On the Failures of Central Planning in Cuba

The bad condition of the buildings and the ruins of the city are among the favorite snapshots that foreign tourists love to take as a souvenir — and are among the many failures of a centrally planned economy. (14ymedio)

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14ymedio, Elías Amor Bravo, Economist, 28 October 2020 – I do not think I am wrong in saying that, in Cuba at this point, there are still those who believe in the feasibility of central economic planning, even after 61 years of continuous failures.

Central planning means giving the state superior power to direct, according to its political criteria, the decisions of economic operators, thus breaking with market efficiency as an instrument for resource allocation. The ethics of centralized economic planning are unacceptable. This even, thinking that its chances of success increase, since there are no private property rights in Cuba.

Between the two extreme positions, central planning and market, there are countless points where a favorable result can be achieved in terms of well-being and quality of life. continue reading

But in Cuba it is still thought that the comprehensive transformation of the development management system can be successfully undertaken through central planning as its main element. This idea, rooted in the revolutionary principles of communist orthodoxy, refuses to use other instruments of economic policy, such as regulation, public policy management, governance or economic control, among others.

Perhaps that is why planning was established as a benchmark in the so-called Conceptualización del Modelo [Conceptualisation of the Cuban Socio-Economic Socialist Development Model], approved during the seventh Communist Congress. It was approved, that the planning-based management system should establish a mandatory relationship between the Plan Nacional de Desarrollo Económico y Social [National Economic and Social Development Plan], the State Budget and the monetary and financial balance, all in line with fiscal, monetary, exchange rate, credit, wage and price policies.

The Cuban economy, under such conditions, does not depend on the free and motivated action of private and public economic operators, but rather is centralized under absolute control of the state, which, moreover, owns most of the resources and means of production. Contrary to official doctrine, which considers this scenario to be a strength, it makes sense to think just the opposite, considering what the results of planning have been at all levels.

If in the free market economy the adjustment between the decisions of the operators is made in the market, through supply and demand, in Cuba this process goes through the hands of bureaucrats holed up in a government “ministry,” who make decisions based on their alleged superiority over the rest of the citizens and companies.

While the market produces efficient results, despite its failures, the second is a scenario of failure, and one after the other. And the bad news is that the Cuban communist authorities cling to planning, as if it were the only thing that can help overcome the serious obstacles of the economy.

Centralized planning is the source of numerous problems, because it limits, conditions, and, in some ways, coerces the behaviors of the economic operators of consumption, investment, savings, production, etc. Decisions that in any economy of the world are freely made by their stakeholders, in Cuba are directed “from above” and there is no room for your questions. Then, when what is planned doesn’t come to pass, no one is answerable for their failures. And it all begins again.

Over the years, the Cuban communist experience in centralized economic planning has served to prove the real impossibility of a state or government efficiently conducting its economy. The enormous centralization of decisions in the Cuban economy and the total absence of democracy in the processes, determine that the population is facing problems in order to exercise their role as consumers, investors, savers or simply to devote hours to leisure. Centralized economic planning intervenes in micro space, where operators maximize their well-being with income constraints, and therefore the Cuban economy is systematically distorted.

For example, central planning explains why bankrupt state-owned enterprises, which produce at very high prices, and therefore need state budget subsidies to adapt prices to the low purchasing power of the population, are kept in operation. Numerous examples of investment, foreign trade operations and even decisions on what to produce and how could be cited. Those responsible for central planning in Cuba have never negotiated to achieve a consensus, but have imposed their decisions, setting objectives that, most of the time, were simply impossible to meet.

By identifying central planning as the central axis of the economy, together with the key role given to state-owned enterprises, the Cuban communist régime regresses 50 years, to positions that in the global and modern digital world and in transition to the Fourth Industrial Revolution, are unthinkable, and which will eventually cause its own demise. The foundations of this model of economic organization, based on numerous failures and mistakes, are weaker than the authorities think and at any moment, the house of cards will fall apart completely.

