• 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. It includes analyses and observations of the author, Arch Ritter, as well as hyper-links, abstracts, summaries, and commentaries relating to other research works from academic, governmental, media, non-governmental organizations and international institutions.
    Commentary, critique and discussion on any of the postings is most welcome.
    This Blog on The Cuban Economy is dedicated to Cuba's Generation "A". Although inspired by Yoani Sánchez' original 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:
    "... 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."

Sixth Congress of the Communist Party of Cuba: Will Raul Forge His Own Legacy?

The Sixth Congress of the Cuba’s Communist Party, meeting from April 16 to 19, may be a turning point for Cuba. It may also be the beginning of President Raul Castro’s attempt to forge his own “legacy” and to emerge from the long shadow of his brother. In order to succeed, the reformist thrust of the Congress must be ambitious and courageous, moving Cuba away from the defunct economic and political approaches copied from Soviet orthodoxy in the 1960s.

How likely is Raul to succeed?

There seems to be no chance that Raul will abandon Cuba’s Soviet-style political institutions and Communist Party monopoly. While Cuba is a signatory to Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights and the International Labour Organization’s Conventions, there is virtually no possibility that Raul will use the opportunity of the Congress to honor fully Cuba’s commitments to the human, political, civil and labor rights enshrined in these covenants.

But economic reform in a “market friendly” direction is probable.  In various speeches since 2006, Raul has indicated that he recognizes the problems that Cuba confronts in terms of the production of agricultural and industrial goods and improvement of Cuba’s infrastructure. He is well aware of the unbalanced structure of the economy, the monetary and exchange rate pathologies and the dysfunctional incentive environment. He has approached the problems systematically and deliberatively – though perhaps somewhat leisurely.

Raul’s new approach is embodied in the “Draft Guide for Economic and Social Reform” published in November 2010. This constitutes an ambitions and comprehensive “wish-list” or statement of aspirations designed principally for popular discussion. It represents a strong commitment to reform. While there are internal inconsistencies and opaque elements among the 291 recommendations, there are deep-cutting proposals on many aspects of economic organization and policy. However, there were no priorities indicated among the recommendations. There was no suggestion of the sequencing of policies. There was no apparent coordination among the proposals.

In order to forge a viable reformist strategy from this wish-list, a new document is required. This indeed has probably been prepared for approval at the Congress. This document may include a clearer statement of specific objectives. It also would need to prioritize policies and include some sequencing of actions and generally to provide some “focus” to what is in effect a check list of good intentions.

In such a reform process many things would be changing simultaneously with symbiotic impacts and consequences that will likely be painful and are difficult to foresee. Will Raul have the courage to take the risks inherent in an ambitious process of economic change? This was not apparent in view of his earlier “go-slow” approach prior to the Congress.

There undoubtedly is opposition, of indeterminate strength, to the prospective reform process. Former Minister Jos Luis Rodriguez, for example asserted that

“…essentially, the model could be sustained; the proof is that the economy continued growing since 1994. ….the fact is that there was not a recession despite all the problems”

If the model was not in crisis, ambitious and deep-cutting reforms obviously would be unnecessary and perhaps foolish.

However, while the “Fidelistas” will run interference, the reform process is likely sustainable. There are a variety of reasons for this conclusion:

  • Cuba’s economic problems must be dealt with;
  • As the micro-manager of the economy for some 45 years, Fidel himself is discredited:
  • All of the “Fidel Models” are discredited by current realities, by the “Draft Guide,,,”; by Raul’s statements and speeches and by the publicity regarding the need for a reform;
  • The “Fidelistas” appear to be on the wane;
  • Generational change is under way;
  • The climate of opinion seems to have changed and large numbers of Cuban citizens appear to be ready for reform – despite the risks that are already apparent;
  • Heightened popular expectations for change will be increasingly difficult to contain.

Moreover, the Fidelista Ministers have been replaced by President Raul Castro and he has moved his military colleagues into management positions throughout the economy – though this also is problematic.

Finally, at this stage of his life Raul is probably thinking about his “legacy” and his place in history. It is unlikely that he wants to be judged as the minor appendage of his older brother. He seems to want his own “economic model.”  Perhaps he recognizes that while “History will (not) absolve” Fidel, perhaps it might absolve him. If he were to introduce major political reforms he would earn a very significant place in “History.” However, introducing deep-cutting economic reform is a start.

The Sixth Congress of the Communist Party of Cuba is indeed Raul’s main chance.

Primer Congreso del Partido Comunista de Cuba

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Cuban Public Opinion Survey, 2011, International Republican Institute

The International Republican Institute has just published the results of a public opinion survey taken in Cuba, the fifth such survey since 2007. A series of questions were asked concerning general perspectives on Cuba, attitudes towards political and economic change, and access to information technology. Some of the same questions have been asked since 2007 providing some interesting comparisons over time.

The complete survey is located here: Cuban Public Opinion Survey, 2011, Int’n’l Republican Institute

The survey methodology was as follows

  • Dates of Interviewing: The fieldwork was conducted Jan, 28 – Feb. 10, 2011.
  • Data Collection Method: Stratified-intercept methodology based on personal, face-to-face interviews in Cuba.
  • Sample Size: 463 Cuban adults (age 18 and older).
  • Sample: Interviews were conducted in twelve (12) Cuban provinces
  • The sample was stratified by province, then by sub-units within each province. Interviewees were allocated by gender and age quotas. The final selection of each interviewee was random.
  • Respondents: The sample selection for province, gender and age are based on the last available Cuban census data, released in 2002.
  • Maximum Sample Margin of Error: Margin of error of ± five percent for a 95 percent level of confidence.

There are a number of interesting results of the survey. Here are a couple.

1. What do you think is the biggest problem in Cuba?   60.7% said that Low Salaries / High Cost of Living were the most serious, up from 40% in 2009,  while 12.7% said that food scarcity was the most serious. 1% of the respondents stated that the Lack of Freedoms / Political System was the most serious. This suggests that Raul Castro’s priority on the economy is not misplaced.

