Tag Archives: General Economic Analyses

“CUBA 2017: SLOW MOTION ECONOMIC REFORMS PLUS POLITICAL STASIS”

Posted on January 6, 2017 by Arch Ritter

Attached here is a Power Point Presentation on Cuba’s current economic and political situation.  The complete presentation is attached here:  Cuba 2017: Slow Motion Reforms. January 4, 2017

By Arch Ritter

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VENEZUELA’S ECONOMIC WOES SEND A CHILL OVER CLOSEST ALLY CUBA: Warnings of rationing revive memories of post-Soviet austerity in Havana

Posted on July 27, 2016 by Arch Ritter

Financial Times, July 25, 2016

Marc Frank in Havana

The crisis in Venezuela has spread to its closest ally Cuba, with Havana warning of power rationing and other shortages that some fear could mark a return to the economic austerity that traumatised the island nation after the collapse of the Soviet Union.

Only a year after the euphoria that followed the re-establishment of diplomatic relations with the US, hopes of an economic rebound in Cuba have faded and an undercurrent of concern and frustration is evident on the streets of the capital.

“Just when we thought we were going forward, everything is slipping away again,” says Havana retiree Miriam Calabasa. “I am worried people are going to decide enough is enough: then what?”

Government offices now close early, with open windows and whirring fans in lieu of air-conditioners. Already scant public lighting has been reduced further, and traffic in Havana and other cities is down noticeably.

“Nothing will get better any time soon; it can only get worse,” worries Ignacio Perez, a mechanic. “The roads won’t be paved, schools painted, the rubbish picked up, public transportation improved, and on and on.”

President Raúl Castro outlined the scale of the problem this month, telling the National Assembly that “all but essential spending” must cease. He blamed “limits facing some of our principal commercial partners due to the fall in oil prices … and a certain contraction in the supply of oil contracted with Venezuela.”

Fuel consumption has been cut 28 per cent between now and December, electricity by a similar amount and imports by 15 per cent, or $2.5bn, in a centralised economy where 17 cents of every dollar of economic output consists of imports.

But crippling shortages, rampant inflation and an economy that is expected to shrink 10 per cent this year have forced Venezuela’s president Nicolás Maduro to cut back. According to internal data from state oil company PDVSA seen by Reuters, oil deliveries to Cuba are down a fifth on last year.

Venezuela has for 15 years supplied unspecified amounts of cash and about 90,000 barrels per day of oil — half of Cuba’s energy needs. Havana in return sold medical and other professional services to Caracas. Venezuelan aid helped to lift Cuba out of an economic black hole after Soviet subsidies ended in 1991.

“Under current conditions, [Cuban] gross domestic product will dip into negative territory this year and decline 2.9 per cent in 2017,” says Pavel Vidal, a former Cuban central bank employee who is now a professor at Colombia’s Pontificia Universidad Javeriana Cali. “If relations with Venezuela fall apart completely, GDP could decline 10 per cent.”

Although Venezuelan aid is a fraction of Soviet help, mention of the “special period” that followed the fall of the Berlin Wall provokes traumatic memories in Cuba, with many remembering shortages so severe they ate street cats. Karina Marrón, deputy director of the official Granma newspaper, this month warned of possible street protests similar to 1994.

“A perfect storm is brewing … this phenomenon of a cut in fuel, a cut in energy,” Ms Marrón told the Union of Cuban Journalists. “This country can’t withstand another ’93, another ’94.”

So-called rapid response brigades, formed in the 1990s to quell social unrest, are back on alert, according to one brigade member who asked not to be named.

For Mr Castro, the slowdown is a serious blow to the limited market-orientated reforms begun under his leadership, especially the long-planned liberalisation of the peso, which requires a comfortable foreign reserve cushion.

But foreign businesses hope it may speed economic opening. “Venezuela’s problems increase the chance of Cuban reforms. This government only acts when it has to,” says one Spanish investor on the island.

One complication lies in how the government apportions resources.  Cuba relies heavily on tourists, most of whom expect hotels with electricity and air-conditioning. Meanwhile, some 500,000 people, or 10 per cent of Cuba’s workforce, are employed at restaurants, lodging houses and other recently allowed private businesses which need power to ply their trade.

