Tag Archives: Economic Reforms

THE US AND CUBA: INCREMENTALISM, REVERSAL RISK AND THE DICTATORS DILEMMA

By Cardiff Garcia                        ,

Financial Times, London, March 21, 2016

Original Article: The US and Cuba_ incrementalism reversal risk and the Dictators Dilemma _ FT Alphaville

Introduction:

To analogize the ongoing diplomatic maneuvering between the US and Cuba to a scenario of mutual hostage-taking doesn’t sound charitable, but it might be the best framework for understanding a relationship long defined by its baffling surrealism.

And it’s a useful lens through which to see not only President Obama’s visit to the island, the first by a sitting US president in almost nine decades, but also the specific actions taken by each side in the time since the intent to normalize relations was first announced on 17 December 2014.

Last week John Kavulich, president of the US-Cuba Trade and Economic Council, described this idea to a roomful of lawyers at the US-Cuba Corporate Counsel Summit in New York. On the US side, Obama clearly wants to make the rapprochement an enduring foreign-policy legacy of his administration, and the Cuban government knows this. It can afford to test Obama on how far it needs to go in the direction of economic and political liberalization before satisfying American requirements to continue deepening the relationship.

But Cuba’s efforts to modernize its economy also depend heavily on the country’s relationship with other countries and with foreign (non-US) companies, and specifically on the potential source of foreign investment they can provide. Except these firms and countries are hesitant to provide much investment while the US embargo is in place and Cuba is locked out of most multilateral institutions.

In other words, Cuba needs the momentum towards diplomatic restoration and the end of the US embargo to continue beyond the end of Obama’s time in office. To ensure this happens, the Cuban government will have to take meaningful and credibly permanent steps towards providing greater economic and political freedoms.

The liberalizations on both sides have been made incrementally to this point. The gradual pace was partly for logistical reasons, but I’m sure it was also the result of suspicions inside of both countries about the intentions of the other side.

 Continue Reading:  The US and Cuba_ incrementalism reversal risk and the Dictators Dilemma _ FT Alphaville

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ALTERNATIVE INSTITUTIONAL FUTURES FOR CUBA’S MIXED ECONOMY

Archibald Ritter                                                                                          

February 1, 2016

Since 2010, Cuba has been implementing a redesigned institutional structure of its economy. At this time it is unclear what Cuba’s future mixed economy will look like. However, we can be sure that it will continue to evolve in the near, medium and longer term. A variety of institutional structures are possible in the future and there are a number of types of private sector that Cuba could adopt. Indeed it seems as though Cuba were moving towards a number of possibilities simultaneously.

The objective of this note is to examine a number of key institutional alternatives and weigh the relative advantages and disadvantages for each arrangement.  All alternatives include some mixture of domestic or indigenous private enterprises, cooperative and “not-for-profit” activities. foreign enterprise on a joint venture or stand-alone basis, some state enterprises (in natural monopolies for example) and a public sector.  However, the emphasis on each of these components will vary depending on the policy choices of future Cuban governments.

The possible institutional structures to be examined here include:

1. Institutional status-quo as of 2016;

2. A mixed economy with intensified “cooperativization”;

3. A mixed economy, with private foreign and domestic oligopolies replacing the state oligopolies;

4. A mixed economy with an emphasis on indigenous small and medium enterprise.

 Option 1. Institutional Status-Quo as of 2016

The institutional “status quo” is defined by the volumes of employment in the registered and unregistered segments of the small enterprise sector, the small farmer sector, the cooperative areas, the public sector, and the joint venture sector, plus independent arts and crafts and religious personnel.  The employment numbers are mainly from the Anuario Estadístico de Cuba together with a number of guesstimates, some inspired by Richard Feinberg (2013). The guesstimate for unregistered employment in the small enterprise sector may seem exaggerated. However, a large proportion of the “cuentapropistas” utilize unregistered workers and a proportion of the underground economy does not seem to have surfaced into formally registered activities.  These employment estimates by institutional area are presented in Table 1 and illustrated in Chart 1, which also serve as a “base case” for sketching the other institutional alternatives.

Table 1 z zz

The current institutional status quo has a number of advantages but also some disadvantages. On the plus side, adhering to the status quo would avoid all the uncertainties and risks of a transition.  It would maintain the possibility of “macro-flexibility,” that is the ability for the central government to reallocate resources by command in a rapid and large scale fashion. However, in view of the numerous “macro errors” made possible by a centralized command economy (the 10 million ton sugar harvest of 1970, the “New Man” endeavor, shutting down half the sugar mills), “macro-flexibility” may be a disadvantage.  There are major advantages for the Communist Party in maintaining the institutional status quo in the economy, namely enabling political control of the citizenry (a disadvantage from other perspectives) and continuing state control over most of the distribution of income (also a disadvantage from other perspectives).  The approach also helps foster good relations with North Korea (I am running out of advantages).

There are also major disadvantages. The centralized planned economy and public enterprise system generates continuing bureaucratization of production; continuing politicization of state-sector economic management and functioning; continuing lack of an effective price mechanism in the state sector and continuing perversity and dysfunctional of the incentive structure. The result of this is damage to efficiency, productivity and innovation.