2.      If you were given the opportunity to vote to change from the current economic system to a market economy system – with economic freedoms, including opportunities for Cubans to own property and run businesses – would you vote in favor of, or against, that change?  90.7 of the respondents were in favor. The prospective pro-market reforms of the Sixth Congress would appear to be in line with public opinion.

3.      Do you believe the current government will succeed in solving Cuba’s biggest problem in the next few years?     77% say no, a higher proportion than in any IRI survey since 2007.

4.      If you were given the opportunity to vote to change from the current political system to a democratic system – with multi-party elections, freedom of speech and freedom of expression – would you vote in favor of, or against, that change? 78.2% were in favor.

5.      Do you regularly use a cellular phone?  25.3% said yes, up from 10% in 2007.

Presumably the Government of Cuba conducts similar studies but with differently worded questions that produce results somewhat more congenial to the status quo.

But the results of the IRI surveys certainly must be of deep concern to the Government and the Party.

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Chronology: Raul Castro’s Road to Reform in Cuba April 13, 2011

By Marc Frank, Reuters, April 13, 2011

External Link: http://www.reuters.com/article/2011/04/13/us-cuba-reform-chronology

HAVANA (Reuters) – Cuba’s pace of economic reform is expected to pick up after a congress of its ruling Communist Party that begins this weekend and whose main agenda item is “modernizing” the socialist economy.

Reforms up for discussion include: decentralization of government decision-making and revenue flows; giving more autonomy to state-run companies; slashing state payrolls and subsidies and reducing the state’s role in agriculture and retail in favor of a growing “non-state sector”.

The congress crowns President Raul Castro’s efforts to build a consensus for major changes in how the Caribbean country runs its economy and how its people live.

Since he took over day-to-day rule from his ailing older brother Fidel Castro in 2006, Raul Castro signaled that one of the world’s last Soviet-style economies was due for overhaul. But he has ruled out any switch to Western-style capitalism.

What follows is a chronology of Castro’s most important reform measures and statements:

2007

July – In his first major speech, Raul Castro calls the state milk collection and distribution system “absurd” and says farmers will deliver directly to local consumers where possible.

“To have more, we have to begin by producing more, with a sense of rationality and efficiency,” he said.

August – Castro signs a law ordering all state companies to adopt a system of “perfecting” management. This was developed by the military when Castro was defense minister to improve performance using capitalist-style management techniques.

2008

February – In his formal inaugural address as the new Cuban president, Castro says: “We must make efforts to find the ways and means to remove any deterrent to productive forces. In many respects, local initiative can be effective and viable”.

March – Computers, cell phones, DVD players and electric appliances go on sale for the public and bans on Cubans renting cars and staying in tourism hotels are lifted.

A sweeping reform of agriculture begins. This includes decentralization of decision-making, increases in state prices paid to farmers, leasing of fallow state land and loosening of regulations on farmers selling directly to consumers.

August – A significant labor reform ties wages to individual productivity, and caps on earnings are eliminated.

Government announces domestic freight transport and housing construction will be decentralized to the municipal level.

2009

March – Castro purges his brother’s economic cabinet and places trusted military men and reform-minded technocrats in key economy and planning posts. The central bank head Francisco Soberon quits two months later and is replaced.

April – The new cabinet slashes the budget and imports. Plans are unveiled to develop suburban farming around most cities and towns, using mainly private plots.

July – Castro is quoted as stating “ideas chart the course, the reality of figures is decisive,” an unusual statement in a nation where ideology and politics trump economics.

August – National Assembly establishes office of the Comptroller General of the Republic. Castro says it will aim to improve “economic discipline” and crack down on corruption.

He calls for “elimination of free services and improper subsidies — with the exception of those called for in the constitution (healthcare, education and social security).”

Santiago mountain dwellers are allowed to sell fruits and produce at roadside kiosks. Spreads to adjoining provinces.

September – Licenses are issued to food vendors in various cities, making them legal.

October – Granma announces state work place lunchrooms will close in exchange for a daily stipend.

December – Economy Minister Marino Murillo tells parliament: “We have begun experiments … to ease the burden on the state of some services it provides.”

2010

January – Municipal governments are ordered to draw up economic development plans that may include cooperatives and small business. A pilot project where taxi drivers lease cabs instead of receiving a state wage begins in Havana.

April – Barbershops and beauty salons with up to three chairs go over to a leasing system. Rules for home construction and improvements are liberalized.

June – Sale of construction materials to the population is liberalized. The government authorizes farm cooperatives to establish mini-industries to process produce.

August – New rules authorize Cubans with small garden plots and small farmers to sell produce directly to consumers.

The state increases from 50 to 99 years the time foreign companies can lease land as part of tourism and leisure development projects, such as golf courses and marinas.

Stores open where farmers can purchase supplies in local currency without regulation.

September – The government announces the lay-off of more than 500,000 state workers and 250,000 new licenses for family businesses over six months. Some 200,000 of the state jobs will go over to leasing, cooperatives and other arrangements. Unemployment benefits are cut.

Self-employment regulations are loosened and taxes tightened. Family businesses are authorized for the first time to hire labor, do business with the state and rent space.

December – Castro gives most explicit reform speech yet urging change of “erroneous and unsustainable concepts about socialism that have been deeply rooted in broad sectors of the population over the years, as a result of the excessively paternalistic, idealistic and egalitarian approach instituted by the Revolution in the interest of social justice.”

2011

January – State banks begin issuing microcredits to would-be farmers who have leased land.

March – Castro announces the original timetable to lay-off 500,000 state workers by April has been scrapped and there is no fixed date to complete the process as workers resist losing their jobs and balk at the high cost of proposed leasing arrangements. Castro creates new post to oversee economic reform and promotes Economy Minister Murillo to the job.

April – Authorities announce 120,000 people have leased land since 2008 and 180,000 people have taken out licenses to work for themselves and rent space to new entrepreneurs since October. State banks are authorized to issue microcredits to new entrepreneurs and state bodies to do business with them.

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Cuba’s Economic Agenda and Prospects: An Optimistic View!

By Arch Ritter

Published originally in FOCALPoint, April 2011, Volume 10, N0. 3.

