Tag Archives: Exports

HOW DOES CUBA MANAGE TO ACHIEVE FIRST-WORLD HEALTH STATISTICS?

The island’s medical system is envied throughout the region and is a major foreign revenue earner

ÁLVARO FUENTE; EL PAÍS, Havana 10 FEB 2017

Original Article: Cuba’s Medical System

Cuba’s healthcare system is a source of pride for its communist government. The country has well-trained, capable doctors, the sector has become an important export earner and gives Cuba valuable soft power – yet the real picture is less rosy. A lot of health infrastructure is deteriorating and there is a de facto two-tier system that favors those with money.

Cuba’s child mortality rate is on par with some of the world’s richest countries. With six deaths for every 1,000 births, according to World Bank data from 2015, Cuba is level with New Zealand. In 2015, the global average was 42.5 deaths for every 1,000 births. Despite more than half a century of a US economic embargo, Cuba’s average life expectancy matches that in the US: 79.1 years, just a few months shorter than Americans who, on average, live to 79.3 years, according to 2015 data from the World Health Organization (WHO).

Much of Cuba’s success in these areas is due to its primary healthcare system, which is one of the most proactive in the world. Cuba’s population of 11.27 million has 452 out-patient clinics and the government gives priority to disease prevention, universal coverage and access to treatment.

Cuba has also produced innovations in medical research. In 1985 the country pioneered the first and only vaccine against meningitis B. The country’s scientists developed new treatments for hepatitis B, diabetic foot, vitiligo and psoriasis. They also developed a lung cancer vaccine that is currently being tested in the United States. Cuba was also the first country on earth to eliminate the transmission of HIV and syphilis from mother to child, a feat recognized by the WHO in 2015.

In 2015, Cuba spent 10.57% of its GDP on health, slightly higher than the global average. According to the World Bank in 2014, the European average spending GDP spending was 10%, compared to 17.1% in the United States.

TWO-TIER SYSTEM

A lesser-known characteristic of Cuba’s healthcare system is the existence of special clinics, reserved for tourists, politicians and VIPs. The state reserves the best hospitals and doctors for the national elite and foreigners, while ordinary Cubans sometimes must turn to the black market or ask expatriate friends or family to send medicine.

“Cuba’s health service is divided in two: one for Cubans and the other for foreigners, who receive better quality care, while the national population has to be satisfied with dilapidated facilities and a lack of medicines and specialists, who are sent abroad to make money for Cuba,” says Dr. Julio César Alfonzo, a Cuban exile in Miami and director of the NGO Solidaridad Sin Fronteras.

In 2015, Cuba spent 10.57% of its GDP on health, slightly higher than the global average

In 1959, the country had only 6,000 doctors, half of whom emigrated after the Cuban revolution. By 2014, Cuba had 67.2 doctors for every 10,000 inhabitants, with only Qatar and Monaco ahead of it.

However, despite these impressive statistics, the quality of primary healthcare, which has been fundamental to Cuba’s success, has been declining in recent years. Between 2009 and 2014 there was a 62% fall in the number of family doctors, from 34,261 to 12,842, according to Cuba’s National Statistics Office (ONEI).

AN ARMY OF WHITE COATS

In the words of Fidel Castro, Cuba’s “army of white coats” was formed in 1960, when a medical brigade was sent to Chile after an earthquake left thousands dead. Since then, Cuba has sent more than 300,000 healthcare workers to 158 countries in Latin America, Africa and Asia, according to Cuba’s state news agency. Today, around 50,000 Cuban medical workers are present in 67 countries.

“Cuban doctors are rooted in solidarity and in the Hippocratic Oath. Our job would be unthinkable without foreign missions,” says Salvador Silva, a doctor specializing in infectious diseases who has worked in Haiti and Liberia.   “Yes, our salary is low and maybe that pushes us to go abroad, but it also makes us proud when we see our work recognized throughout the world, on top of just helping in our own country,” he adds.

Doctors are arguably Cuba’s most profitable resource and the country’s medical missions have proved to be a lucrative diplomatic tool. The healthcare industry is also one of the country’s main sources of income. In 2014, Cuban authorities estimated overseas healthcare services would bring in $8.2 billion, putting it ahead of tourism.

Cuba has a different deal with each country it works with. For example, in exchange for sending 3,500 health care workers to work in and provide training in Venezuela, a close Cuban ally, Venezuela sends oil.

With such a high demand for personnel, some suspect that the Cuban government has been reducing educational requirements to hasten students’ entry into the work force.  “They are giving doctors licenses in record time to meet the need to export them, and this has been detrimental to the quality of training and medicine, which used to be the best. This has been happening since they started the program in Venezuela, between 2003 and 2004,” says Dr Alfonzo.

Doctors are also eager to be sent abroad, not only to help the less fortunate, but also for money. Salaries are higher – depending on the location, with doctors abroad reportedly making up to $1,000 per month (minus taxes), whereas those in Cuba make around $50. On the island, it isn’t rare to find taxi drivers, shopkeepers or construction workers with medical degrees.

