Tag Archives: General Economic Performance

EL LEGADO DE FIDEL: BALANCE ECONÓMICO SOCIAL EN 2016

A fin de enmendar el legado de Fidel, a Raúl le queda poco más de un año para acelerar y profundizar sus reformas estructurales.

Fidel Surveying Havana from the Cabana Fortress

Por Carmelo Mesa Lago, Nueva Sociedad, Enero 2017

Original Article: El legado de Fidel: balance económico social en 2016

Con motivo del deceso de Fidel Castro, los medios de comunicación mundiales han ensalzado su legado de soberanía política interna y su rol internacionalista, así como las notables mejoras en la educación y la salud, aunque el juicio es usualmente adverso en cuanto a la economía. En una previa publicación hice un balance económico social de medio siglo de Fidel en el poder (1959-2008) usando 87 indicadores que demostraban que el desempeño económico fue generalmente negativo y el social mezclado alcanzando una cima en 1989 y un deterioro después.1 Aquí se evalúa la situación entre 1989 y 2016, poniendo énfasis en la última década. También se evalúa si las reformas estructurales de Raúl en el último decenio han logrado dar un impulso a la economía y al bienestar social en la Isla

Entre 1960 y 1990 Cuba recibió US$65.000 millones de la URSS, dos tercios de los cuales no era reembolsable; esta ayuda fue superior a la recibida por toda América Latina durante la Alianza para el Progreso. Tras la desaparición del socialismo soviético (el «Período Especial») ocurrió un marcado declive en todos los indicadores económicos y sociales, seguido de cierta recuperación especialmente a comienzos del siglo XXI por la substancial ayuda económica de Venezuela, la cual equivalió al 21% del PIB de Cuba en 20102.He sugerido que a fin de mejorar el pobrísimo desempeño económico es primordial avanzar en las reformas estructurales de Raúl, mientras que los benéficos pero costosos servicios sociales deben hacerse sostenibles financieramente a largo plazo.

En múltiples publicaciones he analizado las reformas estructurales implementadas por Raúl entre 2007/08 y 2016, concluyendo que son las más importantes bajo la revolución, intentan resolver los problemas heredados de Fidel y están bien encaminadas, pero son excesivamente lentas, enfrentan severas trabas, altos impuestos y desincentivos, por cuyas razones no han logrado hasta ahora un impacto palpable en la economía y en los servicios sociales; de hecho ha ocurrido un retroceso en algunas reformas3. La grave crisis económica en la República Bolivariana ha contribuido a esos problemas.

La tasa de crecimiento económico cubana que fue de 12% en 2006, en buena medida por el apoyo económico venezolano, ha exhibido desde entonces una tendencia declinante: 4,4% en 2015 y -0,9% en 2016,4 un quinto de la meta inicial fijada a fines de 2015. La formación bruta de capital promedió 13% anual en 2008-2015, la mitad del requerido 25% para un crecimiento económico sostenido. El índice de producción industrial en 2015 estaba 38% por debajo de 1989; la caída fue más acentuada en fertilizantes (95%), azúcar (80%), cemento (60%), acero (29%) y textiles (25%); por lo contrario, la producción de petróleo, gas natural, electricidad y níquel era superior (pero la última 26% menor que en 2008). Similar declive se observa en la agricultura: cítricos (88%), pesca (70%), leche de vaca (56%), tabaco en rama (42%), arroz (22%), cabezas de ganado (18%) y huevos (13%); sólo eran mayores las hortalizas y los tubérculos. Las estadísticas del sector externo en 2015, comparadas con las 2014, indican una agudización de la crisis: las exportaciones de mercancías cayeron 31%, las exportaciones de servicios profesionales (primer ingreso en divisas de Cuba y vendidos mayormente a Venezuela) mermaron 18%, y el excedente entre el saldo positivo de servicios menos el saldo negativo de mercancías menguó 47%5. Si esto ocurrió cuando la economía creció 4,4%, el deterioro debe haber sido mayor en 2016 con la contracción. Cuba atraviesa la peor crisis desde los años 90.