Mr Castro insists residential users will be spared power cuts, for now, while Marino Murillo, who heads the reform commission of the ruling Communist party, says hard currency earning sectors such as tourism and nickel would be spared.

Another problem is that the other countries Cuba exports medical services to, such as Algeria, Angola and Brazil, are also expected to reduce spending. In 2014, medical services earned Cuba about $8bn, or 40 per cent of exports.

“We cannot deny there will be some impact, including worse than currently, but we are prepared,” Mr Castro has said.

Analysts suggest Mr Castro’s warning may in part serve to deflate expectations following the easing of US sanctions. Certainly, a full return to special period-style austerity looks unlikely as Cuba has more diversified income streams, from increased remittances, medical services, tourism to a nascent private sector.

However, “a majority [in Cuba] are still very dependent on state salaries that are now worth a third of what they were in 1989 in real terms”, said Prof Vidal. “[They] are in a situation of extreme vulnerability.”

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AMID GRIM ECONOMIC FORECASTS, CUBANS FEAR A RETURN TO DARKER TIMES

Posted on July 12, 2016 by Arch Ritter

By VICTORIA BURNETT

New York Times, JULY 12, 2016

Original Article: Darker Times

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A return to the “Black-outs” of the early 1990s?  No, I don’t think so.    Maybe a few but unlikely to be as widespread or longlasting.zz apagon

 

MEXICO CITY — During the economic turmoil of the early 1990s, power cuts in Havana were so routine that residents called the few hours of daily electricity “lightouts.”

Now, grim economic forecasts; the crisis in its patron, Venezuela; and government warnings to save energy have stoked fears among Cubans of a return to the days when they used oil lamps to light their living rooms and walked or bicycled miles to work because there was no gasoline.

Addressing members of Parliament last week, Cuba’s economy minister, Marino Murillo, said the country would have to cut fuel consumption by nearly a third during the second half of the year and reduce state investments and imports. His comments, to a closed session, were published on Saturday by the state news media.

Cuba’s economy grew by just 1 percent in the first half of the year, compared with 4 percent last year, as export income and fuel supply to the island dropped, said Mr. Murillo.

“This has placed us in a tense economic situation,” he said.

Weak oil and nickel prices and a poor sugar harvest have contributed to Cuba’s woes, officials said. Venezuela’s economic agony has led many Cubans to wonder how much longer their oil-rich ally will continue to supply the island with crucial oil — especially if the government of President Nicolás Maduro falls.  Those fears grew last week after Mr. Murillo warned of blackouts and state workers were asked to cut their hours and sharply reduce energy use.

“We all know that it’s Venezuelan oil that keeps the lights on,” said Regina Coyula, a blogger who worked for several years for Cuban state security. “People are convinced that if Maduro falls, there will be blackouts here.”

President Raúl Castro of Cuba acknowledged those fears on Friday but said they were unfounded.

“There is speculation and rumors of an imminent collapse of our economy and a return to the acute phase of the ‘special period,’” Mr. Castro said in speech to Parliament, referring to the 1990s, when Cuba lost billions of dollars’ worth of Soviet subsidies.

“We don’t deny that there may be ill effects,” he added, “but we are in better conditions than we were then to face them.”

Mark Entwistle, a business consultant who was Canada’s ambassador to Cuba during the special period, said that despite its dependency on Venezuelan fuel, the island’s economy is now more sophisticated and diversified than it was before the Soviet collapse.

Besides, he said, Cuba has “this phenomenal social and political capacity to absorb critical changes.”

Still, some are perturbed at the prospect of power cuts. None of the Havana residents interviewed over the weekend had experienced power outages in their neighborhoods.

In an unusually blunt speech to journalists this month, Karina Marrón González, a deputy director of Granma, the official Communist Party newspaper in Cuba, warned of the risk of protests like those of August 1994, when hundreds of angry Cubans took to the streets of Havana for several hours.

 “We are creating a perfect storm,” she said, according to a transcript of her speech that was published in various blogs. She added, “Sirs, this country cannot take another ’93, another ’94.”

Herbert Delgado-Rodríguez, 29, an art student, remembered his mother cooking with charcoal in the 1990s.

“I don’t know if it will get to the point where there will be protests in the street,” he said. However, he added, Cubans “won’t tolerate the extreme hardships we faced in the ’90s.”