Juan drives a 1950s Chevrolet he bought with his brother and he uses it as a taxi from 6pm to midnight. He’s also a doctor in the clinic Hermanos Ameijeiras. “The wage is a pittance. We find ourselves obligated to make a living doing other things. I have coworkers who sell prescriptions to pharmacies, who work in unlicensed clinics or help their families in shops. It’s frustrating,” he says. “It’s like they’re pushing us to enlist in international missions, the business of Cuba.”

The country’s medical missions abroad have been an important escape route for Cubans looking to defect. Before migratory reforms were passed in January 2013 allowing Cubans with passports and visas to travel abroad, the preferred way to abandon Cuba was via Venezuela. In 2013 and 2014, more than 3,000 doctors deserted the island to go to the United States through a special visa program called Cuban Medical Professional Parole, a program started by George W. Bush to help healthcare workers who had escaped while working abroad.

Lucia Newman, a former CNN correspondent in Habana, said Cuban doctors complain that travel restrictions prevent them from attending conferences or keeping abreast of the latest medical advances. The US trade embargo on Cuba includes some textbooks, but the major problem is that Cuban doctors cannot buy medical equipment from the United States or from any US subsidiaries.

For Odalys, a young patient waiting at the Hospital Salvador Allende, “the situation is becoming unsustainable in this country and it’s not because of a lack of specialists, it’s because we have to bring everything ourselves. I just bought a light bulb for the hospital room. I’ve called home so that they can bring me bedding, towels and even toilet paper. There aren’t even stretchers, I saw a family carrying their sick son into a room. Free and universal health care, yes, but it’s a bit of a mess and very informal,” she says.

English version: Alyssa McMurtry.

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CHARCOAL — FIRST LEGAL CARGO FROM CUBA IN MORE THAN 50 YEARS — ARRIVES AT PORT EVERGLADES

Original Article:  http://www.miamiherald.com/news/nation-world/world/americas/cuba/article128433209.html#storylink=cpy

BY MIMI WHITEFIELD

The first Cuban exports since the embargo went into effect over a half century ago arrived at Port Everglades Tuesday as port officials prepared to receive a business delegation from Cuba later in the week.

The delegation also plans to visit the Port of Palm Beach, which is located in Riviera Beach, and Port Tampa Bay durina a swing through the United States that has already included a stop at the Port of Houston. Also on the itinerary are visits to the Port of New Orleans and the Port of Virginia in Norfolk and meetings with the U.S. Chamber of Commerce in Washington D.C., members of Congress and the American Association of Port Authorities, which is holding a conference in Tampa.

Two containers of artisanal charcoal made from Cuban Marabú, an invasive woody species from Africa that is considered a nuisance on the island, arrived at the Fort Lauderdale port aboard a Crowley Maritime ship called the K-Storm. The charcoal exports, which are produced by private worker-owned cooperatives, are legal under a rule change by the former Obama administration that allows the importation of some products produced by independent Cuban entrepreneurs.

In Cuba, Marabú has taken over wide swaths of idle agricultural land and strangled other plants. But it makes a hardwood charcoal that is winning acceptance as a fuel for pizza and bread ovens in Europe and the Middle East. It will be sold under the Fogo Charcoal brand by various U.S. retailers.

The charcoal deal was put together by Coabana Trading, a subsidiary of Reneo Consulting, a firm chaired by Scott Gilbert, the Washington D.C. lawyer who represented Alan Gross, the USAID subcontractor who was jailed by the Cuban government for five years.

“This is truly a momentous occasion,” Gilbert said when the deal for 40 tons of charcoal was announced earlier this month. “Now U.S. consumers will be able to purchase this product, as have Europeans and others for many years. More importantly, this marks the beginning of a new era of trade between the United States and Cuba.”

The agreement was struck with CubaExport, a Cuban government entity that develops trade opportunities, but Scott said that the Marabú plant is cut and the charcoal produced by private Cuban cooperatives.

The embargo still remains in effect, but executive orders issued by Obama over the past two years eased some Cuba-related travel and trade restrictions.

Although the transaction was negotiated under the Obama opening, the historic Cuban exports are arriving during the Trump administration. Trump has said he might roll back some of Obama’s executive orders on Cuba unless Cuba offers a better deal to the United States and Secretary of State-nominee Rex Tillerson has said that all Obama’s executive orders on Cuba will be reviewed.

Whether Cuban charcoal becomes a staple of U.S. trade with the island remains to be seen.

“It’s experimental, but the importer hopes to have regular shipments,” said Jay Brickman, vice president of government services and Cuba service at Crowley. Brickman called the shipment “the first truly commercial shipment from a Cuban cooperative to a private U.S. business since the U.S.-Cuba trade embargo was imposed more than 50 years ago.”

