Presented at Florida International University, Cuban Research Institute Conference: “Beyond Perpetual Antagonism: Re-imagining U.S. – Cuba Relations.”
February 24, 2017
Presented at Florida International University, Cuban Research Institute Conference: “Beyond Perpetual Antagonism: Re-imagining U.S. – Cuba Relations.”
February 24, 2017
BY PAUL HARE
In Cuba Today, August 29, 2016
Original Essay: BAD NEWS FOR NEW IDEAS IN CUBA
Havana historian Eusebio Leal escorts U.S. Secretary of State John Kerry around Old Havana during a tour of the city last year. Ismael Francisco AP
Very few without Castro in their name have survived in the leadership of the Cuban Revolution as long as Eusebio Leal. And he didn’t do it by the conventional means of silence and obedience. He brought loyalty but also ideas to the Castros. Now the military-run business empire has asserted itself in Old Havana as elsewhere and Leal appears to have been outmaneuvered.
Uniquely among Cuban leaders Leal has cared about other things beyond preserving the Castro Revolution. He has been as fascinated by Cuba’s past as its future. He has received numerous overseas cultural awards but his stature in Cuba has been that he thought differently.
In 2002 the British embassy in Havana staged a two-month-long series of events to commemorate 100 years of diplomatic relations between Cuba and the United Kingdom. We were told it was the largest such festival by an overseas country ever held in Cuba. Leal was our indispensable ally for venues, organization, contacts and vision. At times the Revolution’s agenda surfaced and he negotiated hard. But his heart was in the history of both our countries. Leal even created a garden in Old Havana in memory of Princess Diana. And as a historian he loved the story of the British invasion of Havana in 1762.
The military conglomerate GAESA will now assume business control over Leal’s beloved Old Havana project. This has been a labor of love and ingenuity. But it has also depended on his versatile role at the heart of revolutionary politics. He proved a man of taste, of determination but also shone as a contemporary entrepreneur in a Cuba which despises individualism.
His versatility served him well. A teenager at the time of the Revolution, he chose to prove that innovation and a love of past cultures and elegance could coexist with the new era. He admired Fidel, a fellow intellectual, and — not accidentally — he was chosen by the official Cuban media to eulogize his old friend again on his 90th birthday. Typically, the Revolution was extracting a declaration of loyalty from a man who was feeling pretty disgruntled.
Times are changing in Cuba and the undermining of Leal’s control has wider implications.
Times are changing in Cuba and the undermining of Leal’s control has wider implications. He may not be a household name outside Cuba and he may be in failing health. But his project showed he knew the Castros would never allow private sector growth to restore the largest area of Spanish colonial architecture in the Western Hemisphere.
His only chance was to harness funds from tourist visitors and foreign investors. There is still much to do but the current rush of tourists to Cuba owes much to achievement.
Leal’s fate is nothing new. Set in the 57-year context of the Cuban Revolution, many able and loyal leaders have been discarded. Felipe Pérez Roque, Carlos Lage and Roberto Robaina are recent examples. But Leal had survived and appeared to be growing in stature with Raúl. His walking tour of Old Havana with Obama received worldwide publicity.
Leal’s bonding with the U.S. president may have irked the Castros. The disintegration of Venezuela and loss of subsidies under Nicolás Maduro gave the military companies the opening they needed to swoop for Old Havana. Now, effectively Raúl Castro’s son-in-law will rule the roost and U.S.-operated cruise ships will soon be occupying many berths in the Old Havana harbor.
But perhaps the saddest lesson from Leal’s marginalization is the signal it sends to Cuban innovators and foreign investors. The restoration of the Revolution is still more important than the architectural jewels of past eras. Almost at the same time as Leal’s demise, a far less visionary but unquestioning loyalist, Ricardo Cabrisas, was promoted. These are indeed depressing times for Cubans hoping for some new ideas and less of the same.
