• This Blog on The Cuban Economy is dedicated to Cuba's Generation "A". Although inspired by Yoani Sánchez' blog "Generation Y" this is not dedicated to those with names starting with the letter "A". Instead, it draws from Douglas Coupland's novel Generation A which begins with a quotation from Kurt Vonnegut at a University Commencement that was brought to my attention by Andrew Johnston of Ottawa: ".. ... I hereby declare you Generation A, as much as the beginning of a series of astounding triumphs and failures as Adam and Eve were so long ago."

    The objective of this Blog is to facilitate access to research resources and analyses from all relevant and useful sources, mainly on the economy of Cuba.

A VIEW FROM HAVANA ON CUBAN-U.S. RELATIONS

By Miriam Leiva

Huffigton Post, December 8, 2015

 Original here: View from Havana

The worrisome early announcement on December 17 — that Raul Castro would address the nation live on television that morning, concerning the United States — turned out to be the news many Cubans feared they would not live to hear. “As a result of a dialogue at the highest level, that included my phone conversation yesterday with President Obama, we were able to move forward in the solution of some issues of interest for both nations,” said the Cuban President. Cubans then burst into joy.

Among the ways they’re moving forward are the establishment of diplomatic relations and the release of contractor Alan Gross and a spy in prison for almost 20 years in exchange for the three Cubans serving sentences for spying in the U.S. For the last 55 years, the government here had been hammering Cuban’s minds, sending them to trenches through the island nation and abroad, depriving them of food, clothes, money, entertainment and the Internet, closely watching and repressing, alleging perils and shortages imposed by American imperialism and the embargo. Neither Santa Claus nor the Three Wise Men, but Barack Obama and Raul Castro, who anticipated them, brought hope on December 17.

Amazed Cubans then watched the “enemy” announcing the new measures, and read Obama’s speech published next to Raul Castro’s in the newspapers. Since then, anywhere one goes, there has been only one main issue in conversations — broad interpretations and hopeful expectations on the window of opportunities opened by Obama, expanding the proactive people-to-people policy started in 2009. Quiet concern and resistance from the old guard and its entourage exists, yet Raul Castro’s dramatic move shows their lack of influence over the government and their adaptation to preserve the privileges that still maintain. For the first time, Fidel Castro has not been in the spotlight. The major shift in his 56-years-long reign — even if he gave his approval — is too difficult for him to face (although grave illness cannot be discounted here).

The historic decisions by both presidents depend on how they are implemented, and how much the Cuban government is willing to allow. Nevertheless, once Pandora’s box is opened, it cannot be shut. Raul Castro desperately needs to ease tensions and reestablish relations with the U.S. The regime faces a 25-years-long economic crisis, which it has proven incapable of surmounting — and which could worsen if there is decreased financial support from Venezuela.

It has made limited changes in the framework of updating an economic model that has been a failure for 56 years. It is desperately seeking financial support and substantial foreign investment to recapitalize and develop, when the current international economic environment advises caution and assurance to property and benefits. The new Foreign Investment Law enacted in 2014 is intended to do so, but there are flaws. The Mariel Port and its Special Development Zone should give a boost to the Cuban economy, yet it depends on the U.S. lifting many restrictions and increasing trade.

Raul Castro is stepping down in three years, and is currently paving the way for new leaders. This period is crucial for the transition and the future of Cuba, both for the civil society and foreign partners. Mainly Brazil, Russia, and China have been positioning themselves in different sectors in Cuba, yet Americans and Cuban-Americans have been prevented by their government from participating in economic and commercial endeavors with Cuba — and from contributing their much-needed knowhow and technology. Moreover, Americans cannot travel freely to Cuba, and Cubans cannot benefit from the exchange of ideas, values and expertise.

For the United States, this new dialogue with Cuba eliminates an obstacle in the relations with all of Latin America and the Caribbean. President Obama stated an unwavering commitment to democracy, human rights and civil society, a continuation of U.S. programs aimed at promoting positive change in Cuba and encouragement of reforms in high-level engagement with Cuban officials. Many dissidents and opponents support the new American approach in the relations with the Cuban government, but many others do not. Raul Castro reaffirmed the usual accusations against the “counterrevolutionaries” a few days after reaching the agreement. He seemed to be warning the enthusiastic population that political openness was out of the question — and reminding the opposition that the regime was as repressive as ever. Nevertheless, the government has been losing credibility from its unfulfilled promises, and from the critical economic and social situation.

