• 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.

BUILDING SOCIALISM IN CUBA: AS PRESSURE FOR ECONOMIC LIBERALIZATION GROWS, WHAT WOULD IT TAKE TO TURN CUBA INTO A SOCIALIST DEMOCRACY?

The Jacobin. October 12, 2016

https://www.jacobinmag.com/2016/10/alternative-cuba-socialism-left-opposition-worker-control/

 By Samuel Farber

 In July 2016, thanks to a 20 percent reduction in oil shipments from Venezuela, Cuba’s economy minister Marino Murillo announced a 6 percent cut in electricity and a 28 percent cut in fuel. Meanwhile, he ordered an immediate drop in public sector energy use, with consequent working-hour reductions for state employees, and warned of possible blackouts, raising the specter of the dark and hungry days of the Special Period of the nineties.

This turn of events delivered another blow to Raúl Castro’s attempts to establish a Cuban version of the Sino-Vietnamese model, which maintains a one-party state while opening the economy to private enterprise and the market.

RevolucionIn the political realm, this has meant a relaxation of state control over the citizenry. But this hasn’t been matched with democratization. For example, the 2012 emigration reform facilitated Cuban citizens’ movement in and out of the country, but did not recognize travel abroad as their right.

In the economic realm, the government has implemented a modest and contradictory strategy. For example, the agricultural sector’s structural reforms provide land leases for a maximum of twenty years; the Chinese and Vietnamese governments, in contrast, established much longer and, in some cases, permanent contracts.

The government now allows self-employment in few occupations (a little over two hundred). Had it opened it up for the whole economy — reserving only those sectors regarded as high social priorities, like medicine — the reform would increase available products and services.

Complementary changes introduced to bolster these structural reforms — like the establishment of wholesale markets and commercial bank credits — have been inadequate and ended up negatively impacting the reform program. In addition, the bureaucratic and inefficient Acopio — the state agency with the monopoly power to buy most agricultural products at prices established by the government — has slowed agricultural production. As a result, harvested produce has spoiled while waiting to be processed at government plants.

The Castro regime’s half measures will, more likely than not, push Cuba closer to a form of state capitalism without democracy. But there is a feasible alternative for the country.

No Recovery

Until this new crisis, the Cuban economy had partially bounced back after the worst years of the Special Period, which devastated the country in the wake of the collapse of the Soviet bloc in the late eighties and early nineties.

The country hit bottom between 1992 and 1994, when extreme food shortages led to an outbreak of an optical neuropathy epidemic that affected some fifty thousand people. Since then, the Cuban economy has surpassed the GDP it achieved in 1989.

But other indicators — such as real wages and pensions, which in 2014 were still at 27 percent and 50 percent of their 1989 level, respectively — never came back. Meanwhile, social spending is still falling, and family consumption is expected to decline 2.8 percent in 2016 and 7.5 percent in 2017.

Although the hunger of the early nineties is gone, Cubans still struggle to find enough food. The much-praised development of organic and urban agriculture on the island represents a relatively small part of agricultural production. As Cuban economist C. Juan Triana Cordoví pointed out, declining domestic production has forced hotels to import vegetables, including yucca, the root-vegetable mainstay of the Cuban diet. The small progress in sustainable agriculture doesn’t make up for the fact that food production has never regained its 1989 level and that more than half of Cuba’s food supply comes from imports, at an annual cost of $2 billion.

Many of the revolution’s gains in education and health have also been lost. The teachers who fled the educational sector’s low pay haven’t been fully replaced, and private tutoring — often provided by public school teachers in their spare time — has grown exponentially. In addition, numerous school buildings, libraries, and laboratories are crumbling. Before the start of the current school year, 350 schools were closed after they were found to be in dangerous physical condition.

The same applies to many hospitals and other medical facilities, which now operate with skeleton crews: the government sends large numbers of general practitioners and specialists to Venezuela and other foreign countries in exchange for oil or hard currency.

The regime’s contradictory reforms will likely pass with the historic generation of leaders. Second-generation bureaucratic officials are likely to fully commit to the Sino-Vietnamese model, perhaps tilting somewhat toward Russia’s capitalism, which combines massive oligarchic theft of state property with a nominal “democracy” that would give US Congress the political cover it needs to repeal the 1996 Helms-Burton law and remove the island’s economic blockade.

Besides winning the United States’s enthusiasm, this new generation of leaders will enlist foreign capital and at least a sector of Cuban American capital by reassuring them that the government will maintain total control over the state, the mass media, and the mass organizations — including state-controlled unions — to guarantee their new capitalist investors, foreign and Cuban, peace, law, and order.

Yet there are other economic models that are being talked about inside and outside the government, although in a rather discreet fashion due, in great part, to the political system that does not allow a full and candid exploration of ideas.

Free and Rational

Mainstream critics have for some time been arguing for the establishment of a free-market economy, which they present as the only “rational” alternative to the bureaucratic economic management of Communist Party rule.

This group covers a wide spectrum, ranging from a hard free-market stance to a more social-democratic welfare state perspective. In this latter grouping, moderate critics overlap with sections of the island’s academic economists, including members of the Center for the Study of the Cuban Economy at the University of Havana.

Yet hardly any of these critics have openly addressed the question of what to do with the most important part of the Cuban economy, the larger state-owned enterprises. Instead, they focus on establishing private PYMEs — the Spanish language acronym for small and medium size enterprises — although they haven’t clarified what “medium” actually means.

They have also supported the government’s move toward replacing the universal rationing system with one that subsidizes categories of people instead of products. Today, all Cubans, regardless of income, can receive a number of products at low, subsidized prices. The new system would only provide these products to the poorest and most disadvantaged, thereby rationalizing agricultural markets and reducing the government’s budget. The government’s recent reduction of the number of products distributed by this system marks the first step in this means-tested direction.

Finally, they imply that the state monopoly of foreign trade should end, and Cubans should be free to import all they can afford from abroad.

Tito in Cuba

Like all of the regime’s opponents, the nascent critical left — mostly composed of anarchist and social-democratic currents — has had to operate under close state monitoring and repression. These left-wing formations resist reductions to state benefits and — unprecedented in the Cuban left’s history — call for a worker-managed economy.

Interestingly, they never mention democratic planning or coordination among economic sectors. As a result, their version of worker self-management would create an economy of self-sufficient firms in competition with each other. This resembles the system implemented in Tito’s Yugoslavia from the 1950s until the 1970s.

This market socialism was locally self-managed, but regionally and nationally controlled by the League of Communists. It did increase worker input, decision-making, and productivity at the local level but, because of its competitive and unplanned nature, also created unemployment, sharp trade cycles, pay inequality, and notable regional disparities that favored the northern republics.

The workers’ powerlessness to decide on anything beyond what happened in their workplaces encouraged parochialism, isolating them from broader, national economic decisions. Workers felt no reason to support investment in other enterprises, particularly those located far away.

In the last analysis, as Catherine Samary points out in Yugoslavia Dismembered, Yugoslavian self-management could not confront either the bureaucratic plan or the market. The 1970s was the last decade of growth. Eventually a $20 billion debt led to the International Monetary Fund’s intervention.

The Yugoslav model is a fraught one to emulate in Cuban, then. Further making any kind of worker control unlikely, none of the government’s left-wing opponents have explained how it might be implemented in the absence of a workers’ movement or how it might operate if workers aren’t motivated to fight for those goals.

There are other voices on the critical left that reject any concession to private enterprise and capital on the grounds that capitalist enterprise by definition contradicts socialism. But they have been unable to answer the critical question of how a socialist and democratic Cuba could emerge from poverty and economic stagnation without concessions of any kind.

