Tag Archives: Economic Reforms

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

Carmelo Mesa-Lago, University of Pittsburgh,

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

This essay reviews the following works:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

5 ONEI, Anuario Estadístico de Cuba 2015.

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

7 ONEI, Anuario Estadístico de Cuba 2015.

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

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

10 ONEI, Anuario Estadístico de Cuba 2015.

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

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

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

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

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

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

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

 

 

Posted in Blog, Featured | Tagged , , , , , , | Leave a comment

ALTERNATE FUTURES FOR CUBA’S EMERGING NON-STATE ECONOMIC SECTOR

Presented at Florida International University, Cuban Research Institute Conference: “Beyond Perpetual Antagonism: Re-imagining U.S. – Cuba Relations.”

February 24, 2017

Complete Presentation:  FIU CRI 2017 Presentation


Posted in Blog, Featured | Tagged , , , , , , | Leave a comment

DONALD TRUMP HAS A CHOICE TO MAKE ON CUBA

CNBC.com

Ted Henken,  November 14, 2016

zzazaOne example of freer markets in Cuba isthe Paladar La Cocina de Lilliam (Lilliam’s Kitchen), a home-based restaurant garden where President Jimmy Carter ate on his first visit to Cuba in 2002. Photo: Ted Henken

While Americans have been reeling over the shocking outcome of our presidential election, Cubans are experiencing perhaps even greater vertigo as a result of the surprise victory of Donald Trump.

As the saying goes, “When the U.S. sneezes, the rest of the world gets a cold.” Or perhaps the old Mexican adage is more appropriate to the situation Cubans find themselves in: “Poor Mexico! So far from God, but so close to the United States!”

Cubans went from a largely acrimonious relationship with the U.S. prior to December 2014, to one of unprecedented “hope and change” during the past 22 months under bilateral efforts to achieve diplomatic normalization between the erstwhile adversaries, to one of great trepidation and uncertainty over the past week given the president-elect’s campaign promise to “cancel Obama’s one-sided Cuban deal.” President Raúl Castro perfectly captured the moment’s ambivalence for Cuba by quickly sending the president-elect a brief note of congratulations while simultaneously ordering a five-day military mobilization.

In my more than half-dozen trips to the island over the past year, I have noted a palpable, ebullient expectation among Cubans for a better, more prosperous future under Obama’s “new rules” of engagement. This was especially pronounced among Cuba’s emergent entrepreneurial class, which includes old school cabbies in their even older school American cars, hip app designers in Cuba’s surprising tech start-up scene, and some of the many restaurateurs behind the island’s surging circle of “paladares” (private, home-based restaurants) which now number more than 1,800.

This hard-won hope was also born of Cuba’s own “new rules” introduced in late 2010 under President Raúl Castro aimed at expanding the island’s long-suppressed private sector. However, I also found that most entrepreneurs were under no illusions that the Cuban government would be fully lifting its own counter-productive “auto-bloqueo” or internal embargo against grass-roots entrepreneurial innovation and inventiveness any time soon.

This sense of rising hope inside Cuba reached its climax in Obama’s brilliant deployment of soft power during his historic state visit to the island in March 2016. Many Cubans identified with this youthful, optimistic, and eloquent African-American family man endowed with both a sense of history and of humor much more than with their own waxworks of old white ideologues.

However, Cuba’s old guard realized that Obama’s charm offensive had begun to fatally undermine their own authority and undercut their long-effective use of the U.S. boogeyman as a scapegoat for their own economic failures and as a justification for their continued political authoritarianism. In response, the Cuban leadership has spent the past eight months constantly reminding Cuban citizens of the continued U.S. existential threat to Cuban sovereignty under the Revolution and simultaneously dashing their hopes for a better, more open and prosperous future by stepping up detentions of peaceful political opponents and independent journalists and slowing economic reforms to a manageable trickle.

The clearest example of the Cuban government’s efforts to lower expectations has come on the economic front. First, April’s Seventh Party Congress included no new resolutions about deepening or expanding much needed market-oriented reforms apart from a vague reference to studying the possibility of granting status as legal businesses to a portion of the half-a-million strong micro-enterprise sector. Nothing has come of this idea in the intervening seven months.

Second, price controls have been reimposed in the private agriculture and transportation sectors, reducing incentives for greater production. Third, this past summer saw the government scale back economic growth estimates for 2016 to under 1 percent and impose severe energy saving and cost-cutting measures across the state sector due to a liquidity crisis and the Venezuelan debacle.

Finally, the issuing of new licenses for Havana’s surging private, home-based restaurant sector were suspended for six weeks in the fall in order to root out legal violations such as providing bar services and live entertainment without permission, obtaining supplies from black-market sources, staying open past the state-imposed 3 a.m. closing time, and tax evasion. Some have even been accused of doubling as sites of prostitution and drug trafficking and shut down.
show chapters

However, the government has so far not delivered on its promise to provide affordable access to wholesale markets for these restaurateurs nor has it allowed them to legally import supplies from abroad or expand beyond the arbitrary limit of 50 place settings. Moreover, the tax system for the private sector provokes “creative bookkeeping” by imposing a rigid 40-percent deduction limit for business often burdened by much higher supply costs due to Cuba’s environment of chronic scarcity. It also imposes a labor tax on any more than five employees disincentivizing legal hiring.

To add insult to this injury, the moribund network of their state-run competitor restaurants do enjoy access to wholesale markets and suffer no seating or size restrictions or employment taxes. Especially frustrating for Cuban entrepreneurs is the fact that this emphasis on law and order comes in the context of shrinking output in the state enterprise sector, a looming emigration crisis with record numbers of new Cuban arrivals in the U.S., and in the midst of a tourism boom that the state hospitality sector has proven unable to absorb.

As Cubans like to say: “¡No es fácil!” (It ain’t easy!)

President-elect Donald Trump could follow the recommendation of some Congressional Republicans by adding his own isolationist wind to the already full sails of the Cuban government’s rigid control that attempts to keep Cuban entrepreneurs in their frustrated and impoverished places. Or he could send Cuba’s business pioneers a message of support and solidarity as they attempt to build a more prosperous future by continuing America’s historic opening to Cuba that aims to empower the island’s mergent capitalists through engagement, investment, and trade.

For someone who campaigned as a anti-politician who would bring a hard-nosed business sense to Washington, Cuba presents Trump with a golden opportunity to place economic pragmatism and the tangible benefits it would bring to citizens of both countries over the out-dated and counterproductive Cold War ideology that undergirds the embargo.

Commentary by Ted A. Henken, an associate professor of Sociology and Latin American Studies at Baruch College, City University of New York and co-author with Arch Ritter of the book “Entrepreneurial Cuba: The Changing Policy Landscape.” He is a past president of the Association for the Study of the Cuban Economy (2012-2014). Read his blog and follow him on Twitter @ElYuma.

 

Posted in Blog | Tagged , , , , , | Leave a comment

BUILDING SOCIALISM IN CUBA: AS PRESSURE FOR ECONOMIC LIBERALIZATION GROWS, WHAT WOULD IT TAKE TO TURN CUBA INTO A SOCIALIST DEMOCRACY?

The Jacobin. October 12, 2016

https://www.jacobinmag.com/2016/10/alternative-cuba-socialism-left-opposition-worker-control/

 By Samuel Farber

 In July 2016, thanks to a 20 percent reduction in oil shipments from Venezuela, Cuba’s economy minister Marino Murillo announced a 6 percent cut in electricity and a 28 percent cut in fuel. Meanwhile, he ordered an immediate drop in public sector energy use, with consequent working-hour reductions for state employees, and warned of possible blackouts, raising the specter of the dark and hungry days of the Special Period of the nineties.

This turn of events delivered another blow to Raúl Castro’s attempts to establish a Cuban version of the Sino-Vietnamese model, which maintains a one-party state while opening the economy to private enterprise and the market.

RevolucionIn the political realm, this has meant a relaxation of state control over the citizenry. But this hasn’t been matched with democratization. For example, the 2012 emigration reform facilitated Cuban citizens’ movement in and out of the country, but did not recognize travel abroad as their right.

In the economic realm, the government has implemented a modest and contradictory strategy. For example, the agricultural sector’s structural reforms provide land leases for a maximum of twenty years; the Chinese and Vietnamese governments, in contrast, established much longer and, in some cases, permanent contracts.

The government now allows self-employment in few occupations (a little over two hundred). Had it opened it up for the whole economy — reserving only those sectors regarded as high social priorities, like medicine — the reform would increase available products and services.

Complementary changes introduced to bolster these structural reforms — like the establishment of wholesale markets and commercial bank credits — have been inadequate and ended up negatively impacting the reform program. In addition, the bureaucratic and inefficient Acopio — the state agency with the monopoly power to buy most agricultural products at prices established by the government — has slowed agricultural production. As a result, harvested produce has spoiled while waiting to be processed at government plants.

