The Slow Agony and Death of Fidel Castro’s Currency

Cuba’s two official currencies: the Cuban convertible peso (CUC) and the Cuban peso (CUP).

14ymedio biggerElías Amor Bravo, Economist, 27 November 2019 — The CUC was the fictitious currency created by Fidel Castro during the Special Period to avoid the dollarization of the Cuban economy. A controversial decision that has created not a few problems in the operation of demand and supply.

Three years after his death, the authorities seem to have lost confidence in that currency and anticipate a long and slow agony. A magnificent chronicle by Cuban journalists Luz Escobar and Mario J. Pentón for 14ymedio about the depreciation of the CUC, encourages fears about the way in which the authorities will address the elimination of this currency.

Causing its loss of value, until it dies of starvation. Instead of announcing an end to the fictitious currency, on a transparent and clear date and conditions so that the economic agents having CUCs in their possession know what to expect, the communist leaders have grown tired of the mortgage of the CUC and according to information coming from the island, its days are numbered. But best of all, the pressure of the dollar continues, and even increases in strength. Arango and Parreño already said it. continue reading

At the moment, the depreciation of the CUC is noted, above all, in the transactions that are carried out in the powerful and diversified informal economy that exists in Cuba, whose development and social roots are due to the prohibitions, obstacles and communist interferences in normal behavior of economic agents on the island.

Well, the CUC has depreciated in these informal exchange markets, and citizens are surprised when changing the dollars they receive from their families for CUC that they get a greater amount of currency. In fact, many people are asking their relatives abroad, instead of sending remittances by bank, to bring the money in their pockets. It will not take long to see the Cuban customs searching those who enter the country.

A good part of the convulsion suffered by the price of the CUC is due to the competition of the dollar, which the leaders of the regime have allowed to be used stores in an attempt to compete with private imports (via ’mules’) of household appliances and auto parts.

This fact has meant that the value of the CUC is reduced by 30% in the black market while the official exchange rate is still applied in the official CADECA currency exchanges.

Conclusion, those who receive remittances from the United States now get more CUCs for the same amount of dollars if they change them in the informal markets. Mules that carry cash will see their business grow.

But the collapse of the CUC has very negative consequences on demand and supply, because its loss of value and progressive cornering in the economic system will influence the behavior of the prices of goods purchased with this currency, which are practically all, as there is more variety and they are used in more and better stocked stores.

At the moment, in the shops of the Rancho Boyeros airport it has been announced that payment is not accepted in CUC, so that tourists who arrive with remnants in this currency to make the last purchases should be aware that this practice will be impossible.

In the short term, the depreciation of the CUC will increase the price of the goods that are bought with this currency, or in other words, to buy a specific product, more CUC will be necessary than before. This can have an inflationary impact.

Now, if prices cannot increase, because they are buffered or because there is no market reaction, then the goods will be scarce. The CUC may not even be accepted as a means of payment in some establishments. This would be the final death of Fidel Castro’s currency.

As for the offer, I do not want to think about the problems created in state companies that keep their accounts in double currency, when one of them continuously loses value and the other does not. Reviewing the accounts, re-analyzing the investment plans and calculating the balance sheet and income statement ratios, becomes a very complicated task with the new situation.

Another major loser with the depreciation of the CUC is the regime, the state apparatus, basically because it will not be raising the dollars that previously entered the CADECA network (the official exchange houses) since many people prefer to change their currency in the informal market where they get more for it and also avoid the 10% tax on the dollar in cash.

Cubans will retain dollars for all types of operations, from leaving the country, to buying goods or services inside, a large number of activities.

The steps towards dollarization are being taken. As the government forces people to open accounts in dollars to be able to buy appliances in a series of state stores, by means of an electronic card, the resistance to this procedure will also mean losses for the regime, along with those in the CADECAs.

The appreciation of the dollar and the simultaneous depreciation of the CUC in the informal market is apparently not affecting the Cuban peso (CUP), which is outside these trends, at least for now. But it will soon be affected, despite its marginal role in the economy. The depreciation of the CUC may mean that its exchange with the CUP, currently 1:24, also ends up benefiting the Cuban peso, the historical currency.

Imagine the parity in the exchange and the consequences that this could have on the economy. I do not see how this can be possible if one takes into account, as already stated in another entry in this blog, that the fundamentals of the economy do not give much attention to the CUP. In any case, this is the most complex scenario ahead.

Meanwhile, it will be necessary to see what happens with the most important economic operations on the island, such as the purchase and sale of homes, the rental of vehicles or the supply of inputs by private entrepreneurs. An apartment, with the price in CUC, may experience a price increase, if currency depreciation continues. Conclusion, people will end up conducting operations in dollars or in extreme cases, in CUP.

Therefore, it is assumed that the demand for dollars by the population will increase. A demand that also the authorities of the regime will also have to face with international creditors. The conflict is set. Letting the CUC die is a possibility; however, there is a weak link: deposit holders in this currency have to receive some kind of compensation if the dreaded losses occur.

And given the magnitude of monetary circulation in Cuba, where cash in the hands of the public is as much as 25% of GDP, it will not be easy to drain that liquidity. Monetary unification in Cuba is far from being achieved. The CUC will continue to languish until it finally dies.

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COLLABORATE WITH OUR WORK: The 14ymedio team is committed to practicing serious journalism that reflects Cuba’s reality in all its depth. Thank you for joining us on this long journey. We invite you to continue supporting us by becoming a member of 14ymedio now. Together we can continue transforming journalism in Cuba.

Government Unveils New Measures to Control Cuba’s Private Sector

According to the State newspaper “Granma,” these regulations were negotiated at the end of 2018 with the entrepreneurs.

14ymedio bigger14ymedio, Elías Amor, Valencia | 6 November 2019 — Cuban entrepreneurs cannot catch a break. The regime does not want the independent economy to flourish in Cuba, not even during critical times like right now, when the productivity of the private sector has clearly demonstrated to be superior to the economy under communist control. Gaceta Oficial just published a new series of regulations that limit, control and stifle even more the individual entrepreneurial activities in Cuba.

Granma says in this regard that the implementation of these rules was negotiated at the end of 2018 with self-employed workers. The opinions and suggestions of the population were also received and the newspaper also refers to letters received in the Ministry of Labor and Social Security. Caution. We already know how these things work in Cuba; it is believed, for example, that an “assembly of several neighbors of a certain block” can serve to form an organ of democratic representation. The field of public opinion in Cuba is far from what we know in the rest of the world.

Granma says that these measures aim to “incorporate new activities, compact and refine the reach of some and simplify procedures.”  And this at a particularly difficult time in which the economy is heading towards a deep recession as a result of the reduction in low-priced oil supplies from Venezuela and the impact of lower worldwide growth on internal activity, a time of special difficulty that does not lend itself to policies of this type. continue reading

Specifically, six new activities have been added to the list of allowable work for the self-employed, namely: operator and/or lessor of equipment for artistic production, casting agent, and artistic production assistant. Nobody knows  what sense it makes to approve occupations in dribs and drabs, particularly where these occupations are already being carried out in the field of the informal economy or independently, and why this anachronistic and interventional procedure is not liberalized once and for all, in determining what private activities Cubans can engage in. Specifically, these occupations belonging to the cultural field represent a small fraction of all employment associated with this sector, which has important potentials in Cuba.

Similarly, the activity of certified translator and interpreter is approved. Interesting. An activity that is questioned in many countries by modern information technologies (electronic devices integrated in the external ear) that can lead to the destruction of employment in this sector, which has to be adapted more to cultural mediation than to administrative work. Once again, and as has been the case in the last 60 years, the communist regime of Cuba, every time it moves, places itself to the rear of world economic activity.

Finally, the activity of commercial fisherman and producer-seller of food products has been approved, which includes the production and sale of sausages, smoked foods, preserves and the like. Apparently they had been forgotten in some previous approval. They love to grab the bull by the horns.