Las reformas estructurales han tenido efectos adversos en los indicadores sociales. Entre 2008 y 2015, con el fin de recortar el insostenible costo social, la asignación a servicios sociales (educación, salud, pensiones, vivienda, asistencia social) decreció de 55% a 47% del presupuesto y de 37% al 28% del PIB. El salario medio estatal ajustado a la inflación en 2008 era 25% del nivel de 1989 y, aunque aumentó a 38% en 2015, el poder adquisitivo era 62% inferior a 19896. La pensión media en 2008-2015 era la mitad que en 1989. Todos los hospitales rurales y postas urbanas y rurales se cerraron en 2011; entre 2008-2015, el número de hospitales decreció 30%, el personal de salud total menguó 22%, los médicos de familia que proveen la atención primaria se redujeron en 65%, por otra parte el número de médicos creció en 15% (aunque parte está en el extranjero), la mortalidad infantil continuó bajando de 4,7 a 4,3 por mil nacidos vivos, y la tasa de mortalidad materna mermó de 46,5 a 41,6 por 100.000 nacimientos (pero aún mayor que 29,2 en 1989). La matrícula universitaria decreció de 743.979 a 165.926 (78%) entre los cursos 2007/08 y 2015/16. La construcción de viviendas declinó de 44.775 a 23.003 entre 2008 y 2015 y por 1.000 habitantes cayó de 4,0 a 2,0. La asignación a la asistencia social disminuyó de 2,1% del presupuesto a 0,4% y como porcentaje de la población de 5,2% a 1,6%7. La tasa de desempleo declarado que llegó a un mínimo de 1,6% en 2008, creció a 3,5% en 2012 por causa del programa de despedido de 1,8 millones de empleados estatales innecesarios, pero sólo medio millón fue despedido y la tasa disminuyó a 2,4% en 20158. Cuba nunca ha publicado estadísticas sobre distribución del ingreso, pero otros indicadores sugieren que se colocaba a la cabeza de la región en igualdad; las reformas han cambiado diametralmente la situación, debido a un grupo no estatal con altos ingresos y la caída en el salario estata9.

Un importante avance ha sido la condonación o reducción de la mayor parte de la deuda externa por los acreedores; Cuba comenzó a pagar la deuda restante en octubre de 2016 y se ignora si podrá continuar haciéndolo. El aspecto más brillante es el turismo. La normalización de relaciones con los EEUU y las órdenes ejecutivas de Obama, virtualmente han abierto la puerta a los visitantes norteamericanos que saltaron de 95.254 en 2004 a 161.233 en 2015 y a cerca de 200.000 en 2016; además todos los otros principales emisores han crecido, por lo cual el total de visitantes subió 17% en 2015 y alcanzó 4 millones en 2016; así mismo, los ingresos brutos por turismo crecieron 11% en 2015 y se proyecta que alcanzarán los US$4.000 millones en 2016.

En el balance, los factores adversos sobrepasan con creces a los favorables y 2017 será muy tenso. A fin de enmendar el legado de Fidel, a Raúl le queda poco más de un año para acelerar y profundizar sus reformas estructurales. Si Trump revierte las medidas de Obama y no avanzan las reformas, la crisis se agravará en Cuba.

The Cross-harbour Ferry from the Steps of the Russian Orthodox Church

  1. C. Mesa-Lago: Cuba en la era de Raúl Castro: Reformas económico-sociales y sus efectos, Colibrí, Madrid, 2012.
  2. C. Mesa-Lago: «Institutional Changes in Cuba’s Economic and Social Reforms» en R. Feinberg y T. Piccone (comps.): Cuba Economic Change in Comparative Perspective, Brookings Institution / Universidad de La Habana, Washington, DC, 2014, pp. 49-69; «El lento avance de la reforma” en Política ExteriorNº 171, 5-6/2016, pp. 94-104; y con R.Veiga, L. González, S. Vera y A. Pérez-Liñán: Voces de cambio en el sector estatal cubano, Iberoamericana, Madrid, 2016.
  3. Raúl Castro Ruz, Discurso en la clausura de la Asamblea Nacional del Poder Popular, Granma, 28 diciembre 2016, p.3.
  4. Cálculos del autor basados en Oficina Nacional de Estadísticas e Información (ONEI): Anuario estadístico de Cuba 2015, La Habana, 2016; datod de 1989, del Comité Estatal de Estadística: Anuario Estadístico de Cuba 1989, La Habana, 1991.
  5. La CEPAL, Balance preliminar de las economías de América Latina y el Caribe 2016, Santiago de Chile, diciembre 2016, cuadro 4.4, estima un crecimiento de 43% en el salario medio real, el mayor en la región, pero con base en el año 2010 cuando estaba 27% por debajo del nivel de 1989
  6. Cálculos del autor basados en ONEI: Anuario Estadístico de Cuba 2008, La Habana, 2009, y cit.
  7. Basado en C. Mesa-Lago: «El desempleo en Cuba: de oculto a visible” en Espacio LaicalNº 4, 2010, pp. 59-66, y ONEI: Anuario 2015, cit.

8. C. Mesa Lago: «La desigualdad del ingreso y la experiencia de América Latina” en Temas Nº 84, 10-12/2015, pp. 35-43

A Few of Cuba’s Amazingly Talented Musicians

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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

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

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?

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 disadvantages 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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CUBA’S CHALLENGE: WHAT DID THE CUBAN REVOLUTION ACCOMPLISH AND WHERE CAN IT GO FROM HERE?

BY SAMUEL FARBER, June 10, 2015

Original Essay from “JACOBIN” Here:  Cuba’s Challenge

Samuel Farber was born and raised in Cuba. He is the author of Cuba Since the Revolution of 1959: A Critical Assessment.