The Castro regime’s half measures will, more likely than not, push Cuba closer to a form of state capitalism without democracy. But there is a feasible alternative for the country.

No Recovery

Until this new crisis, the Cuban economy had partially bounced back after the worst years of the Special Period, which devastated the country in the wake of the collapse of the Soviet bloc in the late eighties and early nineties.

The country hit bottom between 1992 and 1994, when extreme food shortages led to an outbreak of an optical neuropathy epidemic that affected some fifty thousand people. Since then, the Cuban economy has surpassed the GDP it achieved in 1989.

But other indicators — such as real wages and pensions, which in 2014 were still at 27 percent and 50 percent of their 1989 level, respectively — never came back. Meanwhile, social spending is still falling, and family consumption is expected to decline 2.8 percent in 2016 and 7.5 percent in 2017.

Although the hunger of the early nineties is gone, Cubans still struggle to find enough food. The much-praised development of organic and urban agriculture on the island represents a relatively small part of agricultural production. As Cuban economist C. Juan Triana Cordoví pointed out, declining domestic production has forced hotels to import vegetables, including yucca, the root-vegetable mainstay of the Cuban diet. The small progress in sustainable agriculture doesn’t make up for the fact that food production has never regained its 1989 level and that more than half of Cuba’s food supply comes from imports, at an annual cost of $2 billion.

Many of the revolution’s gains in education and health have also been lost. The teachers who fled the educational sector’s low pay haven’t been fully replaced, and private tutoring — often provided by public school teachers in their spare time — has grown exponentially. In addition, numerous school buildings, libraries, and laboratories are crumbling. Before the start of the current school year, 350 schools were closed after they were found to be in dangerous physical condition.

The same applies to many hospitals and other medical facilities, which now operate with skeleton crews: the government sends large numbers of general practitioners and specialists to Venezuela and other foreign countries in exchange for oil or hard currency.

The regime’s contradictory reforms will likely pass with the historic generation of leaders. Second-generation bureaucratic officials are likely to fully commit to the Sino-Vietnamese model, perhaps tilting somewhat toward Russia’s capitalism, which combines massive oligarchic theft of state property with a nominal “democracy” that would give US Congress the political cover it needs to repeal the 1996 Helms-Burton law and remove the island’s economic blockade.

Besides winning the United States’s enthusiasm, this new generation of leaders will enlist foreign capital and at least a sector of Cuban American capital by reassuring them that the government will maintain total control over the state, the mass media, and the mass organizations — including state-controlled unions — to guarantee their new capitalist investors, foreign and Cuban, peace, law, and order.

Yet there are other economic models that are being talked about inside and outside the government, although in a rather discreet fashion due, in great part, to the political system that does not allow a full and candid exploration of ideas.

Free and Rational

Mainstream critics have for some time been arguing for the establishment of a free-market economy, which they present as the only “rational” alternative to the bureaucratic economic management of Communist Party rule.

This group covers a wide spectrum, ranging from a hard free-market stance to a more social-democratic welfare state perspective. In this latter grouping, moderate critics overlap with sections of the island’s academic economists, including members of the Center for the Study of the Cuban Economy at the University of Havana.

Yet hardly any of these critics have openly addressed the question of what to do with the most important part of the Cuban economy, the larger state-owned enterprises. Instead, they focus on establishing private PYMEs — the Spanish language acronym for small and medium size enterprises — although they haven’t clarified what “medium” actually means.

They have also supported the government’s move toward replacing the universal rationing system with one that subsidizes categories of people instead of products. Today, all Cubans, regardless of income, can receive a number of products at low, subsidized prices. The new system would only provide these products to the poorest and most disadvantaged, thereby rationalizing agricultural markets and reducing the government’s budget. The government’s recent reduction of the number of products distributed by this system marks the first step in this means-tested direction.

Finally, they imply that the state monopoly of foreign trade should end, and Cubans should be free to import all they can afford from abroad.

Tito in Cuba

Like all of the regime’s opponents, the nascent critical left — mostly composed of anarchist and social-democratic currents — has had to operate under close state monitoring and repression. These left-wing formations resist reductions to state benefits and — unprecedented in the Cuban left’s history — call for a worker-managed economy.

Interestingly, they never mention democratic planning or coordination among economic sectors. As a result, their version of worker self-management would create an economy of self-sufficient firms in competition with each other. This resembles the system implemented in Tito’s Yugoslavia from the 1950s until the 1970s.

This market socialism was locally self-managed, but regionally and nationally controlled by the League of Communists. It did increase worker input, decision-making, and productivity at the local level but, because of its competitive and unplanned nature, also created unemployment, sharp trade cycles, pay inequality, and notable regional disparities that favored the northern republics.

The workers’ powerlessness to decide on anything beyond what happened in their workplaces encouraged parochialism, isolating them from broader, national economic decisions. Workers felt no reason to support investment in other enterprises, particularly those located far away.

In the last analysis, as Catherine Samary points out in Yugoslavia Dismembered, Yugoslavian self-management could not confront either the bureaucratic plan or the market. The 1970s was the last decade of growth. Eventually a $20 billion debt led to the International Monetary Fund’s intervention.

The Yugoslav model is a fraught one to emulate in Cuban, then. Further making any kind of worker control unlikely, none of the government’s left-wing opponents have explained how it might be implemented in the absence of a workers’ movement or how it might operate if workers aren’t motivated to fight for those goals.

There are other voices on the critical left that reject any concession to private enterprise and capital on the grounds that capitalist enterprise by definition contradicts socialism. But they have been unable to answer the critical question of how a socialist and democratic Cuba could emerge from poverty and economic stagnation without concessions of any kind.

What is Possible

A growing number of Cubans on and off the island, see socialism — whether democratic or authoritarian — as an impossibility. A diminishing number of Cubans still regard it as either desirable or likely. Certainly, the island’s current economic conditions — combined with extraordinarily powerful international capital — make it hard to imagine a fully fledged form of socialism.

This view derives from a specific application of the general Marxist theory that rejects the possibility of socialism in one country, particularly when that country is economically underdeveloped and exists in a capitalist world currently unthreatened by socialist revolutions.

Besides having to face the hostility of its imperial northern neighbor, autarkic “socialist” economic development won’t fit for Cuba because the country still depends on oil imports. Further, its reliance on tourism and medical service, nickel and, to a lesser degree, pharmaceutical product exports and the dramatically shrunken sugar industry underline the foreign-trade character of Cuba’s economy. The island’s considerable integration into the capitalist world market prevents the establishment of a full socialist democracy.

This does not mean, however, that Cuba should abandon socialism. Instead, critics must think in terms of a transitional economy, a holding operation that can realistically be implemented until an international situation more favorable to socialism develops.

Classical Marxist political economy provides a model for what that possible holding pattern could be. This theory recognizes the greater role that individual, family, and small-scale production and distribution play in less-developed economies like Cuba.

In Socialism: Utopian and Scientific, Friedrich Engels distinguishes between modern capitalism — where production is a social act, but the social product is appropriated and controlled by individual capitalists — and socialism — where both production and its appropriation are socialized. Following this distinction, the productive property requiring collective work becomes the proper object of socialization, leaving aside individual and family production as well as personal property.

A transitional economy in Cuba would therefore allow for small, productive private property. This accommodation derives from a fundamental Marxist analysis of capitalism, not an opportunistic adaptation to liberal, free-market politics.

In Cuba, as in many other less developed countries, a transitional economy would subordinate a private sector of small enterprises ruled by market mechanisms under a commanding state sector that administers the island’s big industry — pharmaceuticals, tourism, minerals, and banks — through workers’ control and democratically coordinated and planned in a democratic polity. The government would strive, through its knowledge of market conditions and adequate economic forecasts, towards harmonizing the state and self-employed economy according to a definite plan.

Economic Obstacles

But we must first honestly assess the Cuban economy, which, even before a reduction in Venezuelan oil shipments provoked the current crisis, had been in a marked state of deterioration.

For one thing, its all-encompassing public sector is floundering. As the Cuban economist Pedro Monreal reminded us, the government has openly admitted that 58 percent of state enterprises function “deficiently or badly.”

Also, the island’s economic growth has been generally low, a situation that will only be aggravated by the current crisis. Cuban economist Pavel Vidal Alejandro estimates that Cuba’s GDP will not grow in 2016 and will likely shrink by almost 3 percent in 2017. This would mark the first year of negative growth in the last quarter century.

Important voices in the left opposition have argued against economic growth for ecological and other reasons. But improving most Cubans’ material conditions is a condition of a successful democratization. The alternative — continual stagnation and declining living standards — will encourage massive emigration. This represents a tragedy in itself, but would also undermine potential democratic and progressive — let alone socialist — opposition movements.

