• 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."

A Citizen’s Perspective: Jorge Gonzalez on the Cuban Economy

From Oliver Blatch,  Guardian Weekly, Series: First person Thursday 31 January 2008

Oliver Blatch published this statement from Jorge Gonzalez describing his and his family’s existence in Cuba and the general attitudes towards low wages, food shortages, the dual economy, and the political paralysis that prevents meaningful change.

Gonzalez is an ex-member of the Foreign Ministry.

I feel like a real revolutionary – someone who desires to see things change for the better. Here in Cuba, nothing ever improves. It only stays the same or gets worse.

Imagine, my daughter is 23 years old and she’s never ever stayed in a hotel. Not one night in her whole life. If she did go, the police would probably think she was a prostitute anyway.

Tienda, La Habana circa 1969, Photo by Arch Ritter

My wife works as a doctor. She was one of the first doctors to go to Venezuela to help Hugo Chávez with his socialist revolution. She earns 400 Cuban national pesos (£7.60) a month. That’s all we receive. She works six days a week, with one night shift included.

A pair of shoes is worth around 30 Cuban convertible pesos (£7.66). So if we need some shoes, how are we supposed to wash or eat or pay for electricity? Sure, we get basic rations every month, but they only last about 10 days.

Tienda, circa 2007, Photo by Arch Ritter

At the moment my son is in the United States. He’s a ballet dancer. He escaped there illegally after a tour in Mexico; on the last day, he just disappeared. Now he has a car, laptop, mobile phone and an apartment that he rents.

And here I am, 46 years old, never having owned my own car. Just think about it. I have a beautiful beach less than half an hour away from my house and I haven’t visited it for three years because I can’t afford the transport.

That is why there’s a clandestine economy going on in every household. Everyone is on the make, selling things on the side. I graduated as a lawyer and worked in a variety of government positions, but now I earn my living as an odd-job mechanic. If the inspectors found out, I’d get severely fined.

Read More, directly from  from the Guardian:

“Thank you Fidel for all you have given us”

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

Review of Che’s Afterlife: The Legacy of an Image. By Michael Casey. New York: Vintage Books, 2009. Pp. 388. $15.95 paper. ISBN: 9780307279309.

Michael Casey, from Perth, Western Australia, and recently the Dow Jones Newswires Bureau Chief in Buenos Aires, has written an excellent book on the commercialization of Che Guevara. In Che’s Afterlife, Michael Casey follows Korda’s famous photograph of a Christ-like Ernesto “Che” Guevara into the consciousness of people around the world. This image is a well-defended and trademarked icon (copyright VA-1-276-975) owned by Korda’s daughter, Diana Díaz, and used in collaboration with the government of Cuba.

Korda’s “Che”

For some, the Korda image of “Che” is a quasi-spiritual symbol of hope for a better future. For others – those sporting the Che T-shirts for example – it is a symbol of undefined but earnest youthful rebellion. But for still others, it is an abhorrent symbol of the kangaroo justice meted out in La Cabana fortress – converted to a prison – in East Havana where Che as commander of the prison presided for 11 months over the summary trials and executions of somewhere around some 220 prisoners or of many more.

For me, Che may be all of the above and more. But he is also the economic czar who damaged the Cuban economy immensely. First, as President of the Central Bank, he presided over the loss of convertibility of the Cuban peso which has continued for half a century. Convertibility of the Cuban peso now appears far from current realities.  Second, as Minister of Industry he  amalgamated five sub-units into a behemoth Ministry responsible for running some 1,800 work units with 150,800 employees. Attempting to run so many enterprises from office towers in Havana was a central planning folly of immense proportions. Third, he was the prime mover of the attempt to use the “New Man” concept as a means of mobilizing the work efforts of Cuban citizens in the second half of the 1960s and also the author also of the so-called “budgetary system of finance” that abolished accounting and the financial autonomy of productive enterprises. Implementation of these approaches was in President Castro’s hands, not Guevara’s. These two dimensions of running the economy from 1965 to 1970 compounded the problems and dislocations of the attempt to produce 10 million tons of sugar. These three interlinked dimensions of running the economy met with such disastrous results that they were reversed in 1971. Cuba then moved to Soviet economic orthodoxy – plus Soviet loans and hidden subsidization – which produced surprisingly better results.

