Category Archives: Blog

CUBA OPENS FOREIGN CURRENCY-ONLY SHOPS, ENDS TAX ON DOLLAR

Andrea Rodriguez | AP

Washington Post, July 20, 2020 at 7:04 p.m. EDT

HAVANA — Cuba opened shops Monday that accept only foreign currencies and eliminated a special tax on the U.S. dollar, deepening a process of collecting stronger currencies to face the country’s economic crisis. By morning, long queues had formed in a half-dozen such shops in Havana dedicated to the sale of food and toiletries. Under the new system, people buy merchandise using national or foreign cards backed by hard currencies, especially dollars, including Visa or Mastercards. Cash is not accepted.

The shelves of a large foreign-currency warehouse store visited by Associated Press journalists contained products currently missing from peso-sale stores, including detergent, minced chicken, beef and canned goods.  “It looks to me like at this critical time, when the country is going without food, there is everything” in the market, said Lenon Fernández, a 32-year-old entrepreneur who went shopping at a supermarket known as 70.

The shortages have worsened since the middle of last year when the Trump administration tightened sanctions to pressure for a change in the island’s political model. Now, on top of sanctions, a cut in remittances from abroad and internal inefficiencies, Cuba is losing tourist revenues because of the coronavirus pandemic and its GDP growth is close to 0%. The result has been long lines and exasperation due to the lack of food.

The new stores in the capital and other Cuban cities add to a dollarization process of retail trade that began in late 2019, when shops were opened under the modality of foreign currency sales for household appliances. The effect was an increase in the value of the dollar on the black market.

Before then, any transactions in currencies other than those issued by Cuba was prohibited since 2004, when the dollar was withdrawn.

This new form of sale in foreign currencies for food and cleaning goods was announced last week by President Miguel Díaz-Canel as a way of obtaining income and providing goods to the population.  The measure reflects the reality on the communist-run island of social sectors with money and dollars to spend – such as entrepreneurs, relatives who receive remittances, employees of foreign companies, etc. – and those who do not.

The government said it will keep stores in convertible pesos or CUC – almost equal to the dollar – and in Cuban pesos (24 for a CUC), which are the other two currencies circulating on the island.  It will also continue to support monthly quotas of basic foods such as rice, beans, some chicken or meat, milk, coffee and sugar.

“In the midst of an economic crisis of very uncertain scope and duration, the Diaz-Canel administration is using the political credit of its successful management of the pandemic to implement economic reforms postponed for more than a decade,” said Cuban economist Arturo López-Levy, professor at Holy Names University in California.

Cuba has managed to control the spread of the new coronavirus. In four months, authorities say it infected 2,446 people. But they reported no new confirmed cases on Monday.

In general, Cuban authorities have resisted changes – despite a timid process initiated by former President Raúl Castro in 2010 – claiming they want to limit the negative effects of inequality and not hurt vulnerable sectors.

The elimination of a 10% tax on the use of the U.S. dollar, in force since 2004, went into effect Monday. When anyone exchanged 10 dollars for CUC in the local market, they only received nine CUC.

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Cuba: Getting Serious about Reform?

Cuba: Getting Serious about Reform?

By Ricardo Torres*

AULA Blog, August 17, 2020; Original Article: https://aulablog.net/

Cuban President, Miguel Díaz-Canel Bermúdez/ Cubadebate/

The economic reform proposals that the Cuban government announced on July 16 sound promising, but they feel very similar to past efforts, and authorities have yet to demonstrate commitment to implement them in a manner that matches today’s serious global and national conditions. The measures come at a time that Cuba is experiencing its worst economic crisis in 30 years. According to the Economic Commission for Latin America and the Caribbean (CEPAL), the country’s imports fell 41 percent in the first five months of 2020 – more than any other country in the region except Venezuela. The commission predicts the island’s gross domestic product will decline 8 percent this year – a conservative estimate in view of its dependence on tourism, remittances (almost all from the United States), and distant trading partners.

  • The announced measures are too general to permit a detailed analysis of their potential impact, but a substantial number of them represent a more flexible interpretation of policies agreed upon during the Seventh Party Congress in 2016. They feature a 180-degree shift of focus on the private sector and cooperatives, which just two years ago the government was taking steps to severely limit. The greater use of the U.S. dollar – an inevitable consequence of the severe balance-of-payments crisis – is also noteworthy.

