• 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."

Prison workers used in many Cuban government enterprises

By Juan O. Tamayo, Miami Herald, Posted on Mon, May. 21, 2012

Combinado del Este

 The Cuban government-owned enterprise Provari is known on the island for making everything from bricks and construction blocks to mattresses, tourist handicrafts and the insecticide Lomaté — I Killed It.

What is less well known is that the vast majority of its workers are prison inmates — what dissidents denounce as “slave laborers” who work with few safety protections and receive meager wages or are not paid at all.

Prison labor in Cuba is extensive yet “like the dark side of the moon, not well known at all,” said Elizardo Sánchez Santa Cruz, head of the Cuban Commission for Human Rights and National Reconciliation.

A Provari business prospectus claimed it had 150 production facilities around the island in 2001. Sánchez said it operates in virtually all of the estimated 200 prisons and labor camps in Cuba.

Prison labor is common around the world. In the United States, prisoners make license plates, government furniture and much more. Florida state prisons require inmates to work unless they are exempt for medical or other reasons. Most earn nothing, and canteen workers, barbers and a few others get only $50 a month.

“There’s no objection in principle to companies managing factories in prisons,” said Andrew Coyle of the International Centre for Prison Studies in London. But inmates should have equal salaries and work conditions. “This should not be forced or slave labor.”

But Cuba is a dictatorship, Sánchez argued, where the communist government can do anything and keep it secret. That includes exploiting inmate workers at will and punishing anyone who complains.

He added that he was specially concerned about the safety conditions in prison factories and singled out the Lomaté insecticide, manufactured in Havana’s Combinado del Este and other prisons around the island.

Farm workers seldom get special clothing to protect them from chemicals, and cane cutters rarely get proper boots to protect their feet from their machetes, said Joel Brito, a former safety expert in the island’s lone labor union, the Cuban Workers’ Central.

The Interior Ministry (MININT) and Ministry of the Armed Forces, which own a large number of manufacturing and construction enterprises, do not report industrial accidents to the National Statistics Office, Brito noted.

“There are no protective measures because there’s always a shortage of money. And if that’s the case in the general economy, imagine what it’s like for prisoners,” added Brito, who now heads a Miami group that monitors labor abuses in Cuba.

Questions about prison labor in Cuba arose recently amid reports that the IKEA furniture chain and an East German firm had hired the Cuban state-owned company EMIAT to use prison labor to manufacture tables and sofas in 1987.

One Cuban business report says EMIAT imports supplies and commercializes products for government-owned companies, including Provari. EMIAT and Provari — Enterprise for Various Products — share a Havana address in some of the reports.

A man who answered the phone at Provari’s Havana office, asked if the company uses prison labor, said, “Yes, the work is by prisoners.” He also confirmed the firm is owned by MININT, which is in charge of prisons, but declined further comment.

A Cuban government radio report on Provari’s work last summer said it was established 20 years earlier “principally with the objective of offering work to prisoners … and integrating them into work useful for society.”

Many prisoners work for the chance at fresh air and perhaps better food, and to avoid having their records marked “refused to work,” which would dash any hope for an early release, said Luis Enrique Ferrer, a dissident who spent eight years in prison.

Authorities allow only common criminals to work, fearing that political prisoners would publicize the work conditions, he added. Ferrer, who did not work in prison, was freed in 2010 and now lives in Miami.

But dissidents and independent journalists in touch with prisoners have published several reports over the years alleging problems at Provari’s prison workshops.

Journalists Jorge Alberto Liriano Linares reported in 2010 that 16 inmates suffered serious accidents at a Provari factory for construction materials at the Kilo 8 prison in eastern Camaguey Province, where he served part of his own13-year sentence.

Inmates in “this killer factory” are forced to work without salary, clothes, shoes or gloves, he wrote for the news service Hablemos Press. They work 10 hours a day and handle toxic chemicals “and because of that they suffer respiratory and skin diseases.”

Brito’s International Group for Corporate Social Responsibility in Cuba reported in 2010 that a factory in Prison 1580 near Havana was forcing inmates to work up to 12 hours a day making construction blocks and seldom paying the promised $10 a month.

Its 2009 annual report included complaints that inmates at the Nieves Morejón prison in Sancti Spiritus were paid a mere $2 per month, and that prisoners in Boniato in eastern Cuba were paid $1 per month — plus a promised bonus that was never paid.

Dissident Felix Reyes reported last year that prisoners at the Canaleta prison in eastern Ciego de Avila had complained that the gloves bought for them by the Provari factory there “were rotted and were missing fingers.”

Independent journalist Dania Virgen Garcia, who has written often about prison conditions, told El Nuevo Herald that she knew of prisoners who worked up to 16 hours a day, six days a week, and were paid nothing.

Sanchez and Ferrer said most of the overall prison labor in Cuba involves agricultural work like weeding fields, harvesting vegetables and picking fruit — some for sale, some for the prisons’ own consumption.

Provari uses the prison labor more for manufacturing, said Sánchez and García. It also has subsidiaries that build roads and government buildings, although it is not clear if they use prison labor.

A report last year in the government’s Guerrillero newspaper noted that the Provari branch in the western province of Pinar del Rio had the equivalent of $200,000 worth of sales in 2010, “mostly for products sold locally rather than export.”

The branch’s production included bleach and muriatic acid, beach chairs, cribs and playpens, clay and concrete construction blocks, paint and paint brushes, plastic tubes and ornamental plants, according to the report.