What is Possible

A growing number of Cubans on and off the island, see socialism — whether democratic or authoritarian — as an impossibility. A diminishing number of Cubans still regard it as either desirable or likely. Certainly, the island’s current economic conditions — combined with extraordinarily powerful international capital — make it hard to imagine a fully fledged form of socialism.

This view derives from a specific application of the general Marxist theory that rejects the possibility of socialism in one country, particularly when that country is economically underdeveloped and exists in a capitalist world currently unthreatened by socialist revolutions.

Besides having to face the hostility of its imperial northern neighbor, autarkic “socialist” economic development won’t fit for Cuba because the country still depends on oil imports. Further, its reliance on tourism and medical service, nickel and, to a lesser degree, pharmaceutical product exports and the dramatically shrunken sugar industry underline the foreign-trade character of Cuba’s economy. The island’s considerable integration into the capitalist world market prevents the establishment of a full socialist democracy.

This does not mean, however, that Cuba should abandon socialism. Instead, critics must think in terms of a transitional economy, a holding operation that can realistically be implemented until an international situation more favorable to socialism develops.

Classical Marxist political economy provides a model for what that possible holding pattern could be. This theory recognizes the greater role that individual, family, and small-scale production and distribution play in less-developed economies like Cuba.

In Socialism: Utopian and Scientific, Friedrich Engels distinguishes between modern capitalism — where production is a social act, but the social product is appropriated and controlled by individual capitalists — and socialism — where both production and its appropriation are socialized. Following this distinction, the productive property requiring collective work becomes the proper object of socialization, leaving aside individual and family production as well as personal property.

A transitional economy in Cuba would therefore allow for small, productive private property. This accommodation derives from a fundamental Marxist analysis of capitalism, not an opportunistic adaptation to liberal, free-market politics.

In Cuba, as in many other less developed countries, a transitional economy would subordinate a private sector of small enterprises ruled by market mechanisms under a commanding state sector that administers the island’s big industry — pharmaceuticals, tourism, minerals, and banks — through workers’ control and democratically coordinated and planned in a democratic polity. The government would strive, through its knowledge of market conditions and adequate economic forecasts, towards harmonizing the state and self-employed economy according to a definite plan.

Economic Obstacles

But we must first honestly assess the Cuban economy, which, even before a reduction in Venezuelan oil shipments provoked the current crisis, had been in a marked state of deterioration.

For one thing, its all-encompassing public sector is floundering. As the Cuban economist Pedro Monreal reminded us, the government has openly admitted that 58 percent of state enterprises function “deficiently or badly.”

Also, the island’s economic growth has been generally low, a situation that will only be aggravated by the current crisis. Cuban economist Pavel Vidal Alejandro estimates that Cuba’s GDP will not grow in 2016 and will likely shrink by almost 3 percent in 2017. This would mark the first year of negative growth in the last quarter century.

Important voices in the left opposition have argued against economic growth for ecological and other reasons. But improving most Cubans’ material conditions is a condition of a successful democratization. The alternative — continual stagnation and declining living standards — will encourage massive emigration. This represents a tragedy in itself, but would also undermine potential democratic and progressive — let alone socialist — opposition movements.

Alarmingly, the rate of new investment, necessary to replenish the existent capital stock, has become among the lowest in Latin America, dropping below 12 percent of GDP. Government forecasts indicate that investments will fall 17 percent in 2016 and 20 percent in 2017. This will result in a rate of gross capital formation slightly over 10 percent, barely half the rate of investment considered necessary for economic development

The deterioration of Cuba’s capital stock makes it impossible to maintain the current economic output and living standards, much less to expand them. As a result, the substantial increase in tourism — from 3 million visitors in 2014 to 3.5 million in 2015, and a projected 3.7 million by the end of 2016, sparked by the resumption of US-Cuba relations in December 2014 — has strained Cuba’s tourist capacity to its limit.

Further, President Obama’s elimination of restrictions on the remittances sent to the island by Cuban Americans has significantly worsened food and beverage shortages. Supply cannot meet the increase in demand.

The Cuban economy’s productivity also lags. Agricultural yields — with the exception of potatoes — are well below the rest of Latin America. In industry, biotechnology is the only sector that enjoys high productivity relative to the region.

Rising productivity isn’t just a profit-driven capitalist scheme. An economy that prioritizes reducing backbreaking labor, improving living standards, and maximizing leisure time can only do so if it also prioritizes making more with the existing workforce.

Che Guevara advocated what in effect was the “sweating of labor.” But better organization, technology, and — most importantly — worker control would have the same effect.

Control, in itself, represents a powerful motivator. The current low productivity comes from a bureaucratic system that systematically creates disorganization and chaos and does not provide workers either with political incentives — allowing them to have a say and control over what they do — or with material incentives — typical of the developed capitalist world — to motivate them. Guevara’s moral incentives failed: they were a method to get workers to take responsibility without power and to work harder without control or pay.

Ecological Obstacles

Much of the island’s left opposition to economic growth is grounded in environmental considerations. Cuba now confronts many serious ecological problems, including the increasing number of breakages and leaks in the old and poorly serviced water pipes all over the island. This has led to a massive loss of water, which often spills into streets and empty lots, and to the frequently inappropriate storage that many residents have been forced to resort to in response to the lack of water. Consequently, the Aedes Aegypti mosquito, which transmits the dreaded Dengue illness, has proliferated.

Moreover, the growing number of pigs, poultry, and house-grown crops — part of the much-vaunted, but very problematic, urban agriculture movement — has combined with deteriorating garbage collection services to considerably increase the risk of urban health crises.

The recent government claims to have held off the Zika epidemic and almost eliminated the Dengue fever must be met with skepticism as long as these and other conditions that propitiate the spread of diseases remain.

Anti-growth sentiment among Cuban left-wing oppositionists was reinforced when, on a recent visit to Havana, the economist Jeffrey Sachs recommended that “the Cuban people don’t progress into the twentieth century.” As the left-wing journalist Fernando Ravsberg explained, Sachs argued that Cubans should not forget sustainability and concentrate on the development of organic agriculture, sowed without tractors and grown without using chemical fertilizers or pesticides.

If Ravsberg’s account is correct, Sachs’s argument fails to weigh the relative costs and benefits of environmentally conscious measures. Small and economical tractors, like those the Cuban government is planning to produce in association with US capital, do still consume oil. But oil’s negative environmental effects do not compare to the cost of human- and animal-powered agriculture. The latter model produces less food while requiring massive energy inputs from workers and animals.

Cuba’s history already proves this: the forced abandonment of motorized agricultural vehicles at the beginning of the Special Period constituted, in net terms, a huge setback for the Cuban people.

Also in the nineties, urban transport was demotorized, and many city residents turned to bicycles. They were later abandoned — not because Cubans abstractly preferred the infrequent and overcrowded buses or the expensive urban collective taxis (only a small proportion of Cubans own automobiles), but because bicycles don’t let workers arrive on time from distant working-class suburbs nor do they protect riders from tropical rains and winds from June until November.

The Chinese government has encouraged individual car ownership, which has contributed to the country’s overwhelming urban pollution. This should serve as a warning sign for Cuba to aim for the adoption of an effective mass transit system as an alternative environmental policy.

Finally, at a minimum, Cuba needs to improve on the 5 percent of its electricity derived from renewable sources, which is a quarter of the Latin American average.

The Politics of a Socialist Alternative

The move toward a socialist society does not only require a program, but also a politics. This requires using principled strategic and tactical considerations to engage with the government’s and various oppositionist currents’ proposals.

