• 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."

Cuba’s Best Friend: the Canadian Winter

Winter in Ottawa

By Arch Ritter

As I trudge through the snow to the University here in Ottawa with the temperature below minus 30 degrees Celsius (or about minus 25 Fahrenheit) in a Canadian “cold snap”, my thoughts turn towards the Tropics and Cuba and also to global warming. This is a characteristic shared by many Canadians in winter- though I also must confess that I am always thinking about Cuba. .

As everyone knows, Cuba has regained its position as a foremost tropical tourist destination. Canada has been the largest single national source of tourists consistently from 1990 to 2009. (See Chart 1) By 2009, Canadian citizens were by far the most numerous with about 915,000 tourist “arrivals”, or 37.6% of total (see Table1). Tourism is of course a major source of foreign exchange earnings for Cuba, larger than any single merchandise export but also smaller than other service exports (mainly medical and educational services.)

Most Canadian tourists head to the beach with a package tour – seldom making it to Havana or another city.  For this reason, they have been sometimes derided as “el cheapo” tourists who spend as little as they can in the Cuban economy.  There may be some truth in this, but most other tourists also are in similar package tours. Foreign exchange earnings from Canadian tourism were likely in the area of US$ 882 million for 2008, (calculated as 37.6% of total tourism earnings of U.S. $ 2,346.9 million.) If one takes both Canadian tourism plus Canadian merchandise imports (mainly nickel) from Cuba into consideration, Canada contributed about U.S. $1.6 billion in 2008, a substantial proportion of Cuba’s foreign exchange availability.

When US citizens are free to travel to Cuba, there undoubtedly will be a “tsunami” of curiosity tourism, sun, sea and sand tourism, “snowbird” tourism, convention tourism, cultural and sport tourism, medical tourism, “March-Break” tourism, and retirement tourism. Will Canadian tourists be squeezed out and priced out of the market as demand increases? Perhaps, for a while. But I expect that Cuba will continue to expand its tourist facilities of all sorts very rapidly. Until “global warming” has eliminated the winter up here in the True North, or until escalating jet fuel prices make air travel prohibitively expensive, my guess is that Canadians will continue to head south in winter and Cuba will continue as a top choice location.

Varadero Cuba

Guardalavaca, Cuba

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Carmelo Mesa-Lago: “Cincuenta años de servicios sociales en Cuba”

Carmelo Mesa-Lago. Professor Emeritus, University of Pittsburgh

Hyperlink: Revista TEMAS, no. 64: 45-56, octubre-diciembre de 2010

Revista Temas has published a valuable work by Carmelo Mesa-Lago analysing Cuba’s major social issues, namely health, education, pensions, and housing, and drawing on the work of various analysts from the Centro de Estudios sobre la Economia Cubana. Inclusion of Mesa-Lago’s work in Revista TEMAS is indeed encouraging in my view and contrasts with the situation some 25 years ago when he and other Cuban-American analysts were villified as “Cubanologos.”

Here is the Table of Contents for  followed by its concluding session. Unfortunately an English translation is not available right now.

Introducción

Evolución de los servicios sociales (1959-2000

Costo actual de los servicios sociales en Cuba

Un caso de estudio: el costo creciente de las pensiones

Capacidad económica para sostener los servicios sociales a largo plazo

Cambios necesarios para mejorar y hacer sustentables los servicios sociales

No es posible resolver los problemas que los costosos servicios sociales enfrentan sin un aumento de la producción, la productividad y las exportaciones que permitan, a su vez, reducir las importaciones. Pero para lograrlo, se necesita implementar las reformas estructurales anunciadas por el presidente Raúl Castro y recomendadas por numerosos economistas cubanos.

El tema de la sostenibilidad de los servicios sociales ha sido planteado por varios economistas cubanos. Viviana Togores y Anicia García consideran que

la crisis económica y el proceso de ajuste han mostrado que la preservación de los beneficios sociales debe transitar hacia una nueva etapa donde su sustentabilidad financiera quede asociada al desarrollo de la economía y los cambios estructurales y organizativos [necesarios] […] las decisiones de política social deben tomarse no solo teniendo en cuenta las funciones sociales, sino que debenrespetar los principios de equilibrio económico.34

Por ejemplo, la seguridad y asistencia socials agravan seriamente el déficit fiscal y su carga, hoy solo asumida por el Estado; debe ser compartida por otros contribuyentes (los trabajadores). Mayra Espina agrega:

El primer reto [de la renovación social] es el de la sustentabilidad económica de la política de desarrollo social […] es necesario encontrar fórmulas de reinserción  de la economía cubana en los mercados internacionales que reactiven la producción interna y doten a los programas sociales de los recursos suficientes, sin los cuales siempre estarán enfrentados al déficit.35

Las decisiones cruciales sobre la economía y los servicios sociales competen a los cubanos. Pero a  diferencia de la crisis de los años 90, en que hubo una estrategia para hacerles frente, en la presente esta no se ha definido. El VI Congreso del PCC, anunciado inicialmente para fines de 2008, debe decidir los lineamientos económicos para el próximo quinquenio y también dictar las directrices en materia de servicios sociales. Habiendo dedicado cincuenta años de mi vida al estudio de este tema en toda América Latina, incluida  Cuba, hago unas sugerencias —parte de estas coinciden con las de economistas y académicos cubanos— como aporte para el debate. A mi juicio, sería posible aumentar el ingreso fiscal y reducir el gasto social, mediante mejoras en la asignación y uso de los recursos, con las medidas siguientes:

Educación: En la enseñanza elemental habría que transferir fondos hacia el pago de mejores sueldos a los maestros (en vista de la caída en la fecundidad y de la población en edad primaria) y, en la secundaria,  riorizar la educación vocacional. Respecto a la superior, Juan  Triana propone invertir más en las carreras técnicas y las que contribuyen al conocimiento, aunque son más costosas que las humanidades, la pedagogía y las ciencias sociales.36 Las carreras científicas son esenciales para el desarrollo, incluyendo la administración de negocios y la economía moderna, por lo que habría que transferor recursos de carreras no tan esenciales, imponiéndoles cuotas y estándares de ingreso más estrictos. Ya en 2008-2009 se estaba reduciendo la matrícula en medicina, humanidades y ciencias sociales, pero también en agronomía y ciencias técnicas.37 Además, habría que continuar y expandir las medidas recién iniciadas que  establecen exámenes de ingreso para la educación superior y requisitos más estrictos de admisión, lo cual ayudaría a aumentar la relación de graduados por matriculados; considerar el establecimiento de pago de matrículas en las universidades a los grupos de altos ingresos, y legalizar el trabajo por cuenta propia de los maestros y profesores.

Salud: Sería aconsejable priorizar la infraestructura de agua potable y alcantarillado,38 reasignar los recursos destinados a la continuada reducción de la mortalidad infantil (un problema resuelto hace años) hacia la reparación de la infraestructura deteriorada, la importación de medicinas, la disminución de la mortalidad materna y otras áreas de mayor necesidad; subordinar el número de profesionales de la salud que  trabajan en el extranjero a las necesidades internas, e invertir parte de los ingresos en divisas que generan sus servicios en la mejora de las instalaciones y equipos  internos y el suministro de medicinas; convertir  hospitales de  aternidad y pediatría que tienen bajas tasas de ocupación en hospitales geriátricos y asilos para ancianos; terminar las becas a estudiantes extranjeros y cobrar el costo básico de los servicios que hoy se regalan  a otros países; cargar el costo de cuartos privados al grupo de altos ingresos de la población cubana; autorizar el trabajo por cuenta propia del personal de salud y permitir la organización de cooperativas médicas.

Pensiones de seguridad social: Habría que realizar un studio que determine cuál es la cotización de  quilibrio del sistema; establecer cotizaciones a todos los trabajadores de empresas no estatales con un mínimo de empleados, incorporándolos al sistema; cargar a los trabajadores por cuenta propia y empleados en el sector  rivado el mismo 5% que paga parte de los asalariados (en lugar de 10% y 15%) para promover su afiliación; ajustar las pensiones al costo de la vida, lo que requiere, primero, aumentar la producción y la productividad y, a su vez, avanzar en las reformas estructurales. Medidas más complejas serían cerrar el actual sistema de pensiones, que el Estado se haga responsable de las pensiones en curso de pago, y crear un nuevo sistema público para los asegurados jóvenes y los nuevos trabajadores, con una reserva que se invierta para generar un retorno del capital y ayudar en el financiamiento a largo plazo y mejorar las pensiones.

Vivienda: Rafael Hernández argumenta que la ley originalmente estipuló que la vivienda es propiedad de los ciudadanos, y es lógico que ellos puedan hacer con ella lo que quieran, venderla y también comprarla; además, hay que facilitar que la gente pueda reparar y construir viviendas por medios propios.39 Habría que proporcionar a la población el acceso a materiales de construcción, y otorgar pequeños créditos estatales rembolsables con interés para la construcción y reparación de viviendas; permitir el uso de la casa propia como colateral para obtener  réstamos destinados a su reparación; posibilitar la inversión de remesas externas en esas actividades; eliminar el actual sistema de permutas y autorizar la compraventa con regulaciones adecuadas.