 OPTION 2. Mixed Economy with Intensified “Cooperativization”

zzzA second alternative might be to promote the authentic “cooperativization” of the economy in a major way.  This would involve permitting cooperatives in all areas, including professional activities; opening up the current approval processes; encouraging grass-roots bottom-up ventures; providing import & export rights; and improving credit and wholesaling systems for coops.

 This approach has a number of advantages. First, it would strengthen the incentive structure and elicit serious work effort and creativity on the part of those in the coops.  This is because worker ownership and management provides powerful motivation to work hard and profit-sharing ensures an alignment of worker and owner interests. This approach would generate a more egalitarian distribution of income than privately-owned enterprises. Cooperatives may possess a greater degree of flexibility than state and even private firms because their income and profits payments to members can reflect market conditions. Perhaps most important, democracy in the work-place through effective and genuine coops is valuable in itself and constitutes an advantage over both state- and privately-owned enterprise.  [Workers’ ownership and control proposed in Cuba’s cooperative legislation is ironic and perhaps impossible since Cuba’s political system is characterized by a one-party monopoly.  On the other hand it may help propel political democratization.]

The “second degree cooperatives” or “cooperative coalition of cooperatives” called for in the cooperative legislation is particularly interesting as it may permit  reaping organizational economies of scale (a la Starbucks, McDonalds, etc. ) for small Cuban coops in these areas.

An emphasis on cooperatives would help to maintain ownership and diffused control and profit-sharing among local citizens, thereby promoting greater equity in income distribution.

But cooperatives also face difficulties and disadvantages.  First, are they really more efficient than state and private enterprises? Generally speaking, cooperatives have passed the “survival test” but have not made huge inroads against private enterprise in other countries over the years.  Perhaps this is because the “transactions costs” of participatory management may be significant.  Personal animosities, ideological or political differences, participatory failures and/or managerial mistakes may occur.  And for larger coops, complex governance structures may impair flexibility.

 Second, Cuba’s actual complex co-op approval process is problematic and creates the possibility of political controls and biases. Certification of professional cooperatives is unclear. Also, the hiring of contractual workers is problematic

  • The “Hire or Fire after 90 days” rule may curtail job creation;
  • The 10% limit on contractual labor also may curtail job creation;
  • Governance may be impaired if uncommitted workers have to join.

Finally, what will be the role of the Communist Party in the cooperatives?  Will it keep out of cooperative management?  Will Party control subvert workers’ democracy and deform incentives structures?

OPTION 3. Wide Open Foreign Investment Approach zzzzA third possibility would be to open up completely to foreign investment. This would involve a rapid sell-off of state oligopolistic enterprises to deep-pocket foreign buyers such as China, the United States (in due course), Europe, Brazil, or elsewhere.  The buyers might be the Walmart’s, Lowes, Subways, or Starbucks of this world, wanting to acquire major access to the Cuban market. This is a strong possibility if existing state oligopolies (e.g., CIMEX and Gaviota) were to be privatized in big chunks. The policy requirements for this approach to occur would be rapid privatization plus indiscriminate direct foreign investment and takeovers by large foreign firms.

 This approach does have some advantages.

  • It would generate large and immediate revenue receipts for the Cuban government;
  • It would lead to large and rapid transfers into Cuba of financial resources; entrepreneurship and managerial talent; physical capital (machinery and equipment and structures); most modern technology embedded in machinery and equipment; and personnel where and when necessary;
  • The results would be rapid productivity gains, higher-productivity work and rapid GDP gains.

However, there would also be disadvantages such as:

  • Profits would flow out ad infinitum;
  • Income concentration: profits to foreign owners (e.g. the Walton family of Arkansas who practically own Walmart) and profits to oligopolistic domestic owners;
  • Oligopolistic economic structures would be damaging in the long run;
  • There would be a strengthened probability of lucrative employment and ownership for the civilian and military “Nomenclatura”;
  • Blockages or inhibitions to the development of Cuban entrepreneurship;
  • “Walmartization” of Cuban culture; dilution of Cuban uniqueness;
  • Further reduction of the potential for diversified manufacturing in Cuba (e.g. due to the  Walmart/China  mass-purchaser/mass-supplier symbiosis);
  • Probably a blockage of export diversification.

 OPTION 4: Pro-Indigenous Private Sector in a Mixed Economy

zzzzzA fourth possibility would be for Cuba to promote its own small-, medium- and larger enterprises in an open mixed economy. This would require

  • An “enabling environment” for micro, small and medium enterprise with a reasonable and fair tax regimen; an end to the discrimination against domestic Cuban enterprise (See Henken and Ritter, 2015, Chapter 7);
  •  The establishment of unified and realistic monetary and exchange rate systems;
  •  Property law and company law.

A liberalization of micro-, small and medium enterprise would also be necessary to release the creativity, energy and intelligence of Cuban citizens.  This would involve open and automatic licensing for professional enterprises;  an opening up for all areas for enterprise – not only the “201”; permission for firms to expand  to 50 + employees in all areas; creation of wholesale markets for inputs; open access to foreign exchange and imported inputs;  full legalization of “intermediaries” ; and permission for advertising.