While these activities are approved, the Ministry of Labor and Social Security announced a “new regulation aimed at unifying activities and modifying the scope of those that are related” which, they say, increases “the range of services, which can to be provided under the same authorization.”

Several examples. Starting now, “the activities of craftsman, saddle-maker, producer, footwear seller are integrated, and the seller of artificial flowers is also incorporated, a practice currently integrated to that of florist. Similarly, the locksmith activity can exercise the electronic locksmith activity, and in the case of the water carrier, the sale of ice is allowed.

Once again, it is necessary to insist on the same, why not leave the freelance workers to establish the associations and collaborations that are more interesting and profitable for their businesses? Why does the communist state intervene and authorize processes such as those described, and many others, that are included in the norm published in the official Gazette?

What the Cuban leaders do not understand is that as soon as these “authorizations” are approved, demands for others are already appearing. The reason is very simple: the market, independent free enterprise goes much faster than the bureaucratic dinosaur state created in Cuba by Fidel Castro and now managed by his heirs.

Economic freedom does not require the State to say whether auto bodyworkers can be independent or not of the carriers, or if the repairers of mechanical equipment have to be electricians at the same time, and if the decorators can organize birthday parties.

Reaching these levels in the control of economic activity is nothing more than showing the communist regime’s distrust of free enterprise and the independent work of Cubans. In short, the fear that the economy will acquire sufficient dimensions to stand up to communist political power and demand concessions, as in democratic and free countries.

Keeping self-employment under control, the latest official data is 617,974 people, just over 12% of the country’s employed population, which ensures the regime a dominant role in the economy and society, which is the dominant note of Castroism.

The published rules also incorporate references to vacations that the self-employed person can offer the hired worker and set deadlines for exits abroad (applicable only when the would-be traveler is not “regulated,” and the exercise of said right contained in the Castro constitution is prohibited), limiting the hiring of a spouse, or relatives of first and second degree of consanguinity (children, parents, brothers, grandchildren and grandparents), or relatives of the first degree of affinity (son-in-law, daughter-in-law, in-laws, in-laws). And most surprisingly, an authorization for independent workers to commercialize the result of their work. Amazing.

Regulations have been established for contractual relations between self-employed workers and non-agricultural cooperatives with legal entities, which may be financed in the two currencies in circulation. Measures designed to promote the productive chain of the different economic actors. If this is so, it would not be necessary to regulate anything, and an in-depth liberalization of these agreements would allow private agents to develop the most appropriate formulas for their interests and needs.

Finally, certain tax and fiscal aspects were approved that logically try to obtain more income from the exercise of independent private activity, which limits its growth and consolidation.

Nothing new under the sun. Since the initial launch in 2007 of self-employment, Government action on its subsequent dynamic has been reluctant and hesitant. These measures confirm it. Instead of liberalizing the sector, respecting the economic human rights of Cubans, and supporting independent work and entrepreneurs with a modern and efficient structure, similar to that of other countries in the world, the regime is determined to maintain control with the “carrot and the stick.” Then they say that the problem is the blockade, as they call the American embargo, but even they don’t believe that.

Editorial Note: This text was originally published on the Cubaeconomics blog  and is reproduced here with the author’s permission.

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COLLABORATE WITH OUR WORK: The 14ymedio team is committed to practicing serious journalism that reflects Cuba’s reality in all its depth. Thank you for joining us on this long journey. We invite you to continue supporting us by becoming a member of 14ymedio now. Together we can continue transforming journalism in Cuba.

The "Resurrection" of the Cuatro Caminos Market and Free Trade in Cuba

Cuatro Caminos Market clock.

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, 15 November 2019 — The beautiful published images of the rehabilitation of the Cuatro Caminos Market and resumption of operations at the service of Cubans is one of the few pieces of good news coming from that troubled country.

After almost half a century of paralysis, after the confiscations and expropriations from their rightful owners by the communists, the state owner of this facility has given a boost to the building for its rehabilitation, and best of all, it is now possible sell diverse products, which leads us to ask ourselves, for how long?

The Cuatro Caminos Market was already known to me when, as a young child — but one of great understandings — I accompanied my grandfather on his business in Havana. I remember, then, that there were still some products in the different stalls, whose former owners had now become slaves who worked for the state, and as a result, it had lost the joy, the yelling, the heat and the sounds that, according to my grandfather, had characterized the market and its people in previous decades. continue reading

There, people gathered daily not only to buy but to enjoy conversations and relationships in the surrounding bars and cafes, many of them also closed by their former owners who could do nothing but flee the country to avoid repression or jail.

In those years and under the watchful eye of the communists, always dressed in the exhausting olive green and patrolling the streets with their weapons aimed at civilians, information could still be obtained from the events that the official Castro press hid from Cubans. The market was a space for life. And because of that, it was extinguished and died.

Now the resurrection is attempted and we will see how it goes. Photographs in the state newspaper Granma show spaces full of merchandise but, as Cubans know well, it can be an illusion for a day and a lament for months.

The fact is that a hundred years after its founding and fifty after its sentencing by the communist regime, the Cuatro Caminos Market has come back to life, and this is great news. Hopefully it will recover its commercial value, its joy, its ability to gather and summon citizens to that activity as peaceful and necessary as choosing the goods and products that fill their shopping baskets. An activity banned for decades by communism, which was responsible for exchanging it for the dramatic ration book.

So when, this Saturday the 16th, the market reopens its doors to Havanans, its capacity to summon will be seen, and also to be seen is if what communist authorities say will really be fulfilled. Dreams don’t always come true, sometimes they become sad nightmares.

Why do I talk about this? Because trade as a human activity requires the existence of production, supply, goods that can be sold to buyers. In addition, the goods must be continually delivered to the stores. And their quality must be fresh so that buyers do not abandon the place or change their preferences.  And really, does anyone believe that the existing economic system in Cuba can sustain this simple operating model?

Honestly, I have my doubts, seeing the experience of the last decades. If the option is to sell in hard currencies, then there could be some future for the Cuatro Caminos, especially for those who receive remittances, but if the sales are conducted in Cuban pesos, it will not take long to see the empty shelves.

The CIMEX Group responsible for the restoration of the building, which apparently will be managed by a foreign company, has pulled out all the stops, but they should know that goods that are not produced cannot arrive at the market. However much money has been invested in rehabilitation, according to its previous design, the important thing is what exists within the premises and the structure of the economic and trade relations. Relations in which the state must be on the sidelines, turning their execution over to private agents. As simple as that.

It is useless to have an intelligent platform for the control of electricity, and climate controls with photovoltaic panels, if at any moment a blackout lets everything stored in that industrial cold deteriorate. There is no use in opening the place for the most extended hours, or 51 sales terminals, or several plants for services, if the shelves are empty of merchandise. Who will have an interest in keeping something going if it will never be theirs?

In truth, this story published in Granma seems more like “counting the chickens before they hatch” than an event to celebrate, as I said at the beginning, although it is good news that the historical heritage is restored.  At best it could have another dedication, but that is for another article. I talked a long time ago about a Convent Garden in Havana. I maintain that option, now that I see how the building looks.

The communist authorities want to achieve a lot of things that make no sense or reason, much less justification, and the worst is that the State is still sticking its nose into free trade economic activity through CIMEX.

Property rights and freedom of enterprise are the vectors that move markets such as Cuatro Caminos in all countries of the world. They already did it before 1959. If they do not want chaos, destruction and abandonment to return, there is no other way than privatization and profit-oriented management.

All the rest is a fairy tale.

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COLLABORATE WITH OUR WORK: The 14ymedio team is committed to practicing serious journalism that reflects Cuba’s reality in all its depth. Thank you for joining us on this long journey. We invite you to continue supporting us by becoming a member of 14ymedio now. Together we can continue transforming journalism in Cuba.