Casey has written an intriguing history of the image’s trajectory over the last half century. He brings together research into the lives of both Korda and Guevara, a command of the history of Revolutionary Cuba, knowledge of countries where the Guevara mythology is important, an understanding of copyright law, and original investigative interviewing and reporting.

Casey begins his narrative with the instant when the photo was taken on 5 March 1960. He sketches Che’s role in the new government—notably as chief of La Cabaña prison and overseer of the swift executions of prisoners—his secretive and disastrous Congo operation, and his guerrilla campaign in Bolivia, putting the launch of Che as icon and of the “Heroic Revolutionary” brand at the 18 October 1967 memorial ceremony at the Plaza de la Revolución.

Casey also presents an account of Korda’s activities in Havana, the first publications of his photograph, and the cultural ferment of the early years of the Revolution, followed by the disillusionment of many in the mid-1960s.

Alberto Korda

He traces the peregrinations of Korda’s “Che” through Argentina, Bolivia, Venezuela, and Miami, as well as in the student ferment of 1968 from Paris to Berkeley. His later chapters focus on the use of Che’s image as a brand by the government of Cuba; here, it no longer signifies a heroic guerrilla promoting revolution, but has instead become an advertisement, selling Cuba in the international tourist marketplace. The essence of the image ia now “the idea of revolutionary nostalgia” (306). After some thirty-seven years during which the photograph was freely available for use by anyone, copyright ownership now applies and control is exercised through legal means when necessary.

Casey takes us on a fascinating journey through the life and afterlife of Che and through a half century of international social and political history, using Che’s image as a prism. His book should find a wide readership, of all political stripes, who have an interest in Cuba or in major political and social movements. Those with interests in marketing, branding, and copyright law will also find this volume illuminating.

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Freedom of Expression, Economic Self-Correction and Self-Renewal

An important requirement for the sustained effectiveness of an economic system and society is the ability to analyze and criticize – freely, openly and continuously – its functioning.  Open analysis and criticism in a context of free generation and diffusion of information provide a necessary spur for self-correction, exposing illegalities, flawed policies and errors.  Free analysis and criticism are vital in order to bring illicit actions to light, to correct errors on the part of all institutions and enterprises as well as policy makers and to help generate improved policy design and implementation. This in turn requires freedom of expression and freedom of association, embedded in an independent press, publications systems and media, independent universities and research institutes, and freely-functioning opposition political parties.

The absence of free economic criticisms means that major policy errors or indeed fiascos are not “nipped in the bud” and terminated quickly but steam ahead to disaster. Some major examples of this in Cuba have been

  • The 1961-1963 instant industrialization strategy, aborted in 1963
  • The 10 Million Ton Sugar Harvest effort, from 1964 to 1970;
  • The attempt to use the “New Man” ideology as a labour mobilization device, 1966-1970
  • The shut-down of half of Cuba’s sugar agro-industrial complex (2002)
  • The billion dollar mini-generator component of the “Revolucin Energtica (2006)

Pluralistic democratic countries have free presses and open debate on the issues of the day.  Opposition political parties, academics, interest groups and NGOs, and journalists continuously analyze and critique public policy issues and proposals and the functioning of private and public enterprises and institutions.  Indeed, there is major competition among economic and business journalists as well as academics to be the most perspicacious analysts and critics of public policy.

Unfortunately much of this has been lacking in Cuba.  The media largely performs a cheerleader role, unless issues have been opened up for discussion by the President and the Party.  For example, there was virtually no public discussion or debate concerning the shut-down of half of the sugar sector in 2002, the attacks on self-employment, the dysfunctional parts of the “Revolución Energética” or of the imprisoning of the critics  – or so-called “dissidents” –in  2003.This means that public policies get announced and implemented full-blown without critical input into their formulation, and without subsequent criticism and early correction.