When in the 1950s, along with many of my high school classmates, I became involved in the struggle against Cuban dictator Fulgencio Batista, one of our teachers remarked that we had no real reason to criticize the state of our country because so many other nations in the region — such as Bolivia and Haiti — were much worse off than us.

His description of Cuba’s comparative position was accurate, but incomplete. On the eve of the 1959 Revolution, Cuba had the fourth highest per capita income in Latin America, after Venezuela, Uruguay, and Argentina.

And although average per capita income is an insufficient, and sometimes misleading, indicator of general economic development, other indicators support his picture of the pre-revolutionary Cuban economy: in 1953, Cuba also ranked fourth in Latin America according to an average of twelve indexes covering such items as percentage of labor force employed in mining, manufacturing, and construction, percentage of literate persons, per capita electric power, newsprint, and caloric food consumption.

Yet, at that time the country’s economy was also suffering from stagnation and the pernicious effects of sugar monoculture, including substantial unemployment (partly caused by the short sugar cane season of three or four months). Most importantly, the national indexes of living standards hid dramatic differences between the urban (57 percent of the population in 1953) and rural areas (43 percent), especially between Havana (21 percent of Cuba’s total population) and the rest of the country. The Cuban countryside was plagued by malnutrition, widespread poverty, poor health, and lack of education.

For my teacher, it seems, the fact that other people were worse off made him more accepting of his own life circumstances. But he was the exception. To the extent that Cubans compared themselves with the people of other countries, they preferred to look up to the much higher standard of living of the United States rather than console themselves by looking down at the greater misery of their Latin American brethren.

As a 1956 report of the United States Bureau of Foreign Commerce put it: “the worker in Cuba . . . has wider horizons than most Latin American workers and expects more out of life in material amenities than many European workers . . . His goal is to reach a standard of living comparable with that of the American worker.”

This underlines the fundamental mistake of assuming instead of ascertaining that comparisons of economic performance have any meaning to the people who live in those economies. Taken to an extreme, this mistake leads to an “objectivist” analysis that stands outside history as it is actually lived by its actors and is likely, as in the case of my high school teacher, to result in a conservative commitment to the existing social order, as opposed to a questioning of, or opposition to, the existing social order and its ruling group.

For those who are affected by it, economic development has a meaning that goes beyond economic data and requires an understanding of popular aspirations and expectations, which are based in part on the existing material reality and in part on past history.

In terms of its material reality, the Cuba of the fifties was on the one hand characterized by uneven modernity, fairly advanced means of communication and transportation — especially the high circulation, by Latin American standards, of newspapers and magazines — and the rapid development of television and radio. On the other hand, there were abysmal living conditions in the Cuban countryside.

As far as its history, the Cuba of the 1950s was still living the effects of the frustrated revolution of 1933, a nationalist revolution against dictatorship with an important anti-imperialist component and the participation of an incipient labor movement, then under Communist leadership.

Although this revolution had achieved some significant reforms equivalent in the Cuban context to Franklin Roosevelt’s New Deal, it failed to achieve major structural changes in Cuban society, such as real national political and economic independence from US imperialism (beyond the abolition of the Platt Amendment in 1934) or any meaningful agrarian reform and diversification away from the one-crop sugar economy with all it implied in terms of economic instability, large-scale unemployment, and poverty.

These were the economic issues brandished by the Cuban opposition at that time to struggle for more or less radical reforms to the existing order, instead of pondering and celebrating Cuba’s comparative high rank among Latin American economies. Thus Eduardo Chibás, the leader of the reform Ortodoxo Party, of which Fidel Castro was a secondary leader, proposed in 1948 a series of modest reforms to improve the life of the Cuban rural population.

Five years later, after Batista’s coup against the constitutional government, Castro — in his “History Will Absolve Me” speech at his trial for his failed attack against one of Batista’s military installations — proposed a more radical series of measures, including giving property titles to peasants holding up to 165 acres of land, with compensation granted to landlords on the basis of the average income they would have received over a ten-year period. He also added new elements to his reform agenda, such as his radical plan for the employees of all large industrial, mercantile, or mining concerns, including sugar mills, to receive 30 percent of profits.

Fidel, 1956

Fidel and Rebels, 1956

After 1959

Immediately after the victory of January 1, 1959, in response to many Cubans’ pent-up expectations, Castro’s revolutionary government engaged in a vigorous policy of redistribution. There was an urban reform law to substantially reduce rents, a left-Keynesian policy of public works to combat unemployment, and a radical, albeit not a collectivist, agrarian reform law proclaimed in May 1959.

Then, in late 1960, in part in response to the hostility of US imperialism and in part based on the political inclinations of the revolutionary leaders, the large majority of both urban and rural property was nationalized by the Cuban state.

In April 1961, Castro declared Cuba to be “socialist,” and it became, in structural and institutional terms, a replica of the model in the Soviet Union and Eastern Europe. Although Cuba’s one-party state placed more emphasis on popular participation than its equivalents in the Eastern Bloc, its political control was before long just as absolute.

