Tag Archives: Economic Reforms

The Economist, Special Report on Cuba, March 24, 2012

Posted on March 28, 2012 by Arch Ritter

 

The Castros, Cuba and America; On the road towards capitalism

Change is coming to Cuba at last. The United States could do far more to encourage it.

The Economist has produced one of its excellent surveys, this time focusing on Cuba.

Below are a set of hyperlinks to the various chapters of the Cuba Report. The chapter on the economy is presented following the Table of Contents.

Hyperlinked Table of Contents

  Revolution in retreat; Revolution in retreat

Under Raúl Castro, Cuba has begun the journey towards capitalism. But it will take a decade and a big political battle to complete, writes Michael Reid

  Inequality; The deal’s off

Inequalities are growing as the paternalistic state is becoming ever less affordable

Population; Hasta la vista, baby

The population is shrinking, ageing—and emigrating

The economy: Edging towards capitalism

Why reforms are slow and difficult

Politics; Grandmother’s footsteps

With no sign of a Cuban spring, change will have to come from within the party

Cuban-Americans; The Miami mirror

Cubans on the other side of the water are slowly changing too

After the Castros; The biological factor

Who and what will follow Raúl?

The Economy: Edging towards capitalism

Why reforms are slow and difficult

GISELA NICOLAS AND two of her friends wanted to set up an events-catering company, but that is not one of the 181 activities on the approved list for those who work por cuenta propia (“on their own account”), so in May 2011 they opened a restaurant called La Galeria. With 50 covers, it is a fairly ambitious business by Havana standards. They have rented a large house in Vedado and hired a top chef and 13 other staff who are paid two to three times the average wage, plus tips. The customers are mainly foreign businesspeople and diplomats, Cuban artists and musicians and visiting Cuban-Americans.

“This opportunity means a lot to us,” says Ms Nicolas, who used to work for a Mexican marketing company. “But they haven’t created the conditions for a profitable business.” There are no wholesalers in Cuba, so all supplies come from state-owned supermarkets or from trips abroad. Reservations are taken on Ms Nicolas’s mobile phone. Advertising is banned, though classified ads in the phone book will soon be allowed.

Across Cuba small businesses are proliferating. Most are on a more modest scale than La Galeria. Fernando and Orlandis Suri, who are smallholders at El Cacahual, a hamlet south of Havana, can now legally sell their fat pineapples and papaya from a roadside stall, along with other produce. Orlandis plans to rent space on Havana’s seafront to sell fruit cocktails and juice. In Santa Clara, Mr Pérez’s wife, Yolanda, sells ice-cream from their home. Having paid 200 pesos for a licence and 87 pesos in social-security contributions, she earns enough “to buy salad”. The streets around Havana’s Parque Central heave with vendors hawking snacks and tourist trinkets. Many of them are teachers, accountants and doctors who have left their jobs for a more lucrative, if precarious, life in the private sector.

No reason to work

This cuentapropismo is only the most visible part of Raúl Castro’s reform plan. “The fundamental issue in Cuba is production,” says Omar Everleny, a reformist economist. “Prices are high and wages are low because we don’t produce enough.”

Cuban statistics are incomplete, inconsistent and often questionable. But in a lifetime’s detective work, Carmelo Mesa Lago at the University of Pittsburgh has calculated that output per head of 15 out of 22 main agricultural and industrial products was dramatically lower in 2007 than it had been in 1958. The biggest growth has come in oil and gas and in nickel mining, largely thanks to investment since the 1990s by Sherritt, a Canadian firm. But output per head of sugar, an iconic Cuban product, has dropped to an eighth of its level in 1958 and 1989. Capital investment has collapsed. Raúl Castro has repeatedly lamented that Cuba imported around 80% of the food it consumed between 2007 and 2009, at a cost of over $1.7 billion a year.

The American embargo is an irritant, but the economy’s central failing is that Fidel’s paternalist state did away with any incentive to work, or any sanction for not doing so. So most Cubans do not work very hard at their official jobs. People stand around chatting or conduct long telephone conversations with their mothers. They also routinely pilfer supplies from their workplace: that is what keeps the informal economy going.

The global financial crisis in 2007-08 also took its toll. Tourists stayed away, the oil price plunged, and with it Venezuelan aid. Hurricane damage meant more food imports, just when world food prices were rising and those of nickel, now Cuba’s main export, were plunging. All this coincided with the political infighting in which Mr Lage was ousted, during which “all financial and budgetary discipline was blown away”, according to a foreign businessman. Having repeatedly defaulted on its foreign debt, Cuba has little access to credit. Instead of devaluing the CUC, which would have pushed up inflation, in January 2009 the government seized about $1 billion in hard-currency balances held by state-owned enterprises (SOEs) and foreign joint ventures. It did not finish paying them back until December 2011.

The guidelines approved by the party congress contain measures to raise production and exports, cut import demand and make the state financially sustainable. This involves, first, turning over idle state land to private farmers; second, making the state more productive by transferring surplus workers to the private sector or to co-ops; and third, lifting some of the many prohibitions that restrict Cuban lives, and granting much more autonomy to the 3,700 SOEs.

The grip of the state on Cuban farming has been disastrous. State farms of various kinds hold 75% of Cuba’s 6.7m hectares of agricultural land. In 2007 some 45% of this was lying idle, much of it overrun by marabú, a tenacious weed. Cuba is the only country in Latin America where killing a cow is a crime (and eating beef a rare luxury). That has not stopped the cattle herd declining from 7m in 1967 to 4m in 2011.