Alarmingly, the rate of new investment, necessary to replenish the existent capital stock, has become among the lowest in Latin America, dropping below 12 percent of GDP. Government forecasts indicate that investments will fall 17 percent in 2016 and 20 percent in 2017. This will result in a rate of gross capital formation slightly over 10 percent, barely half the rate of investment considered necessary for economic development

The deterioration of Cuba’s capital stock makes it impossible to maintain the current economic output and living standards, much less to expand them. As a result, the substantial increase in tourism — from 3 million visitors in 2014 to 3.5 million in 2015, and a projected 3.7 million by the end of 2016, sparked by the resumption of US-Cuba relations in December 2014 — has strained Cuba’s tourist capacity to its limit.

Further, President Obama’s elimination of restrictions on the remittances sent to the island by Cuban Americans has significantly worsened food and beverage shortages. Supply cannot meet the increase in demand.

The Cuban economy’s productivity also lags. Agricultural yields — with the exception of potatoes — are well below the rest of Latin America. In industry, biotechnology is the only sector that enjoys high productivity relative to the region.

Rising productivity isn’t just a profit-driven capitalist scheme. An economy that prioritizes reducing backbreaking labor, improving living standards, and maximizing leisure time can only do so if it also prioritizes making more with the existing workforce.

Che Guevara advocated what in effect was the “sweating of labor.” But better organization, technology, and — most importantly — worker control would have the same effect.

Control, in itself, represents a powerful motivator. The current low productivity comes from a bureaucratic system that systematically creates disorganization and chaos and does not provide workers either with political incentives — allowing them to have a say and control over what they do — or with material incentives — typical of the developed capitalist world — to motivate them. Guevara’s moral incentives failed: they were a method to get workers to take responsibility without power and to work harder without control or pay.

Ecological Obstacles

Much of the island’s left opposition to economic growth is grounded in environmental considerations. Cuba now confronts many serious ecological problems, including the increasing number of breakages and leaks in the old and poorly serviced water pipes all over the island. This has led to a massive loss of water, which often spills into streets and empty lots, and to the frequently inappropriate storage that many residents have been forced to resort to in response to the lack of water. Consequently, the Aedes Aegypti mosquito, which transmits the dreaded Dengue illness, has proliferated.

Moreover, the growing number of pigs, poultry, and house-grown crops — part of the much-vaunted, but very problematic, urban agriculture movement — has combined with deteriorating garbage collection services to considerably increase the risk of urban health crises.

The recent government claims to have held off the Zika epidemic and almost eliminated the Dengue fever must be met with skepticism as long as these and other conditions that propitiate the spread of diseases remain.

Anti-growth sentiment among Cuban left-wing oppositionists was reinforced when, on a recent visit to Havana, the economist Jeffrey Sachs recommended that “the Cuban people don’t progress into the twentieth century.” As the left-wing journalist Fernando Ravsberg explained, Sachs argued that Cubans should not forget sustainability and concentrate on the development of organic agriculture, sowed without tractors and grown without using chemical fertilizers or pesticides.

If Ravsberg’s account is correct, Sachs’s argument fails to weigh the relative costs and benefits of environmentally conscious measures. Small and economical tractors, like those the Cuban government is planning to produce in association with US capital, do still consume oil. But oil’s negative environmental effects do not compare to the cost of human- and animal-powered agriculture. The latter model produces less food while requiring massive energy inputs from workers and animals.

Cuba’s history already proves this: the forced abandonment of motorized agricultural vehicles at the beginning of the Special Period constituted, in net terms, a huge setback for the Cuban people.

Also in the nineties, urban transport was demotorized, and many city residents turned to bicycles. They were later abandoned — not because Cubans abstractly preferred the infrequent and overcrowded buses or the expensive urban collective taxis (only a small proportion of Cubans own automobiles), but because bicycles don’t let workers arrive on time from distant working-class suburbs nor do they protect riders from tropical rains and winds from June until November.

The Chinese government has encouraged individual car ownership, which has contributed to the country’s overwhelming urban pollution. This should serve as a warning sign for Cuba to aim for the adoption of an effective mass transit system as an alternative environmental policy.

Finally, at a minimum, Cuba needs to improve on the 5 percent of its electricity derived from renewable sources, which is a quarter of the Latin American average.

The Politics of a Socialist Alternative

The move toward a socialist society does not only require a program, but also a politics. This requires using principled strategic and tactical considerations to engage with the government’s and various oppositionist currents’ proposals.

In doing so, Cuban socialists might find areas of overlap with the liberal Catholic and social-democratic critics. Those include proposals that would promote agricultural production and productivity, such as codifying individual farmers’ usufruct rights, eliminating the compulsory sale of agricultural produce to the government at prices dictated by the Acopio, and creating wholesale markets for small firms and individual producers.

In the field of urban employment, these proposals include forming cooperatives based on the initiative of interested workers, rather than on government diktats trying to dispose of so-called lemons — unprofitable enterprises or businesses that are difficult to administer on a centralized basis, like small restaurants.

At the same time, this new left will need to counter other proposals from those same groups. For example, they call for legalization of all forms of self-employment, including occupations that should be run on behalf of the public interest, like education and medicine.

The Left can respond to the call for free importation by arguing that a democratically run state should allocate foreign exchange on a strict priority basis, with social criteria that favor the most economically deprived sectors of the population and the purchase of capital goods that would most support the country’s economic development. Otherwise, affluent Cubans might waste the country’s relatively scarce foreign exchange on frivolous imports, such as expensive vehicles or luxurious furniture and household effects.

Socialists should also resist the dominant view — held by both critics and an increasing number of government economists — that the government should subsidize people, not products, that it should replace its universal subsidies with a system that provides for only the neediest citizens.

To be sure, those universal subsidies unnecessarily benefit wealthier Cubans. However, the critics of this program never mention their proposal’s downside, which is that it undermines social solidarity. International experience has shown that income-tested programs for the poor produce stigmatization and, as a result, lose political legitimacy over time, thus threatening their long-term funding and viability.

One answer to this problem would be the introduction of a sliding scale where everybody benefits in inverse proportion to their income. This would recognize differential need while maintaining maximum political support.

Socialists in the Marxist tradition understand that subsidies must be selective: if, under current conditions, everything was provided free of charge or sold below production costs, an economy would collapse in short order. Moreover, a relatively underdeveloped economy like Cuba’s has a much smaller surplus to leverage for free and subsidized goods.

But keeping the idea of universal subsidies alive leaves the road open for their future expansion as the Cuban economy becomes more productive and wealthier.

Liberal critics and the government itself support foreign investment as a means to deal with the Cuban economy’s undercapitalization. Many on the Left have opposed it, seeing it as the Trojan horse of capitalism and foreign domination. However, a policy of controlled and selective foreign capitalist investment is indispensable in the absence of a domestic developed-goods industry. These imports could bring in new machinery and renew transportation and utility infrastructure.

New investments from abroad can also have significant employment and multiplier effects that trigger the development of entirely new industries that complement and further develop the established ones.

Further, the impact of foreign investment on wages and working conditions could be negotiated by independent unions, which, among other things, should prioritize the immediate abolition of the Cuban government’s practice of collecting salaries owed to Cuban workers from foreign investors and then turning over to their citizens only a small fraction of the money collected. The government claims that they do this to finance social spending and other government operations. But the same goal could be achieved through a transparent and equitable tax system rather than through the government monopoly of the sale and control of labor.

It is true that worker-controlled production and powerful unions may deter foreign investment. However, an honest public administration and tax system as well as the existence of natural and human resources not reproducible elsewhere can also serve as a draw that supersedes those disadvantages.

Right-wing critics and oppositionists play down — if not ignore entirely — the crucially important issue of Cuba’s growing inequality. For the Left this presents a unique opportunity to push for independent unions, which, along with a progressive tax system, could be a more effective policy than the current one, in which the proliferation of bureaucratic rules harasses small firms and the self-employed.

This is not to do away with regulation entirely; it is necessary in occupational safety, health, pensions, and union rights. If these rules were administered — under worker control and supervision — by professional organizations rather than by a central bureaucracy, they would surely benefit workers, not owners. But to do so will require distinguishing between rules designed to protect the interests of the workers and those that protect the interests of bureaucrats.

Engaging with the specific proposals put forward by both the undemocratic government and by the pro-capitalist opposition sector, the Left will have the opportunity to formulate specific demands and to mobilize people to fight for them. This would build a movement — or at least a clear organizational pole — in spite of government repression and popular skepticism.

Cuba’s present regime will not permit the existence of other legal political parties, independent unions, or a free mass media. Of course, these elements constitute precisely the political setting that would facilitate the kind of transitional social and political system outlined here.

