Central Planning of the Economy, What For?

Cubans wait in line to buy milk powder. (14ymedio)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, June 3, 2019 — The Castrist regime announces the beginning of the process of drawing up the economic plan for 2020, the main instrument to intervene in the state economy. The information in the newspaper “Workers” speaks of the beginning of the analysis meetings with workers for the economic plan preparation and the budget corresponding to the next year. An initiative that claims to make a more participatory and flexible plan, in accordance with the desires of the Minister of Economy and Planning.

The question, paraphrasing Fidel Castro in reference to elections, is: What For? Confidence in the economic planning over six decades is directly responsible for the backwardness and general impoverishment of the Castroist economy. And now, undeterred, they have embarked upon what they call “indentifying internal reserves and strengths in each territory and company, exploiting the potential of productive linking, and exporting more, without limiting productive growth.” Hopefully they achieve it, but I see it as complicated. continue reading

Communism introduced central planning of the economy as an alternative to the market in the allocation of resources that were always scarce for alternative purposes. By substituting the mechanism of supply and demand, and price adjusting, with decisions by planning bureaucrats almost always remote from reality and tangled in dubious calculations of calories, weights, and other evils, the Cuban economic system was turned upside down in a matter of years.

From the first moment, the economists still holding their positions at the head of the companies that had not yet been confiscated to become property of the state, realized that the model was on its way to disaster. And thus it has been. Castroist economic planning has the merit of not having been right in even a single year in its forecasts, and in particular, since 2006, with the opening of small spaces to private activity, the results are even worse.

Why does this happen? Why, despite the insistence of the authorities and the efforts made in its preparation by the administrative management and the workers to improve the results of the planning, are the results worse and worse? Are we facing a demand for real change in the Castroist economy?

One can think what one likes, but in my understanding, yes. On the one hand, the bureaucrats continue buried in their calculations and estimations that never seem to end, with an increasing volume of norms, regulations, and provisions. Before it was easy to “plan,” by listening to a long and boring speech by Fidel Castro, it was already known how the accounts would have to be squared. Now the matter is worse.

For one thing, one has to read a panoply of documents so boring as to be useless, like the new Constitution, or the so-called Conceptualization of the Cuban Economic and Social Model of Socialist Development; even the most optimistic must read the Foundations of the National Plan for Economic and Social Development until 2030, and finally if one still has the desire, the so-called Guidelines for the Economic and Social Policy of the Party and the Revolution for the 2016-2021 period.

As they say in Workers, “to these documents must be added speeches, interventions, directions, and articles referred to the topic, which would serve as a basis to develop proposals with ’all the tools,’ with clear definitions and a strategic character.” With so much reading, and so much iron, economic decisions lose that spontaneity and richness that the market offers them when the objective is to satisfy the consumer.

In the end, the planning is a game that ends in a bad result. Because even if on the one hand they want everyone to participate, and I have my doubts that that would be easy to achieve, on the other hand, from the ministry (previously the communist Junta Central de Planificación [JUCEPLAN], or Central Planning Board) nothing is left to improvisation, and the premises are being established for the plan, so that no one leaves out even a single comma from the framework that really concerns the ruling leadership. This is what we have. Unfortunately the priority of customer service is replaced with some undefined “potentialities to contribute more to the strategies and priorities of the economy,” and end up the same way.

The truly worrying thing is that they are committed to playing this dangerous game, just as things are. The Cuban economy no longer works, and it has exhausted its tail engines, for what will have to be thought about changing on the fly. There have already been several scares like the absence of products in markets, but worse times will come. One doesn’t have to be a strategist to know that things are going to get worse, and that the year 2020 will be characterized by a situation of a lack of cash flow, of unbearable foreign debt that will asphyxiate the impoverished Cuban economy even more, without anyone moving a single finger.

The design of the plan, if they insist on this communist nonsense, would have to be oriented toward promoting to the maximum amount what is working in the Cuban economy, but the ideological priorities and the historical complexes prevent the regime’s authorities from adopting the fundamental decisions to place Cuba on an even plane with the rest of the surrounding countries. That would mean more markets, more property rights, more economic freedoms, more private business sector. A plan that allows the private sector to assume the global operation of the economy, concentrating the largest percentage of resources, and driven by an accelerated privatization of the productive and business capital of the country.

Studies confirm that gains in productivity and creation of value in the Cuban economy are centered in small business deals by self-employed people and entrepreneurial initiatives. It makes no sense to continue restraining these economic agents for the benefit of loss-making state-owned companies and a budgeted sector that is drowning the country. Central planning of the economy must be removed to let the market take its place.

It’s no use to establish priorities like “increasing production or services bound for export and satisfying the demands of export entities; achieving the maximum use of existing capacities, and assuring the processes aimed at satisfying the demands of the internal economy, fundamentally of food, transport, computerization of society, housing, construction materials, renewable energy resources, medicine, and tourism,” if the economic agents involved in them are not capable of driving these objectives and find themselves so limited and conditioned in their operation, that they can barely survive.