The political and economic moment calls for measures that are bold enough to change expectations – reduced because of past non-performance – and produce real results. After years of false starts, the government’s willingness to make the reforms a reality remains in question. The biggest doubts deal with how far the authorities will go toward restructuring state enterprises – an unavoidable step for any true transformation. The government faces five immediate challenges to managing the current crisis and ensuring a positive impact from the package of reforms.

  • Convincing domestic and foreign public opinion that this time reform is for real and will be sufficient and permanent. Decisions over the past four years have been erratic, undermining the conceptualización that then-President Raúl Castro announced in 2016 as an “updating” of “the theoretical bases and essential characteristics of the economic and social model.”
  • Creating and consolidating new, agile, and effective mechanisms for decision-making. The country lacks a system for guaranteeing that the best ideas for transformation reach the highest levels of government, are examined, and are adopted in a timely fashion. Ensuring that bureaucrats do not distort the policies is also essential.
  • Avoiding the hidden traps of some measures that have already been tried, which will remind Cubans of the worst moments of the Special Period in the 1990s. The dollarization scheme implemented back then, for example, was complicated by rule changes the government made midstream. Authorities also rejected the necessary restructuring of the enterprise system and public sector. Cuba survived – collapse was avoided – but emerged without a sustainable economic model. Genuine development was not achievable.
  • Achieving a critical mass of changes that become self-reinforcing and overcome trenchant ideological resistance and create enough momentum to refloat the economy. In the 1990s, Cuba benefited from a world economy that was growing – radically different from today. The current situation requires much greater internal efforts.
  • Adding social justice as a priority in the reform package. Although a central talking point in official discourse, it is either totally missing from the new strategy or implemented in ways that are not relevant to the new social structure of the island. Cuba needs a debate about modern social policies to address its multidimensional inequalities.

So far, the big winners in this new scenario are the private sector and cooperatives as well as people who have access to U.S. dollars. But the entrepreneurs face obstacles, such as the requirement that they use government-controlled enterprises in all foreign trade. The idea that the state intends to create its own micro, small, and medium enterprises also detracts from the reform message.

  • Expanded dollarization will further segment the productive sectors, but this time it probably will allow producers to purchase capital goods – an essential step in any process of stimulating production over the long term. The potential impact will be greater if combined with the promised, but often delayed, move toward a sustainable monetary and exchange scheme. The big question remains, however, if the government is serious about making it happen this time.

August 17, 2020

*Ricardo Torres is a Professor at the Centro de Estudios de la Economía Cubana at the University of Havana and a former CLALS Research Fellow.

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JOE BIDEN WILL HAVE TO WIN BACK CUBA’S TRUST IF HE WANTS TO REVIVE OBAMA-ERA THAW IN RELATIONS, SAYS EX-U.S. DIPLOMAT

NEWSWEEK,  David Brennan April 16, 2020

This week marked five years since President Barack Obama requested that Congress revoke Cuba’s designation as a “State Sponsor of Terrorism,” a key step in re-establishing diplomatic relations with the Caribbean nation after decades of antagonism between the Cold War foes.

Obama went on to become the first U.S. president to visit the island since 1928, lift some travel restrictions and reopen the U.S. embassy in Havana, closed since 1961. The then-president hailed the thaw and described his visit as an “extraordinary honor.”

The move faced opposition from both sides of the U.S. political spectrum. Anti-normalization figures pointed to the historic human rights abuses on the part of the island’s revolutionary and totalitarian regime, plus its seizure of private property—including that owned by Americans.

When President Donald Trump came into office, he announced he was “canceling” the deals struck between the Obama administration and Cuba. Though some of the agreements remain in place, Trump oversaw new financial sanctions on regime figures and fresh travel restrictions.

But with the November presidential election looming, another shift in U.S.-Cuba relations could be on the cards. Presumptive Democratic nominee and former Vice President Joe Biden was part of the administration that upended the long campaign against Cuba, though in recent months has attacked former rival Sen. Bernie Sanders for praising the regime’s achievements.

Biden was critical of the Cuban regime before the Obama-led detente, supporting existing trade embargoes on the island. But the former vice president dropped his opposition in support of the president, and has since criticized the “outdated” antagonistic ideology towards Cuba and trade and travel restrictions, which he described as forming an “ineffective stumbling block” to relations with other nations in the Americas.

