Tag Archives: Economic Reforms

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

Por Pavel Vidal Alejandro, Diciembre de 2018.

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

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

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

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

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

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

Dos amortiguadores del shock venezolano

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

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

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

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

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

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

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

Los cambios irrelevantes en el margen

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

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

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

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

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

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

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

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

Dr.  Pavel Vidal

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DEMOCRATIZING CUBA? INTERVIEW WITH ARTURO LÓPEZ-LEVY

Published originally by NACLA (https://nacla.org). This is the last installment of a NACLA series on Cuba’s constitutional reform

Arturo López-Levy is the Bruce Gray Fellow and Visiting Assistant Professor of International Relations at Gustavus Adolphus College, Minnesota. He worked as a political analyst for the Cuban government until 1994. He is a co-author of Raúl Castro and the new Cuba: A Close-Up View of Change (McFarland, 2012.

Arturo López-Levy

During his time as president, Raúl Castro announced a series of reforms. [3] One of these was to overhaul Cuba’s 1976 constitution [4], which was drafted at the height of Cuban socialism and has long been out of sync with the country’s post-Soviet reality. In July, Cuba’s National Assembly unveiled a proposed version for the new constitution [5]. This draft will undergo a process of public debate throughout the fall and should be ratified in February 2019.

The constitutional reform has intensified debates on the island about rights, citizenship, and the new economy. This essay forms part of a running forum NACLA is hosting to offer a range of views on this crucial process at a critical moment in Cuban history.

In this essay, political scientist and international relations expert Arturo López-Levy explains how the constitutional reform reflects the goals and expectations of a new generation of the Cuban political elite.

 

Michelle Chase (MC): In broad strokes, what are the most relevant changes proposed in the new draft of the Constitution?

Arturo López-Levy (ALL): If people outside Cuba want to understand the current process of constitutional reform in Cuba, they should look at the relevant terms of the debate and balance of power within the island rather than impose prescriptive and sometimes utopian views about democracy from the outside.

The first thing I would caution is that we should pay attention to the framing of this debate. While many outside observers, dissidents, opposition, and exile intellectuals focus on substantive issues of liberal democracy (such as the right to organize political parties, freedom of association and expression, etc.), the framing of this debate within Cuba’s political structures is mostly focused on procedures and institutions (term limits, decentralization, separation of a new presidency of the republic, presidency of the Council of State, and premiership and legalizing new institutions and practices of the new economy.)

This is hardly a surprise. Facing the passing of the generation who made the Cuban revolution in 1959, the goal of the Cuban elite is improving the collective character of the leadership and the sustainability of the one-party system. There is a new generation of leaders rising in Cuba, but there is no evidence to suggest that they will dismantle the monopoly of the Cuban Communist Party (PCC), establish an independent judicial system, or willingly adopt a free press. This fact has made many observers of Cuba’s political reform skeptical about the prospects for democratization in Cuba. That is why they dismiss the relevance and implications of the debate that is taking place as non-consequential.  The problem with these analysts is that they are imposing their own priorities and values without observing the process on its own merits. In contrast, a good analysis should emphasize the magnitude of the institutional change being proposed, and how a change in these institutional procedures can produce substantive changes, even if unintentionally, in the long run.

From an institutional point of view, the proposed reforms to Cuba’s current constitution represent a fundamental political liberalization of the current system. The new Carta Magna represents explicit and implied changes of utmost importance in the economic realm and the organizational structure of the Cuban state.

In terms of explicit changes, the proposed amendments redefine the character and goals of the Cuban state. The proposed constitution drops the goal of “building a communist society” and ratifies the adoption of a new model of a mixed economy in which not only private property is legalized but also the role of the state sector in the Cuban economy changes. This goes farther than reforms introduced in 1992, which opened the possibility for some expansion of private property in the country but explicitly excluded some sectors of production from privatization. That list disappears in the new project. This change does not mean that the Cuban state now has a “neoliberal orientation,” as some have argued, but it does legally empower the government with discretion to decide what to privatize, how and when.

The draft constitution also lays out changes in the structure of the state that open the gates for a substantial future decentralization. The new constitution redefines the role and mode of election of the provincial governors and their relations with the municipalities. At the national level, the new text proposes the creation of a presidency, as the top official of the country, centralizing in that office many functions that Fidel Castro has said in the past that should be distributed in a council of notables and representatives of the social organizations under the tutelage of the communist party (the Council of State). Together with this new office of the presidency, the constitutional proposal includes the separation of functions and position of the president of the Council of State and prime minister. This is not a separation of power, as some uninformed observers suggest, but a clearer distribution of functions. The prime minister is subordinate to the president, who is also supposed to be the leader of the party, but the premier’s performance and legacy will be essentially assessed by his performance (better economy, welfare, etc.), not in ideological terms.

MC: How was this draft produced? Who exactly contributed to it and how do we see those interests in the draft?

ALL: The politburo of the Communist Party created a commission six years ago that worked on a blueprint of the most important proposals. Then, at the end of the legislative term in December 2017, the National Assembly created a commission of deputies that included many of the members of the first commission created by the party, plus some relevant scholars of law, history and other matters, and representation from official regional and mass organizations.  In terms of generations, the commission showed an interesting mix of old and new blood (in both political and demographic terms).

Most of the members of this commission are openly and inextricably tied to the orthodox party line of the PCC. The group was not composed of the country’s most prominent jurists, constitutional law scholars, experts, or intellectuals. They were competent loyalists who exercised their power as agenda setters in the dark, with no transparency.

This fact disavows any fiction of separation between the state and the party but it also confirms the relevance assigned by the leadership to the constitution making process and the anticipated changes for the political future of the country. This is a loyalist commission that is conscious of the need for renewal within the limits of the system and took seriously the challenge of legitimation and adaptation under the new conditions of the world and Cuban politics and economy.

The commission submitted its proposal to the National Assembly, which debated it and approved it for submission to the general public as a project for debate. Then a process of discussion throughout the whole country began, in every neighborhood or place of employment. In addition, for the first time and creating an interesting precedent, a website hosted by the ministry of foreign relations is collecting comments from emigres. This final project will supposedly be submitted to a referendum during the first half of 2019.

