• 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.

Nueva Sociedad: “Cuba Se Mueve”

A special edition of Nueva Sociedad entitled, Cuba se mueve, has just appeared.  Nueva Sociedad is a project of the Frederich Ebert Foundation of Germany’s Social Democratic Movement. It is a pleasant surprise that the authors include contributors from inside Cuba such as Alzugaray, as well as outside Cuba including DBlanco, Dilla and Farber.

The Table of Contents is presented below with hyperlinks to the original essays.

NUEVA SOCIEDAD 242   Noviembre-Diciembre 2012

 Leonardo Padura Fuentes Eppur si muove en Cuba.

Elizabeth Dore Historia oral y vida cotidiana en Cuba.

Juan Antonio Blanco Cuba en el siglo XXI. Escenarios actuales, cambios inevitables, futuros posibles.

Haroldo Dilla Alfonso Las encrucijadas de la política migratoria cubana.

Juan Triana Cordoví Cuba: ¿de la «actualización» del modelo económico al desarrollo?

Alejandro de la Fuente «Tengo una raza oscura y discriminada». El movimiento afrocubano: hacia un programa consensuado.

Velia Cecilia Bobes Diáspora, ciudadanía y contactos transnacionales.

Samuel Farber La Iglesia y la izquierda crítica en Cuba.

Carlos Alzugaray Las (inexistentes) relaciones Cuba-Estados Unidos en tiempos de cambio.

 

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Havana market offers Cuba a taste of capitalism in the dark

Nick Miroff /Global Post

Original Complete Article: http://www.voxxi.com/havana-market-offers-cuba-capitalism/#ixzz2GqP6zInJ

HAVANA, Cuba — Cuba has yet to grasp the invisible hand of Adam Smith, but it is giving some space to an invisible market. Invisible, at least, during the day.

At night, in an empty lot at the edge of Havana’s Mariano district, an extraordinary gathering of freewheeling commerce has been taking place in recent months. Every evening after sundown, trucks and tractors from all across the island arrive loaded with fresh produce, queuing up for hours just to secure a parking spot. Throwing open their tailgates, farmers and wholesale vendors shout out their wares and cut deals in cash under the faint glow of cellphone screens and lanterns. Young men lugging tomato crates and sacks of yams swarm between the rows of trucks, dodging pushcarts vendors on makeshift tricycle carts piled high with pineapples and cucumbers.

For now, it’s the closest thing Cuba has to the trading floor of the New York Stock Exchange, and a big development in a country where state bureaucrats have tried to set the price for produce for decades.

“What is this place called?” a visiting reporter asked a young vendor.

He shrugged. “I don’t know,” he said. “We call it ‘El Hueco’ [The Hole].”

“This is great because we can sell wholesale here. We don’t have to go out in the streets and try to find customers,” said Yulian Castillo, 28, who was offering banana bunches and 100-pound sacks of taro root for 260 pesos — about $12.

Castillo had to sell two-thirds of this year’s taro crop to the state, which only allowsfarmers to sell their harvest at market rates once they’ve met their production quotas. But Castillo said the government gave him a decent price this year, and he was free to sell the rest here.

Cuba has millions of acres of fertile farmland, but it imports some 70 percent of its food, costing the government $1.5 billion last year. Communist authorities’ perpetual struggle to get local farmers to produce more has forced them to concede a great role for private incentive in agriculture, a shift that is only beginning to extend to the rest of the economy.

And while in towns and cities across the country the government has long permitted retail produce markets that function largely on supply-and-demand market principles, there hasn’t been a central wholesale market where growers from all over the island can sell in bulk quantities. The market is a boon to farmers and fruit-and-vegetable middlemen, who said it allows the wheels of commerce to turn more efficiently by giving them a direct relationship to retail vendors. One group of farmers at the market last Wednesday had hauled their lemons all the way across the island from Santiago de Cuba — 500 miles away. There were onion growers from central Cuba’s Sancti Spiritus province in rumbling 1950s-era Ford farm trucks, and mongers from Matanzas selling squash at half the price of those at the city’s retail markets.

Alejandro Manzo had driven 200 miles from his farm in the Villa Clara province, his family’s 1957 Chevy Bel Air stuffed with garlic. In the past, the police would have tried to seize his produce on the highway, he said. “I used to have to sell on the black market,” said Manzo. “But now the state sees us farmers differently. It’s letting us get ahead. There’s nothing illegal about this anymore — it’s just supply and demand.” Manzo said he makes the trip to the capital every 10 days, selling braided ropes of garlic in 100-head strands for $12 — $3 more than he’d get back home.