A large shop in a Havana women’s prison sews jeans for export under several brand names, as well as uniforms for the police and the military, García said. Sánchez said the Boniato prison, where he spent time in the 1990s, makes metal chain link fencing.

Other Cuban news reports noted that a Provari unit in eastern Ciego de Avila made 20,000 plastic molds, and that the enterprise and the Ministry of Construction were to provide the materials for a 2010 campaign to step up home construction.

The company also manufactures the Lomaté insecticide as well as lice and tick killers “and other products “for sanitary hygiene,” and was planning to build a 170-liter solar water heater, according to other media reports.

A business prospectus issued in 2001 listed some of Provari’s activities as carpentry using precious woods as well as textiles sold under the OESTE and HERCULES brands and the upholstery of office furniture sold under the brand name of OFIMAX.

The prospectus also said the enterprise was ready to do business “with foreign and national companies,” though the deal with IKEA appeared to have run into trouble.

The first sofas made for IKEA in 1988 reportedly had “quality problems,” and it was not clear if any part of the deal was ever carried out.

 

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Cuba crackdown sees foreign companies exit

Financial Times, May 21, 2012 5:29 pm

Cuba crackdown sees foreign companies exit

By Marc Frank in Havana

Tighter restrictions following President Raúl Castro’s crackdown on state corruption and inefficiency is leading foreign businesses to leave Cuba, jeopardising the investment that his reform programme needs if it is to succeed.

The number of foreign joint ventures in Cuba has now fallen to no more than 240, according to government insiders, versus 258 in 2009, the last official figures available, and more joint ventures have closed than opened since the reform package was approved last April.

One of the latest companies to go is Unilever, the Anglo-Dutch consumer giant, after a 15-year joint venture expired and a dispute over the controlling interest in a new venture could not be resolved, a local manager said, asking not to be named.

At the same time, an offshore oil find that Havana had hoped would lead to increased access to international capital and less dependency on socialist ally Venezuela has so far proved fruitless after Repsol, the Spanish oil company, said late last week that the first of three test wells drilled in Cuban waters had no oil.

It was hoped that sweeping reforms adopted by the Communist party last year would open the way for significant foreign investment. But the government has instead re-examined existing agreements and stalled new projects, foreign business sources said.

Four joint ventures controlled by two Canadian trading firms are in the process of being “liquidated”. The top two executives in a British fund, Coral Capital, which says it has invested $75m in Cuba – much of it in the luxurious Saratoga hotel – are being held, although not charged with any offence, on suspicion of corrupt practices. Another target – Max Marambio, a Chilean businessman and friend of Fidel Castro – fled the country after being charged with corruption last year.

Although Mr Castro’s reform plan promised a review of cumbersome foreign investment procedures, promoters of several golf course projects report they are still waiting for approval, despite government promises to sign off in 2011, as are various companies that have been negotiating sugar ventures since 2006.

A multibillion-dollar plan to expand a refinery in central Cienfuegos and build a petrochemical complex around it, announced years ago, has also yet to materialise.

“I like to think the government is cleaning up the house before opening the front door,” Cuban economist Juan Triana told a gathering of British and Canadian businessmen last week.

One western diplomat said: “Cuba is reviewing the investment terms and some officials have said they want to fix mistakes made when the country first opened up to foreign investment in the 1990s, closing contracts that were not beneficial enough.”

Most experts and diplomats believe Mr Castro’s plans to lay off up to 1m state workers and lift the country out of its economic malaise will fail without large flows of direct investment, or a major oil find in the Gulf of Mexico.

The need for foreign partners is especially acute given the uncertain future of Cuba’s cancer-stricken ally, Venezuelan president Hugo Chávez, who provides the island with some 115,000 barrels of subsidised oil a day and faces a presidential vote in October, which he could lose.

“While it is far from clear what the future holds for Chávez and Venezuela, Cuba must be ready for it,” said John Kirk, a Latin America expert at Dalhousie University in Halifax, Canada.

“Given the continued US will to stymie any access to international lending organisations, the only source of significant capital around is still going to be foreign and private,” he added.

Of the dozen or so multinationals operating in Cuba, Telecom Italia left in 2011 while those remaining include Nestlé (bottled water), Sol Melia (hotels), Pernard-Ricard (rum), Anheuser-Busch InBev (beer), Imperial Tobacco (cigars) and Bouygues Batiment (construction).

If Havana hoped an offshore oil find would strengthen its position, it may now have to think again after Repsol said on Friday that the test well it drilled to 4,500m below the seabed was dry. Russia’s Gazprom and Malaysia’s Petronas will soon drill a second well, and Venezuela’s PDVSA is tentatively scheduled to drill a third. The US Geological Survey has estimated that Cuban waters could contain 5bn barrels of oil.

 

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Cuba’s crumbling buildings mean Havana housing shortage

By Sarah Rainsford;  BBC News, Havana

Havana risks seeing its historic city centre reduced to ‘a void’

Havana is beguiling from a distance, especially its old colonial buildings bathed in tropical sunshine. But up close this city is crumbling. Number 69 on the Malecon, the city’s long seafront, looks particularly perilous. The apartment block has gaping holes where chunks of brick and plaster have fallen away. Bare metal rods protrude where balconies used to be.

“Look how badly these columns have deteriorated,” says Olga Torriente, pointing to thick cracks in the external wall of her flat, up on the top floor.