The process of debate serves many purposes beyond the pursuit of some domestic and external legitimation. One of the most important goals is the collection of information about the positions not only of the antagonists but also about those who are associates in different degree with the system. The discussion allows also some cooptation of civil society’s demands and elites opening space for them within the governing coalition. It also allows the historic generation of the revolution to test the persuasive capability and attraction of the different positions of those rising within their ranks.

MC: Why is the Constitution being revisited at this time? How is it related to Raúl Castro’s reforms, the new presidency of Miguel Díaz-Canel, etc.?

ALL: This proposal of constitutional reform is part and parcel of the gradualist and incrementalist approach to economic and political reform adopted by Raúl Castro. An important part of the new project has to do with the political conception about what type of state Cuba will be. The new Article 1 introduces the notion of a socialist “rule of law,” better interpreted as a socialist rule by law. Although this term has been mentioned several times since 1959, it has never been elevated to the rank of a constitutional principle. The idea—as presented by the most outspoken voice in the commission, the chief of the secretariat of the Council of Ministers Homero Acosta—emphasized constitutional obedience and observance over arbitrary power.

Does talking about a “rule of law” socialist state and the reintroduction of guarantees of important rights such as habeas corpus represent the adoption of a judiciary independent from the Communist Party? Obviously not, but that does not mean that when Cuban leaders speak about a “more democratic system” or a “democratic party of the Cuban nation” or rapprochement with patriotic emigres, they are just babbling demagoguery. On the contrary, this is an acknowledgment that, without the complement of political liberalization, the success of economic reform is at risk. Facing the ideological position presented by former dean of the law school of the University of Havana, Jose Toledo Santander who defended the proposition that the Communist party was above the National Assembly and the constitution is what the party- particularly its Political Bureau- say it is; Acosta proposed a different scheme in which the party lead the discussion of the constitutional reform today and then becomes the main guardian of its strict application in accordance with the will of the people who is the ultimate holder of Cuban sovereignty.

The new president Miguel Díaz-Canel and his team are conscious of the potential problems that a more open Cuba can bring. Let’s not forget that political liberalization, not to mention democratization, can be a destabilizing process for a system like Cuba’s. But Díaz-Canel and the new generation of leaders know that accelerating the reforms adopted under Raúl is their best chance. Many factors are pushing in this direction. The one-party state’s old pillars of legitimacy (personal charisma, the appeal of communist paradigms, the appeal of social equality) have declined. It is also clear that the current political structure is inadequate to cope with challenges associated with these reforms, such as the rise of inequality, the overlapping of race and class in the income gap, the increase of corruption and the divisions between urban and rural areas, tourist and non-tourist sectors of the economy, and sectors that benefit from remittances versus those that do not.

In general, these reforms show that president Díaz-Canel and his generational team are setting the political agenda of the country. Some of these leaders have been candid about the fact that the constitutional reforms are updating the legal framework of the country because politics and law have lagged behind the economic and social changes in the country. This was never a major concern of Fidel and Raúl Castro, or the generation of the so-called “historicos.” It confirms that the new generation of leaders is acting with the support of the old generation but is pressing their own issues forward.

MC: Is it fair to say that the new constitution is moving Cuba toward a more republican, or liberal, concept of citizenship?

ALL: Yes, in the margins. In the liberal sense, it proposes a rule by law, not a rule of law. This is better than what exists now but it is not based on an open and transparent competition of political views within the paradigm of the universal declaration of human rights. In the republican sense, the assessment is more complex. The new project creates a better separation of functions between president and prime minister and improves some mechanisms of horizontal accountability and decentralization. At the same time, by transferring to a president of the republic the previous functions of the council of state, the new constitution will strengthen the individual power of the top executive. This could open the door to bouts of Latin American caudillismo down the road.

However, liberal democracy or republicanism in the western style should not be the main criterion to measure the progress of Cuban political development. Cuba democratizes according to its own history and culture. The concept of political liberalization is better fitted to deal with the transformation taking place in Cuba because it emphasizes issues such as the expansion of choices and human rights as international standards. For instance, the expansion of rule by law provides the country with better institutional mechanisms (courts, police, prosecutors, etc.) to cope with an eventual democratization, regardless of the government’s intention to use it to strengthen one-party rule. In a worst-case scenario, non-liberal reformers will be doing the right thing for the wrong reason. The result could be positive.

MC: What implications do all these changes have for U.S. policy toward Cuba?

ALL: If the international community, particularly Latin America and the United States, want to have a realist policy of democracy promotion towards Cuba, it is essential for their policymakers to abandon false presumptions about short-term democratization in the liberal sense and educate themselves about the real and relevant framework, choices, and scenarios within which Cuba is discussing its constitutional reforms. In such a critical hour, the policies of the Trump administration are the model of what not to do. If they continue to adopt a narrow vision about democratization and rights, the role of most international actors, their positions and interactions will be counterproductive.

At a critical time of debate, which will shape how Cuban politics will unfold and whether there will be more opportunities for democratization in the future, the role of the United States is important mainly for what it shouldn’t do. Cubans will decide their own destiny within the context of a nationalist culture strengthened by the 1959 revolution. If Washington insists on treating the new government as mere continuation of the previous generations, trying to play favorites within Cuban politics and interfering in Cuba’s internal affairs, American policy will be very counterproductive to Cuba’s political development and even detrimental to America’s national long-term interest in a peaceful, stable, democratic, and market-oriented Cuba.

The Trump administration has chosen to reaffirm policies of hostility despite all the promising signs for marketization and political liberalization of more engagement during the last two years of the Obama administration. Washington should reconsider the way it engages with a changing Cuba. It should look at this process of constitutional reform with a flexible vision about the positions and motivations of all Cuban actors, including non-liberal reformers in the government. Rather than dismiss the relevance of the intergenerational transition of leadership, it should engage the new president Miguel Díaz-Canel with dialogue and dignity using this critical juncture for a new beginning and facilitating the deepening of the reforms, not repeating the hostility role so fruitful to the most conservative elements in the Cuban government ranks.

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CUBA’S STALLED REVOLUTION

Cuba’s Stalled Revolution: Can New Leadership Unfreeze Cuban Politics After the Castros?