The shipping line makes thrice-monthly trips from Port Everglades to Cuba’s container port in Mariel and also calls in Honduras and Guatemala before returning to the Fort Lauderdale port. Crowley mostly carries frozen chicken parts and foodstuffs to Cuba but it also handles small amounts of other legal exports to the island and was involved in shipping some of the equipment that the Rolling Stones used in their historic concert in Cuba in March 2016.

Crowley has been calling on Cuba for the past 15 years. “We average about 40 to 45 loads of cargo [for Cuba] per voyage,” said Brickman.

Another port user, Pearl Seas Cruises’ Pearl Mist, is currently on its maiden voyage to Cuba from Port Everglades.

On Thursday, a Cuban delegation will be at Port Everglades to sign a memorandum of understanding between the port and the National Port Administration of Cuba that could pave the way for joint marketing studies, joint training and other cooperation, said Jim Pyburn, the port’s director of business development.

“We would like to see U.S. exports to Cuba increase; imports are good, too,” said Pyburn.

He hopes for a future when large U.S. grocery chains and shopping clubs ship food to Cuba from the port. “Cubans are in dire need of paint and basic building materials and we’d like that to be part of the [export] mix, too,” he said.

At Port Everglades, the seven-member Cuban delegation will begin its day with a meeting with Port Director Steven Cernak, tour the port and then lunch with executives from Crowley and the cruise lines. In the afternoon, the delegation will present a “Doing Business with Cuba” seminar for about 150 invited businesses executives. It will include presentations on inland and sea transportation in Cuba, the Mariel Container Terminal and the Mariel Special Economic Development Zone, which is prospecting for foreign investment projects leading to sustainable economic development.

The Cuban delegation includes Ana Teresa Igarza, general director of the Mariel zone; José Leonardo Sosa Barrios, deputy director of the Mariel Container Terminal; Eradis González de la Peña, president of Almacenes Universales; René Rolando Fernández, director of inland waterway and sea transport for the Ministry of Transportation; Tania Vazquez, an official with the Ministry of Foreign Trade and Investment; Joel Lago from the Cuban Embassy in Washington’s economic and trade office and Ernesto Viñas, an adviser to the deputy minister of transportation.

Pyburn said Port Everglades had been working on an MOU with Cuba since early 2016 but originally it was only going to cover Mariel, which is about 28 miles west of Havana. Now, with the involvement of the National Port Administration, it will cover all Cuban ports.

He said the MOU was completed for signing in May. But there was little action until Brickman visited Washington in December. During the trip, Brickman said he received a call from the Cuban Embassy “saying the Cubans would really like to sign a memorandum of understanding with Port Everglades.” He helped facilitate the visit and the signing.

The Port of Palm Beach also is expected to sign a MOU with the Cuban port administration on Friday.

Unloading Charcoal at Port Everglades, Florida

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CUBA’S FIRST EXPORT TO THE UNITED STATES SINCE 1961: ARTISANAL CHARCOAL

Artisanal charcoal will become the first legal Cuban export to the United States in decades under a deal announced Thursday between Cuba’s government and the former lawyer for imprisoned U.S. government contractor Alan Gross.

Attorney Scott Gilbert, who has sought to build economic ties between the two countries since Gross’ release, said a company that he founded will buy 40 tons of charcoal made from the invasive woody plant marabu. The charcoal is produced by hundreds of worker-owned cooperatives across Cuba and has become an increasingly profitable export, valued for its clean-burning properties and often used in pizza and bread ovens.

Gilbert’s company will pay $420 a ton, which is significantly above the wholesale market price of about $360. The first delivery is scheduled for Jan. 18, two days before the inauguration of Donald Trump as U.S. president.

Products of privately run or cooperative farms in Cuba can be exported to the United States under measures introduced by President Barack Obama after the Dec. 17, 2014, declaration of detente with Cuba. The measures loosen a 55-year-old trade embargo on Cuba.

The charcoal is sold by cooperatives to a local packager, which sells it on to state-run export firm CubaExport. Each middleman takes a 1 percent or 2 percent commission, CubaExport general director Isabel O’Reilly said. CubaExport said the charcoal would be the first legal export to the United States in more than five decades, and it hoped to expand the deal to include honey and coffee.

The charcoal will be sold to restaurants and online to consumers in 33-pound bags under the brand name Fogo, Gilbert said.

Cuba sells about 40,000 to 80,000 tons of marabu charcoal annually to buyers in Italy, Germany and about a half dozen other countries, O’Reilly said.

Attorney Scott Gilbert

“I think that once they have examined this situation and looked at all the facts, that they will be supportive of increased engagement and the economic changes that it will bring,” Gilbert said.

Under Obama’s changes, American visitors to Cuba can return with unlimited rum and cigars, but state-run companies cannot export those products to the U.S.

A man prepares artisanal charcoal at a farm on the outskirts of Havana, Cuba, on Jan. 5, 2017. Artisanal charcoal will become the first Cuban export to the U.S. this month under a new deal between the Cuban government and the former lawyer for imprisoned U.S. government contractor Alan Gross.