Awareness and empowerment have developed, and the interaction with Cuban-Americans and Americans visiting Cuba, and Cubans traveling to U.S., has played an important role. The years to come are full of challenges and threats in Cuba, but also of hope and opportunities.

red_Miriam-Oscar_8-5-11-1_400x400Miriam Leiva, with her husband,  the late Oscar Chepe

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ENDING CUBA EMBARGO URGED BY NEW AGRICULTURE INDUSTRY COALITION

By Carter Dougherty,  January 08, 2015, Bloomberg

Original here: Coalition

A new agribusiness coalition is seeking an immediate end of the U.S. economic embargo on Cuba, prodding Congress to act as the Obama administration eases some restrictions in place for more than 50 years.

The U.S. Agriculture Coalition for Cuba, with more than 25 companies and farm trade associations, is being created Thursday in Washington to urge repeal of a 1996 law that made permanent sanctions on Cuba after Fidel Castro seized power in a communist revolution.

“It’s going to take time for Congress to get comfortable with Cuba,” Paul Johnson, the president of Chicago Foods International LLC, a company that handles logistics for products sold to Cuba. “But we need to end this embargo.”

President Barack Obama last month used the limited flexibility allowed by the law to ease travel, trade and finance with Cuba. But the economic embargo, in place since the early 1960s, needs congressional action to remove the restraints.

Johnson, vice-chairman of the coalition, said pushing for a quick end to the embargo might not be a pragmatic approach because Obama’s limited moves have already drawn criticism from Republicans in control of both the House and Senate. “But there’s a lot of sentiment for trade, and moving forward.”

The coalition will be led by Devry Boughner Vorwerk, director of international business relations at Cargill Inc., the closely held Minneapolis-based multinational

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IS CUBA READY FOR LIFE WITHOUT US TRADE EMBARGO?

   Cuba Mar 2014 071 By Carlos Batista, 8 January 2015

Original here: IS CUBA READY

Havana (AFP) – As US President Barack Obama prepares to ask Congress to lift the Cuban trade embargo — in line with his decision to normalize diplomatic ties — some Cubans wonder if they’re ready for such an economic tidal wave.

The embargo outlawing most economic and financial transactions with the communist-run island was decreed in 1962 by then president John F. Kennedy and severely toughened under the so-called Helms-Burton law of 1996.

The Havana government regularly cites the embargo as an impediment to Cuban development. Damages — the opportunity cost of all the trade that never happened — are often estimated by Cuban officials at $100 billion over 50 years.

For opponents of the Cuban regime and some observers, the sanctions have certainly hurt the Western hemisphere’s only communist nation. But they have also given the government a target to blame for its troubled economy.

Soon, “the Cuban government will no longer have the big excuse that the island’s problems stem from the American embargo,” Patricio Navia, of the Center for Latin American and Caribbean Studies at New York University, told AFP

The lifting of US sanctions would allow an injection of US capital into Cuba’s economy and the introduction of new products in a market that is light years away from the levels of a typical Western consumer society.

But Cuba’s economy — 90 percent controlled by the state — is not ready to welcome international investors and companies, said Carlos Alzugaray, a former diplomat who is now a university professor.  Reforms announced by President Raul Castro in 2008 have either yet to bear fruit or are still awaiting implementation, he said. “Fortunately the lifting of the blockage will be a slow process and probably gradual, which will allow for adaptation” in Cuba, said Alzugaray. He called for deeper and faster market-based reforms of the Cuban economy, a legacy of the Soviet model and now tottering on its last legs.

After six years of reforms undertaken by President Raul Castro, who took over for his ailing brother Fidel, the heroic leader of the Cuban revolution, the economy is still sputtering. GDP growth in 2014 was just 1.3 percent. Market-oriented changes have really only just begun.

The government encourages people to start up small businesses of their own and has adopted a law on foreign investment.  But decrepit infrastructure and industry, as well as the sluggish local bureaucracy, seem, at least for now, to be scaring away investors with money to spend.

In addition, Cuba has had two currencies — the official peso and another that is convertible — for more than 20 years. The government said more than a year ago it would do away with this messy system, but so far it has not.

Obama announced he intended to push for the embargo to be lifted when he made the historic announcement on December 17 that he would start the process of restoring diplomatic relations with Cuba. But lifting the sanctions is up to Congress, whose two chambers are now controlled by a Republican party opposed to such a change in Cuba policy. Lengthy debate in both chambers lies ahead.