Asistencia social. Para reducir la pobreza, Lía Añé recomienda eliminar la dualidad monetaria,

disminuir la segmentación del mercado, mejorar los salaries más bajos, y consolidar y evaluar la efectividad de los nuevos programas sociales.40 Pedro Campos propone eliminar la libreta de racionamiento, previa concesión de subsidios directos focalizados en las personas de bajos ingresos, y un reajuste salarial para compensar el incremento de precios que ocurriría.41 Alexis Codina agrega que los cuantiosos recursos fiscales asignados a subsidios de precios por la libreta, recibidos por todos, independientemente de sus ingresos, deberían quedar solo para la población más vulnerable y el resto utilizaría el mercado.

En mi opinión, el sistema de racionamiento no debería aliminarse de golpe, pues o bien sería muy  costoso o dejaría parte de los necesitados sin protección. Lo ideal sería hacerlo gradualmente, de manera paralela a los incrementos en la producción y la productividad  que resulten de reformas estructurales, a la par que se focaliza la asistencia social en toda la población pobre y vulnerable, a fin de crear una amplia red mínima de protección. Ello requeriría mecanismos eficientes para determinar el grado de necesidad de la población y una estimación confiable de la incidencia de pobreza. También habría que permitir a iglesias y ONG que establezcan y expandan asilos gratuitos para ancianos pobres con ayuda externa directa.

La Revolución transformó los servicios socials —salvo la vivienda—,  universalizó su cobertura, eliminó desigualdades entre grupos de ingreso y zonas urbanas y rurales, y otorgó servicios gratuitos de calidad. Las crisis de los años 90 y la actual, unidas a deficiencias de las políticas económicas, han afectado severamente esos servicios y agravado su falta de sustentabilidad a largo plazo. Resulta crucial, por tanto, implementar  las reformas estructurales necesarias y los cambios en dichos servicios para restaurar su calidad y garantizarlos a las generaciones futuras.

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Micro-enterprise Tax Reform, 2010: The Right Direction but Still Onerous and Stultifying

By Arch Ritter

As part of the policy reforms designed to absorb almost 1.2 million redundant state sector workers into the private sector, the Government of Cuba has modified the micro-enterprise tax regimen. Some of the modifications were positive in the sense that they will reduce the heavy tax burden on self-employment. However, the changes are modest, and the tax system will continue to limit job-creation and the expansion of micro-enterprise.

Bicitaxis, Central Havana

I. The New Tax Regime

The new taxation system, presented in the Gaceta Oficial, número 11, and Gaceta Oficial, número 12 on October 1 and 8, 2010, has five components:

1.      Sales Tax on Goods

2.      Tax on Hiring of Workers

3.      Income Tax

4.      Surtax on Services

5.      Social Security or Social insurance Payments

Taxes generally will now be payable in Moneda Nacional or “old” pesos. For purposes of tax payment, taxes owing in convertible pesos (CUCs) are to be exchanged into Moneda Nacional at the going quasi-official rate (around 22 to 26 “old” pesos per convertible peso, over the 2001-2010 period). There is a special regimen for bed-and-breakfast operations that is not considered here.

1. Sales Tax

This is a 10% tax levied on the value of sales of goods and payable by all micro-enterprises that do not qualify for the Simplified Tax Regime (See 3. below.)  While this tax in principle is reasonable and is used in most countries, the administrative cost of monitoring the value of sales and collecting the tax for the many of the smaller self-employed activities will be high.

2. Tax on the “Utilization of Labor”

This tax on the hiring of employees is set at “25% of 150%” (that is, 37.5%) of the average national wage which was 429 pesos per month in 2009 (ONE, AEC Table 7.4). The tax would thus be about 161pesos per month per employee or 1,932 pesos per year.

A “Minimum” requirement for the hiring of employees for tax determination purposes is set at two employees for paladares and one for other food vendors and a few other activities. There appears to be no exception or adjustment of the tax for part-time employees.

(Note that some 74 self-employment activities are prohibited from hiring employees and another 7 can hire one employee only.)

3. The Income Tax

There are two tax income regimes, a simplified regime for lesser self-employment activities and a more complex regime for larger activities.

The Simplified Tax Regime applies to some 91 activities. In place of the income tax, sales tax, tax on public services, they instead pay a consolidated tax, constituted by the monthly licensing fee which ranges from 40 to 150 pesos per month, payable in the first ten days of each month. (It is unclear whether overpayments would be refunded – they were not under the previous system.)

Other enterprises fall under the general tax regime, and pay all of the individual taxes discussed here. These activities pay the up-front monthly tax/license ranging from 40 to 700 pesos per month.

For the determination of the tax payment, the “tax base” is defined as total revenue less a fixed amount for deductible expenses. The maximum amounts allowed for deductible expenses range from 10% for 10 activities, 20% for room rental operations, 25% for 40 activities, 30% for 10 activities and 40% for 6 food and transport activities. (Bed and breakfast operations have their own specific regimen.)

The income tax rates rise progressively from 0% for the first 5,000 pesos, through 25% for additional income between 5,000 and 10,000, 30% for income increments from 10,000 to 20,000, 30% for 20,000 to 30,000, 40% for 30,000 to 50,000 and 50% for additional income exceeding 50,000.00 pesos. This rate is high but not unreasonable in international comparison.

4. Sales Tax on Services

A 10% additional sales tax is levied on services provided by micro-enterprise. Those enterprises qualifying for the Simplified Tax Regime are exempt from this tax.

5. Social Security Payments

These payments are destined ultimately for old age support, maternity leave, disability and death in the family. They are determined according to a scale that the self-employed worker selects, and may range from 25% of 350 to 2000 pesos per month depending on the choice of the self-employed person. This is a social insurance scheme though the payments are similar to taxes.

II. Evaluation of New Tax Arrangement

This new tax regime represents a minor improvement over the previous regime. The main improvement is that it permits the deduction as costs of production of more than a maximum of 10% of total revenues as was the case previously. This is a reasonable adjustment to the tax base as most of the self-employed activities generate costs that are higher than the maximum allowable 10% of total revenues.  This is especially beneficial for activities such as gastronomic, transport and handy-craft or artisan activities for which input costs are far beyond 10% of total revenues.

The progressive structuring of the income tax regime is reasonable though stiff.

However there are a number of flaws in the taxation regimen which will continue to stunt the development of small enterprise and will prevent the absorption of the redundant workers being displaced from the public sector.

1. The Blocking of Job-Creation

First, the tax on employment is problematic as it adds to the employer’s cost of hiring a worker. The obvious impact of this tax will be to limit hiring and job creation. Or employment will be “under the table”, unrecorded, and out of sight of officialdom.

2. Onerous Overall Tax Levels

The overall tax level is punitive. The sum of the income tax, employee hiring tax, and public service surtax is high- and as noted below can help create effective tax rates exceeding 100%, as is explained on Section III. This will continue to promote non-compliance. It will discourage underground enterprises from becoming legal. The establishment of new enterprises will be discouraged.

3. Erroneous and Unrealistic Base for the Income Tax

The most serious shortcoming of the income tax regime involves the tax base which is not “net revenues” after the deduction of input costs, but an arbitrary proportion of total revenues.

The tax regime limits the maximum for input costs deductible from total revenues to 10 to 40% depending on the type of enterprise involved. When the actual micro-enterprise input costs exceed the maximum allowable, the tax rate on true net income can become very high. In the example below, the effective tax rate (defined as the taxes payable as a percentage of true net income) can exceed 100%. Obviously this would kill the enterprise and promote cheating and non-compliance. It will discourage underground economic activities from becoming legal and block the establishment of new enterprises.

4. Continued Discrimination versus Cuban Enterprise in Favor of Foreign Enterprise

The minor reforms of the micro-enterprise tax regime do relatively little to reduce the fiscal discrimination favoring foreign enterprise. (See Table 1.) The main difference is the determination of the effective tax base which is total revenues minus costs of production for foreign firms but for micro-enterprise is gross revenue minus an arbitrary and limited allowable level of input costs. The result of this is that the effective tax rates for foreign enterprises are reasonable but can be unreasonable for Cuban microenterprises. For Cuban micro-enterprises, the effective tax rate could reach and exceed 100%.

Moreover, investment costs are deductible from future income streams for foreign firms this being the normal international convention. But on the other hand, for Cuban micro-enterprise, investment costs are deductible only within the 10 to 40% allowable cost deduction levels.

III. Example: Three Taxation Cases for a Paladar or Restaurant

To illustrate the character of the tax regime, a case of a “Paladar” is examined below. It is assumed that the total revenues or gross earnings of the Paladar are 100,000 pesos per year (Row 1) or a modest 280 CUP or about $US 10.50 per day.

It is imagined then that there are three costs of production cases: Case A, B and C where costs of production are 40%, 60 and 80% of total revenues respectively. A situation where input costs for a Paladar are 80% of total revenues is reasonable, given the required purchases of food, labor, capital expenses, rent, public utilities etc. On the other hand, the 40% maximum is unreasonably low.

The differing true input cost situations (Rows 2 and 3) generate different true net income (Row 6). The tax base however is determined by the legal maximum allowable of 40,000 (Row 4 and 5) and is 60,000 pesos in all three cases (Row 7). The income tax payable is determined by the progressively cascading scale noted above and is 19,750 in all three cases (Row 8, based on calculations not shown here). The tax on hiring the legal minimum two employees is 25% of 150% (that is, 37.5%) of the average national wage which was 429 pesos per month or 161 pesos for 12 months for two employees = 3,864 pesos per year (Row 9). A guess for the surtax on use of public services is 1,200 pesos per year (Row 10). The total taxes then are the sum of Rows 8 t0 10 and are 26,614 per year (Row 11).