Since taking over Cuba’s presidency in 2008, Raul Castro has made agriculture reform one of his signature policy moves, distributing some 3 million acres of under performing state land to private farmers and cooperatives. But his government still hasn’t taken basic steps to boost production and eliminate the farming bureaucracy that often ends up making Cuban produce more expensive for consumers. Cuban farmers still can’t buy new tractors or trucks, relying instead upon rusting Soviet machinery and 50-year-old American farm equipment.

While Havana residents say there’s more food than ever in their markets, prices have risen faster than Cubans’ meager pensions and government salaries, leaving many to complain that the state should intervene more, not less.

One reason for the market distortion, economists say, is the growing inequality in Havana between Cubans who work in low-paid government posts and those who have access to hard currency sent by relatives abroad or through jobs in tourism and private business. It’s one of several reasons that liberalization measures like the new wholesale market haven’t yet led to lower prices for Cuban consumers.

“The growth of all the new [private] restaurants and snack bars has also kept demand high,” said University of Havana economist Juan Triana.

As the government has loosened restrictions on private farmers’ ability to hire laborers, rural wages have risen, he said. “Before farmers could pay workers 15 or 20 pesos [80 cents] a day. Now it’s 40 pesos [$1.50].”

With more money to be made in farming, anecdotal evidence also suggests Cuba is slowing the trend of rural-to-urban migration that left farmers complaining of too few young people interested in growing crops.

Abel Ramos, 35, had arrived at the market at dusk, but with the line of trucks stretching down the road, he said he didn’t expect to get a spot in the market until after midnight. The wait would be worth it, he said. “Three or four years ago, I used to grow tomatoes and they would go bad while I waited for the state to buy them,” said Ramos. “Not anymore. Now I can come here.” “This is a beautiful thing,” he said.

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Cuba’s New Law on Cooperatives

Below is Phil Peters fine summary and analysis of Cuba’s new law on cooperatives. Phil is first off the mark with this. I still have not been able to download the Gazeta Oficial to see the legislation first hand.

Peters’ essay can be seen on his Blog, “The Cuban Triangle” here:The new cooperatives law.

Here is his evaluation:

What does this all mean?

I think this is a major step, even though the full definition of the policy will only come with time as cooperatives are created and as the government moves beyond the experimental phase.

Certainly from a capitalist perspective, all we see are the restrictions – first and foremost in the requirement that these businesses organize as cooperatives. But from the perspective of the Cuba of five years ago, this new law was unimaginable.

It opens the door to a much larger private sector, one involved in more substantial activities than the small entrepreneurs.  It is a second option for Cubans interested in private business activity, and a new option for friends and relatives abroad who would support them with capital.  There is nothing stopping five software designers from applying to form a business under this law; we’ll see if there is anything stopping the government from approving it.  If the sector prospers it can create efficiencies in agriculture, construction, transportation, and other sectors that will benefit Cuba’s economy and people. And the government needs the cooperatives to prosper.  Without them, it cannot meet its own goals of cutting state payrolls and generating new private sector jobs.

The pace will satisfy no one, the process will be influenced by officials with more orthodox views, and it will surely have positive and negative notes.  But there’s no denying that this law breaks new ground, with potentially large consequences.

Phil Peters

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The Right to Speak About God in Cuba

By Veronica Vega

Veronica Vega: 
For years I had a hard time deciding between writing, painting or dancing. It was writing that proved to make the most sense financially in the short term. I live in Alamar, an aborted project for a city that only breathes from what’s left of nature, from the alternative cultural and political scene, and above all, from the infinite will of the human soul. I’m not a journalist. Writing in HT has been an opportunity to say what I believe can be improved in Cuba

HAVANA TIMES — The question posed by Havana Times contributor Jose Iser (in “Quien se atreve a romper el tabu?”), concerning the tacit ban on playing of Christian music over the Cuban airwaves, started to “pick at one of my old scabs” (meaning it’s one of those sore points that never really heals because there’s no real cure or solution).

The author of the article believes that this avoidance by the media reflects more than fear, but “a prejudice, a bias, or — better yet — an aversion.” I would love to accompany him in that line of thought, but I have a hunch things aren’t so simple.

Even those freedoms that he says are afforded to us by the constitution, at least in my direct experience, can be quite relative.

Legal research would have to be done on that point, but more than anything, taking into account concrete facts would have to also accompany this because the responses from lawyers don’t necessarily reflect practical reality.