King Felipe VI: A Brave and Democratic Speech in Cuba

King Felipe VI of Spain speaking at a dinner in Cuba with Cuban president Miguel Diaz-Canel seated at left. (es-mb the epoch times.com)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, 14 November 2019 — It is possible that some think he should have gone further. It is an equally respectable position. But there is no doubt that the Spanish King Felipe VI has risen to the circumstances, and in his dinner speech before Cuba’s communist president Miguel Díaz-Canel, he offered a brave defense of democracy, noting that this system is the one that “best defends human rights.” And not satisfied with this, he added that “it is the Cuban people themselves who must decide on their future because changes in a country cannot be imposed.”

A very clear message, sincere, direct, timely and must have felt like a jug of cold water to Diaz-Canel at the dinner that the communist authorities had organized for the Spanish monarch with his wife, Queen Letizia. Even Raúl Castro from a distance, because he was not invited to dinner, must not have felt very comfortable with the speech.

The King has lived up to the moment. continue reading

Specifically, Felipe VI defended as “necessary the existence of representative institutions of all citizens so that all different preferences can be expressed” and added “to find in them adequate respect for the integrity of their rights, including the ability to express freely their ideas, freedom of association or assembly.” It is clear that this speech was not agreed to with the communists. They will have wanted to interpret what they want, but the message of the King has been clear, “evolution, adaptation and change are inevitable in the dynamics of events in history.”

Thus, after expressly saying that “Nothing is frozen in time, and whoever resists in its path loses the opportunity to collaborate in the design of that future that is already being born or, even more so, that it is already here,” he said, adding that “The future of the Cuban people must be elucidated by themselves” and that “the changes cannot be imposed, they must be born from internal dynamics.”

Attributing to the Cuban people the role of the agent driving the changes that the country needs, is to go against the flow of a regime that is attributes to itself a superior nature to direct the destiny of the Cubans. Magnificent, the King.

From the impeccable vision of the democratic experience of the monarchy in Spanish democracy, the King told Diaz-Canel and his communist court that “in the same way that a change that does not emanate from within the social forces and the politics of the country cannot succeed, it is equally true that change will not bring consensus and well-being if it does not represent the will of citizens.”

And at this point, Felipe VI came to propose to Díaz-Canel how these decisions for change have to be implemented, by expressly indicating before the heir of the Castro regime, the importance of “agreement, negotiation, consensus and reconciliation” as the foundations of political action, and gave as an example the experience of the Spanish transition to democracy and the 1978 constitution, bastions of the change registered in Spain after the disappearance of Franco.

Specifically, the King said that “from that constitution and their own history, the Spanish have learned that it is in democracy that human rights, freedom, dignity of people and citizens’ interests are best represented and defended.” Nothing to do with the Castroist constitution, an empty shell of communist ideology that takes away power and political rights from Cubans.

As a Democratic King, he said clearly that “the strength that democracy gives to its institutions is what allows the progress and well-being of the people and to facing the risks and challenges that will inevitably arise along the way.” He added a message that reminded many of those who heard that of John Paul II when he said, “May Cuba open itself to the world and may the world open itself to Cuba.”

Felipe VI was straight to the point, “currently no country can live in isolation and it is up to the authorities to give citizens the opportunity to travel and receive people from other countries. Citizens must access new technologies and have rules that allow the full development of creativity in all areas, from cultural creation to the generation of business initiatives.” In clear reference to the “regulated” — Cubans not allowed to leave the country — and the totalitarian monopoly of the State company Etecsa in communications.

Most clearly: an open and shut case. Expressly mentioning words like this before the Cuban communist leader justifies the trip, although some may think that references to political prisoners or the repression of the opponents that exists in Cuba were left out of the official discourse.  The King went on to conclude that, ” Spain wants to continue being part of the economic growth of Cuba and help generate opportunities, at which time it highlighted the work that Spanish entrepreneurs have been doing on the island despite having to overcome enormous difficulties.”

The King could have made a protocol speech, sentimental and of a general nature, referring to what Fraga Iribarne called “the blood ties that unite Spain and Cuba” and the common historical and cultural heritage. With that he would have had enough for an institutional discourse before the banquet. However, far from omitting these issues, certainly important, and even more on the eve of Havana’s 500th anniversary, the King spoke of democracy, freedom, human rights, pluralism, transition, change and respect for everyone’s opinions. Aspects that the Cuban communists should have felt like a shot.

The communist leader was not expected to reply to the King’s speech. But you already know. In Cuba everything is possible. This was not agreed either. So Díaz-Canel again directed his speech to the argument of “claiming its independence and rejecting interference on the road that he says the island has undertaken,” and added to that “on this path that we have chosen by our own will it is important to have the accompaniment of true friends in the world and the Spaniards are among them. We are today an example of what shared will and mutual respect can contribute to a solid relationship.”

And I add that neither elected, nor will, nor friends, nor example, nor anything. The case is not to shut up, and yes, keep in mind that 57 million euros is a crumb but can be used to pay the next term of the debt with the umpteenth Paris Club and take advantage of the visit to place Spain with Cuba in the attack on the US embargo is a short play that can be very expensive. You know, for the Castroists, anything goes.

Someone may think that the King fell short in his speech, that he did not go straight to the point and that he missed a great opportunity to denounce the Castroist stumbling blocks to the world.

For example, I would have liked some emotional and supportive reference to the thousands of Spaniards who, after 1959, had their property confiscated by the so-called revolution and were expelled from the country to a miserable existence at the end of their days. It would not have cost much. It is a pending issue, but involves reaching consensus positions not to the liking of all, allowing it to move forward. And in this case, the King’s speech goes further. Its impact in Havana will remain for posterity. It has not been a trip in vain.

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COLLABORATE WITH OUR WORK: The 14ymedio team is committed to practicing serious journalism that reflects Cuba’s reality in all its depth. Thank you for joining us on this long journey. We invite you to continue supporting us by becoming a member of 14ymedio now. Together we can continue transforming journalism in Cuba.

Is the Dollarization of the Cuban Economy Possible?

Photo: Rolando Pujol, EFE

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, 29 October 2019 — Since the Cuban regime authorized the new system of buying home appliances and car parts with hard currency and magnetic cards, Cubans once again feel a special attraction to the American dollar. Information from Havana  speaks of a spectacular increase in demand in the first days of this new measure.

Some data.

It could be said that in quantitative terms, the operation does not seem complicated. The current GDP of the United States, 19.39 trillion dollars, is 221 times larger than that of Cuba (87.73 billion dollars); that is, Cuba’s GDP is only 0.45% of that of the United States. Monetary absorption would be immediate.

If looked at from the perspective of the value of the GDP of individual US states,, Cuba would occupy the 36th position behind Nebraska and before New Mexico. In that case, it represents such a small fraction of the US economy that it seems negligible. Florida alone, for example, has a GDP of 754 billion dollars, eight times higher than that of the island of Cuba. continue reading

In absolute terms, the total dollars needed to finance the monetary circulation and transactions of the Cuban economy would be equivalent to those of a state like Nebraska, which, however, has a per capita GDP of $49,778 seven times higher than that of Cuba, which is only $7,602.

From a quantitative perspective, it would not be problematic to replace the currencies that circulate on the island with the dollar, in a massive conversion operation similar to that carried out in the European Union when it was agreed to establish the euro as a common currency.  But what the communist authorities would be willing accept is something else altogether, surely contrary to this process. The main difficulty of this is to establish a type of conversion that allows the Cuban economy to be competitive at the regional level, and I do not believe that the US would have any problem with this.

Bypassing the political obstacles, which are the most important, dollarization, under such conditions, would not be a quantitative problem, but a qualitative one. Because before establishing the dollar as a currency in Cuba and suppressing the other currencies, the variables of the fundamentals of the economy would have to be adjusted, and this requires determining what state they are currently in, what has been their recent evolution, and if it is possible to intuit what the dynamics may be in the coming years.