By Richard E. Feinberg and Ted Piccone

 Foreign Affairs, September 2018

Original Article: https://www.foreignaffairs.com/articles/central-america-caribbean/2018-09-20/cubas-stalled-revolution

For Cuba, 2018 marks the end of an era. For the first time in almost six decades, the country’s president is no longer a Castro—neither the late guerilla fighter, revolutionary caudillo, and international icon Fidel, nor his lower-profile brother Raúl, who succeeded Fidel as president in 2008. This April, the mantle was instead passed to former vice-president Miguel Díaz-Canel, a younger post-revolutionary politician who raised paradoxical hopes of both continuity and change.

Yet for those who imagined that the post-Castro era would quickly bring major reforms, Díaz-Canel’s tenure so far has been sorely disappointing. Five months in, progress in the country has come either slowly or not at all. The island’s economy continues to decline, just as it has since the collapse of the Soviet Union nearly 30 years ago, and this despite the carefully calibrated reforms Raul Castro instituted in 2011. Investment rates are alarmingly low, foreign exchange scarce, and shortages of consumer goods widespread. Many discontented Cubans, especially educated youth, continue to emigrate in search of higher living standards and better career choices, depleting the current and future workforce.

Miguel Díaz-Canel 

Reformers and hardliners continue to do battle within the Cuban Communist Party. A new draft constitution promises progress, notably on gender and gay rights, but it also reaffirms the hegemony of the Cuban Communist Party and institutionalizes outdated economic thinking. Recent government initiatives further restrict individual freedoms in business, the arts, and media. The Trump administration, meanwhile, has largely returned to the pre-Obama rhetoric of regime change and posture of hostility and isolation.

STAGNATION NATION

Díaz-Canel has inherited an economy in a state of transition. During his decade-long rule, Raúl Castro broke through once-forbidding ideological barriers on economic policy. He actively inserted Cuba into global commerce, opened the island to foreign investment, and promoted a burgeoning domestic private sector. Raúl also relaxed barriers to travel abroad, allowed private markets for real estate and automobiles, and gradually expanded access to mobile technology and social media. The private sector took off. By 2017, it provided jobs and income to as many as four out of ten Cubans of working age. Tourist traffic rose more than 80 percent during Raul’s tenure. Even though U.S. travelers became less common on the streets of Havana over the course of 2017, as the Obama bump gave way to a Trump dip, tourism is once again the brightest feature of the Cuban economy.

The government has not laid out a new economic policy agenda, much less a strategic vision for long-term development.

And yet, the Cuban economy has performed poorly overall. During the decade of Raúl Castro’s rule, Cuba’s GDP grew an average 2.4 percent per year—at least according to government statistics. At times, GDP growth stagnated at below two percent per year. Five percent would be the minimum necessary for Cuba’s growth to be considered sustainable.

The government has failed to create a truly receptive business climate, and outside the flourishing tourism sector, foreign investors remain skeptical. The precipitous drop in Cuba’s merchandise exports bodes particularly ill, signaling that the country’s state-owned enterprises are failing to compete in global markets. In 2016, these exports shrunk to less than $3 billion, their lowest level in more than ten years. In response, authorities slashed imports, from a peak of nearly $15 billion in 2013 to $10.4 billion in 2016. The loss of these imports has left Cuban stores empty of the most basic consumer items, from beer and paper products to spare parts for household appliances. All the while, restrictions on bringing capital goods into the country continue to exacerbate the already serious lack of factory machinery and farm equipment.

Change is unlikely to materialize soon. The Díaz-Canel administration, occupied with managing austerity policies, has not yet laid out a new economic policy agenda, much less a strategic vision for long-term development. In July, the government issued tough new regulations for the island’s emerging private enterprises. Aimed at preventing private companies and citizens from accumulating wealth—and nipping in the bud any potential challenge to the state’s monopoly on economic and political power—the new rules show that Cuban leaders are still extremely wary of, if not outright hostile to, private enterprise.

OLD RUM IN NEW BOTTLES?

Cuban politics are similarly resistant to change. Raúl Castro is still very present—as head of the Cuban Communist Party until 2021 and as leader of the government’s current efforts to revise the constitution. Every step of the relatively smooth succession process seemed designed to signal continuity with the measured pace of change that had marked Raúl Castro’s tenure, encapsulated by his maxim “sin prisa, pero sin pausa”—without haste, but without pause. It’s no wonder, then, that Díaz-Canel told the national assembly upon donning the presidential sash that “comrade Raúl will head the decisions for the present and future of the nation.”

Díaz-Canel has a lighter touch and is less camera-shy than his predecessor, but when it comes to policymaking, he has so far failed to deliver change. He retains a largely inherited team of senior bureaucrats, and his public remarks have been less about programmatic innovation than about maintaining party unity. Granted, this could be a temporary posture meant to reassure the old party apparatchiks while he builds a more autonomous governing class of technocrats. By this interpretation, the 58-year old is cautiously cultivating a power base of his own to set forward in the later portion of his five-year term, especially after Raúl steps down as party chief in 2021.

On the institutional side, recent changes are a mixed bag. The National Assembly chosen in March includes a mix of old and new faces. More than half of the deputies are new, 53 percent are women, and 41 percent are black or of mixed race. Likewise, the council of state, which is headed by Díaz-Canel and effectively governs the country year-round, has three new vice presidents between the ages of 48 and 52—young leadership for a country long ruled by former revolutionaries in their seventies and older. New rules mandate that deputies serve no more than two five-year terms and enter office at an age no older than 60. Taken together, the changes suggest that party leaders understand the importance of making the benefits of public office accessible to younger cadres and of diversifying the ranks of the governing elite.

A proposed constitutional reform, meanwhile, promises a modest but potentially meaningful political opening. The draft constitution divides power between a president serving as head of state and a prime minister who manages the government’s day-to-day functions. It devolves more autonomy over local affairs to provincial authorities, even though governors would still be appointed by the president. Other provisions suggest greater separation between state and party, even though the overlap in personnel would probably remain high. A new national electoral council would improve the image of the country’s elections, if not their actual integrity. Citizens who gather at least 10,000 signatures can propose legislation. Those who gather 50,000 or more will be able to initiate constitutional revisions.