In 2008 Raúl allowed private farmers and co-ops to lease idle state land for ten years. By December last year 1.4m hectares had been handed out. The government has now agreed to extend the lease-period to up to 25 years, allow farm buildings to be put up and pay for any improvements if the leases are not renewed.

Credit and technical assistance also remain scarce, says Armando Nova of CEEC. Farmers suffer in the grip of Acopio, the state marketing organisation. It is the monopoly supplier of inputs such as seeds, fertiliser and equipment and was the sole purchaser of the farms’ output, but its monopoly is being dented. Farmers can now sell surplus production of all but 17 basic crops themselves. Under a pilot programme in Artemisa and Mayabeque provinces, near Havana, new co-ops will take over many of Acopio’s functions.

The reformers want to see Acopio go. More surprisingly, so does Joaquín Infante Ugarte at the National Association of Economists and Accountants (ANEC): “It’s always been a disaster. We should put a bomb under it.” But in around 100 of Cuba’s 168 municipalities the economy is based on farming, so Acopio is a big source of power and perks for party hacks, and its future is the subject of an intense political battle. That makes farmers nervous. A year ago the 30 or so farmers in the Antonio Maceo co-op in Mayabeque leased extra land, got a loan and planted bananas, citrus and beans. The administrator says output is up, but “it will take time to see a real difference.” And with that he clammed up.

Official data suggest that output of many crops fell last year; the price of food rose by 20%. That may be partly because farmers are bypassing the official channels. Granma, the official—and only—daily newspaper, reported in January that a spontaneous, self-organised and regulated wholesale market in farm products has sprung up in Havana. That looks like the future.

Letting go is hard to do

Reducing the state’s share of the economy has been even more contested. Raúl originally said the government would lay off 500,000 workers by March 2011 and a total of 1.1m by 2014. That timetable has slipped by several years because the government has been reluctant to allow sufficiently attractive alternatives for workers to give up the security (and the pilfering opportunities) of a state job. But including voluntary lay-offs and plans to turn many state service jobs into co-ops (as has already happened with small barber’s shops, beauty parlours and a few taxi drivers), some 35-40% of the workforce of 4.1m should end up in the private sector by 2015, reckons Mr Everleny.

Raúl sees corruption as politically incendiary at a time of rising inequality

By October 2011, he says, some 338,000 people had requested a business licence, 60% of whom were not leaving state jobs, suggesting that they were simply legalising a previous informal activity. As happens to small businesses the world over, many fail in the first year. Few of the cuentapropistas have Ms Nicolas’s business experience. Many clearly find it hard to distinguish revenue from profit. ANEC is organising training courses. But the government has stalled an attempt by the Catholic church to set up an embryonic business school.

If cuentapropismo is not to be a recipe for poverty, the government will have to ease the rules. Mr Everleny wants to see private professional-service firms being established: architects, engineers, even doctors. Already the taxes levied on the new businesses have been cut, but they are still designed to produce “bonsai companies”, in the words of Oscar Espinosa Chepe, a dissident economist.

Lack of credit is another obstacle. Start-up capital for new businesses comes mainly from remittances. In a pilot scheme the government approved $3.6m in credits in January, nearly all for house improvements. As for deregulation, Raúl has taken some simple and popular steps, lifting bans on Cubans using tourist hotels and owning mobile phones and computers, and last year allowing them to buy and sell houses and cars.

But reforming SOEs is far more complicated. They have been told to introduce performance-related pay. The boldest step was last year’s abolition of the sugar ministry. In principle, SOEs that lose money will be merged or turned over to their workers as co-ops. But a planned bankruptcy law is still pending. So is the elimination of subsidies and the introduction of market pricing. Mr Ugarte of ANEC thinks much of this will happen this year, along with a new law to introduce corporate income tax.

The pace of change has picked up since the party congress set up a commission with 90 staff under Marino Murillo, a Politburo member and former economy minister, to push through the reforms, says Jorge Mario Sánchez at CEEC. “By 2015 there won’t be the socialist economy of the 1990s, nor the same society.” But there are several gaps.

For one, the government seems undecided what to do about foreign investment, a key element in the rapid growth in Vietnam and China. It has cancelled some of the joint ventures it had signed (often in haste) during the Special Period, and such new agreements as it is entering are almost exclusively with companies from Venezuela, China and Brazil. Odebrecht, a Brazilian conglomerate, has reached an agreement under which it will run a large sugar mill in Cienfuegos for ten years. Many foreign companies are keen to invest in Cuba but are put off by the government’s insistence on keeping a majority stake and its history of arbitrary policy change.

Officials worry that foreign investment brings corruption. Raúl has launched an anti-corruption drive with the creation of a powerful new auditor-general’s office. Several hundred Cuban officials, some very senior, have been jailed, as have three foreigners. Raúl rightly sees corruption as politically incendiary at a time of rising inequality. But he is tackling the symptoms rather than the cause. “People who were making $20 a month were negotiating contracts worth $10m,” says a foreign diplomat.

The guidelines involve only microeconomic reforms. Raúl’s macroeconomic recipe has so far been limited to austerity: he has managed to trim the fiscal and current-account deficits. The trickiest reform of all will be unifying the two currencies, by devaluing the CUC and revaluing the peso. It would help if Cuba were a member of the IMF and the World Bank and had access to international credit, but so far the government has shown no interest in joining. Mr Vidal of CEEC points out that for devaluation to provide a stimulus, rather than just generating inflation, the economy would have to be far more flexible. That will require a political battle.