One worker at a bank said that employees had been told to use air-conditioning for two hours each day and work a half-day. Fuel for office cars had been cut by half, she said. A university professor said that she had been given a fan for her office and told to work at home when possible.

Jose Gonzales, who owns a small cafeteria in downtown Havana, was more sanguine.

“Raúl is simply urging us to cut back on unnecessary consumption, that’s all,” he said, adding that talk of another special period was “just a lot of speculation.”

Not all offices or companies have been affected, and Mr. Murillo said that the idea was to ration energy in some users so that others — homes, tourist facilities and companies — could use as much as they need.

In all, he said, the government aimed to cut electricity usage by 6 percent and fuel by 28 percent in the second half of the year.

Under an agreement signed in 2000, Venezuela supplies Cuba with about 80,000 barrels of oil per day, a deal worth about $1.3 billion, said Jorge Piñon, an energy expert at the University of Texas. In return, Cuba sends thousands of medical and other specialists to Venezuela.

On Friday, Mr. Castro said there had been a “certain contraction” of that oil supply.

How large of a contraction is unclear. Reuters reported last week that shipments of crude to Cuba had fallen 40 percent in the first half of this year. Mr. Piñon said that at least part of the reduction was oil that Venezuela refines in Cuba and then ships out again.

Cuba’s energy problems may also be a product of growing demand on the electricity grid, he said. Electricity consumption has risen dramatically over the past 10 years as Cubans who receive remittances from abroad kept air-conditioners whirring and private restaurants, bars and bed-and-breakfasts added refrigerators and heated food in toaster ovens.

Tourism has soared since the United States and Cuba announced an end to their 50-year standoff in December 2014. The number of visitors rose 13.5 percent in the first four months of 2016 and is likely to rise further when commercial flights from the United States begin this year.

If Venezuela did halt oil exports to Cuba, it would not necessarily precipitate a political crisis, experts and bloggers said.

The United States may offer help in order to prevent instability or a mass exodus of desperate Cubans. The Cuban government might speed reforms and open the door wider to foreign investment, Mr. Entwistle said.

“To extrapolate some dire political consequence is unwise,” said Mr. Entwistle, adding, “There are so many levers that they have to push and pull.”

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DOES CUBA HAVE A FUTURE IN MANUFACTURING?

Posted on June 7, 2016 by Arch Ritter

By Archibald R. M. Ritter

June 7 2016.

 Complete Article Here:  A Futute in Manufacturing? June 7 2016

Cuba has experienced a serious “de-industrialization” from which, by mid-2016, it had not recovered. The causes of the collapse are complex and multi-dimensional. The consequences include job and income loss, the loss of an important part of its economic base, the loss of much of the potential for export expansion and diversification, and rust-belt style industrial and urban decay. Can Cuba‘s manufacturing sector recover from this collapse? What can be done to reverse this situation?

I.       THE COLLAPSE OF MANUFACTURING, 1989-2014

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II.   CAUSAL FACTORS ANE CONSEQUENCES

III.  THE “LINEAMIENTOS” ON MANUFACTURING

IV. WHAT MIGHT BE THE SUCCESSFUL MANUFACTURING SUB-SECTORS IN FUTURE? 

V.  A POLICY ENVIRONMENT FOR THE PROMOTION OF MANUFACTURING

 CONCLUSION

 Does Cuba have a future in manufacturing?  There are some general comparative advantages as well as dis–advantages for manufacturing that Cuba is facing as of mid-2016. First, the disadvantages:

  • Cuba’s manufacturing base has collapsed significantly;
  • Its capital stock and infrastructure generally is decayed and obsolete;
  • Low investment levels impede up-grading the capital stock;
  • Human skills relevant for manufacturing are badly decayed, mis-fitted and obsolete;
  • Cuba’s domestic market size small due mainly low real income levels;
  • Agglomerative and scale economies are minimal.

.But Cuba also has important advantages:

  • Cuba’s citizens generally are well-educated with an incentive for further learning;
  • Many Cuban citizens are energetic, creative, and entrepreneurial;
  • Cuba has a some strong manufacturing sub-sectors such as  pharmaceutical products and traditional products (beverages and tobacco);
  • Cuba has potential in some agricultural products, namely fruits and vegetables;
  • Cuba will be able to capitalize on its locational advantage with respect to the US market;
  • The potential symbiotic relationship between Cubans on the Island and the Cuban-American community will stimulate the future development of economic activities in many areas, including manufacturing.