The effective tax rate is then calculated as Tax Payment as a percentage of Actual Net Income (Row 11 divided by Row 6). For the third case where true costs of production are 80% of total revenues, the effective tax rate turns out to be well over 100% (124.1%). This is due to fixing the maximum allowable for costs in determining taxable income at an unrealistic 40% while the true costs of production were 80% of total revenues.

The chief result of this example is that effective tax rates can be much higher than the nominal tax rates for all the activities where true input costs exceed the defined maximum. In some cases, taxes owed could easily exceed authentic net income – assuming full tax compliance.  This situation likely occurs for all activities not covered by the simplified tax regime.

Such high effective rates of taxation of course could destroy the relevant microenterprise, and block the emergence of new enterprises. While under the previous policy environment for microenterprise, this was perhaps the objective of policy. However, the objective of the new policy environment is to foster and enable micro-enterprise and to create jobs.

IV. Conclusion

Can the Micro-enterprise sector generate about 500,000 new jobs by April 2011 and 1.2 million in the next year? On the positive side, there have been some measures of a non-tax nature (e.g. the stigmatization has been relaxed, licensing has been liberalized; there has been a minor increase in legal activities; prohibitions and regulations have been eased somewhat; and improved access to inputs will likely be possible.) But on the negative side, a narrow definition of legal activities will limit enterprise and job creation; the prohibition of professional activities remains; restrictions and prohibitions on hiring workers remain; and restrictions and prohibitions remain.

The timid revisions of the tax regimen will not facilitate job creation in the microenterprise sector.

  • The high level of taxes generally will limit enterprise creation and legalization.
  • The underground economy will continue to be encouraged.
  • The tax on the hiring of employees will discourage the absorption of labor into microenterprise activity.
  • Microenterprises will remain stunted by the high effective tax rates that are incurred when costs of production exceed the minimum deductible for tax determination purposes.
  • The tax discrimination favoring foreign firms in joint ventures continues.

In order for the micro-enterprise sector is to expand so as to absorb the 1.2 million redundant public sector workers in the process of being fired, further reform of the tax system is necessary.

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“Shifting Realities in ‘Special Period. Cuba”, LATIN AMERICAN RESEARCH REVIEW, volume 45 number 3, 2010

By Arch Ritter

Just Published: “Shifting Realities in ‘Special Period’ Cuba”

Archibald R. M. Ritter, Carleton University, Ottawa, Canada

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

The Cuba Wars: Fidel Castro, the United States, and the Next Revolution. By Daniel P. Erikson. New York: Bloomsbury Press, 2008. Pp. xiii + 352. $28.00 cloth. ISBN: 9781596914346.

Political Disaffection in Cuba’s Revolution and Exodus. By Sylvia Pedraza. Cambridge: Cambridge University Press, 2007. Pp. xix + 359. paper. ISBN: 9780521687294.

Looking Forward: Comparative Perspectives on Cuba’s Transition. Edited by Marifeli Pérez-Stable. Notre Dame, IN: University of Notre Dame Press, 2007. Pp. xx + 332. $27.00 paper. ISBN: 9780268038915.

Cuba in the Shadow of Change: Daily Life in the Twilight of the Revolution. By Amelia Rosenberg Weinreb. Gainesville: University Press of Florida, 2009. Pp. 272. $69.95 cloth. ISBN: 9780813033693.

Cuban Currency: The Dollar and Special Period Fiction. By Esther Whitfield. Minneapolis: University of Minnesota Press, 2008. Pp. 217. $22.50 paper. ISBN: 9780816650378.

Revolutionary Cuba’s Golden Age ended in 1988-1990 when the former Soviet Union adopted world prices in its trade with Cuba, ceased new lending, and discontinued its subsidization of the Cuban economy. The result was the economic meltdown of 1989-1994. In1992, President Fidel Castro labeled the new époque the “Special Period in Time of Peace,” a title that has lasted almost two decades as of 2010. Many outside observers have imagined that Cuba would in time follow the countries of Eastern Europe and the former Soviet Union in making a transition toward a more market-oriented economic system and perhaps a Western style of pluralistic democracy. This has not happened. The modest economic changes of the early1990s have not led to sustained reform. Political reform has been almost undetectable. At times, rapid change has seemed inevitable and imminent. But at others, it has appeared that gerontocratic paralysis might endure well into the 2010s. Change will undoubtedly occur, but its trajectory, timing, and character are difficult if not impossible to predict. When a process of transition does arrive, it will likely be unexpected, confused, and erratic, and will probably not fit the patterns of Eastern Europe, China, or Vietnam.

The books included in this review focus mainly on changing realities during the Special Period and the nature of prospective change. They constitute a valuable contribution to our understanding of a range of dimensions of Cuba’s existence in this era which in fact is not “special” but is instead the “real world”.

The collection edited by Marifeli Pérez-Stable assumes that a transition will occur and asks what useful insights may be gleaned from the experiences of other Latin, Eastern European, Asian, and Western European countries. The analyses included in the collection constitute the best exploration of the key aspects of Cuba’s possible alternative futures yet available. Then Daniel P. Erikson examines the U.S.-Cuban relationship together with domestic U.S. policies toward Cuba during the Special Period, concluding with a chapter on “The Next Revolution.” His popular historical analysis also is probably the best available as well as most readable review of this tragically dysfunctional relationship.

The culture of the silent majority or “shadow public” is the focus of Amelia Weinreb. This sociological-anthropological analysis of Cuba’s silent majority fills a major vacuum in works on Cuba over the last 20 years, focusing as it does on the character, aspirations and behavior of a group that has been almost ignored even though it probably constitutes a majority of the population of Cuba. Sylvia Pedraza examines Cuba’s evolving domestic political situation and the consequences for emigration over the last half century, including the two decades of the Special Period. Her work is probably the seminal analysis of the motivations underlying and patterns of Cuba’s continuing emigration hemorrhage.

Michael Casey examines how the Cuban government has capitalized on Che Guevara’s “brand”—epitomized by the iconic photograph by Alberto Korda—and how Che’s image has been commercialized for both political and financial motivations, using property and trademark law, and the marketing mechanisms of the international capitalist system. While perhaps outside the common purview of mainstream social science research on Cuba, Casey’s examination of the Korda-Che image provides a novel and convincing examination of how the Cuban political regime has sought to commercialize the central martyr of the Revolution. Finally, Esther Whitfield explores cultural and literary changes in Cuba’s world of fiction during the Special Period. Her work is also ground-breaking in examining the impacts of the economic realities of the two-currency pathology on the incentive structure and orientation of Cuban writers of fiction.

Marifeli Pérez-Stable has assembled an all-star cast of authors to produce yet another fine contribution to our understanding of Cuba and its current situation.[1] Looking Forward aims to investigate the alternatives facing Cuba after a possible regime change or “poof moment”—as Jorge Domínguez puts it (7 and 61) —when such change might occur, as if by magic. The authors were asked to examine their particular areas of expertise for insights from other democratizing processes, the particular relevance of the conditions of the Special Period, and the “plausible and/or desirable alternatives . . . for a Cuba in transition” (7). Given the concision and richness of the twelve essays in this book, it is difficult if not impossible to outline and critique them in the detail that each of them merits in a brief review. All are substantively first-rate.

In opening, Pérez-Stable assumes that “a medium-term democratic transition is likely in Cuba though not certain” (19). She explores first the transitions of Eastern and Central Europe and Latin America for insights into the Cuban case, and second, the possible roles in a post-Fidel Castro Cuba of the Communist Party, the National Assembly, and the Association of Combatants of the Cuban Revolution, Cuba’s veterans’ organization. Her central conclusion is that a hybrid regime is most probable, in which elements of marketization and some liberalization combine with continued authoritarianism.

In his examination of military-civil relations, Jorge Domínguez is reasonably optimistic that further downsizing of the Cuban military will occur with the normalization of U.S.-Cuban relations. He also argues that the military will be compatible with democratization under the last three of the four scenarios that he explores: 1. a dynastic succession with continued Communist Party monopoly and a market economy opening; 2. with removal of the external threat, the military could focus on internal security only; 3. the previous scenario, but with a stronger military to maintain public order in the face of serious domestic security threats; and 4. the second scenario again but with a major continuing role for professional armed forces for international peace-keeping. (61-70).

Gustavo Arnavat analyzes the legal and constitutional dimensions of moving toward representative democracy and a market economy, and argues that major constitutional amendments or a new constitution approved by referendum will be necessary.

Damián Fernández presents a thought-provoking and sobering analysis of the role of civil society, emphasizing the difficulty of political reengagement and the development of attitudes supporting participatory citizenship. Mala Htun puts forward a well-balanced discussion of Cuba’s achievements and lingering problems in the same area of transition politics, and of the impacts of the Special Period on women and gender equality. She concludes that “[a]chieving gender justice . . . requires greater economic growth and political reforms” (137). Alejandro de la Fuente also outlines the achievements of Cuba since 1959 and some of the setbacks for Afro-Cubans since 1990; these include a smaller share of remittances and relatively less employment in tourism and high-end self-employment. His main conclusion is that special antidiscrimination policies will be necessary in the transition to a market economy. Jorge Pérez-Lopez contributes a fine analysis of the economic policy reforms needed for transition. In his first-rate essay, Carmelo Mesa-Lago carefully reviews the impacts of the Special Period on social welfare—education, health, social services, poverty, and income equality—and outlines the range of policy approaches needed if Cuba is to maintain social justice while providing incentives to economic improvement.

