Author: Elias Amor Bravo

Much More Damaging Than a Hurricane: Expropriations Without Compensation

House destroyed in Caibarién by Hurricane Irma. (Pedry Roxana)

The Cuban Economy, Elias Amor Bravo, 27 August 2018 – Someone asks a naive question in Granma today: “Can a policy be more harmful than a hurricane?” The answer is yes, of course a policy can cause irreparable damage to a society by its application.

The most obvious example is the policy practiced by the Cuban communist regime against its people. Don’t look at “the blockade or the US embargo,” because however many measures one can cite of concrete cases of the application of that legislation, the harm caused by communist policies is infinitely worse. One in particular, the worst of them all: expropriations without compensation.

In any case, as has already been pointed out on this blog on numerous occasions, the matter of the embargo has an easy fix: pay what is owed by the Cuban regime. When one of the parties is unwilling to assume its responsibilities in a dispute, normally the other one will not make a move either. continue reading

It has been almost 60 years, certainly, but many more could pass, because I insist that the damage that the poorly-named ’blockade’ causes the Cuban economy is miniscule compared with the waste, lavish spending, nonsense, and accepted bankruptcies over six decades of the Castro regime.

Cuba has done business, received investments, obtained credits and loans over decades, without any limit, but nevertheless, that did not mean an improvement in the living conditions of Cubans, but rather the complete opposite. It’s time that demagogy be set aside once and for all, and that they begin to assume responsibilities for the many votes that they obtain from the countries of the United Nations.

Even a hurricane, as the Cuban residents of south Florida well know, with all its destructive force, can still create economic opportunities in recovery that over the long term end up being positive. To this end, it is the financial sector, savings and insurance, whose development on the island is practically nonexistent. The Castro blockade of an activity essential for the functioning of an economy, in terms of connection to disasters, is an example that confirms the terrible quality of the economic policies implemented on the island.

Playing dominoes in Cuba after Irma.

In Cuba, cyclones are devastating, among other things, because there is no space for private or public savings. Basically, because Cubans scrape by on the lowest salaries in the world, incapable of saving for old age and with a notable suspicion and distrust toward the banks belonging to the state, which on occasions have shown that, when the time comes to defend interests, they never put first those of their depositors, but rather those of the ones in charge. The Cuban economy has neither the rigor nor the confidence necessary for the damages of a hurricane to be fixed as happens in any other country in the world. To that end, the consequences are bigger and it takes much more time to return to the levels of prior to the natural disaster.

History is what it is. After the property confiscations decreed by the communist revolution at the beginning of the 60s and until the “revolutionary offensive” of 1968, the hereditary private capital of Cubans passed to the hands of the state without any compensation.

A hurricane of massive destruction. It’s possible that the Granma columnist doesn’t know it, or that the report that is sparingly made every year for the United Nations doesn’t want to refer to it, but those uncompensated expropriations by the state from their legitimate owners (many of them citizens of the US whose government sees itself as entitled to defend their interests) meant the absolute impossibility of every again reaching their prior levels of income and wealth and, for this reason, they ended their days in the most absolute misery.

Perhaps it doesn’t matter to the communists what could happen to these people, their assets, and their companies, but what they had to endure as a result of these “revolutionary” actions was much more destructive than the worst of hurricanes: exile, rupture, the loss of family ties, or simply fleeing abroad in search of freedom.

What Granma calls “the economic, commercial, and financial blockade imposed by the United States against Cuba” is a joke compared with the harm caused by that communist greed to change the structure of property in the Cuban economy. The impact of this was well over $140 billion. In practical terms, this is the total value of all the homes and savings that were expropriated suddenly in two or three neighborhoods in Havana. If what they want is to compare, let them do so.

I insist again. The “blockade” has an easy fix. Pay. Once done, let’s see if it’s true that the Cuban economy can straighten itself out. I greatly fear that it won’t be possible if one considers the design created in the so-called “constitutional reform.” One step forward, but two steps back. This is the real check on any real advance in the Cuban economy and in the improvement of the population’s living conditions.