(Ramon Espinosa / AP)

Associated Press

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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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REFORMANDO EL MODELO ECONÓMICO CUBANO

Mauricio A. Font y Mario González-Corzo, Editores, Con la asistencia de Rosalina López

New York: Bildner Center for Western Hemisphere Studies, The Graduate Center, The City University of New York, 2015

Documento Completo: Reformando el Modelo Economico Cubano

 New Picture (12)

CONTENIDO

Introducción, Mario González-Corzo

Del ajuste externo a una nueva concepción del socialism Cubano, Juan Triana Cordoví

La estructura de las exportaciones de bienes en Cuba 29, Ricardo Torres

Relanzamiento del cuentapropismo en medio del ajuste structural, Pavel Vidal Alejandro y Omar Everleny Pérez Villanueva

Las cooperativas en Cuba, Camila Piñeiro Harnecker

La apertura a las microfinanzas en Cuba, Pavel Vidal Alejandro

Hacia una nueva fiscalidad en Cuba, Saira Pons

Bibliografía

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CAN CUBA RE-INDUSTRIALIZE?

By Arch Ritter, October 5, 2013

 Since 1989, and similar to the United States and Canada among other countries, Cuba has experienced a serious de-industrialization from which it has not recovered. The consequences of this are grave, including job and income loss, the loss of an important part of its economic base and rust-belt style urban decay. Cuba risks becoming a typical small Caribbean Island, exporting services and some resources, while importing almost all manufactures.[i]

New PictureThe causes of the collapse are complex and multi-dimensional. They were outlined in an earlier article available here:   Can Cuba Recover from its De-Industrialization? I. Characteristics and Causes.  In summary, the causes include:

  •   The ending of the subsidization from the Soviet Union resulting in an incapacitation of the manufacturing sector;
  •  The antiquated and uncompetitive technological inheritance from the Soviet era;
  •   Maintenance and re-investment was de-emphasized before 1989 and collapsed thereafter;
  •   Low investment levels. [Investment was 10.5% of GDP in 2008 in comparison with 20.6% for all of Latin America, according to UN ECLA];
  •  The dual monetary and exchange rate systems penalize traditional and potential new exporters that have received Moneda Nacional pesos at a rate of  CuP 1 = $US 1.00 from exports – while the relevant rate for Cuban citizens is 26 CuP = $US1.00;
  •   The prohibition of most small and medium enterprise for the last 50 years has blocked entrepreneurial trial and error and the emergence of new manufacturing activities;
  • Effective competition from Chinese manufactures imports, stimulated further by China’s undervalued exchange rate and Cuba’s over-valued exchange rate.

The accompanying chart illustrates the changes that have occurred Cuban manufacturing and some of its subsectors. Total manufacturing output excluding sugar in 2011 was 48.8% below the level of 1989 in terms of physical volumes. Many sectors experienced reductions in the 50% to 99% range. The exceptional success was pharmaceutical production which increased by 765% from 1989 to 2009, albeit from a low base.

What are the longer term consequences of “de-industrialization”?  Is it likely that the policy proposals of the Lineamientos approved at the VI Congress of the Communist Party of Cuba will lead to a recovery from this collapse? What can be done to reverse this situation?

 I.                   CONSEQUENCES OF THE COLLAPSE OF CUBA’S MANUFACTURING SECTOR

The consequences of the shrinkage of the manufacturing sector are serious. First, employment in the sector (including sugar) declined from 685,500 in 1989 to 530,800 in 2009 or to 77.4% of the 1989 level, a reduction of 32.6%. (ONE AEC, 2011 Table 7.3)

Second, labor productivity in manufacturing has fallen.  The volume of output has diminished more rapidly than employment. The 2009 level of output in the manufacturing sector (including sugar) was 44.9% of the 1989 level (a decline of 55.1%) but employment declined by 32,6%.  This means that labor productivity in manufacturing has also probably declined from 1989 to 2009, though this cannot be known for sure without knowing the values as well as the volumes of production in these years. 

Third, the importation of manufactures has risen sharply. Virtually all the shoes, clothing, textiles, household gadgetry and a lot of furniture are now imported. Indeed, one can purchase most plumbing supplies, electrical materials, dishes, pots and pans, household gadgetry and furnishings only for “Convertible Pesos” rather than the Moneda Nacional that people actually earn.

Paradoxically, visits to the various Tiendas por la Recaudacion de Divisas (TRDs or former dollar stores) which are the main source of household equipment and gadgetry, furnishings, clothing, foot-ware, plumbing materials, electrical items etc. is similar in one sense to visits to the major Big Box stores such as Walmart or Target in that the vast majority of the items for sale are imported from China. Walmart, Home Depot, Target and their ilk, make their mammoth purchases from China for all their stores in the country, obtaining massive economies of scale and quantity discounts. Has the China-Walmart Alliance helped to de-industrialized the United States?