In doing so, Cuban socialists might find areas of overlap with the liberal Catholic and social-democratic critics. Those include proposals that would promote agricultural production and productivity, such as codifying individual farmers’ usufruct rights, eliminating the compulsory sale of agricultural produce to the government at prices dictated by the Acopio, and creating wholesale markets for small firms and individual producers.

In the field of urban employment, these proposals include forming cooperatives based on the initiative of interested workers, rather than on government diktats trying to dispose of so-called lemons — unprofitable enterprises or businesses that are difficult to administer on a centralized basis, like small restaurants.

At the same time, this new left will need to counter other proposals from those same groups. For example, they call for legalization of all forms of self-employment, including occupations that should be run on behalf of the public interest, like education and medicine.

The Left can respond to the call for free importation by arguing that a democratically run state should allocate foreign exchange on a strict priority basis, with social criteria that favor the most economically deprived sectors of the population and the purchase of capital goods that would most support the country’s economic development. Otherwise, affluent Cubans might waste the country’s relatively scarce foreign exchange on frivolous imports, such as expensive vehicles or luxurious furniture and household effects.

Socialists should also resist the dominant view — held by both critics and an increasing number of government economists — that the government should subsidize people, not products, that it should replace its universal subsidies with a system that provides for only the neediest citizens.

To be sure, those universal subsidies unnecessarily benefit wealthier Cubans. However, the critics of this program never mention their proposal’s downside, which is that it undermines social solidarity. International experience has shown that income-tested programs for the poor produce stigmatization and, as a result, lose political legitimacy over time, thus threatening their long-term funding and viability.

One answer to this problem would be the introduction of a sliding scale where everybody benefits in inverse proportion to their income. This would recognize differential need while maintaining maximum political support.

Socialists in the Marxist tradition understand that subsidies must be selective: if, under current conditions, everything was provided free of charge or sold below production costs, an economy would collapse in short order. Moreover, a relatively underdeveloped economy like Cuba’s has a much smaller surplus to leverage for free and subsidized goods.

But keeping the idea of universal subsidies alive leaves the road open for their future expansion as the Cuban economy becomes more productive and wealthier.

Liberal critics and the government itself support foreign investment as a means to deal with the Cuban economy’s undercapitalization. Many on the Left have opposed it, seeing it as the Trojan horse of capitalism and foreign domination. However, a policy of controlled and selective foreign capitalist investment is indispensable in the absence of a domestic developed-goods industry. These imports could bring in new machinery and renew transportation and utility infrastructure.

New investments from abroad can also have significant employment and multiplier effects that trigger the development of entirely new industries that complement and further develop the established ones.

Further, the impact of foreign investment on wages and working conditions could be negotiated by independent unions, which, among other things, should prioritize the immediate abolition of the Cuban government’s practice of collecting salaries owed to Cuban workers from foreign investors and then turning over to their citizens only a small fraction of the money collected. The government claims that they do this to finance social spending and other government operations. But the same goal could be achieved through a transparent and equitable tax system rather than through the government monopoly of the sale and control of labor.

It is true that worker-controlled production and powerful unions may deter foreign investment. However, an honest public administration and tax system as well as the existence of natural and human resources not reproducible elsewhere can also serve as a draw that supersedes those disadvantages.

Right-wing critics and oppositionists play down — if not ignore entirely — the crucially important issue of Cuba’s growing inequality. For the Left this presents a unique opportunity to push for independent unions, which, along with a progressive tax system, could be a more effective policy than the current one, in which the proliferation of bureaucratic rules harasses small firms and the self-employed.

This is not to do away with regulation entirely; it is necessary in occupational safety, health, pensions, and union rights. If these rules were administered — under worker control and supervision — by professional organizations rather than by a central bureaucracy, they would surely benefit workers, not owners. But to do so will require distinguishing between rules designed to protect the interests of the workers and those that protect the interests of bureaucrats.

Engaging with the specific proposals put forward by both the undemocratic government and by the pro-capitalist opposition sector, the Left will have the opportunity to formulate specific demands and to mobilize people to fight for them. This would build a movement — or at least a clear organizational pole — in spite of government repression and popular skepticism.

Cuba’s present regime will not permit the existence of other legal political parties, independent unions, or a free mass media. Of course, these elements constitute precisely the political setting that would facilitate the kind of transitional social and political system outlined here.

Nevertheless, the left opposition must talk about an alternative model that openly acknowledges both the possibilities and the difficulties involved in building a socialist democracy. This empowers people, rather than making them feel that nothing can be done to push the country in an anticapitalist, radically democratic, and socialist direction. But there is an alternative.

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A special report by the Committee to Protect Journalists: CONNECTING CUBA: MORE SPACE FOR CRITICISM BUT RESTRICTIONS SLOW

By Carlos Lauría

More in This Report

Table of Contents

Recommendations

Multimedia

Video: Internet in Cuba

Video: Interview with Elaine Díaz Rodríguez

Graphic: Unpacking the Packet

Graphic: How Cubans Get Online

Complete Report Here: Download the PDF

EXECUTIVE SUMMARY: CUBA’S MEDIA VITALLY TRANSFORMED BUT CAUTIOUS APPROACH IS SLOWING PROGRESS

A lively blogosphere, an increasing number of news websites carrying investigative reporting and news commentary, and an innovative breed of independent reporters who are critical of, yet still support socialist ideas have vitally transformed Cuba’s media landscape in the past five years.

 zazaThe energized press scene is in stark contrast with the island nation’s restrictive legal framework, which curbs freedom of speech under the pretense of protecting the “independence or territorial integrity of the state.” The constitution bans private ownership of the press and all media are supposedly controlled by the one-party Communist state, but the spread of independent reporting is a sign of a changing Cuba.

Reporters, from the most critical—who are known as dissidents—to journalism graduates, documentary filmmakers, and pro-revolutionary bloggers are opening new spaces for free expression and entrepreneurial journalism that not long ago seemed off limits.

Bloggers with whom CPJ spoke said they have embraced the loosening of restrictions. “We are seeing opportunities that were inconceivable five years ago,” said Alejandro Rodríguez, who quit his job in 2012 at Adelante, a state-run weekly in the eastern city of Camagüey, to start a blog.

However, many said that more work needs to be done, with the threat of arbitrary detention, vague and outdated laws, and limitations on internet access slowing Cuba’s press freedom progress.

Internet access in Cuba, which the U.N. ranks in last place in the Americas, is still inaccessible to most citizens. And while large-scale systematic state repression has eased significantly, the most strident opponents in the media told CPJ they still face harassment and intimidation from authorities.

The burgeoning media field began its expansion in 2011, when President Raúl Castro introduced market-style reforms to reinvent socialism. However, many of those reforms have been implemented sluggishly, and even reversed in some areas.

When the call for loosening of restrictions was first made, the party leadership urged the Cuban population to be critical of the government and state institutions. Castro told the People’s Assembly in a December 2010 speech not to fear discrepancies and differences of opinions.

Journalists, especially those working for the state press, have been emboldened by these statements. And while there is almost no criticism of government policies in state media, most newspapers—including the national daily Granmahave started “Letters to The Editor” sections that provide a vehicle for Cubans to express opinions.

State journalists and academics in Havana said they recognize the need for the official press to become more critical, and some have called for a public information law. Laura Blanco Betancourt, a reporter for the state-owned provincial daily Vanguardia, acknowledged that the lack of “a culture of debate” had prevented candid discussions within the official press. José Ramón Vidal, a former editor of the daily Juventud Rebelde, went further in an interview published in the December 2015-March 2016 edition of Mexican magazine Razón y Palabra, where he argued that Cuba should change its “communication model” because “important social issues” were being left behind. Vidal, now a communications professor at the University of Havana, said the propaganda-based media model was facing a crisis and Cubans no longer paid attention to it.

