Tag Archives: President Raul Castro

Cuba’s 12 to 20 Chair Reform: Can the Small Enterprise Sector Save the Cuban Economy?

Posted on December 15, 2010 by Arch Ritter

 

The quasi-private restaurants in the Barrio Chino have enjoyed a cultural exemption from the controls placed on normal “paladars” or restaurants. They have faced no 12 chair size limitation. They emerged some time ago as dynamic, large, diverse and efficient restaurants – indeed, the best in Havana. They are a living example of what many sectors of the Cuban economy could become if the tight restrictions and toxic tax levels were all made more reasonable. This is not yet happening. (Photo by Arch Ritter  2008)
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By Arch Ritter

In October 2010, Raul Castro’s Government increased the size limitation on private restaurants from 12 to 20 chairs. This was part of a broader reform package designed to shrink the state sector ultimately by about 1 million workers or 20% of the labour force and to re-absorb them into an expanding small enterprise sector. The 20 chair rule however is symbolic of the positive but timid character of the reforms undertaken so far.

This is an amazing and ironic reversal of fortune for Cuba’s private sector. Small enterprises were almost eliminated in the 1960s, were liberalized from 1993 to 1995 and then were stigmatized and contained by onerous regulations and taxation. Now they are supposed to save the economy, generating jobs, higher productivity and higher living standards than was possible under the old system. 9Raul apparently has even more faith in the small enterprise sector than I do!)

Fidel Castro’s 50-year attempt to construct his own variety of “socialism” is being repudiated and abandoned by his own brother and by the Cuban Government. This is an obvious humiliation for Fidel, even though the genuflections in the media and official documents –  including even the “Linamientos” – continue.

Firing one million state sector workers looks risky and brutal. Hoping that they will somehow be absorbed in the small enterprise sector looks like wishful thinking. In other contexts this approach would be labeled “neo-liberal”! Will the laid-off workers have the abilities and aptitudes necessary to start their own businesses?

But the biggest question is whether the small enterprise sector can create 500,000 jobs by March 30 and ultimately one million new jobs. As of  November 28, half way through period when the lay-offs are to occur, only 45,000 new self-employment licenses had been issued, with 43% going to retirees rather than those in the labor force. This process is off to a slow start but perhaps it will accelerate.

The regulatory and tax regimes under which small enterprise operated from 1995 to 2010 were designed to contain its growth, to keep enterprises tiny, and to limit the incomes of the self-employed. Now the tax and regulatory framework has been liberalized somewhat:

  • Licensing has been broadened.
  • Rental of facilities from citizens or the state is easier.
  • Sales to state entities are now possible.
  • Use of banking facilities and bank credit will be possible.
  • Permitted activities have been increased.
  • Some regulations have been eased.
  • Punishments for infractions have been eased. Virtually all of the old ‘infracciones’ continue to punished by the same fines as before. But the seizure of equipment and  the retraction of licenses have been dropped.
  • Imported inputs will become accessible for small enterprise at wholesale prices.

But tight limits on self-employment remain.

  • Professional activities are prohibited.
  • Intermediaries are prohibited and each producer is supposed to be the seller of his or her output.
  • Petty restrictions such as the 20 chair rule continue.
  • Tight limits continue on the hiring of employees.
  • Advertising remains prohibited.

The tax regime has been slightly relaxed but is still problematic. Small enterprises face five taxes: a sales tax (10%), a tax on hiring employees, social security taxes, a public services usage tax, and an income tax (that rises to 50% of income above 50,000 “old” pesos or about $2,000.00 per year.) For the calculation of the income tax, deductible costs of production from total revenues are limited to 10% for simpler enterprises up to 40% for larger enterprises. This means that for a restaurant with actual costs of production of 80% of total income, the tax on actual net revenue exceeds 100%.  The tax on hiring an employee is 37.5% of the average monthly wage for Cuba.

For very small-scale activities, an up-front monthly licensing fee that constitutes a simplified tax payment is required.

This revised regime is an improvement over the previous system. It may induce some enterprises to come up from underground and may promote the establishment of some new enterprises. But, on the other hand:

  • The high effective tax rates will kill off many potential enterprises and promote continued non-compliance.
  • The 37.5% employment tax will limit hiring.
  • The numerous controls and limitations on small enterprise will continue to “stunt” them so that they remain inefficient, wasting human and material resources.

It is therefore unlikely that small enterprise will expand enough to absorb one million redundant workers. By stunting the small enterprises, the possibilities of raising productivity, real incomes and ultimately living standards will also be limited

What happens then? Perhaps the “Fidelistas” could proclaim victory and halt or reverse the reform process. This is unlikely because the old “Fidel” model is discredited by events and by Raul himself. Moreover, Raul’s appointees now dominate the Council of Ministers. His military colleagues hold many key posts in the economy.

More likely, Raul’s Government will conclude that job creation should precede the lay-offs, not vice versa and that their expectations regarding job creation in the small-enterprise sector were overly optimistic. They might then slow down the lay-offs and in time liberalize the tax and regulatory framework.

Raul Castro is finally emerging from 60 years in his elder brother’s shadow. Perhaps he is thinking of his own historical legacy. “History” will never “absolve” Fidel, but it might absolve Raul if he sets Cuba on a course towards a workable economic system – not to mention human rights and meaningful pluralistic democracy.

Since its liberalization in 1993, the production of arts and crafts, largely for the tourist market, has expanded immensely and the quality and diversity of the products has improved greatly. It is now  a major source of foreign exchange for Cuba, though statistics on this do not seem to exist. This sector  provides another living example of the improvements that could be made in the small enterprise sector generally if it was liberalized appropriately. Above, a photo of the crafts market near the Cathedral on Avenida del Puerto, by Arch Ritter, 2008.

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CARMELO MESA-LAGO, El desempleo en Cuba: de oculto a visible, in Espacio Laical Digital

Posted on November 22, 2010 by Arch Ritter

Espacio Laical, the publication of the CONSEJO ARQUIDIOCESANO DE LAICOS DE LA HABANA , has just published an excellent analysis by Carmelo Mesa-Lago, on underemployment, unemployment and the ability of the small enterprise sector to reabsorb redundant labor to be released from the state sector. Mesa-Lago, the “Dean” of analysts of Cuban economy, has focused particularly on the labor sector in Cuba since he was an employee of the Cuba’s Ministry of Labor in the early 1960s and wrote his Ph.D. Dissertation (The Labor Force, Employment, Unemployment and Underemployment in Cuba, 1959-1970, Beverley Hills, Sage Publications, 1972).