So, does Cuba have a future in manufacturing?

The answer is “Yes” – if policy reforms are significant and expeditious regarding further enterprise liberalization and taxation and if successful monetary and exchange rate reform lead to currency convertibility.  (However, I am a pathological optimist.)

A broad-based industrial revival for Cuba is possible but will be difficult.

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EL NUEVO EVANGELIO, SEGÚN EL GENERAL SAN RAÚL, EL VERDE OLIVO, PORTADOR DE LA VERDAD REVELADA POR SU ANTECESOR, EL MAGNO ORATE, NOS ANUNCIA UNA “BUENA NUEVA”

Posted on June 6, 2016 by Arch Ritter

Jueves, mayo 26, 2016 |  Miriam Celaya  |

Original Article: El Nuevo Evangelio,

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Raúl Castro habría deslizado los designios del PCC en el tabloide con los documentos analizados y aprobados durante el VII Congreso

LA HABANA, Cuba.- El partido-estado-gobierno cubano acaba de publicar un tabloide que contiene dos de los documentos raigales analizados y aprobados durante el VII Congreso del PCC, el pasado mes de abril de 2016. Se trata del Proyecto de Conceptualización del Modelo Económico y Social Cubano de Desarrollo Socialista y delProyecto Plan Nacional de Desarrollo Económico y Social hasta 2030: Propuesta de Visión de la Nación, Ejes y Sectores Estratégicos.

Sin dudas, estamos ante un caso de “desclasificación parcial”, teniendo en cuenta que los cuatro documentos aprobados en el rito oculto de abril tuvieron un carácter estrictamente secreto y en su discusión y aprobación, producida en condiciones de clandestinidad, participaron alrededor de un millar de ungidos (dizque “delegados”) y –según cifras oficiales– 3 500 “invitados”.

Aún quedan por desclasificar los dos misteriosos pergaminos restantes, a saber, el Informe sobre los Resultados de la Implementación de los Lineamientos de la Política Económica y Social del Partido y la Revolución, con la Actualización de los Lineamientos para el período 2016-2021, y el que contiene el Trabajo del partido en cumplimiento de los objetivos aprobados en la Primera Conferencia Nacional y de las Directrices del Primer Secretario del Comité Central, es decir, los sagrados mandamientos del propio General-Presidente.

Lo primero que llama la atención en la divulgación de este tabloide es la indiferencia de la población cubana, que no ha dado la menor importancia a un documento donde, se supone, quedaron trazados y consagrados los destinos de la nación. En contraste, algunas agencias de prensa extranjeras han desatado una ola de comentarios que tienden a magnificar los referidos documentos como si se tratase del nacimiento de un milagro, centrando el foco de atención sobre lo que consideran la gran novedad: el supuesto reconocimiento del PCC a la “propiedad privada”, incluyendo en esa categoría a pequeñas y medianas empresas. A la vez, sus analistas más audaces sugieren cierta voluntad política del gobierno cubano de potenciar o permitir el desarrollo de este tipo de gestión económica.

Semejante espejismo agitado por los “co-responsables” de prensa acreditados en La Habana –tan diligentes en legitimar el discurso oficial de la cúpula como refractarios a adentrarse en la investigación seria y profunda de la realidad cubana– parte de una errónea interpretación del punto número 91 de la “Conceptualización…”, que expone textualmente “Otra transformación para contribuir a la economía, al empleo y al bienestar de la población es el reconocimiento del papel complementario de la propiedad privada sobre determinados medios de producción…”.

Sin embargo, es sabido que la verdadera propiedad privada solo es posible en sociedades donde los individuos, grupos o entidades empresariales estén en condiciones de ejercer el derecho de poseer, controlar, heredar, administrar y hacer producir sus bienes y capitales con el fin de alcanzar riquezas. Derechos estos que incluyen la posibilidad de ampliar sus propiedades en dependencia de sus capacidades, o de adquirir (incluso importar) materias primas, maquinarias, equipos y cualquier elemento necesario para el desarrollo de su actividad comercial o productiva, lo cual implica la existencia de un marco jurídico que ofrezca garantías legales a los “propietarios”. No es el caso de Cuba, como deberían conocer los corrillos de la prensa acreditada.