Biden was fiercely critical of Trump’s decision to undo Obama policy, describing the new president’s wider Latin America approach as a “Cold War-era retread and, at worst, at worst, an ineffective mess.”

Biden argued that Trump’s restrictions would throttle Cuban entrepreneurs—undermining their independence from the communist regime—and limit the ability of Cubans in the U.S. to support their families at home.

Asked to comment on Biden’s Cuba stance, a campaign spokesperson pointed Newsweek to an interview with the former vice president published in Americas Quarterly in March.

“As president, I will promptly reverse the failed Trump policies that have inflicted harm on the Cuban people and done nothing to advance democracy and human rights,” Biden said, lauding Americans “and especially Cuban-Americans” as the “best ambassadors for freedom” on the island.

Jeffrey DeLaurentis served as Obama’s top diplomat in Cuba, and was nominated as ambassador to the island though was never approved by the Republican-controlled Senate. He told Newsweek he believes that any new president would have the backing of “the majority of the American public,” which supports a better relationship with Cuba “despite the differences we may have.”

“The current administration’s decision to roll back the opening just repeats a failed policy from the past,” DeLaurentis believes. “You can’t continue doing the same thing and hope for a different result.”

DeLaurentis argued that better cooperation between the U.S. and Cuba on issues including migration, counter-narcotics and climate change could improve American national security. Any such policies should “help, not hurt, the Cuban people,” he added.

Prominent lawmakers—particularly in Florida where some represent much of the Cuban diaspora that fled Fidel Castro’s revolution—have long believed the price of negotiating is too high. Florida Sen. Marco Rubio—the son of Cuban migrants—is one of the most prominent among Republicans, and according to Politico has more or less masterminded Trump’s Cuba strategy.

After Sanders recently praised some elements of the regime in Cuba and suggested its achievements had the support of many Cubans, Rubio shot back noting that the Castro brothers retained power because dissidents had been “jailed, murdered or exiled.” During his unsuccessful run for president, Rubio suggested Obama’s Cuba policies were “in violation of the law.”

The Cuban diaspora represents an important electoral question for Biden and Trump. A hard line on the regime in Havana could swing some Cuban descendants behind the Republican party in Florida—a vital swing state.

“The Trump administration already has the 2020 elections in mind,” DeLaurentis suggested. “And so clearly the policies are designed to secure maximum popularity with a certain constituency in a key state.” Indeed, Trump made a point of attacking his predecessor’s Cuba strategy in his most recent State of the Union address, claiming to be “standing up for freedom in our hemisphere.”

Cuban-Americans are not a voting monolith, but the scars of the revolution run deep. When Sanders praised the regime, Florida Democrats rushed to condemn his remarks and demand an apology. “Donald Trump wins Florida if Bernie is our nominee,” warned Rep. Javier Fernandez.

The Trump administration maintains that Cuba is a malign power that needs to be contained, not negotiated with. A spokesperson for the president’s re-election campaign told Newsweek that Trump “has held Cuba’s corrupt communist government accountable for its actions, reversing the failed policies of the Obama-Biden administration.”

The spokesperson claimed, “If it were up to Joe Biden, America would revert back to sympathizing with communists and implementing foreign policy that compromises our national security and weakens our standing in [the] world.”

Elsewhere, the Cuban regime is deeply involved in Venezuela, propping up beleaguered President Nicolas Maduro who has been indicted in the U.S. Secretary of State Mike Pompeo has identified Cuba as a central facilitator of Maduro’s regime.

A senior Pentagon official told Newsweek earlier this month that U.S. intelligence “has evidence that Maduro is trafficking drugs using naval vessels between Venezuela and Cuba,” an allegation denied by the Cuban government.

The Biden campaign spokesperson who spoke to Newsweek declined to comment on questions regarding Cuba’s influence in Venezuela and the allegations of drug smuggling.

DeLaurentis said that Cuba’s role in Venezuela would “certainly be one of the big challenges” for any president who wished to revive relations with Havana. “In this situation, you can’t negotiate with just the people you want to negotiate with, you have to negotiate with the people who are involved,” he said.

But after three years of Trump, there is no guarantee that Cuba would be willing to come back to the table. “You would have to make an effort to win back their trust,” DeLaurentis said. “Although a number of Cuban officials have indicated that they’d certainly be willing to return to the negotiating table.”

The Cuban foreign ministry did not reply to Newsweek‘s request for comment.