In 1995, for instance, I personally accompanied a Mexican friend to Radio Taino, where he hoped to speak about and promote yoga meditation. The journalist who conducted the interview was petrified that words like “God” or “soul” or “spirit” might creep into the discussion.

This fear was because any one of those terms — according to what he told us to our faces — could have cost him his job.

In lecture halls where my friend gave presentations, similar warnings were made to us. However after the visit by Pope John Paul II, one has to admit that significant changes were made in this regard.

On Cuban TV itself, for example, there began to appear films with philosophical postulates and even explicitly mystical ones.

But a sudden relaxation doesn’t mean no pressure exists. I don’t buy into the widespread theory that many limitations in Cuba are suffered due to bureaucratic inertia. If this inertia exists it’s because it’s sustained and nurtured from the top of the pyramid.

I share the opinion of my fellow writer about the urgent need to expand musical alternatives, because the current bombardment of reggaeton isn’t only alarming, it’s stifling. What’s more, the degenerative effects of its lyrics are painfully palpable.

A Biblical passage reads: “Out of the abundance of the heart, the mouth speaks.” Relatedly, whenever I’m riding in a collective taxi or on a bus, I’m bound to hear: “If they stick it in, weep, if they take it out, yell”, or “I like to do it with my leg in the air” or “when I start feeling whorish.”

These thoughts make me wonder if those are the sincere concerns of many people or whether these are unconscious feelings engendered by compulsion, inertia, apathy, or rebelliousness.

This isn’t even about getting into a tiff over whether or not those words are should be censored. It’s an indisputable fact that people have the right to disseminate alternative thought.

I fully agree that Christian music should be heard on the radio, but I would go further and ask: Why don’t they de-penalize not only songs inspired by Christ, but all devotional expressions inspired by Gods, whether focused on Jesus or Buddha or Krishna or Mohammed.

All of them are beings that have radiated spirituality into this world or are spontaneous expressions of the recognition of that truth – from the subjective perspective of the author.

This void felt by those of us interested in that subject, or let’s call it this gag that has been forced on some of us creators who have filtered our anxieties and findings in the search for God, is a need that is as objective as the legalization of political dissent or homosexual marriage.

I know musicians who don’t try to camouflage their belief in God in their work with any metaphors. They believe in God, even without confining themselves to any specific religion or creed. This, I stress, I don’t see as a particular merit but merely as a choice.

What comes to mind right now mind is a couple I met years ago, Maricarmen and Ramsay, who no longer live in Cuba, as well as the reggae group “Estudiante sin semilla” or the young rapper David of the Omni project, who this year organized a concert in Alamar paying tribute to Marcus Garvey, who’s considered one of the ideologues of the Rastafarian movement.

While I enjoyed the concert, I thought about all those people unaware of the event, which would have been an attractive alternative even for youth. I’m talking about music whose benefit doesn’t detract in the least from what’s already officially broadcasted.

So now who’s willing to step up to the plate? With a medium as controlled as the radio it’s not the program directors or managers who have the real authority to decide what crosses the line and requires censorship.

Even a supervisor can see a contradiction between this absolute avoidance of Christian music while promoting themes praising deities of the Yoruba religion, ones such as Chango, Obatala, Yemaya… which in their opinion, if there’s a law it is not equitable but is instead discriminatory.

But to generate debate and initiate legal research on the issue — demanding that attention be given for once and for all to this great omission that many of us have suffered — is already a decisive step, in my opinion.

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Cuba’s energy problem and oil in the Gulf of Mexico

By Ricardo Torres Perez, CEEC – University of Havana, December 20, 2012

from the Cuban Studies Group

Original Article here:   Torres, Cuba’s Energy Problem and Oil in the Gulf of Mexico

On-Shore Petroleum Extraction on the Bacuranao Oil Field between Matanzas and Varadero, Photo by Arch Ritter, 1996,

Cuba has historically suffered from an acute dependence on foreign sources to meet its  energy needs. Until now, the island has had a small supply of conventional energy resources such as oil1, gas and coal, key sources in the current energy model. During the last century, and for different reasons, the country concentrated its oil imports in two major contemporary economic and military powers, the U.S.  and the extinct Soviet Union. The analysis of the evolution of this dependence is essential to explain the possibilities of development for the country. Therefore, any event with the power to mitigate this  constraint has sizeble economic and geopolitical significance for the Caribbean nation.
After 1959, the Soviet Union became the quintessential foreign supplier. Preferential  supply conditions notably eased the pressures of the road towards diversified energy and greater weight for domestic sources, although there was a breakthrough in energy production from sugarcane biomass, logical result of the growth in volumes of sugarcane.