De hecho, el documento recién publicado refrenda todo lo contrario de lo que cabe esperarse allí donde existe la verdadera propiedad privada, cuando expone en el punto número 104: “No se permite la concentración de la propiedad y la riqueza en personas naturales o jurídicas no estatales conforme a lo legislado, de modo consecuente con los principios de nuestro socialismo”. Y, por si esto no bastara, se coloca otro clavo sobre el ataúd de la ilusoria “propiedad privada” en el punto 201, cuando dicta: “el Estado regula la constitución, disolución, liquidación y reestructuración de las personas jurídicas de todas las formas de propiedad, define sus ámbitos de actuación y actividades principales”.

Pero precisamente el valor más relevante del “Proyecto de Conceptualización…” es la enorme suma de elementos contrapuestos y excluyentes entre sí, lo que refleja con claridad meridiana no solo la magnitud y profundidad de la crisis socioeconómica cubana, sino la imposibilidad de darle solución desde el marco político-jurídico establecido en los últimos 57 años.

Esto se hace evidente a lo largo de todo el documento, pero bastan unas pocas cuestiones esenciales que contradicen los presupuestos ideológicos sobre los que se pretende construir el “Modelo”. Pongamos por caso las inversiones extranjeras, una “forma de propiedad” que ahora se reconoce oficialmente por el gobierno como “una fuente de desarrollo y vía de acceso a capitales, tecnologías, mercados y experiencia gerencial, que tributa a la solución  de importantes desequilibrios estructurales y a encadenamientos productivos…” (Punto número 90).

No obstante, se mantiene el principio de que el sistema de dirección de la economía es planificada, regulada y controlada desde el Estado, que también controla las relaciones con  la economía internacional (punto 203).

Es decir, que la solución a la crisis estructural del socialismo cubano se encuentra en las formas de producción capitalistas, pero la distribución de la riqueza que se obtenga de las relaciones de mercado a través del comercio exterior y de la inversión extranjera (capitalista) será ejercida por el Estado socialista. Luego, la riqueza obtenida de la capacidad de producción capitalista sería de propiedad estatal-socialista, ya que, como expone el punto 124, “el Estado actúa como representante del dueño, que es el pueblo”.

Y como, además, “Dada su condición de representante del dueño, el Estado decide y controla los destinos de las utilidades de las empresas propiedad socialista de todo el pueblo, una vez cumplidas las obligaciones tributarias y otros compromisos” (punto 148), se mantiene la colosal estatificación de la economía.

Esta “representatividad” incluye la regulación y control de las instituciones, empresas y medios de comunicación, como recurso estratégico del Estado –es decir, el monopolio estatal de los medios–, “según la política trazada” por el PCC, “preservando la soberanía tecnológica, con observancia de la legislación establecida en materia de defensa y seguridad nacionales” (puntos 110 y 111), en lo que presupone la ratificación de la Ley 88 (Ley Mordaza).

Desde luego, ese papel del Estado (a la vez gobierno y partido único) como  “padre” administrador de la riqueza y de las propiedades en virtud de “representante del pueblo” es más que discutible en una nación donde no se realizan elecciones para el cargo de Presidente desde hace más de 60 años, y donde más del 70% de la población nació después de 1959 y nunca ha tenido la posibilidad de legitimar semejante paternidad.

Precisamente esto determina que la “nueva” propuesta –absurdamente futurista, pero casi idéntica a toda la retórica discursiva de las décadas precedentes– desde la misma cúpula octogenaria y retrógrada, no despierte interés alguno entre los cubanos comunes. ¿A qué “debatir” acerca del mismo viejo hecho consumado?, se preguntan con la apatía que domina a la sociedad cubana.

Pocos se han detenido a pensar que con “el debate” popular que, según se dice, se producirá en torno a estos documentos, la casta gobernante persigue “legitimar” la consagración del capitalismo de estado para su propio beneficio, y mantenerse aferrada al poder más allá de las posibilidades biológicas de los bandoleros verde olivo. Así parece quedar expresado en la presentación del mamotreto en cuestión: estamos ante el  legado estratégico de la “generación histórica” a las nuevas generaciones.