One wonders if the procurement patterns for the large state store chains in Cuba are not unlike those of Walmart, pictured below. Does CIMEX, the major retailing conglomerate in Cuba make its purchases in the same way, providing for all its outlets in Cuba with single orders?  Is a CIMEX-China Alliance in Cuba echoing the China-Walmart Alliance in the United States and having similar results in avoiding smaller scale procurement purchases from Cuba or other countries?

Picture1The World According to Walmart’s Procurement Purchases

(One wonders if CIMEX procurement would be somewhat similar.)

A fourth result of Cuba’s de-industrialization is that it has lost much of the foundation on which diversified manufacturing activities could be developed in future. For example, Cuba has essentially lost the “clusters” of economic activities that once surrounded the sugar sector specifically and agriculture generally producing inputs and processing outputs.  Parts of the sugar-related manufacturing sector have largely shut down – notably the manufacture of cane harvesters and agricultural machinery and equipment as well as the production of replacement parts for the sugar mills. As illustrated in Chart 1, the production of machinery and equipment is at 0.4% of the 1989 level while that for metal fabrication is at 32.8%.

This situation prevails in many other areas of manufacturing as well. A glance at the Chart indicates the magnitudes of the collapse.

Fifth, the potential for the emergence of manufacturing for export markets has been impaired. It will be difficult to reconstruct the manufacturing activities for which Cuba might have been able to develop some comparative advantages.

 

II.                THE “LINEAMIENTOS” ON THE MANUFACTURING SECTOR.

The Lineamientos de la Política Económica y Social del Partido y la Revolución,” approved on April 18, 2011 by the VI Party Congress include 25 guidelines on Industry. (Lineamientos de la Política Económica y Social del Partido y la Revolución.) Some of the guidelines are of obvious significance and would be of great usefulness if they can be implemented. These include

  •  “prioritizing” exports (Guideline No. 215) and maintenance  (220),
  • assuring inputs for the self-employment and cooperative sectors (217),
  •   emphasizing technical training ((132 and 138)
  •  the rationalization and restructuring of industrial capacity, including the sales, rental or usufruct of unused facilities to the self-employed (219).

Some specific industrial sectors are slated for emphasis, including pharmaceuticals (221(, nickel (224), natural medicines and dietary supplements (222) , information technology and electronics for export (226), fertilizers (230), rubber tires (231), construction materials (233), and metallurgy and machinery and equipment (234 236 and 237). Some of these seem reasonable and may have important roles to play in future manufacturing.

Elsewhere in the “Lineamientos” exchange rate and pricing considerations are mentioned, with the stated intention to move to a unified and realistic exchange rate but with no implementation as of September 2013.   

Liberalizing small enterprise and promoting larger co-operative forms of organization are now in process of implementation. For these two sectors, pricing is for the most part to be determined by the forces of supply and demand.  This may be an important step in permitting the emergence of new innovative enterprises. However, the continuing limits on size and professional activities impede the evolution of a diversified range of medium scale enterprise in higher tech manufacturing and related services.

If indeed the proposals of the “Lineamientos” were implemented fully and quickly, one could envisage the possibility of a turn-around for the manufacturing sector. So far, however, reforms in these areas have been cautious limited and slow.

III.             SOME POSSIBILITIES

 What might be the successful manufacturing sub-sectors in future? This section briefly considers some possibilities.

It is of course hard if not impossible to “pick the winners” in advance.  The most efficacious general approach for Cuba would be to establish a reasonable policy and institutional framework and let the winners emerge over time.  This would include such policies as unifying the monetary and exchange rate systems, liberalizing small and medium enterprise further, establishing a secure property rights system, consolidating the framework for the impartial rule of law towards enterprises, and a fair taxation system for Cuban-owned private sector enterprises, etc. (See  The Tax Regimen for the Mariel Export Processing Zone.regarding the unfairness of the tax system as regards Cuban-owned micro-enterprises.) Cuba is in the process of implementation in some of these areas though it still has a distance to go.

However, assuming that Cuba does establish an “enabling environment” for the emergence of a manufacturing sector, what might be the manufacturing opportunities for Cuba? This section tries to make a first sketch of Cuba’s main manufacturing sub-sectors and their future potential.

 

A.    Traditional Agro-Industries: Sugar, Tobacco and Rum.

The volumes of output in the sugar agro-industrial sector fell from 7 to 8 million metric tons of sugar per year in the 1980s to 1.8 million for the 2013 harvest. Perhaps the sector, focusing also on bio-fuels, can be reconstructed although now this would have to be almost from the ground up. Foreign – that is, Brazilian – technology, investible resources, managerial talent and entrepreneurship would be vital in this endeavor. But the old dysfunctional state enterprise model seems so entrenched that only successful implementation of dramatic institutional change as well as massive investment can bring it about.