Lifting the embargo could increase Cuba’s trade not just with the United States but also with countries that deal with the United States. Under current US law, companies that do business in America can be fined for doing business with Cuba.

Jerome Cottin-Bizonne, managing director of the Franco-Cuban rum manufacturer Havana Club International — owned jointly by the Pernod Ricard drinks group and the Cuban government — recently said his firm was ready to “conquer the US market,” which, he said, was brimming with potential. But for the time being, prospects for Cuban exporters seem limited. Only rum and Cuba’s famed cigars seem to have real potential to make inroads in the US market. However, they account for just $600 million a year in export revenue, less than four percent of Cuba’s $17.5 billion-total.

Cuba’s top export, generating $11 billion in revenue, are professionals, including doctors. But physicians are not needed in the United States. And Cuban-made medicines, which account for $900 million a year in export revenue, would have trouble obtaining approval in the US, which has some of the strictest regulations.

Cubans could also find their access to movies and computer software drastically changed. Currently, under the shelter of the embargo, Cubans pirate much of their content, but if the sanctions are lifted they would have to honor copyrights and pay.

But for better or for worse, said Esteban Morales, a specialist on US-Cuban relations, the country would have to get used to life without sanctions the same way it got used to the embargo in the first place. “What are we going to say, ‘postpone the lifting of the sanctions, because we are not ready’?”

“Listo”

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TANIA BRUGUERA LEAVES UNEAC AND RETURNS HER NATIONAL CULTURE AWARD

14ymedio, Havana | Enero 06, 2015

Original here: Tania Bruguera

This Monday, the Cuban artist Tania Bruguera returned the National Culture Award (Distinción por la Cultura Nacional) she received in 2002, and decided to renounce her membership in the National Union of Writers and Artists of Cuba (UNEAC).

“I can not receive recognition from, nor be part of, an institution that speaks for all but only through the presidency of the organization. Cultural institutions which, instead of opening a dialogue and a space for aesthetic analysis criminalize and judge, reduce the response to a work to generating fear of the work, and on top of it, distance themselves from it,” says the letter addressed to Cuba’s Deputy Minister of Culture, Fernando Rojas, and delivered Monday to the headquarters of the Ministry of Culture.

Bruguera was released last Friday after her attempt to stage a ‘performance’ in the Plaza of the Revolution in Havana, which would have given one minute at the microphone to any citizen who participated. The artist could not reach the Plaza because she was arrested before leaving home and twice more in the following days. “To peacefully present yourself and speak for one minute is an example of political art and of the function of art in society. It is what is called ‘Art Made for a Specific Political Moment,’ which can be translated as a work undertaken for a specific political context and situation,” she added.

Bruguera-TEDGlobal-James-Duncan-Davidson_CYMIMA20150105_0017_13The text of the letter:

Compañero Fernando Rojas Vice Minister of Culture Republic of Cuba

Upon my return from  Documenta11, on 27 November 2002 the Ministry of Culture gave me, along with other young artists, the National Culture Award ( Distinción por la Cultura Nacional). For years I did not give importance to this event because it did not change anything in my life or in my thinking. In fact, I didn’t remember if I had saved it, or if it had been lost. After recent events, this Award has taken on another meaning for me.

Today I return the Award to the Ministry of Culture, I put it in the hands of the vice minister with whom I previously have had ideological discussions about censorship. Today I also renounce my membership in the National Union of Writers and Artists of Cuba (UNEAC). I can not receive recognition from, nor be part of, an institution that speaks for all but only through the presidency of the organization. Cultural institutions which, instead of opening a dialogue and a space for aesthetic analysis criminalize and judge, reduce the response to a work to generating fear of the work, and on top of it, distance themselves from it.

I have heard many times in Cuba that this is not the appropriate time to criticize or to use a metaphor or to stage a work. Many times I have censored myself in the face of these words that magically cast blame on a doubt or an opinion. Today I know that the appropriate time for an artist is ALWAYS, but especially when the ways of evaluating the social or the human are suspended, but the appropriate moment cannot be a government directive because this makes it propaganda and not art. The artist would be in service to a government and not to a society. Opinion and art cannot exist only when they are permitted by the institution. I believe that it was the appropriate moment to make a work of art because all the decisions about what Cuba is going to be are still not implemented. There is still hope, many believe that undefined spaces exist within which all of we Cubans could be a part.