 This approach has some major advantages:

 Oligopoly power would be more curtailed compared to Option 3;

  • The economy would be more competitively structured with all the benefits this generates;
  • It would encourage a further flourishing and evolution of Cuban entrepreneurship;
  • It would permit the development of a diversified range of manufacturing and service activities and also a greater diversification of exports;
  • It would provide a reduced role for the “Nomenclatura” of military and political personnel and their families that would otherwise gain from the rapid privatization of state enterprises;
  • It would decentralize economic and thence political power and reduce the power for government to exert political influence through economic control;
  • It would generate a more equitable distribution of income among Cuban citizens and among owners than Option 3;
  •  Profits would remain in Cuba;
  •  There would be a stronger maintenance of Cuban culture.

There would be some disadvantages with this approach.

  • There would be no massive and immediate cash infusion to Government from asset sell-offs.   Or is this an advantage?  [more effective use of in-coming revenues]
  •  Perhaps there would be a slower macroeconomic recuperation;
  • There would be slower inflows of technology, finance, managerial know-how – but more domestically controlled.

Conclusion

Most likely, Cuban policy-makers in the government of Raúl Castro, the government of his immediate successor, and future governments of a politically pluralistic character will design policies that ultimately will lead to some hybrid mixture of the above four possibilities.  I of course will have little or no say in the process. However, my personal preference would be for an economy resembling the structure in the accompanying chart, with a large “indigenous” private sector, a significant cooperative sector, of course a large public sector for the provision of public goods, a small sector of government-owned enterprises, and a significant private foreign and joint venture sector. zzzzzzSo my bottom-line recommendations for current and future governments of Cuba would be:

  1. Utilize Cuba’s abundant resource — well-educated, innovative, strongly-motivated entrepreneurship — effectively, by further liberalizing the regulatory and fiscal regime for the indigenous micro-, small and medium enterprise sector, thereby also promoting Cuba’s indigenous economic culture;
  2. Use Cooperatives and “Coops of Coops” where possible;
  3.  Avoid “Walmartization” & homogenization of Cuban economy and culture by utilizing an activist policy towards direct foreign investment.

Bibliography

Feinberg, Richard E., Cuba’s Economic Change in Comparative Perspective, Brookings Institution, 2013

Oficina Nacional de Estadísticas, Anuario Estadístico de Cuba, 2014

Ritter, Archibald and Ted Henken, Entrepreneurial Cuba, The Changing Policy landscape, Boulder Colorado: Lynn Rienner, 2015

 

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CUBA’S REFORM AND ECONOMIC GROWTH: A COMPARATIVE PERSPECTIVE WITH VIETNAM

Pavel Vidal Alejandro

 Journal of Economic Policy Reform, 2015  

Original Essay here:  Vidal Cuba’s reform and economic growth

Abstract

Cuban reform process lags behind the GDP growth reached by the Vietnamese. When comparing the evolution of the different sectors and demand components of GDP, Vietnam has had higher growth rates in all cases, highlighting exports first and investment second. Once the Balance of Payments Constrained Growth model has been estimated, the significant effect of the foreign exchange constraints on growth for both countries is confirmed. However, the Vietnam growth can be explained not only by its export success. International openness, which included the end of the US embargo, and institutional factors also explains the differential of results.

pavel-vidal-CP-685x342

Pavel Vidal

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LA AGROINDUSTRIA CAÑERA CUBANA: TRANSFORMACIONES RECIENTES

Mario González-Corzo, Editor, con la asistencia de Rosalina López

Bildner Center for Western Hemisphere Studies, The Graduate Center, The City University of New York

 This volume presents an analysis of the evolution and recent transformation of the sugar cane industry in Cuba from the fallout of sugar production during the Special Period to the creation of AZCUBA in 2011 to face new challenges; it also covers the potential use of sugar as energy and the behavior of the commodity within the global market economy.

 Complete document here:  La agroindustria cañera cubana

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CONTENIDO

Introducción, Mario González-Corzo

1 Importancia económica y estratég ica de la agroindustria cubana, Armando Nova González

2 La agroindustria bioenergética de la caña azúcar: retos y pers-pectivas, Federico Sulroca Domínguez

3 Las agroindustria cañera cubana: desempeño y tendencias recientes, Mario González-Corzo

4   AZCUBA: un modelo de la agroindustria cubana, Federico Sulroca Domínguez

5 La inserción de la agroindustria en la economía internacional, Lázaro Peña Castellanos

Bibliografía

Sobre los autores

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CUBA’S AGRICULTURAL TRANSFORMATIONS

Journal of Agricultural Studies ISSN 2166-0379 2015, Vol. 3, No. 2

Armando Nova González, Centro de Investigaciones de la Economía Internacional (CIEI), Universidad de La Habana, and Mario A. González Corzo, Lehman College, City University of New York (CUNY)

Complete Essay Here:  Mario Gonzalez-Corzo and Armando Nova, Cuba’s Agricultural Transformations, 2015

 ABSTRACT:

  The Cuban government has implemented a series of agricultural transformations since 2007 to increase the country’s agricultural self-sufficiency and reduce its dependency on food imports. These include the transfer (in usufruct) of State-owned land to non-State producers (e.g. cooperatives and private farmers), moderate price reforms, the decentralization of decision making, and the gradual relaxation of existing forms of agricultural commercialization.

As a result of these measures, the area planted, as well as physical output and agricultural yields (in selected non-sugar crop categories) have shown mixed results, but still remain below desired levels.