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THE WORLD REDISCOVERS CUBAN MEDICAL INTERNATIONALISM

The world rediscovers Cuban medical internationalism

Helen Yaffe,April 8th, 2020, 

 

As coronavirus has spread around the world, the global public has been surprised to see Cuban medicines being used in China and Cuban doctors disembarking in northern Italy. But Cuba’s solidarity-based medical internationalism has been going strong since the 1960s, writes Helen Yaffe (University of Glasgow).

Just weeks ago, in late February 2020, US Democratic Senator Bernie Sanders was vilified by the US establishment for acknowledging education and healthcare achievements in revolutionary Cuba. Now, as the SARS-CoV-2 pandemic sweeps the globe, the island’s medical prowess is back in the spotlight, first because the Chinese National Health Commission listed the Cuban anti-viral drug Interferon alfa-2b amongst the treatments it is using for Covid-19 patients.

Effective and and safe in the therapy of viral diseases including hepatitis B and C, shingles, HIV-Aids, and dengue, the Cuban anti-viral drug has shown some promise in China and the island has now received requests for the product from 45 countries.

Then, on 21 March a 53-strong Cuban medical brigade arrived in Lombardy, Italy, at that time the epicentre of the pandemic, to assist local healthcare authorities. While images spilled out over social media, little was said in mainstream outlets. The medics were members of Cuba’s Henry Reeve Contingent, which received a World Health Organisation (WHO) Public Health Prize in 2017 in recognition of its provision of free emergency medical aid. In addition to Italy, Cuba sent medical specialists to treat Covid-19 cases in 14 of the 59 countries in which their healthcare workers were already operating.

Continue Reading: THE WORLD REDISCOVERS CUBAN MEDICAL INTERNATIONALISM

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CUBA’S REPUTATION AS MEDICAL POWERHOUSE TESTED

Marc Frank, Financial Times, April 5 2020

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

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

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

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

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

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

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

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

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

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

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

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

The measures appear to have drawn near unanimous support.

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

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

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

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

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

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

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

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CUBA: U.S. EMBARGO BLOCKS CORONAVIRUS AID SHIPMENT FROM ASIA

Michael Weissenstein The Associated Press, Friday, April 3, 2020

HAVANA — Cuban officials say a shipment of coronavirus aid from Asia’s richest man, Jack Ma, has been blocked by the six-decade U.S. embargo on the island.

Carlos M. Pereira, Cuba’s ambassador to China, said on his blog this week that Ma’s foundation tried to send Cuba 100,000 facemasks and 10 COVID-19 diagnostic kits last month, along with other aid including ventilators and gloves.

Cuba was one of 24 countries in the region meant to receive the donations announced on March. 21 by the Jack Ma Foundation, which is sending similar aid to countries around the world, including the United States.

Cuban officials say the cargo carrier of Colombia-based Avianca Airlines declined to carry the aid to Cuba because its major shareholder is a U.S.-based company subject to the trade embargo on Cuba. The embargo has exceptions for food and medical aid but companies are often afraid to carry out related financing or transportation due to the risk of fines or prosecution under the embargo.

Human-rights groups have been calling for the U.S. to lift sanctions on Venezuela, Cuba and Iran during the coronavirus epidemic in order to permit the flow of more aid. The Trump administration has argued that only the countries’ government would benefit from the sanctions relief.

An Avianca spokeswoman referred a query to a spokeswoman for Ma’s company, Alibaba, who did not return an email seeking comment.

Cuba has closed all air and sea connections, with the exception of essential cargo and government flights, in an attempt to prevent the further introduction of coronavirus to the island.As of Friday morning, Cuba had 269 confirmed cases, 3,241 people in quarantine, 15 patients recovered from the infection and six who have died of it.

A town in western Cuba and a relatively well-off section of Havana have both been completely isolated to prevent the spread of the disease.

Cuba has free universal health care and a high ratio of medical workers, 95,000, for a population of 11 million but operates without much of the equipment and testing generally available in developed countries.

The blocking of the aid should be “an action inconceivable in a global crisis,” but “it doesn’t surprise us,” said Carlos Fernando de Cossio, Cuba’s head of U.S. affairs. “It’s the type of obstacle that Cuba confronts daily in order to take care of the country’s basic necessities.”