Cuba has a major comparative advantage in cigars and a thriving agricultural and manufacturing base for future expansion. Market prospects are mixed but modestly positive on balance. The market for cigars in the high income countries may weaken in future as the baby boomers age further and become more concerned about their health. The cigar fad of the 1990s is unlikely to return in those countries with the same intensity.

On the other hand, cigars may become a status symbol for the males of the burgeoning middle classes of the emerging middle income countries of Latin America and Asia. Normalization of relations with the US will also increase demand.  

Conclusion?  Continue to promote this sector.  Also a suggestion: produce for export high quality but machine-made cigars at prices that are more affordable for a broader market. Cuba has priced itself out of the middle class cigar market.

The market for rum and alcoholic beverages has been strong.  Its future should also be positive again due to increasing demand in emerging countries and the United States after normalization.

 

B.     Food Processing

Cuba should have great potential in processing agricultural products. However, this depends on a thriving agricultural sector providing the raw materials. Unfortunately agriculture has been in steady decline especially since 1990. Some past exports such as citrus fruit have fallen out of the picture.

Cuba could have significant production for export markets of citrus products, tropical fruits, vegetables, and beverages. This would require major expansion of food production and is thus a longer-term possibility at this time. However, a a diversified range of agro-industrial possibilities could be considered, e.g. mango cultivation and juicing for export markets. [ii]

 

C.    Pharmaceuticals.

This sector has been dramatically successful since 1989, and has become a major export exporter to a growing range of countries. (See the accompanying chart.) This success should continue into the future.

However there are some downside risks. First, new drugs must continuously be developed because generic versions of existing drugs can be produced freely anywhere (read India and China) when patent protection runs out – if not before. This means that Cuba’s producers, like big pharmaceutical companies, face future death unless they innovate successfully. Second, some of the markets for Cuba’s pharmaceuticals are a type of ideological “sweet-heart” deal, e.g. purchases by Venezuela. These may be at risk in the longer term when the Cuba-Venezuela “special relationship” runs its course.

New Picture (2) 

D.    Light Manufactures

Some of the economic activities that have declined most seriously – from 70% to 90% in different cases – are footwear, textiles, clothing, and consumer products of leather, wood, paper, metal, rubber and plastic for household use (See Chart 1.) This seems tragic when one considers that even in the 1940’s, Cuba was a major producer of a range of products such as leather and rubber shoes, cotton and rayon textiles, rubber tires, soap, paint, clothing etc. (IBRD, Report on Cuba 1950, p.130.)  The collapse of much of Cuba’s light industry is of course paralleled by its corresponding collapse in Canada and the United States, with the resultant job-loss and urban decay in the rust-belt.

 It would be difficult for Cuba to reclaim many of these areas, given the incredible economies of scale and agglomerative economies that big countries such as China, India, and other Asian countries experience.

 

One can imagine niche-type markets for which Cuba could have success. For example, the manufacture of some lines of specialty women’s clothing, leather footwear, and Spanish-colonial style furniture might be possibilities. Already one sees surprising crafts-level innovation in a myriad of areas, focusing on hard-currency tourist markets. These provide some hope that middle-sized enterprises could emerge and develop new products for Cuban and foreign markets.

But for this to happen there would have to be the possibility that micro-enterprises could evolve into small and medium scale firms. This is still blocked – with the exception of cooperative forms of enterprises.

 

E.     Chemical and Petrochemical Products.

If Cuba emerges as a significant petroleum producer or refiner of petroleum imports, it is possible that it may develop a range of petrochemical products for national and regional markets. Some production and exports are likely to emerge from the new refinery complex in Cienfuegos. However, the competition in the region from established producers in the region such as the US gulf coast, Mexico, Trinidad and Venezuela is serious so the possibilities here seem limited.

Could the production or “mixing” of fertilizers – from imported potash, phosphates and nitrogen – be revived? Perhaps, though Cuba has no particular advantage in this area.

 

F.     Heavy Industry and Capital Goods Production

Heavy industry such as an iron and steel complex, metal fabrication, wire and tube making is unlikely to emerge in a significant way in Cuba due to lack of cheap energy sources at this time, the absence of relevant raw materials, absence of significant metal using industries within Cuba, the small domestic market vis-à-vis efficient scales of production, absence of relevant skills etc. This situation could change in future if low-cost sources of energy from off-shore petroleum were to be developed.

 

H.    Machinery and Equipment

Cuba has produced some agricultural transport equipment, namely cane carts, since early colonial times. More recently, it produced heavy can harvesters such as the one in the adjoining photograph.

At this time, Cuba has lost the agricultural foundation for the production of machinery and equipment for the agricultural sector, though there may be some niches where possibilities exist. Brazil seems likely to capture much of this market. There may be some niche products that could emerge however.

Chances for Cuba of capturing automotive parts, batteries, rubber tires etc. seem slim and assembly is out of the question given the lack of the relevant cluster of economic activities on which these would be based and the great economies of scale in established producers elsewhere.   