Translated by: Sheilagh Herrera

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The 14ymedio team is committed to serious journalism that reflects the reality of deep Cuba. Thank you for joining us on this long road. We invite you to continue supporting us, but this time by becoming a member of 14ymedio. Together we can continue to transform journalism in Cuba.

What Cuban Business Co-ops Really Need is Private Property

In Cuba, losses during harvest and after collection represent 30% of total production, plus an additional 27% is lost during distribution. (EFE)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, 24 May 2019 — Considering that they are essential to introducing fresh air into the rarefied Cuban agricultural system, farming cooperatives need much more than bureaucratic regulations purportedly aimed at “perfecting and updating the economic model.” First of all, little or nothing can be done in the Cuban countryside as long as the communist government resists giving up its claims to the land. Let me explain.

The state currently owns 78% of the country’s arable land. The ability of farming cooperatives to increase the amount of acreage under cultivation and achieve greater economies of scale depend largely on ideological and political considerations rather market conditions based on supply and demand. As long as models of business organization based on legitimate property ownership are not respected or fully integrated into the Cuban economy, land management by farming co-ops will not achieve the desired results.

Currently, 67.8% of farmland is under cooperative management. While this could be considered a success, I would argue that management alone is not enough. Decisive steps towards private ownership of land must be taken so that farming co-ops and all other producers can freely decide for themselves what to produce, and under what conditions, without interference from the state. We cannot pretend these are privately owned businesses under the pretense that they are privately “managed” without taking further action. Sixty years after land was confiscated from its legitimate owners, the state of Cuban agriculture remains far from ideal. And it will not seem like it is headed in the right direction as long as it has to adhere to the kind of rules that keep getting written. continue reading

We find ourselves in the odd situation in which the state acknowledges that it must rely on and support private farming cooperatives, putting them on an equal footing with other actors in the agricultural sector such as livestock and state-run farming operations. But it refuses to adopt the measures necessary for establishing a legal framework to provide institutional recognition of private property rights, without which the agricultural sector cannot prosper or increase its productivity. In this regard, recently adopted measures — Legal Decree #354 and Regulatory Decree #354, published in Official Ordinary Gazette #37 — are of little help when it comes to providing the types of reforms and modernization that cooperatives need.

The primary aim of these rules, in general, is to eliminate existing legislative ambiguity and little else. Don’t expect big changes. The land will still be owned by one entity: the communist state; and the principles that underpin economic activity will remain the same: bureaucracy, inefficiency and control.

Attempts to improve the cooperative system have focused primarily on doing away with some regulations, modifying others that have fallen into disuse and implementing so-called “guidelines” adopted at communist conclaves. These are better left forgotten. If “dissatisfaction with the processes of administrative management, operations, efficiency, hiring, monitoring, accompaniment and control by the companies” have really been detected, what reasons are there for not taking action and adopting, once and for all, a law that restores private enterprise to the Cuban economy, grants it legal rights and makes it the backbone of the economic system?

Cooperatives in other countries, such as Spain and Italy, are private enterprises with a social commitment, not simply managers of assets belonging to others. Here lies their success, in being the true owners of the wealth they generate, which is substantial.

The various measures recently adopted in Cuba seek to “harmonize the operation of cooperatives with the other actors in the productive sphere” and “consolidate the relationship between the cooperative and the agricultural enterprise to which it is associated by giving the latter the responsibility of providing the necessary attention to processes of management, planning, production and contracting of the productions aimed at satisfying the planned demand.” Does anyone really believe this can improve Cuban agricultural production?

In my opinion the only thing this will change will be the bureaucracy, which will tighten its procedures for control over the cooperatives, including consolidating the economic regime through the allocation and distribution of funds from the general assembly, and adopting a ridiculously ideological communist rule that “all cooperatives share common names,” as though fixing every problem boils down to a question of terminology.

The newly approved regulations do include some improvements, particularly for joint venture partners as well as small concessions to silence any possible protests. Cooperatives will be freed from the so-called “socio-cultural fund,” which will no longer be considered part of their assets and will no longer be retained to pay off joint venture partners. Similarly, “areas of collective use,” which are intended to provide services to cooperative members, are hinted at in the new regulations. But in any case, all of this is subject to “the country’s development programs of the country,” without further explanation. These are slim pickings.

In conclusion, Cuba’s cooperative system needs a lot more than a couple of decrees to move forward and become what it is capable of becoming: a real engine of productivity. The “improvements” on which the authorities are relying only mean more bureaucracy and control, without removing the legal, economic, commercial and logistical obstacles that hinder the dynamics of these operations. The road is long and the communist regime refuses to face reality. There will be food shortages and they will blame the embargo/blockade. But the real problem is to found in recently published decrees intended to take control of the cooperatives.