The Sixth Congress of the Communist Party of Cuba, taking place April 16-19, 2011, will focus on a comprehensive range of economic reforms, labelled an “updating” of its model, but ostensibly not a movement away from Cuban socialism. This reflects the depth of Cuba’s economic problems as well as the unwillingness of the regime to tolerate discussion of political reform, which is not on the agenda.

The Cuban economy faces severe difficulties, despite purportedly high GDP growth figures. The real state of the economy can be summarized as follows. There has been minimal recovery from the near 80 per cent collapse in the population’s real income levels since 1989. De-industrialization brought 2010 industrial output to 51 per cent of its 1989 level. Sugar production has declined catastrophically, from roughly seven million tonnes in the 1980s to approximately 1.3 million tonnes per year at present. Reduced production of foodstuffs has resulted in major increases in food imports. Investment has been insufficient, at 8.5 per cent of GDP (compared with 21.9 per cent for Latin America in 2008). There are high levels of under-employment in the state sector —an estimated 1.2 to 1.8 million workers, or 20 to 35 per cent of the labour force— compared to the official unemployment rate of 1.6 per cent. These factors are combined with a half-century of monetary pathology, 20 years of the dual exchange rate and monetary systems, and heavy reliance on special trade arrangements of dubious sustainability with Venezuela.

President Raúl Castro has spoken forcefully on the need for economic reform (in contrast with the complacency of his brother Fidel), stating in April 2010:

“We face unpleasant realities, but we are not closing our eyes to them. We are convinced that we must break dogmas, and we undertake with strength and confidence the modernization, already underway, of our economic model.”

The character of socialism has also been redefined under Raúl’s regime as spelled out in the Draft Guidelines for Economic and Social Policy, a document released in November 2010 as part of the lead-up to the Congress: “In the economic policy that is proposed, socialism is equality of rights and opportunities for the citizens, not egalitarianism.” This may be of game-changing significance, suggesting that Cuba is moving toward “social democratic” orthodoxy.

When Raúl succeeded his brother in 2006, there were heightened expectations that he would introduce reforms, given his reputation for pragmatism. However, few significant changes were introduced in his first four years, with the exception of postponement of the retirement age and the granting of 10-year leases on unused state-owned farmlands to private farmers.

In October 2010, Raúl introduced a program to downsize the state sector that would lay off 500,000 redundant workers by March 31, 2011, and ultimately, 1.8 million workers in total by 2015. These workers were to be absorbed in an invigorated small-enterprise and co-operative sector. In order to encourage small enterprise, the licensing process, regulatory system and tax regime were liberalized. These measures were headed in the right direction, but were too modest to stimulate the required expansion of self-employment. By January 2011, some 83,400 new self-employment licenses had been granted —far below the 500,000 target for March 31. Because of this, the implementation of the state sector downsizing was decelerated and indeed appears to be on hold until after the April Congress. Few if any workers have actually been laid off, although some have been told that they are to be let go, prompting informational and procedural discussions in many workplaces.

The Draft Guidelines for Economic and Social Policy document was issued by the government to serve as the basis for public discussion of the reforms and prepare a more definitive strategy to be approved at the Congress. These Guidelines include 291 recommendations for changes in every area of economic and social policy. It is a statement of aspirations, with no indication of policy priorities, sequences or co-ordination. The reforms are to be within the framework of the socialist planning system.

There are a variety of views among analysts regarding the possible outcome of the Congress. Some expect no meaningful policy changes. But others —including some dissident economists and mainstream analysts alike— are optimistic and expect reforms. Indeed, the climate of opinion within Cuba decisively favours reform.

Can Raúl’s administration forge a workable strategy from the Guidelines’ wish list? Given the deliberative and systematic way in which Raúl has proceeded so far, this appears probable. A process of economic —but not political— reform will most likely begin after the Congress. Where it will lead is hard to predict. Presumably Raúl’s regime would like the process to end with a new balance between public and private sectors, with a controlled movement toward the market mechanism in price determination and the shaping of economic structures, and with the construction of a rational configuration of incentives shaping citizens’ daily economic actions so that their private endeavours become compatible with Cuba’s broader economic well-being. This, however, remains to be seen.

Third Congress of the Communist Party of Cuba, Bohemia, 8 April 2011.


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Ana Julia Faya: “The Sixth Congress of the Communist Party of Cuba: Walking a Fine Line”

Cuba’s leaders are currently facing a serious internal crisis.

The Sixth Congress of the Cuban Communist Party (PCC) will take place in Havana April 16-19, 2011, during which an ambiguous process of economic reform that the governing elite calls “updating the system” will be sanctioned. Reluctant to admit that they are undertaking reforms, Cuba’s leaders face a serious internal crisis; meanwhile they continue to express loyalty to socialism and rely on a fledgling and confined private sector to save the national economy.

In December 2010, Raúl Castro, the president of Cuba and second secretary of the PCC, said that the island now finds itself at the edge of an abyss, and analysts across the political spectrum agree. The regime is facing serious financial and credibility crises.

On the one hand, Cuba is having difficulty fulfilling its financial promises: the country does not receive credit from international institutions; oil reserve prospects have not materialized; and aid from Venezuela seems to have bottomed out.

On the other hand, the sources of the government’s legitimacy are dissolving quickly among a population that is struggling to survive in the midst of basic shortages and shrinking state subsidies. The struggle against the U.S. embargo has become a tough sell as an instrument for internal cohesion since the Cuban government itself has publicly admitted that a good part of the island’s economic problems is due to inefficiency and bad policy decisions rather than the embargo. Services such as education and public health, which have historically been presented as achievements of the system, can no longer receive the same level of subsidies that they did in past years and are now subject to scrutiny by a population enduring their gradual deterioration.

Given this situation, the Cuban government faces the dilemma of making changes it has qualified as “pressing,” such as decentralizing the state, to ensure the system’s survival. However, such changes could jeopardize the totalitarian model that has existed until now and, ultimately, support for the elite in power. It is within the context of this dilemma that after 13 years of postponement, the Congress, which according to the statutes of the PCC “decides on all of the most important policy issues,” will meet to focus the discussion on the meager Draft Guidelines for Economic and Social Policy.