Twenty-two years ago, that model was in crisis. The country was forced to severely restrict consumption between 1990 and 1995, which was only partially relaxed to the extent that the economy left this critical period in the early nineties. The symbol par
excellence was the blackout, an extreme measure used frequently in exceptional circumstances. One of the immediate responses to alleviate the situation was the decision to double efforts to increase domestic oil production. That attempt was made feasible by the participation of foreign companies, under a scheme of risk contracts. The results have been very good, increasing output by nearly six times in the period. Progress was also made in the use of natural gas, which plays a major role in the generation of electricity2 and the supply of fuel for cooking in the capital of the country. In both examples, the role of foreign investment has been crucial.

Petroleum Exploration Concessions

Author: Ricardo Torres, CEEC Universidad de La Habana

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Raul Castro Says Economic Reforms Are Working

By By PETER ORSI Associated Press
HAVANA December 13, 2012 (AP)

President Raul Castro, December 13, 2012

 President Raul Castro declared Thursday that Cuba’s two-year experiment with market reforms is working and has the wind at its back, but said much work remains to breathe life into the sputtering economy.

In a speech devoid of any new policy announcements, the military khaki-clad leader sounded a generally positive tone in discussing the Marxist country’s progress, though he conceded that the island faces a “colossal psychological barrier” in shedding old habits and “concepts of the past.”

“The updating of the Cuban economic model … marches with a sure step and is beginning to delve into questions of greater reach, complexity and depth,” Castro said, according to an official transcript of his remarks before lawmakers at the second of their twice-annual sessions.

The proceedings were closed to foreign journalists, but state television later broadcast tape-delayed highlights.

Cuban economy czar Marino Murillo told the assembly that the government is planning more measures to support and increase the ranks of independent workers and small business owners.

Real estate broker, delivery person, antiques dealer and produce vendor will all be newly legalized private jobs in a country where the government has long dominated the economy and employed nearly the entire workforce.

The self-employed “are gaining space,” Murillo was quoted as saying by the Cuban news agency Prensa Latina.

Economists have said Cuba needs to expand the number of allowable private enterprises, with an emphasis on white-collar work. Real estate has been a particular concern. Cuba legalized the buying and selling of property 12 months ago, but has yet to allow agents to facilitate transactions.

Some 400,000 people now work in the private sector in 180 legally approved job areas, Prensa Latina said. That’s up from 156,000 in late 2010, the onset of Castro’s five-year plan to reform the economy with a dash of free-market activity.

Cuba intends to keep control of key sectors, however, and Castro and other top officials insist the country is not abandoning a half-century of socialism for freewheeling capitalism.

Murillo also said that in the future, state-run businesses including tourism concerns will be paying independent contractors via bank transactions in hard currency.

Meanwhile, lawmakers passed a 2013 budget with a deficit of 3.6 percent of GDP and heard an update on the country’s economy.

The government announced recently that GDP rose 3.1 percent this year, below expectations of 3.4 percent. Growth of 3.7 percent is forecast for 2013, low for a small developing economy, but Castro called it “acceptable in a scenario of continuing global economic crisis.”

Economy Minister Adel Izquierdo said the construction sector is expected to expand 20 percent in the coming year, worker productivity should rise 2.6 percent and the country has a goal of topping 3 million tourist visits for the first time, according to Prensa Latina.

In its first order of business, the assembly unanimously passed a resolution of support for Venezuelan President Hugo Chavez, who earlier this week underwent his fourth cancer-related surgery in the Cuban capital.

Chavez is a key ally of Cuba, and during his presidency Venezuela has sent billions of dollars’ worth of oil to the island on preferential terms.

“At this crucial hour for Venezuela … we will be like always,” Castro said, “together with President Chavez and the Bolivarian Revolution he leads.”

The unicameral parliament will reconvene in February with a new membership following elections and is then expected to name Castro to another five-year term.

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New Co-op Laws In Cuba

Co-op Laws In Cuba Are Seen As Progress (Cave, NYT)

Wednesday, December 12, 2012

New York Times

By Damien Cave

MEXICO CITY – The Cuban government authorized a wide range of co-ops on Tuesday, allowing workers to collectively open new businesses or take over existing state-run businesses in construction, transportation and other industries.