 

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CUBA: One step forward

Posted on March 20, 2012 by Arch Ritter

By Andrea Armeni,

Published originally here “CUBA: One step forward” in Emerging Markets, 19/03/2012

After several tough years, the Cuban economy in 2011 started to show signs of recovery. Following a wave of reforms seeking a mild opening of the economy, and renewed, if limited, attention from international partners, some took this as cause for hope that things might be looking up for the island nation. Yet the challenges for the small and isolated enclave of socialism in the Americas remain daunting.

Faced with crippling foreign debt following the liquidity crisis of 2008 and 2009, Cuba found itself in need of a drastic overhaul. Already bare-bone, imports were slashed a further 38%, and government spending was cut back.

But this last crisis finally prompted the state to enact its first series of serious economic reforms in six decades. As Cuba’s outdated economic model is generally considered to be the real reason of its economic ills, any kind of progress in the model is an improvement.

Observers had anticipated that Raúl Castro, after taking over the reins from his brother Fidel in 2006, would herald a period of transition. But early attempts at reform were stymied, and Raúl did not prove to be a stalwart of change. His early criticisms of the Cuban economy did not materialize into effective policy. Moves towards openness and away from the almost absolute control by the state of economic activity didn’t happen.

Real change started to take place in 2011, when Raúl pushed for the long-delayed Sixth Congress to adopt a series of economic action points ranging from a slashing of the bloated state payroll and a sliver of openness to private enterprise, to private ownership of real estate and greater freedoms in agricultural production. The reforms are moving Cuba in the right direction – and, as compared to previous measures, they are concrete measures. According to Armando Linde, former president of the Association for the Study of the Cuban Economy (ASCE), unlike in the past: “the current reforms are not merely to appease possible Castro-fatigue in Cuba. They are doing it because they feel that their model has been exhausted.”

Mercado Artesanal, on the Malecon, Photos by Arrch Ritter, around 2004

Richard Feinberg, a non-resident senior fellow of the Brookings Institution and author of a recent major report on Cuba, notes that “the reform process, which is still cautious, is accelerating.”

This positive impression of the state’s intentions is accompanied by a widespread sentiment that the reforms still do not go far – or fast – enough. Others, such as Arch Ritter, a Canadian academic at Carleton University and an expert on the Cuban economy, voice concerns over the feasibility and the implementation of the 300-odd “main lines” of reform.

Cuban economist Oscar Espinosa Chepe, a frequent critic of the state, welcomes the reforms but also notes that the government has already fallen short on its proposed implementation timetable. Omar Everleny, a professor as well as director of the prominent Center for the Study of the Cuban Economy in Havana, sounds a more positive note: “The option given by the government is a good one: a gradual approach, that is to say, every few months a new measure is implemented.” A case in point is the reduction of the state employee rolls: the plan called for the dismissal of half a million workers in the state’s employ by the end of 2011. According to Carmelo Mesa-Lago, a respected scholar of the Cuban economy, only some 100,000 have been dismissed so far. Without the sudden creation of jobs in the private sector, the firing of so many state employees would have resulted in an unemployment rate of 22%, says Mesa-Lago.

With significant limitations on alternative employment for a population used to monopolistic state employment, change has to be gradual.

INITIAL CHANGES

But the resurgence of economic activity is evident, particularly in the capital, and there is little doubt that Cuba’s internal economy has received a positive push by allowing private micro-enterprise. Real GDP growth is expected to reach 2.5% in 2012. But limitations remain in terms of the scarcity of productive inputs, from flour to fertilizer, an uncertain new taxation scheme, and the strangulation of any enterprise that goes beyond a handful of employees.

Agriculture, another sector that has suffered tremendously in the last years, is showing signs of recovery in the official figures. This should be spurred further by easing restrictions on independent agricultural production and sale of farm produce. There is talk of making agricultural credits available as well as providing raw materials, such as seeds and fertilizers, that were previously accessible only to state producers.

But national production across the board remains dismal. Cuba manages its trade deficit in goods only by exporting services, principally in the form of doctors and nurses, to Venezuela and other friendly countries.

Cuba’s dependency on Venezuela creates problems of its own. Venezuela now counts for 40% of Cuba’s hard currency from trade, and its share in Cuba’s total trade deficit has risen to 42%, according to Mesa-Lago. Cuba is still reeling from the impact of the end of Soviet subsidies and many believe that if Venezuela’s policies vis-à-vis Cuba were to change, the island would likely suffer another tremendous crisis. Venezuela’s elections, scheduled for October, have raised the possibility, however slim, that Chávez could be unseated, not least following his diagnosis with cancer. “Cuba is going to be in trouble if there is a change of regime in Venezuela,” says Ritter. “With a regime change in Venezuela, which looks like a possibility, Cuba may lose its massive indirect quasi-subsidization through the purchase of these medical services.”

Nor is there any imminent rescue from other parties in sight. China’s credits are reportedly limited to commercial purchases of Chinese goods (Cuba does not officially publish such figures). Foreign direct investment is still low after the scare from the 2008–09 liquidity crisis, which caused investors to flee as the government froze foreign companies’ bank accounts and limitations emerged on the repatriation of proceeds. At the institutional level, Brazil is a potential partner for Cuba in the coming years. Lula’s seminal visit in 2010 was followed by a three-day visit from president Dilma Rousseff early this year. The economy featured at the core of the discussions, reinforcing Brazil’s presence on the island, with interests that range from a successful tobacco joint venture, Brascuba, to Brazil’s $640 million contribution to the renovation of one of Cuba’s main harbours.