In that sense, the fundamentals of an economy include the qualitative and quantitative information that is essential to determine economic and financial well-being, and the consequent estimation of the value of the economy, having as its primary reference its currency.  And given that qualitative information implies the need to access elements that are not easy to measure, such as managerial experience or the qualifications of human capital, economists use quantitative information whose statistical or mathematical analysis is very useful for measurement purposes.

It is useless to promote the dollarization of the Cuban economy if there is no necessary convergence of the fundamentals with the US macroeconomic scenario, which, on the other hand, cannot be immediate, and which would demand different economic policies from today’s. If that convergence did not occur, the Cuban economy could break into a thousand pieces, and dollarization would not be a correct decision.

The truth is that the contrast between the main fundamentals of the two economies forces us to reflect. Basically because the distance is huge.

First, GDP growth in the US is currently around 3%, showing remarkable strength, while Cuba is inexorably approaching a recession, after announcing a growth rate of 0.5%, and probably even lower for this year. The difference in terms of growth is very relevant, and places the Cuban economy far from convergence. Either it grows more and more stable, or it is better not to make the move.

Second, inflation, which in Cuba cannot be estimated with comparative data, because its current consumer price index does not follow the rules used in international calculation. In this case, it should be approximated through the price index of the GDP deflator, a figure that has experienced an average annual growth from 2013 to 2018 of 3.5%, with notable inflationary tensions.  In the US in the same period, the inflation rate has stood at an average of 1.7%, or roughly half, which illustrates that the Cuban economy is at a considerable distance from any convergence process in terms of fundamentals.

Third, interest rates in Cuba are not determined by the market based on supply and demand, but are set by the government to finance the public deficit through debt issuance. The most recent data has interest rates at 2.5%. In the US, the Federal Reserve, autonomous in its monetary policy decisions in relation to the government, has set rates at 1.75% annually, which again displaces the Cuban economy from any convergence process, further separating its monetary conditions from those existing in USA.

Fourth, in relation to the state deficit, that is to say the difference between income and public expenditures, Cuba has announced for 2019 an imbalance of 11%, higher than in previous years, while the US, although it its deficit is high, 960 billion dollars, its economy has such outstanding dimensions that the deficit’s percentage of GDP stands at 4.95%, once again distancing the Cuban economy from any process of convergence with the US in the fundamentals.
Finally, the external sector of the Cuban economy is strongly deficient in trade in goods with an unfavorable real exchange relationship, which undermines the competitiveness of the economy. The trade deficit of the Cuban economy in 2018 (most recent data from Cuba’s National Statistics Office, ONEI) stood at 10.45% of GDP, totalling $9.112 billion, while in the US, although it rose to the figure of $621 billion, once again its relationship with GDP placed it at 3.2%, so that the necessary convergence of the Cuban economy with this indicator also is not observed.
The distance that separates the Cuban economy from that of the US in the fundamentals makes it very difficult for the currency of that country to serve as a benchmark for integration. It can be affirmed that there would be a serious danger in moving towards the dollarization of the Cuban economy, because it could pose serious problems for the different sectors and productive activities of the Cuban economy if the necessary adjustment are not made beforehand to correct for the notable distances that exist in the fundamentals.

It is enough to look at the current conversion that is established between the dollar and the Cuban peso (CUP), through the CUC (Cuban convertible peso), to understand the difficulty involved in the process. Similarly, the upward tension of the dollar that has been announced in recent days in Cuba reminds us of the times of the “Special Period” when the free circulation of US currency on the island was authorized. The Cuban peso is practically dead. Cubans’ betting on the dollar shows the remarkable distance between the two economies. The doors to the dollarization of the Cuban economy have been opened by the enemies of the colonial empire. Playing with fire in monetary operations means getting burned. We will see how this all shakes out.

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The 14ymedio team is committed to practicing serious journalism that reflects Cuba’s reality in all its depth. Thank you for joining us on this long journey. We invite you to continue supporting us by now becoming a member of 14ymedio. Together we can continue transforming journalism in Cuba.

Why Are There No Canned Tomatoes in Cuban Stores?

A recent photo of Cubans in line at a store hoping to be able to buy powdered milk (14ymedio)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, 18 October 2019 — In the midst of the serious crisis in the Cuban economy, some news that jumps out from the official Communist newspaper deserves special attention.

President Díaz-Canel said in one of the meetings he has been holding with the different sectors of the economy, that it is necessary to “exploit the country’s potential in industrial matters, due to its high impact on the national economy and its relevance in the [replacing] imports [with domestic products].”

It is not bad that the term “exploit” is installed in the official language of the Castro regime. It was time. Let’s see if they lose their fear, and also start talking about such noble and important and necessary things for an economy, such as enrichment, accumulation of wealth, investment and benefits. Everything will go. continue reading

Supporting a country’s industry is common sense. In particular, if one takes into account the structural problems that exist in Cuba in relation to the manufacture of containers and packaging, with the chemical industry, the sugar industry, the non-sugar industry, the food industry in general; pharmaceutical, biotechnological and biomedical products; also with hydraulic resources, construction, transport, light industry and tourism.

Finally, to be used in depth in the development of a relationship of different activities, when the problem of the industry is general and is summarized in two or three words: abandonment, lack of productivity and obsolescence .

And why does this happen in Cuban industrial activity? The answer is simple. Ask the business owner who is solely responsible for this situation. Yes. Ask Díaz-Canel as the representative of the state, the sole owner of the companies that operate in the economy in the field of industrial activity. To date, as far as is known, self-employment is only authorized in the services sector and in activities of low productivity.

The industry, the industrial companies belong to the state, and therefore, the president is responsible for is bad state and malfunctioning. According to the primetime news on Cuban television, which the newspaper Granma cites in the note that serves as a reference to this blog post, “the sector requires a technological renovation because its deliveries do not meet the current demand and a high amount is imported annually of raw materials and products.” Well, if we all agree, why don’t they get to work.

It seems so, and there is, of course, a “planned development project until 2030.” In the Castro regime, where the passage of time has a different dimension to that of other countries and the emergencies end up being filed away, that the solution to the problems of the industry is available at a distant date like 2030 has several readings: the situation can be aggravated, it is not possible to apprehend the result of the investigation and its application to technology, and what is worse, a critical scenario is maintained, in which nobody believes that industry can end up being competitive and manage to meet the basic needs of Cubans.

This comes to mind because in the same edition of Granma another piece of news appears that shows to what extent Cuban industry has fallen behind and been abandoned by its sole owner. I refer to the information according to which, the communist’s newspaper celebrates as a great event, that “despite the deficit of raw material that has faced the industry, canned tomatoes will return to the trade network from the month of November”after having disappeared almost entirely in the last months.

Canned tomatoes. Yes. A basic product, essential to Cuban cuisine, that struggles to return to the underserved bodegas of the Castro regime. I have never seen it. A product that is simple to manufacture, which does not involve major complications and for which Cuba has the resources, since the raw material does not have to come from anywhere.

After 60 years, Cubans are accustomed, to a forced coexistence with products of little or no presence in the bodegas. Now it’s this one, later it’s another.  Canned tomatoes, which are manufactured by a state-owned company, depend on deliveries of raw material, that is, tomatoes.

The planners who know so much, estimated tomato deliveries for the year 2019 to total 79,940 tons. But as always, the planning is not right in their plans and only 22,814 tons were received, a satisfaction of the plan of only 28%, and then, nobody did anything, and that’s why the canned tomatoes disappeared.

You have to get tomatoes from wherever you can, don’t you?

So the question is, who cares that only 6,733 tons of finished products equivalent to 35% of what was planned for, have been achieved? In Cuba, the market cannot punish this type of results with its behavior, because the system does not allow it.  The owner of the canned tomato companies, the Castro state, doesn’t give a damn, that is to say it cares nothing, whether Cubans can put mashed potatoes or tomato sauce on their tables. It is a matter about which no one will ask for explanations.