Corruption has been a curse for Cuba since Independence. It has evolved in unique ways there since 1990, and has tended to escalate seriously in Eastern European transitions, as Dan Erikson shows in his contribution to Looking Forward. The politically complex and difficult role of Cuban émigrés in any future transition is addressed by Lisandro Pérez, though perhaps not with due emphasis on how Cuban-Americans are likely to contribute to institutional development, trade linkages, investment projects, return migration, and tourism. Rafael Rojas provides an insightful exploration of the psychological and political transformations that must occur in this same area, in which polarized and implacable enemies— each claiming ownership of historical interpretation—must become loyal adversaries, competing yet cooperating within democratic rules. Finally, William LeoGrande provides a superb survey of U.S.-Cuban relations during the Special Period and of U.S. relations with former adversaries, so as to address the future dealings of the two neighbors.

In its entirety, this fine volume sets a high standard that will be difficult to surpass. What one would also like to see, however, is another chapter on how Cuba might get to and through a transition to achieve genuine democracy and a mixed-market economy. One might also question the editor’s decision against the citation of sources so as to reach a broader, less academic audience. This book should indeed reach a wide public, but the absence of the citations hardly seems necessary for that purpose.

In a market well supplied with books and reports on U.S.-Cuba relations, Erikson’s The Cuba Wars is perceptive, objective, and engaging. His work is based on general political analysis from his vantage point at the Inter-American Dialogue in Washington; on interviews with many key players on Cuban issues in Miami, the U.S. Congress, the policy community, and academics; and on his own knowledge of Cuba, attained in many visits to the island in the past decade. For those who have lived through the U.S.-Cuba relationship over the last decade or the last 50 years, Erikson’s discussion will be enjoyable as well as insightful. His narrative style is captivating and brings again to life various events at the center of U.S.-Cuban interaction: events such as the Elián González affair, the tenure of James Cason as chief of the U.S. Interests Section, Cuba’s shooting down of an aircraft operated by Brothers to the Rescue, the conviction of Cuban spy Ana Belén Montes, the “Five Cuban Heroes,” and the eviction of Cubans from a hotel in Mexico City by the U.S. Treasury Department’s Office of Foreign Asset Control. Erikson’s discussions of the Chávez/Venezuela-Castro/Cuba relationship, the Cuban-American Community in Miami, and the pressures promoting and obstructing a greater role for market mechanisms in Cuba are all captivating and substantive. His vignettes of congressmen and women with important roles in policymaking with respect to Cuba are fascinating. If I have any quibbles with the book, it is with the title which seems over-amplified, as there has not been a war between the two countries. The “Next Revolution” referred to in the title is not impossible, but I would think that a difficult but orderly evolution toward Western-style participatory democracy, and a more centrist form of economic organization, are more probable.[2]

In Cuba in the Shadows, Amelia Rosenberg Weinreb (Anthropology, University of Texas at Austin) explores and analyzes the lives, behavior, and views of “ordinary Cubans.”[3] These Cubans are familiar to those who have come to know Cuba during the Special Period. They probably constitute a large majority of the population. These “unsatisfied citizen-consumers,” as Weinreb calls them (2 and 168.), strive to survive with some access to basic “modern” goods, above and beyond what the ration book provides in an amount insufficient for life maintenance since 1990. These modern goods perhaps include some luxuries, but they also include basics such as toilet paper and women’s hygiene products that are available only in the “dollar stores” or tiendas de recaudación de divisas (stores for the collection of foreign exchange). This “silent majority” has remained under-analyzed and largely ignored by scholars, perhaps—as Weinreb suggests—because they do not seem to merit special attention relative to indigenous peoples, the poor, or labor unions, or perhaps because they do not fit the orientations of New Social Movement and Structuralist Marxist approaches.

Weinreb’s ethnographic participant observation succeeds in producing an analysis from about as deep within Cuban realities as it is possible for an outsider to get. Her success can be attributed in part to her research assistants and neighborhood ambassadors, namely her three young children, Maya, Max, and Boaz, who helped to establish rapport, friendship, and shared parenting bonds with Cubans who empathized and wanted to help a young mother. This “family fieldwork” provides a unique window into Cuban society and the lives of Cubans.

Weinreb’s focus is a “shadow public,” somewhat analogous to the shadow economy, as the following explains:

[U]nsatisfied citizen-consumers . . . share interests, characteristics, a social imagery and practice, but their political silence, underground economic activity, and secret identity as prospective migrants casts a shadow over them. They are therefore a shadow public, an un-coalesced but powerful group that engages in resistance to state domination but without a public sphere, and only in ways that will allow them to remain invisible while maintaining or improving their families’ economic welfare. (168)

The roots of the shadow economy of course predate the Revolution, indeed going back to the colonial period and its unofficial economy of smuggling and contraband, as reflected in the expression obedezco pero no cumplo (I obey but do not comply). However, the expansion and pervasiveness of today’s shadow economy were generated by the character of central planning itself, and by the circumstances of the Special Period, as analyzed in chapter 1. Chapters 2 and 3 examine how citizens strive to maintain private space and personal control within the context of the state’s domination of personal life and economic activity. Chapters 4-6 explore a range of survival strategies. Chapter 4 focuses on the concepts and practices encapsulated by the terms resolver, luchar, conseguir, and inventar, each with unique connotations in the context of the Special Period. The significance of material things—and the lack thereof—are investigated in chapter 5. Chapter 6 treats the importance of access to foreign exchange or “convertible pesos.” Weinreb here presents a Cuban class system that puts the “red bourgeoisie” at the top, followed by artists with privileged access to travel and foreign exchange earnings, “dollar dogs” or cuenta propistas (own-account workers) with access to tourist expenditures or remittances from relatives or friends abroad, “unsatisfied citizen consumers,” and finally, at the bottom, the “peso poor” who lack access to foreign exchange and additional earnings. The final chapters examine the broad-based phenomenon of feeling trapped and the dream of escape via emigration. Chapter 8 explores “off-stage” expressions of dissatisfaction, criticism, and resistance, which remain purposely hidden, unorganized, and outside public space. This state of affairs may be changing, however, with the Damas en Blanco and bloggers courageously breaking into the public arena, spearheaded by Yoani Sánchez. Finally, chapter 9 draws together the strands of Weinreb’s analysis and explores the relevance of the concepts of shadow public and unsatisfied citizen-consumer in the broader context of Latin America.

Weinreb succeeds admirably in describing and analyzing Cuba’s silent majority, those “ordinary outlaws” who are decent, hard-working, entrepreneurial, and ethical, yet must defend themselves and their survival through a myriad of economic illegalities within the framework of a dysfunctional economic system. These people live within the doble moral, effectively cowed into acquiescence by a political system whose main escape valve is criticism, innocuous at first, but then increasingly bitter, followed by emigration. The shadow public perhaps constitutes a potential “shadow opposition,” but seems to be easily contained and controlled by the governments of the Castro brothers. One might conclude from Weinreb’s work that this population—currently disengaged and thinking incessantly about emigration—is ripe for public reengagement and that in time there may occur a surprisingly rapid mobilization for change.

Weinreb’s analysis raises some additional questions. Under what circumstances might a shadow opposition become organized, finding a strong voice to become a real opposition? Will the new citizen-journalists of Cuba’s blogging community—plus critics such as Vladimiro Roca, Oscar Espinosa Chepe, Marta Beatriz Roque, Elizardo Sánchez, the Damas en Blanco, and some Catholic organizations—be able to break the control of the Communist Party and the current leadership? Will normalization of relations with the United States and the ending of the “external threat”—a siege mentality long used as a pretext for denying basic political liberties—further erode control of the Party and create new political alignments within Cuba?

Like the flag raised by Máximo Gómez in Cuba’s struggle for independence but sewn by Victoria Pedraza, her grandaunt, Sylvia Pedraza (Sociology, University of Michigan) intends her book to be a contribution to Cuban history. Political Disaffection in Cuba’s Revolution and Exodus,  Pedraza’s magnum opus so far,  is indeed a splendid contribution. It examines the political, social, and economic history of Revolutionary Cuba, exploring its impact on citizens and on emigration decisions and patterns from 1959 to midway through the first decade of the present century. The scope of the work of course goes beyond the Special Period, whose emigrants are the most recent product of a series of four waves from Revolutionary Cuba, following those of 1959-1962, 1962-1979, and 1979-1989.[4] These emigrations serve as organizing periods for Pedraza, who offers a careful reading of the history of the Revolution, using participation and observation from within the Cuban-American community and among Cubans on the island, 120 in-depth structured interviews with a representative selection of émigrés from 1959 to 2004, personal documents of émigrés, and census and polling information. Of special interest in this engaging and moving mix (which few academics manage to achieve) are Pedraza’s personal odyssey and insights as a child of the Revolution, quasi-Peter Pan émigré, and returnee with the Antonio Maceo Brigade in 1979. The account of her reunification with an extended family that she had not seen since leaving Cuba is particularly poignant.

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. For some, it is a quasi-spiritual symbol of hope for a better future; for others, a symbol of undefined but earnest youthful rebellion; and for still others, an abhorrent symbol of authoritarianism. Casey, a Dow Jones Newswire bureau chief in Buenos Aires, 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 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. 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.