Even if reformers manage to wedge open some cracks in the state’s monolithic apparatus, Cuba will remain a strictly one-party system.

The draft constitution explicitly grants important civil and due process rights, including habeas corpus, the presumption of innocence, the right to seek restitution for violations committed by state agents, non-discrimination regardless of sexual orientation, and religious liberty. But it makes such fundamental rights conditional upon “collective security, general well-being, respect for public order, the Constitution and laws.” The draft document is rife with such contradictory loopholes that ultimately confirm the state’s supreme power to override fundamental human rights.

Make no mistake: even if reformers manage to wedge open some cracks in the state’s monolithic apparatus, Cuba will remain a strictly one-party system. The draft constitution re-inscribes the Cuban Communist Party as the “superior leading force of [Cuban] society and the state.” Cuban socialism and its political and social system remain “irrevocable.” In the economy, the draft charter complements state planning and ownership with some space for domestic and foreign private capital, but these changes stop well short of formally embracing a more genuinely balanced, hybrid regime, such as the market socialist models of China or Vietnam.

At the moment, the Communist Party is holding forums to debate the draft constitution across the island. These forums are generating discussions among interested elites, but they are expected to yield only modest fixes to the issues outlined above. Once ratified by the legislature and by public referendum—likely easy hurdles—the new constitution will mainly cement the Castro legacy in constitutional, legal and de facto terms, while also bestowing some political legitimacy upon the post-revolutionary cohort Díaz-Canel now leads. For the many Cubans yearning for higher wages and more consumer goods, there is little relief in sight.

MISSED OPPORTUNITIES

Havana’s economic and political inertia has left Washington with little room to elicit more progressive reforms. Either the United States can accept Cuba’s reality and find ways of getting along in order to protect its national interests, or it can maintain and perhaps even step up its efforts to pursue regime change through punitive measures. The latter policy, in place for nearly six decades, has demonstrably failed, but it is unfortunately entrenched in U.S. law, thanks to Congress’ codification of the U.S. economic embargo against Cuba in 1996. U.S. President Donald Trump, who has rolled back many of the openings granted by President Obama, has important pro-embargo constituencies in Florida and is unlikely to shift direction any time soon.  In effect, the Miami hardliners have won back the initiative from the diverse anti-embargo constituencies of the Obama era. This is probably fine and well with hardliners in Cuba, as it gives them some breathing space to seek better relations with Europe, Russia and China without Washington in the picture.

The new administration will likely split the country along generational lines.

The United States and Cuba still cooperate in some areas, but such exchanges face significant challenges. U.S. tourism to the island, especially cruise ship travel, is showing signs of recovery, after a sharp decrease in 2017 and in the first half of 2018. Bilateral cooperation in the areas of law enforcement, migration, and environmental affairs continues quietly, but depleted staffing at both U.S. and Cuban embassies, in part due to a wave of mysterious health concerns reported by U.S. diplomats in Cuba last year, has hampered basic diplomatic and consular functions. U.S. congressional activity has stalled, with the exception of efforts to lift financial restrictions on agricultural trade. All told, neither the punishing embargo nor anemic U.S. diplomacy is likely to prod Havana towards more ambitious reforms.

Domestically, the Díaz-Canel administration will likely split the country along generational lines. For many older Cubans, the new government’s commitment to the principles that guided the Castro era is reassuring. Many middle-aged Cubans will welcome the renewed guarantees of state-sponsored economic security and welfare. Some may also perceive glimmers of a more normal, open and, accessible polity, and will take heart in Díaz-Canel’s support for gradual, carefully monitored openings to foreign investment, the internet, and controlled private enterprise. Cuba’s restless youth, on the other hand, are likely to see only more missed opportunities, whether in a constitutional reform that prioritizes continuity over change or in a president who so far has proven more cheerleader for the status quo than agent of reform. Tragically, Cubans of all stripes, including too many of the best and the brightest, will continue to seek opportunities elsewhere.

 

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IS CUBA’S VISION OF MARKET SOCIALISM SUSTAINABLE?

William M. LeoGrande

Tuesday, July 31, 2018

Just three months after Miguel Diaz-Canel took over the presidency of Cuba from Raul Castro, his government has unveiled a new Council of Ministers—essentially, Cuba’s Cabinet—along with the draft of a new constitution and sweeping new regulations on the island’s emergent private sector. While the changes announced represent continuity with the basic reform program Raul Castro laid out during his tenure, they are nevertheless significant milestones along the road to a more market-oriented socialist system.

The discussion and approval of the draft constitution was the main event of last week’s National Assembly meeting. The revised charter will now be circulated for public debate, revised, reconsidered by the National Assembly, and then submitted to voters in a referendum early next year. The avowed reason for revamping the constitution is to align it with the economic reforms spelled out in 2011 and 2016 that constitute the blueprint for Cuba’s transition to market socialism. Cuba’s 1976 constitution, adopted at the height of its adherence to a Soviet model of central planning, reflected “historical circumstances, and social and economic conditions, which have changed with the passing of time,” as Raul Castro explained two years ago. …

Continue Reading: Is Cubas Vision of Market Socialism Sustainable_

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GACETA OFICIAL NO. 35 EXTRAORDINARIA, DE 10 DE JULIO DE 2018:

New Regulations for Cuba’s Non-Agricultural Private Enterprises as of July 10, 2018

Complete Document available here:

Gaceta-Oficial-Extraordinaria, 10 de Juliode 2018, _CYMFIL20180710_0001

 

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CUBA MOVES BACKWARDS: NEW REGULATIONS LIKELY TO IMPEDE PRIVATE SECTOR GROWTH.

Brookings, Friday, July 13, 2018

Richard E. Feinberg, Nonresident Senior Fellow – Foreign PolicyLatin America Initiative and Claudia Padrón Cueto, Reporter – El Toque (Havana, Cuba)

In a leap backwards, the Cuban government has published a massive compendium of tough new regulations governing the island’s struggling private enterprises. The new regulations—the first major policy pronouncement during the administration of President Miguel Díaz-Canel—appear more focused on controlling and restricting the emerging private sector than on stimulating investment and job creation, more concerned with capping wealth accumulation than in poverty alleviation.