Raudiel Peña Barrios, a lawyer in Havana, wrote in the online magazine OnCuba, “the mere fact that [freedom of information] is under discussion is big news in the Cuban context.” In the article, “The Right to Information Cuba: Possibility or Utopia?” Peña said that such legislation “should help to democratize access to information.”

Blanco Betancourt, who is based in Santa Clara province, said that a public communication strategy could help, adding that any such legislation “must include access to public information for all Cubans.”

While Cuba’s tight grip on the press has waned in recent years, authorities still exert control over the media and the most critical independent journalists continue to face harassment. Long-term incarcerations have become rare since the 2003 crackdown—during which CPJ documented 29 journalists serving lengthy prison sentences—but detentions and summons are still common, CPJ research shows. The once-common accusation of acting as “mercenaries” at the service of the U.S. has become almost obsolete.

“We are seeing opportunities that were inconceivable five years ago.” Alejandro Rodríguez, blogger

The restoration of diplomatic ties between Washington and Havana in December 2014, coupled with U.S. President Barack Obama’s historic March 2016 visit to Cuba, have made it harder for the government to justify press censorship as a means to protect the nation from American aggression, Cuban journalists said.

However, on the day that Obama arrived in Cuba, independent blogger and activist Lázaro Yuri Valle Roca was arrested and held in custody for five days after trying to cover a protest by the Ladies in White, an opposition group founded by the wives of jailed dissidents. The journalist told CPJ after his release that no charges were filed, but he was warned that he could face legal action if arrested again.

The restoration of ties has led to suggestions from some analysts that Cuba may return to the Organization of American States, which expelled Cuba in 1962. But in June, Cuba said that as a show of solidarity with Venezuela, it would not join the group, the BBC reported. Castro’s statement came after the OAS Secretary-General Luis Almagro called for sanctions to be imposed on Venezuela. Membership to the OAS, whose charter includes a commission to protect human rights, would require Cuba to improve its press freedom record, including easing restrictions on internet access and ending the harassment of journalists.

Press freedom boundaries

Cuba, ranked 10th on CPJ’s 2015 list of the world’s most censored countries, has the most restrictive laws on free speech and press freedom in the Americas. Its penal code contains restrictive press freedom provisions.

Most criminal prosecutions that threaten freedom of speech include charges of contempt of authority under Article 144, “enemy propaganda” under Article 115, or acting against “the independence or the territorial integrity of the state,” under Article 91, which is often used in conjunction with Law 88, “protection of Cuba’s national independence and economy,” according to a 2016 comparative study of criminal defamation laws in the Americas, prepared for CPJ by the law firm Debevoise & Plimpton in collaboration with the Thomson Reuters Foundation. The charges can carry a prison term of up to 20 years.

Most of the prosecutions refer to the defamation of public institutions, organizations, national heroes and martyrs, which is also often used in conjunction with other provisions to curb freedom of expression by preventing public debate and criticism of the authorities and government policies.

The far-reaching transformation of the media landscape has broadened the space for criticism allowing all sectors of the press to delve into issues previously perceived as taboo, such as gay rights, allegations of official corruption and poverty.

The internet is, perhaps, the biggest hurdle for journalists to becoming relevant, because most of their content is consumed outside the island. At the same time, they must pay high prices for online access and find original ways to disseminate their work to a home audience that is largely offline.

These new media journalists also operate in a legal limbo. Article 53 of the constitution bans private ownership of the press and recognizes “freedom of speech and the press in accordance with the goals of the socialist society.” Many of the journalists CPJ interviewed said that they approach their work cautiously and sometimes veer away from publishing overtly critical work because of the current legal framework.

Dismantling this framework for the press, removing all barriers to individual internet access, while expanding it to the population at large are key to fostering a more open environment, according to analysts and Cuba experts.

The slow loosening of restrictions reflects a government with many high-ranking leaders above the age of 80 who are not part of an active online community. Within the government and the party leadership there is a debate on how swift this opening should be.

Dissidents, journalists who report on social issues but are not considered hostile, pro-government bloggers, and members of the state-owned press all agree on one point: they want the government to provide more, inexpensive and less-restricted access for Cuba’s 11 million people.

In a July 2015 interview in Juventud Rebelde, José Ramón Machado Ventura, the second-highest ranking member of Cuba’s Communist Party, accused foreigners of trying to promote expanded internet access “not for Cuban people to communicate but to penetrate us and do ideological work for a new conquest.” This stubborn approach to internet access calls into question whether the government will meet its pledge of bringing internet access to 50 percent of the population by 2020, finances permitting. Such an achievement will demand a great deal of courage from the Cuban leadership.

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RAUL’S GRANDSON GETS KEY PROMOTION: THE DYNASTY STRENGTHENS

By J.J. Almeida, son of former Raul Castro confidant, deceased Cuban General Juan Almeida, in Translating Cuba, September 6, 2016

To review:

z2— Raul’s son-in-law, General Luis Alberto Rodriguez Lopez-Callejas, runs GAESA, the military’s tourism conglomerate that controls nearly 80% of the island’s business activity;

zz 8D3B4DDC-27B4-440B-B045-D5DEBC20365A_w987_r1_s— Raul’s only son, Col. Alejandro Castro, heads the powerful Commission on Defense and National Security, which oversees the state security apparatus; and now

zz 1439874195_raulito
— Raul’s favorite grandson, Raul Guillermo Rodriguez Castro, heads the General Direction of Personal Security (DGSP).

General Francis is Out of the Game and Raul’s Grandson Ascends 

The most powerful of all the Cuban generals, Division General Humberto Omar Francis Pardo, was replaced in his job as Head of the General Direction of Personal Security (DGSP).

The position is now filled by Raúl Guillermo Rodríguez Castro, who is known by various nicknames, like “The Crab,” “Grandson-in-Chief,” Raulito” and even “The Arnol-mal,” this last one from his frenetic addiction to steroids and exercise.

Before creating the Commission of Defense and National Security, which Colonel Alejandro Castro Espín directs today, the Direction of Personal Security was the invisible apparatus with the most power on the island. Under this nomenclature, like the current “Commission,” ministries, institutions and all the MININT (Ministry of the Interior) divisions were subordinated.

“After a long period of stress, and multiple disagreements, Francis suffered a cerebral stroke. He was admitted to the hospital but now is at home,” said a family member of the dismissed General.

The DGSP, intended to protect the force of the myth, the fiscal and moral integrity of Fidel Castro and the rest of the so-called leaders of the first level, has succeeded in amassing more cash than some armies.

The DGSP’s empire

The DSP relies on a section of the transport police in order to review the fastest road or route for moving the leader. It has a film group, with experts in the art of photography, where they touch up the images of the “untouchables.” Another section is dedicated to documentation and migration matters and also functions as a trip coordinator; an anti-attack brigade consists of snipers and experts in every type of explosive; and a medical department, in addition to having a clinic for everything, has a fixed allocation of doctors, nurses, radiologists, physical therapists, laboratory technicians and other health workers.

They have a division of technology and telephone, workshops, diving masters, gymnasiums, coordinators; a very effective counterintelligence service that, in coordination with other State agencies, looks for, manages and controls all the information of that brotherhood, the family circles and friendships; a department of international relations that coordinates with other secret services the visits to Cuba of people of interest and personalities (friends or not), whether they are presidents, governors, heads of State, members of Congress, religious leaders, etc.; a purchasing group in charge of pleasing even the most bizarre tastes; a department that checks the news that should or should not be released about the Cuban leaders; and a unit to contract service staff (maids) who later work in the houses of those chosen.