Brazil’s interests in Cuba are far less ideological than those of Venezuela. Brazil’s knowledge and investments in sugar cane and its derivative ethanol could revive Cuba’s sugar industry, for example. But the interest is also geopolitical, as Brazil aims to assert its diplomatic influence over the continent.

The prospect of oil revenues is another reason for hope that Cuba can earn much-needed hard currency. Exploration began earlier this year for offshore oil extraction in Cuba’s waters. While the discovery of drillable reserves would be a godsend to the Cuban economy, any financial rewards would not come for another four or five years. Cuba can’t afford to wait that long on the economic sidelines – the reforms will have to prove effective in spurring internal growth quickly if Cuba is to avert another major crisis.

NOT SO SPLENDID ISOLATION

Beyond all this lies the fact that Cuba is still cut off from all international financial institutions (IFIs). “Cuba can’t be the only country out of some 200 that doesn’t belong to any of these institutions,” says Everleny. “To the extent that Cuba is changing its economy and is establishing better relations with other countries in Latin America, why should Venezuela be a part of these international institutions but not Cuba? Why Ecuador, Bolivia, Nicaragua?” The notion that Cuba should become a member in IFIs is gaining traction. Feinberg’s recent seminal paper, published by the Brookings Institution, analyses the feasibility of Cuba joining the IFIs, and was read with interest in Cuba. Feinberg outlines the complicated interplay between the morass of US legislation surrounding Cuba’s isolation from the rest of the world and the island’s real chances for establishing relations with the IFIs and, perhaps more plausibly, with Andean Development Bank Comunidad Andina de Fomento (CAF), which has already invested beyond its member countries.

“One would imagine that influential CAF shareholders (including Venezuela, Brazil and Argentina) would be supportive, and would agree that the goals of a Cuba fund could be made consistent with overall CAF policies,” says Feinberg’s paper.

For a long time the socialist state scoffed at the idea of dealing with such imperialist institutions as the World Bank and the IMF, but Cuba under Raúl has toned down its rhetoric against the IFIs. A recent visit to Cuba by several World Bank economists – though in their personal capacities – was mentioned positively by several observers.

Everleny, who met officials from the Washington multilaterals visiting Havana, says: “The spirit is to try to initiate an exchange from a technical standpoint – information, publication, access for them to see what is happening in Cuba.”

Officially, the World Bank, the IMF and the IDB will not comment on anything concerning Cuba, but these informal gestures have been welcome – even on the part of the Cuban government. “There has to be a dialogue already, even though officially there has not been a proposal to join any of the IFIs,” says Everleny. “But at the same time – the state has not blocked it either.”

Peter Hakim, president emeritus of the Inter-American Dialogue, echoes the voices that would welcome more involvement by the IFIs in Cuba, even if just at the consultative level. “The World Bank and the IMF have very talented people who know a lot about developing economies; they could be very helpful,” he says, “and even more helpful if they could put some money behind the reform process.”

Linde, the ASCE economist who retired as deputy secretary of the IMF, agrees, but he sees little chance of any significant steps happening quickly. While it is doubtful that any steps towards openness will come from the Obama administration before the 2012 elections, he says: “The Cuban community in the US is becoming more open to a rapprochement with the Castro regime. This younger generation is more amenable to looking ahead rather than looking back to the past.”

But the fact remains that until the US – for whatever reason – demonstrates a willingness to engage with Cuba, there is little prospect for any international action that could do much to improve the lot of the Cuban people. Hakim calls this a “terrible mistake” that has effectively stopped the IFIs from meaningfully approaching Cuba.

One good chance for openness to a dialogue in recognition of Cuba’s reforms should be the Summit of the Americas in April. Despite its lack of participation in the OAS (Organization of American States), Cuba has signalled its willingness to participate in the summit if invited, a position backed by the ALBA (Bolivarian Alliance for the Americas) countries. This is seen by some as a good opportunity for the US and Cuba to greet a new era where the two can sit at the same table.

Uninspiringly, US hardliners such as chairman of the House Foreign Affairs Committee Ileana Ros-Lehtinen are vehemently opposed to Cuba’s presence at the Colombia Summit: “Allowing the Cuban tyranny to participate would fly in the face of everything the Charter and the OAS is supposed to stand for,” she says.

The isolationist stance has fewer and fewer supporters outside a narrowing cluster of Miami Cubans. The overwhelming majority of non-political observers say the US should recognize the steps taken by Cuba and help push them along. It is 2012, not 1962, after all.

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New Publication, CUBA: PEOPLE, CULTURE, HISTORY

Posted on February 14, 2012 by Arch Ritter

A near-encyclopedic volume on Cuba was recently published by Charles Scribner’s Sons but has received surprisingly limited publicity- at least from my perspective up here in winter-time in the True North. I have not yet seen the volume myself nor have I even seen the Table of Contents. However, the description of the substance of the volume below looks interesting.

If my finances were infinite, I would certainly buy a copy, even though the price ranges from $284.44 to $454.95, depending on the seller.