The Guidelines seek to perfect a dysfunctional model while walking a fine line: the document introduces a private sector that will have to absorb more than one million unemployed workers from the public sector (excluding coercive and security agencies, which have grown), yet warns that concentrating capital in private hands will not be permitted. This ambiguity has generated criticism from all sides. Some militant orthodox communists have expressed their dissatisfaction with the reforms and have labelled them “state monopoly capitalism”; reformists within the system and others from the opposition describe the guidelines as “cosmetic” because they do not include an actual restructuring of the current regime and as “lacking a real base,” as there are no resources or financing to allow the private sector to expand.

What is certain is that Cubans have expressed their opinions both in the assemblies convened by the PCC to discuss the Guidelines and on the Web, and on March 1 Raúl announced that the beginning of the layoffs would be postponed. Perhaps the government took into consideration one of the most reiterated arguments offered by specialists: Wait until the private sector consolidates before proceeding with dismissals. Perhaps the government also decided to show caution given the explosive social climate created by the layoff announcements and cuts to social benefits —such as the closing of workers’ canteens and the gradual disappearance of the rations book— in addition to the international context of protests against long-lived dictatorships. Raúl has announced that due to the “complexity” involved in “updating the system,” it will take at least five years to implement the new model completely. We will have to wait until the Congress meets for a clearer outline of these plans, which are currently vague and shifting.

It also remains to be seen if Congress will take into consideration proposals by specialists on Cuba that include: abandoning the planning model; abolishing the 10-year limit for leasing new plots of land; creating legal support to protect the new private sector; legalizing the buying and selling of homes and vehicles; adding flexibility to the onerous tax system for the self-employed; and creating industrial and service co-operatives from state-run companies.

Despite the fact that Raúl has asked the leadership for a “change in mentality,” what has been left out of discussions is the role that the Cuban diaspora should play in the reform process given its support for the new private sector through remittances, of which the government has made a utilitarian use. The Congress will also exclude topics such as ending repression, arbitrary arrests and “repudiation meetings” against peaceful opposition; it will disregard important political and civil issues, such as abolishing permits for Cubans entering and leaving the country or ceasing control of communications and the Internet; and it will not discuss freedom of association. Yet, these issues constitute the basis for reaching sustainable economic development in any society.

According to Raúl, this Congress will be the last one held by the “historic administration.” It will have to approve the new Central Committee and make appointments to the positions of first and second secretaries of the PCC, currently held by the official leaders, Fidel and Raúl Castro.

To date, everything indicates that the decisions of the Sixth Congress will prolong the status quo by adopting ambiguous reforms under strong controls. But the consequences of introducing these reforms are difficult to predict; in politics, when one walks a fine line any of the tendencies in play can prevail. Clearly, Cuba’s economy will change as Cuban society already has. The elite in power should change, too. After 52 years, it is about time.

Ana J. Faya is an independent consultant and policy analyst.

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Cuba’s Economic Reform Process under President Raul Castro: Challenges, Strategic Actions and Prospective Performance

The Bildner Center at City University of New York Graduate Center organized a conference entitled “Cuba Futures: Past and Present” from March 31 to April 2. The very rich and interdisciplinary program can be found here: Cuba Futures Conference, Program.

I had the honor of making a presentation in the Opening Plenary Panel.  The Power Point presentation is available at “Cuba’s Economic Reform Process under President Raul Castro.”

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Recuperation and Development of the Bahi ́a de la Habana

By Arch Ritter

The Bahia de la Habana has been a centre for international shipping and trade since the early 1500s. It served as a haven from storms and pirates, a fortification against the British, a provisioning center and a gathering point for the Spanish fleet sailing between Seville and Cadiz and the ports of the New World. It is still a hard-working port, handling much of Cuba’s container and bulk shipping, as well as naval installations, cruise ship facilities and industry. After almost 500 years as a working port, however, it appears to be in the process of transformation to a modified and redeveloped tourist and transport center.

“His Britannic Majesty’s Land Forces Taking Possession of Havannah (sic.), August 14, 1762 and Sloops of War Assisting to Open the Booms” Artist: Philip Orsbridge.    Less than a year after Havana was captured by the British in the Seven Years War it was returned to Spain in exchange for Florida by the Treaty of Paris. By the same treaty, France chose to retain Guadalupe and Martinique in exchange for Quebec which went to the British.

The Oficina del Historiador de La Habana, established in 1938 by Dr. Emilio Roig de Leuchsenring for the restoration of historic Havana has played a vital role in restoring Old Havana under the leadership of Eusebio Leal Spengler in 1967. His work has been exemplary, and the historical quarter certainly deserves its UNESCO designation of “World Heritage Site”, awarded in 1982. The restoration and preservation of historic Havana continues to radiate out from the Cathedral quarter and now includes the Plaza Vieja and various locales alongside the Avenida del Puerto to the Iglesia San Francisco de Paula.

It now appears that the whole port area has been designated as a development zone. The old derelict wharves and warehouses are being dismantled and removed. The Arts and Crafts Market has been transferred from close to the Cathedral to the old Almacenes San José into the interior of the port, which have been restored and renovated.  New hotels such as the Armadores de Santander have opened. The new Russian Orthodox Church is in this areas as well

Bahia de La Habana

Removing Derelict Wharves, February 2011, Photos by Arch Ritter

Furthermore, the container port and much of the bulk shipment port will be moved to a new facility in the excellent harbor at Mariel, 50 kilometers west of Havana, which will also generate some regional development impulses in that region. The old Havana petroleum refinery, formerly owned by Esso and Shell, will shut down when to the new refinery in Cienfuegos opens. And the electrical generation plant at the edge of the port, a heavy air polluter for the capital, will relocate to Matanzas. In time, the serious pollution of the port will be reduced, and one hopes cleaned up definitively. [For a glance at current pollution in the harbor, check this web site: Pollution from the Oil Refinery]. This will be an expensive process taking many years. It is also likely that there are significant toxic residues in much of the land used for industrial purposes for past decades. Cleaning this up also will be costly and time-consuming.