Are the restrictions on freedom of expression becoming more or less severe in recent years? Some indications suggest that there is some relaxation of such restrictions, notably:

  • On June 16 to 20, the Catholic church was able to organize the Semana Social Católica including a Panel on “Economy and Society” with Pavel Vidal Alejandro, Omar Everleny Perez, Carmelo Mesa-Lago y Cristina Calvo.
  • The presentation of information on the economy has improved over the last 10 years. The web site of the Oficina Nacional de Estadisticas is now surprisingly good and the Anuario Estadistico Economico is quite comprehensive and appears in a timely way. (However, the methodologies for the measurement of some fundamental economic data such as labor force, employment and unemployment, consumer price index, and national accounts are opaque and ambiguous so that the analyses based on them are not as strong as they could be.)

But on the other hand, there are also some indications of a hardening of the restrictions on freedom of expression.

  • The containment and harassment of the bloggers continues. They have been denied access to the web. They have been harassed and intimidated – unsuccessfully – by actions of state security. They have been vilified as “mercenaries” in the service of foreign powers. They have been denied the right to travel abroad. They are often denied the right to participate in relevant domestic events such as a conference on civil society and the new media! Their web sites and therefore their commentaries are available within Cuba only with difficulty. But they have not been shut down as of mid-2010, though this could change.
  • The expulsion of Esteban Morales, Professor of Economics and Political Science, University of Havana, from the Communist Party also represents a hardening of restrictions on freedom of expression. Morales comments on the character of racism in Cuba, Challenges of the racial problem in Cuba seemed reasonably innocuous. His April 22 essay entitled “Corruption: The True Counter Revolution” was more hard hitting. But being expelled from the Party looks to me like a reward, not a punishment. Of course, this is not correct, because expulsion from the Party usually means exclusion from foreign travel which is vital for academics as a means of buttressing their inadequate Moneda Nacional incomes.

  • Certain areas of the economy appear to continue to be off limits to analysis and scrutiny, notably the bio-technological industry and the conglomerate enterprises that straddle the peso and the convertible peso economies.
  • The political decision-making process on economic and other matters within the highest levels of the Government continues to be a “black box,” the workings of which we can only speculate about.  Cuban Universities need some real Departments of Political Science!

The near-absence of checks and balances on the policy-making machinery of the state also contributes to obscuring over-riding real priorities and to prolonging and amplifying error.  The National Assembly, dominated by the Communist Party, meets for very short periods of time – four to six days a year – and has a large work load, so that it is unable to serve as a mechanism for undertaking serious analysis and debate of economic or other matters. The cost for Cuba of this situation over the years has been enormous.  It is unfortunate that Cuba lacks the concept and reality of a “Loyal Opposition” within the electoral system and in civil society.  These are vital for economic efficiency, not to mention, of course, for authentic participatory democracy.

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Pavel Vidal Alejandro, “Cuban Economic Policy under the Raul Castro Government”

An excellent  study on Cuban economic policy has recently been published by Pavel Vidal Alejandro of the Centro de Estudios sobre la Economia Cubana, University of Havana.  “Cuban Economic Policy under the Raul Castro Government” is published through the Institute of Developing Economies of the Japan External Trade Organization. Attached is the Hyperlink:


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The Economic Consequences of Lifting the US Travel Restrictions on Cuba

On Wednesday, June 30, 2010,  the House Agriculture Committee approved  by 25 to 20 to take the Travel Restriction Reform and Export Enhancement Act (H.R. 4645) for a vote in the House of Representatives. This bill was introduced in the United States House of Representatives on February 23 2010 by Representatives Collin Peterson (D, Minnesota) and Jerry Moran (R, Kansas) with forty bi-partisan House cosponsors.