I contributed two essays on the Cuban economy. These are available here:

Archibald Ritter  “The Cuban Economy, Revolution, 1959-1990”

Archibald Ritter, “Cuba’s Economy During the Special Period, 1990-2010”

Here is a brief description of the volume:

Editor in Chief: Alan West-Durán, Northeastern University

 Associate Editors: Victor Fowler Calzada, Unión de Escritores y Artistas de Cuba (UNEAC); Gladys E. García Pérez, Unión de Escritores y Artistas de Cuba (UNEAC); Louis A Pérez, Jr., University of North Carolina; César Salgado, University of Texas; Maria de los Angeles Torres, University of Illinois, Chicago

Charles Scribner’s Sons,  An Imprint of Gale, Cengage Learning 2011

 INTRODUCTION

In an exceedingly complex and changing global situation,  understanding Cuba is an important and challenging task. The Scribner CUBA: People, Culture, History is a reference work that goes beyond a mere presentation of facts, biographies, and “ready reference” information, which is widely available on the Internet, to offer deep interpretation. The book will offer on the one hand, twenty-one interpretative essays on major topics in Cuban history, culture and society, as well as over one hundred twenty-five shorter essays on artistic, literary, and nonfiction works; major events and places of cultural significance.

The major essays will not only cover Economics, Sugar, Tobacco, Religion, and Food, but also Cuba and its Diasporas, Ecology and Environment, Sexuality, Gender, Race and Ethnicity, the Arts, Language, Sports and Cuban Ways of Knowing and Being, among others.

The short essays will focus on specific literary works, photographs, paintings, political documents, speeches, testimonies, historical dates, key places and cities on the island and abroad. For example:  literary works include “Los Versos sencillos”; “Paradiso”; and “The Mambo Kings Play Songs of Love”; works of nonfiction include: “Cuba: Azúcar y Población”; “Indagación del choteo”; and “La historia me absolverá”; works of visual art: “La Jungla”; and “Los Hijos del agua conversando con un pez”; works of music: “Guantanamera”; “Misa cubana”; and “Mambo #5”; cinema: “Lucía”; and “Fresa y chocolate”; events: “Violence and Insurrection in 1912: A Racial Conflict”; and “January 1, 1959”; and places of cultural significance: “Baracoa”; “Holguín”; “Isla de Pinos”; “Spain”; and “New York,” to name a few examples.

By combining longer overview pieces with short and focused descriptive and analytical ones, CUBA  aims to give the curious and interested reader a way to comprehend the country by presenting the major forces that have shaped the island historically and culturally. Rather than overwhelm the reader with thousands of entries and biographies, CUBA offers a close look at major themes that are emblematic to the country’s unique history. CUBA is a reference guide for readers undertaking a journey of comprehension; it is not a work that presumes to have all of the answers.

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Melissa Lockhart, “After dramatic 2011 in Cuba, will US-Cuban policy shift in 2012?”

Posted on December 29, 2011 by Arch Ritter

Melissa Lockhart reviews a year of what she calls big change in Cuba, little change in US policy. From the Christian Science Monitor. http://www.csmonitor.com/World/Americas/ December 29, 2011

This year in Cuban history will be viewed as a significant one, having seen more economic change and reform on the island than some entire decades. Yet Washington’s response has been minimal.

Let’s start with a brief summary of the past year. In January 2011, the executive branch of the US government announced and published new travel and remittance rules with respect to Cuba, which increased possibilities for people-to-people travel. The effect has been gradual (OFAC in the Treasury is under-staffed and really quite slow), but greater numbers of cultural travel groups have received the necessary licenses and are leading trips to the island because of the new rules.

February and March saw the trial of the infamous violent Cuban exile Luis Posada Carriles, and a historic step in the US to prosecute him for terrorist acts in Cuba (he was later acquitted, to the chagrin of many Cuba-watchers). Alan Gross, the USAID contractor who remains in jail in Cuba, was ultimately sentenced in March to 15 years in prison — a relationship-damaging development that has continued to be a point of great contention between Washington and Havana.

In April, the Cuban Communist Party held their Sixth Party Congress and reviewed the terms of a great number of economic reforms whose implementation has proceeded during the course of the year. Yet in the fall, the US stood nearly solo at the United Nations as the world voted against the US embargo on Cuba. Washington put Cuba again on its list of “State Sponsors of Terrorism,” though the evidence to support the designation has withered.

This week, President Castro pardoned 2,900 prisoners in advance of the Pope’s visit to the island in 2012, noting that many of the pardoned were first-time offenders, youths, or inmates over 60 or suffering from illness. Yet here we are at the close of the year, and the Obama administration is still apparently convinced that the release of political prisoners in Cuba and the drastic economic changes underway are not enough to qualify as the “change” that would merit a significant bilateral discussion.

Asi es la vida for Cuba-watchers. The most unexpected event of this year was not a “happening” at all: it is the lack of movement forward in Washington on Cuba issues, and the continuing age-old tendency to cater to the conservative Miami Cuban-American base — a demographic that is changing and adapting its views to new developments in Cuba more so than Congress and the current administration, it seems. We expected more this year, despite the myriad of other global challenges faced by the US. Washington has found time recently to take a fresh look at Myanmar, but still not at our close neighbor Cuba.

With all of the events of the last year, here in the US the individual whose name has received the most airtime – and who therefore receives our designation of person of the year – is Alan Gross. Mr. Gross has been held in Cuba since December 2009 for distributing communications equipment illegally on the island. His sentence of 15 years in prison for crimes against the Cuban state was upheld by the Cuban Supreme Court in August. US officials have tried unsuccessfully to argue for his unilateral release; many experts have unsuccessfully argued for a prisoner swap (modeled off of the Israel-Hamas prisoner exchange of Gilad Shalit for hundreds of Palestinians — but in this case just one for five). Mr. Gross remains imprisoned, and as he was not one of the recently pardoned 2,900, Washington has continued to ignore other signs of significant change within the Cuban state. As long as Gross remains imprisoned, it appears there can be no progress.