Paul W. Hare is a former British ambassador to Cuba and currently senior lecturer at the Frederick S. Pardee School of Global Studies at Boston University
February 1, 2016
Since 2010, Cuba has been implementing a redesigned institutional structure of its economy. At this time it is unclear what Cuba’s future mixed economy will look like. However, we can be sure that it will continue to evolve in the near, medium and longer term. A variety of institutional structures are possible in the future and there are a number of types of private sector that Cuba could adopt. Indeed it seems as though Cuba were moving towards a number of possibilities simultaneously.
The objective of this note is to examine a number of key institutional alternatives and weigh the relative advantages and disadvantages for each arrangement. All alternatives include some mixture of domestic or indigenous private enterprises, cooperative and “not-for-profit” activities. foreign enterprise on a joint venture or stand-alone basis, some state enterprises (in natural monopolies for example) and a public sector. However, the emphasis on each of these components will vary depending on the policy choices of future Cuban governments.
The possible institutional structures to be examined here include:
1. Institutional status-quo as of 2016;
2. A mixed economy with intensified “cooperativization”;
3. A mixed economy, with private foreign and domestic oligopolies replacing the state oligopolies;
4. A mixed economy with an emphasis on indigenous small and medium enterprise.
Option 1. Institutional Status-Quo as of 2016
The institutional “status quo” is defined by the volumes of employment in the registered and unregistered segments of the small enterprise sector, the small farmer sector, the cooperative areas, the public sector, and the joint venture sector, plus independent arts and crafts and religious personnel. The employment numbers are mainly from the Anuario Estadístico de Cuba together with a number of guesstimates, some inspired by Richard Feinberg (2013). The guesstimate for unregistered employment in the small enterprise sector may seem exaggerated. However, a large proportion of the “cuentapropistas” utilize unregistered workers and a proportion of the underground economy does not seem to have surfaced into formally registered activities. These employment estimates by institutional area are presented in Table 1 and illustrated in Chart 1, which also serve as a “base case” for sketching the other institutional alternatives.
The current institutional status quo has a number of advantages but also some disadvantages. On the plus side, adhering to the status quo would avoid all the uncertainties and risks of a transition. It would maintain the possibility of “macro-flexibility,” that is the ability for the central government to reallocate resources by command in a rapid and large scale fashion. However, in view of the numerous “macro errors” made possible by a centralized command economy (the 10 million ton sugar harvest of 1970, the “New Man” endeavor, shutting down half the sugar mills), “macro-flexibility” may be a disadvantage. There are major advantages for the Communist Party in maintaining the institutional status quo in the economy, namely enabling political control of the citizenry (a disadvantage from other perspectives) and continuing state control over most of the distribution of income (also a disadvantage from other perspectives). The approach also helps foster good relations with North Korea (I am running out of advantages).
There are also major disadvantages. The centralized planned economy and public enterprise system generates continuing bureaucratization of production; continuing politicization of state-sector economic management and functioning; continuing lack of an effective price mechanism in the state sector and continuing perversity and dysfunctional of the incentive structure. The result of this is damage to efficiency, productivity and innovation.
OPTION 2. Mixed Economy with Intensified “Cooperativization”
A second alternative might be to promote the authentic “cooperativization” of the economy in a major way. This would involve permitting cooperatives in all areas, including professional activities; opening up the current approval processes; encouraging grass-roots bottom-up ventures; providing import & export rights; and improving credit and wholesaling systems for coops.
This approach has a number of advantages. First, it would strengthen the incentive structure and elicit serious work effort and creativity on the part of those in the coops. This is because worker ownership and management provides powerful motivation to work hard and profit-sharing ensures an alignment of worker and owner interests. This approach would generate a more egalitarian distribution of income than privately-owned enterprises. Cooperatives may possess a greater degree of flexibility than state and even private firms because their income and profits payments to members can reflect market conditions. Perhaps most important, democracy in the work-place through effective and genuine coops is valuable in itself and constitutes an advantage over both state- and privately-owned enterprise. [Workers’ ownership and control proposed in Cuba’s cooperative legislation is ironic and perhaps impossible since Cuba’s political system is characterized by a one-party monopoly. On the other hand it may help propel political democratization.]