She pulls her bed into the centre of the room in a storm, afraid the whole wall could come crashing down.  Big chunks have already fallen off this building on the Malecon Some of Olga’s neighbours – those judged priority cases – have been rehoused. Others joined a “microbrigada”, or construction team, almost three years ago to help build a replacement apartment block for themselves. But there is still no completion date, and no alternative.

“How long will we have to wait? We need to get out,” says Ms Torriente. “People ask me if I’m not afraid to live here. Of course I’m afraid, but this is my house so where can I go?”

Like Ms Torriente, most Cubans own the house they live in – one of the principles of the revolution. But many have lacked the funds to maintain them.

Adding to Cuba’s difficulties, some 200,000 families across the island were left homeless by devastating hurricanes in 2008.

“Buildings are crumbling because they’re old. Then there’s the salt spray, humidity, termites, hurricanes and overcrowding. There are many kinds of problems and sometimes altogether,” explains former city architect Mario Coyula.

Seven out of every 10 houses need major repairs, according to official statistics. Some 7% of housing in Havana has formally been declared uninhabitable. The province around the capital needs some 300,000 more properties.   The shortage has forced expanding families to build lofts and new partitions within their homes, putting weakened structures under additional strain.

“It’s difficult, because neither the government nor the people have the money to care for the buildings. In a way, we inherited a city we are not able to keep,” Mr Coyula says, referring to Havana’s once grand colonial-era architecture in particular.

But the government is now trying to stop the rot – literally. For decades, Cuba subsidised all construction materials, but production slumped when state budgets became strained. Finding materials was difficult and an expensive black market emerged. There were also tight restrictions on building work.

Now, Cuba has shifted tack. It is allowing builders yards to sell materials at market prices, while offering state funds to help those home owners in most need. Hurricane victims are a priority but anyone on a low income and in what is considered “vulnerable” housing can apply.

“We used to subsidise materials now we’re subsidising the individual,” says Marbelis Velazquez, from Havana’s provincial housing office. “Not everyone is in the same situation, economically and the state clearly has to help those most in need,” she says.

The new grants range from 5,000 Cuban pesos ($208) for minor repairs to a maximum 80,000 pesos ($3,333) to build a 25 sq metre room from scratch.

In Cerro, one of central Havana’s most run-down districts, the Padro family is hoping their own petition will be accepted. Nadia Padro’s parents built a basic wooden and brick shack in their garden when living there with six siblings and assorted partners and grandchildren became too crowded. There is a kitchen, with water and electricity. But the roof leaks when it rains and Nadia and her husband have to squeeze into one bed at night alongside their two young children. “A government grant would really improve things,” Nadia says, explaining that they want to build a separate room for their daughters. Neither she nor her husband has a steady job and could never afford the work on their own.

The government plans to fund the grants with the sales tax it collects from state-owned building yards. It has already increased production and after years of bare forecourts, the yards are filling up with materials for sale.

“Before you had to hunt for things through friends or contacts,” Hernan Mayor explains, as he loads roofing material onto the back of his bike at The Wonder builders yard. He has been saving money to build a small extension to his house. “The materials are all here legally now, which is better. If things were a bit cheaper, it would be perfect. But at least they’re available now,” he says.

Nadia Padro is hoping to get a government grant to build another room in her shack New regulations have also made it much faster – and simpler – to get a licence for new building work. And, for the first time, bank credit is becoming available.

So Cuba is creeping into action over its housing stock. But the delay has already cost dearly. In Havana alone, it is said that three houses collapse either partially or completely every single day.

As for the city’s heritage, beyond the carefully restored “hub” of Old Havana, much of that may already have been lost for good. “It’s impossible to preserve all the buildings, I know many will go,” says s architect Mario Coyula. “If nothing changes, Havana may end like a circle…with a void in the middle where the city used to be.”

Havana, April 2012, Photos by Arch Ritter


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Mark Frank: “Cuba drags feet on foreign investment”

* No increase in foreign investment despite reforms

* Potential new partners wait for answers

* Existing ventures under scrutiny

Camilo Cienfuegos Refinery

By Marc Frank

HAVANA, May 15 (Reuters) – Cuba’s reform plans to attract more overseas investment are off to a slow start as the government focuses more on regulating existing foreign joint ventures than encouraging new ones, businessmen and diplomats say.

In fact, Cuba has closed more joint ventures than it has opened since the ruling Communist Party adopted wide-ranging economic reforms a year ago, and remains far off highs reached in the 1990s, according to official reports.

The list of endangered or terminated joint ventures includes one big name, Unilever PLC, the Anglo-Dutch consumer giant, and a number of others that have operated in the country for 15 years or more.

Cuba’s investment reform plan announced last year spoke positively of foreign investment, promised a review of the cumbersome approval process and stated that special economic zones, joint venture golf courses, marinas and new manufacturing projects were planned.

Most experts believe large flows of direct investment will be needed for development and to create jobs if the government follows through with plans to lay off up to a million workers in an attempt to lift the country out of its economic malaise.

It will be particularly critical given the health of cancer-stricken ally Venezuelan President Hugo Chavez, who has championed close cooperation between Cuba and oil-rich Venezuela.

While the reform plan built up hopes of an opening to foreign capital, it also made clear that existing and future investments would be subject to “rigorous controls” on “regulations and procedures, as well as the commitments assumed by foreign partners.” This part of the program has been vigorously carried out, according to both business and Cuban sources, with a review of the country’s approximately 240 foreign investment projects recently concluded.