The new laws published Tuesday are the latest step in a slow, fitful process of opening Cuba’s economy to free-market ideas. The latest announcement calls for the creation of more than 200 co-ops as part of a pilot program. If it grows, analysts said, the experiment could do more for economic growth and productivity than earlier efforts to allow for self-employment, or to reform agriculture.

Co-ops that are run independent from the government could shift a large portion of the island’s economy to free-market competition from government-managed socialism, analysts contend, a change from earlier co-op efforts within state-run agriculture.

“The potential is large,” said Richard E. Feinberg, a professor of international political economy at the University of California, San Diego. “The Cubans are looking for something in between the old state-owned enterprise and a pure free market. Cooperatives are an answer, so looking forward, they could play a significant role.”

For some Cubans, the new laws will just legalize what is already going on in the black market. But the government also seemed interested in encouraging consolidation among small entrepreneurs. The new laws call for lower tax rates for co-ops than for self-employed workers. That means barbers or fishermen or carpenters who now work as individuals will have an incentive to join co-ops, companies in which each worker has a vote.

The new laws also say that co-ops can be formed with as few as three people, and that in addition to converting state businesses into co-ops – with first preference given to workers already there – co-ops will be able to bid for leases of idle government properties.

The co-ops “will not be administratively subordinated to any state entity,” the government said in a summary of the laws in Granma, the state-run newspaper. But the government will play a large role in determining who gets the chance to open businesses. Workers seeking to start co-ops must submit applications that go to local government offices that pass them up to the Council of Ministers, which includes President Raúl Castro, for approval.

It is not yet clear whether higher-skilled professionals, like architects or doctors, will be able to form co-ops. Philip Peters, a Cuba expert at the Lexington Institute, a nonpartisan policy group, said that initially the co-ops would probably fill a gap in basic services, like transportation for farm products. He predicted co-ops would most likely reduce the likelihood of theft.

“People pilfer from the state; they don’t from a business in which they have a stake,” he said. But to fully reach the co-ops’ potential, he and other experts said, questions about the government’s interaction with them will need to be answered.

“They have not been liberated overnight from operating in the Cuban context,” said Professor Feinberg, who was an adviser to the Clinton administration. “How do they get credit? How do they get inputs? How are workers going to be properly trained? How will management be properly trained? These are all outstanding issues.”

 

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Cuba cracks down on dissidents on Rights Day

By Juan O. Tamayo, from the Nuevo Herald, December 11, 2012

Original Article here: Cuba cracks down…..”
Cuban police have detained more than 100 dissidents and put another 100 to 150 under house arrest in an island-wide crackdown to block any gatherings marking International Human Rights Day on Monday, according to government opponents.
Among those detained were about 80 members and supporters of the Ladies in White, including dozens who were reportedly carted off roughly during roundups in Havana and on their way to the Our Lady of Charity Basilica in the eastern town of El Cobre.
Security agents also sealed off several homes in eastern Cuba to avert gatherings of dissidents to mark the 60th anniversary of the Universal Declaration of Human Rights, said Jose Daniel Ferrer Garcia, head of the opposition Cuban Patriotic Union.
The U.S. government swiftly denounced the arrests, saying it was “deeply concerned by the Cuban government’s repeated use of arbitrary detention and violence to silence critics, disrupt peaceful assembly and intimidate independent civil society.”
“We call on the Cuban government to end” the arrests and violence “and we look forward to the day when all Cubans can freely express their ideas,” State Department spokesperson Victoria Nuland said Monday.
Cuban police and State Security agents usually round up scores of dissidents on or before Dec. 10 each year to keep them from staging any sort of events marking the day. The government critics are then released after a few hours or days.
About 45 Ladies in White and 10 supporters were arrested in Havana following their traditional march outside the Santa Rita church after Sunday mass, said Elizardo Sanchez Santa Cruz, head of the Cuban Commission for Human Rights and National Reconciliation.
The women usually are allowed to go home without incident after the marches, but this weekend were harassed by government agents. When they sat down in protest, police dragged them roughly to three waiting buses, Sanchez said. Most were released by Sunday night.
Ferrer said another 34 Ladies in White and two young girls were detained, 16 of them “with violence,” over the weekend around eastern Cuba as they tried to make their way to El Cobre to pray for human rights. All had been freed as of noon Monday.
Police intercepted three more at the gates to the church on Sunday and tried to seize two others already inside, Ferrer told El Nuevo Herald by phone from his home in the nearby town of Palmarito de Cauto. But a priest in the church protected the women and drove them home after the mass.
The Ladies in White, founded by the wives, daughters and mothers of political prisoners, was awarded the European Parliament’s Sakharov Prize for Freedom of Thought in 2005. They wear white clothes and carry pink gladiolas during their marches.
Another 20 male dissidents were taken into custody and held in police lockups around eastern Cuba over the weekend, Ferrer added. Four were confirmed to have been freed as of noon Monday but there was no word on the fate of the others.