Like the supporters of the Cuban status quo before the revolution, the supporters of today’s Cuban system assert that it is economically superior to other countries, particularly in Latin America. In terms of GDP — which, as previously mentioned, is not by itself a reliable indicator of economic well-being, although the Cuban government relies on it in a modified form — Cuba has fared poorly in comparison with its neighbors.

Whereas in 1950 Cuba ranked tenth in per capita GDP among the forty-seven countries in Latin America and the Caribbean, almost sixty years later, in 2006, it ranked near the bottom of the list, only ahead of Haiti, Honduras, Nicaragua, Bolivia, El Salvador, and Paraguay. GDP has increased little since then with a 2 percent average rate of growth in the last five years.

The government’s supporters point to Cuba’s achievements in education and health (in particular, its low infant mortality) as conclusive evidence for its more progressive economic policies. And indeed Cuba has performed very well in the Human Development Index (HDI), which combines income, health, and education statistics.

But while this index does a good job of measuring critical aspects of well-being in the less developed capitalist countries, it does not adequately capture the shape of state-socialist economies such as Cuba. It does not quantify the hardships that people suffer in countries where the economic problems of underdevelopment intersect with those particular to Soviet-style societies.

Take income, for example. Unlike capitalist societies, in Cuba, access to many luxury or high-cost goods is often obtained by the ruling groups through extra-economic, in kind, political means, rather than through the expenditure of monetary income. Although this situation has become more complicated since Raúl Castro took office in 2006 and expanded private economic activity to cover approximately 25 percent of the labor force, obtaining high-end goods still depends to an important degree on political access.

One example is traveling abroad. For the majority of Cubans who don’t have sufficiently wealthy relatives overseas, it is political access to state-sponsored travel — for example, officially sanctioned attendance to political, economic, cultural, or academic conferences — rather than private income that remains the principal way to venture outside the island.

A similar situation exists in terms of Internet access. In Cuba — a country with one of the lowest levels of web availability in Latin America and the Caribbean — many people can connect to the Internet only at their workplace or school, but only for strictly work-related purposes. Otherwise, they run the serious risk of being reprimanded or even losing their ability to go online.

Privately, they can get on the Internet by paying rates unaffordable to average Cubans, and only at tourist hotels or at the centers sponsored by the state telephone monopoly. However, free access to the Internet is the norm for those who are well-situated in terms of political power or have connections to those who do.

Besides the issue of monetary income, the HDI ignores other factors that make living conditions in Cuba difficult. These include the irregular supply and quality of food, housing, toiletries, and birth control devices for women and men. The same applies to the poor state of roads, inter-urban bus and railway transport (premium transportation services exist but are costly and therefore out of the reach of most Cubans), and the delivery of basic necessities such as water, electricity, and garbage collection.

The HDI does not quantify the hardships of daily life associated with these inadequacies either — for example, the amount of time people have to spend going from place to place and standing in line to obtain a wide variety of goods. Economic indexes can also be deceptive insofar as they don’t take into account the maintenance and upkeep of systems that deliver key services.

Take water, for example. Viewed in one way, Cuba ranks well in that regard, with 95 percent of its population officially having access to drinking water. But serious water shortages are a normal condition of life in Cuba. This is partially due to seasonal droughts in certain regions, particularly in the eastern half of the island. But the most important cause of that shortage is the deteriorated infrastructure — broken pipes and numerous leaks — going back to well before the collapse of the Soviet bloc.

For these reasons, more than half of the water pumped by the country’s aqueducts is lost, especially in the Havana metropolitan area. This is much of the daily material reality Cubans face, and it shapes their aspirations and expectations.

Strong Thumbs, No Fingers

The Cuban government and its supporters claim that most of these economic problems are the result of the criminal economic blockade of the island imposed, for more than fifty years, by the United States and which remains mostly in force despite the resumption of diplomatic relations between the two countries.

There is no doubt that the embargo has been damaging, particularly in the early years of the revolution, as Cuba was forced to reorient most of its economic activity towards the Eastern Bloc. Repealing the 1996 Helms-Burton Act and ending the blockade would be a very welcome development for both principled and practical reasons. Such a move would also considerably increase economic activity in Cuba, most likely in the fields of tourism and, possibly, biotechnology and the production and export of certain types of agricultural commodities such as citrus.

However, the US blockade did not prevent Cuba from trading with industrialized capitalist countries in Asia and Europe, and particularly with Canada and Spain. The principal obstacle to Cuba’s economic relations with those non-US industrial capitalist countries was Cuba’s own lack of goods to sell and thus its lack of hard currency with which to pay for imports, whether capital or consumer goods. Nevertheless, Cuba received more than $6 billion in credits and loans from many of the industrialized capitalist countries until Cuba suspended the service of these debts several years before the collapse of the Soviet bloc.

More important than the damage caused by the US economic blockade is Cuba’s inadequate capital, as well as other problems typical of economically less developed countries — the export of commodities such as nickel and sugar amid unstable world prices — which in turn interact with the myriad economic shortcomings and contradictions of Soviet-style economies, including the failures of agriculture and the scarcity and poor quality of consumer goods.