Could monetary and exchange rate be the setting for the crisis of the model? Of course it could. As now planned, with a central role of the state in controlling the wage and price process after the devaluation of the Cuban currency, anything can happen. Without the need for “shock therapies” or avoiding “leaving anyone helpless,” the tensions that will occur after the devaluation and the effects on prices, wages and consumption will make it very difficult to anticipate the results, no matter how much planning is done.

Companies fear that they will not be able to pass their higher costs on through prices, consumers fear that they will not be able to buy the products they want to consume because of their insufficient wages and pensions, commodity producers do not know the impact of the devaluation on their supply, the export options are unknown, the utilization of installed production capacity remains low. The uncertainty and risks ahead are so high that many wonder, what’s the point of centrally planning the economy, when there is no confidence in the authorities in charge of its leadership.

Translated by: Hombre de Paz

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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.

Failures of the Cuban Revolution for Di­az Canel: Food Production

Cuban farmers have been hit hard by lack of inputs, fuel shortages and drought. (Flickr / Kuhnmi)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, September 29, 2020 — President Díaz Canel told the Council of Ministers in September that “failure will never be an option for the Revolution.” It’s all well and good for him to think that, even to say it, but when the official communist newspaper says otherwise on a daily basis, it means something is wrong.

Either Díaz Canel is divorced from reality, which is quite likely, or the editors at Granma want to pull the rug out from under him. Or both. That is the way things are at the moment in Cuba, which is incomprehensibly celebrating sixty years of criminal rule by gangsters, who have made life impossible for decent people and forced many of them to flee the country. How the story ends, no one knows, but certainly not well.

That said, an article in Granma undercuts Díaz Canel’s triumphal tone by once again focusing on the failure of country’s agriculture and livestock producers to feed the Cuban people. As usual, Machado Ventura is driving the bandwagon, reminding farm laborers of “the need to work with the sense of urgency demanded by the current situation facing the country.” Slogan after slogan but still no deliveries of food to state-run stores. When a delivery does arrive, a line of customers makes sure it quickly disappears. continue reading

At this point in the story, telling Cuban farm peasants they have to “to work with greater preparedness, tenacity and intelligence to increase production, improve the contracting, marketing and supply systems, and monitor prices and product delivery” seems to me like a tactless insult.

And, as statistics show, the situation is getting worse all the time. Machado Ventura has told farm industry representatives that “going forward, we will only have those foods that we are able to produce.” This is starting to get really ugly. If the only supplies available to people are what is produced domestically, then we are facing an imminent, unstoppable food crisis whose only solution will be aid from United Nations World Food Program.

Communist leaders such as Machado Ventura are incapable of solving the problems that have destroyed Cuba’s once prosperous agricultural sector. They refuse to face reality and cling to what they call “our socialist project,” which has been disastrous for Cuban farming. Díaz Canel should be taking notes.

Machado Ventura’s solution amounts to “producing more with the few resources we have, which means making use of existing reserves, which are widely available and not insubstantial, and getting rid of the inefficiencies that often arise in certain areas.”

Well, let’s see. What resources is he talking about? The agricultural sector accounted for 17% of total employment in 2019 but, because it is burdened with state-owned livestock farms and land rented to tenant farmers who will never own it, productivity is very low. There are certainly resources but what reserves is he talking about when farmers now have to pay for supplies with hard currency?

Can Machado Ventura point to a tenant farmer who earns money from his land while having to submit to the absurdities of the distribution system? We agree that inefficiency has to be rooted out, but that requires transforming the legal system to guarantee property rights so that guajiros can actually own the land they farm and feel motivated to make it grow and prosper. But the communists are oblivious to this reality.

A food crisis is looming and there is only one option. Imports of grain and poultry from the United States must be purchased with cash. Without hard currency to pay for them, talk of food security — what the communists call “food sovereignty” — is just a lot of hot air. And worst of all, no one is making plans to deal with what is coming.