Espacio Laical continues to consolidate its position as a leading fora for economic analysis on the Cuban economy!

The first few paragraphs are presented below. The full analysis can be found here: El desempleo en Cuba: de oculto a visible

El desempleo en Cuba: de oculto a visible: ¿Podrá emplearse el millón de trabajadores que será despedido?

Por CARMELO MESA-LAGO

Mi disertación doctoral, escrita hace 42 años, analizaba los problemas de desempleo declarado o visible, y subempleo o desempleo oculto (subutilización de mano de obra, empleo excedente) en países socialistas. Comparando a Cuba, China, la URSS y Yugoslavia, aportaba evidencia contraria a la teoría entonces en boga acerca del pleno empleo en economías socialistas de planificación centralizada. En el capítulo sobre Cuba (1970-1989) argumentaba que la reducción del desempleo visible durante la Revolución se había logrado en gran medida mediante el empleo excedente o innecesario. Por ejemplo, una fábrica, granja o entidad estatal de servicios, necesitaba 100 trabajadores, pero ocupaba a 200, así reducía el desempleo nacional visible, pero  ambién la productividad y el salario a la mitad, a más de erosionar el incentivo del esfuerzo laboral (Mesa-Lago, 1968, 1972).

Casi medio siglo después, los hechos en 2010 confirman la hipótesis.

Este artículo: 1) prueba con estadísticas oficiales y de CEPAL, así como con análisis de economistas cubanos,  que el problema no es nuevo, sino que se remonta al inicio de la  Revolución; 2) estima la magnitud del desempleo actual y sus efectos; 3) evalúa las medidas del

Gobierno para abrir empleo privado a más de un millón de trabajadores excedentes, y 4) ofrece opciones para mejorar dichas políticas (sus efectos fiscales son analizados por Vidal y Pérez Villanueva).

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Oscar Espinosa Chepe:, “Changes in Cuba: Few, Limited and Late” (Part 1 and 2)

Posted on November 16, 2010 by Arch Ritter

Here is a commentary from Oscar Espinosa Chepe on the recent changes in Cuba.

Óscar Manuel Espinosa Chepe , a Cuban economist, was one of approximately 75 dissidents arrested, tried and convicted in 2003 as part of  a crackdown by the Cuban government. Amnesty International declared him  a prisoner of conscience.

He graduated from the University of Havana with a degree in economics. From 1965 until 1968 he worked in the Economic Advisory Group of Prime Minister Fidel Castro.  From 1970 until 1984, Espinosa was responsible for Cuba’s economic, technical and scientific cooperation with Czechoslovakia, YugoslaviaHungary. In the 1980s, Espinosa grew increasingly disillusioned with the Cuban government’s economic policies. In 1996 he was reportedly fired from his job at  Cuba’s central bank. Since then, he has written many articles, analyses, and commentaries about economic and other matters. (from Wikipedia)

¨Un sistema opresor no puede ser reformado.  Debe ser totalmente abandonado¨, Nelson Mandela

Con la  publicación oficial de los instrumentos legales para la Implementación de la política sobre el ejercicio del trabajo  por cuenta propia y los procesos de reducción de plantillas infladas y, posteriormente, del Proyecto de Lineamientos de la Política Económica y Social para aprobar en el VI Congreso del Partido Comunista a celebrarse en abril de 2011, el gobierno ha brindado elementos que ratifican que sus ideas para salir de la crisis se basan en medidas parciales e insuficientes, que no solucionaran los graves problemas existentes en Cuba.

Cuando se leen detenidamente esos documentos, se evidencia el propósito de realizar tardíos y pequeños cambios para mantener lo que en realidad constituye la fuente real de los problemas: un sistema absolutamente disfuncional y un régimen totalitario que ha llevado la nación al más completo desastre y a la incierta dependencia de factores externos.  Esos documentos denotan que los cambios que se quieren hacer son para que en esencia todo siga igual y se garantice el poder omnímodo y los privilegios detentados por un grupo de personas durante 51 años, sin importar los crecientes sufrimientos de la población.

Esos documentos soslayan la verdadera génesis de los problemas y exponen medidas que se quedan a mitad del camino, llenas de limitaciones y prohibiciones.  Repiten otras anteriores como la entrega de tierras en usufructo o el pago por resultado a los trabajadores, implementadas sin tener en cuenta una concepción integral de la economía.  Los resultados de la entrega de más de un millón de hectáreas de tierra no han logrado el incremento de la producción agropecuaria, sino todo lo contrario.  Hasta el 30 de septiembre de 2010, la caída ha sido del 5,1%, sin incluir el desastroso comportamiento de la producción cañera.

Todo debido a que el estrecho tutelaje estatal  ha quedado intacto, bloqueando y desalentando las capacidades productivas, mientras Cuba continúa comprando en el exterior el 80,0% de los alimentos de la canasta básica.  Similar ocurre en el ámbito salarial con el pago por resultado, al no eliminarse la excesiva burocratización en el sistema empresarial y sin garantizarse el fluido suministro de abastecimientos a los centros de trabajo, ni existir una correspondiente organización laboral.

Ahora se quiere impulsar la restructuración laboral, que abarcará el despido de 500 000 trabajadores  en su primera etapa a finalizar en abril de 2011; el 10,0% de la fuerza de trabajo empleada.  El proceso continuaría hasta completar 1,3 millón   de persona, el 25,0% del total.  Según la concepción gubernamental tendrán la opción ser ubicados en la construcción y la agricultura, o dedicarse al cuentapropismo que ahora se pretende ampliar.  Indudablemente la reorganización de la fuerza de trabajo en Cuba es indispensable.   Resulta imposible organizar los centros de trabajo con las plantillas infladas que no permiten incrementar la productividad, la eficiencia, la disciplina, y mucho menos el salario  para que motive al trabajador, en un país donde equivale a 21 dólares aproximadamente como promedio mensual, según datos oficiales, y reconocido por el Presidente Raúl Castro ¨como insuficiente para poder vivir¨.

Sin embargo, el proceso de racionalización, demorado por tantos años, se quiere hacer de forma muy rápida ahora, sin la preparación adecuada para que pueda tener éxito ni la organización para que en un plazo tan breve se pueda reubicar una cantidad tan grande de trabajadores.