For a responsible government, throwing a stone and hiding the hand isn’t the most appropriate conduct. If the communist regime wants to normalize economic, commercial, and financial relations with the United States, it knows well what it has to do.

I don’t see the US government especially interested in maintaining a policy whose sole responsibility belongs to someone else. The recent toughening of sanctions by president Donald Trump in 2017 is a good point in the game to try to put a definitive end to the dispute. Above all because it means not accepting a Castro “snub” from which US citizens and companies never should have suffered.

The United States does well to defend its’ people’s interests. It’s a message that, transferred to the rest of the world, has a very clear and valuable meaning, possibly quite superior to that given by other countries to their citizens who are victims of communist expropriations.

History is there to be told. Frequently, the communist regime in Havana tends to create a history that never existed, or to cut from it scenes that by now turn out to be unviable, like the arguments offered to oppose a democratic and pluralistic multiparty system. This is typical of authoritarianisms, because they only want one culture, one economy, a political system based on one ideology: socialist or communist, it doesn’t make a difference.

If the General Assembly of the United Nations really wanted to help in this matter, it would be easy. Maybe in Havana they are more interested in permanent harassment of their neighbor to the north. Maybe they want it to continue this way for another 60 years.

Translated by: Sheilagh Carey

The Failure Of The Dairy Sector In Cuba: From The Glass Of Milk To The ‘Master’ Cheesemaker / Elias Amor Bravo

Illustration of a cow. (14ymedio)

Elias Amor Bravo (economist), 17 July 2018 – The National Milk Group is one of those inefficient conglomerates that exist in the Cuban state economy to control corporate production, in this case in a fundamental sector such as dairy. To cite just one example, the National Office of Statistics (ONEI) reported the value of wholesale and retail trade in dairy products as 1.3 billion Cuban pesos (roughly $52 million USD) in 2016, representing 10% of total food expenditures. Almost nothing.

An article in the state newspaper Granma alludes to the increase in the investments of the State Group to increase the productive capacity of the dairy industry. The Castro brothers have starred in some unforgettable episodes. One of these was undoubtedly Raul Castro’s “glass of milk” speech.   But Fidel Castro himself, on occasion, acted as a cheese specialist before the master cheese makers of Cuba. Amazing. continue reading

One of the great failures of the Cuban economy established by the so-called Revolution has been cattle ranching and the dairy industry. The confiscations of the private cattle ranches and of the companies of the sector at the very beginning the revolutionary process left these industries, of vital importance for the country, without a strategic direction..

The regime has been trying for 60 years to increase the production of milk and derivatives, but has not been successful. Basically, because the institutional and property rights system is unable to offer products in the conditions of “variety, quality, safety and priority” that is required, and what is even more serious, of quantity. Cubans have been forced to coexist with the rationing of products in great demand. In other words, the collectivist effort has had disastrous consequences for a sector such as dairy. Let’s look at the data.

To mention some examples, the most outstanding and from the official information source, the ONEI, in 2006 the production of pasteurized milk, the highest volume type (in relation to condensed and evaporated) registered 127.8 thousand tons. In 2016, the last published data was 123.1 thousand tons. Only a year earlier it had been 104.8 thousand tons. In the years between 2012 and 2016, the average annual production of pasteurized milk was 110.78 thousand tons, 10% less than that obtained in 2006.

Another dairy product in high demand, yogurt, fell further, from 183.5 thousand tons in 2006 to 146.7 thousand in 2016, a 20% drop. It is even more serious to note that condensed milk, for example, was reduced from 0.9 thousand to 0.4 thousand in the same period, a 55% drop. But in this case, the aggravating factor is that imports of condensed milk, in the face of a limited domestic supply, has gone from 2.3 thousand tons to 2.6 thousand in the same period. The case of milk powder is also significant. Imports in 2016 amounted to 55 million tons, and according to ONEI’s statistics the product “disappeared” between 2012 and 2016, while in 2006 it had reached a total of 21.1 thousand tons. In this case, 141 million pesos are paid for imports, as a consequence of the absence of a domestic product.