In truth, Cuba’s achievements and failures resemble those of the Soviet Union, China, and Vietnam before these countries took the capitalist road, suggesting that systemic similarities are more significant than national idiosyncrasies and variations on the general Soviet model.

Konstantin Chernenko fidel castro cuba ussr Soviet Leonid BrezhnevFidel and Leonid

Cuba shares with the USSR what the political scientist Charles E. Lindblom called “strong thumbs, no fingers.” Having “strong thumbs” allows the government to mobilize large numbers of people to carry out homogeneous, routinized, and repetitive tasks that require little if any variation, initiative, or improvisation to adapt to specific conditions and unexpected circumstances at the local level — precisely the tasks that require subtle fingers rather than undiscriminating thumbs.

This explains how a Soviet-style government can organize a massive vaccination campaign, while at the same time its bureaucratic, centralized administration and lack of “nimble fingers” prevent it from acquiring the necessary precision for timely coordination of complicated production and distribution in all economic sectors — especially agriculture, among the least homogeneous and predictable areas of the economy.

Cuba’s deficiencies, particularly in the production of consumer goods, also stem to a large extent from its principal leaders’ ideological inclinations. While these leaders have clearly favored the production and delivery of certain collective goods like education and health care, they have tended to be indifferent if not hostile to goods normally consumed by individuals or families.

This is rooted in a deeply ascetic strain of some leftist traditions. The most prominent and consistently austere among the revolutionary leaders was Ernesto “Che” Guevara, who as minister of industry in the early days of the revolution shaped many aspects of the Cuban economy.

When serious shortages of consumer goods began to occur in Cuba in the early 1960s, Guevara spoke critically of the comforts that Cubans had surrounded themselves with in the cities, comforts which he attributed to the way of life to which imperialism had accustomed people, and not to a standard of living resulting from the relative economic development of the country and especially to the working class and popular struggles in the pre-revolutionary era.

Guevara argued that countries such as Cuba should invest completely in production for economic development, and that because Cuba was at war, the revolutionary government had to ensure peoples’ access to food, but that soap and similar goods were non-essential. It is clear however, that his hostility to consumer goods was by no means specific to a war economy.

As he put it in his private reflections shortly after he left the Cuban government in the mid-1960s, “in Cuba, a television set that does not work is a big problem but not in Vietnam where there is no television and they are building socialism.” He added that “the development of consciousness allows for the substitution of the secondary comforts which at a given moment had transformed themselves into part of the individual’s life, with the overall education of society allowing for the return to an earlier era that did not have this need.”

Later, after the failure of the grandiose plans for economic growth that Guevara and other revolutionary leaders articulated, these ascetic politics came to be shared by the entire Cuban government leadership. They were soon consecrated in the Cuban revolutionary ideology as hostility to the “consumer society” of the economically developed world, a view that was never part of the ideology of the pre-revolutionary Cuban left, Communist or otherwise.

It was therefore entirely fitting that during the Cuban economic cycles associated with the spirit and politics of Guevara, the emphasis was always on capital accumulation instead of increased consumption. This was the case, for example, with the Guevarist-type economic period of 1966–1970 (shortly after he left the Cuban government).

As the prominent Cuban economist Carmelo Mesa-Lago points out, at this time the national plan called for a sharp increase in national savings that was to be generated by a cut in consumption through the expansion of rationing, the export of products previously assigned for internal consumption, and the reduction of imports considered unnecessary.

Material incentives sharply decreased, and the population was exhorted to work harder, save more, and accept deprivation with revolutionary spirit. Accordingly, the share of state investment going to the sphere of production increased from 78.7% to 85.8% between 1965 and 1970. This was indeed a Cuban high point of what the Hungarian theorists Ferenc Fehér, Agnes Heller, and György Márkus have called the “dictatorship over needs.”

The Special Period

Until the collapse of the Soviet bloc, the Cuban government was able to deliver for the majority of its people an austere standard of living that, on the whole, guaranteed a minimum of economic security and the satisfaction of basic needs, in spite of serious deficiencies in areas such as housing and consumer goods.

Notwithstanding the serious problems and contradictions of a Soviet-style economy, this was made possible by the USSR’s massive economic subsidies, which helped the Cuban government finance a generous welfare state with an extensive education, health services, and social security system. These massive subsidies were the result of Cuba joining the Soviet state as its junior partner in an international alliance that did confront strategic obstacles in Latin America (because the USSR was reluctant to challenge the US in its own sphere of influence), but that ended up being much more viable and successful in Africa despite some tactical differences.

Although overall literacy was at 76.4% before the revolution, it was much lower in the countryside; the government has succeeded in almost entirely wiping out illiteracy. It has also expanded secondary and higher education, promoting a substantial degree of social mobility facilitated by the massive emigration from the island of its upper class and large segments of its middle classes.

