estatales al comprar los bonos públicos.

Tal política fiscal anticíclica ha amortiguado la caída del PIB, pero lo preocupante es que ha generado un hueco fiscal por encima de 8,000 millones de pesos en 2017 (8,6 por ciento del PIB) y de cerca de 12,000 millones de pesos para 2018 (alrededor de un 12 por ciento del PIB). El déficit fiscal en pesos corrientes es el histórico más alto y, en relación al PIB, es una proporción que no se veía desde la crisis de inicios de los años 90. No cabe duda de que la expansión fiscal ayuda al crecimiento del PIB en el corto plazo, pero sobre una burbuja financiera que se está acumulando en la forma de bonos públicos en manos de los bancos comerciales estatales.

Los cambios irrelevantes en el margen

 Y no se puede obviar la pérdida de dinamismo en las reformas estructurales, lo cual mantiene estancado el potencial de crecimiento de la economía. Es decir, hay factores cíclicos y coyunturales, pero también siguen lastrando el potencial de crecimiento tanto la dualidad monetaria y las ineficiencias del sector empresarial estatal, como las restricciones sobre la agricultura y al sector privado, todo lo que impide acumular más capital físico y hacer un uso intensivo de la tecnología y el capital humano.

El presidente Díaz-Canel, por el momento, se mantiene en la senda de las transformaciones graduales que no tocan la columna vertebral del sistema centralizado y el monopolio de la empresa estatal. Ello coincide con las expectativas de un Presidente que no llega al poder presentando una agenda propia, sino que fue seleccionado por la generación de los “históricos” para darle continuidad al programa definido durante el período de Raúl Castro.

Una manera simple de ilustrar la manera en que se vienen aplicando las reformas es la siguiente. Si hay que cambiar diez cosas para que funcione eficientemente un sector productivo, un mercado o un mecanismo económico, el gobierno cubano va a cambiar solo dos, y estas dos nunca van a ser las más importantes. Con ello, mantienen la imagen de reforma, minimizan los conflictos y divisiones políticas al interior del gobierno y el Partido, pero gastan tiempo y energía en producir transformaciones que no tienen la posibilidad de ofrecer resultados significativos, dado que no se han cambiado las otras ocho cosas que impiden el funcionamiento eficien Lo acabamos de ver este año cuando se deciden realizar modificaciones a la Ley 118 de la Inversión Extranjera con vistas a acelerar la llegada de capital extranjero, y para ello se establece que, en las propuestas de inversión, hay dos documentos que ya no son necesarios presentar al Ministerio de Comercio Exterior (MINCEX), y que ya no hay necesidad de presentar un estudio completo de factibilidad de la inversión, sino un estudio más sencillo de pre-factibilidad.

Sin embargo, las modificaciones no tocan, por ejemplo, el sistema de contratación de la fuerza de trabajo a través de empresas empleadoras estatales que operan con objetivos rentistas y dañan la competitividad, ni van dirigidas a potenciar la inversión con capital de los cubanos residentes en el exterior.

También se evidencia en las recientes medidas para evitar la evasión fiscal del sector privado, en las cuales se considera la obligación de tener una cuenta bancaria por parte de los negocios de mayores ingresos, pero no se atacan las principales fuentes de informalidad y del uso del efectivo, tales como la ausencia de un mercado mayorista, la no autorización para importar insumos, el poco uso de medios de pagos electrónicos y que los negocios no cuentan con personalidad jurídica.

En la agricultura también vimos este año otro ejemplo de medidas en el margen que no van a producir resultados significativos. Se decide ampliar los tiempos del usufructo y las extensiones máximas de tierra asignadas a los privados, pero no se desmonta el sistema centralizado de Acopio estatal, y los campesinos siguen sin contar con un mercado donde obtener los bienes de capital, la tecnología y los insumos suficientes.

El año 2019 tendrá como elementos positivos la recuperación del turismo, la reanudación de entrega de licencias a los privados, el aumento de la inversión extranjera a partir de los proyectos ya aprobados, y las múltiples oportunidades que se abren para generar nuevos servicios a partir de la conexión 3G a los teléfonos celulares.

Una de las mayores ilógicas de la reforma cubana es que solo abrió el sector privado a actividades de bajo valor agregado, teniendo Cuba un capital humano de calidad. Tal vez la conexión 3G sea un punto de inflexión para que esto cambie, y el sector privado pueda aportar más al progreso económico desde el conocimiento y la innovación. Pero para ello se requiere que la política pública se salga del margen y cree un marco regulatorio adecuado, no para restringir, sino para promover la expansión de una de las áreas de la llamada economía naranja de mayor dinamismo a nivel internacional.

Dr.  Pavel Vidal

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CUBAN ECONOMY TODAY AND PERSPECTIVES FOR THE FUTURE, SUMMARY OF FINDINGS OF 28TH ANNUAL ASCE CONFERENCE

(An Excellent Summary Overview on the Cuban Economy from the Annual Meeting of the Association for the Study of the Cuban Economy, 2018.    A.R.)

By Joaquín P. Pujol

November 13, 2018

The 28th Meeting of the Association for the Study of the Cuban Economy  (ASCE) was held in Miami, Florida, July26-28, 2018. This conference differed slightly from prior meetings in that it had a higher participations from Cuban-based economists and students. In fact the two students that won the competition for the student essay awards live in Cuba.

The papers presented summed up the disastrous state of the Cuban economy and the very poor prospects for the immediate future, short of finding a new Sugar Daddy like the Soviet Union or Venezuela to subsidize Cuba.

The Complete Article: CUBAN ECONOMY TODAY AND PERSPECTIVES FOR THE FUTURE

TABLE OF CONTENTS

Measurement of the performance of the Cuban Economy

Impact of the 2010 policy reforms of Raul Castro’s 

Agricultural Policies

Petroleum

The issue of the Multiple Currency Regime

Public Sector Finances

Trade & Foreign Debt

The Impact of the Hurricane Irma

Political Oppression

Investment Requirements for Growth

Joaquín P. Pujol

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