These data confirm the backwardness of the industry, the inaction and the productive inability to meet basic needs. The sector calls for “the modernization of the plants with the entry of new equipment and the repair of existing ones,” although I do not believe that this is the solution, no matter how hard those responsible try to justify it.

Granma alludes to the conclusions of a “meeting held between directors, technologists, researchers and master cheesemakers from all over Cuba, recently organized by the Provincial Dairy Products Company of Camagüey.” What I find surprising is that the event still recalled “the extraordinary knowledge that Fidel Castro had” on how to recover the cheese culture in Cuba. True.

However, Castro retired in 2006 and since then, the results of cheese production are those that from before. An absolute collapse. What is more, now that neither Fidel nor his brother are there, the country is confronting the incentive of demand coming from tourism, estimated at 7 thousand tons of cheese. If Fidel really had any responsibility in the reorientation of the sector, and his words and messages meant at some point “the beginning of a new stage of transformations in the sector,” the results leave no doubt. The glass of milk will have to wait.

To recover the dairy sector in Cuba, it is necessary to make advances in the institutional transformation of the economy. This sector, which needs close ties from the milk producers to the final distribution, has numerous options for management, and none of them are state groups or companies belonging to the state.

The state is not good at milking cows, making milk powder or yogurt. This is an activity that has to be contracted out and for which private companies should be held responsible, with autonomy and a stable legal framework. The alternative is to throw money away. Even with investments in equipment (skimmers, clarifiers, presses, molds and pasteurizers, along with substantial improvements in the cooling systems), and the training of workers, the problem still would not be solved because the value chain of the sector remains broken.

The example is in milk production. In 2006, before the partial land reforms were launched, the private producers managed 344.4 thousand tons. These private producers in 2016 delivered 516.1 thousand tons, a growth of 50%. The state, which still retains a very prominent part of the final production, in the same period increased production figures by only 35%.

The answer is obvious. The private sector manages much better and produces more than the state. The solution does not admit questioning: begin by dissolving the State Groups, put the industrial sector in the hands of private entrepreneurs.

But above all, livestock management also needs to be in the hands of the private sector, as it was before 1959, and we will see how everything improves very fast. Then nobody will remember Fidel Castro’s lessons to the Cuban cheese makers, nor Raul’s “little glass of milk.” Put it to the test.

Tourism as a National Development Priority / Elias Amor Bravo

Several tourists take pictures in the Havana’s Plaza Vieja. (EFE)

Elías Amor Bravo, Economist, July 2, 2018 — No one doubts that tourism is a top priority for the Cuban economy. Whether or not the communist authorities are managing it well is another matter. It is no surprise that President Díaz-Canel stresses “the priority of tourism for the country’s development given that it has become one of the main income generating activities in the island’s economy.” The issue, however, is not just about setting priorities but how to execute them and achieve results. As any Cuban peasant knows, it’s one thing to talk but action is something quite different. The distance between the two can be painfully large.

Let’s consider why.

In terms of absolute growth Díaz-Canel considers tourism in Cuba to be a success. In fact, as a Granma article notes, the so-called “government commission to stimulate and manage the tourism sector” can point to “impressive” growth since the 1990s under the direction of Manuel Marrero Cruz. continue reading

Back when the country was in the depths of the “Special Period,” a high-level communist official recognized Cuba’s potential as a tourist destination. With little hard currency and facing insolvency, the regime began to accept — with a certain degree of resignation — the arrival of foreign tourists in the country. It was an activity that, after the triumph of the so-called “Revolution” in 1959, had been largely banned due to its association wth the bourgeoisie and the wealthy, who were considered enemies of the new Cuban regime.

But, in fact, figures back up Díaz-Canel’s claims. The 18,000 rooms available to tourists in all of Cuba had grown to 67,000 by the end of 2016 according to figures from the National Office for Statistical Information. And that may not even include rooms rented out in private homes through social media sites and other online platforms that have begun springing across the island.