Reconocidos expertos, con cargos oficiales importantes durante muchos años,  han señalado sus preocupaciones por tan amplio desempleo, cuando no se basa en un estudio técnico de organización del trabajo, y, como el Dr.Sc. Lázaro González Rodríguez, exviceministro del trabajo,  publicó en un blog de Internet  ¨el 90,0% de las normas de trabajo son elementales. Las empresas y demás entidades, en su inmensa mayoría, no han realizado durante los últimos años, estudios de organización del trabajo y, por tanto,  cualquier balance de cargas y capacidades es erróneo…durante los últimos 20 años no se han preparado técnicos en organización del trabajo ni se le ha prestado atención a esta disciplina¨.

En ese escenario se plantea efectuar la racionalización con ¨comisiones de expertos¨, compuestas por 5 o 7 personas, elegidas en asambleas en los centros de trabajo, con el evidente propósito de responsabilizar a los  trabajadores del complicado proceso de racionalizar la fuerza de trabajo, cuando se trata de una tarea que compete totalmente a la administración.

Las condiciones para recibir una cantidad tan grande de desempleados no se han preparado convenientemente. Ni siquiera existe un mercado mayorista para abastecer a los cuentrapropistas, por tanto no tienen dónde comprar los insumos en condiciones razonables  para realizar las   producciones y prestar los servicios. Por consecuencia tendrán que adquirirlos en las caras tiendas de venta en divisas o en el mercado negro que seguramente se ampliará ante la falta de previsión del Estado.  Todo esto está unido a altas tasas de impuestos, en un país donde durante decenios fueron suprimidos todos los mecanismos tributarios, por lo que no hay una cultura al respecto.

El colmo de la falta de preparación del proceso se aprecia  en contradicciones entre las decisiones tomadas para ampliar el cuentapropismo y artículos de la Constitución, que no ha sido reformada.  Indudablemente, el anuncio del 1 de agosto por el General Raúl Castro de que se permitiría contratación de fuerza de trabajo por las personas decididas a ejercer el trabajo independiente es positivo.  Sin embargo, no se ha modificado el Artículo 21, que establece: ¨Se garantiza la propiedad sobre los medios e instrumentos de trabajo personal o familiar, los que no pueden ser utilizados para la obtención de ingresos provenientes de la explotación del trabajo ajeno¨. Artículo 45: ¨El trabajo en la sociedad socialista es un derecho…lo garantiza el sistema económico socialista, que propicia el desarrollo económico y social, sin crisis, y que con ello ha eliminado el desempleo….¨ Asimismo, cuando se despiden 500 000 personas, sin totales garantizas de un trabajo honrado, se choca con  el

(SEGUNDA PARTE)

¨Un sistema opresor no puede ser reformado.  Debe ser totalmente abandonado¨, Nelson Mandela

Como señaláramos en la primera parte, los propósitos del gobierno cubano son realizar modificaciones que le permita remontar la actual crisis, cada día más aguda, pero sin perder el control absoluto mantenido sobre la sociedad durante decenios.  Objetivo  imposible de lograr, debido a la acumulación de los problemas existentes, que no sólo son económicos y sociales, sino que abarcan la política, los valores éticos, la identidad nacional, la demografía, el medio ambiente y otros.

Las autoridades pretenden evitar las ¨concentraciones de riquezas¨, como ha reconocido el periódico Granma, y que los ciudadanos al alcanzar la libertad económica deseen obtener la libertad política en una Cuba democrática.  Eso se aprecia en la implantación de un elevado sistema tributario implantado al nuevo sector emergente, mucho más severo y limitante que el existente para las empresas estatales y las mixtas con capital extranjero.   Ejemplo de ello está en el impuesto por la utilización de la fuerza de trabajo que pagarán los trabajadores por cuenta propia, del 25,0% del salario de los trabajadores contratados, considerándose como remuneración mínima pagada a cada trabajador contratado ¨el monto equivalente a un salario medio mensual, incrementado en un 50,0%¨.  Se considera como salario medio mensual el vigente en cada provincia y el Municipio Especial Isla de la Juventud, en el ejercicio fiscal anterior, reconocido por la Oficina Nacional de Estadísticas (ONE).

En caso de contratarse más de 10 y hasta 15 trabajadores, se contempla como remuneración mínima pagada a cada trabajador el monto equivalente a dos salarios medios mensuales; y de contratarse más de 15 trabajadores, el monto equivalente a tres veces un salario medio mensual.  Con ello, y otros obstáculos, el Estado muestra su propósito de impedir el crecimiento del trabajo por cuenta propia y el surgimiento de pequeñas y medianas empresas (PYMES).

A esto se une que los gastos que podrán deducirse de los impuestos sobre los ingresos personales como máximo, y solo en el caso de los elaboradores y vendedores de productos alimenticios y transportadores de carga y pasajeros, podrán ser  hasta un 40,0% de los ingresos obtenidos en el año. En otras actividades, los gastos permitidos a deducir tendrán un porcentaje inferior,  llegando en algunos  oficios hasta únicamente el 10,0% de los ingresos anuales.

Otro ejemplo de las intenciones de limitar la iniciativa individual es la forma como se cobrará el impuesto sobre los ingresos personales.  De acuerdo a las ¨Normas¨, se determinarán por la suma de todos los ingresos devengados menos los gastos deducibles permitidos.  Para la determinación de la base imponible, se deducen además de los ingresos declarados los tributos pagados y el porciento por concepto de los gastos necesarios de la actividad de acuerdo a la siguiente escala progresiva:

UM: PESOS

INGRESOS NETOS ANUALES                                                                                        %

Hasta                      5.000.00                                                                                     Exento

El exceso de          5,000.00 hasta 10,000.00                                                            25

El exceso de        10,000.00 hasta 20,000.00          30                       El exceso de        20,000.00 hasta  30,000.00                                                            35

El exceso de        30,000.00 hasta 50,000.00                                                            40

El exceso  de       50,000.00                                                                                          50

Como puede observarse a partir de 50 000 pesos (2500 US dólares), existe una alta carga tributaria que unida a la existente para el pago por la utilización de fuerza de trabajo hará prácticamente imposible la capitalización indispensable para el crecimiento de los nuevos negocios. A esto se une la obligatoriedad de la contribución a la seguridad social, con el pago del 25,0 % de una base de contribución seleccionada por la persona en cuestión, en  una escala que va de de 350 a 2000 pesos.  La creación de una red de protección económica para los cuentapropistas es en principio algo positivo, pero resulta cuestionable el carácter compulsivo de la medida, mucho más cuando comienza a nacer el sector privado en un contexto sin la debida preparación y   con grandes dificultades de todo tipo.