Many small businesses that cater to foreign visitors are already suffering from Trump-era restrictions and travel warnings that have decimated the U.S. tourist trade in Havana. But the new regulations are more a product of domestic Cuban politics than foreign pressures.

On a positive note, the Cuban government promises to renew the granting of licenses for many categories of private businesses by year-end, repealing the extended suspension announced last summer. But the new regulations greatly empower government rule-makers and intrusive inspectors, casting a gray cloud over the island’s business climate. Many existing businesses are likely to retrench if not close altogether.

The private sector grew dramatically in recent years, to include nearly 600,000 owners and employees by official figures, with many more enterprising Cubans working informally; in contrast, the state sector stagnated and further decapitalized. Indeed, many thriving private businesses began to compete successfully against state entities, notably in restaurants, bars and night clubs, guest houses, construction, and transportation. The healthy wages paid by profitable private firms often eclipsed the meager salaries paid to disgruntled government officials and factory workers.

The extensive, highly detailed regulations, which go into effect in December, read like “the revenge of the jealous bureaucrat.” Drawing on a multitude of ministries and operating at all levels—national, provincial, and municipal—interagency committees will now be empowered to authorize, inspect, and regularly report upon private businesses under their jurisdictions. The regulations are replete with astoundingly specific performance requirements and innumerable legal breaches that seem crafted to allow government officials wide discrimination to impose heavy fines (or extort bribes), suspend licenses, and even seize properties.

To cite but a few such regulations: Private restaurants and guest houses must cook food at a minimum of 70 degrees Celsius for the time required for each food; day care centers must allocate at least two square meters per child, have no more than six children per attendant, and be outfitted with pristine bathroom facilities described in exquisite detail (private schools and academies are strictly prohibited); and private taxi drivers must document that they are purchasing fuel at government gas stations, rather than buying on the black market. Further, local officials can deny new licenses based on “previous analyses,” even if the proposed business plan meets all the other specifications, and can fix prices “when conditions warrant.”

The regulations could help shield state enterprises from unwanted private competition. The very ministries that stand to lose market shares are in charge of approving licenses in their sector. For example, the ministry of tourism has the lead in judging licenses for private guest houses. Appeals are possible, but to administrative authorities, not to judicial courts.

Government agencies are also seeking to reassert control over the island’s vibrant artistic communities. The regulations prohibit artists from contracting directly with private restaurants and bars; rather they must be represented by public-sector entities that charge commissions up to 24 percent of revenues. Moreover, performers must not use “sexist, vulgar or obscene language,” which if enforced could imply the banning of popular hip-hop and reggaeton songs and videos.

Perhaps most telling are the restrictive rules squarely aimed at inhibiting private capital accumulation. In a sharp turn from past practice, Cubans will now only be allowed one license for one business, effectively outlawing franchising and diversification. Capacity at restaurants and bars is capped at 50 guests. Most biting, the new regulations establish an upward-sloping wage scale (whereby wages rise as more workers are hired); hiring more than 20 workers becomes prohibitively expensive (six times the average wage). Unlike in the past, employers will now have to pay taxes on the first five workers hired as well.

Many private businesses must also record their transactions (revenues and expenditures) in an account at a government financial institution and keep three months of prospective taxes on deposit. Intended to reduce under-reporting of income, this measure will significantly raise the effective rates of taxation. Investors must also explain their sources of funds. In a country where political authority is unchecked, these financial impositions alone will discourage many potential entrepreneurs.

The Cuban authorities have repeatedly asserted their interest in attracting foreign investment, to compensate for weak domestic savings. However, foreign investors are likely to view these new regulations, even though they apply to domestically-owned firms, as indicative of an official wariness if not hostility toward private enterprise in general. Risk-averse foreign investors will also note that the Cuban government is quite capable of precipitously altering the rules of the game.

The new regulations are the first major policy initiative promulgated during the administration of President Miguel Díaz-Canel. Many of the resolutions were approved by the Council of State under Raúl Castro, prior to Díaz-Canel’s inauguration in April, but nevertheless were issued during his young tenure. Not a good sign for those hoping that Díaz-Canel, 58 years old and ostensibly representing a younger generation, might quickly place his own imprimatur over the extensive state apparatus.

The new regulations make one thing abundantly clear: The Cuban government, state-owned enterprises and the ruling Cuban Communist Party do not want to risk major competition to their own interests—economic, commercial, and political—from a potentially capital-rich, diversified emerging private sector. Apparently, perceived interests in security and stability have overruled Cuba’s own declared economic development goals.

 

 

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CAN CUBA’S MIGUEL DÍAZ-CANEL COMPLETE RAÚL CASTRO’S ECONOMIC REVOLUTION?

BY WILLIAM M. LEOGRANDE ON 5/3/18 AT 12:18 PM

Original Article: MIGUEL DÍAZ-CANEL

When Miguel Díaz-Canel formally accepted the presidency of Cuba in April, he became the first non-Castro to run the country since Fidel’s revolution swept the island in 1959.

In his inaugural address, the new president pledged to continue Raúl Castro’s vision, most notably his unfinished “updating” of the economy, a Cuban form of market socialism launched in 2011 to replace the former Soviet-style central planning system. If he is successful, his reforms would produce the most profound transformation since Fidel took power six decades ago and lay the groundwork for what his brother Raúl called “prosperous and sustainable socialism.”

Salvador Sanchez Ceren recibe a VicePresidente de Cuba, Miguel Diaz Canel.

Miguel Díaz-Canel

But, in taking the helm of government, Díaz-Canel faces strong political headwinds. He has to force Raúl’s economic reforms through a resistant bureaucracy—something even Raúl had trouble doing. He has to hold together a fractious political elite, which is divided over how far and how fast to push economic change for fear of unleashing forces beyond its control. And he has to deliver the goods to a population increasingly vocal in its demands for a higher standard of living and a greater say in politics.

Never has the pursuit of continuity seemed so hard.