At this time, there seems to be no master-plan for the development of the harbor region available to the public. However, there was some talk in February 2011 of such a plan becoming available in May of 2011.

In time, it is expected that new hotels will ring part of the harbor. With normalization of relations with the United States, the port of Havana also will become a key destination for virtually all of the cruise ships entering the Caribbean region. Quick access to Casablanca and the fortifications on the east side of the harbor will likely be provided with transit by improved cross-harbor ferryboat. One could imagine as well circum-harbor excursion ferry boats plying a vigorous trade. With normalization of travel between the United States and Cuba, high-speed hydrofoil passenger transportation and normal traditional ferry boat service from Key West and Miami to Havana will likely be established, providing further stimulus to the port area. A good deal more of the area around the port thus will become an attractive tourist, commercial and perhaps residential zone. It may also be possible that office complexes are eventually developed in the area as well, shifting part of the commercial center of gravity of Havana from the far west back to the harbor zone.

If the redevelopment of the harbor area proceeds with the same deliberativeness as the restoration of Old Havana, we can anticipate a fine citizen- and tourist-friendly extension of the Old Havana zone southwards into the Baha de La Habana and across the harbor to Casablanca, Regla and the Fortaleza San Carlos de la Cabana area.

[Note: The basic idea for this note came from Omar Everley Perez, Centro de Estudios sobre la Economa Cubana on March 8, 2011]

New Artisanal Center at the restored  Almacenes San José, Avenida del Puerto, Photo by Arch Ritter, February 2011

Russian Orthodox Church, Avenida del Puerto, Photo by Arch Ritter, March 2008

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New Publication: Oscar Chepe, Cambios en Cuba: Pocos, Limitados y Tardíos

Oscar Chepe’s recent  work on Cuba’s economic situation and the reform process has just been published and is available on the web site: Reconciliación Cubana, or here: Oscar Chepe, Cambios Cuba: Pocos, Limitados y Tardíos

Oscar continues to be a courageous and  outspoken analyst of Cuba’s economic policies. In this past, this earned for him a period of forced labor in the 1960s and incarceration in March 2003 along with 75 others. Despite this, he continues to express his views openly and honestly. Although his voice is heard easily outside his own country, within Cuba, his views unfortunately are blocked rather effectively by state control of the publications media, the electronic media and by the continuous violation of the right to freedom of assembly.

Below is a Table of Contents followed by an Executive Summary by Rolando Castaneda.

Table of Contents:

Prologo por Carmelo Mesa Lago 1
Resume Ejecutivo por Rolando Castañeda 6
I. Introducción 11
II. Pequeñas y medianas empresas 14
III. Actualización del modelo económico cubano 16
IV. Problemas de orden externo e interno 19
V. La empresa estatal socialista 22
VI. Mercados mayoristas, precios 24
VII. Cooperativas 27
VIII. Política fiscal 29
IX. Políticas macroeconómicas 31
X. Política monetaria 34
XI. Política económica externa 37
XII. Inversión extranjera 40
XIII. Política inversionista 43
XIV. Ciencia, tecnología e innovación 45
XV. Política social 47
XVI. Salud 51
XVII. Deporte 54
XVIII. Cultura 56
XIX. Seguridad social 59
XX. Empleo y salarios 61
XXI. Política agroindustrial 64
XXII. Política industrial y energética 68
XXIII. Política energética 71
XXIV. Turismo 74
XXV. Política de transporte 77
XXVI. Construcciones, las viviendas y los recursos hidráulicos 79
XXVII. Comercio 82
XXVIII. Conclusiones 84
A 20 años de Primer Informe de Desarrollo Humano de ONU 87
Cuba Bordeando el Precipicio 90
La Economía Cubana en 2010 93
Cuba: Un Principio Espeluznante 100

Oscar Chepe and Miriam Leiva, February 2010. Photo by Arch Ritter

Resumen Ejecutivo, por Rolando Castañeda

Planteamiento general
Los instrumentos aprobados por el gobierno para la implementación del trabajo por cuenta propia, el proceso de la reducción de las plantillas infladas, el recorte de los gastos sociales y el Proyecto de Lineamientos de la Política Económica y Social, revelan pocos, parciales e insuficientes cambios, que no solucionarán la crisis socioeconómica existente.
El gobierno sólo actualiza (“le pone parches”) a las fuentes principales de los problemas actuales: el sistema socioeconómico, que no ha funcionado, es irreparable y está mal gestionado, así como el régimen político totalitario carente de libertades civiles fundamentales. Ellos han llevado al desastre, la dependencia externa e impiden la sustentabilidad económica.
La baja eficiencia, la descapitalización de la base productiva y de la infraestructura, el envejecimiento y estancamiento en el crecimiento poblacional, entre otros muchos males, son consecuencias de ese modelo.
El gobierno elude medidas indispensables mientras propone unas pocas medidas insuficientes, llenas de limitaciones y prohibiciones. También reitera sin corregir apropiadamente medidas anteriores que han sido implementadas con muchas limitaciones y sin tener una concepción integral de la economía, tales como: la entrega de tierras en usufructo, el pago por resultado a los trabajadores y los recortes fiscales.
Los Lineamientos definen que primará la planificación y no el mercado, o sea continuará la burocratización de la sociedad, bajo rígidas normas centralizadoras, que imposibilitan la flexibilidad requerida por la actividad económica y la vida en general de la nación. No se reconoce la propiedad privada y se subraya la política de no permitir el crecimiento de la actividad individual.
La seria contradicción de una política con ribetes neoliberales de drásticos recortes, sin que se brinde a los ciudadanos posibilidades reales de ganarse el sustento decentemente, e incluso aportar de forma racional a los gastos del Estado, podría determinar convulsiones sociales, en un ambiente ya permeado por la desilusión y la falta de esperanza.