The dramatic enlargement of the military also allowed for the rise into officialdom of many Cubans of humble origin. Black Cubans in particular benefited, with the elimination of the informal but substantial racial segregation that had existed in pre-revolutionary Cuba, especially in the area of employment.

Racism was by no means eliminated. The Cuban government, implicitly identifying racism only with its segregationist form, soon declared the problem solved, with policies of “affirmative action” not even considered, in a context where blacks were not allowed to organize independently to defend their interests.

In general, however, Cuba became a more egalitarian society, attaining in the mid-1980s a Gini coefficient of 0.24 (although this measure also suffers from the political access problems discussed above). It was this, along with the growth of a nationalist and anti-imperialist consciousness that ensured a large base of popular support for the government. At the same time, however, critical voices even inside the Castro administration were systematically suppressed, and political dissidents (as well as petty offenders — Cuba has one of the highest imprisonment rates for common crimes) were jailed in large numbers.

The collapse of the Soviet bloc provoked a massive economic crisis, reflected in the quick and sharp 35 percent GDP drop. Cubans went very hungry in the first half of the nineties, the worst years of the crisis, leading to serious nutritional deficiencies that provoked an outbreak of optical neuropathy in 1991 that affected more than fifty thousand people until it was partially controlled in 1993.

Services such as public transportation went into a tailspin, from which they have only partially recuperated. Inequality has grown significantly, particularly between those with and without access to the hard currency provided by remittances from abroad. Real wages in the public sector, which still accounts for at least 75 percent of the labor force, dropped precipitously, and as late as 2013 they had only reached 27 percent of 1989 levels.

The “Special Period” also had a noticeable impact on the health care system, reducing the gains achieved in the previous thirty years. There are shortages of medical supplies and of family doctors and specialists, who are often working abroad as a part of international programs.

Patients have to even bring their own bedding to the hospitals, and “gratuities” to medical personnel have become increasingly common. Teachers have fled the education field in search of higher wages in other sectors such as tourism; at one point the government even tried to replace those educators with television sets and quickly trained high school graduates, with predictably negative results.

The system of social security, which made great advances in the 1960s with universal coverage and the unification of the previously existing patchwork of pension and retirement plans, went into a sharp crisis as the peso-denominated pensions fell to a fraction of their previous purchasing power.

Most importantly, during the quarter century that has elapsed since the fall of the USSR, the support of the regime has fallen quite substantially, particularly among young people. This does not mean that they have begun to openly oppose the government. They are far more likely to look for individual ways to resolve these problems. They would rather leave the island than politically confront a government that despite having released most political prisoners and allowed for a significant degree of social liberalization (for example, in terms of religion and emigration) still maintains a one-party state and an apparatus of repression. (Although it typically employs close monitoring, harassment, and frequent short-term arrests of dissidents instead of the long prison terms that were the norm under Fidel Castro’s rule.)

The Critique from the Left

Supporters of the government, especially abroad, continue to defend the system as if nothing happened during the last twenty-five years, and keep pointing to poor countries such as Haiti — which were worse off than Cuba before the 1959 Revolution — as evidence of how better off Cuba is. But for the most part, the Cuban people are not comparing their standard of living to those of other less developed countries.

Older Cubans are much more likely to compare their current hardships with the greater security and predictability they experienced before the Special Period, and remember nostalgically the early 1980s when the opening of the farmers’ markets, after the mass exodus from the Port of Mariel in spring 1980, allowed Cubans to reach perhaps their highest living standards since the 1960s.

For many Cubans, and particularly for the disenchanted young who are keenly aware of contemporary cultural trends in fashion, music, and dance, the existence of a large Cuban-American community in South Florida has also become a major standard of comparison.

And the nascent critical left in Cuba — like the oppositionists of the 1940s and 1950s — does not celebrate, in the manner of the official Communist party press and foreign supporters, Cuba’s good performance in the HDI. Instead, it is trying to organize under extremely difficult conditions, on behalf of the political liberties necessary to defend the standard of living of the Cuban people and open up the possibility for a popular and democratically self-managed economy and polity.

sam-farberSamuel Farber

 

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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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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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CUBA’S ECONOMY AT A CROSSROADS

Original Here: NY Times, Editorial: Cuban Economy

Leer en español

By THE EDITORIAL BOARD, DEC. 14, 2014

In July 2007, while serving as acting president as his brother underwent medical treatment, Raúl Castro delivered a startling indictment of the Cuban economy when he railed about the inefficiencies of the dairy industry. His description of the onerous and expensive mechanism to get milk from cows to dinner tables was old news to Cubans, who have been subjected for decades to a centrally planned economy that is among the world’s most dysfunctional and anomalous. It soon became clear that Mr. Castro’s unexpected candor that day signaled the start of a transformational era for the island’s economy.

After Fidel Castro ceded power to his brother in 2008, the government initiated reforms that have allowed Cubans to start building livelihoods that are not wholly subject to state control. The pace has been halting, with plenty of backtracking from the government’s old guard, which views further liberalization of the economy as an abdication of the socialist system Fidel Castro made sacrosanct.