Nevertheless, the left opposition must talk about an alternative model that openly acknowledges both the possibilities and the difficulties involved in building a socialist democracy. This empowers people, rather than making them feel that nothing can be done to push the country in an anticapitalist, radically democratic, and socialist direction. But there is an alternative.

Posted in Blog | Tagged , , , , | Leave a comment

CONCEPTUALIZACIÓN DEL MODELO ECONÓMICO Y SOCIAL CUBANO DE DESARROLLO SOCIALISTA, Y PLAN NACIONAL DE DESARROLLO ECONÓMICO Y SOCIAL HASTA 2030: PROPUESTA DE VISIÓN DE LA NACIÓN, EJES Y SECTORES ESTRATÉGICOS.

Documento Completo: Conceptualizacion del Modelo Economico… y Plan Nacional hasta 2030

 EL SEPTIMO CONGRESO DEL PARTIDO COMUNISTA DE CUBA,

17 de Abril 21 2016

El objetivo de la Conceptualización es server de referente o guía teórica conceptual en la conformación del modelo económico y social, así como contribuir a la mejor comprensión. Se exponen y fundamentan, de forma sintética, las características y bases teóricas esenciales del modelo económico y social que resultará del proceso de actualización. Su redacción se ha elaborado en tiempo presente, aunque se refiere a la sociedad future a que aspiramos, teniendo en cuenta las condiciones de la actual etapa de la construcción del socialismo. No atañe a este document exponer cómo se actualizará el Modelo; es decir, las acciones y medidas concretas para alcanzar estos objetivos, lo que corresponde a otros, en especial al Plan Nacional de Desarrollo Económico y Social hasta 2030.

 CONCEPTUALIZACIÓN DEL MODELO ECONÓMICO Y SOCIAL CUBANO DE DESARROLLO SOCIALISTA

 ÍNDICE

INTRODUCCIÓN                                                                                                        4

CAPÍTULO 1  LOS PRINCIPIOS QUE SUSTENTAN EL MODELO Y SUS PRINCIPALES TRANSFORMACIONES                                                                   5

CAPÍTULO 2  LA PROPIEDAD SOBRE LOS MEDIOS DE PRODUCCIÓN          8

CAPÍTULO 3 LA DIRECCIÓN PLANIFICADA DE LA ECONOMÍA                     11

CAPÍTULO 4 LA POLÍTICA SOCIAL                                                                          13

CONSIDERACIONES FINALES                                                                                  15

 PLAN NACIONAL DE DESARROLLO ECONÓMICO Y SOCIAL HASTA 2030: PROPUESTA DE VISIÓN DE LA NACIÓN, EJES Y SECTORES ECONÓMICOS ESTRATÉGICO

ÍNDICE

I. INTRODUCCIÓN                                                                                                    17

II. PRINCIPIOS RECTORES Y EJES TEMÁTICOS PARA LA ELABORACIÓN DEL PLAN NACIONAL DE DESARROLLO ECONÓMICO Y SOCIAL                       17

III. VISIÓN DE LA NACIÓN PARA 2030                                                                18

IV. EJES ESTRATÉGICOS                                                                                          18

V. SECTORES ECONÓMICOS ESTRATÉGICOS                                                     25

 zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzCapture

 

Posted in Blog | Tagged , , , , | Leave a comment

VOCES DE CAMBIO EN EL SECTOR NO ESTATAL CUBANO. Cuentapropistas, usufructuarios, socios de cooperativas y compraventa de viviendas.

Mesa-Lago, Carmelo (coord.) Veiga González, Roberto; González Mederos, Lenier; Vera Rojas, Sofía; Pérez-Liñán, Aníbal

zzzzzzzzzzzzzzzzzzzzzzzzzz Capture

Septiembre de 2016

See: VOCES DE CAMBIO

Más de un millón de personas, casi un tercio de la fuerza laboral cubana, está en el “sector no estatal” de la economía: trabajadores autónomos, usufructuarios de la tierra, miembros de nuevas cooperativas, compradores y vendedores de viviendas privadas y otros grupos. Aunque se trata de la reforma estructural más importante de Raúl Castro, que conlleva una reducción gradual del sector estatal, poco concreto se sabe sobre las características (edad, género, raza y educación), condiciones económico-sociales y aspiraciones del emergente sector no estatal.

Basado en 80 entrevistas intensivas hechas en Cuba entre 2014 y 2015, el libro recoge las voces del sector: hablan sobre su nivel de satisfacción con lo que hacen y ganan, sobre empleados contratados y formas de pago, ganancias y su distribución entre inversión y consumo, planes de expansión de los micronegocios, recibo de remesas externas y microcréditos, competencia y publicidad, y pago de impuestos.

La parte crucial es la que detalla las voces sobre los principales problemas que enfrentan los cuentapropistas y sus deseos de mejora o cambio.

Dice un trabajador autónomo: “Debe haber rienda suelta a toda esta fértil imaginación que estamos demostrando los cubanos, que se realice sin trabas, de manera libre, que el gobierno permita que esto fluya, no lo dificulte y controle sólo lo que debe controlar”.

COORDINADORES

Coordinado por Carmelo Mesa-Lago, Catedrático Distinguido de Economía y Estudios Latinoamericanos en la Universidad de Pittsburgh. Es autor o editor de 93 libros y 300 artículos/capítulos en libros sobre economía de la seguridad social en América Latina, la economía cubana y sistemas económicos comparados, traducidos a 7 idiomas y publicados en 34 países. Ha recibido los premios Arthur Whitaker (1982), Hoover Institution (1986) y Alexander Von Humbolt Stiftung (1991, 2002).

El libro cuenta con la colaboración de Roberto Veiga González y Lenier González Mederos, cubanos residentes en la Isla que realizaron las entrevistas; la de Sofía Vera Rojas y Aníbal Pérez-Liñán que llevaron a cabo las tabulaciones y su análisis.

Iberoamericana Editorial Vervuert, S.L.U.

c/ Amor de Dios, 1
E-28014 Madrid
E-Mail: info@iberoamericanalibros.com

R121015

Posted in Blog | Tagged , , , , | Leave a comment

IS CUBA “OPEN FOR BUSINESS”? BOOK REVIEW BY TED HENKEN

ZZZZZZZZZZZZZZZZZZZBy Ted Henken. Complete review is available here: http://cubacounterpoints.com/archives/3832

A review of Open for Business: Building The New Cuban Economy by Richard E. Feinberg,  August 30, 2016, Washington, D.C.Brookings Institution Press, 264 pages, $22.00;    ISBN-10: 0815727674’;     ISBN-13: 978-0815727675

Introduction

A few years ago I ran into a fellow watcher of Cuba’s economy in my favorite local New York coffee shop. It was just after the publication of my own recent book on the emergent Cuban private sector, which I co-wrote with the Canadian economist Archibald Ritter. Keen on announcing my good fortune (and great timing!) to my colleague, I whipped the book out and proudly presented it to her. However, when she saw the title, Entrepreneurial Cuba, she looked up at me with a skeptical grin and said: “Well, aren’t you the optimistic one?!” I laughed, quickly assuring her that while the title was indeed up-beat, the contents of the book were a decidedly more complex, critical, and ambivalent affair, filled with equal parts new opportunities, old obstacles, significant reforms, and frightful omens.

Similarly, the title of Richard Feinberg’s own eminently readable and richly informative new book, Open for Business: Building the New Cuban Economy, slyly posits a reality of economic “openness” that is aspirational. The author himself admits that this position is still as much a government slogan for the future as it is an achieved present-day reality. While Feinberg tells his readers that Cuba is indeed “open for business” on the book’s eye-catching cover, the actual contents of the book’s wide-ranging eight chapters highlight aspects of Cuba’s new post-Fidel economy that place an emphatic and well deserved question mark (?) after this claim.

Far from falling prey to the “irrational exuberance” of facile boosterism or blatant apologetics that tend to characterize much business-oriented writing about Cuba these days, Feinberg’s book is a critical-minded and deeply informed evaluation of the pro-market experiments undertaken by the Cuban government over the past two decades with a special emphasis on Raúl Castro’s economic reforms between 2010-2016. Thankfully, Feinberg goes beyond an exclusive focus on the top-down administrative efforts on the part of the government to solve its chronic economic problems (chapter 2). Feinberg does consider the so-called “update” of Cuba’s state socialist economic model that is often in league with sympathetic foreign governments like China, Brazil, and Venezuela (Chapter 3) and pioneering foreign firms including Sherritt, Meliá, and Unilever (chapters 4-5).

Notably, chapter 6 on entrepreneurial Cuba tells the fascinating story of Cuba’s emerging private entrepreneurs and middle classes. According to Feinberg, now this new economic class includes as many as two million people and makes up 40% of the island’s workforce (a well-sourced if questionable claim). This is followed by a wonderfully original chapter that profiles a dozen Cuban “millennial voices”; youthful, and quite hopeful, pioneers in fields as diverse as business, art, media, academics, and technology. These innovative sections of the book allow the author to offer his readers a refreshingly rich and diverse portrait of the grass-roots efforts of everyday citizens to “open Cuba for business” from the inside and for the benefit of Cubans themselves.