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The 14ymedio team is committed to serious journalism that reflects the reality of deep Cuba. Thank you for joining us on this long road. We invite you to continue supporting us, but this time by becoming a member of 14ymedio. Together we can continue to transform journalism in Cuba.

The Right to Nationalize vs. the Right to Confiscate

The article written by Lázaro Barredo and published in Cuban government media, was illustrated with this picture with the caption “dos camajanes” (colonialists), referring to U.S. Senators Marco Rubio and Bob Menendez, both of Cuban extraction. (Bohemia)

14ymedio biggerElías Amor Bravo, Economist, 7 May 2019 — In a recent article Lázaro Barredo rails against “camajanes” or colonialists. I cannot think of a more embarrassing epithet to use in discussing Fidel Castro’s nationalizations. From my own personal point of view, I cannot disagree more.

Many lies have been written about the confiscations, which were neither expropriations nor nationalizations, carried out by the Castro regime from 1959 until 1968, when the so-called “revolutionary offensive” came to an end. Rivers of ink were used to create demagogic propaganda which was written to confuse and create a hostile environment for the legitimate owners of financial assets and real estate, who are the real victims in this story.

How does one assess the systematic and organized theft of property — large, medium and small — from all Cubans, which dates back to the start of the Revolution? What rational basis or justification was there for undertaking a structural transformation of the economy, which led to its decline and loss of value, as has been evident for the last 60 years? continue reading

Not even Cuba’s original revolutionary warriors, the Mambisas, behaved this way towards the Spaniards, who controlled all the country’s assets at the start of independence in 1898. Quite the opposite. The young republic was honest and generous with all its children. It had a clear enough vision of the future to respect the existing legal framework of property rights established four centuries earlier. These were the foundations for the development of a great nation that was lost forever in the dark days of the Castro regime.

Respect for private property and property rights are enshrined in the UN’s Declaration of Human Rights, specifically Article 17, which states that “everyone has the right to own property alone as well as in association with others” and that “no one shall be arbitrarily deprived of his property.”

Respect for this right would have provided many advantages and few disadvantages as the Cuban economy evolved after 1959. The violation of this right by the communist regime injured many people, who were not able to recover their losses because the regime never had any intention of compensating them, however much it now tries to say otherwise.

There was no reason for such disproportionate action against the right to property other than communism’s totalitarian ambitions and the desire to plunge Cuba into chaos. Nor was there justification for the confiscation of “embezzled” property or property owned by foreigners and US citizens who had businesses in Cuba. It was the opening of a new  and ultimately unsuccessful front in an ongoing conflict.

Initially, the Argentine ambassador acted as mediator between the Cuban government and the Eisenhower administration in an initial effort to win some sort of compensation for the confiscated properties. In the end, however, it was Cuban citizens —in greater numbers than  Americans and other foreigners — whose properties were confiscated. They were expelled from the country and forced into an impoverished exile by their own government just as many were beginning to enjoy a well-deserved rest after a lifetime of work, effort and dedication.

These are not “frantic attacks stemming from years of pent up frustration with the many policy failures that has led to uncontrolled rage.” What is happening in regards to Cuba with enforcement of Title III the Helms-Burton Act is nothing more and nothing less than a process that has been long anticipated but was delayed for reasons that are now of no interest. It reflects a process born of a desire for justice, not revenge.

Secondly, it has nothing to do with scaring away foreign investors. I would hope they might be able to develop their projects in Cuba with total freedom and in sectors they themselves choose, not in properties that were confiscated. Opportunities exist, but the communist regime does not make them available. Why is that?

I see no need to discuss here the powers governments have to nationalize property. Of course, they exist and are used routinely, but they are based on legal procedures whose main objective is respect for private property whose ownership is to be transferred to the state for the social good and in exceptional circumstances. How else would highways, telecommunications networks, airports, railways, hydro-electric dams, renewable energy plants and the like get built?

A state acquires title to financial assets through expropriations, generally of real estate, which allows it to take on these projects. Because they are essential to national development, the United Nations recognized their legality in 1974 but stipulated a fair price must be paid, in a timely and reasonable manner, for the expropriated property.

However, what was done in Cuba after 1959 in no way complied with international norms. Rather than being examples of nationalization or expropriation, they must correctly be referred to as expropriations. It was a move clearly intended to provoke tensions with the United States with the malevolent intent of transferring all private property to the state at no cost, then managing those assets using Stalinist planning methods and state control of the economy. The results in Cuba are plain to see.