El despido de trabajadores y el trabajo por cuenta propia
El vital proceso de racionalización laboral, con el despido hasta abril de 2011 de 500.000 trabajadores considerados innecesarios, el 10% de la fuerza de trabajo ocupada, para continuar haciéndolo posteriormente con otros 800.000, que fue postergado por tantos años, ahora se pretende realizar de forma muy rápida. No se ha contado con la preparación apropiada ni la organización para que tenga éxito en un plazo tan breve y se pueda reubicar una cantidad tan grande de despedidos. Ni siquiera se han modificado los artículos de la Constitución Política (i.e. el 21 y el 45) que se contraponen a lo propuesto.
Al desestimulo por los bajos salarios, la carencia de información técnica, el vacío de reconocimiento social y las generalizadas malas condiciones laborables, a las nuevas generaciones de estudiantes se une ahora la incertidumbre de hallar empleo futuro por el despido masivo de trabajadores.
El trabajo por cuenta propia en sólo 178 actividades permitidas que deberá absorber el despedido masivo de trabajadores, enfrenta graves limitaciones, más severas que las existentes para las empresas estatales y las mixtas con capital extranjero. Incluyen los impuestos por seguridad social del 25% que el trabajador por cuenta propia deberá contribuir, así como los trabajadores que se contraten con base en un salario fijado por el gobierno, a un nivel 50% mayor que el salario medio prevaleciente. También están los elevados impuestos sobre los ingresos personales que pueden llegar hasta el 50% cuando excedan de $50,000 anuales, y las restricciones a los gastos de operación que se permiten deducir de los ingresos brutos para fines tributarios, en algunos oficios de sólo hasta el 10% de los ingresos anuales.
A ello hay que añadir algunas prohibiciones arbitrarias, tal como las sobre el número de sillas de los restaurantes (20) y las barberías (3), así como la ausencia de un mercado mayorista de abastecimiento de insumos. Hasta tanto ese mercado no aparezca, continuará desarrollándose la ilegalidad y, sobre todo, el robo de los recursos estatales, estimulado por el extendido descontrol existente y el miserable salario de los trabajadores. ‘
De esta forma el Estado reduce la actividad individual a iniciativas arbolitos bonsái e impide el crecimiento del trabajo por cuenta propia y el surgimiento de pequeñas y medianas empresa. Un mecanismo configurado para mantener el estrecho control del Estado-Partido sobre la sociedad, temeroso de que el fortalecimiento y desarrollo de la actividad privada pueda convertirse posteriormente en un peligro.

Aspectos generales y macroeconómicos

La mayoría de los Lineamientos sobre aspectos generales, macroeconómicos y sectoriales son enunciativos, generalidades que soslayan la grave situación con la continuada acumulación de graves problemas y sin proponer soluciones reales para los mismos. Desafortunadamente, los cambios requeridos no se avizoran. Este conjunto de 28 artículos se refiere a estos temas y por qué considera que su tratamiento es insuficiente para una sociedad estatizada, llena de distorsiones y carente de racionalidad económica
El problema de la descapitalización física es sumamente serio. Desde inicios de los años 1990 se mantienen tasas de formación bruta de capital fijo en relación con el PIB usualmente inferiores al 10%, menores a las tasas de amortización de los medios de producción y la infraestructura, aceleradas por la falta de reposición, actualización tecnológica y mantenimiento adecuado.
Desprovisto el país de la “ayuda” a inicios de 1990, empezó el deterioro paulatino de la salud pública, la educación, la seguridad social, el deporte y la cultura, con una incidencia muy negativa en los salarios, que como indicara el presidente Raúl Castro el 26 de julio de 2007 son insuficientes para vivir. La permanencia de los esquemas sociales con oportunidades de acceso para todos está en peligro debido a la falta de sustentación económica.
Resulta indispensable introducir tasas de cambio reales. Las tasas actuales, recargadas por gravámenes absurdos, que pueden conducir a análisis distorsionados y por consecuencia a decisiones equivocadas. En especial respecto a la política de inversiones, el comercio exterior y otros aspectos vitales para el desarrollo nacional. Una moneda sobredimensionada representa un serio obstáculo para el crecimiento de la llegada de turistas, al reducir arbitrariamente la competitividad del mercado cubano.
Cuba paga intereses bancarios muy altos a los prestamistas extranjeros; sin embargo, a los nacionales se les abonan intereses sumamente bajos, incluso por debajo de las tasas de inflación reales. Es necesario motivar a la población a depositar sus ahorros en los bancos, en especial aquellos en moneda convertible, dándosele las debidas garantías y el pago de intereses estimulantes y acordes con la situación financiera del país.
El gobierno no contempla la participación de la comunidad cubana en el exterior en la reconstrucción nacional. Un sector de nuestro pueblo que, con el otorgamiento de las garantías necesarias, podría ser fuente de importantes recursos financieros, tecnologías avanzadas, conocimiento y experiencia en la gestión de negocios y posibles nuevos mercados. Habría que adoptar una política pragmática e inteligente de acercamiento a nuestros hermanos en el extranjero, muy en especial hacia la comunidad afincada en EEUU, que además podría ser un puente para mejorar las relaciones con ese país, con enormes beneficios para nuestra economía.

Aspectos sectoriales
En los aspectos sectoriales de los Lineamientos se habla mucho acerca de ejecutar proyectos e inversiones, de potenciar capacidades de diseño y proyección, y fortalecer determinadas capacidades, pero no se define como hacerlo ni como financiarlo.