And they are all so content, because the profitability of the company is under wraps, its marketing (that is, satisfying consumers) is unknown, and therefore, if there are no tomatoes, nor tomato sauce, nor tomato paste. Cubans are left to “resolve” the situation with other things. And so it goes for 60 years. And nobody protests or says anything. Amazing.

There is no justification for the lack of existence of raw materials or supplies for the production of canned tomatoes. If in Cuba they are not produced, for any reason, the supply is sought outside and the product is brought from the Dominican Republic, Mexico or Haiti.  Yes, there may not be foreign exchange, but this is an example that once again the communist state puts its priorities before the free choice of citizens. It is how the game is played in Cuba, or you take it or leave it.

We must tell Cubans that there is another economic model where, when they go to the market every day, they would find what they are looking for without any problems. They can choose from many brands and buy the one that really satisfies them in price and quality. That it is not possible to live with the sword of Damocles hanging over them about what is going to be missing at the bodega today, and that the only person responsible for this situation is the communist state, absolute owner of industry, the land, the infrastructures in short, of everything. The productive capital of the nation.

If that productive capital goes into private hands, the situation would be very different. Products would always be in the retail sales network, industries could invest their benefits in R&D, pay higher wages to workers, be more productive, meet the population’s choices and consumption needs and export surpluses with which to get more income.

That model exists and Cuba enjoyed it before 1959 . Going back to it is possible and necessary. Instead of wasting time with harangues and slogans that do not go anywhere, calling for reducing imports, working more, etc., etc., what needs to be done is to reintegrate the productive capital of the nation into the private sector and let it run freely.

The example of the situation of the industry and canned tomato is well worth it. You have to get out of the Castro time capsule and take a deep breath. The future is much better than the past.
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The Extraordinary Resemblance Between Tourism in Nazi Germany and Communist Cuba

There is a government apartheid so that tourists do not experience the tough conditions of the lives of Cubans. (EFE)

14ymedio bigger14ymedio, Elías Amor Bravo, Valencia, 30 September 2019 — The Spanish newspaper ABC dedicated an interesting report to tourism during the third German Reich, and how Hitler fooled millions of tourists in World War II. All this comes from a book by Julia Boyd entitled Travelers in the Third Reich from the Atico Libros publishing house, filled with letters, documents and testimonies recovered from the summer of 1936, when nothing seemed to indicate that the atmosphere in Nazi Germany was going to be poisoned as much as it would be three years later.

The chronicle allows us to establish a striking parallel between tourism to Nazi Germany in those years and tourists traveling to communist Cuba in recent years. In those years there were no signs of war in Germany, the capital was preparing to host the Olympic Games and the National Socialist Party received massive support from citizens. Thus, tourists arrived in the country without worrying too much about what was already happening, but things were going downhill.

The book makes reference to the testimony of two travelers, Alice and her husband, who were surprised during their honeymoon when they arrived in Frankfurt, to see a woman who stopped their car, in which had a sticker that identified them as foreigners, to ask them a favor. continue reading

After talking with the newlyweds about the persecution of the Jews and the barbarities perpetrated by Hitler, she begged them to take her daughter to Britain. What would you have done? They, despite their perplexity, accepted. The testimony of this couple is one of many included in the book by the author Julia Boyd (aresearcher and member, among many other associations, of the Winston Churchill Memorial Foundation).

Germany under the reins of Adolf Hitler was a destination for tourists from all over Europe who, in many cases, ignored what was happening. it is more or less the same in Cuba, where tourists claim not to know the acts of repression that the authorities maintain over a population subject to the power of the single party, which has no respect for human rights. Two periods distant in time and seemingly different, but not so much.

It is interesting to interview the author of the book, who emphasizes, for example, a “certain solidarity” among tourists arriving in Germany, and a feeling of guilt over the consequences of the Treaty of Versailles and the harsh conditions that had been imposed on Germany.

She says that “believing in the Führer allowed them to avoid remorse.” A feeling shared by tourists who have been traveling to Cuba since Fidel Castro authorized the development of this activity during the Special Period, despite the “embargo or blockade” to which the Castro authorities continually refer, while showing a “solidarity” with the paradise of “the revolution of the poor.”

Similar to what happened in Germany, many types of foreigners, tourists, businessmen, journalists, diplomats arrive every year in Cuba. And each one finds a different type of country based on their preferences and objectives. Above all, because there is a government apartheid so that they do not experience the harsh living conditions of Cubans. A few days ago one could see how the long lines at CUPET gas stations do not include foreigners and diplomats who carry ministerial letters, but only ordinary Cubans.

The information that foreign travelers receive about the situation in Cuba is different as soon as they arrive in the country. They are not worried. There are few tourists and travelers committed to the cause of the freedoms of a people fighting against oppression. Strolling through a street with once-stately buildings, destroyed by neglect in downtown Havana, is even a reason for souvenir photographs.

As with Germany, where the Nazis offered tourists “many things,” the Castro regime tries to do the same, although with notable difficulties because of the absolute, inefficient control exercised by the communist state over this activity over companies dependent on members of the army and police security. In Nazi Germany, onthe contrary, it was the private sector that led tourism.

Tourists arriving in Nazi Germany found newspapers on the left and on the right. The author says that “some emphasized the most horrible aspects of Nazism. Others concentrated on the good and talked about the resurgence that Germany had experienced or the new structures that had been built (for example, the highways).”

In Cuba this situation is impossible, since freedom of the press is outlawed and there is only an authorized public voice, although it is curious that travelers who arrived in Nazi Germany “preferred to believe the official version and ignore the rumors of torture, persecutions or imprisonment without trial. However, one party was simply confused and did not know which version to believe.”

In the interview, reference is made to what the tourists who came to Germany thought about Hitler, something similar to what travelers thought of Fidel Castro, admired and hated in equal parts, and certainly with much more of an image than his brother and, light years from what Díaz-Canel currently represents.

The author says that “some tourists in Germany came to witness unfortunate displays of Nazism such as book burning and policies against Jews and yet, in the book testimonies of the” Führer as if he was Jesus Christ” are collected. Something similar to Fidel Castro, who was granted a prestige and relevance completely alien to the reality of the character, hidden behind the propaganda of the media under state control.

The author refers to the fact that the Nazis even deceived several leaders and African Americans civil rights activists from the United States, who, far from having a negative opinion of Hitler, showed favorable impressions. They admired the “achievements of Nazism” in the education taught in the country, or the music of Wagner. Something similar to what happens with European Democrats who travel to Cuba and end up exalting the advantages of “single party democracy,” or the “Education and Health” of the achievements of the Revolution.

The Nazis came to invite tourists to visit the Dachau concentration camp, “justifying that they were reeducating the worst people in society (murderers, pedophiles …), while in other countries they would have shot them. The propaganda presented a positive approach. Travelers were impressed in a positive way.” However, from 1935 on they stopped those visits.

In Cuba, visits to communist projects of the types such as the “schools in the countryside” have been arranged for tourists, and although the UMAP camps were canceled long ago, they received some attention as instruments of communist reeducation of those disaffected with the regime.

Tourism trips to that rotten Germany continued until a few weeks before the Second World War, as the author says in her book. It is still curious that the newly-defunct Thomas Cook agency organized trips until 1939 to places like Oberammergau, cosidered of religious importance. But after the “night of broken glass” tourism to Germany fell dramatically.

In a special way, the Olympic Games marked a point of reference in that tourist boom of the Third Reich, which took the opportunity to present itself to the world as a kind regime that only sought peace.

Cuba does not emphasize its religious tourist destinations, nor does it have Olympic Games in its tourism offer. Perhaps this is the most important difference with Nazi Germany.

Finally, the author concludes that the income from tourism to Germany was very important and the money received was dedicated to investments in armaments, the absolute priority of Nazism, so that the income of foreign tourism had a vital importance.