Progress has been slow. A total of 313 specific economic reforms were approved by the Cuban Communist Party in 2011. By 2016, less than a quarter of them had been achieved. The plans call for state enterprises that are subject to market prices and efficient enough to show a profit, a vibrant private sector to generate jobs and tax revenue, and an open door for foreign direct investment to provide the capital for growth.

But the reforms are stalled, held back by recalcitrant bureaucrats loathe to give up their authority and perks, and by senior Communist Party leaders who worry that the reintroduction of markets, private property and foreign investment betrays the revolutionary values for which they fought. Raúl called their attitude “an obsolete mentality based on decades of paternalism.”

Foreign investors have been wary. Minister of Foreign Trade and Investment Rodrigo Malmierca says Cuba needs to attract $2.5 billion a year in direct foreign investment. But in the three years since Cuba adopted a new investment law with attractive concessions, it has raised just $3.4 billion. Cuba’s opaque and unresponsive bureaucracy still deters all but the most intrepid foreign companies.

On the domestic front, most state enterprises lack adequate cost accounting systems. Introducing them and requiring that state enterprises make a profit has been an excruciatingly slow process. Some 20 percent of the state budget still goes to cover deficits from failing state companies. But closing them en masse is something the government has been unwilling to do, as it would create a huge unemployment problem.

The government has licensed 580,000 private businesses—a five-fold increase since 2010—and the agricultural sector is composed almost entirely of private farms and cooperatives. In total, the private sector now employs 29 percent of the labor force.

But in the eyes of some Cubans, private businesses have been too successful. Hemmed in by unrealistic regulations, many private companies skirt the law—buying supplies on the black market because there are no wholesale markets, evading taxes because the rates are extortionate and operating beyond the terms of their licenses because the permits are so narrow.

To conservatives in the Communist Party, this looks suspiciously like incipient capitalism run amok. To the average Cuban, the private sector’s growth has fueled rising and visible inequality. Today, unlike a decade ago, you can find fashionably dressed Cubans eating at the most expensive restaurants and staying at tourist hotels once reserved for foreigners. Meanwhile, most people struggle to get by on inadequate state salaries.

Raúl understood that market reforms would produce inequality, but he expected the changes to boost productivity, stimulate growth and raise everyone’s standard of living, thereby blunting discontent over the inequality. It hasn’t worked out that way. Because the state sector is so resistant to change, growth has been anemic, undermining the political logic of the reform process. A Cuban economist advising the government told me that Cuba’s senior leadership understands what economic steps it needs to take to put the economy on sound footing; what worries them is the political risk.

That explains why Cuba still has two currencies—the Cuban peso and the Cuban convertible peso, which is has the same value as the U.S. dollar—and multiple exchange rates. Introduced in the 1990s to attract remittances from the Cuban diaspora, the two-peso system is now a huge drag on economic growth, making realistic cost accounting almost impossible. But currency unification is complex and will ripple through the economy in unpredictable ways. With a chronic shortage of foreign reserves and no access to help from international financial institutions, Cuba will have to manage the conversion on its own.

So while Díaz-Canel’s most urgent tasks are economic, his bigger problems are political. Independent opinion polls conducted in Cuba consistently show that discontent with the economy is pervasive, and faith in the government’s ability to improve things is low. In a 2016 poll by NORC (formerly the National Opinion Research Center) at the University of Chicago, 70 percent of Cubans cited the economy as the country’s most serious problem, and half thought that inequality had become too great. Discontent is even higher among younger generations, who have no memory of the revolution’s halcyon days in the 1960s and 1970s.

As Díaz-Canel tries to navigate the ship of state through these dangerous shoals, he also has to keep an eye out for mutiny among the crew.

Although decision-making among Cuba’s top leadership is opaque, signals point to divisions over the economic reforms and how to respond to expressions of popular discontent that have grown with the expansion of the internet. Raúl Castro’s authority as a revolutionary veteran enabled him to manage these disagreements and maintain elite cohesion—an advantage Díaz-Canel will not enjoy. Although he is a seasoned politician who has spent three decades working his way up the political ladder, he is not well known outside the two provinces where he served as Communist Party first secretary. But he will not be alone. Raúl still serves as Community Party leader, and he promises to be there supporting Díaz-Canel, telling the National Assembly that he expects the new president to ultimately become leader of the party as well.

So Cuba’s new president is no mere puppet. Through a calibrated handover of power, he will become the man in charge. And he has his work cut out for him.

William M. LeoGrande is a professor of government at American University in Washington, D.C., and co-author with Peter Kornbluh of Back Channel to Cuba: The Hidden History of Negotiations Between Washington and Havana (University of North Carolina Press, 2015).

 

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BOOK REVIEW, ENTREPRENEURIAL CUBA: THE CHANGING POLICY LANDSCAPE

Boulder, CO: First Forum Press, 2015. 373 pp.

By Archibald R. M. Ritter and Ted A. Henken

Review by Sergio Díaz-Briquets,

Cuban Studies, Volume 46, 2018, pp. 375-377, University of Pittsburgh Press

The small business sector, under many different guises, often has been, since the 1960s, at the center of Cuban economic policy. In some ways, it has been the canary in the mine. As ideological winds have shifted and economic conditions changed, it has been repressed or encouraged, morphed and gone underground, surviving, if not thriving, as part of the second or underground economy. Along the way, it has helped satisfy consumer needs not fulfilled by the inefficient state economy. This intricate, at times even colorful, trajectory has seen the 1968 Revolutionary Offensive that did away with even the smallest private businesses, modest efforts to legalize self-employment in the 1979s, the Mercados Libres Campesinos experiment of the 1980s, and the late 1980s ideological retrenchment associated with the late 1980s Rectification Process.

Of much consequence—ideologically and increasingly economically—are the policy decisions implemented since the 1990s by the regime, under the leadership of both Castro brothers. Initially as part of Special Period, various emergency measures were introduced to allow Cuba to cope with the economic crisis precipitated by the collapse of the communist bloc and the end of Soviet subsidies. These early, modest entrepreneurial openings were eventually expanded as part of the deeper institutional reforms implemented by Raúl upon assuming power in 2006, at first temporarily, and then permanently upon the resignation of his brother as head of the Cuban government.