The Castro regime did the math. To turn tourism into the locomotive of the Cuban economy, it had to produce hotel rooms. The reality, however, is that the determinist Marxist system, which has done so much damage to countries that embraced it, rarely produces the expected results. And Cuba proved to be no exception. Tourism is still not an engine, much less a locomotive, or anything resembling one. Díaz-Canel himself has recognized this.

The president defends the Cuban tourism sector, citing “the comfort of its hotels, the beauty of its beaches and scenery, the country’s low crime rate.” But at the same time he acknowledges weaknesses, including the fact “that many products which could be produced domestically are still being imported, which raises costs.” His solution is “to further develop agriculture as well as sources of renewable energy and new technologies.” In short, what he calls the “so-called industry without chimneys.”

As a corollary, Díaz-Canel cites challenges to the sector, including “focusing attention on the growing number of visitors, raising the quality of Cuban tourism and finding replacements for imports.”

Developing the tourism industry requires taking all these factors into consideration. But there are many others that Díaz-Canel’s communist regime is not even mentioning. However, he has only to ask his advisers for a brief description of tourism successes in other parts of the world to recognize that “talk and actions are very far apart.” I also have the impression, an admittedly pessimistic one, that they are not willing to do the things it takes to be successful. Let’s look at them one by one.

First, tourism is a private sector activity. Nowhere else in the world does the state own hotels unless there is some concrete reason (national patrimony, cultural significance, historic preservation) to justify it. And even in those cases there is no question that overall operation and management is best left to the private sector.

As a private sector activity, the hospitality industry needs a legal system which respects private property rights and does not create obstacles — other than those related to legal and urban planning issues — to business development. Owners of tourism related businesses respond more quickly to the tastes of their consumers and are much more familiar with their needs. They can more easily direct financial resources to the needs of their businesses and, once those businesses are profitable, are more able to expand or increase their operational bases. If we look at examples from other countries, we see this is nothing new.

Secondly, tourism requires training and expertise. Can anyone tell me in what university or trade school run by that “accomplishment of the revolution,” the Cuban educational system, can someone study gastronomy or learn how to be a professional chef? Where can someone learn how to be a waiter, maitre d’, sommelier, bartender, hotel receptionist, housekeeper… in short, any of the various jobs within the field of hospitality?

Not only must training centers be created as soon as possible, foreign language instruction along with the full range of administration and facilities management must be promoted. Given the country’s backwardness in these areas, companies must be able to rely on funding for employee training.

Third, tourism requires intelligent promotion. Cuba is competing with financially stable, high quality tourist destinations in an area of the world which attracts the most affluent segment of the tourism market. Its competitors have more experience and their promotional campaigns in target markets guarantee them a steady and growing stream of visitors, even when the economic climate becomes difficult, as happened in late 2008.

Tourism promotion in Cuba is controlled, directed and carried out by the state. It does meet its publicly defined objectives because basically it does not adequately support what Cuba has to offer, which are its competitive advantages. All consumer demand from overseas is channeled through package deals arranged by international tour operators. Tourists who want to travel freely to the island must deal with a shortage of information that prevents them from being able to experience the country on a modest budget.

Fourth, as a result of the secular amnesia that began in 1959, Cuba has arrived late to global tourism. Its new importance stems from official statements about being the locomotive of national development, something that upon arrival the tourist does not perceive. I refer to the current state of the country’s abandoned infrastructure, roads, communications media and services in general.

The tourist who wants to experience the reality of Cuba is confronted upon arrival with a backdrop of social devastation, creating feelings of anxiety that one does not associate with the idea of a pleasant vacation. The next year he does not come back. These are the kinds of things of which one should take note.

Mogherini’s Real Interest in Havana

Federica Mogherini in Havana this month (Radio Cadena Agramonte)

Cubaeconomía.com, Elias Amor Bravo, 5 January 2018 – The Castro regime, in its urgent need to find external financing for the economy, has developed a strategy of approaching the European Union that has come to an end, at least for the moment, with the recent visit of Federica Mogherini to Havana. The agreement is a vague text, with language so general it can mean anything, but it does not deceive anyone in terms of its objectives.