That number is a decline from the 258 projects Foreign Trade and Investment Minister Rodrigo Malmierca reported at the close of 2009 and way down from the 700 Cuba had a decade ago.

The issue in part appears to be the result of old ideological habits dying hard, said Geoff Thale, program director at the Washington Office on Latin America.

Other reforms, such as encouraging more self employment and private farming, have been easier to implement.

“From the point of view of the state, an opening to foreign investment seems like a much bigger step to take in changing the economic model than does the liberalizing of domestic agriculture or current opening to small business,” Thale said.

VENTURES CLOSE

Unilever PLC, the Anglo-Dutch consumer giant, is the latest and best known of the foreign firms to pack its bags.

The company’s 15-year, 50-50 economic association has expired and a dispute over the controlling interest in a new venture could not be resolved.

“We wanted 51 percent of the new venture and so did the Cubans. At this point we are leaving, even though some discussion is still going on,” a company manager said, requesting anonymity.

Israeli investors, operating out of the Panama-based BM Group, recently pulled out of their longstanding juice processing business after new contract negotiations broke down, according to the business sources.

Investors in Havana’s container terminal are leaving as Cuba prepares to open a new terminal at Mariel, diplomats said.

Several ventures controlled by two Canadian trading firms and British investment fund Coral Capital under investigation for alleged corrupt practices are in the process of liquidation. Th e ir offices were closed last year and their top executives arrested as part of the crackdown on corruption.

SOCIALIST INVESTMENT

Following the election in Venezuela in 1998 of president Hugo Chavez, an avowed socialist, Cuba turned away from encouraging private investment in favor of state-funded cooperation with its new oil-producing ally.

Venezuela has since become Cuba’s biggest economic partner, with some 50 joint ventures signed over the last 10 years, although many are still only on the drawing board.

Cuba depends on Venezuelan oil to meet its domestic energy needs and Chavez’s uncertain future makes it more imperative that the Cuban government pick up the pace if it wants more foreign investment, said a western diplomat.

“The Cubans may be allergic to foreign investment, but the clock is ticking, and concessions on this front are inevitable,” the diplomat said.

“Instead, they are going over existing companies with a fine-tooth comb. It is hard to understand. Perhaps they are waiting for oil to be discovered offshore,” she said.

Other investment projects remain up in the air. A dozen golf course projects report no progress despite government promises to sign off after years of negotiations, as do companies negotiating ventures with the sugar industry since 2006.

Billion dollar plans to expand refineries and build a petrochemical complex around a refinery in central Cienfuegos, announced years ago, have yet to be signed off on.

On the other hand, in perhaps the most promising joint venture in decades, offshore oil exploration began in earnest this year with foreign partners planning at least three wells drilled by a massive, Chinese-built rig now parked 20 miles off the coast in the Gulf of Mexico.

Camilo Cienfuegos Refinery

$900 Million Brazil-financed Port Development at Mariel

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Can Cuba Move Half its Economy to the ‘Non-State’ Sector?

From the Inter-Americanj Dialogue’s “Latin America Adviser” comes some interesting comments on the feasibility of shifting half of Cuba’s economy as measured by GDP to the non-state sector. The analysts are undoubtedly correct in arguing that the conditions are not yet in placed to permit an expansion of the private sector so as to constitute 50% of the economy.

However, as a statement of intention, Hernández comment is interesting. This objective may provide the impetus for intensifying the reform process in order to permit the expansion of the non-state sector to occur.

The original is located here: Inter-American Dialogue, Latin America Adviser, May 11, 2012

 Question:

Cuba wants to move nearly half of its economy to the “non-state” sector within the next five years, Communist Party official Lazo Hernández said last month in a speech in Havana. Currently, government-run businesses account for 95 percent of the island’s GDP, said  Hernández. Is the plan to move almost half of the country’s economy to private businesses realistic? Can the country’s tiny private sector absorb such an effort? Would such a move strengthen Cuba’s economy?

 Answers:

José Azel, senior scholar at the Institute for Cuban and Cuban- American Studies at the University of Miami:

Lazo Hernández announced that the country is seeking to transform its economy by increasing the economic participation of the ‘non-state’ sector tenfold. To accomplish this, the government is relying on its Draft Guidelines for Economic and Social Policy. This document proposes to chart Cuba’s economic future and states paradoxically that ‘central planning and not the market will be supreme in the actualization of the economic model.’ The centerpiece of this plan revolves around firing as many as a million state employees (20 percent of the workforce) who could then solicit licenses to become self-employed as ‘cuentapropistas‘ in precisely 181 specified trades.

Moreover, the guidelines insist that prices will be set according to the dictates of central planning and the plan will insure that any new ‘non-state’ economic activities (apparently the term ‘private sector’ is not to be spoken) do not lead to the accumulation of wealth. To fully appreciate the economic surrealism of the Cuban ‘reforms,’ it is useful to examine a handful of the 181 trades and activities that are authorized for self-employment and which are foreseen as becoming 50 percent of the country’s economic activity. These include: trimming palm trees, cleaning spark plugs, refilling disposable cigarette lighters, mattress repair, wrapping buttons with fabric, umbrella repair and natural fruit peeling. This bizarre list of permitted private service sector activities will not drive the economic development of the country. Cuba’s GDP today is made up primarily by tourism, the services of doctors abroad, nickel and a handful of agricultural exports. Hernández’s stated goal seems mathematically impossible given a private sector permitted only in subsistence-level activities. An impediment to real reforms is simply that without inspired democratic leadership, the set of long-held Marxist economic assumptions will not be swapped for another set of economic beliefs. These are not reforms to unleash the market’s ‘invisible hand,’ but rather to reaffirm the Castros’ clinched fist.”