I must confess that when I agreed to include Cuban Currency: the Dollar and Special Period Fiction in this review, I thought it was an analysis of Cuba’s monetary system, not having read the title carefully. To my initial trepidation, Esther Whitfield focuses instead on literature, but in the context of Cuba’s dual-currency pathology. Her survey of recent fiction has turned out to be a delight, even for an economist with little direct knowledge of Cuban literature.

Whitfield’s central argument is that the Special Period generated a boom in cultural exports, including literature, due to the opening of Cuba’s economy and society, the subsequent expansion of international tourism and the popularity of all things Cuban, the decriminalization of the use of the dollar, its adoption as a legal currency, and its quick ascent to supremacy over the “old peso.” Special Period literature then became market-driven—like many other activities in Cuba—with authors’ incomes dependent on foreign sales and hard-currency contracts, rather than on Cuba’s literary bureaucracy and membership in the writers’ union. The dominance of the foreign market was further strengthened by the shrinkage of the domestic peso market for books because of declining incomes. This new foreign-market orientation was formalized by legislation in 1993 that permitted authors to negotiate their own contracts with foreign publishing houses and to repatriate their royalties under a relatively generous tax regime. Like other Cuban citizens, authors responded quickly to these new incentives. Special Period fiction is set in a “real Cuba” of interest to foreigners, namely in the Cuba of a behavior-warping dual-currency system, urban decay, dysfunctional Soviet-style economy, and political gerontocracy, together with a vibrant Afro-Latin culture and time-immemorial tropical eroticism. Ironically, the international boom in Cuban fiction during the sunset of the Revolution was a sequel to the literary boom of the 1960s, which was set in the confidence and vigor of the youthful Revolution.

Whitfield begins with an analysis of the circumstances of the Special Period that pushed authors into an external orientation. She then focuses on the works of Zoé Valdés, especially her award-winning I Gave You All I Had (1966), published in exile in Paris, which allows Whitfield to trace the central role played by a U.S. one dollar bill and its symbolic relevance for the culture of the Special Period. Short stories are the subject of the next chapter, with particular attention to the work of Ronáldo Menéndez. His story, entitled “Money,” is also set in the world of the doble moneda and doble moral, but criticizes the reliance on foreign markets and worries about the jineterización (translated imperfectly as “prostituting”) of the writer-publisher relationship and possible debasement of “true” Cuban literature. Whitfield goes on to examine the work of Pedro Juan Gutiérrez, notably the five books of his Ciclo Centro Habana. Gutiérrez writes for a foreign readership, but also critiques it, placing the reader in the position of voyeur into the “lives of sexual disorder, moral depravity and economic despair” of Havana (98). In her final chapter Whitfield meditates on artists’ depictions of Cuba’s urban decay and on critical analyses of such depictions.

Whitfield has produced a fine analysis of how economic circumstances generated new problems and new possibilities for Cuban authors, who have risen to the challenge and produced a literature of broad international appeal. Whitfield’s writing is engaging, her knowledge seems profound, and her subject is enchanting. However, I am not a competent critic of Cuban literature or literary criticism, and cannot tender a confident evaluation of its value for scholars in these fields. Her book, linking socio-politico-economic circumstances of the Special Period to Cuban literature, will nevertheless interest a broad range of social scientists, as well as the more literary-minded.

Is the international market for Cuban fiction as transitory as one might expect or hope that the Special Period itself may be? Perhaps. It may be that when Cuba escapes the Special Period and becomes a “normal country” with a normal monetary system, the special interest in its literary portrayal may diminish. However, the difficulties of economic and political reform are likely to continue for some time, and are likely to take various twists and turns that will hold our interest for some time to come. I hope that Cuba’s fiction writers are there to illuminate the process for a world readership.


[1] Full disclosure: I served as an evaluator for Marifeli Perez-Stable’s edited collection Looking Forward for the University of Notre Dame Press.
[2] One minor detail: Fidel Castro’s hometown was not Bayamo but Birán, not far from Cueto and Mayarí, both immortalized in the song “Chan Chan” by the Buena Vista Social Club.
[3] I also served as a reader for the Universities Press of Florida for the original manuscript of this volume. I was as impressed with it then as I am now.
[4] The emigrations of 1979-1989 were sparked in part by the return visits of Cuban Americans, who turned out not to be gusanos (worms)—the dehumanizing  label given to them by the Cuban government—but instead mariposas (butterflies), as they were relabeled with typical Cuban humor.

 

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Cuba’s 12 to 20 Chair Reform: Can the Small Enterprise Sector Save the Cuban Economy?

 

The quasi-private restaurants in the Barrio Chino have enjoyed a cultural exemption from the controls placed on normal “paladars” or restaurants. They have faced no 12 chair size limitation. They emerged some time ago as dynamic, large, diverse and efficient restaurants – indeed, the best in Havana. They are a living example of what many sectors of the Cuban economy could become if the tight restrictions and toxic tax levels were all made more reasonable. This is not yet happening. (Photo by Arch Ritter  2008)
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By Arch Ritter

In October 2010, Raul Castro’s Government increased the size limitation on private restaurants from 12 to 20 chairs. This was part of a broader reform package designed to shrink the state sector ultimately by about 1 million workers or 20% of the labour force and to re-absorb them into an expanding small enterprise sector. The 20 chair rule however is symbolic of the positive but timid character of the reforms undertaken so far.

This is an amazing and ironic reversal of fortune for Cuba’s private sector. Small enterprises were almost eliminated in the 1960s, were liberalized from 1993 to 1995 and then were stigmatized and contained by onerous regulations and taxation. Now they are supposed to save the economy, generating jobs, higher productivity and higher living standards than was possible under the old system. 9Raul apparently has even more faith in the small enterprise sector than I do!)

Fidel Castro’s 50-year attempt to construct his own variety of “socialism” is being repudiated and abandoned by his own brother and by the Cuban Government. This is an obvious humiliation for Fidel, even though the genuflections in the media and official documents –  including even the “Linamientos” – continue.

Firing one million state sector workers looks risky and brutal. Hoping that they will somehow be absorbed in the small enterprise sector looks like wishful thinking. In other contexts this approach would be labeled “neo-liberal”! Will the laid-off workers have the abilities and aptitudes necessary to start their own businesses?

But the biggest question is whether the small enterprise sector can create 500,000 jobs by March 30 and ultimately one million new jobs. As of  November 28, half way through period when the lay-offs are to occur, only 45,000 new self-employment licenses had been issued, with 43% going to retirees rather than those in the labor force. This process is off to a slow start but perhaps it will accelerate.

The regulatory and tax regimes under which small enterprise operated from 1995 to 2010 were designed to contain its growth, to keep enterprises tiny, and to limit the incomes of the self-employed. Now the tax and regulatory framework has been liberalized somewhat:

  • Licensing has been broadened.
  • Rental of facilities from citizens or the state is easier.
  • Sales to state entities are now possible.
  • Use of banking facilities and bank credit will be possible.
  • Permitted activities have been increased.
  • Some regulations have been eased.
  • Punishments for infractions have been eased. Virtually all of the old ‘infracciones’ continue to punished by the same fines as before. But the seizure of equipment and  the retraction of licenses have been dropped.
  • Imported inputs will become accessible for small enterprise at wholesale prices.

But tight limits on self-employment remain.

  • Professional activities are prohibited.
  • Intermediaries are prohibited and each producer is supposed to be the seller of his or her output.
  • Petty restrictions such as the 20 chair rule continue.
  • Tight limits continue on the hiring of employees.
  • Advertising remains prohibited.

The tax regime has been slightly relaxed but is still problematic. Small enterprises face five taxes: a sales tax (10%), a tax on hiring employees, social security taxes, a public services usage tax, and an income tax (that rises to 50% of income above 50,000 “old” pesos or about $2,000.00 per year.) For the calculation of the income tax, deductible costs of production from total revenues are limited to 10% for simpler enterprises up to 40% for larger enterprises. This means that for a restaurant with actual costs of production of 80% of total income, the tax on actual net revenue exceeds 100%.  The tax on hiring an employee is 37.5% of the average monthly wage for Cuba.

For very small-scale activities, an up-front monthly licensing fee that constitutes a simplified tax payment is required.

This revised regime is an improvement over the previous system. It may induce some enterprises to come up from underground and may promote the establishment of some new enterprises. But, on the other hand:

  • The high effective tax rates will kill off many potential enterprises and promote continued non-compliance.
  • The 37.5% employment tax will limit hiring.
  • The numerous controls and limitations on small enterprise will continue to “stunt” them so that they remain inefficient, wasting human and material resources.

It is therefore unlikely that small enterprise will expand enough to absorb one million redundant workers. By stunting the small enterprises, the possibilities of raising productivity, real incomes and ultimately living standards will also be limited

What happens then? Perhaps the “Fidelistas” could proclaim victory and halt or reverse the reform process. This is unlikely because the old “Fidel” model is discredited by events and by Raul himself. Moreover, Raul’s appointees now dominate the Council of Ministers. His military colleagues hold many key posts in the economy.

More likely, Raul’s Government will conclude that job creation should precede the lay-offs, not vice versa and that their expectations regarding job creation in the small-enterprise sector were overly optimistic. They might then slow down the lay-offs and in time liberalize the tax and regulatory framework.

Raul Castro is finally emerging from 60 years in his elder brother’s shadow. Perhaps he is thinking of his own historical legacy. “History” will never “absolve” Fidel, but it might absolve Raul if he sets Cuba on a course towards a workable economic system – not to mention human rights and meaningful pluralistic democracy.