A los frenos tributarios descritos y la carencia de un mínimo mercado mayorista donde los cuentapropistas pudieran comprar legalmente los productos necesarios para realizar sus actividades, se suman barreras administrativas tendientes a limitar el tamaño de los negociones y evitar el supuesto enriquecimiento de las personas. Así las capacidades de los restaurantes no podrán exceder a 20 comensales, ni las barberías a un numero pequeño de sillones, cuando lo que  requiere urgentemente la economía nacional es alentar a los ciudadanos emprendedores, así como   centros de trabajo prósperos y eficientes donde sean creados a la mayor velocidad posible puestos de trabajo para dar empleo a las personas que próximamente serán masivamente despedidas y que, a la medida que se desarrollen, contribuyan a la riqueza del país con el aumento del pago de impuestos que sirvan para el financiamiento de las necesidades sociales.

Continuará…

La Habana, Noviembre 17 de 2O1O

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Partido Comunista de Cuba, “Proyecto de Lineamientos de la Politica Economica y Social”: Viable Strategic Economic Re-Orientation and / or Wish List ?

Posted on November 10, 2010 by Arch Ritter

I. “Structural Adjustment” on a Major Scale

On Tuesday, November 9, a major document appeared for sale in Cuba entitled “Proyecto de Lineamientos de La Political Economica y Social” or “Draft Guide for Economic and Social Policy.”  The purpose of the “Guide’ presumably is to spark and to shape public discussion and education on the economic matters that will be the focus of the long-postponed Sixth Congress of the Cuban Communist Party to take place in April, 2011. It also provides the essentials of the new approach that will likely be adopted at the Sixth Congress.

It can be found in its entirety, courtesy of the Blog Caf Fuerte. (http://cafefuerte.com/

, here: Projecto de Lineamientos de la Politica Economica y Social,

The “Guide” is a broad-reaching and comprehensive document that puts forward 291 propositions for the improvement of the functioning of the Cuban economy. It signals a break in the four years of near inaction that the Cuban economy endured since Raul Castro took over as acting and then actual President – and the ten years of paralysis from about 1995 to 2006 under President Fidel.  It amounts to a major process of “structural adjustment” of the sort that was begun in 1992-1994, but was then stalled when the Cuban economy appeared to rebound after 1994.  The document is also a contradiction and maybe a “slap-in-the-face” for Fidel Castro, as it indeed indicates that the Fidelista-style Cuban model – his life’s work – is not working. (See “Fidel’s No-Good Very Bad Day” and The “FIDEL” Models Never Worked; Soviet and Venezuelan Subsidization Did.)

II. General Character of the Proposals

The Table of Contents provides a quick idea of the scope of the document:

Introduction

Contours of Economic and Social Policy

I           Economic Management Model

II          Macroeconomic Policies

III        External Economic Policies

IV        Investment Policy

V         Science, Technology and Innovation Policy

VI        Social Policy

VII       Agroindustrial Policy

VIII     Industrial and Energy Policy ix

IX        Tourism Policy

X           Transport Policy

XI         Construction, Housing, and Hydraulic Resource Policy

xii        Commercial Policy.

The Introduction summarizes the basic objectives required to overcome the principal problems of the economy. These include putting into productive use the unused lands constituting almost 50% of total, raising agricultural yields, developing new mechanisms to reverse the process of industrial and infrastructural de-capitalization, eliminating excess and redundant employment, raising labor productivity, recovery of export capacity in traditional exports, undertake studies in order to eliminate monetary dualism, and provide improved capacities for more decentralized regional development.

The “Contour” section then states that “…only socialism is capable of overcoming the difficulties and preserving the conquests of the Revolution, and the implementation of the economic model prioritizes planification and not the market”. However, the next paragraph states “…socialism is equality of rights and equality of opportunity for all citizens, not egalitarianism.” The latter sounds less like “socialism” and more like “social democrat” if not the common approach of most Western countries. The latter quotation makes the former somewhat hard to interpret if not meaningless.

The document then goes on to list the 291 propositions under the 12 different headings. A few of the more interesting propositions are summarized below:

  • Wholesale markets for supplying state, cooperative and self-employment enterprises will be established. (9)
  • State enterprises will decide themselves how to allocate their investment funds, and normally will not receive budgetary support for this. (13)
  • Insolvent enterprises will face liquidation. (16)
  • Workers incomes in state enterprises will be linked to enterprise performance (# 19)
  • Monetary and exchange rate unification will be “advanced” (54)
  • The taxation system will be advanced in terms of progressivity and coverage, and will be based on generality and equity of its structure. (56 and 57)
  • The centralized character of the determination of the planned level and structure of prices will be maintained. (62)
  • Recover the place of work as the fundamental means of contributing to the development of society and the satisfaction of personal and family needs. (130)
  • Modify the structure of employment, reducing inflated staffing and increasing employment in the non-state sector (158-159)
  • Eliminate the ration book as a means of distributing products. (162)
  • Improve agriculture so that Cuba is no longer a net importer of food, prioritizing import substituting activities, reviving citrus fruit production, augmenting sugar production. (166, 174, 179, 194.)
  • Promote export-oriented industry (197)
  • Develop a range of new industries such as tires, construction materials and metallurgy (213, 215, 216)
  • Restructuring of domestic retailing and wholesaling. (283-291)

III. Preliminary Evaluation

This document will receive a great deal of attention inside and outside Cuba. It provides fodder – along with the recent legislation on self-employment – for analysts and observers of Cuba, who have had little of hard substance on which to base their analyses of Cuban policy under the “Raulista” Presidency for some time.

In some senses, this document is remarkable. It sets out an ambitious reform program for much of the Cuban economy. It may indeed constitute a “Wish List” of all the types of policy improvements and changes that would be nice to have. The question is “can and will they be implemented?”

This document also is a major risk for the Raul Castro Administration. It provides a check-list of tasks that will be difficult to achieve. If future implementation and economic performance is far below the expectations that are now being raised to high levels, there could well be a serious fall-out for the Government and the Party.

The document is also broad and ambitious but does not set any clear priorities and does not propose a sequence of actions. Everything can’t be done at once. How should the policy changes be phased or sequenced?

Some observers are skeptical and perhaps cynical regarding the “Guide” – for good historical reasons. In her Blog Entry entitled The Art of Speaking Without Speaking (http://www.desdecuba.com/generationy/?p=2088) Yoani Sanchez states:

When you grow up decoding each line that appears in the newspapers, you manage to find, among the rhetoric, the nugget of information that motivates, the hidden shreds of the news. We Cubans have become detectives of the unexpressed, experts in discarding the chatter and discovering — deep down — what is really driving things. The Draft Guidelines for the Communist Party’s VI Congress is a good exercise to sharpen our senses, a model example to evaluate the practice of speaking without speaking, which is what state discourse is here.