The changes in Cuba cannot be real if the decision comes from above and is reported and must be accepted. The changes in Cuba cannot be real if a different opinion is given when the government invites it. The changes in Cuba cannot be real if Cubans are afraid to know certain words, for example Human Rights. The changes in Cuba cannot be real if Cubans fear that having an opinion will leave them without a job. The changes in Cuba cannot be real if what is of interest to the government about Cubans is their money and not their ideas.

How sad is a government that sees a threat to the state in allowing regular Cubans one minute in which they can say what they think without government control! How sad is a government that jails the audience of a work of art!

Un abrazo,

Tania Bruguera

Havana, 5 January 2015.

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CANADA’S INFLUENCE IN CUBA COULD WANE

by Dr. Peter McKenna

The Ottawa Citizen; Published on January 2, 2015

Original here: “Influence”

fidel castro3

It’s not surprising that Canadians were at the centre of trying to foster some sort of rapprochement between Washington and Havana. In fact, we’ve been trying to play the role of intermediary between the U.S. and Cuban governments for over 50 years.

Let’s remember that Canada has been viewed as a useful interlocutor because of our amicable relations with both Cuba and the United States. In short, we’ve had the crucial ingredient of trust in the eyes of the two governments.

According to some U.S. officials, Canada’s involvement in the most recent secret talks was nothing short of “indispensable.” We were undoubtedly the bridge that was needed to bring the two sides together.

As we look ahead, though, what will a U.S.-Cuba reconciliation mean for the future of Canada-Cuba relations? Will it weaken or strengthen the historical linkages between the two countries? Will we be able to use our uninterrupted relations with Cuba to gain special dispensation or favours from Havana going forward?

For the Cubans, Canada was one of only two countries in the Americas (the other being Mexico) not to sever diplomatic relations with Revolutionary Cuba in 1962. Since 1959, Canada has embraced a Cuba policy of dialogue, commercial exchange and principled engagement — which was highlighted by Prime Minister Pierre Trudeau’s 1976 visit to the country and Jean Chrétien’s difficult meetings in Havana with Fidel Castro in April of 1998.

Though relations between Canada and Cuba have not always been smooth or cordial (witness Ottawa’s refusal to invite Cuba to the Quebec City Summit of the Americas in 2001), neither side has deemed it necessary to shut down the channels of diplomatic communication. And the Cubans understand full well that the Canadians — who have been long-standing critics of the U.S. embargo against Cuba since the early 1960s — were not going to stab them in the back.

Canada, unlike the U.S., has been careful over the decades not to allow human rights considerations to impede bilateral relations with the Cubans. Official Ottawa has known for some time that hostility toward, and isolation of, Cuba has exhibited few tangible results.

castro_and_michelFidel with Margaret and Michel Trudeau, Michel not impressed!

For our American friends, we had “street cred” because Canadian officials in Cuba have been sharing with them intelligence on the country for over 50 years. They also knew that the Canadians have wanted the same things in Cuba as them since 1959 — political liberalization, respect for basic human rights and an open economy — while differing sharply on the means of securing those policy objectives.

It’s worth mentioning, though, that the normalization of U.S.-Cuban relations could have both positive and negative implications for Canada. We may very well benefit from seeing greater demand in Cuba for additional infrastructure projects (trading on our good name as long-time friends), investment opportunities in certain specialized sectors (like oil and mineral development along with financial and banking services) and from sharing Canadian expertise on tourism management.

But these recent developments could negatively impact Canada in terms of its own commercial relationship with Cuba (which exceeds $1 billion annually in two-way trade). While Canadian companies are highly regarded on the island, they could easily get squeezed out by their American competitors. As a result, we could eventually see a sharp decline in trade and investment dollars between Canada and Cuba.

In addition, a good part of Canada’s influence in Cuba is tied to Havana’s completely dysfunctional relationship with Washington. But as U.S.-Cuban relations take on greater importance, Canada’s leverage is likely to wane.

Still, this role of facilitator is precisely the kind of niche diplomacy that Canada should be conducting around the world — and thus Prime Minister Stephen Harper and Foreign Minister John Baird deserve a pat on the back. But we need to be vigilant here about making sure that both Havana and Washington don’t allow the enemies of normalization, and there are many, to undermine our outstanding efforts to date.

Peter McKenna is professor and chair of political science at the University of Prince Edward Island and the co-author of Canada-Cuba Relations: The Other Good Neighbor Policy.

UN-MILLENNIUM SUMMIT-CANADA/CUBA Fidel, perhaps listening?