Farms are plagued by low productivity and the dictates of local communist councils. They lack fuel, raw materials, tools, supplies and fertilizer. Farmland is limited, with most of it under the control of the state. Tenant farmers do what they can with the land they lease but they can only do so much. Meanwhile, Machado Ventura continues with his harangues.

The communists are trying to fix the situation by offering guidance to farmers, who know much more than they do about the land, how to make it productive and how to use organic substitutes for hard-to-find fertilizers, herbicides and pesticides.

They also know more about rotating crops, making better use of irrigation systems and tapping the entire supply of idle land, including land belonging to shuttered sugar cane refineries, for food production. It is hard to believe that these steps have not have already been taken but land leasing is what it is. It can only do so much.

Cuban farming veers between the impossible and the failure to meet expectations. Idle fields could be made productive if private land ownership was legally possible. Involving local municipalities in this issue is of no use. It is more important to Machado Ventura to “defend the revolution from the furrows” in hopes of providing “the five kilograms of protein a family requires.”

If, of course, that were how things worked. Providing protein without attending to consumer needs — so varied, so different, so complex — along with the collective farm system of the last century, explain the failure of the agricultural and livestock sectors. The latter’s serious failure in particular to meet its targets, both in terms of meat and dairy production, are well-known. Though the problems are by nature quite varied, the problem lies, once again, with the laws governing the sector.

What is Machado Ventura thinking of doing at this point to fix the failures of the agricultural sector? The answer is a slogan to be used by local municipal production and self-sufficiency councils. It involves creating “a broad mass movement of people working in agriculture to sow, clean and cultivate, among other things.” Is this déja vu? Are they once again going to send people out to work in the fields? If so, who, when and how?

A bad idea. It represents a return to the old way of doing things, like the sad days of the 1960s when a Cuban who wanted to leave the country had to first do forced labor in the fields or work as a guard on weekends. Sometimes his children had to do the same as part of the disastrous “school in the countryside” program.

Do Cuba’s officials never get tired of the same old thing? Is it that they have no new ideas? Do they never give any thought to progress or true well-being? Given Machado Ventura’s expressed concern about food shortages in Havana, it is very likely that communist pressure will be brought to bear on the agricultural sector in nearby provinces. But will it be enough?

The failure of the Revolution is all too obvious. Walking around the country like Machado Ventura, counting the acreage to be planted next season and replacing imported raw materials with domestically produced ones are indications of just how totally out of control things have become, and how incapable the Cuban agriculture and livestock sectors are of providing a solution to the nation’s food needs.

“Squeezing juice from the field,” as the veteran communist leader says, will not be achieved under the current communist system. Though the obstacles are great, the problem lies more in ideology and mindset than in reality. The time has come to do something, and the sooner the better.

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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 Cuban State Bank, From Bad to Worse

A line outside a currency exchange (Cadeca), amid rumors of a reduction in the value of Cuban convertible pesos CUC. (14ymedio)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist. 15 September 2020 — This morning (Tuesday) I had the opportunity to have a coffee with a colleague who works as director of a bank office in the Valencia capital. During the conversation, which revolved around important issues related to the future of the Spanish economy, it occurred to me to show him the Cubadebate report entitled “Behind the lines and rumors, what is happening in Cuban banks?”

My friend was surprised by everything. By the content of the article, By the photographs showing people lining up at bank offices and, in general, everything.

I finished by saying that this happened here in Spain 40 years ago. Today it is unthinkable. Office managers find it difficult to get people to come in person to do business. They do everything online, even the elderly. The world has changed a great deal. My friend, unintentionally, was referring to the latest bank merger announced in Spain, which will mean the layoff of thousands of employees and the closure of numerous bank branches, but there will be no lines. “You can be sure about that,” he affirmed forcefully. continue reading

The truth is that lines in Cuba at banks and currency exchanges – known as Cadecas – as presented in the article in CubaDebate, are a specific phenomenon of Cuba, basically the twisted roots of the Communist social economic system, and however much they insist that they do, the lines have little to do with the announcements of an eventual monetary unification. The lines have much more surprising motifs. In fact, the line has become something inherent in the Cuban way of life.