The Guide undoubtedly could be seen as an economic rescue program designed to rescue also the Communist party of Cuba, which faces steady de-legitimation as the economy deteriorates – even as the official GDP statistics appear to rise steadily.

What is missing from the “Guide”? Here is a first brief listing. Further analysis will be incorporated here later.

1.      Nothing is said regarding labor rights. A vital part of the reform approach if labor is to be used effectively would be freedom of association, collective bargaining and the right to strike. In the absence of these, pressures and insights from the grass roots to improve economic policy and its effectiveness are suppressed.

2.      Nothing is said regarding freedom of expression and the right to criticize the policies and institutions openly, honestly and continuously. The absence of this right leads to economic inefficiency and corruption as argued elsewhere. ( Freedom of Expression, Economic Self-Correction and Self-Renewal)

3.      No further elaboration of how the self-employment or micro-enterprise sector is presented, suggesting that the recent reforms are the end of the journey not a first step.

4.      The dedication to centralized determination of prices is problematic. If maintained strictly, it would make the decentralized decision-making allotted to enterprises for investment, the hiring of resource inputs, etc. meaningless, and the problems of trying to run the economy from a few office towers in Havana would continue.

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State Sector Lay-offs then Private Sector Job Creation: Has Raul Got the Cart before the Horse?

Posted on September 22, 2010 by Arch Ritter

On Monday September 13 2010, the Cuban Labour Federation announced a new government policy on lay-offs in the state sector and expansion of self-employment and cooperative sector employment.( Pronunciamiento de la Central de Trabajadores de Cuba.) As is now well known, the policy calls for the lay-off of some 500.000 workers, about 10% of Cuba’s entire labor force and their re-incorporation into self-employment activities mainly, but also some co-operative activities. This of course marks a major strategic re-orientation of Cuba’s economic structure. The economy already was a “mixed economy” though with a small self-employment sector outside of agriculture, but it will now shift further towards a “marketization.” Raul basically is asking the small and harassed self-employment to come to the rescue of the Cuban economy by generating productive employment because the state sector ostemsibly has failed to do so. Many questions can be and have been raised by outside observers as to how this new approach will be implemented. A couple of questions are noted here. I. Has Raul Got it “Bass Ackwards”? 1.      Prior to any state sector lay-offs, would it not be wise to redesign the framework within which small enterprise operates so that it will be in a position to expand and absorb the laid-off state sector workers? Firing state sector workers and hoping that they somehow will be reabsorbed somewhere sounds distinctly un-socialist. 2.      If workers’ efforts and productivity are low, is this due mainly to sloth and laziness? Or is it instead due to a dysfunctional incentive structure in which workers are paid very little in Moneda Nacional, but somehow have to acquire  “Convertible Pesos” to survive with purchase in the Hard Currency (formerly dollar) stores? As the old saying goes:  “They pretend to pay us and we pretend to work.” Maintenance Workers at the Australia Sugar Mill, November 1994; Certainly working hard, but probably laid off in 2002 when the Mill was converted to a museum;  visited with Nick Rowe who “blogs”  at “Worthwhile Canadian Initiative” and Larry Willmore, who “blogs” at “Thought du Jour” (Photo by A. Ritter) 3.      Is low productivity also due to mismanagement that wastes human effort? Is inefficiency also the result of low capacity utilization in enterprises  for example, in state stores that have little to sell, in offices with little to do, or in industrial enterprises idled through poor maintenance, insufficient imported inputs, breakdowns etc.? (Note the diagram below that illustrates the reduction in non-sugar industrial output since 1989. Despite allegations of record economic growth in the late 2000s, industrial output remains around half of its 1989 level.) II.   Who will be laid off and how will it be done? 1.      Will those who are laid off be good candidates for creating their own self-employment small businesses? 2.      Will those laid-off be offered “severance packages” or “buy-outs” that would provide them with an amount of capital to begin their own small businesses? 3.      Will older workers be offered “early retirement packages” that would assist them in starting a small business or co-operative? 4.      Will workers be free to self-select – with a “severance package” – so that they can start a small business? 5.      Will those who are laid off be the truly redundant and unproductive workers, in which case they may not have the aptitude to start their own small business? 6.      If laid-off workers can self-select, will the state sector enterprises or bureaucracies then lose their more capable and industrious workers? 7.      How generous will the unemployment benefits be and how long will they last while workers look for new jobs or attempt their own job-creation? In any case, the process of laying people off will be most difficult. The anxieties generated among the population must be intense and the Workers Assemblies now discussing these issues must be acrimonious. III.   Creating an “Enabling Environment” for Micro, Small and Cooperative Enterprise Since 1995, public policy has been aimed at containing small enterprise – after liberalizing it in 1993 – by licensing limitations, tight and vexatious regulations, onerous taxation, harassment by inspectors and negative political and media stigmatization. This has not been an easy environment for the functioning of self-employed to operate. Major changes will be necessary if the small enterprise sector is to expand in order to be able to absorb the lion’s share of the displaced state workers. How can this be done? A previous Blog outlined some possible measures: Raul Castro and Policy towards Self-Employment: Promising Apertura or False Start? Here are some of the key policies that would be necessary to generate a flowering of the micro, small, and cooperative enterprise sector. Additional policies regarding advertising and vending 1. Liberalize Licensing: Let anyone and everyone open a small enterprise ( Result: competition will push prices downwards and quality upwards); 2. Permit All Types of Self-Employment, including Professional and High-Tech while maintaining state medicine and health systems intact; 3. Raise the limit on employees to 5, 10 or 20; 4. Provide legal sources for the purchase of Inputs; 5. Permit access to imported inputs (outside TRDs and at the exchange rater available for the state sector); 6. Eliminate silly and vexations restrictions; 7. Make microenterprise taxation simpler and fairer; 8. Establish micro-credit institutions; 9. Establish a “Ministry for the Promotion of Small Enterprise.” Photographer, at the Capitolio circa 1996, (Photo by A, Ritter)

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New Publication on Cuban-Canadian Relations

Posted on September 21, 2010 by Arch Ritter

A New publication has just appeared on Canadian-Cuban relations. It is a Special Issue of Canadian Foreign Policy edited by Professor Lana Wylie. Political Science, McMaster University, Hamilton Canada. The journal is produced by the Norman Paterson School of International Affairs, Carleton University, Ottawa. This issue is a bi-national production with Cuban authors as well as Canadians.