Lorenzo Perez, member of the Association for the Study of the Cuban Economy and former deputy director of the Middle East and Central Asia Department at the IMF:

“An expansion of Cuba’s private sector will certainly strengthen the economy. The realism of moving half of the economy to the private sector over a five-year period will depend on the measures taken to attain this goal. While positive steps have been taken in recent months, the measures up to now have been too timid or contradictory to attain this goal. A significant expansion of the private sector would require the opening of most sectors of the economy to private initiatives, respect for private property and the rule of law, freedom for markets to operate and the establishment of a sustainable macroeconomic framework. The activities opened to the private sector are too few (some 200 activities) and continue to limit most private professional activities, thereby negating possible benefits from the country’s well-educated labor force. Insufficient institutional arrangements have been adopted to establish clear property rights and promote the creation of private companies. For example, land distributed to farmers has only been leased, while the creation of companies with unlimited capacity to hire labor is not envisaged. Markets are not operating freely; a substantial amount of food production has to be sold to the state at fixed prices, the private sector cannot carry out most foreign trade activities and a heavy tax burden discourages private investment and hiring. A sustainable macroeconomic framework does not exist with public finances and the balance of payments depends on politically motivated financial relations with Venezuela. No effective measures have been taken to restructure the external debt with most industrialized countries, including negotiations with the United States to settle political differences. As a result, Cuba continues to be isolated from the international economy and organizations.”

Carmelo Mesa-Lago, distinguished professor emeritus of economics and Latin American studies at the University of Pittsburgh:

“The plan to generate half of GDP from the non-state sector requires that 1.8 million workers are transferred from the state sector by 2014, tantamount to 35 percent of the labor force. In 2006-2010, the non-state sector shrank. Under Raúl’s reforms, the government dismissed only 140,000 unneeded state workers in 2011 (14 percent of the target). In that year, there were 357,000 self-employed people (7 percent of the labor force) out of which 209,600 were new and only 17 percent had been unemployed. In addition, from 2009 to 2011, 147,000 agricultural producers were granted usufruct contracts in unused state land (2.9 percent of the labor force), but much less in 2011 alone. Finally 1,500 cooperatives in production and services were created in 2011; the number of members has not been released but assuming 4 members per coop there would be 6,000 (0.1 percent). In summary, perhaps 300,000 jobs in the non-state sector were created in 2011 (5.8 percent of the labor force), which means that 1.5 million non-state jobs must be created in the next three years to reach the 1.8 million target, at an annual average of 500,000. That is impossible at last year’s growth rate. Thus, the structural reforms must be accelerated and deepened, for example, through significant tax cuts in the non-state sector, an expansion of self-employment to university graduates and the elimination of bureaucratic impediments. If this were the case and the targets of state worker dismissals and non-state job creation were met, then the economy would probably be strengthened. The state would save a lot on wages and the private sector, which has proven to be more efficient than the state sector, should increase production and productivity. But a lot of ‘ifs’ must materialize.”

Uva de Aragón, associate director of the Cuban Research Institute at Florida International University:

“It isn’t an easy goal, but it could be attainable if there is: 1) a change of mentality  and acceptance that actors in the nonstate economic sector have a right to profits, and that the creation of a middle class would be healthy for the country; 2) a transparent legal framework; 3) a tax code based on profits, with a moratorium of at least two years for new businesses; 4) expansion of the areas in which the non-estate sector can grow; 5) reduction and eventual elimination of bureaucratic red tape; 6) access to tools and raw materials, in a timely manner and at reduced costs; 7) sustainable markets, which will require among other things higher salaries and pensions for remaining state employees and retirees,  respectively; 8) significant advance in technology; 9) training of Cubans in businesses practices; 10) restructuring of monetary policies (the disparity between salaries in Cuban pesos and cost of products in convertible pesos cannot be maintained) and 11) capital. Where will the capital come from? Can a climate of stability be created to entice foreign investors? Will they allow Cubans in the diaspora to invest, even if only as partners with their relatives and friends? As changes take place, can the state continue to provide a safety net—education, healthcare, social services— for most Cubans? The changes needed are so deep they cannot be done too quickly; but a slow pace is as dangerous. Will Cuba find the needed steady rhythm to transform itself? I personally hope it does.”

José Azel, Uva de Aragon, Carmelo Mesa-Lago and Lorenzo Peréz

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SPECIAL REPORT: “Cuba’s little capitalists are ready to rumba”

Fri May 4, 2012 3:30pm IST

By Jeff Franks

HAVANA May 2 (Reuters) – When Ojacy Curbello and her husband opened a restaurant at their home in Havana in late December, not a single customer showed up.

It was a disheartening debut for Bollywood, the first Indian restaurant in the Cuban capital. Curbello worried that their dream of cashing in on recent reforms in this Communist-run country would collapse.

The next day customers began trickling in. As word spread, the trickle became a flood. Many nights the couple had to turn people away or serve them at the family dining table and call in extra help. Today they are planning to increase the 22-seat capacity by expanding their 1950s home and putting tables and a bar in what is now their bedroom.