In Cuba, tourism has been planned by the authorities with the same objective of serving the communist state: financing a structure of insolvent and unsustainable public spending. There are so many similarities that it makes an impression.

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Note: This text was originally published on the Cubaeconomics blog and is reproduced here with the author’s permission

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.

Of Inaugurations and Authoritarian Regimes: The Case of Tourism in Cuba

Varadero Melia International Hotel (Trivago)

14ymedio biggerElías Amor Bravo, Economist, 16 September 2019 — Each dictator celebrates the inaugurations of what they can, or what they leave. There is a close relationship between authoritarian power and political celebratory openings. In the case of Franco, it was common to see him in the “News and Documentaries” — known as No-Do — inaugurating reservoirs for the production of hydroelectric power and storing water for the areas with the lowest rainfall in southeastern Spain. The reservoirs have been left for posterity and have a much wider use than originally planned. Generally, no one questions them, except for some radical environmental organizations. In the case of Díaz-Canel, another authoritarian leader, he loves to attend the openings of hotels.

On this occasion, the new facility has been named the “Hotel Meliá Internacional Varadero” because although the building belongs to the Diaz-Canel regime, the establishment is managed by the Mallorcan company Sol Meliá. The project is engaged in an open dispute wih the legitimate owners under the protection of Title V of the United States’ Helms Burton Act. So, before a large group of representatives of his government, such as the person in charge of tourism, Marrero, and even the president of Sol Meliá, Díaz-Canel said that the new hotel is intended to “become a hotel of excellence in the main tourist center from the country.” continue reading

The Cuban government’s commitment to tourism is apart of the little it has left to face the current serious crisis situation, but the prospects are not good. The National Statistics Office of Cuba, ONEI published on its website a report of the tourism sector between January and June,and almost simultaneously, another Informative note regarding the period from January to July to show the number of international visitor arrivals.

It is interesting to note that in the first period (from January to June), there was a 2.4% increase in the number of travelers compared to the same period of the previous year. This is the data that has been disseminated in the media and through social networks. On the other hand, the other more recent data in of travelers to the month of July, what really took place is a 1.1% decrease in the number of travelers.

The reason is explained in the second Note to which reference is made. In July, the number of travelers entering the island was only 295,042, with a collapse in that month of 23.6%, the equivalent of 90,992 fewer tourists. Almost 100,000 stopped coming to Cuba in July compared to the same month of the previous year.  A very bad month, very bad prospects. As a result, the collapse in the figures accumulated in the period from January to July, increasingly far from the objectives of the regime.

The Sol Meliá business group has bet on tourism in Cuba since the distant times of the Special Period, accepting the management formula offered by the Castro regime, unique throughout the Caribbean region. A formula that undoubtedly benefits two parties, as has been the occasion to verify since it has been maintained despite the difficulties that have arisen, which are not few. In addition, the effort put into management and organization of facilities in Cuba has not returned the expected results to the Spanish hotel chain. Their annual reports make this clear.

At first, the chain opted for the future, thinking that the Special Period at some point would have to disappear. Then came the “objective” of 5 million travelers which has remained unmet and with levels of occupancy levels much lower than other resort destinations in the Caribbean (The Dominican Republic attracts 11 million a year). Also, how curious, with the passing of the years, the Spanish hotel group is again faced with a similar situation, which is not the same as the Special Period, when it began operations on the island. The feeling of “deja vu” among the chain’s managers must be more than evident. And in the midst of these low levels of tourist activity, this new hotel is launched, in an area that is already relatively congested with hotel rooms, and that has lost much of its international pull.

The Sol Meliá company manages this magnificent establishment, which, however, it may lose at any time given the contractual conditions; but there is the Varadero International, a five-star luxury, with its almost 1,000 rooms in different dimensions and characteristics, modern from the technological point of view, with a commitment to quality and all kinds of installations and facilities for the use of customers. Nothing is known with respect to what the cost has been for the Castro regime, its owner, but it should not be cheap, of course, and in difficult times like today, less still.

The question that always arises in these cases is whether there is another alternative model to tourism in Cuba, other than this state monopoly under the management of international groups. The results of the current model are known. The volume of travelers has stagnated and there are bad prospects for the following months, during which in every year, another hurricane makes an appearance in the Caribbean.

In my opinion, there is an alternative. The world tourism powers, including Spain, the country to which the Mallorcan group belongs, need to rely on the the capabilities and resources of private initiative, and not of the state. To be true, there is some kind of state participation, in Spain, for example Paradores, to exploit emblematic buildings with history and heritage, but recently doubts have been raised as to whether state management should be maintained.

The Castro regime should know that tourism is mostly a private activity, which is carried out by private companies that have a clear orientation to the market and to meeting the needs of customers. Tourism should not be a propaganda device of any authoritarian regime. Fraga Iribarne, in his time as minister of the branch, managed to ensure that tourism in Spain did not take this route. In the United Kingdom it is perfectly possible to tour the country in a wide and extensive network of bed & breakfast accommodations that delight the traveler. The same happens in France and Italy, as in Spain, where the private hotel sector coexists with these establishments that offer high quality services to travelers.

In Cuba, this model must be supported more, because we have already what the state model achieves. And the little route it has. If it is intended to increase tourism, and make it a sector that contributes resources to the national economy, we must advance in the privatization of the sector and let it be privately owned at all levels of accommodations. The state can make cash and devote it to other infrastructure investments that the country needs. There is no other alternative.

The state monopoly in any economic activity, has a limited route, and it is enough to compare tourism data in other areas of the Caribbean, Dominican Republic or Cancun, with Cuba to see that the problem of tourism in Cuba is in who directs it, controls it and is dedicated to the propaganda of authoritarian inaugurations. That’s how it goes.

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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.

E-Commerce in Cuba with Nothing to Buy

Few Cubans trust the island’s banking system. (14ymedio)

14ymedio bigger14ymedio, Elías Amor Bravo, September 11, 2019 — Amazing. We had to wait until the now distant point in time — April 2016, when Guideline #108 of the Economic and Social Policy of the Party and the Revolution was approved — before Cubans could start engaging in e-commerce transactions in accordance with the country’s computerization process. It is curious how one political party’s “guidelines” can still impact Cubans’ living conditions.

It should be noted, however, that e-commerce is an activity that is widespread throughout the world, even in countries whose levels of development are lower than Cuba’s. Nevertheless, Granma believes this activity now merits an article extolling and promoting its virtues on the island.

Given these circumstances, the question that comes to mind is “Electronic commerce. What for?” as Fidel Castro, with full revolutionary fervor, said of elections. E-commerce is widespread where there is something to sell, where people can take advantage of its benefits and the ways it can improve their quality of life. Can anyone explain to me how Cubans, who can seldom find what they want in old, dilapidated bodegas, are now going to do their shopping electronically? With all the obstacles that currently exist and when things are rationed when least expected, how are they going to access this platform? Who is Granma trying to kid? continue reading

The reality is that Cubans have a poor, inefficient, disorganized and antiquated retail system plagued by chronic supply shortages. As a result it is very difficult to exercise the right to free choice for desired goods and services. Commerce, logistics, distribution and “middle-men” were early victims of communist repression. Businesses and companies were violently and unjustly confiscated by militias, condemning many former owners of these once prosperous entities to either a miserable existence on the island or escape into exile to save their lives.

Decisions like this — fervently promoted by Che Guevara, with the approval of Fidel Castro — are at the root of Cuba’s economic failures. And what is even worse are the limited possibilities for overcoming the backwardness and the widespread poverty in which Cubans find themselves.

Granma’s article makes you want to laugh and, along with it, at e-commerce too. This ought to be the guideline’s slogan. But I fear this is a mistake. It is possible that some Cubans might be interested in this formula. But I cannot see how someone could earn thirty dollars a month through e-commerce, especially under current conditions.