La esencia de los problemas nacionales, pueden hallarse en la destrucción de la agricultura que ha provocado una extraordinaria dependencia de alimentos importados, incluido azúcar, café y otros muchos que antes Cuba exportaba, mientras, los Lineamientos, reconocen que “ …las tierras todavía ociosas,.. constituyen el 50%…”. El sector está afectado por los precios fijados por el Estado unilateralmente por debajo del mercado, con frecuentes largas demoras en los pagos y las tradicionales deficiencias en la gestión de las empresas acopiadoras oficiales. Las tiendas abiertas para la venta de herramientas e insumos tampoco constituyen una solución, los precios son demasiado altos.
Las Cooperativas de Crédito y Servicios (CCS), donde los productores con muchas dificultades mantienen sus tierras individualmente, con sólo el 18% de la superficie agrícola total (cierre de 2007) han generado tradicionalmente más del 60% de la producción agrícola nacional, así como el más bajo por ciento de tierras ociosas, a pesar de la crónica falta de recursos, el permanente hostigamiento, las prohibiciones y la obligatoriedad de entregar las cosechas total o parcialmente al Estado en las condiciones y a los precios arbitrarios fijados por él.
En este escenario si se continúa con la mentalidad de ejercer estrictos controles sobre los posibles cooperativistas y negando la voluntariedad como concepto básico para la formación de las cooperativas, por muchos “buenos deseos” e indefinidos planteamientos que existan, el movimiento cooperativo no avanzará.
En la industria se refleja con mayor fuerza el proceso de descapitalización generalizado desde principios de la década de 1990. Por ello se requiere con urgencia su modernización y reequipamiento para poder detener la tendencia al actual atraso tecnológico, e incluso la paralización del sector. En 2009 se alcanzó una producción correspondiente al 45% de 1989, incluida la industria azucarera. Si se excluyera esta industria, el indicador sería del 51%. La producción nacional de materiales de construcción es muy baja, con un índice de volumen físico, al cierre de 2009, solo del 27% del nivel de 1989.
El gobierno cubano no publica los ingresos netos por concepto de turismo, por lo cual es difícil evaluar con precisión sus beneficios. Debido al pobre desarrollo de la economía cubana, se importa muchos productos consumidos por los visitantes. Esta actividad podría ser una de las locomotoras que impulse las demás ramas de la economía, pero para ello habría que realizar reformas estructurales, que reduzcan radicalmente la dependencia del exterior.
Conclusión

El aniquilamiento de los sueños de un futuro más justo y próspero para Cuba, podría detenerse si se propiciara un proceso de reconstrucción radical, con el abandono de los dogmas que tanto daño han hecho. Cuba posee significativas reservas productivas inexplotadas y un pueblo que debidamente estimulado, con libertad para crear, podría sacar a la nación de la crisis. Para ello resulta indispensable un nuevo modelo económico, político y social en el cual participarían en paridad de derechos y deberes las iniciativas públicas y privadas, estableciéndose un círculo virtuoso propiciador de desarrollo, que en la medida en que progresen ambas iniciativas se beneficie el país con mayores niveles de eficiencia, así como más y mejores productos, y el incremento del pago de impuestos que haga sostenible la financiación de la educación, salud pública, seguridad y asistencia social, y otros.

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An Overview Evaluation of Economic Policy in Cuba circa 2010

By Arch Ritter

The essay attached and summarized briefly here was presented at a conference at CIAPA, in San Jose, Costa Rica, February 3 and 4, 2009 organized by Paolo Spadonu of Tulane University.

The full essay is entitled An Overview Evaluation of Economic Policy in Cuba, circa 2010, June 30, 2010 and can be seen “HERE”. The Introduction and Conclusion are presented below.

Hopefully, this evaluation will change considerably for the better after the Sixth Congress of the Communist party of Cuba in April.

I. Introduction

The economic development of Cuba has been characterized by high levels of investment in people with successful results, but with weak performance in terms of the production of goods and services generally. Cuba’s achievements regarding human development are well known and are epitomized by the United Nations Development Program’s “Human Development Index” (HDI). On the one hand, this index ranks Cuba at #1 in the world for the Education component (somewhat surprisingly) and #31for the Life Expectancy component. On the other hand, Cuba’s world ranking is for GDP per capita in purchasing power parity terms is #94 with an overall world HDI ranking of #51(UNDP, HDR, 2009, 271.) These rankings underline the inconsistency between the Cuba’s high level of human development on the one hand and its economic underperformance on the other. The strong economic performance of the 2004 to 2008 period appeared to constitute a rapid recovery in terms of Cuban GDP statistics. However, this recovery, while perhaps not illusory, was fragile and unsustainable, based on factors such as support from Venezuela and high nickel export prices, and indeed it has been reversed in 2009-2010.

Given the quality of Cuba’s human resources, the economic performance for the last 15 years should have been excellent. The central argument of this essay is that Cuba’s weak economic performance has been the result of counter-productive public policy. The objective of this essay is to analyze and evaluate a number of central policy areas that shape Cuba’s economic performance, including monetary and exchange rate policy, policy towards micro-enterprise; agricultural policy, labor policy, foreign investment policy, policies towards infrastructure renewal, and the policy approach to self-correction and self-renewal.

In order to present a brief overview of the evaluations, an academic style of grading is employed, with an “A+” being excellent through to an “F” representing “failure”.

This evaluation schema is of course subjective, impressionistic and suggestive rather than rigorous. It is based on brief analyses of the various policy areas. However, the schema is similar to the scoring systems widely used in academia, and is used here with no more apology than is normally the case in the academic world.

Before proceeding with the policy analysis and evaluation, a brief overview of economic performance in the decade of the 2000s is presented to provide the context for the examinations of economic policy.

II. General Economic Performance

III.  Evaluation of Some Central Policy Areas

IV.   Summary and Conclusion:

A summary of the evaluations of the various assessment areas yields an overall evaluation of   “D +”. This is not a strong assessment of Cuban economic policies.

1. Monetary & Exchange Rate Policy                  C-

2. Micro-Enterprise Policy                                    F

3. Policy towards Agriculture                              C-

4. Labor Policy                                                        D+

5. Foreign Investment Policy D+

6. Infrastructure Renewal                                   D

7. Capacity for Self Correction                            D

Overall Grade: D +

The result of such weak policies in these areas is weak economic performance. Badly conceived economic policies nullify the potential efforts of the Cuban citizenry. The major investments in human capital, while fine in their own right, are not yielding strong economic performance. Indeed, misguided policies are undermining, sabotaging and wasting the economic energies and initiatives of Cuba’s citizens.

Major policy reforms amounting to a strategic reorientation of Cuban economic management are likely necessary to achieve a sustained economic recovery and future economic trajectory. So far, writing in June 2010, the Government of Raul Castro has made some modest moves, principally in agriculture, as mentioned earlier. Other policy areas such as those relating to micro-enterprise are reported to be under discussion at high levels in the government. On the other hand, the replacement of the reputed pragmatists Carlos Lage, (Secretary of the Council of Ministers) and Jose Luis Rodriguez, (Vice President of the Council of Ministers and Minister of Economy and Planning) and the replacement of Lage by Major General José Amado Ricardo Guerra of the Armed Forces seems to suggest that the Raul Castro Government may be moving towards a less reformist approach to economic management ( Granma International, 2009.)