 ********************

Conclusion

Not a typical academic monograph focused on a single aspect of the Cuban economy, Feinberg’s “Open for Business” is instead a globally-informed analysis of what are arguably the three most important and dynamic aspects of Cuba’s new economy: International trade, foreign investment, and the island’s emerging domestic entrepreneurs. His wide-ranging yet richly detailed focus – enhanced by multiple foreign investor case studies and vivid profiles of Cuba’s emerging entrepreneurs and pioneering millennials – makes this book required reading not just for professional economists and other academics, but also – and perhaps especially – for the growing ranks of potential foreign investors looking for independent, hard-nosed, and practical advice about Cuba’s unique business environment as they contemplate their own entreé into the Cuban market. It will also be useful and revelatory tool for U.S. policymakers as they gauge how best to “engage” the Cuban government over questions of trade and investment and “empower” the Cuban people, especially the emerging Cuban entrepreneurial middle classes.

open-for-business

Posted in Blog | Tagged , | Leave a comment

SELF-EMPLOYMENT IN CUBA: BETWEEN INFORMALITY AND ENTREPRENEURSHIP – THE CASE OF SHOE MANUFACTURING

Yailenis Mulet Concepción

Third World Quarterly

Volume 37, 2016 – Issue 9

Original Article: SELF-EMPLOYMENT IN CUBA: THE CASE OF SHOE MANUFACTURING

Abstract

This article discusses the phenomenon of self-employment in Cuba from three perspectives: its conceptualisation, its links with informality and the challenges to its growth. First, it reviews the characteristics of self-employment in Cuba, in comparison with available theory and with various studies of informality carried out in other countries. Second, it documents the dimensions of informality and Cuba’s black market economy through the study of a specific sector of the independent labour force: shoe producers. Third, it considers the main challenges for the growth of self-employment in Cuba, as illustrated by the case of Cuban shoemakers, and draws some lessons that should improve the situation of this sector, taking into account different international studies.

zz Cuba-Nov-2008-0482Cuenta Propista artisan and vendor, party supplieszz Mercado-Artesanal-on-the-MaleconMercado Artesanal, on the Malecon, photos by Arch Ritter

Introduction

The growth of self-employment is a significant feature within the reforms currently reshaping the Cuban economy. After the crisis of the 1990s the centrally planned economy failed to satisfy many needs for goods and services, so these were met through economic activities driven by the imperative of survival (some of them not allowed, and others not well accepted, within the socialist development model).

Today activities that were discouraged or even forbidden by the government have been incorporated into the economic strategy of the current government.1 Self-employment has ceased to be viewed as ‘a necessary evil’, as it was in the early 1990s. Today it is viewed by authorities as a valid solution within Cuban Socialism, and is also expected to contribute to the economic development of the nation.

Before 2010, as Ritter and Henken point out, serious studies of this sector were largely discouraged and considered taboo. From 2010 onwards self-employment became the object of scholarly analysis within Cuba and abroad by authors such as Villanueva and Vidal, González, Arredondo, Centeno and Portes, Dámaso, Díaz and Piñeiro, González-Corzo, Morales, Triana, Feinberg, and in the most recent work of Ritter and Henken.2 On the one hand, the deepest and most revealing publications are by foreign researchers, with limited diffusion in Cuba. In addition, ethnography and field studies are methods used by few Cuban researchers. On the other hand, research into self-employment, in the specific case of Cuba, largely centres on two aspects: (1) the characteristics and limitations of the private sector in Cuba; and (2) the impact of the emerging private sector on Cuban civil partnership, the political regime and Cuban socialism.

Despite these problems, the study of self-employment in Cuba is valuable for what it reveals about the functioning of markets in their distorted versions of informal performance, especially when seen in an international context, mainly that of informality in Latin America. Also, this study may help generate public policies to improve the situation of this sector in Cuba, drawing both from the conceptual analysis and the case study.

Currently half a million Cubans – 10% of the total workforce – are registered as self-employed.3 However, access to statistics on this sector is still limited. Besides, most of those engaged in this activity try to conceal the real dimension of their operations; it is centred on the circulation and recirculation of goods and services, with a strong tendency towards non-legal growth and very strong links with the so-called submerged economy. For this reason this article examines the emergence and development of a specific sector of self-employment, namely the shoe manufacturing chain, which combines the ‘formality’ of registered worker with the ‘illegality’ inherent to the buying of tools on the black market.

The production of footwear by public companies has been disadvantaged since the crisis of the 1990s, contributing on average only two million pairs of shoes annually. In 2015 the production of footwear by public companies increased by 53%; however, 50.76% of this increase corresponds to the production of footwear for work and orthopaedic shoes. As demonstrated below, the lack of selection of footwear is largely satisfied by means of the independent labour force, which produces close to eight million pairs of shoes a year. Although there are no official numbers on the consumption of footwear in Cuba, the fact that the independent labour force produces more than public companies arouses interest.

*********************************

Conclusions

In general, advances in the process of formalisation of self-employment in Cuba are dependent, in part, on new behaviours from self-employed workers and on their ability to make their businesses transparent. At the same time the main obstacles to the formalisation of private enterprises in Cuba are the concepts and culture still ruling in the establishment and political system.

Self-employed Cubans cannot yet be formalised as private enterprises, mainly because of the negative consequences arising from informality and the unregulated market, as well as of the multiple impediments to ownership within the current legislation. Many of those hoping to formalise their enterprises did not turn to self-employment out of preference, but out of a survival imperative. This necessity has led to creativity, sacrifice and effort to start a business, but without conditions of stability. Reform requires public policies that guarantee more secure prospects in the future.

It is not possible to fully assess the real capacities of productive growth in this sector, given the regulatory and political restrictions and conditions of informality in which it operates.

This case study shows that a great part of the activity is associated with some degree of illegality. Thus there are still many institutional and organisational changes to be managed by the state before producers can make their business transparent in matters of means of production; coordination channels; association; cooperation; or legal status of producers and vendors.60 As Douglas North states, an efficient institutional organisation is an essential condition for the development of a country.61 The correct functioning of institutions forms the basis for accomplishing a culture of legality.

International studies have shown multiple solutions to informality and, although not all of these are feasible in Cuba, they do provide important lessons to help redefine the regulatory framework and to stimulate new public policies. As Tokman points out, ‘it is not about isolating productive activities and occupations, but, on the contrary, acknowledging existing interrelations and their nature in more open and profoundly unequal economies’.

The study of self-employment in Cuba can contribute to the more general discussion about the informal sector and small and medium enterprises in Latin America. For instance, the way in which Cuba has generalised registry, taxation and access to social security may be of wider relevance. The same is true of supervision by sub-national authorities, as this contrasts with the absence of any serious regulation of informality in some other countries.

Similarly, the Cuban case provides a benchmark for the analysis of educational qualifications and innovation of the informal sector, since many of the units considered here make use of high qualifications and have generated innovations in design, services and business models. Some represent important social innovations.

Posted in Blog | Tagged , , | Leave a comment

MORE BAD NEWS FOR NEW IDEAS IN CUBA: EUSEBIO LEAL SIDELINED

BY PAUL HARE

In Cuba Today, August 29, 2016

Original Essay: BAD NEWS FOR NEW IDEAS IN CUBA z111

Havana historian Eusebio Leal escorts U.S. Secretary of State John Kerry around Old Havana during a tour of the city last year. Ismael Francisco AP

Very few without Castro in their name have survived in the leadership of the Cuban Revolution as long as Eusebio Leal. And he didn’t do it by the conventional means of silence and obedience. He brought loyalty but also ideas to the Castros. Now the military-run business empire has asserted itself in Old Havana as elsewhere and Leal appears to have been outmaneuvered.

Uniquely among Cuban leaders Leal has cared about other things beyond preserving the Castro Revolution. He has been as fascinated by Cuba’s past as its future. He has received numerous overseas cultural awards but his stature in Cuba has been that he thought differently.

In 2002 the British embassy in Havana staged a two-month-long series of events to commemorate 100 years of diplomatic relations between Cuba and the United Kingdom. We were told it was the largest such festival by an overseas country ever held in Cuba. Leal was our indispensable ally for venues, organization, contacts and vision. At times the Revolution’s agenda surfaced and he negotiated hard. But his heart was in the history of both our countries. Leal even created a garden in Old Havana in memory of Princess Diana. And as a historian he loved the story of the British invasion of Havana in 1762.