The looming end of the Castro era — Raúl Castro, 83, has said he will step down in 2018 — is unfolding amid a vigorous debate on the future of the country’s economy.

To date, the Obama administration has watched the reforms with skepticism. The White House has eased restrictions on remittances and travel to the island, but it has done relatively little else to pare down the web of sanctions the United States has imposed on Cuba for decades.

President Obama could help expand the role of Cuba’s small but growing entrepreneurial class by relaxing sanctions through executive authority and working with the growing number of lawmakers who want to expand business with Cuba. The White House could start that process by removing Cuba from the State Department list of countries that sponsor terrorist organizations and making it easier for Americans to provide start up-capital for independent small businesses. Doing that would empower Cuban-Americans to play a more robust role in the island’s economic transformation. More significantly, it would gradually erode the Cuban government’s ability to blame Washington for the shortcomings of an economy that is failing its citizens largely as a result of its own policies.

Before Fidel Castro came to power in 1959, Cuba’s economy was heavily reliant on the United States, which bought the bulk of its main export, sugar. American tourists flocked to the island, lured by its proximity, tropical weather and raucous night life.

After the overthrow of Fulgencio Batista, an authoritarian leader who had protected American commercial interests on the island, Fidel Castro’s government asserted control over virtually every segment of the economy. It seized land and assets from American companies and vowed to guarantee all citizens housing, health care and education. Communism brought an ever more anemic and backward economy, one propped up largely by Moscow. But after the Soviet Union collapsed in 1991, so did Cuba’s economy.

Cubans euphemistically call the stark deprivation of the 1990s the “special period,” a time when the Cuban government was forced to allow in some foreign investment and authorize limited private-sector employment. In 1999, Havana found a new benefactor in the newly elected president of Venezuela, Hugo Chávez — which gave Cuban officials the ability to retighten state control of the economy. But in the last two years Venezuela, which provides heavily subsidized oil to Cuba in exchange for medical services, has struggled with a worsening economic and political crisis, which could force it to cut off subsidies to Havana.

The precariousness of that relationship has added urgency to the debate over how fast the Cuban government needs to implement the reforms Raúl Castro endorsed. Old-guard leaders warn that a liberalized market economy could turn Cuba into a less egalitarian society and provide an opening for the United States to destabilize the government through a flood of private investment. Reformists, including some of the country’s leading economists, say the current state of the economy is untenable.

The reality is that the island’s social welfare achievements cannot be sustained if current economic and demographic trends hold. Cuba is currently ranked in the top tier of the United Nations Human Development Index, a measure of a country’s education level, life expectancy and other variables. That’s an achievement matched by only two other countries in Latin America and the Caribbean, Argentina and Chile.

Wages in Cuba are worth roughly 28 percent of what they were before the collapse of the Soviet Union, according to the Center for the Study of the Cuban Economy at the state-run University of Havana. The devaluation has turned workplace theft into a major problem. It has also led tens of thousands of Cuban professionals to emigrate to the United States and elsewhere in Latin America in recent years in search of a better life. The country’s birthrate is declining, while its elderly are living longer.

The agricultural sector remains stymied by outdated technology and byzantine policies. A foreign investment law Cuba’s National Assembly approved in March has yet to deliver a single deal. Adding to the challenges, the Cuban government has pledged to do away soon with its dual-currency system (which includes a dollar-pegged peso established in the 1990s when tourism opened up), a process that could drive up inflation. Yet against the picture of stagnation is the growth of a new class of private-sector employees, now nearly 500,000 strong. That’s not a huge number in a nation of 11 million, but they are a marvel of ingenuity in a place where running a private restaurant requires buying virtually all ingredients on the black market. Basic staples, like potatoes, must be purchased as contraband in Cuba.

Many of those building small businesses, such as bed-and-breakfasts, are Cubans who returned with savings earned abroad and those with relatives outside the country who provided start-up capital. All struggle with the bureaucracy, since they are unable to import legally items as basic as mattresses and pillows. Bringing items from the United States is onerous and complicated by American sanctions. Cuban authorities appear conflicted about the growing private sector. While they welcome the employment and tax revenue it generates, bureaucrats are throttling businesses that are doing particularly well and forcing some to become joint ventures with the state. The underlying message seems to be: We want prosperity but not overly prosperous individuals.