No es posible agotar en un solo texto todos los ambiguos vericuetos que se deslizan a lo largo de los 330 puntos del Proyecto de Conceptualización. Baste, por el momento, con resumir que ellos constituyen la “buena nueva” que nos anuncia San Raúl, el verde olivo, portador de una verdad que seguramente le ha sido revelada por su antecesor, el Magno Orate: si nos apegamos al concepto de “Revolución” de aquel sabio anciano, si se cumplen los “Lineamientos” y si los resultados de la implementación de éstos resulta efectiva, para el año 2030 los cubanos estaremos en condiciones de “construir una nación soberana, independiente, socialista, democrática, próspera y sostenible”.

No se sorprenda nadie si en las semanas venideras se incrementa exponencialmente el número de emigrados desde esta ínsula imposible.

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Partido Comumunista de Cuba: CONCEPTUALIZACIÓN DEL MODELO ECONÓMICO Y SOCIAL CUBANO DE DESARROLLO SOCIALISTA y PLAN NACIONAL DE DESARROLLO ECONÓMICO Y SOCIAL HASTA 2030: PROPUESTADE VISIÓN DE LA NACIÓN, EJES Y SECTORES ESTRATÉGICOS

Posted on May 30, 2016 by Arch Ritter

Partido Cumunista de Cuba

May 2016

Complete Documents: Cuba PCC, May 2016, CONCEPTUALIZACIÓN DEL MODELO ECONÓMICO

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CUBA’S ECONOMIC PROSPECTS IN THE AFTERMATH OF THE VII PARTY CONGRESS: A FEW TENTATIVE REMARKS

Posted on May 24, 2016 by Arch Ritter

 By Alberto Gabriele

Introduction

 This article proposes a synthetic and tentative interpretation  of  Cuba’s present economic perspectives. Its approach is meant to be an intrinsically dialectic one. As such, it emphasizes the diverse roles played by exogenous and endogenous, domestic and external, economic and political factors, and by their reciprocal interactions. In my view, such a methodological approach can be fruitful to analyze the development of any distinct socioeconomic formation unfolding in a unique moment in time, but particularly so in the case of Cuba, a small island whose history has been and is still shaped very strongly by its uneven relation with the US and by the weight of ideology in economic policy.

Every country’s economic trajectory is the product of the dialectical interaction of several sets of endogenous and exogenous, domestic and external factors. From the subjective viewpoint of economic policy-makers, endogenous factors are to be interpreted as those that can be shaped by their own present and future actions. Obviously, policy-makers constitute a small but very influential group of technicians-politicians. Yet, they are endowed with limited degrees of freedom, due to a host of constraints stemming not only from the external world, but also from their cooperative/conflicting relations with other branches of the government, from the contradictions and tensions internal to their own group, and from the impact of non-governmental societal forces and movements.

The latter forces and movements  (whose composition and relative strength differs  markedly from  one country to another)  can condition and affect the economic policy-making process through a number of formal and informal channels, only some of which clearly manifest themselves as belonging to the political sphere. This phenomenon can be interpreted as the endogenization of societal factors into the policy-making machine. In the case of Cuba, where no formal multiparty democracy exists but the social and cultural fabric is not monolithic, the main channel through which endogenization works is the interaction between the Party and the rest of the  population.

Exogenous factors are both domestic and external.  Domestic exogenous factors are shaped mainly by the natural environment and from history. At any given point in time, each country’s climate and its endowment of physical and human capital are partly due to its geographic, geological, climatic and other structural characteristics, and partly to the cumulative results of human actions carried out by domestic and external agents. For instance, the availability and fertility of arable land depends at least in part from past agricultural and urbanization policies. Human capital is the product of past and present education policies. The balance of payments is the result of the interaction of many domestic and foreign economic forces and of the policy decisions taken in the past to cope with them.

Economic, financial and political external factors, for most countries, are largely but not exclusively the product of  forces beyond the control of their own government and policy-makers. In the case of Cuba, the present reality of the embargo and – more broadly – the more or less aggressive  stance of the US and their allies are, from the latter’s vantage point, the result  of Cuba’s resilience and foreign policy actions since the Revolution. Therefore, notwithstanding its traditional David vs Goliath relation with her powerful neighbor, the island’s ability to influence US Cuban policy stance should not be underestimated.