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AMERICA AND CUBA: THE NEW NORMAL

The Economist, January 3, 2015

 Original Here: The loosening of the embargo will pay dividends far beyond Cuba

ObamaMARCO RUBIO, a prospective Republican candidate for the White House, called it “a victory for oppressive governments the world over”. Only “the heinous Castro brothers, who have oppressed the Cuban people for decades” will benefit, thundered Jeb Bush, a likely rival, who is also based in Florida. The object of their fury: Barack Obama’s startling decision to loosen America’s 54-year-old embargo on Cuba.

Cuba’s Communist government is indeed oppressive, while the Castro brothers can fairly be called heinous and will probably do all they can to maintain control. Raúl Castro, who took over from Fidel in 2008, has said he will step down in 2018, but that is not a prelude to free elections. Nonetheless, easing the embargo is the right thing to do. The measures that Mr Obama and Mr Castro announced on December 17th—including a deal to restore diplomatic relations and the liberalisation of travel and remittances—will do much to normalise a relationship that has been trapped in the sterile logic of the cold war. But its significance goes beyond that. The embargo warps the United States’ relations with other Latin American countries, as well as their relations with one another.

The Economist has long argued that the embargo is self-defeating. Rather than ending the Castros’ rule, it has provided an evergreen excuse for their failures and so helped maintain them in power. The embargo kept Cuba out of international bodies such as the Organisation of American States, where other countries could have prodded the island towards greater openness. It put the United States at odds with most of its allies and nearly every other country in its hemisphere. It would be much better if the embargo were got rid of entirely, but its partial lifting is a step towards normality for the whole region.

So far most of the attention has been on Cuba. The Castros agreed to release 53 political prisoners (along with an aid worker and an American spy). Cubans will have more access to the internet, which should loosen the regime’s weakening grip on information. As Cuba’s relations thicken with the democratic giant next door, its citizens’ demands for freedom may grow more insistent. There is no guarantee that such engagement will unseat the Castros, but the embargo has manifestly failed for half a century. It has only remained there because of the political clout of a dwindling number of elderly Cuban exiles in Florida (which also explains the outrage of the normally more sensible Messrs Bush and Rubio).

But the biggest prize should be the advance of democracy and open markets in Latin America. The Castros are not the only ones who will be discomfited by the loss of the American alibi. Venezuela leads a loose coalition of countries that uses defiance of the United States as an excuse for policies that stunt economic growth and democratic rights. It has long supported Cuba (and other Caribbean countries) with sales of oil at heavily subsidised prices. Even for robustly democratic countries like Brazil, the American bogeyman makes it easier to justify resistance to trade deals and to cosy up to uglier regimes.

Now this depressing narrative may change. Venezuela’s government, reeling from the drop in oil prices, faces difficult parliamentary elections in 2015. Argentina’s next president is likely to be less prickly towards the rest of the world than Cristina Fernández de Kirchner, who will stand down in 2015. Colombia, an American ally, may end its 50-year war with the leftist FARC guerrillas if peace talks succeed. Dilma Rousseff could be a more pragmatic president in her second term.

The scene is set for a new realism in Latin America. As commodity prices tumble and economic growth stalls, the region needs open markets, trade and regional co-operation—including with the yanquis to the north. With his move on Cuba, Mr Obama has opened the way for the sort of diplomatic engagement that Latin America rarely enjoyed during his first six years in office. But Latin America needs to return the compliment. The time for sulking and striking poses is over—in Brasília and Caracas as well as Havana and Miami.

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VENCEREMOS! CUBA’S LESSONS FROM EASTERN EUROPE

Financial Times, | Dec 30 17:05

Original here: LESSONS|

By Piroska Mohácsi Nagy, European Bank for Reconstruction and Development

An historic thawing of ties between Cuba and the United States has raised the question of how far the Communist island state is prepared to go in opening up its economy to the forces of the market and integration with the international community.

If and when Cuba does embark on a path of economic – and perhaps also a degree of political transformation – it could well enjoy the advantages of the late-comer, drawing lessons both positive and negative from eastern Europe over the last quarter of a century.

It can assess what worked and what proved much more difficult, emulating the successes and avoiding the pitfalls. There is no doubt that the east European process was painful, especially at the very start when the existing production systems collapsed in the face of real competition, leading to precipitous declines in output and employment.There is equally no doubt that the unprecedented experiment that was launched after the fall of the Berlin Wall has been a success, however tortuous the route and however many times there have been setbacks on the way.