The Peterson-Moran Bill may be a winner. It would be difficult for Congressmen and Senators in the Republican farm states to vote down an agricultural promotion bill – even with the travel provision. The Bill is supported by a coalition of some 130 US organizations including the U.S. Chamber of Commerce, National Farmers Union, the American Farm Bureau Federation, AFL-CIO, the U.S. Conference of Catholic Bishops, the Brookings Institution, the Council on Foreign Relations and the Cato Institute.

A group of 74 of Cuba’s most prominent political prisoners, independent librarians, bloggers, independent journalists, magazine editors, clerics, intellectuals, artists, members of the civil society and of political organizations also supported the Bill in a letter to the Members of the United States House of Representatives and its Agriculture Committee. It is therefore difficult for remaining hard-liners in the US Congress to argue that the Bill is objectionable because it would be supportive of the Cuban Government.  Of course the Cuban Government would benefit from the foreign exchange earnings from tourism. But all citizens would benefit. Most important,  the process of normalization would be well launched.

Enactment of the Bill would generate major benefits for both countries. By modifying financial terms and requirements of sales to Cuba, it is expected that the US share of Cuba’s food imports will increase further. It is already the largest exporter of agricultural products to Cuba, with food exports reaching US$ 711 million in 2008. The U S quickly displaced Canada as the main food supplier following the 2000 liberalization of agricultural exports by the Bush Administration.

American citizens will acquire a right to travel that they lost, in large part, in 1961. However, Cuban Americans have been able to return to Cuba and many other US citizens have travelled to Cuba for educational and religious reasons, or illegally. In fact, in 2003, there were some 85,000 US visitors.  Last year, following the liberalization of travel for Cuban-Americans, this number was estimated at around 300,000.

Cuba will benefit from lower cost food imports from the US – though this will further reduce the incentive for Cuba to improve its own faltering agricultural economy, where the 2010 sugar harvest will likely be about 1 million tons, the lowest since 1908.

A Tourism “Tsunami ” for Cuba?

Free travel for US citizens to Cuba will produce a deluge of US visitors to Cuba. Among the varieties of tourists would be the following:

  • Curiosity tourism. There could be a huge tourist influx of US citizens wanting to see Cuba for the first time since 1961. Relatively few US citizens appear to have broken US travel restrictions so that the pent-up demand is enormous.
  • Family Reunification tourism. When all controls are lifted on the US side for travel to Cuba, a large increase in short-term visits by Cuban-Americans for family purposes is likely to occur. Such an increase already occurred in 2009-10.
  • Sun, Sea and Sand tourism. Many US citizens, especially from the North Eastern and Central parts of the country will likely follow the winter-escaping Canadians to Cuban beaches for one to two week periods.
  • “Snow-bird” tourism. Some US citizens, mainly retirees, will spend several of the winter months in Cuba. This will be limited until accommodation arrangements such as time-share condominium arrangements are possible.
  • Medical tourism. There may be some travel to Cuba for access to medical services which will likely continue to be inexpensive relative to the United States.
  • Convention tourism. Short-term visits for conventions could increase significantly.
  • Cultural and Sport tourism. One might expect more visits for purposes of interacting with and experiencing Cuban art, music, cinema, and sports.
  • Educational tourism. It is likely that American students and teachers at various levels would enroll or visit Cuban institutions of higher learning or cultural and sports centers for courses, years abroad, sabbaticals, language training etc., in much greater numbers than have been possible under the embargo.
  • March-Breaker” tourism. Students from the US are likely to try a visit to Cuba for the March Break, instead of the Maya Riviera, Florida or elsewhere.

One could imagine US tourism quickly doubling the 2009 Canadian level of 915,000 and redoubling again in a decade or so, as Cuba’s capacity to accommodate more tourists expanded. This would perhaps double Cuba’s total foreign exchange earnings from tourism within a decade, which were already at about $US 2.6 billion by 2008.

The “Jitters” for President Raul Castro?