 

I.        Electric and Electronic Equipment

The assembly of some electric or electronic products occurs now in a minor way and could perhaps be expanded. However, virtually all of the components would have to be imported so that domestic value added would be limited. Again, competition from abroad, notably from China will be difficult to overcome due to its huge advantages noted earlier.

 

J.      The Mariel Export Processing Zone

The Mariel EPZ creates some new possibilities for Cuba. It is possible that China (being wooed by Cuba with a “Mariel mission” visiting that country in September 2013), Brazil and possibly other countries establish assembly, light fabrication or bulk-breaking activities in the EPZ. This is certainly the purpose of the highly generous tax treatment provided to foreign investors, namely a “Zero” profits tax rate for 10 years with presumably full expatriation of profits and a rate of 12.5% after 10 years. (See The Tax Regimen for the Mariel Export Processing Zone.)

 

IV.             CONCLUSION

To revive Cuba’s manufacturing sector will be difficult. The loss of so much industrial capacity over the last quarter Century has weakened the foundation on which such a recovery could be based. There are a few promising sectors, most notably pharmaceuticals, food products, and some niche fabrication activities. But other most sub-sectors appear generally to be un-promising. Perhaps the Mariel Export Processing Zone will have some beneficial impacts.

What is most needed is the establishment of an “enabling environment” of company law, liberalization of small and medium enterprise, a reasonable tax regimen for Cuban private sector enterprises and of the monetary and exchange rate systems. Some of this was recognized in the “Lineamientos.” But there is still some distance to go.

Cane Harvester October 1993 002Cuban-Manufactured Cane-Harvester Pausing on the Highway, November 1994; Photo by Arch Ritter. Was thuis the last Cuban-made Harvester?


[i] The industrial sector has not yet been examined as in as much depth as some other economic areas such as agriculture. However, analysts at the Centro de Estudios sobre la Economia Cubana (CEEC) in Havana, notably Ricardo Torres Perez, have been turning their attention to this area.

[ii] For example, Canada imports growing volumes of several varieties of mango juice from the Republic of South Africa. Cuba could share in such markets. Again, normalization with the United States in time will be of benefit in providing a large near-by market.

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Cuba’s Medical Diplomacy: Aid, State Profiteering and International Financial Backing

BY MARIA C. WERLAU;  mariacwerlau@gmail.com

Haiti’s President Michel Martelly recently visited Cuba to sign cooperation agreements including in health. No doubt Haiti needs help to deliver needed healthcare, but these accords exploit Cuban workers and contribute to the continued oppression and impoverishment of the Cuban people.

Cuban Medical Worker, Haiti

Currently, around 700 Cuban health professionals are in Haiti. Cuba has similar government-to-government agreements with over 70 countries. These partnerships allow the Castro dictatorship to reap huge financial gains, avoid needed reform, and increase international influence to advance its agendas. Meanwhile, the export of scarce medical resources is causing a severe public health crisis in Cuba. Doctors and basic medical supplies are hard to find and facilities are falling apart.

When the earthquake struck, 344 Cuban health professionals were working throughout Haiti; more were immediately sent and deployed to the most remote areas. Cuba had long been receiving millions from international organizations and countries such as France and Japan for these services. Great need and corresponding international largesse became a golden opportunity. Just weeks after the disaster, Cuba was promoting a gigantic endeavor to build a new healthcare infrastructure for Haiti at an annual cost of $170 million, to be paid for by international donors. Cubans and Cuban-trained medical staff would run it at “half the international prices.”

Countless millions are now pouring into Cuba from the Pan American and World Health Organizations, dozens of NGOs, foundations, companies, and individuals from the United States, Canada, Spain, Belgium and others. Many governments have also donated — Venezuela $20 million to start, Brazil $80 million, Norway $2.5 million. The list of donations is undisclosed, but France, Australia, Japan, and other countries have apparently chipped in. The cost to Haiti is just a $300 monthly stipend to each Cuban health worker plus transportation and housing.

Haiti is just one very profitable subsidiary in Cuba’s global multi-billion dollar ¨humanitarian¨ enterprise. Most of its profits come off the backs of Cubans indentured as “collaborators.” Angola, for example, reportedly pays Cuba $60,000 annually per doctor; the doctor receives $2,940 (4.9 percent), at most. These service exports bring more than three times the earnings from tourism and far more than any other industry — $7.5 billion in 2010, the last year reported. Business is so good that in 2010 the Cuban government reduced an already decimated local health staff by 14 percent to send more abroad.

This unique brand of health diplomacy is only possible in a totalitarian state guaranteeing a steady pool of “exportable commodities.” Leaving Cuba without government authorization is punishable with years of prison; health professionals face the strictest travel restrictions. If they defect while abroad, their family, which must stay behind, cannot joint them for five years; issuing them academic or other records is forbidden.