With this new appointment, Raúl Castro, in addition to putting his grandson in a key post, captures a vital space reserved uniquely to Fidel, to control even the most insignificant thing, like the ruling class’s privacy in their homes. This method can have a possible boomerang effect, because it also assures the rejection from a good part of a strategic force that, older and in the military, were always faithful to General Francis.

All the body guards of this prestigious group belong to the DSP. Their work consists of taking care of them, protecting them and satisfying them even in their most quirky desires, in addition to spying, recruiting and blackmailing, in order to maintain, at any price, the “moral purity” of the Cuban politicians. This convoy is in charge of avoiding any type of problem of the leader and his closest family. And when I say “any,” it’s any, from the most absurd up to the most complex, whether it’s financial, political or legal.

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CONCEPTUALIZACIÓN DEL MODELO ECONÓMICO Y SOCIAL CUBANO DE DESARROLLO SOCIALISTA, Y PLAN NACIONAL DE DESARROLLO ECONÓMICO Y SOCIAL HASTA 2030: PROPUESTA DE VISIÓN DE LA NACIÓN, EJES Y SECTORES ESTRATÉGICOS.

Documento Completo: Conceptualizacion del Modelo Economico… y Plan Nacional hasta 2030

 EL SEPTIMO CONGRESO DEL PARTIDO COMUNISTA DE CUBA,

17 de Abril 21 2016

El objetivo de la Conceptualización es server de referente o guía teórica conceptual en la conformación del modelo económico y social, así como contribuir a la mejor comprensión. Se exponen y fundamentan, de forma sintética, las características y bases teóricas esenciales del modelo económico y social que resultará del proceso de actualización. Su redacción se ha elaborado en tiempo presente, aunque se refiere a la sociedad future a que aspiramos, teniendo en cuenta las condiciones de la actual etapa de la construcción del socialismo. No atañe a este document exponer cómo se actualizará el Modelo; es decir, las acciones y medidas concretas para alcanzar estos objetivos, lo que corresponde a otros, en especial al Plan Nacional de Desarrollo Económico y Social hasta 2030.

 CONCEPTUALIZACIÓN DEL MODELO ECONÓMICO Y SOCIAL CUBANO DE DESARROLLO SOCIALISTA

 ÍNDICE

INTRODUCCIÓN                                                                                                        4

CAPÍTULO 1  LOS PRINCIPIOS QUE SUSTENTAN EL MODELO Y SUS PRINCIPALES TRANSFORMACIONES                                                                   5

CAPÍTULO 2  LA PROPIEDAD SOBRE LOS MEDIOS DE PRODUCCIÓN          8

CAPÍTULO 3 LA DIRECCIÓN PLANIFICADA DE LA ECONOMÍA                     11

CAPÍTULO 4 LA POLÍTICA SOCIAL                                                                          13

CONSIDERACIONES FINALES                                                                                  15

 PLAN NACIONAL DE DESARROLLO ECONÓMICO Y SOCIAL HASTA 2030: PROPUESTA DE VISIÓN DE LA NACIÓN, EJES Y SECTORES ECONÓMICOS ESTRATÉGICO

ÍNDICE

I. INTRODUCCIÓN                                                                                                    17

II. PRINCIPIOS RECTORES Y EJES TEMÁTICOS PARA LA ELABORACIÓN DEL PLAN NACIONAL DE DESARROLLO ECONÓMICO Y SOCIAL                       17

III. VISIÓN DE LA NACIÓN PARA 2030                                                                18

IV. EJES ESTRATÉGICOS                                                                                          18

V. SECTORES ECONÓMICOS ESTRATÉGICOS                                                     25

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VOCES DE CAMBIO EN EL SECTOR NO ESTATAL CUBANO. Cuentapropistas, usufructuarios, socios de cooperativas y compraventa de viviendas.

Mesa-Lago, Carmelo (coord.) Veiga González, Roberto; González Mederos, Lenier; Vera Rojas, Sofía; Pérez-Liñán, Aníbal

zzzzzzzzzzzzzzzzzzzzzzzzzz Capture

Septiembre de 2016

See: VOCES DE CAMBIO

Más de un millón de personas, casi un tercio de la fuerza laboral cubana, está en el “sector no estatal” de la economía: trabajadores autónomos, usufructuarios de la tierra, miembros de nuevas cooperativas, compradores y vendedores de viviendas privadas y otros grupos. Aunque se trata de la reforma estructural más importante de Raúl Castro, que conlleva una reducción gradual del sector estatal, poco concreto se sabe sobre las características (edad, género, raza y educación), condiciones económico-sociales y aspiraciones del emergente sector no estatal.

Basado en 80 entrevistas intensivas hechas en Cuba entre 2014 y 2015, el libro recoge las voces del sector: hablan sobre su nivel de satisfacción con lo que hacen y ganan, sobre empleados contratados y formas de pago, ganancias y su distribución entre inversión y consumo, planes de expansión de los micronegocios, recibo de remesas externas y microcréditos, competencia y publicidad, y pago de impuestos.

La parte crucial es la que detalla las voces sobre los principales problemas que enfrentan los cuentapropistas y sus deseos de mejora o cambio.

Dice un trabajador autónomo: “Debe haber rienda suelta a toda esta fértil imaginación que estamos demostrando los cubanos, que se realice sin trabas, de manera libre, que el gobierno permita que esto fluya, no lo dificulte y controle sólo lo que debe controlar”.

COORDINADORES

Coordinado por Carmelo Mesa-Lago, Catedrático Distinguido de Economía y Estudios Latinoamericanos en la Universidad de Pittsburgh. Es autor o editor de 93 libros y 300 artículos/capítulos en libros sobre economía de la seguridad social en América Latina, la economía cubana y sistemas económicos comparados, traducidos a 7 idiomas y publicados en 34 países. Ha recibido los premios Arthur Whitaker (1982), Hoover Institution (1986) y Alexander Von Humbolt Stiftung (1991, 2002).

El libro cuenta con la colaboración de Roberto Veiga González y Lenier González Mederos, cubanos residentes en la Isla que realizaron las entrevistas; la de Sofía Vera Rojas y Aníbal Pérez-Liñán que llevaron a cabo las tabulaciones y su análisis.

Iberoamericana Editorial Vervuert, S.L.U.

c/ Amor de Dios, 1
E-28014 Madrid
E-Mail: info@iberoamericanalibros.com

R121015

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IS CUBA “OPEN FOR BUSINESS”? BOOK REVIEW BY TED HENKEN

ZZZZZZZZZZZZZZZZZZZBy Ted Henken. Complete review is available here: http://cubacounterpoints.com/archives/3832

A review of Open for Business: Building The New Cuban Economy by Richard E. Feinberg,  August 30, 2016, Washington, D.C.Brookings Institution Press, 264 pages, $22.00;    ISBN-10: 0815727674’;     ISBN-13: 978-0815727675

Introduction

A few years ago I ran into a fellow watcher of Cuba’s economy in my favorite local New York coffee shop. It was just after the publication of my own recent book on the emergent Cuban private sector, which I co-wrote with the Canadian economist Archibald Ritter. Keen on announcing my good fortune (and great timing!) to my colleague, I whipped the book out and proudly presented it to her. However, when she saw the title, Entrepreneurial Cuba, she looked up at me with a skeptical grin and said: “Well, aren’t you the optimistic one?!” I laughed, quickly assuring her that while the title was indeed up-beat, the contents of the book were a decidedly more complex, critical, and ambivalent affair, filled with equal parts new opportunities, old obstacles, significant reforms, and frightful omens.