Ladies in White

Sanchez added that police and state security agents also put between 100 and 150 dissidents under house arrest during the crackdown, but stressed that he was still receiving new reports of arrests and releases as of Monday evening.
A blog widely believed to be run by State Security agents, Yohandry’s Blog, claimed that police were forced to drag away the Havana Ladies in White before civilians nearby could give them a “forceful reply” for “failing to respect the pain of the Cuban people” over the health of Venezuelan President Hugo Chávez.
Chávez announced Saturday that he was returning to Cuba for a fourth round of surgery related to his fight with cancer. He arrived Monday.
The opposition group Express Art for Freedom, meanwhile, announced a contest, open to island residents only, for the best Tweet regarding International Human Rights Day. The winner, who will pick from among a computer, a camera or a cellular telephone, will be announced after Dec. 23.
And in Spain, two Cuban groups marched to the Cuban embassy in Madrid on Sunday to protest the detentions and demand the release of Sonia Garros and Calixto Ramon Martinez, dissidents who have been jailed on the island for several weeks.

Jose Daniel Ferrer Garcia

Elizardo Sanchez Santacruz

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Richard Feinberg: The New Cuban Economy What Roles for Foreign Investment?

A new study by Richard Feinberg on direct foreign investment in the Cuban context has just been published by the Brookings Institution.  This is the best recent study on the topic and is well worth a read. The Introduction and the recommendations that are relevant for the Cuban Government are presented below.

The complete report is located here:  Feinberg, The New Cuban Economy, What Role for Foreign Investment 2012

1. Introduction

The Cuban revolution defined itself in large measure in terms of what it was not: not a dependency of the United States; not a dominion governed by global corporations; not a liberal, market-driven economy. As the guerrilla army made its triumphal entry into Havana and the infant revolution shifted leftward, a hallmark of its anti-imperialist ethos became the loudly proclaimed nationalizations of the U.S.-based firms that had controlled many key sectors of the Cuban economy, including hotels and gambling casinos, public utilities, oil refineries, and the rich sugar mills. In the strategic conflict with the United States, the “historic enemy,” the revolution consolidated its power through the excision of the U.S. economic presence.

For revolutionary Cuba, foreign investment has been about more than dollars and cents. It’s about cultural identity and national sovereignty. It’s also about a model of socialist planning, a hybrid of Marxist-Leninism and Fidelismo, which has jealously guarded its domination over all aspects of the economy. During its five decades of rule, the regime’s political and social goals always dominated economic policy; security of the revolution trumped productivity.

Fidel Castro’s brand of anti-capitalism included a strong dose of anti-globalization. For many years, El Comandante en Jefe hosted a large international conference on globalization where he would lecture thousands of delegates with his denunciations of the many evils of multinational firms that spread brutal exploitation and dehumanizing inequality around the world. Not surprisingly, Cuba has received  remarkably small inflows of foreign investment, even taking into account the size of its economy. In the 21st century, the globe is awash in trans-border investments by corporations, large and small. Many developing countries, other than those damaged by severe civil conflicts, receive shares that significantly bolster their growth prospects.

The expansion of foreign direct investment (FDI) into developing countries is one of the great stories of recent decades, rising from $14 billion in 1985 to $617 billion in 2010.1 While FDI2 cannot substitute for domestic savings and investment, it can add significantly to domestic efforts and significantly speed growth.

Today’s ailing Cuban economy, whose 11.2 million people yield the modest GNP reported officially at $64 billion3 (and possibly much less at realistic exchange rates), badly need additional external cooperation— notwithstanding heavily-subsidized oil imports from Venezuela. As with any economy, domestic choices made at home and by Cubans will largely determine the country’s fate. Yet, as Cubans have been well aware since the arrival of Christopher Columbus, the encroaching international economy matters greatly; it can be a source of not only harsh punishments but also great benefits.

In the Brookings Institution monograph Reaching Out: Cuba’s New Economy and the International Response, I explored the modest contributions already being made by certain bilateral and regional cooperation agencies and the larger potential benefits awaiting Cuba if it joins the core global and regional financial institutions—namely the International Monetary Fund, the World Bank, the Inter- American Development Bank, and the Andean Development Corporation.