Since its liberalization in 1993, the production of arts and crafts, largely for the tourist market, has expanded immensely and the quality and diversity of the products has improved greatly. It is now  a major source of foreign exchange for Cuba, though statistics on this do not seem to exist. This sector  provides another living example of the improvements that could be made in the small enterprise sector generally if it was liberalized appropriately. Above, a photo of the crafts market near the Cathedral on Avenida del Puerto, by Arch Ritter, 2008.

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Cuban Demography and Development: the “Conception Seasonality Puzzle”, the “Dissipating Demographic Dividend” and Emigration.

By Arch Ritter

Cuba’s Oficina Nacional de Estadisticas (O.N.E.) recently published the 2010 Edition of the Anuario Demográfico de Cuba 2009, available on line here: http://www.one.cu/anuariodemografico2009.htm. A wide-ranging listing of the web publications on demography and population is located at this address: Oficina Nacional de Estadisticas, LA POBLACION CUBANA . Comprehensive statistical information for Cuba is available quickly, comprehensively. ONE’s coverage and presentation of demographic statistics has been improving steadily in terms of quality and timeliness. (In contrast, basic information on the economy such as unemployment, the consumer price index, and GDP is opaque, minimalist, and not clearly defined.)

Numerous useful and interesting insights into Cuba’s development, past and prospective, are apparent in the ONE data – and other demographic sources. A few are mentioned here.

1. Cuba’s Seasonal Conception Puzzle

An interesting phenomenon. of which I have been unaware. is the seasonal character of the numbers of births in Cuba – and of course the causal seasonality of conception rates. As Chart 1 illustrates, births peak from August to December but decline sharply during the months of February to June. This means that Cuba’s amorous months of high conception levels are from about December to April.

One can venture a number of guesses as to why this might be the case. For example, perhaps the cooler weather of Cuba’s winter months is more conducive to activities related to conception. Or maybe there is greater optimism and dynamism during the more prosperous times of the tourist high season. If anyone has clearer insights into this phenomenon, please let me know!

Chart 1 also shows increasing numbers of births from 2007 to 2009.

2. From Baby Boom to Baby Bust and Beyond?

From 1960 to 1970 Cuba experienced a major “baby boom” with fertility rates rising to around 4.5 children per woman on average Chart 2. This may reflect the improvement in living conditions for many families, improved medical facilities and perhaps greater optimism about the future, leading women and families to choose to have more children during the first decade of the Revolution.  As is well known, however, the fertility rate began a long descent to levels a good deal below the minimum necessary for long-term population stability which is considered to be around 2.2 children per woman.  This baby “bust” commenced in 1970 and has continued to 2009, bottoming out at 1.39 children per woman in 2006 but rising somewhat to 1.70 in 2009. Cuba’s demographic experience is similar to that of numerous higher income countries such as Spain, with a fertility rate of 1.6 in 2005-2010: Italy, 1.4 ; Portugal, 1.4; Russia, 1.5; Canada, 1.6 and Germany 1.3.)

The causes of the declining fertility rates in Cuba undoubtedly included similar factors to the experience of other countries: higher female labor force participation rates (so that the income sacrifice for additional children was higher), better pension systems (so that one’s children were no longer necessary for income-support during old age), reduced opportunities for employing children as income earning assets due to urbanization and increased schooling, different career aspirations for women, easy availability of contraception including abortion etc.

The impact of the changing fertility rates can then be observed in the 2010 population pyramid (Chart 3.) The 1960-1975 “Baby Boomers” reached age 40 to 50 during the 2000s leading to the large cohorts in the 2010 pyramid. But since 1970, the declining fertility rate has led to ever-narrowing cohorts of younger age groups. Even the demographic “echo” of the 1960-1970 cohort was muted.

Chart 3  Cuba’s Population Pyramid, 2010

The consequences for Cuba of an aging population also are similar to those for other countries, though some other high income countries, large scale immigration changes the picture. The main consequences are:

  • The Old Age Dependency rate increased by almost 40% over the 1990-2010 period. Child Dependency rates declined by about 30% in the same period, reflecting the declining fertility rate.  (Table 1.).
  • The aging population will cause the Total Dependency Ratio (the sum of Child and Old Age Dependency as a proportion of the total population) to increase in future, burdening the economically active population for the support of pensioners and their health care.
  • The “aging population” in time will become a “dying population.” The population, previously increasing or stable, will decline sharply when the “baby boom” cohorts hit age 65 or so in 10 to 15 years. This could be modified by compensating changes in fertility or international migration, but not in life expectancy which is unlikely to rise much further in future..
  • The “Total Dependency Ratio” has been particularly low during the years when Child Dependency declined but the large “Baby Boom” age cohorts were still of working age. It is now at 42.2% (Table 1). Consequently the economically active population between age 20 and 60 as a proportion of the total population has been large.This so-called “demographic dividend” or “demographic window of opportunity” normally provides a stimulus to growth and development as in China. However, in Cuba’s case, it is passing quickly and so far has been partly wasted as it has been underemployed in low productivity activities.

Emigration

The Anuario Demográfico de Cuba 2009 also provides comprehensive information on internal migration and some general figures for external migration. Emigration numbers are illustrated in Figure 4. The “Special Period” since 1994 has been characterized by a steady hemorrhage of emigration. While ONE does not present information on the sociological character of the emigrants, casual observation suggests that they are well educated, entrepreneurial and perhaps disproportionately in the early adult 18 to 35 age grouping.

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The New Analysis of Cuba’s Monetary Situation by Pavel Vidal Alejandro: “Cuban Monetary and Financial Jigsaw Puzzle”

An insightful new analysis of Cuba’s monetary, exchange rate, banking and balance of payments imbroglio by Pavel Vidal Alehjandro has just been published by the Real Instituto Elcano, Madrid. A bruef extract is included below.

The full document is available here: The Cuban Monetary and Financial Jigsaw Puzzle

Theme: The 2008-09 balance of payments crisis and a succession of errors in economic policies have resulted in new monetary and financial complications in the Cuban economy, to be added to the costs and distortions of currency duality.

Summary: The Cuban economy currently operates with two local currencies –the Cuban peso and the convertible peso, both with convertibility problems and multiple and overvalued exchange rates– and has been subject to a banking crisis since 2009. It is a veritable monetary and financial jigsaw puzzle. In order to do away with the dual currency and overcome financial imbalances, monetary policy must devalue the two domestic currencies. Cuba’s banks are facing a systemic liquidity crisis with no lender of last resort to help them out of it. The country cannot access a last-resort loan from the IMF, the World Bank or the IDB since it is not a member of these institutions. The government has been applying a tough adjustment policy which has led to the reduction in the fiscal deficit and to a surplus in the balance of payments, which has served to pay off debt and gradually unfreeze bank accounts, although the matter is far from being fully settled

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CARMELO MESA-LAGO, El desempleo en Cuba: de oculto a visible, in Espacio Laical Digital

Espacio Laical, the publication of the CONSEJO ARQUIDIOCESANO DE LAICOS DE LA HABANA , has just published an excellent analysis by Carmelo Mesa-Lago, on underemployment, unemployment and the ability of the small enterprise sector to reabsorb redundant labor to be released from the state sector. Mesa-Lago, the “Dean” of analysts of Cuban economy, has focused particularly on the labor sector in Cuba since he was an employee of the Cuba’s Ministry of Labor in the early 1960s and wrote his Ph.D. Dissertation (The Labor Force, Employment, Unemployment and Underemployment in Cuba, 1959-1970, Beverley Hills, Sage Publications, 1972).

Espacio Laical continues to consolidate its position as a leading fora for economic analysis on the Cuban economy!

The first few paragraphs are presented below. The full analysis can be found here: El desempleo en Cuba: de oculto a visible

El desempleo en Cuba: de oculto a visible: ¿Podrá emplearse el millón de trabajadores que será despedido?

Por CARMELO MESA-LAGO

Mi disertación doctoral, escrita hace 42 años, analizaba los problemas de desempleo declarado o visible, y subempleo o desempleo oculto (subutilización de mano de obra, empleo excedente) en países socialistas. Comparando a Cuba, China, la URSS y Yugoslavia, aportaba evidencia contraria a la teoría entonces en boga acerca del pleno empleo en economías socialistas de planificación centralizada. En el capítulo sobre Cuba (1970-1989) argumentaba que la reducción del desempleo visible durante la Revolución se había logrado en gran medida mediante el empleo excedente o innecesario. Por ejemplo, una fábrica, granja o entidad estatal de servicios, necesitaba 100 trabajadores, pero ocupaba a 200, así reducía el desempleo nacional visible, pero  ambién la productividad y el salario a la mitad, a más de erosionar el incentivo del esfuerzo laboral (Mesa-Lago, 1968, 1972).

Casi medio siglo después, los hechos en 2010 confirman la hipótesis.

Este artículo: 1) prueba con estadísticas oficiales y de CEPAL, así como con análisis de economistas cubanos,  que el problema no es nuevo, sino que se remonta al inicio de la  Revolución; 2) estima la magnitud del desempleo actual y sus efectos; 3) evalúa las medidas del

Gobierno para abrir empleo privado a más de un millón de trabajadores excedentes, y 4) ofrece opciones para mejorar dichas políticas (sus efectos fiscales son analizados por Vidal y Pérez Villanueva).