The Peterson-Moran Bill will also give the Cuban leadership the jitters as 50 years of pent-up tourism from the US inundates the Island.  While the Act is an economic “win-win” for both countries, the deluge of US visitors could have an impact on internal politics in Cuba.  It has often been said – perhaps with some truth – that the best ambassadors for the US are its own citizens. They undoubtedly will be treated warmly and will bring charm and goodwill as well as dollars. They may also bring “contamination” from the perspective of the Government of Cuba  as Cuban citizens learn more about life in the United States on a first hand basis. Increased knowledge and independent income generation will make Cuban citizens more restless – especially if the Cuban government does not immediately liberalize foreign travel for its own citizens.  Indeed, the Cuban government may attempt to decelerate the wave.

Negotiating normalization with Cuba is a politically contentious, complex but ultimately low priority issue for the Obama Administration given all the other problems it faces. It is helpful for Obama to have the normalization process move forward by independent bi-partisan Congressional action.

Will the Cuban Government respond constructively by releasing the political prisoners incarcerated in 2003, or by dropping the 10% tax on US dollar remittance payments and transfers?

Will the Cuban Government, in reply, liberalize travel abroad for its own citizens to the US and elsewhere?

Actions such as these would facilitate additional steps by the United States in the difficult process of normalization and reconciliation.

School Children, Parque Central Havana, Circa 1996

Photograph by the Author


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Bad News for Cuba’s Nickel Industry and Sherritt

A major technological breakthrough in the production of “NPI”, a substitute for refined nickel mined and concentrated in Cuba – as well as Canada. Russia and Australia – is already having a major impact on the nickel market and causing reductions in the price of nickel. This will probably reduce Cuba’s foreign exchange earnings from nickel exports in future, and will likely halt any expansions of nickel mining for years or even decades to come.

A June 11 2010 report by Andy Hoffman in the Toronto Globe and Mail describes a new product, “nickel pig iron” or “NPI”,  that permits a low cost alternative to nickel with obvious implications for the Cuban, Canadian and international nickel industry. NPI is a low-cost and low-tech innovation in the production of stainless steel, developed since 2006 on China. It now accounts for about 10% of world’s $21-billion-a-year nickel market and is increasing rapidly in China, as indicated in the chart below. It also has a long way to go before it captures a large share of the Chinese nickel market.The emergence of NPI has reduced the demand for smelted and refined nickel from traditional sources and will likely lead to further reductions in future. The peak prices of nickel in 2006-2007 that resulted from the tightening market generated by sustained Chinese economic growth over the last 30 years and the general rapid expansion of the world economy from 2000 to 2007 are likely a thing of the past. The cost of NPI will put a permanent ceiling on nickel prices and perhaps reduce demand and mine extraction for traditional nickel in future.

The new technology is based on the direct smelting via cheap electricity of Indonesian or Philippine ore that contains very low levels of nickel – around 2% – but also around 50% iron ore together with coking coal and a mix of gravel and sand . This produces the NPI that is suitable for stainless steel products.

Hoffman estimates that future prices for nickel will remain below about $8.50 per lb. after peaking at about $24.00 a pound in 2007. This means that Cuba’s foreign exchange earnings will never again reach the approximate $2.33 billion of 2007. More likely they would remain around one third this level and then perhaps diminish if new mine development were to be halted because of sustained low prices and shrinking markets.

But there are some questions about the long term attractiveness of NPI.

  1. Does it produce a high grade stainless steel of consistent quality?
  2. To what extent is the electricity used for the smelting process subsidized?
  3. To what extent does the relative cost competitiveness depend on China’s grossly and obviously undervalued exchange rate?
  4. Will environmental concerns and potential pollution abatement costs of mining coal for coking purposes raise costs and reduce the competitiveness of China’s NPI production?

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Has Cuba’s Catastrophic Decline in Real Wage Levels Been Reversed?

The level of “real” or “inflation-adjusted wage levels collapsed catastrophically in the economic melt-down of 1989-1993. Has this been reversed during the alleged economic recovery from 1994 to 2010?

The chart below indicates that real wage levels may have increased steadily after 1994, but they are still a small fraction of their pre-melt-down level. This Chart is based on calculations presented by Pavel Vidal Alejandro, an analyst in Cuba’s primary economic research institute, the Centro de Estudios sobre la Economia Cubana (CEEC), also reproduced below.