This sequel explores the contributions that private foreign investments have been making, and could make on a much greater scale, to propel Cuba onto a more prosperous and sustainable growth path.

Sol Melia Havana

6. Policy Recommendations

It is time for Cuba to extract its rightful share of benefits from participating actively in the global economy. But the Cuban economy has a long way to go before most foreign investors would be willing to take significant risks on the island. Most importantly, Cuba needs to overcome its animosities and fears and reach a national  consensus that, as a small island economy, its economic future depends upon a healthy engagement with the international economy. As many other proud nations have discovered, it is possible to accept FDI without sacrificing national sovereignty and governance capacity. On the contrary, FDI can provide resources—including investment capital and fiscal revenues—that enhance national choices.

If Cuba had allowed FDI inflows equal to 5 percent of its GDP during the last decade, or roughly $2.5 billion a year, Cuba would have supplemented its domestic savings by some $25 billion.  This would have enhanced its ability to recapitalize its productive base while preserving and upgrading the quality of its social services. The Cuban government should send clear signals—including to its own bureaucrats—that it has moved beyond ambiguity and distrust toward a reasoned appreciation of the benefits that foreign investment can bring to a small island economy.

To begin to gradually improve the investment climate, Cuba could:

Complement the 2011 reform guidelines with a coherent national competitiveness strategy that announces a prominent role for foreign investment. In designing this forward-looking strategy, the government should consult with existing joint venture executives.

Completely overhaul the investment approval process, making it more transparent and much faster, as promised in the 2011 guidelines. To facilitate rational decision making by both parties, representatives of proposed investments should have ready access to responsible government officials. So that potential investors can better design projects to meet Cuban national priorities, official rulings should be accompanied by robust explanations. Smaller investments should be placed on a fast-track authorization process.

Detail the approval criteria for the new FTZs, with its fiscal incentives, and include a coherent list of priority clusters.

Remove the fixed-time horizon facing investments outside of the FTZs, which promotes myopic behavior and disinvestment as the deadline approaches.

Not exclude multinationals that serve the domestic market simply because they do not readily fit into a national export promotion strategy. Cuban firms cannot replicate the massiveR&D and product innovation pipelines that characterize international giants such as Nestlé or Unilever, and whose outputs Cuban consumers will demand.

Build forcefully on the successful strategy of selling quality Cuban products through established international marketing machines. This can be accomplished, for example, by forging alliances among pharmaceutical giants with global reach to make patented Cuban medical innovations available to consumers worldwide.

Encourage FDI to integrate local firms into their supply chains. An inter-ministerial committee should build an integrated strategy to assist local firms to meet acquisition requirements. Include private businesses and cooperatives in an ambitious trade facilitation strategy that targets small and medium enterprises.

Permit foreign investors to form a business association that would allow them to engage in a constructive dialogue with the government. Encourage investors to adapt corporate responsibility practices that observe Cuban laws and national goals and serve corporate stakeholders, including workers, communities, and consumers.

Sharply reduce the implicit tax on labor, to the benefit of Cuban workers and the competitiveness of exports. Eventually dismantle the dual currency labor payment system altogether.

Recast the anti-corruption campaign to focus on root causes: low wages and nontransparency.This can be done, for example, by shining sunlight on the procurement procedures of government entities and SOEs. Combating corruption in both the public and private spheres is critical to sustainable economic development, but properly structured incentives, not arbitrary prosecutions, are the more sustainable pathway toward ethical business practices.

Publish much more data and analysis on the capital account and on FDI, including impacts on savings and investment, employment and wage levels, supply chain integration, and net export earnings.

Cuba could benefit tremendously from learning from other nations that have successfully extracted benefits from foreign investment. The international financial institutions (IFIs) offer a cost-effective short-cut to assess the applicability of comparative country  experiences. As argued in Reaching Out: Cuba’s New Economy and the International Response, now is the time for the international development community to engage in Cuba and support its incipient economic reform process.

Under their own new guidelines, the international financial institutions are capable of working within Cuban national priorities while they contribute their unique bundles of knowledge and capital.  With regard to FDI, IFIs are particularly well equipped. Furthermore, the presence of the IFIs would add credibility to Cuban investment commitments and to contract enforcement—important ingredients in establishing a more secure investment climate in a changing Cuba.