Behind this propaganda scenario, Cuba wants to access the economic funds, certainly substantial, of the so-called Cotonou Agreement, the central axis of the collaboration between the European Union and its member states with another 79 countries belonging to three continents, Africa, the Caribbean and Pacific, abbreviated as the ACP countries, which had been, in their day, colonies of different states now in the Union. continue reading

The Cotonou Agreement, signed in 2000, has as its main objective the reduction of poverty to contribute to its eradication, offering support to the sustainable economic, cultural and social development of its partner countries, and facilitating the progressive integration of their economies into the world economy. Its antecedents start from the founding text of the Treaty of Rome in 1957, with the cooperation later expanded by the two Conventions of Yaoundé and the four of Lomé.

The Agreement establishes a framework of close collaboration between the signatory countries, based on a series of fundamental principles:

  1. The Agreement partners are equal.
  2. The countries determine their own development policies.
  3. Cooperation is not only between governments; parliaments, local authorities, civil society, the private sector and the economic and social partners also play a role.
  4. The cooperation agreements and priorities vary according to some aspects such as the levels of development of the countries.

Since its entry into force, joint institutions have been created to support the implementation of the Agreement, such as the ACP Council of Ministers, which receives assistance from the Committee of Ambassadors and maintains political dialogues, adopts political guidelines and makes decisions for the implementation of the Agreement. This institution is responsible for presenting an annual progress report to the ACP-EU Joint Parliamentary Assembly and as an advisory body it presents recommendations on the achievement of the objectives of the Agreement.

There is no doubt that the political dimension of the Cotonou Agreement is important since it includes, among other elements:

  1. A full political dialogue on national, regional and global issues,
  2. The promotion of human rights and democratic principles,
  3. The development of policies for the consolidation of peace and the prevention and resolution of conflicts, and
  4. The handling of issues related to migration and security, including the fight against terrorism and the proliferation of weapons of mass destruction.

To date, the Agreement has been based mainly on the promotion and development of cooperation activities whose objectives are: the economic development of the industrial, agricultural and tourist sectors of the ACP countries; social and human development to improve health, education and nutrition services, and regional integration and cooperation to encourage and develop trade between the ACP States.

All these activities are financed through the European Development Fund, which between 2014 and 2020 has a budget of 33.1 billion euros. However, it contains important clauses on trade in services, information and communication technologies, as well as capital movements.

Seen from this perspective, the interest of the Castro regime to accede to the Cotonou Agreement is more than evident, since it can act as a beneficiary, both receiving aid for internal development, as well as participating in the health, education and nutrition programs, which receive outstanding financing.

In addition, this Agreement depends on the representative of European foreign policy Federica Mogherini, hence the maximum attention she received in Havana and the displays of fondness and affection such as the visit to Old Havana with Eusebio Leal and the cardinal.

The regime, which agreed to generous plans for debt cancellation with the signatory countries of the Paris Club, and its subsequent conversion into development aid, now has an essential instrument in the Cotonou area to channel programs and give them a politically responsible format. All perfect.

But in addition, it may be known in Havana that the Cotonou Agreement will end in 2020, after the review carried out in 2010, which adapted the collaboration to focus more on issues such as climate change, food security, the fight against HIV/AIDS, the sustainability of fisheries, the strengthening of security in fragile regions, and the achievement of the Millennium Development Goals (replaced in 2016 by 17 Sustainable Development Goals).

Through this gateway to the EU, Cuba is prepared to participate fully in the negotiations of the future Agreement that the Union can elaborate and, in due course, sign with the ACP countries.

To occupy an active position and to be integrated into the more than 100 countries that make up the Agreement can serve the regime to obtain the much needed financing to close its external accounts and avoid structural liquidity problems.

Having exhausted the resources from Venezuela, Havana turns its eyes to Brussels. Will it work?