There were four key building blocks in the reform process that was launched after 1989. These began with the – often initially painful – measures to deregulate and liberalise economic structures, including trade, prices and markets. They also comprised measures to achieve macro-economic stability, the creation of new institutions, regulatory bodies and the dismantling of state-ownership of output via the privatisation process.

Of these four policies, privatisation proved to be the most socially controversial, leading not necessarily to calls for a return to the dominance of the state, but resulting in what was often perceived as a corrupt process that unfairly favoured a privileged set of elite insiders.

But none of the four can be viewed independently of the others; they are intimately intertwined. Without deregulation of product and labour markets, privatisation will not work. Without privatisation, macro stabilisation will not succeed. And without appropriate institutions, none of the reforms can be sustained.

The eastern Europe experience provides pointers on how to approach the reform roll-out and Cuba could benefit from reflecting on the outcome of what in the early years of transition was a furious debate about “big bang” reform or gradualism.

With the benefit of hindsight it is now clear that the advocates of pursuing all the four elements simultaneously were, in the main, right. Those include the believers in the “big bang” as well as the “opportunists”, i.e. those who claim that reforms should be implemented as soon as an opportunity arises.

Gradualism in the sense of postponing any of the key elements has proven not to be a workable option because it can create new vested interest in half-baked reforms, as Ukraine’s experience until recently has shown.

Lessons from eastern Europe’s mistakes
It is, therefore, vitally important to take full advantage of the window of opportunity that exists in the earliest days of transition. One lesson that the international community learnt late was the key role that is to be played by reformed public authorities and the state in helping to define and anchor the reforms that support the market reforms.

In the early post-communism euphoria the mantra of “State=Bad – Market=Good” dominated, leading to some of the worst examples of unfettered capitalism and wild-west economics that enriched the few and impoverished the many.

It was only much later that the reformed state was recognised as being a key element in the transition process, removing itself where markets can do the job more effectively but remaining or even being strengthened where it can support an environment within which the free market can flourish fairly.It is important to bear in mind that simply destroying the state instead of reforming and adapting it to support market development and perform the provision of public goods can lead to chaos and the state’s eventual resurrection with autocratic features.

At the same time, privatisation has to be addressed sensitively, preferably using a combination of methods that ensure fairness and also an acceptable balance between foreign and domestic private ownership.

For many European countries the prospect of EU membership has provided an anchor that has proven to be a major incentive in bedding down reforms and modernising economic structures. Similar options may not be out of reach for Cuba, given the vicinity of NAFTA (North American Free Trade Agreement), for example. And even without a powerful external anchor, like many other economies, Cuba can look to reap the benefits from other forms of external economic opening and integration and joining international organisations that can help to inculcate higher economic standards.

External support can work only if reforms start in earnest. Then foreign capital can be just as transformational as it has been in eastern Europe. Foreign direct investment can support know-how and good governance, in addition to providing much needed fresh capital. While developing external links are crucial, it is just as important for countries to nurture an independent civil society and a free media that holds up the evolving systems to scrutiny. They can both be a major support for developing democracies and fairer economies, acting as a deterrent to corruption and injustice.

However, local ownership of reforms will be, just as in eastern Europe, absolutely critical. The clear communication of new processes and policies is essential. The best policies in the world will not be effective if people do not understand them. Effective communication can help change value systems, explain policy choices and ensure their ultimate success.

What we are witnessing today may well be one of the last pieces of the iron curtain to start coming down. When it finally does, just as for eastern European countries 25 years ago, the Cuban people will deserve strong financial support and the best policy advice by the international community so that they can guide their reforms and re-integration into the world economy with as little volatility as possible.

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Piroska Mohácsi Nagy is Director for Country Policy and Strategy and Initiatives, Office of the Chief Economist, at the European Bank for Reconstruction and Development

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VENEZUELA’S CUBA PROBLEM

The Economist, December 19th 2014

In a surprise announcement on December 17th the US president, Barack Obama, and the Cuban president, Raúl Castro, announced a significant thaw in relations between their respective countries. The move has major implications for Venezuela, Cuba‘s main ally.

The Venezuelan president, Nicolás Maduro, appeared to be caught unawares on December 17th, right in the middle of a rhetorical campaign against “insolent, imperialist” sanctions passed by the US Congress just one week beforehand. Unlike the decades-old Cuba embargo, the sanctions are targeted at senior Venezuelan government officials accused of committing human rights violations. However, just as members of the ruling Partido Socialista Unido de Venezuela (PSUV) were being invited to burn their US visas in public, Cuba was announcing the restoration of diplomatic relations with the US.