Continue Reading: Gabriele, CUBA CONGRESS 25 05 2016

 

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

Posted on March 30, 2016 by Arch Ritter

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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MORE AND MORE CAPITALIST CRACKS IN CUBA

Posted on January 21, 2016 by Arch Ritter

Havana Times, Havana, January 20, 2016

Rogelio Manuel Diaz Moreno

Original article here: http://www.havanatimes.org/?p=116209

Cuba April 2015 213 Cuba April 2015 222

HAVANA TIMES — At the close of 2015, a journalist for Cuba’s Juventud Rebelde newspaper reported that a slight decrease in food product prices had been seen the previous year. The regular contributors and readers of Havana Times then expressed their bewilderment, what with all of the evidence against such a claim.

Many media sites – with greater or lesser candor, depending on their nature – continue to address Cuba’s soaring living costs. Concerns have reached such extremes that a decision to adopt emergency measures was made at the last parliamentary session. This was done when Cuba’s official media sought to deliver the good news that the island’s GDP had grown by 4 %.

Readers will likely recall the oft-repeated government promise that increased production would bring about a drop in prices. No few of us have criticized such claims for their total lack of objectivity.

Personally, I find most statements on the subject made in the news, and the attitude of members of parliament, rather depressing. The reason is simple: the fact they beat around the bush on this matter and show no willingness to acknowledge its true nature. We are encouraged not to become informed about or study the issue, which, to be sure, isn’t that complicated. It’s capitalism, plain and simple.

Though lacking in the talents of the great experts in political economy, we have pointed to a number of basic truths about this situation in previous posts. Those who boast of being Marxists ought to know these well, and they have been confirmed time and time again. As long as such realities aren’t acknowledged, the tired spiels of politicians, the beating of chests by leaders and the appeal to the conscience of workers will be for naught.

I don’t question the growth figures offered by the authorities. Given certain, positive external conditions, an economy based on liberal market mechanisms can indeed grow in macroeconomic terms. And that’s what we’ve had here: cheap imported raw materials, financial arrangements and favorable credit and a considerable softening of the US embargo/blockade. In the case of tourism, this is reflected in the 30% rise in number of visitors. Throw a domestic policy of deregulation into the mix and you’ve got an excellent recipe for growth…capitalist growth, that is.

Because of its very nature, the benefits afforded by this type of growth cannot reach working people, which make up the majority of the population. This is the first point we’ve drawn attention to.

Production has grown and supply has grown with it. They have grown because the policies implemented have lifted certain restrictions that had hitherto been applied. These same policies, however, have produced a specific type of supply side growth, the type that accompanies the growth of demand. More money has flowed into Cuba and a privileged class capable of paying higher prices (and thus raising the standard of living) has flourished.

Have a look, for instance, at Havana’s neighborhood of Miramar. The nouveaux riches have taken up all vacant spaces with their bourgeoning mansions. A good many restaurants have been established, where a single meal costs everything I make in a month (which is twice the average salary). Those restaurants aren’t aimed at people like me, but they have regular customers.

The products and services offered by the State also do not favor a decrease in prices. An employee of ETECSA – Cuba’s telecommunications monopoly – told a journalist that many customers, particularly young ones, ask for cutting-edge equipment, those that cost eight or ten Cuban salaries put together. I walk by these people in public outdoor Internet navigation areas. Despite the many shortcomings of the service, they pay two to three days of my wages to use it. Other basic products have circulation and added value taxes that prove prohibitive.

There’s more money in circulation thanks to remittances, foreign investment, tourism and the new entrepreneurial class. The State itself now has more resources, but its control mechanisms are as inadequate as always – in other words, there’s more to be misappropriated. There isn’t more social justice, there’s just more solvency.

To remain objective and avoid neglecting the positive side to this, the health sector carried out wage adjustments (mostly nullified by inflation). I am also aware of other investments aimed at improving medical services, albeit with many internal deficiencies. These measures, however, are far from satisfying all of the people’s needs, and most people do not spend their entire week at the hospital. As another Havana Times contributor reports, there are other, parallel measures aimed at cutting back on activities, spending and wages.

Thus, within the space of the private economy, the law of supply and demand simply establishes a price balance. We are flooded with complaints about the hoarding of goods, speculation, and monopolistic maneuvers by entrepreneurs to optimize profits at the expense of customers. These are all natural mechanisms inherent to the market and the blessed supply and demand system. We must set aside naivety. Quite simply, that is the explanation offered us by the whole range of political economy theories. You don’t play “nice” in capitalism.