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Oscar Espinosa Chepe:, “Changes in Cuba: Few, Limited and Late” (Part 1 and 2)

Here is a commentary from Oscar Espinosa Chepe on the recent changes in Cuba.

Óscar Manuel Espinosa Chepe , a Cuban economist, was one of approximately 75 dissidents arrested, tried and convicted in 2003 as part of  a crackdown by the Cuban government. Amnesty International declared him  a prisoner of conscience.

He graduated from the University of Havana with a degree in economics. From 1965 until 1968 he worked in the Economic Advisory Group of Prime Minister Fidel Castro.  From 1970 until 1984, Espinosa was responsible for Cuba’s economic, technical and scientific cooperation with Czechoslovakia, YugoslaviaHungary. In the 1980s, Espinosa grew increasingly disillusioned with the Cuban government’s economic policies. In 1996 he was reportedly fired from his job at  Cuba’s central bank. Since then, he has written many articles, analyses, and commentaries about economic and other matters. (from Wikipedia)

¨Un sistema opresor no puede ser reformado.  Debe ser totalmente abandonado¨, Nelson Mandela

Con la  publicación oficial de los instrumentos legales para la Implementación de la política sobre el ejercicio del trabajo  por cuenta propia y los procesos de reducción de plantillas infladas y, posteriormente, del Proyecto de Lineamientos de la Política Económica y Social para aprobar en el VI Congreso del Partido Comunista a celebrarse en abril de 2011, el gobierno ha brindado elementos que ratifican que sus ideas para salir de la crisis se basan en medidas parciales e insuficientes, que no solucionaran los graves problemas existentes en Cuba.

Cuando se leen detenidamente esos documentos, se evidencia el propósito de realizar tardíos y pequeños cambios para mantener lo que en realidad constituye la fuente real de los problemas: un sistema absolutamente disfuncional y un régimen totalitario que ha llevado la nación al más completo desastre y a la incierta dependencia de factores externos.  Esos documentos denotan que los cambios que se quieren hacer son para que en esencia todo siga igual y se garantice el poder omnímodo y los privilegios detentados por un grupo de personas durante 51 años, sin importar los crecientes sufrimientos de la población.

Esos documentos soslayan la verdadera génesis de los problemas y exponen medidas que se quedan a mitad del camino, llenas de limitaciones y prohibiciones.  Repiten otras anteriores como la entrega de tierras en usufructo o el pago por resultado a los trabajadores, implementadas sin tener en cuenta una concepción integral de la economía.  Los resultados de la entrega de más de un millón de hectáreas de tierra no han logrado el incremento de la producción agropecuaria, sino todo lo contrario.  Hasta el 30 de septiembre de 2010, la caída ha sido del 5,1%, sin incluir el desastroso comportamiento de la producción cañera.

Todo debido a que el estrecho tutelaje estatal  ha quedado intacto, bloqueando y desalentando las capacidades productivas, mientras Cuba continúa comprando en el exterior el 80,0% de los alimentos de la canasta básica.  Similar ocurre en el ámbito salarial con el pago por resultado, al no eliminarse la excesiva burocratización en el sistema empresarial y sin garantizarse el fluido suministro de abastecimientos a los centros de trabajo, ni existir una correspondiente organización laboral.

Ahora se quiere impulsar la restructuración laboral, que abarcará el despido de 500 000 trabajadores  en su primera etapa a finalizar en abril de 2011; el 10,0% de la fuerza de trabajo empleada.  El proceso continuaría hasta completar 1,3 millón   de persona, el 25,0% del total.  Según la concepción gubernamental tendrán la opción ser ubicados en la construcción y la agricultura, o dedicarse al cuentapropismo que ahora se pretende ampliar.  Indudablemente la reorganización de la fuerza de trabajo en Cuba es indispensable.   Resulta imposible organizar los centros de trabajo con las plantillas infladas que no permiten incrementar la productividad, la eficiencia, la disciplina, y mucho menos el salario  para que motive al trabajador, en un país donde equivale a 21 dólares aproximadamente como promedio mensual, según datos oficiales, y reconocido por el Presidente Raúl Castro ¨como insuficiente para poder vivir¨.

Sin embargo, el proceso de racionalización, demorado por tantos años, se quiere hacer de forma muy rápida ahora, sin la preparación adecuada para que pueda tener éxito ni la organización para que en un plazo tan breve se pueda reubicar una cantidad tan grande de trabajadores.

Reconocidos expertos, con cargos oficiales importantes durante muchos años,  han señalado sus preocupaciones por tan amplio desempleo, cuando no se basa en un estudio técnico de organización del trabajo, y, como el Dr.Sc. Lázaro González Rodríguez, exviceministro del trabajo,  publicó en un blog de Internet  ¨el 90,0% de las normas de trabajo son elementales. Las empresas y demás entidades, en su inmensa mayoría, no han realizado durante los últimos años, estudios de organización del trabajo y, por tanto,  cualquier balance de cargas y capacidades es erróneo…durante los últimos 20 años no se han preparado técnicos en organización del trabajo ni se le ha prestado atención a esta disciplina¨.

En ese escenario se plantea efectuar la racionalización con ¨comisiones de expertos¨, compuestas por 5 o 7 personas, elegidas en asambleas en los centros de trabajo, con el evidente propósito de responsabilizar a los  trabajadores del complicado proceso de racionalizar la fuerza de trabajo, cuando se trata de una tarea que compete totalmente a la administración.

Las condiciones para recibir una cantidad tan grande de desempleados no se han preparado convenientemente. Ni siquiera existe un mercado mayorista para abastecer a los cuentrapropistas, por tanto no tienen dónde comprar los insumos en condiciones razonables  para realizar las   producciones y prestar los servicios. Por consecuencia tendrán que adquirirlos en las caras tiendas de venta en divisas o en el mercado negro que seguramente se ampliará ante la falta de previsión del Estado.  Todo esto está unido a altas tasas de impuestos, en un país donde durante decenios fueron suprimidos todos los mecanismos tributarios, por lo que no hay una cultura al respecto.

El colmo de la falta de preparación del proceso se aprecia  en contradicciones entre las decisiones tomadas para ampliar el cuentapropismo y artículos de la Constitución, que no ha sido reformada.  Indudablemente, el anuncio del 1 de agosto por el General Raúl Castro de que se permitiría contratación de fuerza de trabajo por las personas decididas a ejercer el trabajo independiente es positivo.  Sin embargo, no se ha modificado el Artículo 21, que establece: ¨Se garantiza la propiedad sobre los medios e instrumentos de trabajo personal o familiar, los que no pueden ser utilizados para la obtención de ingresos provenientes de la explotación del trabajo ajeno¨. Artículo 45: ¨El trabajo en la sociedad socialista es un derecho…lo garantiza el sistema económico socialista, que propicia el desarrollo económico y social, sin crisis, y que con ello ha eliminado el desempleo….¨ Asimismo, cuando se despiden 500 000 personas, sin totales garantizas de un trabajo honrado, se choca con  el

(SEGUNDA PARTE)

¨Un sistema opresor no puede ser reformado.  Debe ser totalmente abandonado¨, Nelson Mandela

Como señaláramos en la primera parte, los propósitos del gobierno cubano son realizar modificaciones que le permita remontar la actual crisis, cada día más aguda, pero sin perder el control absoluto mantenido sobre la sociedad durante decenios.  Objetivo  imposible de lograr, debido a la acumulación de los problemas existentes, que no sólo son económicos y sociales, sino que abarcan la política, los valores éticos, la identidad nacional, la demografía, el medio ambiente y otros.

Las autoridades pretenden evitar las ¨concentraciones de riquezas¨, como ha reconocido el periódico Granma, y que los ciudadanos al alcanzar la libertad económica deseen obtener la libertad política en una Cuba democrática.  Eso se aprecia en la implantación de un elevado sistema tributario implantado al nuevo sector emergente, mucho más severo y limitante que el existente para las empresas estatales y las mixtas con capital extranjero.   Ejemplo de ello está en el impuesto por la utilización de la fuerza de trabajo que pagarán los trabajadores por cuenta propia, del 25,0% del salario de los trabajadores contratados, considerándose como remuneración mínima pagada a cada trabajador contratado ¨el monto equivalente a un salario medio mensual, incrementado en un 50,0%¨.  Se considera como salario medio mensual el vigente en cada provincia y el Municipio Especial Isla de la Juventud, en el ejercicio fiscal anterior, reconocido por la Oficina Nacional de Estadísticas (ONE).

En caso de contratarse más de 10 y hasta 15 trabajadores, se contempla como remuneración mínima pagada a cada trabajador el monto equivalente a dos salarios medios mensuales; y de contratarse más de 15 trabajadores, el monto equivalente a tres veces un salario medio mensual.  Con ello, y otros obstáculos, el Estado muestra su propósito de impedir el crecimiento del trabajo por cuenta propia y el surgimiento de pequeñas y medianas empresas (PYMES).

A esto se une que los gastos que podrán deducirse de los impuestos sobre los ingresos personales como máximo, y solo en el caso de los elaboradores y vendedores de productos alimenticios y transportadores de carga y pasajeros, podrán ser  hasta un 40,0% de los ingresos obtenidos en el año. En otras actividades, los gastos permitidos a deducir tendrán un porcentaje inferior,  llegando en algunos  oficios hasta únicamente el 10,0% de los ingresos anuales.