There are three (3) fundamental unresolved aspects that have prevented Cuba’s agricultural sector from achieving the desired outcomes: (1) the need to achieve the “realization of property,” (2) the recognition and acceptance of the market as a complementary economic coordination mechanism, and (3) the absence of a systemic focus to achieve the successful completion of the agricultural production cycle.

These unresolved aspects should be addressed through:

(1) the consolidation of input markets, where producers can obtain essential inputs at prices that correspond to the prices they can obtain for their output,

(2) greater autonomy to allow agricultural producers to freely decide when, where, and to whom they could sell their output, after social contracts have been fulfilled,

(3) the diversification of the forms of agricultural commercialization to permit greater participation by non-State economic actors,

(4) allowing agricultural producers to freely hire the labor necessary to sustain and increase production, and (5) providing agricultural producers with the financing and technical assistance necessary.

z3 Mario A. González Corzo and Armando Nova González,

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EMPRESA MIXTA ESTADO-COOPERATIVA: UNA PROPUESTA

This interesting proposal was brought to my attention thanks to Jose Luis Rodriguez.

Ensayo original: http://www.perfiles.cult.cu/article.php?article_id=291#sdendnote2sym

Seida Barrera Rodríguez

Un debate que comenzó con el maltrato a la propiedad social en las empresas cubanas inspiró este proyecto. Fenómeno observado desde la cercanía con las entidades visitadas como fiscal del 2005 al 2008, la búsqueda de responsables y debilidades formó parte de la cotidianidad, pero faltó la perspectiva científica. El profesor que luego se convertiría en cotutor, insistió en profundizar cada vez más en la idea inicial de la autora de mezclar otras formas de propiedad con la estatal, y sugirió la cooperativa como una de las alternativas principales.

Habiendo presentado resultados parciales en un evento, con el ánimo de encontrar una organización que reuniera los requisitos adecuados para implementarlos, una colega mencionó que en su lugar de trabajo se advertían muchas de las características de una cooperativa, por el modo en que colaboraban los distintos establecimientos y la camaradería mutua entre sus empleados. Inmediatamente fueron solicitados contactos y entrevistas, y así se arribó a la Empresa de Producciones Industriales Cabildo, en lo adelante Cabildo. Su máximo dirigente, una persona de pensamiento flexible y vanguardista, enseguida se entusiasmó con la posible conversión de uno de sus talleres hacia una empresa mixta, donde el Estado cubano sería copropietario y cogestor con una cooperativa formada por trabajadores de la propia entidad. Para lograrlo, sería imprescindible el registro del proyecto como piloto para su seguimiento durante al menos un año.

Cabildo es una de las nueve empresas que gestiona la Oficina del Historiador de la ciudad de La Habana y no se encuentra en perfeccionamiento empresarial. Está conformada por quince talleres y una oficina central; su objeto social es muy variado: abarca desde el diseño de interiores hasta la costura, pasando por la fundición de las bellas farolas que iluminan esa parte de la ciudad, o la elaboración de banderas. En pocas palabras, sus empleados toman los inmuebles recién reparados o acabados de construir, y los proveen de todo lo necesario: muebles, lencería o pintura, intentando mantener el espíritu del casco histórico.

Los motivos para enfocar los esfuerzos en este frente pueden explicarse con la ayuda de las estadísticas: el 77% de los ocupados en la economía son trabajadores estatales, 3 millones 873 mil, por lo que constituye la mayor fuerza de trabajo a nivel nacional, y se encuentra tan necesitada de incentivos como los sectores cooperativo y privado, que solo representan el 23%.1 Además, en sus manos se encuentran la mayoría de los medios de producción que, conjuntamente con el capital humano, son las claves para incrementar los indicadores de productividad. Por último, existe carencia o debate sobre propuestas concretas en el sector, lo cual se confirma por el silencio de los legisladores, y la creciente flexibilización de las formas de gestión no estatales.

Esta brevísima introducción resume dos años de búsqueda de fundamentos teórico-metodológicos. Perseguimos el diseño, puesta en funcionamiento, legalización y seguimiento de cooperativas de producción y servicios a nivel local; con ello pretendemos seguir el Lineamiento 25 de la política económica y social, que promueve la creación de cooperativas en diferentes sectores de la economía.2

 Leer mas:  EMPRESA MIXTA ESTADO-COOPERATIVA

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Cooperativa de Omnibus Aliados, cerca 1952

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LAS COOPERATIVAS NO AGROPECUARIAS Y LA TRANSFORMACIÓN ECONÓMICA EN CUBA: POLÍTICAS, PROCESOS Y ESTRATEGIAS; NON-AGRICULTURAL CO-OPERATIVES AND ECONOMY TRANSFORMATION IN CUBA: POLITICS PROCESSES AND STRATEGIES

Cuba Mar 2014 139POR Mirta VUOTTO Revista de Estudios Cooperativos (REVESCO), Universidad Complutense de Madrid   El link al ensayo es  REVESCO Mirta VUOTTO, COOPERATIVAS CUBA RESUMEN

La contribución de las cooperativas se ha puesto en evidencia desde la década del 70 como principal línea de desarrollo en la producción agropecuaria de Cuba. En contraste, el reconocimiento de las cooperativas urbanas ha sido tardío, aun cuando fuese percibida la necesidad de transformaciones basadas en la realización de la propiedad en diversos escenarios territoriales.