The “second degree cooperatives” or “cooperative coalition of cooperatives” called for in the cooperative legislation is particularly interesting as it may permit reaping organizational economies of scale (a la Starbucks, McDonalds, etc. ) for small Cuban coops in these areas.
An emphasis on cooperatives would help to maintain ownership and diffused control and profit-sharing among local citizens, thereby promoting greater equity in income distribution.
But cooperatives also face difficulties and disadvantages. First, are they really more efficient than state and private enterprises? Generally speaking, cooperatives have passed the “survival test” but have not made huge inroads against private enterprise in other countries over the years. Perhaps this is because the “transactions costs” of participatory management may be significant. Personal animosities, ideological or political differences, participatory failures and/or managerial mistakes may occur. And for larger coops, complex governance structures may impair flexibility.
Second, Cuba’s actual complex co-op approval process is problematic and creates the possibility of political controls and biases. Certification of professional cooperatives is unclear. Also, the hiring of contractual workers is problematic
Finally, what will be the role of the Communist Party in the cooperatives? Will it keep out of cooperative management? Will Party control subvert workers’ democracy and deform incentives structures?
OPTION 3. Wide Open Foreign Investment Approach A third possibility would be to open up completely to foreign investment. This would involve a rapid sell-off of state oligopolistic enterprises to deep-pocket foreign buyers such as China, the United States (in due course), Europe, Brazil, or elsewhere. The buyers might be the Walmart’s, Lowes, Subways, or Starbucks of this world, wanting to acquire major access to the Cuban market. This is a strong possibility if existing state oligopolies (e.g., CIMEX and Gaviota) were to be privatized in big chunks. The policy requirements for this approach to occur would be rapid privatization plus indiscriminate direct foreign investment and takeovers by large foreign firms.
This approach does have some advantages.
However, there would also be disadvantages such as:
OPTION 4: Pro-Indigenous Private Sector in a Mixed Economy
A liberalization of micro-, small and medium enterprise would also be necessary to release the creativity, energy and intelligence of Cuban citizens. This would involve open and automatic licensing for professional enterprises; an opening up for all areas for enterprise – not only the “201”; permission for firms to expand to 50 + employees in all areas; creation of wholesale markets for inputs; open access to foreign exchange and imported inputs; full legalization of “intermediaries” ; and permission for advertising.
This approach has some major advantages:
Oligopoly power would be more curtailed compared to Option 3;
There would be some disadvantages with this approach.
Most likely, Cuban policy-makers in the government of Raúl Castro, the government of his immediate successor, and future governments of a politically pluralistic character will design policies that ultimately will lead to some hybrid mixture of the above four possibilities. I of course will have little or no say in the process. However, my personal preference would be for an economy resembling the structure in the accompanying chart, with a large “indigenous” private sector, a significant cooperative sector, of course a large public sector for the provision of public goods, a small sector of government-owned enterprises, and a significant private foreign and joint venture sector. So my bottom-line recommendations for current and future governments of Cuba would be:
Feinberg, Richard E., Cuba’s Economic Change in Comparative Perspective, Brookings Institution, 2013
Oficina Nacional de Estadísticas, Anuario Estadístico de Cuba, 2014
Ritter, Archibald and Ted Henken, Entrepreneurial Cuba, The Changing Policy landscape, Boulder Colorado: Lynn Rienner, 2015
This interesting proposal was brought to my attention thanks to Jose Luis Rodriguez.