“It has been amazing how quickly it has taken off,” said Curbello, still looking slightly stunned. She sat with her husband, Cedric Fernandez, a Londoner of Sri Lankan descent, in the main dining area, hung with prints of Indian figures.

Bollywood’s story is an example of how life is slowly changing in Cuba since President Raul Castro launched a string of limited economic reforms in 2010.

Continue reading Here: Mark Frank SPECIAL REPORT Cuba’s little capitalists are ready to rumba

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From Amnesty International: “The authorities attack us because we talk about the issues people face”

Luis Felipe Rojas

For Cuban journalist and blogger Luis Felipe Rojas, posting an entry on his blog Crossing the Wire Fences or even sending an email is a daunting task.

Every time he wants to access the internet, he has to leave his house in the early hours of the morning and travel 200 kilometres from his hometown of Holguín, in eastern Cuba, to the closest cybercafé. If he is lucky, and he is not stopped at a police checkpoint on the way, he will get to a computer in about three hours.

Once there, Luis Felipe has to show ID to buy an access card and pay six US dollars to use the internet for sixty minutes – that is almost a third of a monthly local salary.

Some days he finds websites containing information considered critical of the government are blocked or messages have disappeared from his inbox.

Internet access is so highly controlled in Cuba that critics of the government have come up with creative ways to ensure their stories get out.

Sometimes that involves converting articles into digital images and sending them via SMS to a contact outside of Cuba, to type and post on Luis Felipe’s blog. He also uses text messages for posting on Twitter but the lack of internet access means that he cannot see what others say to (or about) him.

Luis Felipe is part of a growing group of journalists and government critics who are finding new ways to by-pass state control in order to disseminate information about human rights abuses taking place in Cuba.

According to a recent report by Amnesty International, independent journalists and bloggers have faced increased threats and intimidation when publishing information critical to the authorities.

The ‘Hablemos Press’ Information Centre, an unofficial news agency monitoring human rights abuses across Cuba, recently reported that from March 2011 to March 2012 inclusively, more than 75 independent journalists have been detained, some, like Caridad Caballero Batista up to 20 times.

“After the mass release of prisoners of conscience in 2011, we have seen authorities sharpening their strategy to silence dissent by harassing government critics and independent journalists with short term detentions and public acts of repudiation,” said Gerardo Ducos, Cuba expert with Amnesty International.

On 25 March, Luis Felipe was detained in a local police station for five days in order to prevent him from travelling to attend an open-air mass celebrated by Pope Benedict XVI.

“The authorities attack us because we talk about the issues people face – that not everybody has enough food, that public services do not always work, that there are problems with the health service,” Luis Felipe said to Amesty International.

“I have been scared many times. Scared of going to the street, of being beaten up, of being locked up for a long time and not seeing my children. But fear does not stop me. I do not think a tweet from me is going to save anybody from prison but it does save them from impunity.”

 

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After 50 years, Cubans hope to travel freely

May 2, 2012 Wednesday 6:56 AM GMT

After 50 years, Cubans hope to travel freely

BYLINE: By PAUL HAVEN, Associated Press

DATELINE: HAVANA

After controlling the comings and goings of its people for five decades, communist Cuba appears on the verge of a momentous decision to lift many travel restrictions. One senior official says a “radical and profound” change is weeks away.

The comment by Parliament Chief Ricardo Alarcon has residents, exiles and policymakers abuzz with speculation that the much-hated exit visa could be a thing of the past, even if Raul Castro’s government continues to limit the travel of doctors, scientists, military personnel and others in sensitive roles to prevent a brain drain.

Other top Cuban officials have cautioned against over-excitement, leaving islanders and Cuba experts to wonder how far Havana’s leaders are willing to go.

In the past 18 months, Castro has removed prohibitions on some private enterprise, legalized real estate and car sales, and allowed compatriots to hire employees, ideas that were long anathema to the government’s Marxist underpinnings.

Scrapping travel controls could be an even bigger step, at least symbolically, and carries enormous economic, social and political risk.

Even half measures such as ending limits on how long Cubans can live abroad or cutting the staggeringly high fees for the exit visa that Cubans must obtain just to leave the country would be significant.

“It would be a big step forward,” said Philip Peters, a Cuba expert at the Virginia-based Lexington Institute. “If Cuba ends the restrictions on its own citizens’ travel, that means the only travel restrictions that would remain in place would be those the United States imposes on its citizens.”

The move would open the door to increased emigration and make it easier for Cubans overseas to avoid forfeiting their residency rights, a fate that has befallen waves of exiles since the 1959 revolution.

It could also bolster the number of Cubans who travel abroad for work, increasing earnings sent home in the short term and, ultimately, investment by a new moneyed class.

Scrapping exit controls should win Cuba support in Europe, which improved ties after dozens of political prisoners were freed in 2010.

But Peters and several other analysts said they doubt the new rules would bring about any immediate shift in U.S. policy toward Cuba, which includes a ban on American tourism. Those restrictions are entrenched and enjoy the backing of powerful Cuban American exiles.

“I don’t think it would lead to a drastic change in U.S. policy, but an accumulation of human rights improvements could lead to an incremental change,”

Peters said.

Cuba-born Rep. Ileana Ros-Lehtinen, a Republican from Florida, said any discussion about immigration reform on the island is a peripheral issue.

“The kind of changes I’m interested in are not about immigration,” said Ros-Lehtinen, who heads the House Committee on Foreign Affairs. “I’m interested in changes that affect fundamental freedom, democracy and respect for human rights.”