Canadian Foreign Policy: http://www.carleton.ca/cfpj/issue-current.html#1

Unfortunately the electronic version is available only by  subscription to the journal, but most University web sites provide  access to this.   What follows are the Abstracts – sometimes abbreviated – to the articles.Volume 16, Issue 1 (Spring 2010)

SPECIAL SECTION – The Politics of Canada-Cuba Relations: Emerging Possibilities and Diverse Challenges

INTRODUCTION

SHIFTING GROUND: CONSIDERING THE NEW REALITIES IN THE CANADIAN-CUBAN RELATIONSHIP

Guest Editor: Professor Lana Wylie

The articles in this issue of Canadian Foreign Policy consider the current relationship as well as survey the history of Canada’s association with Cuba, touching on the highs and lows of the relationship and making suggestions about the future direction of Ottawa’s policy toward the island state. In selecting the articles that would appear in this issue, the editorial team at the journal and myself, as special editor for this issue, strove to ensure that the issue reflected a range of approaches and perspectives. The nine scholars who penned the following articles thus write from the perspective of six different disciplines: Geography, Political Science, History, Spanish and Latin American Studies, Business, and Economics. Even more interestingly, they tackle the relationship from both the Canadian and the Cuban perspectives, and bring fresh epistemological approaches to the study of the issues.

Peter McKenna, John Kirk, and Archibald Ritter are well-established Canadian scholars with careers that have been  devoted to the relationship. Not only have each of them spent much time in Havana, but they have done so in many capacities, from being visiting scholars at the University of Havana to advising the Canadian government about the direction of policy. In this issue they give us important perspectives on how the history of Canada’s approach toward Cuba is likely to shape the current direction of policy. The various approaches taken by Heather Nicol, Calum McNeil, and Julia Sagebien and Paolo Spadoni both challenge established ways of making sense of the relationship and complement the perspectives taken in other articles of the issue.  Each of these scholars has contributed much toward our knowledge  of Cuba, and in this issue they make crucial observations about the  various ways in which we have to come to understand the relationship. However, it was especially important that an issue devoted to furthering our understanding of the Canadian-Cuban  relationship reflect on it from both the Canadian and Cuban  perspectives. Luis René Fernández Tabío and Raúl Rodríguez help  us appreciate the view from Cuba. The two articles by the Cuban  contributors further demonstrate that what Canadians take as  given facts about Cuba, or about Cuba’s relationship with Canada, are notsettled at all.

CANADA AND THE CUBAN REVOLUTION: DEFINING THE RULES OF ENGAGEMENT 1959-1962 RAÚL RODRÍGUEZ RODRÍGUEZ

The triumph of the Cuban Revolution in 1959 was a turning point in the history of the Cuban republic; a new Cuban government started a process of socio-economic and political transformations. The initial reaction of the United States government—with the additional support of the Cuban propertied class—led to the deterioration of  the United States-Cuba bilateral relation.

As the US economic sanctions were instituted, the Cuban government turned to other Western states, Canada among them, to try to minimize the economic impact of US policy. Canada’s export-oriented economy was poised to benefit from the new  opportunities offered by the Cuban market, and Cuba offered  Canada a means to assert its sovereignty by forging an independent  foreign policy stance. Canada was forced to observe  restraint and allegiance to its NATO partners, and especially to its closest ally, the United States—the state most hostile to the outcome of the Revolution in the context of Cold War. This complex scenario started to unfold in 1959, and was fraught with challenges and opportunities for Canada Cuba bilateral relations.

THE CHRÉTIEN YEARS:EVALUATING ‘CONSTRUCTIVE ENGAGEMENT’     PETER MCKENNA AND JOHN M. KIRK

For most of Prime Minister Jean Chrétien’s ten years in office, his approach toward revolutionary Cuba was predicated on a policy of constructive engagement, or principled pragmatism. The piece begins by outlining the nature and extent of Canada-Cuba engagement, exchange, and dialogue during the Chrétien period. The article will then identify what worked in terms of bilateral relations and what did not, and in light of the Chrétien highs and lows, it will highlight the key lessons learned and explain why. Lastly, it will conclude with a series of policy recommendations for Canadian governments (current and future) to contemplate if Ottawa—especially given the changing United States-Cuba dynamic—hopes to enhance and strengthen ties with a post-Fidel Cuba.

CANADA-CUBA RELATIONS: AN AMBIVALENT MEDIA AND POLICY     HEATHER NICOL

This study examines Canadian newspapers and Parliamentary texts dating from 2000 to 2009. It suggests that there is, and has been, a consistent relationship between media portrayal of Cuba issues since the mid-1990s, but that in recent years as Canada’s  certainty of, and support for, Cuba has declined, a contradictory press facilitates an ambivalence towards Cuba that reflects the current state of Canada-Cuba relations.

Since 2000, less than one percent of all newspaper articles published in all Canadian major dailies have discussed Cuba. This lack of media coverage is striking, considering that Canadian companies have invested largely in Cuba and that Canadians have been among the largest groups of vacationers to the island for quite  some time. The Canadian International Development Agency (CIDA) has invested millions in official development assistance, while the current Conservative Government plays upon human rights issues on the island and the inherent failures of former rounds of Canadian constructive engagement to resolve these. The maintenance of normalized relations with Cuba has been  consistently challenged in Parliamentary debates by Conservative MPs. The latter have linked human rights abuses on the island with an increasingly critical approach to Canada’s traditional policy of constructive engagement.

CANADA’S ECONOMIC RELATIONS WITH CUBA, 1990 TO 2010 AND BEYOND     ARCHIBALD R. M. RITTER

During the Colonial era, from Independence to 1959 and throughout the regimes of Presidents Fidel and Raúl Castro, Canada and Cuba have maintained a normal and mutually beneficial economic relationship. During the first half of the 1990s, this relationship was invaluable for Cuba as it adjusted to the loss of Soviet subsidization and to its disconnection from the former Soviet Bloc. In these years, Canadian participants were enthusiastic and optimistic about future economic relations. However, in the 2000s this was replaced by greater realism and some skepticism concerning the possibilities for deepening economic interaction.

Following a brief review of the evolving relationship from 1959 to 1990, the nature of the economic relationship between Canada and Cuba is analyzed in more detail for the 1990 to 2009 era. The future economic relationship is then explored, focusing on Cuba’s economic recovery and policy environment, and the probable impacts of normalization with the United States.