Similarly, the title of Richard Feinberg’s own eminently readable and richly informative new book, Open for Business: Building the New Cuban Economy, slyly posits a reality of economic “openness” that is aspirational. The author himself admits that this position is still as much a government slogan for the future as it is an achieved present-day reality. While Feinberg tells his readers that Cuba is indeed “open for business” on the book’s eye-catching cover, the actual contents of the book’s wide-ranging eight chapters highlight aspects of Cuba’s new post-Fidel economy that place an emphatic and well deserved question mark (?) after this claim.

Far from falling prey to the “irrational exuberance” of facile boosterism or blatant apologetics that tend to characterize much business-oriented writing about Cuba these days, Feinberg’s book is a critical-minded and deeply informed evaluation of the pro-market experiments undertaken by the Cuban government over the past two decades with a special emphasis on Raúl Castro’s economic reforms between 2010-2016. Thankfully, Feinberg goes beyond an exclusive focus on the top-down administrative efforts on the part of the government to solve its chronic economic problems (chapter 2). Feinberg does consider the so-called “update” of Cuba’s state socialist economic model that is often in league with sympathetic foreign governments like China, Brazil, and Venezuela (Chapter 3) and pioneering foreign firms including Sherritt, Meliá, and Unilever (chapters 4-5).

Notably, chapter 6 on entrepreneurial Cuba tells the fascinating story of Cuba’s emerging private entrepreneurs and middle classes. According to Feinberg, now this new economic class includes as many as two million people and makes up 40% of the island’s workforce (a well-sourced if questionable claim). This is followed by a wonderfully original chapter that profiles a dozen Cuban “millennial voices”; youthful, and quite hopeful, pioneers in fields as diverse as business, art, media, academics, and technology. These innovative sections of the book allow the author to offer his readers a refreshingly rich and diverse portrait of the grass-roots efforts of everyday citizens to “open Cuba for business” from the inside and for the benefit of Cubans themselves.

 ********************

Conclusion

Not a typical academic monograph focused on a single aspect of the Cuban economy, Feinberg’s “Open for Business” is instead a globally-informed analysis of what are arguably the three most important and dynamic aspects of Cuba’s new economy: International trade, foreign investment, and the island’s emerging domestic entrepreneurs. His wide-ranging yet richly detailed focus – enhanced by multiple foreign investor case studies and vivid profiles of Cuba’s emerging entrepreneurs and pioneering millennials – makes this book required reading not just for professional economists and other academics, but also – and perhaps especially – for the growing ranks of potential foreign investors looking for independent, hard-nosed, and practical advice about Cuba’s unique business environment as they contemplate their own entreé into the Cuban market. It will also be useful and revelatory tool for U.S. policymakers as they gauge how best to “engage” the Cuban government over questions of trade and investment and “empower” the Cuban people, especially the emerging Cuban entrepreneurial middle classes.

open-for-business

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THE SHERRITT–CUBA JOINT VENTURE: UNCERTAINTIES FOR BOTH PARTNERS

By Arch Ritter  

September 6,  2016

Cuban nickel production and the Sherritt-Cuba joint venture should have good prospects in view of Cuba’s large and low-cost reserves of nickel. Sherritt’s technology and probable future demand.  However, there are a number of looming issues that darken the horizon for Sherritt and to a lesser extent for Cuba including high transportation costs – shipping nickel/cobalt concentrate from Cuba to Fort Saskatchewan Alberta – together with the “Helms-Burton” status of the mine, and future price levels and volatility..

The Moa mine and processing facility, with a 25,000 ton capacity, were initially constructed by US interests – the Moa Bay Mining Company, a subsidiary of Freeport Sulphur. They used proprietary technology from Sherritt, which had pioneered hydrometallurgy processes at their plant in Fort Saskatchewan Alberta. Extraction and processing began in 1959.

The Government of Cuba then expropriated the operation without compensation in August, 1960 and restarted it in 1961 producing concentrate for the Soviet Union.  The US Foreign Claims Settlement Commission (US FCSC) valued the company at US$ 88.4 million at the time of the expropriation.

Sherritt’s direct connection with Cuba began in 1991 with purchases of Cuban nickel concentrate for its Alberta refinery.  Sherritt had had insufficient volumes of concentrate for many years and in 1990 a refining contract with INCO expired. In 1994, Sherritt International and the Compania General de Niquel of Cuba established a 50/50 joint venture, which now owns the Moa extraction, processing, and smelting operation, the Alberta refinery and the international marketing enterprise. The former President of the company, Ian Delaney, also negotiated agreements with the Cuban Government, permitting Sherritt to enter other sectors of the economy, including electric energy, oil and gas, agriculture, tourism, transportation, communications, and real estate. By 2000, Sherritt International had become a major diversified conglomerate in Cuba.

In this deal, the Cuban Government became and is currently a foreign investor in Canada, as the Compania General de Niquel owns 50% of the nickel refinery, a fact not well known in either Cuba or Canada.

The joint venture between Sherritt International and the Government Cuba is a cooperative masterpiece.  It has generated great benefits for both parties.

 I.         The Nickel/Cobalt Operation

The linking of the Moa nickel deposit and part of Cuba’s processing capacity with the Alberta refinery and its access to attractive energy sources was a stroke of genius and/or good luck for Sherritt and Cuba.

Cuba acquired a market for its nickel concentrate. It acquired access to the technological improvements that have occurred from 1959 to 2016.  These have generated improvements in productivity, energy efficiency, environmental impacts, and health and safety.  It acquired Sherritt’s managerial know-how which. Together with technological improvements, have increased production from around 12,500 tons in the early 1990s to around 34,000 tons in the 2010s.zzzzz3The Government of Cuba is now the joint owner of a vertically integrated nickel operation, from extraction and concentrating through to refining and international marketing. Cuba also has obtained new technologies and managerial skills for oil and gas extraction and utilization, as well as electricity generation.  Cuba’s nickel reserves are fifth largest in the world and production volumes are 10th largest.[i] Nickel has been Cuba’s largest merchandise export since the collapse of sugar by 2002. Foreign exchange earnings from the Sherritt-Cuba joint venture’s share of nickel and cobalt exports have averaged about 40% of total nickel/cobalt exports.

It is not surprising that Ian Delaney became known as “Fidel’s Favorite Capitalist”!

For its part, Sherritt has been able to maintain its Canadian refinery and to use its base in nickel to enter other sectors in Cuba. Its earnings from its Cuban operations are significant. The joint venture has been able to increase metal production and achieve high net operating earnings, which have been in the area of 40 to 50 percent of the company’s gross revenues for most years, depending on international nickel prices.  The following chart illustrates Cuba’s total nickel production volumes.  The impact of Sherritt’s innovations in increasing production volumes in the second half of the 1990s is apparent.

 II.        Petroleum, Natural Gas and Electric Power

Sherritt International’s petroleum and natural gas activities also have been successful. New sources of oil and gas have been discovered and extraction rates have increased through enhanced recovery techniques from 1996 to 2000. Natural gas recovery and utilization has also been improved through the construction of two processing plants, a feeder pipeline network, and a 30 Kilometer pipeline to Havana (Sherritt International, Annual Report, 1997, 13).

Sherritt invested CDN $215 million for the construction of two integrated gas processing and electrical generation systems. The natural gas feedstock previously had been flared and wasted. Commissioned in mid-2002, these operations had a combined capacity of 226 megawatts and generated a significant proportion of Cuba’s electricity. At the same time they reduced sulfur emissions, a potential problem especially at the Varadero site, which is adjacent to the hotel zone. By 2007, installed electricity generation capacity had been further increased to 375 mega watts, following an 85 MW expansion that came on stream in early 2006.