 El artículo analiza los procesos de reforma impulsados en Cuba desde la primera década de 2000 centrándose en las iniciativas tendientes a la promoción, constitución y desempeño de las cooperativas no agropecuarias (CNA). Se examina el potencial y limitaciones propias de las experiencias recientes para reflexionar sobre los procesos y transformaciones organizacionales desde la perspectiva de sus miembros.

A modo de conclusión el análisis plantea interrogantes ace ca de la aptitud de estas cooperativas para sustraerse del impacto de circunstancias anteriores y sobre su capacidad para consolidar estrategias diseñadas por los cooperadores que tiendan a fortalecer los principios de adhesión voluntaria y autonomía en que se fundan estas organizaciones.

ABSTRACT

Contribution of co-operatives has been demonstrated since the 1970s as the main development line in agricultural production in Cuba. In contrast, there has been a late recognition of urban co-operatives, even if the need of transformations based on the realization of property in different territorial scenarios had been identified. The article analyses the reform processes launched since the first decade of the 21st century focusing on the nature of the initiatives fostering formation and promotion of nonagricultural co-operatives including follow up of their performance.

The potential and limitations of the recent experiences are examined in order to reflect on the organizational processes and transformations from the point of view of their members.

To conclude, some questions are posed about whether these co-operatives are capable of avoiding the impact of earlier employment circumstances and of developing strategies aimed at reinforcing voluntary membership and autonomy on which they are founded.

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z  Dra. Mirta VUOTTO

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LA REINTEGRACIÓN ECONÓMICA DE CUBA: COMENZAR CON LAS INSTITUCIONES FINANCIERAS INTERNACIONALES; CUBA’S ECONOMIC REINTEGRATION: BEGIN WITH THE INTERNATIONAL FINANCIAL INSTITUTIONS;

The Right Step for Improving the Lives of Cuba’s Citizens;   Un paso importante para mejorar la vida de los ciudadanos de Cuba

By Pavel Vidal and Scott Brown;      for The Atlantic Council

English Version Here: Pavel Vidal & Scott BrownCuba_ and the IFIs, English.

Spanish Version Here: Pavel Vidal & Scott Brown, Cuba and the IFIs, Spanish

zzzzzzzzTABLE OF CONTENTS

3    Executive Summary

5    Reforms Are Here… and More Are Coming

6    Why Join the IFIs?

An Economy with Promise but Needing Help

How the IFIs Can Assist

A Helping Hand in Tackling Pending Reforms

Challenges for the Cuban Government

How Can Cuba Gain Membership?

11    Global Experiences

Albania’s Entry into the Global Financial System

Sidebar: The Vietnamese Experience

16 Why Should the United States Support Cuba’s Reintegration?

What Is the Best Way to Help the Cuban People?

18    Recommendations for Cuba, the United States, and the International Financial Institutions

20    Endnotes

21    About the Authors

EXECUTIVE SUMMARY

The new US policy toward Cuba comes at a critical moment, with its impact reaching far beyond the Florida Straits. Since President Obama’s historic announcement in December 2014, Havana has welcomed the Presidents of France and Turkey, the Foreign Ministers of Japan and the Netherlands, the Director of Diplomacy for the European Union, the Governor of New York, and a host of other policymakers and entrepreneurs from the United States. Pope Francis is scheduled to visit in September.

Engagement will be critical to buttressing the government’s appetite for reform. After twenty-five years of post-Soviet adjustment and patchy results from limited reforms, a consensus exists that the economic system and old institutions require a fundamental overhaul. The Cuban gov­ernment is cognizant of the imperative to allow the “nonstate,” or private sector, to grow. It is the only way to slim down the public sector without massive unemployment.

Now that Cuba has caught the eye of foreign investors and the international community, it is a good time to reignite discussion on Cuba’s reinte­gration into the global economy. As with so many other countries before, the critical first step will be to regain access to the international financial institutions (IFIs), with a particular focus on the International Monetary Fund (IMF), the World Bank, and the Inter-American Development Bank (IDB).

Accession would serve the interests of Cuba and its citizens, the United States, and the inter­national community. In Cuba, the process of economic reform is at a pivotal moment, and more progress is needed to lift the economy on to a new growth trajectory before President Raúl Castro is to step down in 2018. Accession will require adjustments: improving data and transparency, aggressively working to unify the two currencies, and shifting official attitudes. But in the context of the new relationship with the United States, these should not be difficult.

The experiences of other former communist countries can provide lessons for Cuba. Albania, which joined the IMF in October 1991, has some interesting parallels. Albania’s first loan from the Fund, under a stand-by arrangement, was approved in August 1992, and its reengagement with the global financial system and policy reforms produced significant improvements in the standard of living. Vietnam offers another posi­tive example, with access to IFI support coming after a period of initial reform. In both countries everything from GDP to life expectancy improved. These universal benefits are compelling factors for Cuba.

For the international community, Cuba’s accession is long overdue. Still, in the United States, agreement to Cuban accession could face objections. However, those objections rest on discredited assumptions that sanctions can bring political change and that international support will help only the government and not the people of Cuba. US backing of Cuban membership in the IFIs would be consistent with the new policy of helping to support economic reform. This is a unique opportunity to stimulate further transfor­mations in Cuba.