Are you up on Latin American news? Try our quiz. Christmas In Havana: President Obama prevails on Cuban family travel rules For Cubans, new property rights – and the return of an old anxiety Topics

The forecast for 2012 is unfortunately only a tick higher than bleak in terms of the US-Cuba relationship. 2012 is a US election year, and Cuba policy remains a contentious political issue. Even just in the last few weeks, Cuba-watchers cringed (and spoke out) as a small faction of House representatives sought to fold an amendment into the 2012 spending bill that would change US regulations on Cuban-American family visits to Cuba, rolling this policy back to the Bush era. Fortunately, the White House took a stand and threatened a veto if the amendment was not removed. But many had feared that the administration would not spend the political capital to step in, and this was on an issue that simply maintained the status quo. There is very little reason for an administration seeking re-election to take the kind of political risk that more significant (necessary) Cuba policy changes entail.

However, the island’s future looks positive, at least for the moment. The population is testing out new economic reforms, the reforms are pressing ahead to the long-run benefit of a troubled economy, and foreign businesses and investors remain interested in Cuba (despite recent crackdowns on corruption that have affected foreigners as well as Cubans). Pope Benedict XVI will visit Cuba in March, and the state appears to be taking a look at its prison system in advance of that visit and making the largest number of pardons and releases of prisoners in recent history. These are positive developments that likely will not receive much acknowledgement from Washington, but for now, Havana does not appear to need our stamp of approval.

Melissa Lockhart Fortner is Senior Programs Officer at the Pacific Council on International Policy and Cuba blogger at the Foreign Policy Association. You can read her blog here.

 

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Updating re Economics Essays from TEMAS

Posted on December 29, 2011 by Arch Ritter

Below are a series of hyperlinks to articles on economic reform in Cuba. Unfortunately the essays are available only in Spanish.

Economía y política

Richard Levins y Aurora Levins Morales, Respondiendo a Ricardo Torres

Omar Álvarez Dueñas, A propósito de la controversia sobre la «inviabilidad del socialismo»

Carmelo Mesa-Lago, Sobre la «inviabilidad del socialismo», pero ¿qué tipo de socialismo? (Observaciones a los comentarios de José Luis Rodríguez en Temas)

José Luis Rodríguez, A propósito del socialismo, ¿de qué inviabilidad se habla?

Luis Marcelo Vera ¿Cuál es el problema estratégico principal de la economía cubana?

LArmando Nova González, La propiedad en la economía cubana

Ricardo Torres Pérez, La actualización del modelo económico cubano: continuidad y ruptura

Julio Díaz Vázquez, Es aplicable el modelo chino o vietnamita en Cuba?

Rafael Betancourt, Observaciones en torno al Proyecto de Lineamientos

Fernando Barral, Aproximación sociológica al problema de la corrupción en Cuba

Armando Nova González, El papel estratégico de la agricultura: problemas y medidas

Omar Everleny Perez, Cuba: ¿por dónde va la economía?

Pavel Vidal Alejandro, La estabilidad monetaria en Cuba: una síntesis

Ramón de la Cruz Ochoa, Acotaciones al texto del Dr. Fernando Barral sobre la corrupción en Cuba

 

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New Essay by Carmelo-Mesa-Lago: “LAS REFORMAS DE RAÚL CASTRO Y EL CONGRESO DEL PARTIDO COMUNISTA DE CUBA: Avances, obstáculos y resultados”

Posted on December 19, 2011 by Arch Ritter

Carmelo Mesa-Lago Catedrático Distinguido Emérito de Economía, Universidad de Pittsburgh

Original Essay Here:  Carmelo Mesa-Lago, Cuba VI Congreso CIDOB 2011

Resumen: En 2007, un año después de sustituir a Fidel, Raúl Castro anunció “reformas estructurales” y auspició el debate más amplio bajo la revolución, que alcanzó un alto consenso sobre los cambios necesarios. En los dos años siguientes, Raúl Castro introdujo modificaciones de poca importancia, pero el deterioro económico-social y la aguda crisis económica impulsaron dos reformas más profundas entre 2009 y 2011: el usufructo de tierras ociosas estatales, así como el despido de entre el 10% y el 35% de la fuerza laboral y su empleo en trabajos privados. En el VI Congreso del Partido Comunista de Cuba (PCC), celebrado en abril de 2011, se ratificaron dichas reformas y se anunciaron otras menos importantes. Con estos antecedentes, en este trabajo se hace una revisión de este proceso centrada en los siguientes puntos:1) se identifican las reformas de Raúl Castro y los acuerdos más relevantes del Congreso, 2) se analizan las limitaciones y las dificultades que enfrentan en su implementación, 3) se revisan los ajustes efectuados y se resumen los resultados, y 4) se explora si hay consenso o disenso en la dirigencia para impulsar las reformas y sus efectos.

Carmelo Mesa-Lago

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Paul Hare: “Cuba: What Might Happen Now?”

Posted on December 9, 2011 by Arch Ritter

Paul Hare has just published a valuable analysis on Cuba’s current overall economic and political situation. It is certainly worth some careful attention. Especially interesting is the Appendix which presents a detailed and comprehensive comparison of the positions of the Government with those of dissident groups on a broad range of issues.

Paul Hare was the British Ambassador to Cuba from 2001-2004. He is  currently a Lecturer in International Relations at Boston University.