Washington could empower the reformist camp by making it easier for Cuban entrepreneurs to get external financing and business training. That type of engagement is unlikely to succeed unless the United States abandons its policy of regime change. Cuba’s economic transformation may be proceeding slowly, but it could well lead to a more open society. For now, continued antagonism from Washington is only helping the old guard.

 moa-1

The Moa Bay Nickel Smelter

HAV_MeliaCohiba_Aerial_001Melia Cohiba Hotel and Hotel Riviera on the Right

g-lectores-de-tabaqueria-512Cigar Manufacture

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INSTITUTIONAL CHANGES OF CUBA’S ECONOMIC-SOCIAL REFORMS: STATE AND MARKET ROLES, PROGRESS, HURDLES, COMPARISONS, MONITORING AND EFFECTS

31See: http://www.brookings.edu/research/papers/2014/08/cubas-economic-social-reforms-mesalago

The original essay is available here: Mesa-Lago-Economic and Social Reforms in Cuba-Brookings-14

In INSTITUTIONAL CHANGES OF CUBA’S ECONOMIC-SOCIAL REFORMS, Carmelo Mesa-Lago, distinguished service professor emeritus of economics and Latin American studies at the University of Pittsburgh, evaluates the pros and cons of Cuba’s economic reform plans as they relate to institutional change.

Overall, Mesa-Lago concludes that institutional reforms in Cuba are advancing in a positive direction, albeit slowly. The most important of these so far has been the establishment of microcredit, bank accounts and wholesale markets for the non-state sector, and the sale of homes and establishment of inheritance rights for usufructuaries and home owners. However, key structural changes and components are still missing: integral price reform, elimination of monetary duality, a realistic exchange rate and bank system restructuring.

The author argues that if Cuba were to follow an adapted “socialist market” or mixed economy model, as in China and Vietnam –which have a private sector, open markets and foreign investment, combined with an indicative plan and decentralization of decision making — it would achieve much higher sustained economic growth. Furthermore, the state must permit self-employment in skilled, high-value-added jobs for university graduates, authorize medium-sized enterprises and cooperative ownership of businesses, allow true co-op independence, reduce excessive taxes on non-state workers, halt government measures that create uncertainty, and expand microcredit and wholesale markets. Mesa-Lago offers a variety of other policy recommendations that will help advance the process of institutional reform within the context of the ongoing reform process. However, time is of the essence as Raúl Castro has committed to retiring in February 2018, leaving him with only four years to complete the key institutional changes the nation urgently needs.

New Picture (3)

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WHICH WAY CUBA? THE 2013 STATUS OF POLITICAL TRANSFORMATIONS

Vegard Bye;  The full Report is available here:  NUPI Report: Which Way Cuba? This NUPI Report is the result of a project financed by the Norwegian Ministry of Foreign Affairs, with the purpose of studying and accompanying economic and institutional reform in Cuba. This Report consists of three papers taking stock of the political changes in Cuba by the end of 2013 (with some updates from early 2014). First, Vegard Bye attempts to summarize the status of the Cuban reform processes under president Raul Castro, with emphasis on the link between economic reforms and political transformations. One basic question is whether increasing economic pluralism may also lead to political pluralism, or whether there will rather be a re-concentration of both economic and political power. Second, Armando Chaguaceda looks at the social deterioration in Cuba. What is at stake are some of the most important achievements of the revolution in terms of health, education and social security. The author argues that these achievements have never been seen in a rights perspective. Lastly, Borghild Tønnessen-Krokan describes the polarized debate and issues that have blocked normalization and friendly coexistence, and analyzes constraints and benefits related to dialogue on human rights, security and other contentious issues both inside Cuba and between Cuba and the US in light of a recent thaw. In Annex 1 at the end of the Report, we reprint an English translation of the very visionary Manifest elaborated by our partner Laboratorio Casa Cuba: CUBA SOÑADA; CUBA POSSIBLE; CUBA FUTURA. This is the first proposal for a liberal democracy in Cuba proposed by a group of political thinkers operating within the Cuban political system, and thus tolerated by Government and Party. There is reason to believe that this document – with possible follow-up will become a benchmark for future debate about democratic political transformations in Cuba. New Picture (4) CONTENTS Foreword Which Way Cuba? The 2013 Status of Political Transformations By Vegard Bye

1. Introduction

2. Agricultural transformations and their implications

3. Widening space for employment-generating entrepreneurs?

4. Mariel: the new Cuban panacea?

5. The new cooperative sector

6. A dual state-private structure?

7. Social deteriorations and their possible impact

8. Cuban agents of change

9. International context Cuba towards Latin American normalcy?

10. Assessing the on-going transformations up against theoretical and empirical literature

11. The three scenarios

 Cuba: revisitando la Justicia Social en tiempos de reforma By Armando Chaguaceda

  1. Resumen
  2. Introducción
  3. Las perspectivas del análisis.
  4. El caso cubano
  5. Las reformas y sus impactos
  6. La (in)seguridad alimentaria y los ingresos personales
  7. El déficit habitacional y la marginalidad.
  8. “ é ” y “ á ”
  9. Reducciones en la calidad educacional
  10. Conclusiones

Build Walls or Open Doors? Prospects for Cuba Dialogue By Borghild Tønnessen-Krokan

  1. Introduction
  2. Methodological constraints
  3. Scope and definitions of dialogue and reconciliation
  4. Origins and dynamics of the conflict
  5. From Deadlock to Détente
  6. Conclusion

ANNEX I:

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