The average monthly pay of a doctor in Cuba is around $25, barely guaranteeing survival. Abroad, they live off a bare-bones stipend from the host government. But, they receive from Cuba their usual peso salary and a bonus of $180-220 per month, plus are allowed to send home shipments of consumer goods. This paltry compensation package is enough for Cuban doctors to “volunteer” to be exploited abroad rather than at home.

The health workers are sent abroad for at least two years and often to far-flung areas under rudimentary, sometimes dangerous, conditions. In Venezuela, dozens have been killed or raped. Heavy workloads, surveillance, and many arbitrary restrictions add to their hardship.

In this clever scheme of modern slavery, Cuba is partnering with dozens of governments — including longstanding democracies such as Portugal and Uruguay — and receiving funds from reputable countries and international organizations. Ostensibly, the agreements violate the domestic legislation of many host countries and international accords including the Trafficking in Persons Protocol, several International Labor Organization conventions, and standards concerning the prohibition of “servitude” and “slavery.”

The Martelly agreements with Cuba should be made public. If they violate human rights’ standards, Haiti should manage the international aid independently to hire and compensate Cuban workers directly and invite their families to join them. Other countries should take note.

Maria Werlau is executive director of Cuba Archive, a non-profit human rights’ initiative based in Summit, New Jersey.

 

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Antonio Romero “Cuba: Reformulación del Modelo Economico e Inserción Externa”

From the Cuba Study Group, Desde la Isla, 5 de Noviembre de 2012

Antonio Romero, Universidad de la Habana

From the Island, Issue 13, November 5, 2012

 I.              Economic Growth and Development in Cuba: some conceptual challenge s.

 The set of economic and social guidelines adopted at the Sixth Congress of the PCC (Havana, April 2011) cover a wide range of policies, sectors and areas of action. The application of these guidelines will determine substantive changes for the country’s economic, social and political life. However, it is convenient to think of an analysis that defines strategic foresight—from the experience gained and the economic and social problems currently facing Cuba, which are the basis of the transformation process—a medium and long term vision for the country that is wanted and can be built. It should consider the restrictions on existing national political space, and the basic political consensus, economic and social rights of the Cuban nation.

Such a medium and long term view would necessarily have to include in economic terms, the requirement to achieve high and sustainable growth rates in Cuba. This is key to guarantee expanded reproduction, increased living standards and the welfare of the population, a necessary condition, although not exclusive, for development.

Considering the growth rate of gross domestic product as an indicator of little relevance in economic terms—as it was believed by some in recent periods in Cuba’s economic history—reveals serious limitations in understanding the processes that lead to the development of a country. The development is always a path of sustained growth in the context of the dynamic interaction of capital investment, the accumulation of knowledge applied to production, structural change and institutional development. Key in this strategic vision—in economic terms—would be the discussion and definition of the spaces needed in that process of change:

i)                    the non-government property sector and within it, the private sector;

ii)                  monetary-commercial relationships and their link to national economic development;

iii)                decentralization of the management and direction of the national economy, and what degree of autonomy derived from it would be allowed to economic agents;

iv)                the role of economic stimulus to encourage production and reward the efforts and social contributions of people and the institutions in which they work; and

v)                  the degree of acceptable distributive inequity—and buffer policies—under such a scenario in the medium and long term.

Obviously, such a strategic vision would include other elements, but the five dimensions outlined above would be central to the understanding and to consistency of the process of transformation of the development model for the country.

Progress in terms of development, also involves in the case of small economies like Cuba, the adoption and implementation of a strategy of specialization relatively concentrated in a limited number of export activities that will ensure the country international insertion and that would be beneficial to sustained expanded reproduction.

This is so because small island economies are not able to establish a “closed loop” for operation, since they cannot internally guarantee all conditions that are required for economic growth.

The limited size of the domestic market, the requirements of economies of scale that characterize contemporary technology, and the limitations on labor and financial and productive resources, determine a relatively narrow specialization in the case of small economies like Cuba.

The complete essay:  Antonio Romero, Cuba, Reformulation of the Economic Model  and External Insertion

Antonio Romero, CIEI, Universidad de la Habana

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Crecimiento económico y sector externo en Cuba

A descriptive analysis of Cuba’s external sector and economic growth has been published by Jorge Mario Sanchez, of the Centro de Estudios sobre la Economia Cubana. Here is the hyperlink:

Jorge Mario Sanchez, Crecimiento económico y sector externo en Cuba

Jorge Mario Sánchez

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Cuba’s Economic Reform Process under President Raul Castro: Challenges, Strategic Actions and Prospective Performance

The Bildner Center at City University of New York Graduate Center organized a conference entitled “Cuba Futures: Past and Present” from March 31 to April 2. The very rich and interdisciplinary program can be found here: Cuba Futures Conference, Program.

I had the honor of making a presentation in the Opening Plenary Panel.  The Power Point presentation is available at “Cuba’s Economic Reform Process under President Raul Castro.”

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