CANADIAN–CUBAN ECONOMIC RELATIONS: THE  RECOGNITION AND RESPECT OF DIFFERENCE      LUIS RENÉ FERNÁNDEZ TABÍO

Despite geopolitical and ideological obstacles, the economic relationship between Canada and Cuba has, for the most part, been characterized as a prosperous and positive exchange for the two countries and its people over time. This paper suggests that Canadian-Cuban relations hold the potential to function within a different framework as a kind of new paradigm for North-South relations in the Western hemisphere in the face of US hegemony and its confrontational policy toward Cuba. With Canada and Cuba having benefited from a practice of good business, perhaps this exchange has provided a stable and prosperous base for the two nations to critically analyze structures to build upon for future relations. The significance of this relationship could be explained as a kind of mutual understanding the two have in the making of a new history, the outcome of the two countries having shared a common geographic position in relation to the United States.

TO ENGAGE OR NOT TO ENGAGE: AN (A) EFFECTIVE ARGUMENT IN FAVOUR OF A POLICY OF ENGAGEMENT WITH CUBA     CALUM MCNEIL

This paper seeks to explore the role of emotion in Canadian and American policy toward Cuba, with specific consideration of the emotional and normative dynamics associated Canadian-Cuban policy during the 1990s, and with the Cuban Democracy Act of 1992 and the Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996. A key point of comparison of this analysis is the assumption shared by both Canadian and American policy toward Cuba that regime change is inevitable, and that it will invariably correspond to the norms predominant in the domestic political systems of both states. It is my contention that a consideration of emotion allows us to gain insight into the decision-making behaviour in both states—and amongst the mass publics contained within them. It also allows us a means to more fully understand the possible particularities that distinguish the rational calculus of one state’s policies from another. By broadening our understanding of these, I illustrate how a policy of engagement is preferable to either embargo or constructive engagement.

THE TRUTH ABOUT CUBA?    JULIA SAGEBIEN AND PAOLO SPADONI

The search for truth in and about Cuba is an elusive and puzzling pursuit primarily affected by: 1) competing narratives of contested events; 2) the emotional distress that accompanies the experience of cognitive dissonance; 3) the Cuban cultural propensity towards vehement disagreement; and 4) the syncretic capacity of Cubans to inhabit several worlds at the same time. Canadian Cuba observers must strive to develop a balanced understanding of these competing narratives about Cuba and of the people who tell them.

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Fidel’s No-Good Very Bad Day

Posted on September 15, 2010 by Arch Ritter

A “Senior Moment”? On Wednesday September 8, former President Fidel Castro was quoted as saying: “The Cuban model doesn’t even work for us anymore”, when asked if Cuba’s economic system was still worth exporting to other nations, by Jeffrey Goldberg, of The Atlantic. A few days later, Friday September 10, Fidel said that it was a misunderstanding though Jeff Goldberg and Julia Sweig insisted that this is what he said. Had Fidel been experiencing a “Senior Moment?” Had he been speaking in jest- a throw-away line in a jocular conversation, but also revealing concerning his legacy to Cuba and the world? Was he misunderstood or misheard or mistranslated?

Fidel’s Economic Legacy: Rejected by Brother Raul and Questioned by Cuba’s Government

Then on Monday September 13, the Pronunciamiento de la Central de Trabajadores de Cuba announced the new policy on lay-offs in the state sector and expansion in the self-employment and cooperative sector employment. This statement outlines a new direction for the Cuban economy, namely towards greater reliance on the market mechanism, private ownership and entrepreneurship and a reduced role for the state and (attempted) planning. Cuba already had a “mixed economy” with a substantial private sector in agriculture and some 143,000 in non-agricultural activities, not to mention all those in the underground economy. However, the statement by the Cuban Federation of Labour indicates a major shift of emphasis towards a more marketized, decentralized, private-sector economy. This shift in direction for the Cuban economy negates all that Fidel has stood for regarding the economy in the past. Fidel was responsible for

  • the initial nationalizations of almost all the private sector, including self-employment in 1961-1963 and 1968 (with the “Revolutionary Offensive” )
  • the continuous fulminations against the self-employment and “capitalism” from a variety of perspectives
  • the shut-down of the farmers’ markets in 1986 with the “Rectification program”
  • the tight containment of self-employment after 1995 and
  • discrimination against self-employed Cuban citizens vis-à-vis foreign enterprise in joint ventures in terms of tax regimes.

President Raul Castro’s new approach instead is placing its faith in the small enterprise and cooperative sector, hoping that these will to come to the rescue of the economy by absorbing the underemployed labour in the state sector to be laid off in the next six months. . This is strong confirmation that President Raul Castro himself is convinced that the Cuban model is not working any more – if it ever did. It also is likely that the Communist Party and the National Assembly will not contradict Raul on this. I argued earlier that none of the variants of the “Cuban Model” had worked effectively. (The “FIDEL” Models Never Worked; Soviet and Venezuelan Subsidization Did) Many foreign analysts and observers had of course questioned the value of Fidel’s legacy in the economy as well as politically and in terms of human rights. It now appears that Fidel’s legacy is questioned by his own Government. President Raul Castro has implicitly rejected Fidel’s life work regarding the economy of Cuba.

A Difficult Day – and Situation – for Fidel

Fidel Castro allegedly said to the judges in his famous 1953 speech in his own defense at his trial after the unsuccessful attack on the Moncada army barracks “Condemn me, History will absolve me.” However, “History” will not absolve Fidel. It appears also that even the official versions of “history” under Cuba’s current Communist system will not absolve Fidel either. Small wonder that he is attempting to portray himself as the elder statesman, altruistically offering advice and warnings on international issues, many of which appear to him to be apocalyptic in character. How will Fidel respond to the official Cuban rejection of his vision of “socialism” that he has been attempting to impose on Cuba for almost half a century? . PS. It is instructive that the labour federation, the CTC, is placed in charge of implementing the lay-offs on the part of the government rather than trying to defend the interests of the state sector workers. This pretty much confirms the view of the CTC as an arm of the regime not an organization to defend workers’ rights and interests.

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Raul Castro and Policy towards Self-Employment: Promising Apertura or False Start?

Posted on August 4, 2010 by Arch Ritter

In his speech before the National Assembly on August 2, 2010, President Raul Castro stated that the Council of Ministers had agreed to expand self-employment by eliminating various prohibitions in the granting of licenses and on some types of goods and services. and by making the employment of workers in such enterprises more flexible. At the same time, he referred to a strengthening of taxation on such enterprises.