Three possible approaches exist for Cuba to join the IFIs. The first would involve a gradual process of confidence-building between the IFIs and the Cuban authorities, with no initial commitment or date for membership. The second would be a more direct and immediate path, beginning with a Cuban decision to apply for membership. The third would be for President Obama to take the initiative by making a public statement of sup­port for Cuba’s accession to the IFIs, claiming his constitutional prerogative to define the direction of US foreign policy—much like the leadership by President George H. W. Bush in advocating for Russian engagement and membership in the IMF in 1991-1992.

This report argues that a series of steps can be taken now—by Cuba, the United States, and the international community—to pave the way for Cuba to be welcomed back as a full and active member of the international financial institutions.

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ECONOMISTAS CUBANOS Y DE EEUU DEBATEN EN WASHINGTON SOBRE EL LIBRE MERCADO

Original here: ECONOMISTAS CUBANOS Y DE EEUU DEBATEN

JAIRO MEJIA/EFE

WASHINGTON  3 de Junio de 2015

Conference Program: Rethinking Cuba, New opportunities for Development

12166748-cartoon-like-drawings-of-flags-showing-friendship-between-Cuba-and-USA-Stock-PhotoEl centro de estudios Brookings Institution acogió el martes en Washington un inédito encuentro de economistas cubanos y expertos estadounidenses para analizar los efectos del progresivo e histórico camino en la isla hacia el libre mercado, en paralelo a la normalización de relaciones con EEUU.

En una muestra más de los nuevos tiempos tras el anuncio de normalización de relaciones entre Cuba y Estados Unidos del pasado 17 de diciembre, profesores de la Universidad de la Habana presentaron ante los “cocineros de ideas” de Washington los pasos del castrismo hacia una economía menos regulada.

El subsecretario de Comercio Internacional, Stefan Selig, reconoció que desde la llegada de Raúl Castro al poder Cuba ha realizado reformas para abrir su economía, aunque persisten “profundos desafíos estructurales” para salir del anacronismo.

En su opinión, “Cuba ha estado anclada en el pasado”, algo que no ha permitido a la isla caribeña avanzar del mismo modo que lo hicieron economías que abrieron sus mercados como Chile, Colombia, México o Perú.

“El nuevo rumbo (en Cuba) significará poner el reloj de nuevo en marcha…No nos hacemos ilusiones, sabemos que tomará tiempo y que habrá obstáculos en el camino”, aseguró Selig.

El profesor de Economía de la Universidad de la Habana, Juan Triana, aseguró que, desde la llegada de Raúl Castro, Cuba ha abordado importante reformas, como atestigua el aumento del número de paladares (restaurantes) y alojamientos en el país, que han creado un semillero de pequeños empresarios.

Triana señaló que, desde que comenzó el año, la llegada de turistas norteamericanos ha experimentado un importante aumento, una señal de que las medidas para rebajar las barreras a desplazamientos y transacciones financieras con Cuba adoptadas recientemente por la Casa Blanca han tenido un efecto inmediato.

Pese a los avances en el camino hacia la normalización, que podrían culminar en breve con un anuncio sobre la apertura de embajadas, el levantamiento total del embargo estadounidense a la isla será “largo y tortuoso”, a juicio de Triana.

Por su parte, el economista Archibald Ritter, investigador de la universidad canadiense Carleton, dijo que Cuba debe crear una estrategia de manejo de la inversión extranjera que evite una “walmartización” (término derivado de la cadena de supermercados Walmart, que se refiere a grandes empresas que comen terreno a las pymes) de la economía que acabe con los pequeños empresarios.

Según Ritter, “Raúl Castro es cauteloso y pragmático” en lo que se refiere a las reformas necesarias para que la economía cubana pueda seguir el camino de crecimiento, al tiempo que se abre tras más de un siglo de enemistad con su vecino y primera economía mundial.

Richard Feinberg, investigador de la Universidad de California y experto en Cuba, recordó que el Gobierno castrista sigue manteniendo un férreo control de la economía a través de empresas estatales que no permiten un sector privado sostenible.

La profesora del Centro de Estudios Económicos de la Universidad de la Habana Saira Pons consideró que Cuba necesita dar más libertad a las empresas estatales y crear un marco de relación más acorde con la economía moderna. No obstante, Pons recordó que el gasto social es todavía algo prioritario en Cuba y difícil de recortar. El 20% del producto interior bruto (PIB) cubano se destina a financiar sanidad y educación gratuita.

Yaima Doimeadios, también procedente de la Universidad de la Habana, indicó que una sistema socialista no está dispuesto a rebajar los logros sociales obtenidos, y eso será definitorio en el futuro económico cubano.

Tras más de dos décadas sin el soporte financiero soviético, Cuba se ha visto obligada a dar tímidos pasos hacia una economía más liberalizada, pero la falta de productividad, lastrada por pobres infraestructuras y empresas ineficientes, ha impedido progresos.

“Los ganadores han sido, hasta ahora, los que han producido menos y han sido menos ineficientes”, según apuntó Doimeadios, quien dijo que con la mayor apertura y el posible fin del bloqueo estadounidense persistirán dudas sobre cómo equilibrar crecimiento, estabilidad fiscal y una nueva mentalidad en el país. EFE

Brookings

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CUBA: SHOWTIME IN HAVANA

John-Paul Rathbone

Financial Times, May 21, 2015

Original here: Lady Salsa in Havana

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It is a hot day in central Havana and the doorman at the Television Ballet building is asleep in the heat. But upstairs, Toby Gough, a British impresario, is exhorting nine Cuban dancers to work up a deep sweat. The show they are rehearsing, Lady Salsa, opens in Germany in less than two weeks.