A negotiation with the United States — carried out publicly and with transparency, without ad hoc and unsupportable claims over the costs of a so-called “blockade” or “embargo,” and with payment based properties’ true, current monetary value, duly verified by independent international organizations (unlike the Castro regime’s ludicrous agricultural reform junk bonds paying 4.5% over twenty years, pieces of paper in which no one puts any faith) — would, at the very least, serve as a reasonable starting point towards better relations between the two countries. Had the United States been given such an offer, no one would have been surprised if it had cancelled the sugar quota in 1960. Any other creditor would have done the same.

But, in fact, not only did Fidel Castro have no interest in resolving the conflict, he actually wanted to make it worse in order to build his power base on the pretense of seeking justice. The communist regime falsely claimed it had come up with some proposal which involved real, objective compensation. An example of this approach is the embarrassing negotiation with the socialist government of Felipe Gonzalez in 1986 involving claims over property seized from Spanish citizens, a case better left forgotten.

The implementation of Title III of the Helms-Burton Act represents an exercise in justice, not an attempt to cause embarrassment over the seizure of private property in Cuba after 1959. It is good that this provision is now being enforced because it sends a clear and transparent message to any government, regime or dictatorship of any ideology which believes it has an absolute right to confiscate the financial assets of its citizens. The law establishes not only the permanence of the human right to property, but the primacy of the private over the public when governments behave illegally, as the Cuban communists did after 1959.

There is no justification for what has been done. But history marches on and it is impossible to keep a country sealed in a time capsule, as though it were still in the Cold War. In an era of globalization and the start of a fourth industrial revolution, countries need to demonstrate credibility and confidence to attract investors, capital and talent. None if this is possible in Cuba because its interventionist and totalitarian stance frustrates any efforts at economic freedom, rationality, a better life and prosperity for its citizens, who are the keys to national development. The regime maintains a suicidal position

Even if the confiscations were truly done with the best of intentions — “to give the Cuban people a decent quality of life” — it is quite obvious that the result did not turn out as expected. Despite the promises of “free education and health care” (which are subsidized, and highly subsidized, with tax and non-tax revenues totaling almost 70% of GDP), Cubans who remember what the country was like before 1959 know there few countries in the world whose evolution has been in reverse.

And Cuba is the most significant case of economic regression, one characterized by low salaries, ongoing rationing, lack of choice and decimated real estate. After sixty years, the aspiration of many Cubans is to leave country for a different life abroad based on progress and well-being.

Since that is quite impossible in Cuba, those who oppose Helms-Burton and demand that the Castro government stand firm in the face of legal claims should reflect on whether or not it is worth it to remain fixed in their positions and refuse to change. All they have to do is look around; the conclusion cannot be more obvious. Cuba’s “patriotic and pro-independence” aspirations would fare better in an environment of freedom, choice and property rights. Let’s try it out.

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The 14ymedio team is committed to serious journalism that reflects the reality of deep Cuba. Thank you for joining us on this long road. We invite you to continue supporting us, but this time by becoming a member of 14ymedio. Together we can continue to transform journalism in Cuba.

May Day in Cuba With Little to Celebrate

Shortages of food have made the daily routine difficult for Cubans who now have to stand in long lines to buy it. (14ymedio)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, 1 May 2019 — The relationship between Cuba’s communist regime and the world of work has been difficult. Therefore, there is not much to celebrate this May Day, nor has there been on previous ones. This relationship has always referred to, by the Cuban government, as “adverse times, characterized by the resurgence of aggression, threats and lies by Yankee imperialism and its lackeys,” but the reality is quite different.

There is no external reason to explain why Cuban workers have become the great defeated of a regime which, nevertheless, has wanted to present itself to the world as the “workers’ paradise.” Forget all that. Let’s go back to the beginning.

A bit of history can serve to illustrate what is we’re talking about. After the process of revolutionary transformations that upset the Cuban economy and its position in the world, one of the recurring nightmares of Fidel Castro was the low productivity of labor in the economic system that he himself designed. Without understanding that this fact is a direct consequence of the revolutionary structures, the patches that were placed on the system over several generations, far from resolving the situation, made it worse. continue reading

It is worth remembering that it was that distant August 2, 1961 when the fledgling regime announced a change in the labor legislation and the role of the unions. In an attempt to control the “Cuban Workers Center” (CTC) — as the only legal union, totally controlled by the government, was called –the regime adopted in Cuba the labor relations model of the communist countries.

Until then, most of the companies not expropriated or nationalized maintained a labor framework similar to the one before 1959. But this year saw the real start of the disaster when all Cuban workers became, at one stroke, “employees of the state.”

From then on, the problem became how to produce more, despite the absolute control of the economy by the communists. So much so that only one year later, on March 3, 1962, the first “work card” was created to register the work history of each worker, which ultimately resulted in an assessment of their acceptance of the new regime. and willingness to participate in the activities organized by it. Che Guevara did not take long to question the quality of production, while rationing and shortages were extended to all products.