In this context, to say that “Cuba is a socialist country and cannot function that way” constitutes a naive abstraction. What determines the functioning of a socio-economic system are its productive forces and its relations of production, not mere words. “The State has to intervene, regulate prices and fine infractions” – these are calls to return to measures that have been proven to be ineffective time and time again. Popular discontent has again bubbled up to the surface and politicians have revisited the demagogic attitudes of claiming to protect them from the demon they have set lose with their reforms.

What were the consequences of the lastest attempt to regulate food prices? Understocking, which is music to the ears of the black market. If there’s something that’s worse than the “free” market, it is intervention by a bureaucratic apparatus and corruptible officials (inspectors and their underlings).

In short, Cuba’s growth is visible, but this growth is not for everyone, not even the majority. The new game has new rules and the winners walk away with everything. The most painful thing will be the growth of inequality and the impoverishment of the working majorities without access to the new sources of wealth.

Cuba April 2015 120Street Vendors of Vegetables

Cuba April 2015 211

State Food Store, Jovellar and Hospital, Nuevo Vedado

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CUBA STANDARD, ECONOMIC REPORT 2015, First Quarter

Posted on December 28, 2015 by Arch Ritter

Pavel Vidal, Chief Economist and Johannes Werner, Editor

Original here: Economic Report 2015

EXECUTIVE SUMMARY

•The year 2015 has begun with hopes for economic improvement, based on the speeches by Presidents Barack Obama and Raúl Castro on Dec. 17. Given the new tone in bilateral relations and the measures announced by the U.S. government, favorable impacts are expected on tourism, on the private sector, and on the overall functioning of the Cuban economy. We estimate that the way in which Cuba’s GDP growth will be most favored by the new measures is through investment. The new optimism awakened among businesspeople could propel foreign investment on the island.

•In this first quarter of 2015, we are presenting the Cuba Standard Business Confidence Survey, the first poll of this kind used in Cuba. Half of respondents (50.5%) said that their company has increased its intentions to invest in Cuba. Sixty-one percent of respondents believe that economic conditions on the island will improve in the coming 12 months.

•Survey takers were asked to mark the five biggest obstacles to developing and expanding their business in Cuba. The three factors that were selected by most respondents were government bureaucracy (62.2%), excess of regulations (49.5%), and guarantees and legal procedures (43.4%). None of the three factors refers to clear economic problems, but rather to the quality of institutions in the Cuban system.

•Despite the opening of new opportunities in global markets, we foresee slow reaction speed by the Cuban authorities to the new scenarios and institutional weaknesses that will delay Cuba’s international insertion.

•The Cuban authorities have made evident their optimism regarding the macro economy and the main sectors in their perspectives for 2015. The government is planning an acceleration of GDP growth from 1.3% in 2014 to 4% in 2015. Again, the GDP growth plan is based on a “spectacular” acceleration of investments; this year, the government expects an expansion of investments by 27%.

•We also predict an acceleration of GDP growth in 2015, albeit somewhat less optimistic than the government. Our forecast of 3.4% is based mainly on the possible rebound of investments (even if they don’t match the plan), improved access to external financing (thanks to foreign debt renegotiation agreements the government is pursuing), and the benefits of a relaxation of import and fiscal spending controls

•The Cuba Standard Economic Trend Index (CSETI) indicates that the favorable effects of the new international scenario have not impacted yet the Cuban economy. The February 2015 estimate is -0.14, which suggests that balance-of-payment conditions continue to be unfavorable for GDP growth. Even so, they are less negative that those of the first half of 2014.

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CONTENTS

Executive Summary

I. Structural and institutional reforms

Entering the eighth year of Raúl Castro’s reforms

Cuba Standard Business Confidence Survey

“Rational optimism” towards the Obama administration’s new policy

New procedures for investments

II. Real sector

Official projections for 2015

Business climate and balance-of-payment conditions in the first quarter of 2015

Uncertainty about future GDP growth

III. Economic policies

Monetary reform continues to be delayed, and new ‘noises’ are heard

Salary expansion and doubts about inflation data

IV. Key macroeconomic indicators

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