“More fighting spirit please!” Mr Gough urges the troupe after they run through the opening number. “Keep your eyes forward! Engage more, por favor!”

The rough-floored studio has seen better days; the barre is worn, the mud-green paint peeling from the walls, and two plastic fans circulate the stale air. It is an unlikely setting for Mr Gough, a globe-trotting promoter who once brought a swimming elephant to spirit pop star Kylie Minogue away from press photographers after a Sri Lanka charity benefit.

Yet, for more than a decade the resourceful 44-year-old from Sussex has made his base here in Havana, source of dance talent for several touring shows. His troupe and Cuba’s broader dance scene provide a telling viewpoint on the changes on this socialist island.

Mr Gough’s first outing of Lady Salsa, a rousing two-hour journey through Cuban musical history, enjoyed a sellout European tour in 2000. Fifteen years later, he is reviving the show, which follows the life story of Siomara Valdes, a 75-year-old chanteuse who performed at the Tropicana nightclub before the revolution and once taught Nat King Cole the rumba.

Mr Gough’s European backers saw the rebirth of Lady Salsa as a chance to cash in on the giddy new interest in all things Cuban. This has exploded since the December 17 announcement by Barack Obama, US president, that after 50 years of cold war enmity Washington now sought detente with Havana.

“We need a new introduction,” says Mr Gough. “Can we still have: ‘Welcome to Cuba, an island shaped like a crocodile, biting the foot of the United States’? How about ‘nibbling’ or ‘kissing’ instead?” At this, the dancers laugh and blow kisses at their reflections in the studio mirror.

High hopes, slow progress

Gentle irony is a common Cuban reaction to the prospect of US rapprochement. “It’s very easy to go slower,” says a foreign ministry official. US officials are also cautious. “There are many suppositions about how far or fast US executive action can go,” says one. “They often do not take into account the comedy of the various arms of our government.”

Yet the anticipated end of the US trade embargo, which requires an act of Congress, has unleashed a carnival of expectations. Major US companies such as Citi, which lost a fortune in Cuba financing the 1920 sugar price boom-and-bust known as the “Dance of the Millions”, have said they want to return. World leaders and foreign businesses have jostled to mark their territory before the supposed American invasion.

This month alone, Raúl Castro, Cuba’s 83-year-old president, has met Vladimir Putin, Russia’s president; Pope Francis; Matteo Renzi, Italian prime minister; and François Hollande, the first French head of state to visit Havana in a century — although likely not the last socialist visitor to leave unsaid Cuba’s human rights abuses. “How many foreign dignitaries . . . have visited? We have lost count,” wrote dissident journalist Yoani Sánchez in a column on her website, 14ymedio.com. “But their illustrious presence has brought little relief to Cuban daily life.”

That is certainly true of Cuba’s economy. Seven years ago Mr Castro began a tentative reform process, which includes allowing self-employment, the sale of cars and homes, and the mooted unification of Cuba’s myriad currency system. Their purpose is threefold: to boost flagging growth; retain disenchanted youth emigrating abroad; and prepare Cuba should Venezuela’s swelling economic crisis end the estimated $1.5bn of aid that Caracas provides Havana each year.

In theory, the inevitable passing of the so-called historic generation, which led the 1959 revolution, adds further urgency. US actuarial life tables suggest former leader Fidel Castro, 88, has a life expectancy of another four years.

But Mr Castro’s measures have failed to lift growth, which slowed last year to 1 per cent. Nor has a revamped law done much to boost the stock of foreign investment, yet. At just $427m in 2011, according to UN estimates, it would count as small potatoes elsewhere.

“There is more willingness among Cubans to open up than five years ago,” says Lord Hutton, a British peer who led 45 UK businessmen on an April trade visit, one of whom closed a deal — years in the making — to sell seed potatoes to a fried-chips factory. “But there is still a long way to go; patience is required.”

Certainly, for a Financial Times reporter returning to Cuba after a decade of annual visits, there is little change on Havana’s streets, except perhaps a sense of hope. The dismal food has improved thanks to new, private restaurants. To cater to tourists, private homes are being refurbished — often funded by the $2bn a year that Cuban-Americans send their relatives. And Mr Obama’s relaxation of travel restrictions has produced a 20 per cent rise in US visitors this year, Cuban officials say.

About 600,000 came in 2014 and, although that includes mostly Cuban émigrés, it is still far short of the 3m US tourists the International Monetary Fund estimates could travel to Cuba should relations normalise. But the increase has already stretched Havana’s tourist industry, and led to some unfortunate misunderstandings: a few US visitors have taken to pocketing Tropicana glassware as mementoes of their trip.

“They don’t understand that the poor waiters have to pay for the missing items,” rues Yolanda, a Tropicana dancer. Average state wages are $20 a month.