 

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TOWARDS SUSTAINABLE FAMILY FARMING AND INDEPENDENT FOOD CO-OPERATIVES IN CUBA? POSSIBLE LESSONS FROM NORWAY

TOWARDS SUSTAINABLE FAMILY FARMING AND INDEPENDENT FOOD CO-OPERATIVES IN CUBA?  POSSIBLE LESSONS FROM NORWAY

Published in International Journal of International Agriculture and Food

Vegard Bye, Affiliated researcher, Chr. Michelsen Institute

ABSTRACT

In the Nordic countries, agricultural co-operatives were important when family farmers organised to get access to the quickly developing markets during industrialisation in the late 1800s and early 1900s. These co-operatives were organised both as credit, insurance, processing and marketing co-operatives. Spreading at first from Denmark to the rest of Northern Europe and later reaching the new settler continent in North America, farmers’ co-operatives soon became a key element in private farming in market economies. As many co-operatives became large companies in the capitalist economies, they either became ordinary share companies, or retained their farmer-owned co-operative status like in Norway. After Marxist-inspired revolutions in Russia, China, Eastern Europe and later Vietnam and Cuba, state organised and government-controlled co-operatives were set up in socialist countries. Many of the old forms of agricultural co-operatives in the former Soviet Union and Eastern Europe collapsed when the centrally planned economies were abolished in the early 1990s. However, new forms of food production and distribution cooperation have emerged both in the capitalist and former socialist countries. These co-operatives were organised both among producers and consumers in order to meet the common needs of direct access to foods. While it is assumed that family farming and food markets will have to play a more important role in the Cuban food economy in the future, it will be interesting to see if small farmers in collaboration with wholesale co-operatives will be allowed to develop short and sustainable supply food chains, which could be competitive against state socialist and multinational capitalist agriculture. Cuban agricultural policy must be able to evolve along two strategies: a volume agriculture that delivers high-quality, durable basic foods to the predominantly urban population, but also delivers local traditional food with craftsmanship to tourists and a growing middle class. Both strategies will be necessary in order to address a historic challenge of the Cuban socio-economic development: to produce sufficient food and make it available to consumers at affordable prices, thus also saving scarce currency today spent on food imports.

Continue Reading: Cuban_cooperatives_lessons_from_Norway

Durham Integrated Growers
Organic Agricultural Cooperative in Urban Cuba
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ASCE (ASSOCIATION FOR THE STUDY OF THE CUBAN ECONOMY), A Selection of Papers from the 2018 Annual Conference

The complete set of papers is here:  ASCE Conference Proceedings for 2018.

A complete set of all the papers from the annual ASCE conferences can be found here:  ASCE Conference Proceedings

Cuba: Los Retos Económicos del Gobierno de Miguel Díaz-Canel Omar Everleny Pérez Villanueva PDF version
Cuba 2018: Entre la Continuidad y la Oportunidad Dagoberto Valdés Hernández PDF version
Cuban Peso Unification: Managed Rate and Monetary Analysis Luis R. Luis PDF version
La Agricultura en Cuba: Transformaciones, Resultados y Retos Armando Nova González PDF version
Principal Elements of Agricultural Reforms in Transition Economies: Implications For Cuba? Mario A. González-Corzo PDF version
Cuba’s Economic Liberalization and The Perils to Security and Legality Vidal Romero PDF version
Growth and Policy-Induced Distortions in The Cuban Economy: an Econometric Approach Ernesto Hernández-Catá PDF version
Comparing The Quality of Education in Pre- and Post-Revolutionary Cuba Using U.S. Labor Market Outcomes Luis Locay and John Devereux PDF version
The Global Economy and Cuba: Stasis and Hard Choices Larry Catá Backer PDF version
Five Keys to Presidential Change in Cuba Arturo López-Levy and Rolf Otto Niederstrasser PDF version
Cuba’s Political and Economic Arteriosclerosis – It Is Not Just The Castros Gary H. Maybarduk PDF version
Cuban Tourism Industry in The Eye of The Storm Emilio Morales PDF version
Experiencias de Cuentapropistas Ted A. Henken PDF version
Cuban Demography and Economic Consequences Humberto Barreto PDF version
     
“The Revenge of The Jealous Bureaucrat”: A Critical Analysis of Cuba’s New Rules For Cuentapropistas Ted A. Henken PDF version

 

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CUBAN DEMOGRAPHY AND ECONOMIC CONSEQUENCES

Humberto Barreto

ASCE Conference Proceedings, 2018

Complete Article: Cuban Demography

INTRODUCTION

Cuba is facing a demographic storm that will stress its economy and society: its large baby boom generation is reaching retirement age and fertility is extremely low. While this is not an original observation (Hollerbach, 1980; Díaz-Briquets, 2015 and 2016), this paper uses single-year age-distribution data to show the seriousness of the situation. Unlike previous work (including that at the Cuban government’s Oficina Nacional de Estadística e Información (ONEI), www.one.cu), which focuses on total population change and other aggregates, this paper presents and analyzes the movement of the entire age-distribution over time. Thus, the data display methods adopted in this paper more dramatically show the demographic challenges facing Cuba.