The military conglomerate GAESA will now assume business control over Leal’s beloved Old Havana project. This has been a labor of love and ingenuity. But it has also depended on his versatile role at the heart of revolutionary politics. He proved a man of taste, of determination but also shone as a contemporary entrepreneur in a Cuba which despises individualism.

His versatility served him well. A teenager at the time of the Revolution, he chose to prove that innovation and a love of past cultures and elegance could coexist with the new era. He admired Fidel, a fellow intellectual, and — not accidentally — he was chosen by the official Cuban media to eulogize his old friend again on his 90th birthday. Typically, the Revolution was extracting a declaration of loyalty from a man who was feeling pretty disgruntled.

Times are changing in Cuba and the undermining of Leal’s control has wider implications.

Times are changing in Cuba and the undermining of Leal’s control has wider implications. He may not be a household name outside Cuba and he may be in failing health. But his project showed he knew the Castros would never allow private sector growth to restore the largest area of Spanish colonial architecture in the Western Hemisphere.

His only chance was to harness funds from tourist visitors and foreign investors. There is still much to do but the current rush of tourists to Cuba owes much to achievement.

Leal’s fate is nothing new. Set in the 57-year context of the Cuban Revolution, many able and loyal leaders have been discarded. Felipe Pérez Roque, Carlos Lage and Roberto Robaina are recent examples. But Leal had survived and appeared to be growing in stature with Raúl. His walking tour of Old Havana with Obama received worldwide publicity.

Leal’s bonding with the U.S. president may have irked the Castros. The disintegration of Venezuela and loss of subsidies under Nicolás Maduro gave the military companies the opening they needed to swoop for Old Havana. Now, effectively Raúl Castro’s son-in-law will rule the roost and U.S.-operated cruise ships will soon be occupying many berths in the Old Havana harbor.

But perhaps the saddest lesson from Leal’s marginalization is the signal it sends to Cuban innovators and foreign investors. The restoration of the Revolution is still more important than the architectural jewels of past eras. Almost at the same time as Leal’s demise, a far less visionary but unquestioning loyalist, Ricardo Cabrisas, was promoted. These are indeed depressing times for Cubans hoping for some new ideas and less of the same.

Z11111Dr. Eusebio Leal Spengler, Historiador de La Habana

Paul W. Hare is a former British ambassador to Cuba and currently senior lecturer at the Frederick S. Pardee School of Global Studies at Boston University

Posted in Blog | Tagged , , , , , | Leave a comment

BACKLASH IN CUBA: OBAMA’S HISTORIC VISIT WAS A SMASH HIT IN HAVANA. FIDEL CASTRO WASN’T GOING TO TAKE THAT LYING DOWN.

By Ann Louise Bardach

Politico Magazine, June 10 2016

Original Article: BACKLASH IN CUBA

HAVANA—These days Fidel Castro doesn’t often leave his comfortable home in Siboney, a leafy suburb west of this city. But on April 19, the 89-year-old Cuban leader emerged, aides at his side, wearing a royal blue Adidas sports jacket over a blue plaid shirt, and was driven two miles to the immense Palacio de Convenciones. Inside he was greeted by a thousand members of the Communist Party, the ruling body that has been Cuba’s sole political party for half a century. They were wrapping up their four-day conference, generally held twice a decade.

Fidel is ailing and officially retired, having incrementally handed the reins of power to his brother Raul over the past decade. But he remains a history buff, a news junkie, and a man keenly concerned with his legacy. And he was not pleased with what he had been hearing.

zzzzzzzzzzzzzzzzzzzzzzzPresident Barack Obama had spent three high-profile days in Havana at the invitation of Raul. And the visit, to Fidel’s dismay, had been an immense public success, generating as much excitement and buzz on the island as the arrival of The Rolling Stones for a free concert a few days later. While state media treated Obama with cautious distance, there was no mistaking the thrill of ordinary Cubans as the president toured local sights, watched a baseball game, and drove through Havana with his family and entourage. They dubbed the president Santo Obama. “He’s more popular than the Pope!” one exultant habanera told me.

If the first state visit by a sitting president in 90 years struck Fidel as an unseemly and undeserved victory lap, there was troubling news as well from the Southern Hemisphere as well. Two of the island’s staunchest allies were fighting for their political lives. Brazilian President Dilma Rousseff was nearing impeachment; Argentina’s former president, Cristina Kirchner, was about to be indicted. Indeed, the entire left-wing coalition of Latin America, methodically cultivated by Fidel for decades, was unraveling. The death of Cuba’s Midas-like patron, Hugo Chavez of Venezuela, had birthed a feeble successor who is unlikely to survive the next year; Ecuador’s leftist president was bowing out, while Castro champion Evo Morales of Bolivia had lost a referendum for another presidential term. Peru and Uruguay had lost their center-left leaders. If not a political tidal wave, a domino effect of sorts was shifting the Southern Hemisphere from left to right.

Fidel Castro, Cuba’s Maximum Leader, understood that something had to be done.

Cuba’s Party Congress sets the economic and political agenda of the island, and many, on and off the island, had anticipated that this year’s conclave would further crack the door open to more reform. As the U.S. and Cuba have navigated their rapprochement, their progress has continuously been buffeted by the alternating agendas of the two brothers: Fidel, the intransigent revolutionary, and Raul, the cautious reformer. Obama hoped that a state visit before the Congress would give a boost to Raul’s reform-minded approach, however modest.

Cubans, too, had their eye on the meeting, and many of them expected that the Party would at least start to retire its octo- and nonagenarian ruling elite, the historicos who came up with Fidel and Raul and have been governing the island since. Raul himself had fueled those hopes by urging an age limit of 70 for senior Party officials.

It did not happen that way. Instead the Party’s elders, with the blessing of Fidel, spent the first three days of the Congress issuing a series of retrograde edicts and re-establishing their hegemony. Rejecting the retirements of the old guard, they went on to quash reforms intended to rescue the country’s moribund economy.

For a finale, Fidel addressed the Congress for the first time since 1997. The date of his appearance, April 19, was not coincidental. It fell on the 55th anniversary of the doomed U.S.-sponsored Bay of Pigs invasion, when Fidel’s army vanquished the CIA’s ill-conceived coup, captured thousands of U.S.-backed rebels, and utterly humiliated the world’s greatest superpower.

The days when Fidel routinely gave furious six-hour orations in olive-drab military garb are long gone. Now with hair white as the sands of Varadero Beach, he did not attempt to stand on his feet. Instead, he was helped to a chair at the center of the dais. “This may be one of the last times I speak in this room,” Fidel somberly told the throng.

Although Fidel spoke with a gravelly rasp, those looking to hear conciliatory words were quickly disabused of that hope. “The ideas of Cuban Communists will remain as proof on this planet,” he insisted, and their achievements “will endure.” And to that end, the firebrand Fidel exhorted those present —charged with setting Cuba’s agenda through 2030—“to fight without truce.”

“Soon, I’ll be 90 years old. Soon I’ll be like all the others,” Castro intoned as if giving his own eulogy. “The time will come for all of us.”

Then the old lion, albeit with a patchy beard and a thinning mane, roared again, one last time: “We must tell our brothers in Latin America—and the world,” he declaimed, “that the Cuban people will be victorious!”

In the closed, hermetic world of Cuban politics, Fidel’s speech marked a pivot in what has arguably been the country’s most remarkable three months since the Missile Crisis of 1962. The ceaseless whiplash includes a ballyhooed U.S. presidential visit, a Party Congress slamming the door on reform, a Fidel valedictory finale, and a series of fresh dramas in the long-running saga of the Brothers Castro.

On June 3, Raul turned 85, to be followed by Fidel’s 90th birthday on August 13, a pair of personal milestones that have the brothers keen to cement their legacies. “The Castros are robust and long-lived,” boasted Raul on his big day; he also chatted with Russia’s Vladimir Putin, who called offering birthday wishes.

As the brinkmanship between the two Castros plays out, it’s likely to shape the course of U.S.-Cuban relations for the next generation. In that respect, it was possible to see the Congress as an episode in the long-running drama between two brothers to whom appearances matter deeply. Raul, the internationalist, got to produce the Obama Show. Fidel, the nationalist, won the right to orchestrate the Party Congress and to deliver his response to President Obama’s proposal of accelerated reform and cooperation with the U.S.

And Fidel’s message was unmistakable: Over my dead body.

This was hardly the step forward the White House had hoped for when it orchestrated its historic, if hastily planned, state visit in March. For Obama, Cuba was his “Nixon in China” moment, a legacy move to close the last chapter of the Cold War in our hemisphere.

It could not have contrasted more clearly with the previous U.S. presidential visit. In 1928, the Republican Calvin Coolidge sailed into Havana Harbor on a battleship. Obama, on the other hand, delivered his first words to the Cuban people before he even debarked from Air Force One. They came, cool, breezy and direct, in the form of a tweet. “¿Que bolá Cuba?” he tweeted, using the island slang for “what’s happening?” “Just touched down here, looking forward to meeting and hearing directly from the Cuban people.”