Four years later, at the congress of the CTC, a document was published in which low productivity and absenteeism were noted as the two main ills of the Cuban labor world. And thereafter, the issue began to be increasingly serious and a must-solve for Fidel Castro, who launched the theme, little thought through and hasty, of the “moral stimuli” as a solution to increase productivity.

The 1968 “Revolutionary Offensive” that led to the nationalization of 50,000 small private businesses was of little use, rather it finished poff the economic system, which had barely survived until then.

From then on, the lack of food became an additional concern for the authorities, who did not want to understand the origins of this. In August of that year, the labor minister ended up imposing, compulsorily, the much-criticized “work cards,” which would openly report the behavior and political attitudes of the workers.

Popular trials in the workplace spread all over the country. The failure of the “Ten Million Ton [Sugar] Harvest” was a leap into the void, mobilizing all of the country’s economic resources in a goal that was known to be unattainable, but that would have negative conclusions for the world of Cuban labor.

Nothing in all this could end well, and in May if 1970, taking advantage of the fiesta for May Day, Castro announced a strong attack on the unique union, denouncing the problems of productivity and absenteeism as responsible for the failure  of the zafra (sugar harvest), at the same time announced a reorganization, hidden in the call to “democratize the union.”

A year later, and on the exact same date, Castro announced that from then on wages would be established based on workers’ contribution to production, breaking forever with the revolutionary principle of equality.

In the new tradition of giving each year a name, 1972 was called “The Year of Socialist Emulation” in what was interpreted as an approach to the Soviet institutionality.

However, in July of 1973 Fidel Castro announced in a speech that in Cuba the socialist principle of “to each according to his work, from each according to his needs” would be applied as of that moment, in what was interpreted as a retreat forced by events.

In the CTC congress in November of that year, the regime returned to the idea of material stimuli and the unions recovered part of the lost relevance, with the election of Lazaro Peña as general secretary, but he died only six months later.

From that point forward, things went from bad to worse. The institutionalization of the regime after the approval of the Soviet-inspired 1976 constitution was a failure, and provoked the outbreak of social protest in the Peruvian embassy and the subsequent exit by way of the Port of Mariel of hundreds of thousands of Cubans in the Mariel Boatlift.  This was the first major emigration since the revolutionary times of Camarioca and the “freedom flights.”

In any case, the system created by Fidel Castro continued to expel people from the island, but it was no longer “the rich, the exploiters and collaborators of Batista” who were clinging to the boats leaving from Mariel to flee the country. The arguments were over. The failure of the “workers’ paradise” had been shown clearly before the world.

But the “Special Period” took care of the rest, that time after the collapse of the Soviet Union and the loss of its subsidies plunged the Cuban economy into deep crisis. During those years, Cuban workers found themselves imprisoned by the contradictions of a regime locked in its ideological postulates, which one day said yes, and another sais no, to the same measures and performances.  Now, without Soviet help, the culprit of all evils was the blockade or the embargo, decreed by Kennedy, of which nobody had paid attention to before the collapse of the Berlin Wall.

In its congress of 1990, the CTC, for the first time, had to analyze the problem of unemployment in Cuba, which it tried to explain by the “lack of raw materials,” and only a month later, Instruction 137 of the People’s Supreme Court urged the denouncement of those who had a high standard of living, persecuting and repressing the coleros and macetas, as people who were seen to “line their pockets” were called.

The social outbreak was immediate, and led hundreds of thousands of Cubans to escape the island in rafts, causing another conflict with the US in the waters of the Straits of Florida. There was an attempt to solve the problem by assembling those who fled the island on the US Naval Base in Guantánamo, from which most were eventually allowed to leave for the United States.

This historical record confirms that Cuban workers have not seen a solution to their aspirations in Cuba, and all those who have been able to do so have chosen to leave the country in search of a place where they can make their dreams come true.

In the current situation, in which the regime is paralyzed as a result of the end of aid from Venezuelan, and the failure of the Raulist measures to improve the functioning of the economy, another social explosion is possible. The question is whether there will be a viable way to escape from the country under the current conditions. Castroism remains determined to implement, without democratic support, an economic model different from what they call “savage capitalism,” a model which no longer exists in any country in the world, and so it goes.

If we really want Cuban workers to help promote economic development and improve the quality of life and prosperity of the nation, we must restore a different system of labor relations, because the one that exists does not work. Otherwise, on the 1st of May, the Castro regime will always have little to celebrate.

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The 14ymedio team is committed to serious journalism that reflects the reality of deep Cuba. Thank you for joining us on this long road. We invite you to continue supporting us, but this time by becoming a member of 14ymedio. Together we can continue to transform journalism in Cuba.

Cuba’s Economic Forecasts for 2019 are Pie in the Sky

José Luis Rodríguez has given an account of the forecasts of the economic plan for 2019, not without first recognizing that “this year the world economy will face a situation even more complex than what was present in 2018.”