The economic impact of an aging population is usually presented in terms of resources needed for health care and social services. The old age dependency ratio (the fraction of adults over 65 years old) conveys the idea that society must find a way to pay for care of the elderly. While important, this understates the effect of population aging and misses a mechanism through which it influences the economy. A much more serious challenge for an economy than taking care of the aged revolves around the attitudes and expectations of a society dominated by old people. The old are more pessimistic, conservative, and short-run oriented than the young.

While Keynes (1936, Ch 12:VII) highlighted animal spirits, “a spontaneous urge to action rather than inaction,” as a driver of fluctuations in a market economy, economists have little to say about the effect of expectations on long-run growth. Below are rudimentary thoughts on why a society dominated by the old might languish. The optimism of young people drives their energy and motivation to undertake a whole host of activities, including starting new businesses, trying new products, building new  homes, and moving to new cities. The old, unlike the young, see the end of life and this affects their outlook. For many, the past seems better than the future and they stand pat—personally, socially, and economically.

Risk taking falls as people age and this occurs in every aspect of life. We settle into patterns and stick to what works. In terms of the economy, old people are less likely to buy new products and invest aggressively. They are more concerned with maintaining and conserving what they have than in taking chances with their accumulated wealth.

Young people provide a dynamism to the economy that is fundamental to the success of innovation and technological change. General outlook, attitudes toward risk-taking, and time horizon considerations are all highly correlated and change together as we age. Older people become more negative, careful, and unenthusiastic. These attitudes drag the economy. They have always been there, but they have never been as noticeable and prominent as they are today because of a worldwide revolution in demography.

Countries around the world face aging population distributions that will hamper economic performance. Rich countries, like Japan, are better able to withstand these demographic headwinds. Those that can attract immigrants, like the United States and Germany, can bolster diminishing numbers of younger aged cohorts by welcoming young people from other countries, although this solution  is fraught with challenging political and social effects.

Cuba is in a particularly vulnerable position. Not only are the demographic forces exceptionally strong, but the economy is unusually weak. This paper will focus on the former, examining changes in the population age-distribution since the Revolution and forecasting future outcomes. Even if Cuba somehow manages to reform the economy and incorporate market-based incentives, its population age-distribution presents formidable challenges for an economic take-off. Again, this is not merely an issue of resources devoted to caring for the aged, but requires figuring out how to overcome the stagnation resulting from an economy dominated by old people. Without the energy, optimism, and risk-seeking of the young, the Cuban economy’s long-run future seems bleak.

The next section uses a macro-enabled Excel workbook, PopPyrCuba.xslm, to analyze Cuba’s recent demographic past and current situation. Age-specific fertility and death rates are then used to examine future prospects by iteration.

Continue Reading: Cuban Demography

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CONCLUSION

Although the demographic challenge facing  Cuba and its low fertility have been known for years, the primary contribution of this paper lies in the presentation of the data through the macro-enabled Excel workbook, PopPyrCuba.xlsm, freely available at academic.depauw.edu/~hbarreto/working.  Cuba’s  single-year population pyramid (Figure 1) offers an eyecatching display and, by utilizing simulation to evolve the process, we gain insight into the future prospects facing Cuba. In addition, this paper argues that the implications of an aging population for the economy need to be studied in much more detail.

Discussing teaching and learning at the university level, Marshall (1920, p. 822) said, “The springs of imagination belong to early youth: it is the greatest of all faculties; and in its full development it makes the great soldier, the great artist, the student who extends the boundaries of science, and the great business man.” Indeed, imagination, creativity, and discovery drive technological change and modern economic growth relies on waves of imaginative young people creating wonderful new ways to heal, entertain, and connect us.