And it is not for a lack of experience or interest. Any Cuban who moves abroad, no matter to which country, embraces these technologies and views them positively. The problem is how to do it in the desert that is the Castro economy.

Setting aside the absence of products for sale and the lack of freedom of choice, any Cuban who wants to make an electronic purchase will first need a bank account in which to deposit either his meager monthly salary, which won’t buy much, or  remittances sent by a family member overseas, which have to first be first be processed by a bank.

I also do not see many self-employed businesspeople putting their hard earned money into state-owned Cuban banks. They know that, if they do, that information will be immediately passed along to State Security, which will use it to control their operations. Without opportunities for investment, the best place for hard currency earnings is under the mattress or buried underground, as in colonial times.

Cubans’ confidence in banks is minimal. There are no statistics on the level of banking and financial development in Cuban society but its banking system is one of the most backward and inefficient in the world, owing to the fact that is it wholly owned by the state.

Without a bank account, it will be difficult to make an electronic purchase using a magnetic card at a store’s terminal, as Granma’s communists are encouraging.

But there is another much more complicated problem: How many retail establishments — the old bodegas, for example — have electronic checkout terminals at their points of sale? None. According to Granma’s statistics, there are only 21,462 such terminals, or one for every 950  inhabitants, in the entire country, one of the lowest rates in the world. Most are also concentrated in urban areas, making access limited and complicated for many people.

There may be terminals in hard-currency stores but everyone knows that these establishments represent only a small fraction of overall retail activity in the country. And they are only within reach of those with real money to spend.

In any case, economic inequality, which the Castro regime has so often criticized, is particularly virulent in this area, where the growth of computerization is limited. Many foreign tourists complain about it and about the difficulty of paying by card, something Cubans will not say.

The communist newspaper extolls electronic commerce and defines it “as a method of buying and selling characterized by the distribution, marketing and exchange of products and services in which monetary payments and receipt of funds are made quickly and securely using machines and digital networks, without the need for cash, based on available balances of magnetic cards in both currencies used in Cuba.” A good definition, no doubt, but not applicable in Cuba.

Because few Cubans can afford to engage in e-commerce due to their very limited purchasing power, they do not trust the way it is conducted on the island. Nor, it is clear, should they.

It is surprising that, in spite of offering 8% discounts on purchases made by card, the Cuban Central Bank — one of the tools the state relies on to control its citizens’ financial lives — has had little success convincing people to make purchases using its system. And with good reason. It is telling that the same discount is not needed in Miami or Madrid. On the contrary, banks there charge for this service. The Central Bank’s communist bureaucrats should take note.

The same applies to Transfermóvil, an Android app that supports ETECSA’s infrastructure and network services. This is the same company which many Cubans criticize for the high price of its services.

Though mobile banking is clearly widespread throughout the world, in Cuba it is very underdeveloped. Few Cubans use it to pay their utility and phone bills or to check their account balances. The reasons? The same as before.

To access mobile banking, a customer must have an account linked to a magnetic card issued by a Cuban bank (Popular Savings, Credit and Commerce, Metropolitan) and a Telebanca card. Mistrust in state banks is fully justified.

On the other hand, I do not believe that EnZona, Compra-DTodo or Superfácil platforms are widely used as channels for financial and digital business operations by individuals or and organizations. The fact that they are accessible by internet search engines or through Android apps on Etecsa’s platform does encourage widespread use in private sector businesses, especially given the company’s high prices.

Virtual stores, such as the one in the Commercial Center of 5th Avenue and 42nd Street, offer a home delivery service that allows customers to reserve products and pick them up at their convenience, like any Zara store. But they fail to take off for the reasons mentioned before. In fact, information suggests that store’s products are in short supply and there is little to buy on the shelves.

It is no wonder that Cubans who have spent the last sixty years waiting in line to do anything do not understand the benefits of these virtual stores. The exceptions are young people with financial resources, which highlights once again to the issue of inequality. Transactions must be conducted in hard currency; the local currency is not accepted.

The e-commerce landscape in the era of Diaz-Canel is an example of the absurdity of robbing Peter to pay Paul. It makes no sense to introduce information-based technological solutions when the economic system remains stagnant. The problem boils down to the Cuban people’s limited purchasing power, their low incomes, their mistrust of banks owned by a repressive state and the lack of consumer choice.

Everything else is just beating around the bush. And worst of all, it turns e-commerce into one more arena for increasing social inequalities in communist Cuba. Fidel Castro’s greatest legacy. Without a doubt.

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Editor’s note: This article was originally published in the blog Cubadebate and is reproduced here with the permission of the 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.

What’s Going On with Cuba’s Non-Farming Cooperatives?

Passengers getting ready to board one of the new Rutero fixed-route shared taxis operating in Havana as a part of a cooperative. (14ymedio)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, September 2, 2019 — After the 2013 launch of an economic initiative described as “experimental,” Cuba’s communist regime has decided, without prior warning, to pull the plug non-agricultural cooperatives.

The experiment showed Cuban leaders that the impact of cooperatives on the economy was clearly asymmetrical, with results that were not the same in all sectors or activities. Cooperatives focused on construction, personal and technical services and the industrial sector registered the most positive results while wholesale markets and related services did not yield similar outcomes.

Officials have pointed to “deviations in the management of some cooperatives, primarily related to irregularities and legal violations, which distort the principles of cooperativism.” continue reading

Examples of such deficiencies included “misappropriation of resources and income; evidence of corruption; materialization of important elements by management of some cooperatives related to the contracting of the salaried labor force and the purchase of services from third parties; deficiencies in accounting practices; differences in pay between members who serve as managers and those who perform work directly related to the cooperatives’ core functions; use of bank funds for purposes other than those indicated; irregularities in the budgets of construction projects, and in their billing and collections; non-compliance with planned changes in the management and image of food service cooperatives; and a tendency to raise prices.” And so on and so on.

It’s the same old story. When a private-sector economic activity flourishes in Cuba, it is cut off at the root if it cannot be otherwise controlled. The 398 existing non-farm cooperatives which operate in ten sectors of the economy, employ about 18,000 members and generate income exceeding six billion pesos will be “frozen” in time. And it does not look like any more will be approved. Economic freedom is once again being infringed, as it has been for sixty years.

Proposals that were under review have been officially returned to their applicants through the Provincial Administrative Councils, the Central State Administration Organisms and the National Entities. Evidence that Communist authorities are hitting the brakes can be seen in data from the period between 2014 and 2017, when the number of cooperative members went from 5,521 to 17,704. In 2018, however, it fell to 17,539. According to official figures, the number of workers hired by cooperatives also declined, from 61,280 in 2014, to 888 in 2017, to 777 in 2018.

Cooperatives are part of the so-called “social economy” and operate in every country in the world, especially in those with market economies. Their workers decide voluntarily, independently and without political interference how to run their businesses or launch collaborative initiatives. Though cooperatives prioritize labor, that does not mean financial considerations such as capital investments and profit are ignored. They run on the democratic principle of one worker one vote yet are managed by highly qualified, experienced professionals who operate on the basis of profitability, business survival and value creation.

Why aren’t there more non-farm cooperatives in Cuba? There are the usual political justifications but recent reforms published in the Official Ordinary Gazette No. 63, which take effect in November, offer other clues as to what may be going on. Two new regulations confirm, for example, that the regime does not want cooperatives to partner with individuals who are not part of their workforce to avoid a situation in which a director or general manager prioritizes the interests of the organization over communist orthodoxy. The regime is also interfering in the operation of cooperatives in other ways such as setting limits on partners’ compensation. It also holds out the possibility of temporarily suspending a cooperative’s operations for up to six months if management problems or irregularities are found.