A quiet betrayal?

The process that led to the announcement, it is now clear, began not long after the death of Mr Maduro’s predecessor and mentor, the former Venezuelan president, Hugo Chávez (1999-2013). The Cuban government, which has benefited from billions of dollars in Venezuelan subsidies—including cheap oil under the PetroCaribe oil-financing initiative—needed a “plan B”, given the severe economic crisis facing the Maduro government and the likelihood that it would be unable to resist mounting pressure to divert resources away from foreign aid. However, with an extensive network of Cuban intelligence agents given free rein in Venezuela—particularly in the barracks—Mr Maduro must now be wondering what else has been (or might be) negotiated behind his back.

At the very least, the news of a US-Cuban rapprochement will exacerbate resentment in the military over its subordination to Cuban officials who, it seems, gather intelligence but do not share it. There is also some confusion within the ranks of the PSUV, whose militants find it hard to understand why Mr Obama is allegedly seeking to overthrow Mr Maduro, but is happy to shake Mr Castro’s hand.

Hard choices ahead for Mr Maduro

Anti-imperialism is a handy tool with which to maintain unity against an external enemy. However, it is hard to wield when your best friend is embracing the “empire” (swiftly renamed “the giant of the north” in Mr Maduro’s post-announcement comments). Cuba has for decades played a useful role for Latin American governments of both left and right. “Solidarity” with Cuba has been a convenient, mainly risk-free way to stand up to the US government and beat the nationalist drum.

Now Venezuela faces the prospect of replacing Cuba as the US’s main adversary in the region—just as its economy is imploding and its governability is at risk from internal dissent—or capitulating and losing the support of the already-restive domestic left. The timing could hardly be worse for Mr Maduro.

Maduro_y_Raul_Castro_3

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CUBA INCHES TOWARD TRANSPARENCY, SEEKING INVESTMENT AND CREDIT

Wed Dec 24, 2014

 By Marc Frank

HAVANA, Dec 24 (Reuters) – Cuba released more information on its fragile external finances this week than it has in over a decade, as it seeks foreign investment and credit following its sudden improvement in relations with the United States.

The government revealed a healthy current account surplus of $1 billion for 2014, supported by remittances and the re-export of oil that it receives on favorable terms from Venezuela, its closest ally. An estimate of foreign currency reserves, normally a state secret, has also surfaced. Western diplomats told Reuters they had seen a figure of $10 billion on what appeared to be an official economic report.

The revelations followed U.S. President Barack Obama’s announcement last week that Washington would restore diplomatic ties with Cuba and lift some economic sanctions in a dramatic about-face after more than five decades of confrontation.

Hungry for fresh credit but in no position to enter the bond market, Cuba has over the past four years restructured billions of dollars worth of debt with China, Japanese commercial creditors, Mexico and Russia, obtaining substantial reductions in what it owed in exchange for payment plans it can meet.

It has also significantly increased tax incentives for foreign investment, although companies say tax cuts are not enough and complain about a lack of information needed to make investment decisions.

Debt negotiations with the Paris Club of creditor nations may begin next year after 18 months of informal contacts, according to European diplomats, but they say Cuba will have to first open its books. It appeared to be making a start this week.

FRESH FIGURES

Diplomats said the reserves figure of $10 billion seemed feasible as Cuba has increased its reserves for fear of economic and political turmoil in Venezuela. It also plans to unify the dual monetary system and devalue the one-to-one exchange rate with the dollar.

Cuba last reported its “active” foreign debt, accumulated after it declared a default in the late 1980s, as $13.9 billion in 2011. It no longer reports its “passive” debt from before the default, which economists estimate at $8 billion.

Pavel Vidal, a former Cuban central bank official who now lives in Colombia but follows Cuba’s finances closely, said he estimates the foreign debt is “somewhere between $25 billion and $30 billion” and that a $10 billion reserves figure is plausible.

The current account showed a surplus of $1 billion this year but will drop to $5 million in 2015 as Cuba increases imports by 13 percent to stimulate growth, according to Economy Minister Marino Murillo, a significant admission for a country that usually waits three years to report such information. He revealed the information in a closed-doors session of the National Assembly last week and it was broadcast by state media on Monday.

Since President Raul Castro took over for older brother Fidel in 2008, Cuba has achieved significant trade and current account surpluses after years of deficits. Exports have risen more than 50 percent while imports have grown less than 8 percent as the government tries to regain international credibility by improving its finances and meeting debt payments.