U.S. officials said they have been watching for an announcement for months, noting there has been such talk as far back as August. But nothing has happened, and they are skeptical that the Castro regime is truly committed to such reform.

Asked about possible reciprocal measures, one U.S. official said the Obama administration can’t promise anything because it doesn’t know what exactly Cuba plans to announce. The official wasn’t authorized to speak publicly and demanded anonymity.

State Department spokesman Mark Toner said the U.S. “would certainly welcome greater freedom of movement for the Cuban public.”

Rumors of the exit visa’s imminent demise have circulated on and off for years.

The whispers became open chatter last spring after the Communist Party endorsed migration reform at a crucial gathering. But Castro dashed those hopes in December, saying the timing wasn’t right and the “fate of the revolution” was at stake.

Alarcon’s comments, made in an interview published in April, revived hopes that a bold move is coming.

“One of the questions that we are currently discussing at the highest level of the government is the question of emigration,” he told a French journalist. “We are working toward a radical and profound reform of emigration that in the months to come will eliminate this kind of restriction.”

But on Saturday, Vice Foreign Minister Dagoberto Rodriguez told exiles not to set their hopes too high, vowing the government would maintain some travel controls as long as it faced a threat from enemies in Washington.

Havana residents say they are anxiously waiting to see what the government does.

“The time has come to get rid of the exit visa,” said Vivian Delgado, a shop worker. “It’s absurd that as a Cuban I must get permission to leave my country, and even worse that I need permission to come back.”

Added Domingo Blanco, a 24-year-old state office worker: “It’s as if one needed to ask to leave one’s own house.”

Many Cubans are reluctant to talk about their own experience with the exit visa.

One woman named Miru, who has been trying to leave Cuba since 2006, shared her story on the condition her full name not be used for fear that speaking with a foreign journalist could land her in trouble.

“This has been a very long process,” she said of her odyssey, which began when her husband defected from a medical mission in Africa and sought asylum in the U.S.

First, she had to get a letter releasing her from her job at a government ministry a process that took five years. Only then could she apply for the exit visa. That was three months ago, and Miru still hasn’t received an answer.

Officials say her case is complicated but won’t give a specific reason for the delay.

“I am very anxious to see my husband again,” she said.

The exit controls are a Cold War legacy of Cuba’s alliance with the Soviet Union. They were instituted in December 1961 to fight brain drain as hundreds of thousands of doctors and other professionals fled, many for new lives in Florida. That was three months before the U.S. embargo barring most trade with the island went into full effect.

Over the years, it has become much easier for Cubans to obtain permission to travel, though many are still denied, and it is particularly hard to take children out of the country.

Also, the exit visa’s $150 price tag is a small fortune in a country where salaries average about $20 a month. In addition, the person the traveler wishes to visit must pay $200 at a Cuban consulate.

Those who leave get only a 30-day pass, and the cost of an extension varies by country. In the U.S., the fee is $130 a month. Those who stay abroad more than

11 months lose the right to reside in Cuba. Before 2011, any property would automatically go to the state.

“The Cuban government has monetized every part of the humiliating process of coming and going,” said Ann Louise Bardach, a longtime Cuba expert and author of “Without Fidel: A Death Foretold in Miami, Havana and Washington.” “Getting out means running a gantlet, and it is all based on how much humiliation you can endure, and by the time they end up in Miami, people are filled with hate and dreams of revenge.”

Cuban officials have long portrayed the measures as necessary to counter Washington’s meddling. They accuse the U.S. of trying to lure away doctors by letting them walk into any American consulate and request asylum.

Cuban officials say even ordinary islanders are encouraged to leave by U.S.

regulations that automatically grant asylum to any who reach American shores, a policy Cuba says has encouraged thousands to attempt the dangerous trip on leaky boats and makeshift rafts across the Florida Straits.

It’s not clear how emigration reform will affect dissidents, who are routinely denied permission to leave and could still find themselves on some form of no-exit list.

In a recent New York Times opinion piece, dissident blogger Yoani Sanchez called the exit controls “our own Berlin Wall without the concrete … a wall made of paperwork and stamps, overseen by the grim stares of soldiers.” She has been denied travel papers at least 19 times by her own count.

Some hardliners in Florida predict any change will be merely a sleight of hand designed to export malcontents, ease a severe housing shortage and fob off legions of superfluous state workers.

But for hundreds of thousands of Cubans like Miru, the exit visa is a personal matter, not political. After six years separated from her husband, she clings to hope that she will finally obtain permission or benefit from a change in the law.

“I have followed all the rules of my country,” she said. “I’ll be so happy to leave.”

Associated Press writers Andrea Rodriguez and Peter Orsi in Havana, Laura Wides-Munoz in Miami, and Bradley Klapper in Washington contributed to this report.

Follow Paul Haven on Twitter: www.twitter.com/paulhaven

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Cuba: En Route to Becoming a Normal Mixed-Market Economy?

Esteban Lazo Hernandez

By Marc Frank

HAVANA (Reuters) – Cuba will move nearly 50 percent of the state’s economic activity to the “non-state” sector, a senior Communist party official said at the weekend, the latest signal the island is headed toward a mixed economy.

Cuban President Raul Castro has hammered away at the need for the state to become more efficient and get out of secondary economic activity such as farming and retail services since taking over for his ailing older brother, Fidel, in 2008.