In February 1998, Sherritt acquired a 37.5 percent share of Cubacel, the cellular telephone operator in Cuba for $US 38 million, but this was resold. “Sherritt Green,” a small agricultural branch of the company, entered market gardening, cultivating a variety of vegetables for the tourist market. Sherritt also acquired a 25 percent share of the Las Americas Hotel and golf course in Varadero and a 12.5 percent share of the Melia Habana Hotel, both of which were managed by the Sol Melia enterprise but these also have been divested.  By 2010, Sherritt’s Cuban operations were large and growing. Gross revenues reached CDN $1,040 million in 2008.

 III.      Energy Costs, Transport Costs and Potential Relocation

However, there are a number of clouds on the horizon for Sherritt. First, Cuban nickel concentrate is transported by ship to the east coast of Canada and then overland to the Alberta refinery. This makes some sense economically when energy prices are low.  So far, the existence of the refinery there has compensated for high transportation costs. However, if – or when –transportation costs rise with higher energy prices or when full normalization with the United States occurs or when the existing plant reaches the end of its useful life, would a different location become more attractive?   Energy sources are also available in Venezuela as well as the Gulf of Mexico region of the United States or could be transported to Cuba itself in future.  At some point it will likely make sense to relocate a refinery to a locale closer to the nickel ore body.

 zz3

So far, Cuba is tied to the Canadian location through its 50% joint ownership of the Alberta refinery. But would Sherritt relocate the refinery to a lower-risk Cuba at some time in the future, or to the post-embargo United States or a post-Maduro Venezuela?  Perhaps. However, Alberta will continue to have competitive energy prices and low risk to compensate for its locational disadvantage for some years to come.

 IV.       “Helms-Burton” Status of the Mine Properties.

The second possible problem for Sherritt is that the Moa mine and the concentration plant are “Helms-Burton” properties for which there are US claimants. What would be the current value of the Using the US FCSC interest rate of 6% per year of non-payment, the 2016 compounded value would be a whopping US$ 2,054.6 million. Obviously there will be a negotiations problem for this and all other such claims.

Resolution of the compensation claims issue with full US-Cuba normalization may require Sherritt and the Government of Cuba to negotiate some sort of compensation package for the original US owners.  In one scenario, the US claimants would simply take over the Cuba-Sherritt operation in Cuba. But this would not be reasonable because at this time, the refinery for Cuban nickel is in Alberta and it is jointly owned by Cuba. My guess, however, is that Sherritt, the Government of Cuba and the US claimants will negotiate an arrangement that will be reasonable for all parties.

In any case, the claim of US interests on the mine property generates ambiguities and uncertainties and will be problematic at some time in the future. Sherritt International may well be one of the few economic interests that perhaps could lose from US-Cuban complete economic normalization. A resolution of the property claims issue may turn out to be very expensive for Sherritt. .

 V.        “Nickel Pig Iron”

A technological advance in the production of “Nickel Pig iron” (NPI), a substitute for refined nickel-steel alloys for some uses where high quality is less necessary.  “Nickel pig iron” may well have already captured a portion of the nickel market for low quality alloys.  In future, it may reduce the demand for nickel thereby placing downward pressures on nickel prices. This will likely reduce and Cuba’s foreign exchange earnings and Sherritt’s revenues and profits from nickel exports in future.

As illustrated in Chart 2, nickel prices spiked in the boom of 2003-2007 – helping to generate a period of relative prosperity for Cuba – then declined in the recession of 2008.  What is striking at this time is that in real inflation adjusted terms, the price of nickel in 2015 and 2016 is pretty much where it was in the 1990s. A number of factors are contributing to this of course, especially the growth rate deceleration in China reducing the demand for nickel.  Is “nickel pig iron” also contributing to weak demand for nickel at this time?  What will be its impact in future?

 zzzzz2

Source: United States Geological Survey, Minerals Information, Nickel: Statistics and information., various years. The “real” or “inflation adjusted” price is the US consumer price deflator.

In conclusion, Sherritt has had a great run in Cuba, contributing to improved nickel production and exports, higher foreign exchange earnings for Cuba and high revenues and profits for itself, especially in the 2004-2014 decade.  The future may be less brilliant for both with the uncertainties of resolving the property claims issue and a possible slow=down in international demand for nickel generated in part by “nickel pig iron.”

[i] United States Geological Survey, Commodity Surveys, Nickel, 2016. http://minerals.usgs.gov/minerals/pubs/commodity/nickel/mcs-2016-nicke.pdf

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SELF-EMPLOYMENT IN CUBA: BETWEEN INFORMALITY AND ENTREPRENEURSHIP – THE CASE OF SHOE MANUFACTURING

Yailenis Mulet Concepción

Third World Quarterly

Volume 37, 2016 – Issue 9

Original Article: SELF-EMPLOYMENT IN CUBA: THE CASE OF SHOE MANUFACTURING

Abstract

This article discusses the phenomenon of self-employment in Cuba from three perspectives: its conceptualisation, its links with informality and the challenges to its growth. First, it reviews the characteristics of self-employment in Cuba, in comparison with available theory and with various studies of informality carried out in other countries. Second, it documents the dimensions of informality and Cuba’s black market economy through the study of a specific sector of the independent labour force: shoe producers. Third, it considers the main challenges for the growth of self-employment in Cuba, as illustrated by the case of Cuban shoemakers, and draws some lessons that should improve the situation of this sector, taking into account different international studies.

zz Cuba-Nov-2008-0482Cuenta Propista artisan and vendor, party supplieszz Mercado-Artesanal-on-the-MaleconMercado Artesanal, on the Malecon, photos by Arch Ritter

Introduction

The growth of self-employment is a significant feature within the reforms currently reshaping the Cuban economy. After the crisis of the 1990s the centrally planned economy failed to satisfy many needs for goods and services, so these were met through economic activities driven by the imperative of survival (some of them not allowed, and others not well accepted, within the socialist development model).

Today activities that were discouraged or even forbidden by the government have been incorporated into the economic strategy of the current government.1 Self-employment has ceased to be viewed as ‘a necessary evil’, as it was in the early 1990s. Today it is viewed by authorities as a valid solution within Cuban Socialism, and is also expected to contribute to the economic development of the nation.

Before 2010, as Ritter and Henken point out, serious studies of this sector were largely discouraged and considered taboo. From 2010 onwards self-employment became the object of scholarly analysis within Cuba and abroad by authors such as Villanueva and Vidal, González, Arredondo, Centeno and Portes, Dámaso, Díaz and Piñeiro, González-Corzo, Morales, Triana, Feinberg, and in the most recent work of Ritter and Henken.2 On the one hand, the deepest and most revealing publications are by foreign researchers, with limited diffusion in Cuba. In addition, ethnography and field studies are methods used by few Cuban researchers. On the other hand, research into self-employment, in the specific case of Cuba, largely centres on two aspects: (1) the characteristics and limitations of the private sector in Cuba; and (2) the impact of the emerging private sector on Cuban civil partnership, the political regime and Cuban socialism.

Despite these problems, the study of self-employment in Cuba is valuable for what it reveals about the functioning of markets in their distorted versions of informal performance, especially when seen in an international context, mainly that of informality in Latin America. Also, this study may help generate public policies to improve the situation of this sector in Cuba, drawing both from the conceptual analysis and the case study.

Currently half a million Cubans – 10% of the total workforce – are registered as self-employed.3 However, access to statistics on this sector is still limited. Besides, most of those engaged in this activity try to conceal the real dimension of their operations; it is centred on the circulation and recirculation of goods and services, with a strong tendency towards non-legal growth and very strong links with the so-called submerged economy. For this reason this article examines the emergence and development of a specific sector of self-employment, namely the shoe manufacturing chain, which combines the ‘formality’ of registered worker with the ‘illegality’ inherent to the buying of tools on the black market.