Ensayo original: http://www.perfiles.cult.cu/article.php?article_id=291#sdendnote2sym
Seida Barrera Rodríguez
Un debate que comenzó con el maltrato a la propiedad social en las empresas cubanas inspiró este proyecto. Fenómeno observado desde la cercanía con las entidades visitadas como fiscal del 2005 al 2008, la búsqueda de responsables y debilidades formó parte de la cotidianidad, pero faltó la perspectiva científica. El profesor que luego se convertiría en cotutor, insistió en profundizar cada vez más en la idea inicial de la autora de mezclar otras formas de propiedad con la estatal, y sugirió la cooperativa como una de las alternativas principales.
Habiendo presentado resultados parciales en un evento, con el ánimo de encontrar una organización que reuniera los requisitos adecuados para implementarlos, una colega mencionó que en su lugar de trabajo se advertían muchas de las características de una cooperativa, por el modo en que colaboraban los distintos establecimientos y la camaradería mutua entre sus empleados. Inmediatamente fueron solicitados contactos y entrevistas, y así se arribó a la Empresa de Producciones Industriales Cabildo, en lo adelante Cabildo. Su máximo dirigente, una persona de pensamiento flexible y vanguardista, enseguida se entusiasmó con la posible conversión de uno de sus talleres hacia una empresa mixta, donde el Estado cubano sería copropietario y cogestor con una cooperativa formada por trabajadores de la propia entidad. Para lograrlo, sería imprescindible el registro del proyecto como piloto para su seguimiento durante al menos un año.
Cabildo es una de las nueve empresas que gestiona la Oficina del Historiador de la ciudad de La Habana y no se encuentra en perfeccionamiento empresarial. Está conformada por quince talleres y una oficina central; su objeto social es muy variado: abarca desde el diseño de interiores hasta la costura, pasando por la fundición de las bellas farolas que iluminan esa parte de la ciudad, o la elaboración de banderas. En pocas palabras, sus empleados toman los inmuebles recién reparados o acabados de construir, y los proveen de todo lo necesario: muebles, lencería o pintura, intentando mantener el espíritu del casco histórico.
Los motivos para enfocar los esfuerzos en este frente pueden explicarse con la ayuda de las estadísticas: el 77% de los ocupados en la economía son trabajadores estatales, 3 millones 873 mil, por lo que constituye la mayor fuerza de trabajo a nivel nacional, y se encuentra tan necesitada de incentivos como los sectores cooperativo y privado, que solo representan el 23%.1 Además, en sus manos se encuentran la mayoría de los medios de producción que, conjuntamente con el capital humano, son las claves para incrementar los indicadores de productividad. Por último, existe carencia o debate sobre propuestas concretas en el sector, lo cual se confirma por el silencio de los legisladores, y la creciente flexibilización de las formas de gestión no estatales.
Esta brevísima introducción resume dos años de búsqueda de fundamentos teórico-metodológicos. Perseguimos el diseño, puesta en funcionamiento, legalización y seguimiento de cooperativas de producción y servicios a nivel local; con ello pretendemos seguir el Lineamiento 25 de la política económica y social, que promueve la creación de cooperativas en diferentes sectores de la economía.2
Leer mas: EMPRESA MIXTA ESTADO-COOPERATIVA
Cooperativa de Omnibus Aliados, cerca 1952
By Emilio Morales and translated by Joseph L. Scarpaci, Miami (The Havana Consulting Group).
Original Article here: The Havana Consulting Group, Joint Ventures
There is a longing in Cuba for the ‘old days’ of the 1990s when there was a successful boom in creating joint-venture companies on the island. Such nostalgia stems from the economic and political crisis in Venezuela, which has lessened the flow of capital from Big-Brother Venezuela.
Joint-venture companies played a key role in helping the Cuban economy recovery in the 1990s when Soviet aid dried up and the so-called Special Period began.
Many of these companies supported the expanding tourist sector and the decriminalization of the U.S. dollar, which became a staple in a dollarized retail market.
This spate of joint ventures sought to develop tourism infrastructure, assist in import substitution, and revive the national economy.