There has also been an explosion of touring shows, and freelance dancers can return from a six-month tour with enough saved to buy an apartment or car. Rakatan, a high-octane extravaganza, played in New York in February. Ballet Revolución, a sinuous meld of ballet and Cuban dance styles, tours Australia in June. Others include Soy de Cuba and Havana Queens.

All draw on talent honed by a dance system organised on Soviet lines. “It’s a machine,” says Aaron Cash, co-choreographer of Ballet Revolución. Like all machines, it can be brutally effective at producing technical excellence. Children are funnelled from an early age into one of four categories; ballet, contemporary dance, folklore or cabaret. One star the system has produced is Carlos Acosta, although his career was only saved from obscurity after he was poached by the English National Ballet.

Internal embargo

Like its Soviet-style economic system, Cuba’s dance machine can also be stifling thanks to what is called the “internal embargo”, an official mindset that would bog Cuba down even if the “external embargo” were lifted tomorrow.

“Mental attitudes are a problem,” admits the foreign ministry official.

Its stunting influence is everywhere: at government offices, where bored officials elevate sulkiness to new levels; at state-run clubs such as the Tropicana, where tourists pay $95 to watch dancers run through a stale set; and at the National Ballet, run with an iron grip for over half a century by Alicia Alonso, 93, who is blind but still choreographing. On tour, critics often comment on her dancers’ “artistic straitjacket”.

The internal embargo certainly exists in big business. “My biggest problem is bureaucratic trauma,” says Idermis González, head of co-ordination at Mariel, an $800m free trade zone on Cuba’s northern coast that is the centrepiece of the government’s drive to attract foreign investment.

It also stymies Mr Castro’s tentative reforms, as seen at Zumaya Gutierrez’s small cafeteria. Ms Gutierrez set up the eatery at her village in Mayabeque province a few years ago. She says that she “loves her country”, and that most of her clients are hungry children. “I love them and sometimes give them a break if they do not have money.”

Yet despite this civic sense, her operation is perforce mainly illegal. Shortages and high prices at state retailers mean food supplies can only be sourced on the black market, where Ms Gutierrez, whose name has been changed, also buys fake sales receipts, at $2 a month, so her accounts pass the tax inspectors. Being able to buy supplies legally, and wholesale, would change everything, she says, her eyes brightening. But that is only possible for state companies and sanctioned co-operatives.

Furthermore, eliminating the black market would end a vital cash source for her neighbours, who sell stolen state goods. “Nobody would then have any money to buy my food,” she says. The result, like much else in Cuba, is an apparent impasse.

“Cuba reminds me of our piecemeal reforms before the fall of the Berlin Wall,” says an eastern European diplomat. “Each one requires another to make it effective, and so on. But Havana has not yet realised that, when it comes to the market, you cannot be a little bit pregnant. Some things just don’t work.”

No velvet revolution

Back at the dance studio, Mr Gough has turned to psychodramatic exercises to develop his dancers’ characters and add narrative heft to the show.

“Many Cubans think they can just rock up and dance away and win applause,” he says. “But TV shows like Britain’s Got Talent or Pop Idol have made audiences more demanding. They take slick performances for granted. Technical mastery is not enough. You have to provide drama, the kind that gives the audience a lesson about life.”

Cuba has long provided the world with drama, be it the supposed decadence of pre-revolutionary Havana, or the socialist austerity that followed. What might happen next is only speculation — and most speculations about Cuba have been wrong in the past.

Mr Obama’s move to relax and ultimately end the embargo aims to swivel the spotlight away from Washington’s historic bullying tactics and on to Cuba’s shortcomings. Still, a sudden velvet revolution-style break looks unlikely. Havana also wants to avoid a chaotic Russian-style transition. But China’s example — perestroika over glasnost — while appealing, is contradicted by the slow pace of the reforms.

“The Cubans are in terra incognita, trying to figure it out,” says Pedro Freyre, a Wall Street lawyer with long Cuban experience. “Some of them are very intelligent, but they also have to operate within key intellectual and practical constraints — like going as fast as possible without losing control.”

Next year’s Communist party Congress will be crucial; the reputedly pragmatic Mr Castro, former head of the armed forces, says he wants to deepen the reforms. He has also said he will step down as president in 2018, although he could remain head of the party, where power ultimately resides.

Meanwhile, an army takeover of the economy’s “commanding heights”, the military-tourist complex, is under way. By some estimates, the army controls 60 per cent of the economy, as at businesses like Gaviota, the island’s largest hotel operator. But even military reformers can suffer from the stolid midriff of official inertia.

This became clear when Mr Castro met Pope Francis in Rome. Afterwards, Mr Castro said that, while he remained communist, he was thinking of returning to the church. International media splashed the extraordinary comment, but not Cuba’s state press — thereby censoring the president himself. “The state press is an insult to militants,” as Mr Castro has said.

Mr Gough, like his dancers, has no interest or time for politics; his own show must go on. Sitting on the studio floor, he revises Lady Salsa’s song list. The curtain will drop after Celia Cruz’s “Yo Viveré”, a cover version of Gloria Gaynor’s “I will Survive”, while the encore is “Adiós”, a poppy salsa number.

This is a neat way to end the entertainment — but also an ambiguous speculation on Cuba’s future. Who will survive, and goodbye to what?

“The most exciting thing about Cuba now,” Mr Freyre says, “is the unknown.”

 Joyn-Paul-Rathbone

John-Paul Rathbone

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