Remittances totaled $1.7 billion this year and the re-export of Venezuelan oil brought in $765 million, Murillo said in offering a fairly detailed line item review of the current account for the first time in more than a decade.

He also said the payment of dividends to foreign joint venture partners would increase from $120 million this year to $447 million in 2015. Most surprisingly, Murillo, Castro’s point man charged with dismantling the old Soviet-style economy and building one similar to Asian communism, said Cuba obtained $5.7 billion in credit to cover the same amount in debt payments in 2015.

“To open the international financial gates Cuba will have to be much more transparent in releasing economic data, especially on its balance of payments,” said Richard Feinberg, the author of several studies on Cuba’s need to join the international financial community. “This new data release is a step in the right direction.” (Reporting by Marc Frank; Additional reporting by Daniel Bases in New York; Editing by Daniel Trotta and Kieran Murray)

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SHIFTING DYNAMICS FOR CUBA’S DISSIDENTS

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New York Times, THE EDITORIAL BOARD, DEC. 27, 2014

The words were scrawled in graffiti on a street near the house of the Cuban dissident Oswaldo Payá a few years before his suspicious death in 2012. “In a plaza under siege, dissidence is treasonous.”

Over the decades, Cuba’s authoritarian government has relied on that convenient argument to exert pervasive control over the lives of its citizens and keep opposition movements from gaining enough traction to threaten the state. The message was unmistakable: As long as the United States was intent on toppling the island’s leaders and meddling in the country’s affairs, Cubans, as a matter of national sovereignty, had to close ranks. The era that began this month when President Obama and President Raúl Castro of Cuba announced an end to more than 50 years of enmity between their governments is a watershed moment for Cuba’s diverse and courageous opposition movement.

Under Communist Party rule, Cubans endure the austerity of living under a stagnant, centrally planned economy. Their access to the Internet is severely limited and censored. The island’s official press is wholly subservient to the state. Outside the rigid mechanisms of the party, Cubans have few substantive vehicles to challenge their leaders.

In 1998, at the end of a decade of hunger and deprivation triggered by the collapse of Havana’s longtime patron, the Soviet Union, Mr. Payá undertook an audacious mission. Relying on a Cuban law that ostensibly allowed groups of 10,000 or more eligible voters to propose new laws, Mr. Payá gathered, by some estimates, more than 25,000 signatures from Cubans who endorsed sweeping democratic reforms, including free elections, freedom of assembly, freedom of the press and a less-regulated economy.

Osvaldo Paya

Oswaldo Payá

In 2002, Cuba’s National Assembly responded to Mr. Paya’s initiative, known as the Varela Project, by amending the Constitution to make the island’s socialist, one-party system “irrevocable.” The following year, Cuban authorities jailed scores of dissidents and independent journalists during a period of intense repression known as the Black Spring. The crackdown, which took aim at many leaders of Mr. Payá’s movement, largely escaped global attention.

In 2010, the Cuban government agreed to release many political prisoners in a deal brokered by the Catholic Church, on the condition that they move to Spain. Mr. Payá died in a car crash in 2012 in Cuba that many human rights activists suspect was staged by the authorities.

A few of the released prisoners, including José Daniel Ferrer, a fiery lieutenant in Mr. Payá’s movement, refused to leave the island. Mr. Ferrer now leads the Patriotic Union for Cuba, the most visible and outspoken opposition group on the island. In a recent interview in Havana, Mr. Ferrer said his eight years in prison gave him time to reflect on why Cuba’s democratic movements had failed in the past and how they might one day prevail. Historically, he said, Cuban activists have often been seen by their compatriots as hapless victims of an oppressive state. “These people inspire pity, not a desire to follow them,” said Mr. Ferrer, who is based in Santiago de Cuba, the island’s second-largest city. “We’re trying to avoid reaching people with speeches of losers.”

Mr. Ferrer says his goal is not the type of sudden, dramatic overthrow of the Castro government that many Cuban exiles have historically favored. Rather, he said, Cuba’s opposition movement must become sufficiently empowered to get a seat at the table.

“We need to become large enough to force the regime to negotiate,” Mr. Ferrer said, acknowledging that it will take time to get enough Cubans to believe that siding with the opposition is worth the risks. “No one wants to bet on the horse that’s losing the race.”

-josecc81-daniel-ferrer1

José Daniel Ferrer

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