In fact, the regime does not want cooperatives capable of expanding into nation-wide operations, preferring those that are locally based. Those that do expand to the national level would be strictly regulated and limited to repair and maintenance of textile manufacturing machinery, technological equipment, weight scales, air conditioning and refrigeration equipment, bowling alleys and aluminum fabrication machinery.There are no reasons given for these restrictions, whose aim is to limit the scope of a cooperative’s commercial production and prevent it from achieving the maximum efficiency that economies of scale would provide.

It is an attempt to improve membership training but also a clear interference in these organizations, which should be free to establish their own training programs without being forced to set up a fund to finance them. It is also an attempt to set the terms for electing a cooperative’s president as well as for his or her removal. This violates the principle of collective, democratic decision making by members to organize themselves in an independent manner in order to establish their business.

In its obsessive need for total control, the regime has instituted a probationary period for new members in order to evaluate them before allowing them to join cooperatives. This betrays a clear ignorance of the role members play in a cooperative and a need to insure there are no differences between them.

More obvious are the limits set on the growth of cooperatives and how they disadvantage the largest ones relative to smallest, as outlined below:

Cooperatives with less than ten members will be allowed to grow until the number of members has doubled.

Membership in cooperatives with 11 to 50 members will be allowed to grow no more than 50%.

Membership in cooperatives with 51 to 100 members will be allowed to grow no more than 20%.

Membership in cooperatives with 101 members will be allowed to grow no more than 10%.

The termination and dissolution of cooperatives is another tool the communist bureaucracy uses on these new entities. Regulations allow the administrative body that revokes a cooperative’s license to also settle its debts and liquidate its assets. There is, however, an indefinite right to appeal an administrative decision to dissolve a cooperative. The administrative body is also authorized to negotiate bonuses, exemptions from rental payments for real estate when a cooperative assumes responsibilities for repairs, and the sale of cooperative vehicles to other legal entities.

Property assets owned by individual members may be made available to the cooperative.  In addition to monetary assets and in-kind payments, personal property may also be placed at the cooperative’s disposal, either in exchange for money or at no cost. This is the only instance in which a cooperative, through its general assembly, has authority to approve the corresponding terms, conditions and remuneration of the operation.

To address what authorities see as the most obvious management failures of cooperatives, there are plans to simplify access to supplies as part of recently approved measures to boost the economy. This would be done through the sale of raw materials and consumable goods. But there are no specific details, only talk about a generic authorization for state-owned companies to market any available products they have to cooperatives at set prices, eliminating the subsidy in corresponding cases.

I do not believe that these measures will allow the development of a social economy in Cuba comparable to those other countries. It will not contribute to the development of small and medium size businesses or reduce the state’s suffocating pressure on the economy. It is yet another plan that will end in disaster. And once again the fault will not lie with the embargo or measurees by the Trump’s administration.

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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.

Are Changes to Central Planning Enough to Fix the Cuban Economy?

A Cuban farmer makes extra money turning the invasive marabou weed into charcoal for export. (14ymedio)

14ymedio biggerElías Amor Bravo, economist, June 18, 2019 — Central planning is the basic tool used by the Castro regime to control the Cuban economy. More specifically, it replaces the market as a tool for allocating resources while at the same time taking private initiative out of the economic decision-making process.

Since the establishment of the Central Planning Board (aka JUCEPLAN) in the 1960s, Cuban economic planning, based on the Stalinist model, has never been able to reach its targets. The sad memories of Che’s failed “industrial plans” and the unsuccessful push to harvest 10 million tons of sugar in 1970 stand as historic paradigms of the inconsistencies and inadequacies of communist central planning.

Now it seems Cuba’s new economics minister, Alejandro Gill, has come up with a new twist. In 2020, he says, “the plan will be based with a new concept: It will be developed without specific directives or limits.” He explains that this is because “it will be predicated the active participation of the workers in each company.” continue reading

But don’t get too excited. As long as central planning rather than the marketplace remains the tool used to allocate financial resources, the economy will still have all the same problems as before. Getting rid of the plan is a necessary condition for opening avenues to economic freedom but not enough to overcome the inertia and inadequacies that characterize the Cuban economy. The central plan is the cause, though not the only one, of the Castro-led disaster.

There is no point in making central planning the responsibility of businesses and workers without allowing them to make other decisions as well. I acknowledge it is a step in the right direction but it is not enough. But at this point, what’s the use in kidding ourselves? Taking economic planning out of the hands of communist bureaucrats — people who see themselves as better than the rest of us mortals at making decisions about what to consume, produce, import and export, and invest in — is not a bad idea. But I have the sense that at the end of the day, Mr. Minister, turning the central plan into some sort of — to use your words — “collective construction” intended to “identify potential opportunities in the nation’s businesses” amounts to more of the same.

In making this decision, the minister acknowledges something important. Basically, formulating a plan based on a global economic model from which the sector-specific directives would later be issued, requests for goods and services would be made, and the level of imports and exports would be predetermined make little sense.

The economy is much more than an isolated exercise in bureaucratic calculus. If you want to set up supply chains, you have to get rid of the so-called straitjacket and introduce objective, realistic and conscious decision-making methods. When it comes to doing this, nothing beats the market. A new mindset is clearly what is needed. Things have not been done this way in Cuba for sixty years but at some point you have discard what you cannot use and get to work.

The minister should know that, before embarking on this process, it is not enough to create a bottom-up plan. As long as certain structural reforms are not carried out, the results achieved from switching from a top-down to bottom-up approach will be negligible. Nor will they provide the efficiency necessary for a functioning economy.

I dare say that, without first carrying out the necessary structural reforms, this change could end up producing results even worse than those we have now. And it could generate numerous organizational problems for the economy. Given the very dramatic conditions in the country at the moment — among them, economic and legal restrictions and the impact of recent measures adopted by the United States — such a change would certainly not be advisable.

Before happily committing to any new bottom-to-top plans, to which President Diaz-Canel seems to have given his blessing, important decisions have to be made to guarantee a successful outcome. Among them are legal decisions involving property rights. I believe sixty years is more than enough time to conclude that the communist state’s monopoly ownership of the means of production has been one of the most negative factors impacting Cuba’s progress and economic prosperity.

It is the factor that most impedes improvements in overall quality of life and societal well-being. Given current conditions, there is no justification for all productive assets to be controlled by the state, or for the private sector to be limited to marginal activities such as small-scale self-employment and the long-term land leases.

The Cuban economy needs structural reforms and so the priority should be on restoring property rights and returning ownership of the nation’s capital and means of production to Cubans themselves. Privatizing the nation’s businesses and productive assets is necessary if the economy is to operate effectively again. There is no point in having bottom-up plans if those on the bottom lack the incentives, motivation and buy-in on the project for which they are working. Otherwise, they know they will never be able to take advantage of the fruits of their labor, or see the earnings from their work rise over time, or freely commit themselves to goals that have meaning for them, because they do not have ownership. It’s that simple.

Why work, why exert themselves, why dedicate time and effort to something that will not benefit them? We have to remove the Castros’ straightjacket and reorient productive capital and business towards the private sector, establishing a stable and respectable legal framework which would allow them to exercise their rights. This can be done quickly, as quickly or faster than the so-called revolutionary law-decrees that nationalized businesses after 1959. A couple of laws should be enough. Just transfer property rights to their owners and stop pretending once and for all that people’s assets should be controlled by the state and all the other communist nonsense.

The solution to the Cuban economy’s problems does not lie in government plans but rather, I strongly believe, in their elimination, or at least in a change to the planning process that will effectively tackle a chaotic technical situation in no one knows what to do. The solution lies in the field of property rights, in the idea that there must be private-sector economic players with decision-making power. They must be autonomous, independent of the state, people who can generate wealth for the benefit for their stakeholders. Modern and efficient individuals dedicated to a single principle: to provide the best possible service to their clients. This step is essential to correcting the badly damaged Castro economy. Without this step, there is nothing that can be done. The Chinese and Vietnamese did it and look at the results. Why not Cuba?

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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.

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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