Joint venture companies concentrated mainly in the industrial sector, tourism, food processing, and real estate. Assuming there was a prior agreement with the Cuban counterpart, decisions were usually made by the foreign partner because they had put up the capital and the know-how.
In this stage of the island’s history with joint ventures, foreign companies played a key role training personnel about modern marketing research methods. This was a time when the economic teams of the armed forces launched the so-called ‘business improvement’ (perfeccionamiento empresarial in Spanish) programs.
Upper management teams of these companies learned modern marketing research techniques. Training this echelon of Cuban businessmen and women was a way to ensure loyalty, avoid corruption, and safeguard information.
Some $3 billion drove this surge of joint-venture operations and parallel activities in duty-free zones.
Uncertainty lowers the expectations of reforms.
Around 2002, the number of joint ventures and amount of investment capital began declining. Two years later, the government did an about-face and began centralizing the economy once again which, in turn, caused investment to dry up and erode the economic reforms launched in the 1990s.
As a result, some 200 joint-venture operations folded and investment plummeted. The Cuban government took to prioritizing investments with such friendly nations as Venezuela, China and Brazil to fill this investment void, offering private investors slim pickings.
Figure 1. Number of Businesses Operating in Foreign Direct Investment, 1999-2001.
Data source: Ministry of Foreign Investment and Collaboration (1999) and the Ministry of Foreign Trade and Foreign Investment (2001, calculated by The Havana Consulting Group.
Those foreign companies that remained in Cuba during this period had to endure, from 2008 to 2010, diminished or no payments that were owed to them by the island’s government (called the corralito, or little corral). Considerable tension resulted, particularly between the Spanish diplomatic corps that pleaded for payment to some 300 Spanish firms who had operations there.
This acute two-year financial crisis stemmed from the island’s lack of liquidity that not only affected the supply of raw materials in the sectors where these foreign firms operated, but decreased inventory in hard-currency retail chains and in tourism. The Cuban government’s failure to make payments led to a further decline in foreign investment as investors got jittery.
Raúl Castro introduced a series of economic reforms called “updating the Cuban economic model” when he came to power. This entailed trying to insert market mechanisms at all levels of the economy with the socialist planning system. Joint ventures were at the center of these measures so that the economy could receive foreign investment. In all instances, the Cuban government maintains at least 51% control of these companies.
From the start of these reforms until October 2013, the bulk of them have tried to expand the private sector and agriculture. However, the pace of foreign investment has not gone as expected because of corruption charges made against some foreign investors residing on the island, and Cuban business representatives of joint-venture firms.
Cuban authorities have detained or jailed several foreign businessmen and high-ranking Cuban officials (including one minister and several vice ministers and Cuban CEOs. They are charged with corruption, bribery, and related crimes. Some have been sentenced up to 10 years while others were acquitted after having spent more than a year in jail while awaiting trial.
Undoubtedly, this anticorruption has proven unattractive to foreign investors because of the uncertainty and insecurity the matter has created.
Searching for investors.
Despite all this, the Cuban government has created a special zone adjacent to the Mariel port, just west of Havana. The Brazilian government has invested $900 million, which the Cuban government hopes will attract foreign investment and give the economy a second chance.
By the looks of things, the Cuban government is moving forward with plans to attract investment. It is noteworthy that Venezuela, its principle political ally and one of two pillars of the Cuban economy, is coping with a deep crisis back home. Still, these strategic actions aim to exceed the results obtained in the 1990s.
Potential gains in joint ventures will likely concentrate in the tourism, agriculture and real-estate sectors.
However, it is unclear whether the traditional business partners already located on the island will play a prominent role. The lack of transparency about the jailing of foreign businessmen and the closing of joint ventures is unattractive to international investors.
If we consider the recent announcement about shifting to a single currency, it is obvious that foreign companies with investments in Cuba take a beating. Government efforts to attract a new wave of investors to the new Mariel port facilities could be impacted adversely because of these proposed monetary changes.