Cuban officialdom adopted a noticeably stiffer tone. Despite Obama being the single most important head of state to visit since 1959, Raul Castro—who has personally greeted more than one pope and innumerable national leaders upon their arrival—did not appear at the airport to welcome him. Instead, when the First Family touched down amid an insistent gray rain, they were met by Foreign Minister Bruno Rodriguez, who greeted the president on the tarmac with a cordial handshake.

The government-run media gave a similarly cool treatment. On the eve of Obama’s visit, Granma, the organ of the Communist Party, devoted its six thin pages to the arrival two days earlier of President Nicolás Maduro of Venezuela, Cuba’s principal patron since the collapse of the Soviet Union. In Havana, Maduro was robustly feted, even bestowed a new honorific title, with Raul declaiming that “we will never abandon our Bolivarian revolutionary friends.”

Obama’s trip had been something of a rush job, as state visits go, and behind the scenes, the U.S. had been on the back foot from early in the process. The date of the trip hadn’t been finalized until January. One consideration in the timing was to ensure the visit came prior to the Party Congress, with the White House hoping to be a moderating influence when it convened. But the driving force, according to sources at both State and the Vice President’s office, was that the president and first lady very much wanted a family trip, and the March 20-23 dates coincided with spring break at Sidwell Friends School for daughters Malia, who’s been studying Spanish, and Sasha.

The trip planning also augmented tensions between the White House and the State Department that dated back to the historic Cuban deal announced in December 2014. The landmark agreement had effectively ended the Cold War between the countries and began the process of normalization: Cuba agreed to release numerous political prisoners and return imprisoned USAID contractor Alan Gross along with a significant U.S. intelligence asset, Rolando Sarraff, in exchange for the U.S. returning the remaining three of the “Cuban Five” convicted spies. Although negotiations like this would normally be led by the State Department, Obama had deputized his trusted aide and speechwriter, Ben Rhodes, to make a deal with Cuba happen. The 18 months of secret negotiations largely bypassed the State Department; only one State veteran, Cuba policy specialist Ricardo Zuniga, who partnered with Rhodes, was fully trusted by Obama’s innermost circle, to maintain the secrecy demanded by the administration. Likewise, Cuba’s Foreign Ministry, known as MINREX, was exiled from negotiations. The key player on the Cuban side was none other than Colonel Alejandro Castro Espín, Raul’s 50-year-old son, a steely hard-liner widely believed to be his father’s heir apparent.

The rushed trip also gave the Cubans leverage to shape the agenda, or try to: No meetings with human rights activists, they insisted, and they would decide the guest list, including which U.S. reporters made the cut—a loaded issue with Cuba, which has a long history of barring American reporters who report seriously on the island.

Matters were not looking good, and the press around the reconciliation was getting worse, until Secretary of State John Kerry canceled a trip to Havana in protest weeks before the state visit. Kerry’s bluff worked, and from then on, the U.S. got what it wanted. The Cubans reluctantly issued visas for the reporters; the president had meetings with entrepreneurs, dissidents, human rights activists and even held a news conference, all to be recorded by live television coverage.

***

It is nearly impossible to overstate the impact of President Obama’s arrival in Cuba. The shift in outlook was tectonic. In the course of the visit, I heard more than one habanero refer to Obama as “El Negro de Oro”—the Golden Black Man, a flattering pun on “black gold.” It didn’t hurt that to many Cubans, Obama just looks Cuban; his mixed-race background gives him something in common with the half the island’s population that identifies as mulato, black or mestizo today.

The Obama family made the requisite tourist stops, including the city’s grand Cathedral, built in 1777 from blocks of coral; they took a walking tour led by Havana’s remarkable official historian, Eusebio Leal. Despite failing health and being in considerable pain, Leal gamely guided the Obamas through historic Havana in and around the Plaza de Armas.

The buzz of la bola en la calle—Cuban street gossip—was that the visit had prompted previously unimaginable upgrades to parts of the capital. Every building that the Obama entourage passed had been repainted, and every road his limousine traversed had been repaved. Some streets were still being paved and re-striped just hours before his arrival. “Come visit us,” cried out residents of neglected, pot-holed barrios in what became a weeklong running joke, “y llevar el asfalto!” — “and bring the asphalt!”

The culmination of the trip was Obama’s exquisitely crafted speech, delivered in downtown Havana’s Gran Teatro with Raul Castro and the senior Politburo present, along with an array of invitation-only favored Cubans. “I have come here to bury the last remnant of the Cold War in the Americas,” Obama began, thus ending the half century David-and-Goliath face-off that once almost brought the world to its end. The speech, written by Rhodes, hit every note. Millions of Cubans watched, many saying later they were overwhelmed by emotion, as an American president spoke directly to them, not at them.

“I had tears in my eyes,” said Marta Vitorte, who watched the speech in her Vedado apartment. A former official in the Foreign Ministry, Vitorte for the past decade has run one of Havana’s most popular and upscale casa particulars, or private home rentals. “This is the beginning of the future of Cuba,” she gushed.

But for the island’s 11-million-plus inhabitants, an even more jaw-dropping moment had come earlier in the visit. On Day Two, Obama had cajoled Raul into participating in a live news conference, taking unscreened questions from American reporters.

Considering Cuba’s antagonism towards a free press, Raul’s participation was stunning and, no doubt, a spontaneous decision he quickly regretted. The Cuban leader was plainly displeased by a question on human rights by NBC’s Andrea Mitchell, but he was infuriated by CNN’s Jim Acosta who asked, “Why are there Cuban political prisoners in your country?” Raul visibly bristled, having never endured an unfriendly press query. “Give me the list right now of political prisoners to let go of them,” Raul huffed. “Tell me the name or the names … And if there are political prisoners then before night falls, they will be free. There!” (Lists of prisoner names were promptly circulated on social media—none of whom are known to have been released since.)

“Oh my god,” said a former Cuban diplomat. “It made Raul look weak. No one here has ever seen anything like that.” | AP Photo

As the conference streamed live, Cubans watched a flustered Raul lose his cool, then abruptly end the news conference and march over to Obama to raise his arm in a victory salute. A bemused Obama was having none of it, and let his arm dangle. “Oh my god,” said a former Cuban diplomat. “It made Raul look weak. No one here has ever seen anything like that.”

***

Obama’s show-stopping appearances could only have mortified Fidel Castro, a public-relations genius, who was keenly monitoring the visit from his home. “Never abandon propaganda—even for a minute,” he had counseled compatriots in a 1954 letter. “It is the very soul of our struggle.”

Today, for hard-liners of Fidel’s generation, la lucha, the struggle, means just two things: keeping the principles of the Revolution alive in Cuba; and keeping themselves alive and in power.

At the very minimum, Obama had rewritten Fidel’s carefully scripted drama, in which the U.S. plays the rapacious foe. Suddenly, America seemed far less menacing. As the Cuban novelist Wendy Guerra wrote, in the wake of Obama’s visit: “Since you left, we are little more alone, because now we have to find another enemy.”

“The enemy always drove the story,” says Marilu Menendez, a Cuban exile and branding expert who now lives in New York. “It justified all of [Fidel’s] excesses.”

Even before Obama left the island, Fidel let it be known that that he took a dim view of the visit. Just days after Air Force One departed, an article appeared in the state-run Tribuna de la Habana that accused Obama of lording over a racist country and “inciting rebellion” in Cuba by meeting with pro-democracy activists. Its headline, roughly translated, “Black Man, Are You Dumb?” was a firebomb. “Obama came, saw, but unfortunately, with the pretend gesture of lending a hand, tried to conquer,” wrote Elias Argudín, a government loyalist, “choos[ing] to criticize and subtly suggest … incitements to rebellion and disorder, without caring that he was on foreign ground. Without a doubt, Obama overplayed his hand. Minimally, I can say is … ‘black man, are you dumb?’”

Following a wave of blowback, Argudín offered a quasi-apology for “causing offense,” noting that he himself was black. In a typically mysterious Cuban chess maneuver, the story was briefly deleted, then reposted on the paper’s website, while running in the print edition.

The column was only the first public salvo from hard-liners signaling their distress over the American president’s visit. A few days later, Fidel himself published a searing 1,500-word public letter, a full-throated denunciation of the visit and, by implication, Raul, who had hosted it. Entitled “Brother Obama,” it ran on Page 1 of Granma. Obama’s grand speech (which had begun with a famous line from the beatified patriot José Martí) was derided by Fidel as “honey-coated”—merely by listening to it, he warned, Cubans “ran the risk of having a heart attack.” And then Fidel dropped the hammer: “We don’t need El Imperio—The Empire—to give us any presents!”