14ymedio bigger14ymedio, Elías Amor Bravo, Madrid, 27 March2019 — The The Castro regime’s former minister of the economy, José Luis Rodríguez has reported, in an article published in Cubadebate, on the forecasts for the authorities’ economic plan for 2019. He begins by acknowledging that “this year the world economy will face a more complex situation even than that of 2018.” And he is right. We have already said it several times. The Cuban economy in 2019 could be faced with a very difficult exercise in which anything can happen.

Therefore, and contrary to what Rodriguez says — to wit, “this situation will affect the economic performance of our country, to which is added the foreseeable increase in the negative impact of the US blockade, taking into account the new measures adopted by the government of Donald Trump already in the first months of this year, including the application of Title III of the Helms-Burton Act” — I intend to show in this article that the authorities are the ones to blame for the deficient “planning” for the Cuban economy.

We can orient ourselves with a look at the forecasts. continue reading

For example, for goods exports, growth is estimated to be 6%. A figure clearly excessive, if one takes into account this environment of lower growth of the global economy. And excessive if compared to the evolution experienced in this variable from 2012 to 2017. In those years, and with government data from the National Office of Statistics (ONEI), exports have decreased at an average rate of -3.5%, with some years collapsing -19.7% as happened in 2016. I do not know, therefore, where the planners of the economy invent that 6% for 2019 which, like every year, will end up being unmet, with the negative effects that this has on other variables of the economy.

Another excessively optimistic forecast it that of tourist revenues which, according to the leaders of the regime, should grow by 17.6% Another piece of incongruous data, as the lower growth of the global economy will exert an influence on the demand for tourism trips, and especially sharply so in European countries, which are Cuba’s main markets. Thinking about that 17.6% is pie in the sky to calm the Spanish hoteliers, who know that this can not be achieved. More prudence would have been the right thing to do.

And we continue.

As regards the total investments, so necessary in a decapitalized economy that has a sickly obsession for prioritizing current spending, a growth of 20.1% is planned, reaching 11.3 billion pesos. Once again, the ONEI imposes the number. In none of the 6 years elapsed between 2012 and 2017 has investment exceeded of 10 billion pesos, the average balance being 7.751 billion pesos.

To think that it can reach 11 billion pesos in 2019, with the existing difficulties, is more pie in the sky that undermines the credibility of the design of Castro’s economic policy. Furthermore, this already high level of investment continues to limit the participation of gross capital formation in GDP below 10%, with its negative effects on growth potential.

Forecasts with regards to direct foreign investment are the same thing, with growth estimated at 6.2% of that total, up to 700 million pesos, a far cry, of course, from the goal of two billion pesos that has been pointed out for years to justify the monster known as Law 119. I doubt very much that these figures will be reached with the forecasts of movements of capital at an international level associated with a lower global growth and the limited attraction of investing in Cuba.

The communist planners have established that imports will decline 11.2% compared to what was planned for 2018, with the aim of curbing the country’s foreign debt, which is based on conditions that allow access to financing new credits needed to prevent the economy from going bankrupt. The repossession of foreign currency in hotels that has been practiced since January is only the first step among all the actions that the regime must implement to avoid international bankruptcy.

Cuba’s communist planners remain convinced of the need to replace imports with domestic products, and this it be achieved in an economy that desperately needs technology, intermediate goods and even consumer goods from abroad, because domestic production is unable to meet the demands of the population.

The most curious thing is that this macroeconomic picture is expected to be achieved through the “four basic linkages with foreign investment” and Diaz-Canel talks about nothing else in his habitual meetings to report on progress. Namely, “those related to the growth of production, tourism, exports and the non-state sector, which have been estimated to contribute around 20% of GDP, although in sectors of low productivity, but which already absorb 31% of the workforce.”

With this laundering of figures — absolutely incredible — those responsible for the economy estimate a GDP growth in 2019 of 1.5%, just 4 tenths above what was achieved in 2018, which has little hope of improvement. And they remain so calm, because in Cuba nobody is going to question that scenario, much less offer another alternative that objectively improves the living conditions of the population.

Obviously, I can not trust this design, nor the estimations whose rigor is questionable, let alone give credit to the analysis made by the planners. To think that an increase in exports combined with a decrease of imports can be beneficial in the present conditions of a contracting economy is a serious error. To believe that the recovery of agriculture or tourism can increase the supply and allow the advance of investments is to fail to understand that, for the same reasons as in 2018, these forecasts can fail for meteorological reasons or whatever.

The communist planners’ other “ideas” — for lack of a better word — are to reduce idle inventories by 2%, to support 400 million dollars in the production of goods and services, to reduce the budget deficit of 9% in relation to the GDP in 2018 (predictably higher) to 6.1% this year, with a decrease of 3.06 billion pesos, without affecting the basic social services of public health, education, security and social assistance, something that is simply impossible and the authorities know it, and thus they will further strangle internal liquidity, especially for self-employed workers.