The types of policy reforms that would be necessary to strengthen the policy areas discussed above would include the following:

  1. Monetary & Exchange Rate Policy: movement towards realistic and unified monetary and exchange rate systems;
  2. Micro-Enterprise Policy: establishment of an enabling and supportive policy environment rather than a punitive policy of containment;
  3. Policy towards Agriculture: further support for small-scale farmers plus a reinvigoration of the abandoned sugar fields with cane for ethanol, among other policies;
  4. Labor Policy: implement the International Labour Organization approach to fundamental labor rights;
  5. Foreign Investment Policy: establish a clearer and more unequivocal rules-based policy framework;
  6. Infrastructure Renewal: strengthening resource flows towards maintenance, especially for housing, water, and sanitation, and facilitating self-managed and do-it-yourself maintenance on the housing stock by liberalizing the trades and making repair supplies available at reasonable cost;
  7. Capacity for Self Correction: permit an authentic implementation of freedom of expression and freedom of association thereby permitting economic analysis and criticism through a free press and media and the formation of alternate “teams” of potential economic managers – some within political parties.

In sum, effective economic management requires new ideas, transparency and criticism, and, indeed, a major policy reform process in order to reverse the current wastage of human energies, talents and resources. Policy reorientations in the directions noted above are unlikely to be forthcoming from the Government of Raul Castro, which appears to be deeply conservative as well as “gerontocratic”. Cuba will likely have to wait for a “New Team” or more likely a “generational change” in its overall economic management before such major reforms can be implemented.


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Cuba in Transition: Volume 20 Proceedings of the Twentieth Annual Meeting of the Association for the Study of the Cuban Economy

The papers from the 2010 meetings of the Association for the Study of the Cuban Economy have just been posted on the ASCE Web Site and can be found at Papers and Proceedings of the Twentieth Annual Meeting of ASCE.

As usual, a wide range of excellent papers are presented at ASCE’s annual meetings Many essays include valuable, original and ground-breaking analyses on a wide range of economic as well as socio-economic and politico-economic issues..

A Table of Contents with hyperlinked titles of the papers is included below.

Preface

Conference Program

Table of Contents

The Cuban Economy in 2010 as Seen by Economists Within the Island and Other Observers

Joaquín P. Pujol

La Economía Cubana: ¿Tiempos de Esperanza?

Oscar Espinosa Chepe

Crisis Management of Cuban International Liquidity

Luis R. Luis

If It Were Just the Marabú… Cuba’s Agriculture 2009-10

G.B. Hagelberg

The Numbers Diet: Food Imports as Economic Indicators

Lauren Gifford

Government-Controlled Travel Costs to Cuba and Costs of Related Consular Services: Analysis and International Comparisons

Sergio Díaz-Briquets

Envios de Remesas a Cuba: Desarrollo, Evolución e Impacto

Emilio Morales Dopico

Dashed Expectations: Raúl Castro’s Management of The Cuban Economy, 2006–2010

Jorge F. Pérez-López

Cuba: ¿Hacia otro “Periodo Especial”?

Mario A. González-Corzo

Cuban Education and Human Capital Formation

Enrique S. Pumar

La Masonería Cubana y su Contribución a la Sociedad Civil

Jorge Luis Romeu

The Internet and Emergent Blogosphere in Cuba: Downloading Democracy, Booting Up Development, or Planting the Virus of Dissidence and Destabilization?

Ted Henken

El Insostenible Apoyo Económico de Venezuela a Cuba y sus Implicaciones

Rolando H. Castañeda

Cuba-Venezuela Health Diplomacy: The Politics of Humanitarianism

Maria C. Werlau

British Policy-Making and Our Leyland in Havana (1963–1964)

Maria Carla Chicuén

La Desigualdad en Cuba: El Color Cuenta

Natalie Kitroeff

A Macroeconomic Approach to Foreign Direct Investment (FDI) Inflow from the People’s Republic of China to Cuba

Orlando R. Villaverde

A Survey of the Relationship between Cuba and China: A Chinese Perspective

Pin Zuo

The Evolution of the Cuban Military: A Comparative Look at the FAR with the
Bureaucratic-Authoritarian Model of South America

Michael Aranda

Empowering the Cuban People Through Access to Technology

Cuba Study Group

The Global Economic and Financial Crisis and Cuba’s Healthcare and Biotechnology Sector: Prospects For Survivorship and Longer-term Sustainability

Elaine Scheye

Globalization and the Socialist Multinational: Cuba and ALBA’s Grannacional Projects at the Intersection of Business and Human Rights

Larry Catá Backer

Racismo Estructural en Cuba y Disidencia Política: Breves Antecedentes

Ramón Humberto Colás

Arbitration and Mediation: Impartial Forums to Resolve International Commercial Disputes in Cuba

Rolando Anillo-Badia

Gazing at the Green Light: The Legal and Business Aspects of Real Property Investment in Cuba

Richard M. David

The Creation and Evolution of the Legal Black Hole at Guantánamo Bay

Michael J. Strauss

Las Relaciones Cuba-Israel: A la Espera de una Nueva Etapa

Arturo López-Levy

Revolutionary Cuba’s GDP: A Survey of Methods and Estimates

Jorge F. Pérez-López

A Dynamic Factor Model of Quarterly Real Gross Domestic Product Growth in the Caribbean: The Case of Cuba and the Bahamas

Philip Liu and Rafael Romeu

Cuba’s Attempts at Democracy: The Colony

Roger R. Betancourt

Lessons Learned from 20 Years of Privatization: Albania, Estonia and Russia

Jorge A. Sanguinetty and Tania Mastrapa

The Cuban Tourism Sector: A Note On Performance in the first Decade of the 21st Century

María Dolores Espino

Prospects for Tourism in Cuba: Report on the Residential Sales/Leases in Golf and Marina Developments

Antonio R. Zamora

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