Another weakness is the lack of flexible and attractive foreign investment laws.
This is why the government urgently seeks a new wave of foreign investors. To do that, it has announced that it is reworking its investment laws so that they appeal to the international community. Moreover, for the first time in half a century, these new laws may consider allowing Cubans who reside off the island to invest.
Until now, however, these new laws have not appeared. Until they do, uncertainty grows, the crisis deepens, and the country is losing the glamour and allure it needs to attract new investment.
The complete document is available here: Omar Everleny Pérez Villanueva, The Current Deregulation of Cuban Enterprises. Oct. 3 2013
We cannot examine the last 50 years of Cuban economic activity without casting a critical eye. Even if we are clear about future goals, which are certainly full of challenges, an awareness of the pitfalls, errors, mistakes and misunderstandings from the past period may help to correct the future perspective.
Cuba is undergoing changes directed at achieving efficiency and increasing the productivity of the state-run enterprises (the plan), where efficiency depends, among other factors, on productivity. Productivity can be increased from different sources, but the important factor is that although a company may be proactive in the search for solutions, it is not possible to be proactive while being heavily regulated.
Various academic analyses show a decrease in the majority of state-owned economic sectors in the last 20 years, between the early 90’s and 2010, as well as in virtually all sectors, with the exception of a few, such as telecommunications, mining and construction, sectors that have received a strong injection of foreign capital since the early 90’s. Another study on skilled labor force shows low motivation, due to unsatisfactory wages, few moral and material incentives, organizational problems, over-qualification and, of course, technical materials problems.1
On January 29, 2012, at the closing of the First National Conference of the Communist Party, Raul Castro stated that:
“The only thing that can lead to the defeat of the revolution and socialism in Cuba would be our inability to eradicate the mistakes made in the 50 years since January 1, 1959 and those that we incur in the future.”
Following this thinking, it is clear that the challenges posed by the transformation at a relatively short term of the existing structural distortions in the Cuban economy. If we want Cuba to become a land of opportunities and to achieve a sustained increase in the standard of living for all Cubans, then the time to make such decisions is not very far away, and the measures to take must be more pragmatic than those taken under the current government. At the same time we cannot forget to take into consideration the harassment that Cuba is subject to in its external transactions by the U.S. government.
DR. OMAR EVERLENY PEREZ VILLANUEVA
Professor at the University of Havana. Former director of the Centro de Estudios de la Economia Cubana at the University of Havana. Doctorate in Economic Sciences of the University of Havana in 1998. Masters in Economic and International Relations from CIDE, AC Mexico City, Mexico in 1990. Bachelors in Economics from the University of Havana in 1984.
Dr. Perez Villanueva has presented at conferences in various Cuban institutes as well as internationally, including in the United States, Japan, France, Canada, Spain, Brazil, Puerto Rico, Mexico, Dominican Republic, Venezuela, China, Malaysia, Argentina, Peru, Jamaica, Barbados, Trinidad and Tobago and Norway. He has served as a visiting professor at Universities in the United States, Japan and France and has published over 70 research papers in a variety of areas of the Cuban and global economy.
Dr. Perez Villanueva has also published over 75 articles in publications and has co-authored several books in Cuba and abroad, including “Cuban Economy at the Start of the Twenty-First Century,” with Jorge Dominguez and Lorena Barberia (Harvard University. ISBN 0-674-01798-6, 2004), the second edition of “Reflections on the Cuban Economy” (Editorial Ciencias, Havana. ISBN 959-06-0839-6, 2006) and “Outlook fo the Cuban Economy I and II” (ISBN 978-959-303-004-5). His last book is “Fifty Years of the Cuban Economy” (Editorial Ciencias Sociales. Havana. ISBN 978-959-06-1239-8).