Financing the construction of 32,000 homes in just one year, certainly complicated for economic policy, is more pie in the sky, not to be fulfilled because it begs the question of where they are going to get financing. Lastly, but no less important, reducing the external debt service by 2.8% and the total debt by 1.5%, is an interesting action, but with limited effects because the level of the debt is so high that its sustainability is complicated. Small steps, without commitments or credibility, do not help much.

The Cuban economy can not improve with this design of the Castro regime’s economic policy because it is outdated, obsolete, inefficient and does not go directly to the origin of the problems. Undoubtedly, fundamental actions such as maximum respect for property rights, flexibility and liberalization in matters of production, private companies, investment by Cubans and not only by privileged foreigners, freedom of choice and development of markets and logistics are all lacking.

There are so many things that have to be done, that believing in this design of communist planning is like believing in a fairy tale. What happens is that in Cuba, these Castroite fairy tales always end badly. Very badly.

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Editor’s note: This article was originally published on the blog Cubaeconomía. We reproduce it with the authorization of its author.

The 14ymedio team is committed to serious journalism that reflects the reality of deep Cuba. Thank you for joining us on this long road. We invite you to continue supporting us, but this time by becoming a member of 14ymedio. Together we can continue to transform journalism in Cuba.

Wealth Doesn’t Only Come From Work, There’s More

In their analysis of the economy, Marxists spurn human motivation as an element in the creation of wealth. (Archive)

14ymedio bigger14ymedio, Elías Amor Bravo, Miami, January 6, 2019 — The communist newspaper Granma devotes an article in today’s edition to the economy, and specifically, does it with an untruthful title: “Wealth will come from work.” I have nothing against the journalist who wrote this pamphlet because certainly it will have been dictated to her. But since it commits some very serious errors of elemental economic analysis, this blog will dedicate its first entry of 2019 to commenting on its contents.

To begin, since many years ago, so many that memory doesn’t reach so far back, economic science has known that work, as a factor of production at the macro and micro level, is fundamental for a productive system. But obviously it is not the only factor capable of creating wealth, and with time, economists have stopped speaking of work, homogenous and generic, typical of Marxist teachings, and have started to establish talent as the most adequate measurement of contribution to productivity and wealth.

They are different things. For example, the article assumes a grave error, and I cite from the text: “having more resources, including monetary, for the sake of satisfying growing needs and more quality of life (…) will only come from work, and from individual and collective efforts being directed toward developing the economy.” continue reading

False. This only happens in economies of societies of poverty, of subsistence, in which salary only exists as income, and the population does not have alternative assets that would permit them to generate wealth.

In modern economies, the means that allow people to enjoy a greater standard of living come from work, but not only from work. Above all, of all that can be gained by capitalizing on work, an effort to save, identifying opportunities and risks, and taking positions for the future.

It’s not difficult to observe that in Cuba “activating all the potentials to produce more and with efficiency,” is unthinkable with the current model, because it lacks a fundamental element for that: human motivation.

In their analysis of the economy, Marxists spurn human motivation as an element in the creation of wealth. For them, social uniformity is the priority. Social justice focuses on lowering aspirations, reducing individual motivations in favor of certain collective objectives that are difficult to measure and assess, but scarce and limited. And in this postulate resides the failure of the model. On the other hand, people are driven by incentives that guarantee them the ability to access a better standard of living, to fulfill their dreams, to see realized a better future for their children and grandchildren. That is the motivation.

And so, in addition to the fruits of labor, although only a small part is saved, the fruits of those resources allow access to other goods and services, or supplemented with bank credits they allow investment in one or several homes, in land, buildings, machines, patents, etc, any lawful thing that allows more wealth to be generated.

The capital factor, in Cuba harassed and extinguished by the communist regime for 60 years, hasn’t been used to fulfill its important role in the generation of wealth. Cubans have to flee from Cuba to establish that economic reality, in Miami, Madrid, or wherever destiny takes them.

Economists know that the life cycle of human consumption is conditioned by human wealth, which comes from work throughout one’s life, and non-human wealth, which has to do with the property rights that people have over certain assets, like land, homes, plots, savings, investment and pension plans, etc.

In advanced economies, work is just one factor of the many that generate income and wealth, and governments know that for a country to get out of underdevelopment and firmly direct its evolution toward prosperity, it is necessary not to place obstacles in the way of factors associated with non-human wealth, as happens in Cuba.

Additionally, the article in Granma doesn’t take into account the fact that we live in a global world, in which technologies associated with the fourth industrial revolution are changing the forms of producing, consuming, investing…of working. By now work is not respresented by those gray and uniform human masses of the Europe of the Iron Curtain, Soviet Russia, or the Chinese of Mao’s Cultural Revolution.