It is no coincidence that, during the explosion of development enjoyed by the rich countries of the world in the last two centuries, population and educational attainment have been rising. There has been a constant stream of more educated young people replacing and revitalizing society, sending income per person ever higher. The innovation and technological progress that drives the engine of economic growth is itself dependent on imagination—the springs of which belong to the young. Creativity is less likely to be found in the old because their experiences discourage them from trying all possible solutions to a problem.

Furthermore, parents are willing to undertake heroic and expensive efforts on behalf of their children. Parents deny themselves present consumption to provide a better future for their children. Economies without this kind of forward-looking orientation will invest less and grow more slowly.

Over the next decades, we will get data on how economies function in the presence of smaller cohorts of young people. Japan is a leader in this unfortunate race (see the Japan sheet in PopPyrCuba.xlsm) and the early returns are not promising. Their economy has not fared well after decades of superb post-WWII growth and no standard policy has managed to shake it out of its doldrums. Luckily, Japan is a rich, developed country. Cuba is not and it is facing the same demographic headwinds as Japan.

There do not seem to be any practical policy levers to pull. Mortality is essentially exogenous. We can safely expect small, continued improvement in health and longevity in countries all around the world. Fertility is the key variable here, but we do not understand it well (long-run prediction has been dismal), but there is no reason to expect a Cuban fertility boom. Many countries have tax credits, baby bonuses, parental leaves, and other supports, but these are small relative to the total cost of raising a child and even if they were effective, the Cuban government does not have the resources for ambitious programs to increase fertility. Immigration (the solution, however unwittingly, adopted by the United States) seems highly unlikely to help Cuba withstand the coming demographic storm. Any easing of barriers to movement on the part of Cuba or other countries (especially the United States), would seem to exacerbate   Cuba’s   demographic   challenge   since   more young adults are likely to leave Cuba than enter.

Viewing the number of children as a choice variable that responds to incentives leads to the realization that family planning is an outstanding example of an externality—a cost or benefit not taken into account by the decision-maker. The usual examples in economics involve pollution and education—the former a negative and the latter a positive externality. Standard economic theory says that because negative externalities result in too much of a good or service, we should tax them; but we subsidize positive externalities because they lead too few resources allocated in a given area. The optimal tax or subsidy would close the gap between private and social costs and benefits. This framework was developed by Pigou (1920). He supported taxing sellers of alcoholic drinks, zoning laws, and other government interventions as necessary measures to correct what would come to be known as market failures—misallocation of resources in the presence of a market imperfection such as monopoly or externalities. 1

Since parents do not capture the societal benefits of children,  which  are  a  function  of  the  population’s age-distribution, they do not include these benefits in deciding how many children to have. Countries with inverted population pyramids are in a situation in which too few children are being produced and there is no effective way to signal the need for an increased quantity to individual decision-makers. The externality, in which the full benefit (to society) of having a child cannot be captured by its parents, prevents the system from self-correcting.

Absent a sea change in attitudes toward children, a reduction in the economic penalties  women  must pay to have children, or a technological revolution in how we produce human beings, we should expect that relatively low fertility rates will persist in Cuba and many other countries. The adjustment as population pyramids invert worldwide will not be easy. Cuba, with a weak economy and an especially large elderly cohort, seems to be in a dire position as it becomes the island of the old.

Continue Reading: Cuban Demography

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EL REGRESO DEL DÓLAR A CUBA DEBILITA EL CUC

En el mercado negro, donde se realizan las transacciones entre particulares, el dólar cotiza ahora en 1,13 CUC en lugar de 0,95

14YMEDIO / MARIO J. PENTÓN, La Habana/ Miami | Octubre 23, 2019

El simple anuncio por parte del Gobierno cubano de que el dólar y otras divisas tendrán curso legal en la Isla dentro de unos días ha provocado un desplome del valor del peso convertible (CUC).

En el mercado negro, donde se realizan las transacciones entre particulares, el valor del dólar se cotiza ahora en 1,13 CUC en lugar de 0,95, según la plataforma online Revolico y varias fuentes consultadas en La Habana. Últimamente, a raíz de una mayor demanda provocada por los aumentos salariales, los cambistas pedían entre 1 y 1,05 CUC por dólar.

En las casas de cambio oficiales, las Cadeca, la cotización no se ha movido de 0,87 dólar por 1 CUC porque se trata de un mercado controlado por el Estado, a diferencia del mercado paralelo. donde rige la ley de la oferta y de la demanda. El Estado castiga la divisa estadounidense con un impuesto del 10% y una comisión del 3%, Además, las Cadeca no venden dólares, solo los compran.