If the policy environment is indeed liberalized, it will be a great thing for the Cuban economy and for people’s material levels of living. However, the reference to strengthened taxation is worrisome.

Advantages of an Apertura for Small Enterprise

What might be the impacts of the liberalization of self-employment as well as small enterprise (to five or ten employees)? Here is a quick listing of the benefits:

  • An increase in small enterprise would Increase competition, lower prices, improve quality and broaden diversity of the goods and services produced.
  • Productive employment  would be created
  • Incomes would be generated.
  • The average levels of incomes would be lowered in the small enterprise sector if it were opened up for free entry by anyone wanting to enter the area
  • Citizens would gain when reduced effort and time was necessary to obtain the goods and services necessary for survival.
  • Improved productivity of small enterprises would permit higher material well-being throughout Cuban society.
  • The massive underground economy would shrink.
  • Tax revenues from the sector would increase as it expanded .
  • Foreign exchange earnings and savings would occur as domestic products replaced imported products and as markets for tourists and for export expanded.
  • Innovation and Improvement would be promoted.
  • Urban and rural commercial revival would occur.
  • Improved general quality of life.
  • The culture of compliance and respect for public policy rather than regulation avoidance and illegality would in time take effect.

If one doubts the advantages of small enterprise liberalization, consider the arts and handicrafts sector. Before these areas were liberalized in 1993, the souvenirs and craft products available for purchase by tourists or Cuban citizens were of abysmal quality and without diversity, coming as they did from a number of state workshops. However, following liberalization, this area sprang to life. Very quickly the Place de la Catedral and Avenida “G” (de los Presidentes) were filled with vendors providing a rapidly widening range of crafts and arts. Very soon there were too many vendors for these locales and they were relocated to the Malecn, La Rampa, and the park between Avenida del Puerto and the Cathedral. They now constitute a major tourist attraction and earn significant amounts of foreign exchange for Cuba.

The apertura for the arts and crafts liberated the creativity, innovativeness, entrepreneurship and energies of Cuban citizens who quickly seized the opportunities available. They earn a living for themselves and make a valuable contribution to Cuban society. An apertura in all areas of the economy to small entrepreneurship would make similar contributions.

Art Market, Plaza de la Catedral, 1994

Market Stall for Sculpture, Malecon, circa 2002

 

Disadvantages of an Apertura for Small Enterprise

There are always disadvantages as well as advantages – costs as well as benefits – in economics and in the evaluation of public policy. However, I have trouble finding any disadvantages or costs in a liberalized policy environment for small enterprise.

There are three concerns, however.

First, would such an aperture worsen income distribution? In time, as some small enterprises increased in size, this would indeed likely occur. However, Cuba already has an income tax and system for taxing small enterprise so that this effect could be managed. But opening self-employment and small enterprise up to all possible entrants would also increase competition in the sector and push prices and thence incomes towards average levels.

Second, would an aperture encourage pilferage of inputs from the state sector – as has happened in the past? This is a possibility that has to be managed. It can be managed by establishing a market for inputs for the sector that is reasonable and fair. At present, it is difficult for small enterprises to obtain their necessary inputs – except at the Tiendas para la recaudacion de Divisas (TRDs) or (former) dollar stores – leading to purchases of inputs that have found their way out of the state sector. A reasonable market for the provision of inputs to the sector is thus vital.

Third, would an aperture lead to an expansion of “infractions” and illegalities as small enterprises tried to evade rules and taxes? This could indeed occur if regulations remained asinine and if tax burdens were impossible.  However, if an aperture to small enterprise were accompanied by the dropping of silly regulations and controls, and if the tax regime was made reasonable and fair, it is likely that compliance would improve. However, building a culture of respect for regulations and taxes will also take some time as the self-employed have come to view government as an enemy force imposing rules and regulations that are aimed not just at their containment  but also their elimination.

Current Policy towards Self-Employment

The current policy environment within which the self-employed operate is particularly difficult.

There are a variety of controls and prohibitions that seem designed to obstruct, contain and eliminate the “Cuenta-Propistas”. Here is a summary of the policy environment:

Controls and Prohibitions:

1. All activities are prohibited except those specifically permitted

  • All professional self-employment is prohibited
  • Of the initial 156 legalized activities 41 were prohibited in around 2005

2. The number of the self-employed is strictly controlled through the granting of licenses (See Chart 1.)

3. Taxation is onerous and indeed is much heavier than that facing foreign multi-national corporations in joint ventures. This is  a shocking type of discrimination against Cuban citizens (See Chart 2.)

4. There are numerous prohibitions

  • No access to credit;
  • No access to foreign exchange or imports (except through state “TRD” stores)
  • No advertising
  • No intermediaries
  • Limits on numbers of employees;

5. There are innumerable petty restrictions (See Chart 3.)

6. The political and media environment has been negative since 1995.

For these reasons, the self-employment sector has stagnated over the last 10 years following the initial expansion of 1993-1994 following its initial liberalization (See Chart 4.)

Possible Policies towards a Small-Enterprise Apertura

If President Raul Castro wished or was able to provide a definitive aperture for small enterprise, here are the types of policies that would be under consideration.

1. Liberalize Licensing: Let anyone and everyone open a small enterprise (  Result: competition will push prices downwards and quality upwards;

2. Permit All Types of Self-Employment, including Professional and High-Tech while maintaining state medicine and health systems intact;

3. Raise the limit on employees to 5, 10 or 20;

4. Provide legal sources for the purchase of Inputs;

5. Permit Access to Imported Inputs (outside TRDs and at the exchange rater available for the state sector);

6. Eliminate silly and vexations restrictions;

7. Make Microenterprise Taxation Simpler and Fairer;

8. Establish Micro-Credit Institutions;

9. Establish a Ministry for the Promotion of Small Enterprise.

However, needless to say, former President Fidel Castro undoubtedly would disapprove of any aperture judging from (a) the Initial near shut-down of small enterprise during the 1968 Revolutionary Offensive; (b). the further tightening of the prohibition on self employment during the “Rectification Program” of 1986-1990; and (c) His statement lamenting the 1993 opening to Self-employment in 1995.

On the other hand, Raul Castro has displayed a streak of pragmatism that seems to be lacking in his elder brother, witness his initiative in re- opening the farmer’s markets in 1994.  Moreover, his reputation is more for talking quietly and eventually acting rather than talking with grandiosity and making false starts. Time will tell.

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