Otro ejemplo de las intenciones de limitar la iniciativa individual es la forma como se cobrará el impuesto sobre los ingresos personales.  De acuerdo a las ¨Normas¨, se determinarán por la suma de todos los ingresos devengados menos los gastos deducibles permitidos.  Para la determinación de la base imponible, se deducen además de los ingresos declarados los tributos pagados y el porciento por concepto de los gastos necesarios de la actividad de acuerdo a la siguiente escala progresiva:

UM: PESOS

INGRESOS NETOS ANUALES                                                                                        %

Hasta                      5.000.00                                                                                     Exento

El exceso de          5,000.00 hasta 10,000.00                                                            25

El exceso de        10,000.00 hasta 20,000.00          30                       El exceso de        20,000.00 hasta  30,000.00                                                            35

El exceso de        30,000.00 hasta 50,000.00                                                            40

El exceso  de       50,000.00                                                                                          50

Como puede observarse a partir de 50 000 pesos (2500 US dólares), existe una alta carga tributaria que unida a la existente para el pago por la utilización de fuerza de trabajo hará prácticamente imposible la capitalización indispensable para el crecimiento de los nuevos negocios. A esto se une la obligatoriedad de la contribución a la seguridad social, con el pago del 25,0 % de una base de contribución seleccionada por la persona en cuestión, en  una escala que va de de 350 a 2000 pesos.  La creación de una red de protección económica para los cuentapropistas es en principio algo positivo, pero resulta cuestionable el carácter compulsivo de la medida, mucho más cuando comienza a nacer el sector privado en un contexto sin la debida preparación y   con grandes dificultades de todo tipo.

A los frenos tributarios descritos y la carencia de un mínimo mercado mayorista donde los cuentapropistas pudieran comprar legalmente los productos necesarios para realizar sus actividades, se suman barreras administrativas tendientes a limitar el tamaño de los negociones y evitar el supuesto enriquecimiento de las personas. Así las capacidades de los restaurantes no podrán exceder a 20 comensales, ni las barberías a un numero pequeño de sillones, cuando lo que  requiere urgentemente la economía nacional es alentar a los ciudadanos emprendedores, así como   centros de trabajo prósperos y eficientes donde sean creados a la mayor velocidad posible puestos de trabajo para dar empleo a las personas que próximamente serán masivamente despedidas y que, a la medida que se desarrollen, contribuyan a la riqueza del país con el aumento del pago de impuestos que sirvan para el financiamiento de las necesidades sociales.

Continuará…

La Habana, Noviembre 17 de 2O1O

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Partido Comunista de Cuba, “Proyecto de Lineamientos de la Politica Economica y Social”: Viable Strategic Economic Re-Orientation and / or Wish List ?

I. “Structural Adjustment” on a Major Scale

On Tuesday, November 9, a major document appeared for sale in Cuba entitled “Proyecto de Lineamientos de La Political Economica y Social” or “Draft Guide for Economic and Social Policy.”  The purpose of the “Guide’ presumably is to spark and to shape public discussion and education on the economic matters that will be the focus of the long-postponed Sixth Congress of the Cuban Communist Party to take place in April, 2011. It also provides the essentials of the new approach that will likely be adopted at the Sixth Congress.

It can be found in its entirety, courtesy of the Blog Caf Fuerte. (http://cafefuerte.com/

, here: Projecto de Lineamientos de la Politica Economica y Social,

The “Guide” is a broad-reaching and comprehensive document that puts forward 291 propositions for the improvement of the functioning of the Cuban economy. It signals a break in the four years of near inaction that the Cuban economy endured since Raul Castro took over as acting and then actual President – and the ten years of paralysis from about 1995 to 2006 under President Fidel.  It amounts to a major process of “structural adjustment” of the sort that was begun in 1992-1994, but was then stalled when the Cuban economy appeared to rebound after 1994.  The document is also a contradiction and maybe a “slap-in-the-face” for Fidel Castro, as it indeed indicates that the Fidelista-style Cuban model – his life’s work – is not working. (See “Fidel’s No-Good Very Bad Day” and The “FIDEL” Models Never Worked; Soviet and Venezuelan Subsidization Did.)

II. General Character of the Proposals

The Table of Contents provides a quick idea of the scope of the document:

Introduction

Contours of Economic and Social Policy

I           Economic Management Model

II          Macroeconomic Policies

III        External Economic Policies

IV        Investment Policy

V         Science, Technology and Innovation Policy

VI        Social Policy

VII       Agroindustrial Policy

VIII     Industrial and Energy Policy ix

IX        Tourism Policy

X           Transport Policy

XI         Construction, Housing, and Hydraulic Resource Policy

xii        Commercial Policy.

The Introduction summarizes the basic objectives required to overcome the principal problems of the economy. These include putting into productive use the unused lands constituting almost 50% of total, raising agricultural yields, developing new mechanisms to reverse the process of industrial and infrastructural de-capitalization, eliminating excess and redundant employment, raising labor productivity, recovery of export capacity in traditional exports, undertake studies in order to eliminate monetary dualism, and provide improved capacities for more decentralized regional development.

The “Contour” section then states that “…only socialism is capable of overcoming the difficulties and preserving the conquests of the Revolution, and the implementation of the economic model prioritizes planification and not the market”. However, the next paragraph states “…socialism is equality of rights and equality of opportunity for all citizens, not egalitarianism.” The latter sounds less like “socialism” and more like “social democrat” if not the common approach of most Western countries. The latter quotation makes the former somewhat hard to interpret if not meaningless.

The document then goes on to list the 291 propositions under the 12 different headings. A few of the more interesting propositions are summarized below:

  • Wholesale markets for supplying state, cooperative and self-employment enterprises will be established. (9)
  • State enterprises will decide themselves how to allocate their investment funds, and normally will not receive budgetary support for this. (13)
  • Insolvent enterprises will face liquidation. (16)
  • Workers incomes in state enterprises will be linked to enterprise performance (# 19)
  • Monetary and exchange rate unification will be “advanced” (54)
  • The taxation system will be advanced in terms of progressivity and coverage, and will be based on generality and equity of its structure. (56 and 57)
  • The centralized character of the determination of the planned level and structure of prices will be maintained. (62)
  • Recover the place of work as the fundamental means of contributing to the development of society and the satisfaction of personal and family needs. (130)
  • Modify the structure of employment, reducing inflated staffing and increasing employment in the non-state sector (158-159)
  • Eliminate the ration book as a means of distributing products. (162)
  • Improve agriculture so that Cuba is no longer a net importer of food, prioritizing import substituting activities, reviving citrus fruit production, augmenting sugar production. (166, 174, 179, 194.)
  • Promote export-oriented industry (197)
  • Develop a range of new industries such as tires, construction materials and metallurgy (213, 215, 216)
  • Restructuring of domestic retailing and wholesaling. (283-291)

III. Preliminary Evaluation

This document will receive a great deal of attention inside and outside Cuba. It provides fodder – along with the recent legislation on self-employment – for analysts and observers of Cuba, who have had little of hard substance on which to base their analyses of Cuban policy under the “Raulista” Presidency for some time.

In some senses, this document is remarkable. It sets out an ambitious reform program for much of the Cuban economy. It may indeed constitute a “Wish List” of all the types of policy improvements and changes that would be nice to have. The question is “can and will they be implemented?”

This document also is a major risk for the Raul Castro Administration. It provides a check-list of tasks that will be difficult to achieve. If future implementation and economic performance is far below the expectations that are now being raised to high levels, there could well be a serious fall-out for the Government and the Party.

The document is also broad and ambitious but does not set any clear priorities and does not propose a sequence of actions. Everything can’t be done at once. How should the policy changes be phased or sequenced?

Some observers are skeptical and perhaps cynical regarding the “Guide” – for good historical reasons. In her Blog Entry entitled The Art of Speaking Without Speaking (http://www.desdecuba.com/generationy/?p=2088) Yoani Sanchez states:

When you grow up decoding each line that appears in the newspapers, you manage to find, among the rhetoric, the nugget of information that motivates, the hidden shreds of the news. We Cubans have become detectives of the unexpressed, experts in discarding the chatter and discovering — deep down — what is really driving things. The Draft Guidelines for the Communist Party’s VI Congress is a good exercise to sharpen our senses, a model example to evaluate the practice of speaking without speaking, which is what state discourse is here.

The Guide undoubtedly could be seen as an economic rescue program designed to rescue also the Communist party of Cuba, which faces steady de-legitimation as the economy deteriorates – even as the official GDP statistics appear to rise steadily.

What is missing from the “Guide”? Here is a first brief listing. Further analysis will be incorporated here later.

1.      Nothing is said regarding labor rights. A vital part of the reform approach if labor is to be used effectively would be freedom of association, collective bargaining and the right to strike. In the absence of these, pressures and insights from the grass roots to improve economic policy and its effectiveness are suppressed.

2.      Nothing is said regarding freedom of expression and the right to criticize the policies and institutions openly, honestly and continuously. The absence of this right leads to economic inefficiency and corruption as argued elsewhere. ( Freedom of Expression, Economic Self-Correction and Self-Renewal)

3.      No further elaboration of how the self-employment or micro-enterprise sector is presented, suggesting that the recent reforms are the end of the journey not a first step.

4.      The dedication to centralized determination of prices is problematic. If maintained strictly, it would make the decentralized decision-making allotted to enterprises for investment, the hiring of resource inputs, etc. meaningless, and the problems of trying to run the economy from a few office towers in Havana would continue.

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