In keeping with the historical zigzag policy pattern surrounding small businesses activities—euphemistically labeled these days as the “non-state sector”—while increasingly liberal, they have not been immune to temporary reversals. Among the more significant reforms were the approval of an increasing number of self-employment occupations, gradual expansion of the number of patrons restaurants could serve (as dictated by the allowed number of chairs in privately owned paladares), and the gradual, if uneven, relaxation of regulatory, taxing, and employment regulations. Absent has been the authorization for professionals (with minor exceptions, such as student tutoring) to privately engage in their crafts and the inability to provide wholesale markets where self-employed workers could purchase inputs for their small enterprises.

The authors of this volume, an economist and a sociologist, have combined their talents and carefully documented this ever-changing policy landscape, including the cooperative sector. They have centered their attention on post–Special Period policies and their implications, specifically to “evaluate the effects of these policy changes in terms of the generation of productive employment in the non-state sector, the efficient provision of goods and services by this emergent sector, and the reduction in the size and scope of the underground economy” (297).

While assessing post-1990 changes, Entrepreneurial Cuba also generated a systematic examination of the evolution of the self-employment sector in the early decades of the revolution in light of shifting ideological, political, and economic motivations. Likewise, the contextual setting is enhanced by placing Cuban self-employment within the broader global informal economy framework, particularly in Latin America, and by assessing the overall features of the second economy in socialist economies “neither regulated by the state nor included in its central plan” (41). These historical and contextual factors are of prime importance in assessing the promise and potential pitfalls the small enterprise sector confronts in a changing Cuba.

Rich in its analysis, the book is balanced and comprehensive. It is wide ranging in that it carefully evaluates the many factors impinging on the performance of the small business sector, including their legal and regulatory underpinnings. The authors also evaluate challenges in the Cuban economic model and how they have shaped the proclivity for Cuban entrepreneurs to bend the rules. Present is a treatment of the informal social and trading networks that have sustained the second economy, including the ever-present pilfering of state property and the regulatory and transactional corruption so prevalent in Cuba’s centralized economy.

While none of the above is new to students of the Cuban economy—as documented in previous studies and in countless anecdotal reports—Ritter and Henken make two major contributions. First, they summarize and analyze in a single source a vast amount of historical and contemporary information. The value of the multidisciplinary approach is most evident in the authors’ assessment of how the evolving policy environment has influenced the growth of paladares, the most important and visible segment of the nonstate sector. By focusing on this segment, the authors validate and strengthen their conclusions by drawing from experiences documented in longitudinal, qualitative case studies. The latter provide insights not readily gleaned from documentary and statistical sources by grounding the analysis in realistic appreciations of the challenges and opportunities faced by entrepreneurial Cubans. Most impressive is the capacity of Cuban entrepreneurs to adapt to a policy regime constantly shifting between encouraging and constraining their activities.

Commendable, too, is the authors’ balanced approach regarding the Cuban political environment and how it relates to the non-state sector. Without being bombastic, they are critical of the government when they need to be. One of their analytical premises is that the “growth of private employment and income represents a latent political threat to state power since it erodes the ideals of state ownership of the means of production, the central plan, and especially universal state employment” (275).

This dilemma dominates the concluding discussion of future policy options. Three scenarios are considered possible. The first entails a policy reversal with a return to Fidel’s orthodoxy. This scenario is regarded as unlikely, as Raúl’s policy discourse has discredited this option. A second scenario consists of maintaining the current course while allowing for the gradual but managed growth of the non-state sector. While this might be a viable alternative, it will have limited economic and employment generation effects unless the reform process is deepened by, for example, further liberalizing the tax and regulatory regimes and allowing for the provision of professional services.

The final scenario would be one in which reforms are accelerated, not only allowing for small business growth but also capable of accommodating the emergence of medium and large enterprises in a context where public, private, and cooperative sectors coexist (311). As Ritter and Henken recognize, this scenario is unlikely to come to fruition under the historical revolutionary leadership, it would have to entail the resolution of political antagonisms between Washington and Havana, and a reappraisal by the Cuban government of its relationship with the émigré population. Not mentioned by Ritter and Henken is that eventual political developments—not foreseen today—may facilitate the changes they anticipate under their third scenario.

In short, Entrepreneurial Cuba is a must-read for those interested in the country’s current situation. Its publication is timely not only for what it reveals regarding the country’s economic, social, and political situation but also for its insights regarding the country’s future evolution.

…………………………………………………………………………….

Table of Contents

 Table of Contents,

 List of Charts and Figures

Chapter I Introduction       

Chapter II      Cuba’s Small Enterprise Sector in International and Theoretical Perspective

Chapter III    Revolutionary Trajectories, Strategic Shifts, and Small Enterprise, 1959-1989

Chapter IV    Emergence and Containment During the “Special Period”, 1990-2006

Chapter V        The 2006-2011 Policy Framework for Small Enterprise under the Presidency of    Raul Castro

Chapter VI    The Movement towards Non-Agricultural Cooperatives

Chapter VII  The Underground Economy and Economic Illegalities

Chapter VIII  Ethnographic Case Studies of Microenterprise, 2001 vs. 2011

Chapter IX  Summary and Conclusions

APPENDIX                                                              

GLOSSARY                                                                                                                         

BIBLIOGRAPHY

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CUBA’S COMMUNIST PARTY ADMITS ERRORS, SLOWDOWN IN REFORMS

HAVANA (Reuters) MARCH 27, 2018

Sarah Marsh

 

Cuba’s Communist Party admitted a slowdown and errors in its implementation of Raul Castro’s market-style reforms, just weeks before he steps down from the presidency, but vowed to continue updating the Soviet-style command economy.

The party central committee held a plenary session to discuss the state of reforms undertaken during Castro’s 10-year presidential mandate to open up the ailing economy and give the private sector and foreign investment greater roles. Castro, who steps down as president on April 19, presided over the plenary which took place this week. The 86-year old will remain head of the party, the country’s guiding political force, until 2021.

“Despite the errors and insufficiencies recognized in this plenary, the situation is more favorable than a few years ago,” Castro, 86, was quoted as saying by party newspaper Granma.