“La gente está buscando la seguridad del dólar porque no ve claros los pasos del Gobierno con la economía”, dice vía telefónica Mongui, un cambista que trabaja en las cercanías del hotel San Carlos, en Cienfuegos.

Mongui pide 1,13 CUC por dólar, pero cuando el cliente compra más de 1.000 dólares le hace una rebaja y se lo vende por 1,08. “Ya tengo mi clientela fija, gente que va de mula a Panamá, Cancún y otros lugares. Ahora hay mucho nerviosismo porque el Gobierno le quiere quitar el negocio a las mulas“, agrega.

María Luisa, de 69 años, recibe unos 100 dólares mensuales que le envía su hijo desde Florida y cree que el incremento del valor de esa moneda debió haberse producido hace mucho.

“¿En qué cabeza cabe que el CUC valga más que el dólar, la divisa más fuerte del mundo? Fidel quitó los dólares de la circulación y a cambio nos entregó papelitos. Ahora quieren quitarnos nuevamente los dólares y darnos un número en una tarjeta magnética. Ellos siempre se quedan con lo mejor”, protesta.

María Luisa ha pedido a su hijo que le envíe las remesas en dólares y que para ello deje de utilizar Western Union, que convierte automáticamente las remesas en CUC a un tasa de 0,95 por cada dólar. “Prefiero que me mande el dinero con gente que viene de Miami. Así me rinde más. Lo cambio por fuera de Cadeca. Para ellos puede que sea un peso, pero aquí son 25”, dice la jubilada, que cobra 310 pesos de pensión.

Los dólares no servirán para pagar en efectivo, sino con tarjetas de débito en las 77 tiendas estatales donde se comercializarán productos importados, sobre todo electrodomésticos, motos eléctricas o repuestos para automóviles.

El anuncio no ha sido bien recibido por los clientes que tenían una tarjeta asociada a cuentas en pesos convertibles o pesos cubanos. “Ahora tengo que sacarme otra tarjeta porque la que tengo es de mi cuenta en chavitos (CUC) no me sirve”, lamentaba este lunes Rogelio, un jubilado que recibe remesas de sus dos hijos emigrados.

Los bancos amanecieron este lunes con largas colas en La Habana de clientes interesados en contratar la nueva tarjeta magnética con saldo en divisas. Ahí estaba Rogelio, delante de la sucursal del Banco Metropolitano, en los bajos del Ministerio de Transporte, para comenzar el proceso de apertura de la cuenta y la solicitud de la tarjeta. “Lo bueno es que no se necesita saldo alguno para abrir la cuenta pero lo malo es que esto de pagar con tarjeta es muy complicado en las tiendas”, explica a 14ymedio.

Los constantes cuelgues del sistema de comunicación entre los mercados estatales y los bancos convierten la experiencia de pagar con tarjeta en un dolor de cabeza. Los terminales de pago, conocidos como POS, se quedan con frecuencia sin servicio y sin conexión y los empleados no pueden procesar el pago por esa vía.

“Cuando uno va a una tienda y va a pagar con tarjeta toda la cola te mira con mala cara, porque saben que te vas a demorar bastante, entre una prueba y otra para lograr comunicarse con el banco”, explica Yusimí, una habanera que este lunes también fue de las primeras en solicitar la nueva tarjeta bancaria.

“Hace unos pocos años se estaba hablando con mucha fuerza de que estaba al doblar de la esquina la unificación monetaria, pero ahora resulta que se agrega otra moneda. Esto no hay quien lo entienda”, se queja Nelson, contable en una empresa estatal donde ha tenido que lidiar con las distorsiones que provoca la dualidad financiera.

El economista Pavel Vidal, que fue funcionario del Banco Central de Cuba durante varios años, considera que el regreso del dólar a la economía nacional dará “algún alivio rápido a los crecientes desbalances financieros que se vienen acumulando desde 2015”.

En una columna publicada en OnCuba, Vidal considera que en el corto plazo se observarán “efectos positivos” por estas medidas, como una mayor liquidez en divisas en los bancos y “mayores opciones de compra en mercados formales”. Sin embargo, el ahora profesor de la Universidad Javeriana de Cali (Colombia) considera que el regreso del dólar implica la pérdida de la autonomía monetaria y retrasa la salida de la dualidad monetaria peso/CUC.

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