Paul Webster Hare, Cuba, What Might Happen Now in Cuban Affairs: Quarterly Electronic Journal, Volume 6 Issue 2, 2011

Summary

It didn’t happen 20 years ago. It hasn’t happened so far in 2011. Despite massive popular uprisings against totalitarian governments elsewhere in the world, Cuba continues to buck the trend. If there are no mass protests and sit-ins at the Plaza de la Revolución, what might happen now in Cuba? What changes are taking place in Cuba, and what are the implications for its economic and political future?

This paper analyzes the new political and economic space that is opening up in Cuba. The space is developing because the government has recognized that it needs to salvage the economy if it is to salvage the Revolution. This paper argues that Cuba is unlikely in the near-term to see a grass roots movement that demands the wholesale replacement of its leadership. But the surge of interest in the economy, perhaps unwittingly stimulated by the government, is shifting activity to territory that favors the opposition. Raul Castro is promoting a language of reform, even though his own definitions require some linguistic contortions. His speeches are still more of the parade ground, rather than of a CEO growing a business in the world market. And there is no new product; instead a striving to perfect the old one – socialism – through greater efficiency, reducing state spending and cutting imports. But so far there is no acceptance by Raul Castro that by allowing individuals to get rich, the Cuban economy will grow.

None of this means that democracy with features such as freedom of expression, freedom of movement, and an end to communist party monopoly is around the corner in Cuba. Indeed there have been many times in the 52 year revolution when signals of greater openness were withdrawn. But in 2011 the scenario is moving away irreversibly from the communist comfort zone. The debate is not yet in the political center but it is hard to see how it can be contained, given the principles that are being discussed.

The government is seeking to implement limited reform, change economic calculations, revise revolutionary definitions, and deal with a potential explosion in cell phone use (now 25% of all Cubans) plus demands that internet access be unrestricted for economic and political reasons. The goalposts of 52 years of government are moving slightly. The objective remains a state-controlled economy where the ilitary/government dominates the strategic sectors and not one where a private sector will be given free license. This suggests that those who want an increase in fundamental freedoms in Cuba, and greater political and economic openness, need to engage and show by example in politics, economics and above all in business what works and what offers Cubans a better future. This paper examines how such actions might develop and how a new cadre of “civic entrepreneur” might have a significant influence. The annex provides a summary of what Cubans on the island are saying about current issues of debate.

Annex: How Far Apart are Cubans?

It is difficult if not impossible to gauge opinions on key issues of Cubans on the island. As an attempt to measure the scope of the debate, I have compared below what the government has been saying on a variety of issues with public comments of Cubans not in government positions who live on the island. Some are from members of the “opposition,” some from semi-official centers of studies, and some from popular cultural figures. All are producing the critical comments and new ideas which Raul Castro professes to value. These issues are some of those on which Cubans must join in a debate and where the civic entrepreneurs will have a key contribution.

Ambassador Paul Hare

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Eusebio Mujal-León: “Survival, Adaptation and Uncertainty, The Case of Cuba”

Posted on December 8, 2011 by Arch Ritter

Professor Eusebio Mujal-Leon, of Geogetown University, has just published a valuable analysis of Cuba’s current economic reforms and the changing political configuration under President Raul Castro.

The article was published in the Journal of International Affairs, Fall/Winter 2011, and can be found here: Mujal-Leon_JIA “Survival, Adaptation and Uncertainty, The Case of Cuba”

ABSTRACT

The Cuban Revolution recently experienced a major transition of leadership as power shifted hands from Fidel Castro to his younger brother, Raúl. Eschewing the role of caretaker, Raúl embarked on an ambitious program aiming to streamline a cumbersome and inefficient state while reforming the economy in ways that will increase agricultural production, encourage self-employment and lead to sustainable economic growth. At the same time, Raúl Castro refashioned the ruling coalition and proposed major changes to the ruling Communist Party, including term limits, leadership rotation and the separation of party and state functions. This article analyzes the emergence of a new Cuban political elite, explores how power is distributed between its military and party wings and examines the major challenges this coalition must overcome if it is to successfully manage the transition from the Castro era and  stabilize Cuban autocracy.

Below are two of Professor Mujal-Leon’s tables that summarize the changes in the membership of Cuba’s central political institutions.

ProfessorEusebio Mujal-Leon

 

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Centro de Estudios de la Economía Cubana (CEEC)

Posted on December 2, 2011 by Arch Ritter

By Arch Ritter

Centro de Estudios de la Economía Cubana (CEEC)

The University of Havana’s Centro de Estudios de la Economia Cubana has made itself the foremost research institution on the Cuban economy since its establishment in 1989.  Its faculty includes many of the best-known analysts on the Cuban economy, including both senior and newer faculty members. The work of the Cuban Economy Team is especially impressive and is certainly worth careful study by anyone interested in Cuba. I have often thought that Cuba would benefit immensely if some of the members of CEEC were in key Cabinet positions in the Government of Cuba responsible for the management of the economy.  I expect that this in fact will happen before too long! Cuban Economy Team: Dr. Juan Triana Cordoví, Dr. Omar Everleny Pérez (Director), Dr. Armando Nova González, Dr. Hiram Marquetti Nodarse, Dr. Jorge Mario Sánchez Egozcue, Dr. Pavel Vidal Alejandro, Ms. Betsy Anaya, Ms. CamilaPiñeiro Harnecker, Ms. Ricardo Torres Pérez and Lic. Saira Pons Pérez Enterprise Management Team: Dr. Orlando W. Gutierréz Castillo, Dr. Humberto Blanco Rosales, Dr. Rosendo Morales González, Dr. Jorge Ricardo Ramírez, Dra. Aleida Gonzalez-Cueto, Dra. Dayma Echevarría León, Dra. Ileana Díaz Fernández, Ms. Mercedes González Sánchez, Ms. Maria Isabel Suárez González,  Lic. Dayrelis Ojeda Suris and Lic. Mariuska Cancio  Fonseca The CEEC publishes a number of “Boletínes” each year that usually include valuable analyses of various aspects of Cuba’s economy and economic policy. Here are the Tables of Contents of the last three issues. The “Boletínes” are hyper-linked to the CEEC Web Site and some of the essays are linked to the PDF files for rapid access.