For these reasons, Cuba should signal to the IFIs its interest in entering a gradual path toward receiving, first technical assistance (studies, training) and eventually full membership.

Sherritt International, Cuba

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Cuba sugar cane marabu weeds ‘could be turned to fuel’

Original Article here: Cuba sugar cane marabu weeds ‘could be turned to fuel’

By Sarah Rainsford BBC News, Ciro Redondo, Cuba

Driving the Cart past a “Marabu Woods

Drive anywhere in the Cuban countryside and you will spot the marabu lining the road: a dense, woody weed that grows as tall as trees and has invaded vast swathes of agricultural land. The land-grab began in the 1990s when Cuba was in economic crisis following the collapse of its great benefactor, the Soviet Union. The mighty sugar industry slumped too, and cane fields were overrun by marabu.

But to one British firm, the aggressive weed is less a problem than a valuable resource.

Havana Energy has just signed a $50m (£31m) investment deal to build a renewable-energy power plant in central Cuba, supplying one of the country’s biggest sugar mills as well as the national grid. During the harvest it will be fuelled by sugar-cane residue, known as bagasse. The rest of the year it will be fed with marabu. “Marabu has a very high calorific level and low moisture, so as biomass it’s very attractive,”

Harvesting marabu will also address a pressing issue on the island. “Seventy per cent of the food Cubans consume is imported, which is a national tragedy with their climate and soil,” says technical director Keith Dawson. “Every Cuban hates marabu so we’re doing a service: not just removing it but also returning the land to farming.”

The deal is a joint-venture with Cuba’s state sugar monopoly and is part of a move by the Communist government to diversify its energy supply away from dependence on subsidised, imported oil from its socialist ally, Venezuela.

“Cuba relies on diesel-powered power stations, which are even less green than coal, very expensive and give-off horrible emissions,” Mr Macdonald explains, saying his firm’s green energy will also be cheaper.

Now the papers have finally been signed, the British team face their first major test. Early next year they will import a combination of forestry and construction equipment that they hope can harvest the marabu economically. No-one has managed that yet. “You can’t underestimate marabu. We’ve brought foresters to look at it and they’ve been confused, and agricultural kit is not strong enough,” says agricultural adviser Julian Bell.

‘Terrible state’

The plant’s woody roots vary in size and are as dense as teak with fierce thorns.

“Usually you just wouldn’t bother. But I don’t know anywhere else with 1.5 million hectares covered in such a good energy source,” he says.

There is another incentive. Research at Strathclyde University has revealed that marabu produces high-grade activated carbon for use in filters – like in Cuban rum production. Potentially, the carbon could also be used in new-generation fast-charging batteries. So Havana Energy will bring a reactor to the Ciro Redondo mill next year to trial carbon manufacturing.

In the small town that grew up around the sugar mill, there is a good deal of expectation about the investment. The joint venture should create around 60 new jobs and includes funds to upgrade the dilapidated mill itself, now a century old. Only one of its three crushing machines are operational, it still has Soviet-era signs and ageing east German equipment, and large sections of the roof are missing. “It’s in a terrible state,” says retired sugar-worker Oberto Vazquez as he passes on his bicycle. “When it rains, it rains more inside than out.”

So for Cuba this venture is not only about sourcing alternative energy.

The government is in the midst of a drive to boost sugar production, cashing in on higher global prices and increased demand from countries like China. It has reopened almost a dozen old mills, targeting 20% production growth per year.

Tackling weeds

It has allowed foreign funds into the sector for the first time since the 1959 revolution. As well as the British venture, a Brazilian firm has been contracted to manage another large mill in a nearby province.

“The main [British] investment is to build the power plant, but we have negotiated access to credit to improve the cane fields and the sugar mill itself,” says Rafael Rivacoba, director of international relations at Azcuba, Cuba’s sugar firm. “I think that’s positive.” He describes further foreign investment in the sector as a possibility, but is cautious. The deal with Havana Energy took three years to negotiate. “We’re thinking about other things,” he says, admitting that international sugar brokers are knocking at his door. “But nothing’s been decided.”

On the ground in Ciro Redondo though, funding from anywhere is welcome.  The mill can only afford to irrigate 12% of its crops today; average yields in the cane fields are under half the international norm. “We have the will and the knowledge,” says manager Victor Dieguez. “But we need investment.”

That is now on its way and if this pilot project succeeds, the British team has an option to build four more power plants at other sugar mills. First though, it has to tackle the marabu: to prove that it does have the solution, to turn a weed into a valuable asset.

La Lucha Contra Marabu

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