By Marc Frank; HAVANA | Mon Jul 8, 2013
Original here: Cuba to embark on deregulation of state companies
HAVANA (Reuters) – Cuba will begin deregulating state-run companies in 2014 as reform of the Soviet-style command economy moves from retail services and farming into its biggest enterprises, the head of the Communist Party’s reform efforts said.
Politburo member and reform czar Marino Murillo said the 2014 economic plan included dozens of changes in how the companies, accountable for most economic activity in the country, did business. He made the comments in a closed-door speech to parliament deputies on Saturday, and some of his remarks were published by official media on Monday.
“The plan for the coming year has to be different,” Murillo was quoted as saying by Communist Party daily newspaper Granma. He said that of 136 directives for next year “51 impact directly on the transformation of the companies.”
The reforms will affect big state enterprises like nickel producer Cubaniquel and oil company Cubapetroleo and entail changes like allowing the firms to retain half of their profits for investment and wage increases and giving managers more authority. The plan also threatens nonprofitable concerns with closure if they fail to turn themselves around.
“Murillo’s empowerment of state-run companies is a milestone on the road toward a new Cuban model of state capitalism, where senior managers of government-owned firms become market-driven entrepreneurs,” said Richard Feinberg of the Washington-based Brookings Institution and an expert on Cuba’s economy.
“But only time will tell whether the government is willing to truly submit the big firms to market discipline – to let the inefficient ones go bankrupt,” he said.
Murillo cited the Communist Party’s reform plan, adopted in 2011, which he said called for freeing productive forces to increase efficiency and reducing how companies’ performance was measured to a few indicators such as profit and productivity.
Already this month, 124 small to medium state businesses, from produce markets to minor transportation and construction concerns, were leased to private cooperatives which, with few exceptions, operate on the basis of supply and demand and share profits.
Hundreds more were expected to follow in the coming years as the state moves out of secondary economic activity such as retailing and farming in favor of individual initiative and open markets under reforms orchestrated by President Raul Castro, who took over for his ailing brother Fidel in 2008.
Cuba’s economy was more than 90 percent in state hands up until 2008 and almost all of the its labor force of 5 million workers were state employees.
Cuba began laying off hundreds of thousands of state workers and deregulated small retail services in 2010, simultaneously creating a “non-state” sector of more than 430,000 private businesses and their employees as of July and leasing land to 180,000 would-be farmers.
Now larger enterprises, from communications, energy and mining to metal works, shipping, foreign and domestic trade, are being tweaked as the country strives to avoid bankruptcy and boost growth, which has averaged around 2 percent annually since the reforms began.
John Kirk, one of Canada’s leading academic experts on Latin America and author of a number of books on Cuba, summed up the changes announced by Murillo: “Cuba maintains its path towards a mixed economy.”
“It appears as if government determination to modernize the economy is slowly overcoming the profoundly rooted inertia of the bureaucracy,” he said.
CUPET: Out of gas?
Murillo said companies would keep 50 percent of profits for recapitalization, minor investments, wage raises and other activities, instead of handing over all profits to the state and then waiting for permission to spend the money.
“The plan is designed so that a businessman from whatever sector does not have to ask permission to make minor investments to ensure production does not stop,” Murillo was quoted as saying.
“It eliminates administrative barriers to salary payments, which directors of companies can decide on, always and when they have sufficient profits to cover them,” he said.
Companies, which in the past were assigned hard currency for imports, will now be able to use the money to purchase local products.
“If an institution has … $200 million to import, and a local producer can produce what it plans to import, this body can directly pay that local producer with the approved funds,” Murillo said.
At the same time state firms that have reported losses for two years or more will be expected to turn a profit or they will be downsized, merged with others or closed.
“We can’t make a plan that includes companies like these … because the phenomena of having to finance these losses will persist,” Murillo said.
Cuba has already implemented some measures to set the stage for state company reform.
Most companies have been moved out of government ministries in favor of operating as “independent” holding companies and in some cases, such as in tourism, allowed to keep a percentage of revenues.