Reforms were implemented swiftly in the first three years since being agreed in 2011, the head of the party’s reform commission Marino Murillo was cited as saying.

The number of self-employed workers in the Caribbean island nation of 11.2 million residents has more than tripled to around 580,000 workers.

But implementation has slowed in the last two years due to the complexity of the process, mistakes in oversight, a lack of financial backing and low engagement of the bureaucracy, Murillo said. The party was also deliberately implementing reforms slowly to ensure they would not marginalize anyone.

The government last year froze the issuance of licenses for an important set of private sector activities as it sought to root out malpractices such as purchases on the black market and to improve regulation.

The 142-member central committee discussed the lack of a fiscal culture and accountancy tools to make a serious economic analysis in Cuba as well as difficulties communicating the complex process.

Many Cubans, whose expectations were raised by Castro’s reforms, have felt frustrated by the slowdown that they believe means Havana is not truly committed to updating the economy.

The government said late last year, for example, it would limit licenses to one per person going forwards – a move that could limit Cubans’ entrepreneurial ambitions.  Yet it did not address key private sector concerns like the lack of a wholesale market or ability to import or export.

Havana has also backtracked on reforms in the key agricultural sector over the last few years, once more assigning resources, setting prices and controlling most distribution.

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IS CUBA’S ECONOMY READY FOR THE 2018 LEADERSHIP TRANSITION?

Pavel Vidal Professor, Pontificia Universidad Javeriana Cali

CUBA STUDY GROUP, February 2018

Complete Article, English:  Pavel_Is Cuba’s Economy Ready English

Complete Article, Spanish:  Pavel En qué condicion llega la economia cubana a la transicion generacional

Introduction

Cuba has changed considerably in these last ten years of economic reforms, though not enough. Family income, tourist services, food production, restaurants, and transportation depend less on the state and much more on private initiative. The real estate market, sales of diverse consumer goods and services, and the supply of inputs for the private sector have all expanded, in formal and informal markets. Foreign investment stands out as a fundamental factor in Cuba’s development. The country has achieved important advances in the renegotiation of its external debts.

Nevertheless, many other announced changes were defeated by internal resistance, half-heartedly implemented, or put in place in ways that replicated mistakes of the past. The bureaucratic and inefficient state enterprise sector, tied down by low salaries and a strict central plan, impedes economic progress. Cuba’s advantages in education and human capital continue to be underexploited. Neither has the international environment provided much help. The U.S. trade embargo remains in place, the Trump administration has returned to the old and failed rhetoric of past U.S. policies, and Cuba continues to depend on a Venezuelan economy that does not yet seem to have hit rock bottom.

As a consequence, the growth of GDP and productivity has been disappointing, agricultural reform has produced few positive results, and Cuba is once again drowning in a financial crisis. The reforms implemented to date did not create sufficient quality jobs, and, all told, half a million formal positions were eliminated from the labor market.

The second half of 2017 proved especially challenging due to the impacts of Hurricane Irma and new restrictive measures announced by the U.S. government. To these difficulties one must add the decision of the Cuban government to freeze (temporarily) the issuance of licenses to the private sector.

Even so, the National Office of Statistics and Information (ONEI) reported that the economy has not fallen into recession. There are reasons to doubt these statistics, however. Such doubts only multiply when we take into consideration the decision to delay, or altogether avoid, the publication of reports on individual sectors of the economy and the state of the national accounts. For 2018, the government has proposed a rather optimistic economic growth plan (2% increase in GDP) that once again does not appear to appropriately evaluate the complexity of Cuba’s macro-financial environment.

Three highly significant events are anticipated this year: the generational transition within the government, new norms for the private sector, and the beginning of the currency reform process. These three issues have raised expectations on the island, but each may be tackled in a disappointing fashion.

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Conclusions:

Two Other Changes that Could Disappoint A generational transition in the Cuban government will take place on April 19, 2018. Beyond indications that Miguel Díaz-Canel will be the future president, there are no signals as to who will be vice president or who will direct principal ministries such as the Ministry of the Economy or the Ministry of Foreign Relations. Nor do we know where politicians of the “historic generation” will end up.

The new government will want to demonstrate continuity with the former in order to assure its position with various spheres of political power. It appears that the new government will not have its own economic agenda. We can expect that documents approved by recent Congresses of the Cuban Communist Party—which define the limits of reform, the desired development strategy, and the social and economic model to which Cuba aspires—will continue to serve as economic policy guides.

Whatever the composition of the incoming government, in the short term, Cuba’s new leaders will need to convince other state actors that they have the authority and will to, first, achieve the objectives laid out in the “Guidelines for Economic and Social Policy” (Lineamientos), and then deepen the process of reform, overcoming internal forces resistant to change. The new government will thus have to carefully assess the political costs and benefits of implementing reforms to different degrees and at varying speeds, but it will start with low initial political capital due to less popular recognition and a lack of historic legitimacy. Cuba’s new leaders, moreover, must confront these challenges at a time of renewed conflict with the U.S. government. The task is by no means easy, and we will have to wait to see how they handle it.

Another change we can expect this year is the publication of new rules governing the operations of the private sector, and thus unfreezing the issuance of licenses. A greater degree of control over tax payments, as well as efforts to more strongly “bank” the sector, appear to be two basic objectives of the forthcoming rules.

It is very important that the private sector contribute to the Treasury in proportion to its earnings. This is impossible to guarantee if private sector operations are not registered in banks. An effective and progressive tax system provides net dividends to all. The state budget would benefit, exorbitant gaps in income distribution could be avoided, and the societal image of the private sector would be improved. It will be much easier to defeat political and ideological resistance to expansion of the private sector when its income also serves to finance expenses in education and healthcare, and when individual contributions are in line with variable levels of income.

We still do not know if the new rules for the private sector will focus only on fiscal and banking control, or if new policies will address some of the many complaints that the private sector itself has made—high tax rates, the struggle to obtain inputs, and the difficulty of linking operations to foreign trade, for example. A draft of the rules that has circulated does not contain answers to these problems, but rather suggests a focus primarily on more control and penalization.6 If the rules that are ultimately implemented do not differ much from what appears in this draft, depleted prospects for the private sector will be the first disappointment Cubans face in 2018.

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