The production of footwear by public companies has been disadvantaged since the crisis of the 1990s, contributing on average only two million pairs of shoes annually. In 2015 the production of footwear by public companies increased by 53%; however, 50.76% of this increase corresponds to the production of footwear for work and orthopaedic shoes. As demonstrated below, the lack of selection of footwear is largely satisfied by means of the independent labour force, which produces close to eight million pairs of shoes a year. Although there are no official numbers on the consumption of footwear in Cuba, the fact that the independent labour force produces more than public companies arouses interest.

*********************************

Conclusions

In general, advances in the process of formalisation of self-employment in Cuba are dependent, in part, on new behaviours from self-employed workers and on their ability to make their businesses transparent. At the same time the main obstacles to the formalisation of private enterprises in Cuba are the concepts and culture still ruling in the establishment and political system.

Self-employed Cubans cannot yet be formalised as private enterprises, mainly because of the negative consequences arising from informality and the unregulated market, as well as of the multiple impediments to ownership within the current legislation. Many of those hoping to formalise their enterprises did not turn to self-employment out of preference, but out of a survival imperative. This necessity has led to creativity, sacrifice and effort to start a business, but without conditions of stability. Reform requires public policies that guarantee more secure prospects in the future.

It is not possible to fully assess the real capacities of productive growth in this sector, given the regulatory and political restrictions and conditions of informality in which it operates.

This case study shows that a great part of the activity is associated with some degree of illegality. Thus there are still many institutional and organisational changes to be managed by the state before producers can make their business transparent in matters of means of production; coordination channels; association; cooperation; or legal status of producers and vendors.60 As Douglas North states, an efficient institutional organisation is an essential condition for the development of a country.61 The correct functioning of institutions forms the basis for accomplishing a culture of legality.

International studies have shown multiple solutions to informality and, although not all of these are feasible in Cuba, they do provide important lessons to help redefine the regulatory framework and to stimulate new public policies. As Tokman points out, ‘it is not about isolating productive activities and occupations, but, on the contrary, acknowledging existing interrelations and their nature in more open and profoundly unequal economies’.

The study of self-employment in Cuba can contribute to the more general discussion about the informal sector and small and medium enterprises in Latin America. For instance, the way in which Cuba has generalised registry, taxation and access to social security may be of wider relevance. The same is true of supervision by sub-national authorities, as this contrasts with the absence of any serious regulation of informality in some other countries.

Similarly, the Cuban case provides a benchmark for the analysis of educational qualifications and innovation of the informal sector, since many of the units considered here make use of high qualifications and have generated innovations in design, services and business models. Some represent important social innovations.

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MORE BAD NEWS FOR NEW IDEAS IN CUBA: EUSEBIO LEAL SIDELINED

BY PAUL HARE

In Cuba Today, August 29, 2016

Original Essay: BAD NEWS FOR NEW IDEAS IN CUBA z111

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.

Z11111Dr. Eusebio Leal Spengler, Historiador de La Habana

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

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VENEZUELA’S ECONOMIC WOES SEND A CHILL OVER CLOSEST ALLY CUBA: Warnings of rationing revive memories of post-Soviet austerity in Havana

Financial Times, July 25, 2016

Marc Frank in Havana

The crisis in Venezuela has spread to its closest ally Cuba, with Havana warning of power rationing and other shortages that some fear could mark a return to the economic austerity that traumatised the island nation after the collapse of the Soviet Union.

Only a year after the euphoria that followed the re-establishment of diplomatic relations with the US, hopes of an economic rebound in Cuba have faded and an undercurrent of concern and frustration is evident on the streets of the capital.

“Just when we thought we were going forward, everything is slipping away again,” says Havana retiree Miriam Calabasa. “I am worried people are going to decide enough is enough: then what?”

Government offices now close early, with open windows and whirring fans in lieu of air-conditioners. Already scant public lighting has been reduced further, and traffic in Havana and other cities is down noticeably.

“Nothing will get better any time soon; it can only get worse,” worries Ignacio Perez, a mechanic. “The roads won’t be paved, schools painted, the rubbish picked up, public transportation improved, and on and on.”

President Raúl Castro outlined the scale of the problem this month, telling the National Assembly that “all but essential spending” must cease. He blamed “limits facing some of our principal commercial partners due to the fall in oil prices … and a certain contraction in the supply of oil contracted with Venezuela.”

Fuel consumption has been cut 28 per cent between now and December, electricity by a similar amount and imports by 15 per cent, or $2.5bn, in a centralised economy where 17 cents of every dollar of economic output consists of imports.

But crippling shortages, rampant inflation and an economy that is expected to shrink 10 per cent this year have forced Venezuela’s president Nicolás Maduro to cut back. According to internal data from state oil company PDVSA seen by Reuters, oil deliveries to Cuba are down a fifth on last year.

Venezuela has for 15 years supplied unspecified amounts of cash and about 90,000 barrels per day of oil — half of Cuba’s energy needs. Havana in return sold medical and other professional services to Caracas. Venezuelan aid helped to lift Cuba out of an economic black hole after Soviet subsidies ended in 1991.

“Under current conditions, [Cuban] gross domestic product will dip into negative territory this year and decline 2.9 per cent in 2017,” says Pavel Vidal, a former Cuban central bank employee who is now a professor at Colombia’s Pontificia Universidad Javeriana Cali. “If relations with Venezuela fall apart completely, GDP could decline 10 per cent.”

Although Venezuelan aid is a fraction of Soviet help, mention of the “special period” that followed the fall of the Berlin Wall provokes traumatic memories in Cuba, with many remembering shortages so severe they ate street cats. Karina Marrón, deputy director of the official Granma newspaper, this month warned of possible street protests similar to 1994.

“A perfect storm is brewing … this phenomenon of a cut in fuel, a cut in energy,” Ms Marrón told the Union of Cuban Journalists. “This country can’t withstand another ’93, another ’94.”

So-called rapid response brigades, formed in the 1990s to quell social unrest, are back on alert, according to one brigade member who asked not to be named.

For Mr Castro, the slowdown is a serious blow to the limited market-orientated reforms begun under his leadership, especially the long-planned liberalisation of the peso, which requires a comfortable foreign reserve cushion.

But foreign businesses hope it may speed economic opening. “Venezuela’s problems increase the chance of Cuban reforms. This government only acts when it has to,” says one Spanish investor on the island.

One complication lies in how the government apportions resources.  Cuba relies heavily on tourists, most of whom expect hotels with electricity and air-conditioning. Meanwhile, some 500,000 people, or 10 per cent of Cuba’s workforce, are employed at restaurants, lodging houses and other recently allowed private businesses which need power to ply their trade.

Mr Castro insists residential users will be spared power cuts, for now, while Marino Murillo, who heads the reform commission of the ruling Communist party, says hard currency earning sectors such as tourism and nickel would be spared.

Another problem is that the other countries Cuba exports medical services to, such as Algeria, Angola and Brazil, are also expected to reduce spending. In 2014, medical services earned Cuba about $8bn, or 40 per cent of exports.

“We cannot deny there will be some impact, including worse than currently, but we are prepared,” Mr Castro has said.

Analysts suggest Mr Castro’s warning may in part serve to deflate expectations following the easing of US sanctions. Certainly, a full return to special period-style austerity looks unlikely as Cuba has more diversified income streams, from increased remittances, medical services, tourism to a nascent private sector.

However, “a majority [in Cuba] are still very dependent on state salaries that are now worth a third of what they were in 1989 in real terms”, said Prof Vidal. “[They] are in a situation of extreme vulnerability.”

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