Work in this new century is measured in terms of talent and skill, which is nothing other than a measurement of the quality of the work. Fidel Castro once spoke of rewarding work according to its quality, and there is his legacy: Cuban salaries, some 30 dollars per month, are among the lowest in the world. Without skill businesses cannot function, and for that reason they fight over talent and pay elevated wages to those workers who provide that distinguishing element of competence.

Unskilled workers have to make an effort not to miss the train of the future and opt for a strategy of learning throughout life that, in many cases, encourages businesses to be more productive and efficient. Educational and training systems must be reoriented to contribute in a decisive manner to this process, demand less social prominence, and opt for professional skill.

The problem is that the world has changed — a lot — and the communist regime of the Castros has remained in an artificial bubble since the 1950s, and the worst thing is that they want to make us believe that they are right. An absurd disaster.

Translated by: Sheilagh Carey

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The 14ymedio team is committed to serious journalism that reflects the reality of deep Cuba. Thank you for joining us on this long road. We invite you to continue supporting us, but this time by becoming a member of 14ymedio. Together we can continue to transform journalism in Cuba.

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.

Mobile Internet and the Right of Cubans to Social Networks

A group of Cuban high school students share audiovisual content through a cell phone. (14ymedio)

Elías Amor Bravo, 3 January 2018 — Cuba’s restrictions on internet access are an example of the types of controls the regime imposes on the population. On 28 December, however, it was announced that in 2018 the island’s inhabitants were expected to have access from their cell phones, something that thus far has not been the case. Good news, no doubt.

Many wonder how, in an era of telecommunications and social networks, it is possible to survive given such backwardness. But the reality is that in Cuba internet access is through satellite, which not only means not only higher service costs but also limitations on its effective development. Alternatives such as the undersea cable that exists around the island are not enough to increase capacity. In the end everything depends on policy decisions by the regime that would allow free use of the internet for all Cubans, a right that continues to be restricted. continue reading

Cubans have certainly shown a special interest in anything having to do with web communication and internet access. Authorities have provided figures on the use of social networks in Cuba and, as of July 2017, the regime claims a growth in social network usage of 346%, though obviously this is starting from very low levels that are not seen in other countries. These figures only make sense after taking into account the fact that almost two million Cubans live overseas and many maintain contact with their families on the island.

The state-owned Telecommunications Company of Cuba (ETECSA), which has a monopoly internet service on the island, is apparently still preparing to offer mobile internet service in 2018 though it has not provided exact dates or deadlines for service to begin. Commitment to customers: zero.

With respect to mobile telephone service on the island, official figures indicate that 600,000 new mobile lines were activated in 2017, serving 4.5 million Cubans out a total population of about eleven million. Despite these seemingly impressive figures, the reality is that Cuba has one of the lowest levels of connectivity in the world and is almost 10 years behind in its the use of mobile technologies.

As in many other areas of family finance, what explains this backwardness are actions of the regime, which is the only authorized provider, and limitations on accessing the internet at home. Access is currently limited to workplaces, state enterprises, universities and schools. Another factor to consider is the high price of the service, with home internet service costing between 15 and 70 convertible pesos (CUC) per month according to official ETECSA figures. This is a price too high for a country where the average salary is around $ 20 a month, with the CUC being at parity with the dollar

Therefore, given the inability to receive internet service at home, Cubans now gather outdoors to use the wireless internet access points in the parks and public thoroughfares, an image that has become emblematic of the population’s desire and need to communicate and obtain information. They have a right to complain.

The internet is undoubtedly one of the challenges facing the generation of Cubans, who hope to take over from the Castro regime after Raúl Castro gives up power next April. And many believe that, as in other undemocratic countries in the world, social protests may begin to emerge in Cuba through platforms such as social networks, mobile communications and home-based internet, which are outside the control of informers and state security of the state, which monitor everything.

The successful modernization of Cuban society — a vital but insufficient condition for the transition to democracy, freedom and the rule of law — may depend on the rise and consolidation of social networks. I do not doubt it. As a result, the regime has laid its cards on the table. It not only openly accepts Cuba’s inexplicable backwardness relative to other countries in the use of the internet, but it keeps costs very high, making it unavailable to a population that day after day struggles to gain access.

Another example of the backwardness of mobile communications in Cuba is the fact that ETECSA is taking advantage of the late arrival of the service to introduce the option of making payments using a mobile phone, an option widely available in many African countries with levels of development much lower than those in Cuba. Characterizing mobile banking as a spectacular step forward to pay for services such as telephone, electricity or water requires Cubans to use the banking system to handle current accounts which they use to deposit their paychecks and pay their bills. Does ETECSA know that the percentage of Cuban workers manage their economic affairs in this way? Let’s hope they find out. It will be a surprise.

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?