Though Fidel and Raul’s lives have been anchored in decades of sibling love, collaboration and feuding, Fidel must have known, or quickly learned, that his public harpooning had gone just a bit too far. And so on April 8, a week before the highly anticipated Congress, Fidel made another unusual outing from his home. Wearing a white blousy sports jacket with a black wool scarf tied around his neck, Castro, aided by a cane, spoke briefly at the school named for his late sister-in-law, Vilma Espín.

Espín had been Raul’s wife and compañera in the Revolution from the early 1950s, and had served as Cuba’s de facto first lady. But when she died in 2007, Fidel did not attend her funeral. His own illness served as a reasonable excuse, but as one former Cuban official told me in Havana, none of Fidel’s family—neither his children nor his wife, Dalia—attended either. The snub deeply disappointed the family-centric Raul, who also serves as the Castro clan’s patriarch. Since then, the official said, Raul typically has a weekly family dinner, not with Fidel’s brood, but with his in-laws, the Espíns.

So it was impossible not to interpret Fidel’s tribute as a peace offering to Raul, in advance of the Congress, where it was imperative that the brothers present a unified front. “I’m sure that on a day like today, Vilma would be happy,” Fidel intoned to the schoolchildren in his weakened voice.

Vicki Huddleston, former chief of the U.S. Interests Section in Havana, said the brothers knew they needed to project unity. “They do not want it to appear that there are divisions,” she said. Veteran Cuba negotiator and U.S. ambassador to Mexico, Roberta Jacobson, suggested that the brothers’ brinkmanship was sometimes simply ritual role-playing—a kind of “good cop-bad cop within the Castro family.”

***

The dynamic between the Brothers Castro is of great import to Cubans, of course, and also determines what issues they allow on the table with American negotiators, and at what pace they are willing to address them.

On many issues the brothers are genuinely in lockstep, such as ending the U.S. embargo. While Cuba relentlessly hammers on about “el bloqueo”—the blockade, the hyperbolic term it uses for the embargo—its current prohibitions have been whittled down to a fraction of what they once were. Through executive actions, the Obama administration has lifted an array of trade and investment restrictions. Completely normalized trade and banking will have to wait for Congress to rescind the embargo officially, but whether Hillary Clinton or Donald Trump wins, the Cubans think they will have the requisite votes in Congress to get it done. With GOP Senators Jeff Flake and Rand Paul leading the charge, they expect a vote to come at some point in 2017. But until then, the embargo continues to be useful propaganda about the bully “Empire” to the north.

The embargo can be seen as Cuba’s short game. The longer game is Guantánamo—the territory, not the prison. Even more than the embargo, this 45 square miles of Cuba’s easternmost province has long served as Exhibit A of the crushing foot of El Imperio. As Raul reminded Obama on Day Two of his visit: “It will also be necessary to return the territory illegally occupied by Guantánamo Naval Base.”

While the prisoners held in Gitmo are the issue attracting global attention, for Cuba, they’re simply helpful propaganda in its quest to get its land back. America does have a lease, a 1903 deal stipulating that Guantánamo and its deep-water harbors be used as a “coaling station.” (The rent is $4,085 annually, and the Castros proudly boast that they never cashed a rent check—although they did cash one in 1959.) Cuba now argues that America’s current use of the land is in violation of its lease. “If this was a straight-up landlord-tenant law, the landlord would kick your butt right out,” says Jose Pertierra, a Cuban-born lawyer who shuttles between Havana and Washington.

A former Cuban diplomat told me he expects the Gitmo crusade to get louder and more insistent going forward. “We don’t really care about the prison,” he said, “but [the government] is going to politicize it as a human-rights violation [and] a breach of the lease.” In Havana, I asked Ben Rhodes if the Cubans had put Gitmo on the table as a chip. “There are never discussions in which Guantánamo does not come up,” he answered.

As talks between the countries haltingly advance, it is on domestic economic and political issues where the internal Cuban factions part company. In the 1990s, with the collapse of their Soviet patron, Raul began to see Cuba’s future very differently than his older brother. Raul had studied and visited China and Vietnam, and he liked what he saw: economic powerhouses fueled by competitive capitalism but all under the steely control of the Communist Party.

Fidel, on the other hand, mistrusted any version of capitalism, however dressed up as socialist entrepreneurism. He had railed against perestroika and glasnost and repeatedly warned Mikhail Gorbachev it would be the beginning of the end. (And indeed, it was the end of the Soviets’ billion-dollar patronage of Cuba.)

Unlike his brother, Raul has acknowledged cracks in the pillars of Cuba’s 65-year-old political system; insiders consider them serious. “There is no more discipline within the traditional ranks,” a retired government official told me. “No one wants to belong to the CDR [Committees for the Defense of the Revolution, the neighborhood snitch organs]. No one feels they have to belong to the Communist Party.” He added: “Five years ago, if you didn’t belong to the CDR or the Party, you weren’t going to get a promotion or could get in trouble. But there is no more fear about it.”

Likewise, such bastions of the Revolution as the Federation of Women, the Workers Union, and the Young Communists League are losing members, I was told. All these organs that have buttressed the Revolution are in decline, losing momentum as membership oozes away. “Everybody’s looking down the road about how to be an entrepreneur or a capitalist,” said a man who has turned his home into a casa particular.

For the past two years, Raul has been beseeching allies and trading partners—Russia and much of Europe—to forgive loans and debts incurred over decades, an estimated $51.5 billion, according to Emilio Morales of the Havana Consulting Group. (That figure that doesn’t even include debts owed to Venezuela and Brazil.)

And there is a relatively new reality on the island: corruption. “It’s a daily event,” he said. “If you have money, there’s nothing you cannot get,” then lowering his voice, “even a visa to leave Cuba.“

While Fidel may choose to turn a blind eye to the domestic woes of his country, he is keenly attuned to the fact that there are larger, inexorable forces at work. The Southern Hemisphere is plainly drifting away from Cuba. In 2006, as he lay gravely ill, Fidel could gaze out at Latin America—populated by Lula in Brazil, Evo in Bolivia, the Kirschners in Argentina and his adoring student and patron, Hugo Chavez—and rest serene that fidelismo and Cuba’s future were secure. If Fidel had died that year, as he has said he very nearly did, he would have been one satisfied soul.

But 10 years later, he has lived to confront a radically different picture. Cuba has lost all its patrons, except for the dramatically reduced oil shipments from Venezuela. Both Russia and China have set limits on their future largesse. Meanwhile, the U.S. rapprochement is making it inescapably clear that Cuba’s economic salvation lies, once again, as it did in the first half of the 20th century, in American investment and tourism—meaning ever-deepening ties to Fidel’s lifelong bête noire, the U.S.

So despite the rhetorical saber-rattling, and the alternating star turns of Raul and Fidel, Cuba is going through the only door that, for now, is open: Making friends with Uncle Sam. With no fanfare or pronouncements, U.S. and Cuban negotiators met recently and laid out an agenda for meetings well into the next year covering property claims, trade, environmental concerns and cooperation on narcotics.

In late May, the Cuban government announced that small and medium-size businesses would be legalized. The Party Congress may have repudiated change, but change is happening nonetheless.

Most crucially, there is the daily bonanza of ever-multiplying dollars from U.S. tourism. “More than 94,000 Americans have visited Cuba from Jan-Apr 2016,” proudly tweeted Josefina Vidal, a Cuban official who heads the U.S. division of the Foreign Ministry in May, “a 93% increase with respect to same period 2015.”

Leonardo Padura, Cuba’s most famous living writer, recently tried to explain his country’s contradictions. “If you say [Cuba] is a communist hell or a socialist paradise, you’re missing all the nuances,” he told EFE, the Spanish news agency. “Cuba is a society that apparently has not changed, but it really has.”

That assessment could apply just as well to Raul. Both a “reformer” and a “historico” by definition and personal loyalty—having fought alongside Fidel since 1952 and, since 1959, having run the Cuban Army, the country’s most powerful political organ—Raul has evolved into a pragmatist of necessity over the past 25 years. At the same time, Fidel has doubled down his resolve to resist reform. And like Cuba, the relationship between the deeply bonded brothers apparently has not changed, but it really has.

At his birthday last week, when Raul was toasted by family and friends after hosting a Caribbean summit, there was much to celebrate—replete with historical ironies. Fidel may have rescued Cuba from the clutches of the U.S., but it is Raul who is rescuing Cuba from Fidel.

Ann Louise Bardach is the author of Cuba Confidential (2002) and Without Fidel: A Death Foretold in Miami, Havana and Washington (2009), as well as the editor of The Prison Letters of Fidel Castro and Cuba: A Travelers Literary Companion. She interviewed Fidel Castro in 1993 and 1994 and met Raúl Castro in 1994.

Posted in Blog | Tagged , , , , , , , | Leave a comment