Boletín Agosto 2011

El sistema de gestion y direccion de la economia hoy. Ileana Diaz,  Dra.Ileana Diaz Experiencias noruegas relevantes para la agricultura cubana, Dr. Anicia Garcia La propiedad en la economia cubana. Armando Nova,  Dr.Armando Nova Los sistemas de direccion  de la economia  1961- 1975,  Dra.Ileana Diaz Turismo de salud en Cuba. David Pajon Dr. David Pajon

Boletín Abril-Agosto 2010

Competitividad e innovacion, donde esta Cuba. Ileana Diaz, Dr. Ileana Díaz El impacto del postgrado en la educacion superior Cuba- Venezuela. Rosendo Morales Dr. Rosendo Morales El mercado y el estado, dos partes que forman un todo. Armando Nova, Dr. Armando Nova González Entre el ajuste fiscal y los cambios estructurales, se extiende el cuentapropismo, Dr. Pavel Vidal y Dr. Omar Everleny Pérez Fuerzas favorables y restrictivas a la dirección estratégica de la empresa. Dayrelis Ojeda y Humberto Blanco Lic. Dayrelis Ojeda y Dr. Humber

Boletin Enero-Mayo 2010

El mercado libre agropecuario en 2009. Armando Nova, Dr. Armando Nova González El sector energetico cubano entre 2005 y 2009. Ricardo Torres_0 Ms. Ricardo Torres Pérez La política fiscal actual. Pavel Vidal_0 Dr. Pavel Vidal Alejandro Estrategia. Mito o realidad. Ileana Diaz y Roberto Cartaya_0 Dr. Ileana Díaz y Dr. Roberto Cartaya La producción agricola y ganadera en 2009. Armando Nova_0 Dr. Armando Nova González La universidad, la economía y el desarrollo. Juan Triana_0 Dr. Juan Triana Cordoví Los cambios estructurales e institucionales. Pavel Vidal_0,  Dr. Pavel Vidal Alejandro

Universidad de la Habana, “Alma Mater”

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Richard Feinberg via Brookings Institution: “Reaching Out: Cuba’s New Economy and the International Response”

Posted on November 19, 2011 by Arch Ritter

FOREIGN POLICY at BROOKINGS

The full document can be found here:Richard E. Feinberg, Cuba’s New Economy and the International Response, Brookings, November 2011

“Reaching Out: Cuba’s New Economy and the International Response,” a new report by Brookings Nonresident Senior Fellow Richard Feinberg, urges the international development community to reach out to Cuba to promote its economic renewal. The report offers a detailed pathway for a gradual, systematic rapprochement between Cuba and the international financial institutions (International Monetary Fund, World Bank,
and Inter-American Development Bank). In the first such survey, it also provides an overview of the existing foreign assistance programs sponsored by capitalist nations in Cuba.

The study further analyzes the reform process occurring in Cuba today and describes Cuba’s strategy of engaging with the dynamic emerging market economies, largely
overlooked by U.S. analysts. The report finds that since the dissolution of the Soviet Union, Cuba has reached out to Europe and Canada, and most dramatically and successfully to the emerging market economies of China, Brazil, and Venezuela. Far from isolated by U.S. sanctions, the Cuban economy has become deeply integrated into global trading and investment markets.

Feinberg asserts that the international financial institutions (IFIs) house a wealth of accumulated knowledge and financial resources that fit well with the needs of a
reform-minded Cuba seeking greater economic efficiency and competitiveness. As
evident in their successful relations with Vietnam and Nicaragua, the IFIs –
having reformed their own terms of engagement – can perform effectively in
proud, strong states allergic to external interference. The study reviews the foreign assistance programs of donors such as the European Union, Spain, and Canada and concludes that development cooperation can achieve results in Cuba, improve the lives of beneficiaries, empower independent small producers, and promote decentralized decision-making to local communities.

Based on these research findings, Feinberg offers these specific policy recommendations:

· The international development community should support Cuba’s incipient economic reform process and bolster the struggling reformist factions within Cuba.

· The U.S. government should recognize that in Cuba today the opportunity is in economic reform, legitimized by the regime and openly debated by the Cuban public. Promoting economic reform is the most realistic option for advancing political pluralism in Cuba.

· The IFIs should complete their historical goal of full universality and bring Cuba in from the cold. The gradual warming of IFI-Cuba relations should begin with the provision of policy advice and technical training – prior to full membership.

· The US should not stand in the way of Cuba’s gradual re-admission to the IMF/World Bank. There is no better way to encourage progressive market-oriented reforms in Cuba.

According to Feinberg, the U.S. and international community can do more to help strengthen reform factions on the island. Feinberg concludes that inside Cuba, the forces of progressive change and the forces of bureaucratic inertia and resistance are locked in a fierce struggle. The United States should join with the international development community to bolster Cuba’s forces in favor of forward-looking economic reform.

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