According to this data, Cuba’s real wage collapsed from high of around 190 pesos (Moneda Nacional) to 20 pesos by 1993, recovering only slowly to 2008. For those who observed this collapse in the early 1990s, these figures are indeed credible.  How Cuban citizens reliant upon peso incomes survived through this catastrophic decline constitutes several million stories of endurance and innovation – or the practices encapsulated by the “Special Period” terms “resolver”, “luchar”, “conseguir” and “inventar”.

Chart 1: Cuba: Real Inflation-Adjusted Wages, 1989-2009
(Pesos, Moneda Nacional)

Source: Pavel Vidal Alejandro, “Politica Monetaria y Doble Moneda”,
in Omar Everleny Perez et. al., Miradas a la Economia Cubana,
La Habana: Editorial Caminos, 2009, p.35

The 1989-1993 economic contraction – approaching 40% of GDP – resulted from the termination of the subsidization from the former Soviet Union camouflaged in the form of credits never to be repaid, the above market prices paid for Cuban exports, the below-market prices for Cuban imports with that country.  In terms of official statistics on aggregate per capita economic growth rates, it would appear that the Cuban economy has fully recovered and surpassed the 1989 level by about 20% in GDP per capita terms as indicated in Chart 2.

Source: the author on the basis of statistics from the Oficina Nacional de Estadisticas, Anuario Estadistico de Cuba, various issues and UN ECLAC, Preliminary Overview of theEconomies of Latin America and the Caribbean, various issues

“Where’s the economic recovery? We don’t see it.”

But this raises the question: How could the economy recover so fully while real wages are still only at about 22 to 25 % of the 1989 level? This is indeed a puzzle. Citizens of Cuba have observed the contradiction for some years, as suggested by the saying mentioned above.

One possibility is that the GDP statistics are dubious. Indeed the Cuban government adopted a new approach to measuring GDP relabeling it as “Sustainable Social” GDP, measuring the value of services not at the cost of their provision but at an estimated evaluation of their worth internationally.  This revised GDP measure increased Cuba’s GDP per capita and increased the ostensible growth rate as the service sector expanded.
A second partial explanation for the immense gap between overall economic performance levels and wage levels is that substantial portions of the goods and services produced in the economy are pilfered and distributed through the ubiquitous underground economy so that revenues seem seldom to permit higher wage and salary payments but actually more is produced but leaks out of official circuits.

There are undoubtedly other factors explaining this situation as well.

“Resolver”, “luchar”, “conseguir” and “inventar”

How have Cuban citizens managed to survive with real incomes still around 22 – 25% of their 1980s levels. In fact, many Cubans have been able to generate incomes higher than the official wages and salaries. The additional sources of income include:

  • “Income in kind” ranging from lunches for workers, food supplements for seniors;
  • “Income in kind” and special access to transportation and housing for well-placed government officials (e.g. use of official vehicles for private purposes);
  • Illegal but tolerated salary supplements for employees of joint foreign-state enterprises and embassies;
  • Remittances from abroad;
  • Legal self-employment incomes;
  • Home produced goods and services for exchange or sale with friends and neighbours;
  • Informal (un-registered or underground) economy activities;
  • Pilferage from the state sector for resale or personal use.

If citizens can tap such other income sources, as many or most do, then they can survive reasonably well. However, there are some that have no access to any of these additional sources of income – or perhaps only simple survival activities such as selling cigarettes or Granma in the street. Which groups of citizens fall into this category? Perhaps the following:

  • Some pensioners;
  • Workers in the state sector outside the major cities;
  • Some agricultural workers

However, given that the rationed monthly food allowance is meager and on balance covers around 10 to 14 days of food requirements, while the rest of food requirements and basically everything else must be purchased from the dollar stores – where products bear a 140% sales tax – or the farmers markets or self-employment sector or the underground economy , these individuals obviously are in dire straits.

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