China and Vietnam adopted similar measures in the last few decades of the 20th century as they began to shift to what is known as market socialism.

“Today, almost 95 percent of gross domestic product is produced by the state. Within four or five years between 40 percent and 45 percent will result from different forms of non-state production,” a long-time Communist party political bureau member, Esteban Lazo Hernandez, said in a speech to the Havana city government.

Lazo, who is considered by many to be the Communist party’s top ideologue, said the increased private business and the tax revenue the move would generate meant local government needed to improve its efficiency in order to cope with the shift, according to clips of his speech broadcast by state-run television on Sunday.

The Cuban Communist party approved a comprehensive plan to revamp its Soviet-style command economy in April of last year.

The 311-point document calls on authorities to support and encourage, “mixed-capital companies, cooperatives, farmers with the right to use idle land, landlords of rental properties, self-employed workers and other forms that contribute to raise the efficiency of social labor.”

The plans envision the reduction of the state workforce by at least 20 percent, or a million workers, the elimination of subsidies in favor of more narrowly targeted welfare programs and granting state-run companies more autonomy.

“The question will be to see how this ‘non-state’ production will be split between real private property and cooperatives, and how independent from the state the cooperatives really are,” a Western diplomat said.

Since Castro took office the number of self-employed, often a euphemism for small businesses, has doubled to more than 300,000, and some 200,000 people have taken advantage of a land grant program to encourage small farming.

Small state retail services – from barber shops and beauty parlors to taxis and tiny cafeterias – have already been leased to employees. But local economists said a major shift to the “non-state” sector, like the one outlined by Lazo over the weekend, meant larger chunks of the state’s economic activity would be peeled off.

“Such a shift means not just tiny mom-and-pop operations and small businesses such as restaurants and hostels, but mid-sized companies operating as cooperatives and individually owned,” said a local economist who asked his name not be used.

Skeptics question how quickly Cuba’s centrally planned economy can manage such a radical transformation. “I think a shift of this magnitude in such a short time period would be highly unlikely for Cuba,” said William Messina, agricultural economist with the Food and Resource Economics Department at the University of Florida.

“Even though Raul is trying to implement a number of changes that could move the country in this direction, the bureaucratic resistance that there appears to be (at least within agriculture) will certainly slow the process,” he added.

(Editing by David Adams and Leslie Adler)

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Cuba: Still Paying Homage to the Economic Absurdities of “Che” Guevara

By Arch Ritter

At the main entrance to the Calixto Garcia Hospital in Havana there still stands a large billboard that reads:

“Vale, pero millones de veces mas, la vida de un solo ser humano que todas las propiedades del hombre mas rico de la tierra.”

“The life of one single human being is worth millions of times more than all the wealth of the richest man in the world.” (Author’s translation)

The statement is a quotation attributed to Ernesto Guevara. The billboard has gone through various versions and was there at least as far back as when I saw it in 1995.

At first glance – or even after many years’ worth of glances – this may seem like a noble sentiment, poetically expressed. One is drawn into some sort of warm worshipful respect for such deep thought and for its author. Perhaps he is merely saying that a human life is worth a whole lot, which is undeniable. Perhaps this is just a poetic (and pre-numerate?) exaggeration in the manner in which the Bible says that Methusalah lived for a thousand years or Solomon had 700 wives and 300 concubines.

However, if words are to have meaning and if one thinks about it for a minute, this assertion appears more like foolishness than wisdom. Indeed from the perspective of economic logic or “applied common sense” it is absurd.

The richest man in the world was John D. Rockefeller, whose peak wealth was $318.3 billion (based on 2007 US dollars). If the life of a single human being was one million times larger, it would be valued at $318.3 Trillion. In comparison, the GDP of the US in 2007 was $13.9 Trillion (World Bank, World Development indicators 2009,  p.209) while that of Cuba in 2010 was 64.3 Billion in Moneda Nacional (ONE Anuario Estadistica Cubana 2011, Table 5.17).  Obviously if one person’s life was worth the Che Guevara number and medical investment in that single individual merited that amount of resources, then the resources available for everyone else in both the United States and Cuba would be zero.

In fact nobody’s life is worth an infinity of real resources. My own Father’s life was not judged to be worth an investment of some $5,000.00 by the Ontario medical system at the Kingston General Hospital. When he arrived at the Emergency Ward in 1989, taken there by a Medical Doctor namely my brother, it was judged by the staff that he was too old at age 82 for the more expensive treatment of the time and that a lesser treatment only was appropriate. This undoubtedly cut short his life but by how much I do not know. In my view, $5,000.00 was not a reasonable valuation of his life. But neither would have been $318.3 Trillion.

In actual fact, Cuba has used the scarce resources available for its health services “economically” and wisely. It has managed to squeeze good health results from relatively modest budgets.

Cuba has dropped numerous other economic absurdities promoted by “Che”. This includes the “New Man” approach to the mobilization of human energies and the “budgetary system of finance” (which abolished accounting and financial independence at the level of the enterprise and attempted to run the economy if it was one huge bureaucracy in which there was no knowledge of the value of what was produced nor of the costs of production.)

Perhaps it is time to reconsider all Che’s pronouncements with a critical mind.

See also The Marketing of “Che” Guevara: A Review of “Che’s Afterlife: The Legacy of an Image”, by Michael Casey

(A subsequent Blog entry will outline “Che’s Top Ten Economic Absurdities”.)

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