And I affirm it based on the fact that there is no need to fear a monetary unification in the short term, since the Central Bank of Cuba confirmed in a recent statement, while maintaining that at the time the decision is adopted public opinion would be duly informed through official channels. We’ll see if it’s true.

In any case, the unification of the currencies is now at the back of the drawer of the pending subjects, and in a complicated moment like the present one it does not seem to be a priority for the communist government. The owners of deposits in Cuban pesos (CUC) and Cuban convertible pesos (CUP) can sleep peacefully, because while they will end up losing part of their purchasing power against the dollar, unless they liquidated as soon as possible, in any case, the loss will not be great.

In addition, in reference to CubaDebate, the brand new governor of Havana, Garcia Zapata, looks bad. It appears that the measures being taken to deal with the epidemiological situation of the capital are not giving the desired results and flare-ups of the virus have soared, putting the population in danger and forcing new restrictions on people leaving their homes. It seems that measures and actions are being considered to minimize the concentration of customers in the bank and Cadecas branches. I don’t know if they will go ahead.

Discounting this “fear” effect among people using the banks and Cadecas to exchange currencies, the Cubadebate article is interesting because it analyzes the reasons for these crowds of people in Cuban banks. All of the reasons are inexplicable and absurd and the list is quite extensive.

In the first place, there are the people who wish to open an account in Freely Convertible Currency (MLC, for its Spanish initials). The new hard currency stores, uniquely stocked with supplies of “medium and high range” food, personal hygiene and cleaning products very hard to find elsewhere, can only be shopped in by people possessing electronic cards in MLC. Cuban pesos, CUC, or cash of any kind, are not accepted.

It is evident that the decision was planned by the communist government without taking into account the “chain” effect that a measure of this type would have on the population and the impact on the management capacity of the banks. Once again, the Cuban government errs in its plans. As usual.

Second, the lines were caused, at various bank branches, by people waiting to do operations at the ATM. Cubadebate observed that this situation occurred in several branches, also relatively close. This is another daily problem for Cubans who have opted to use banks and stop using cash they keep in a drawer in their room. It has been known for a long time that the number of ATMs that exists in the great capital of the Antilles is insufficient to meet a growing demand and so, of course, lines appear. Moreover, when in Cuba, you have to go to the ATM with certain frequency to withdraw money, which indicates a certain inflationary pressure on prices.

In fact, Cubadebate verified in its tour of several branches that ATMs “are not stocked with enough cash for all the people who want to access their services” and cite, for example, the “Bank at Manglar and Infanta, where more than 50 people were waiting in line to withdraw money from the ATM.”

This is unthinkable in any country. People, with their jobs and daily responsibilities, cannot waste time standing in line to get money. ATMs that work slowly or poorly, that do not allow you to withdraw money, that run out of money, are all common situations that even foreign tourists report when they use these services.

Thirdly, in most branches, there were also people lined up at the cashiers to carry out personal banking operations, including requesting and picking up the magnetic cards. But unlike the ATMs, apparently, “almost all savings banks were providing services, that is, operations in CUC and CUP, except for the branch of J and 23 where only two were working.” It is still significant that the human component of the bank branch is the one that works best, while the “technological advances” perform poorly.

Cubadebate confirmed that most of the customers in these lines wanted to open accounts in MLC, but they also verified that some people had been trying to carry out this simple procedure for a week without success, sometimes because of the lines, other times because of the requirements, most of them for the fear of Covid-19 infections.

The case of Cadecas was similar. Here the crowds of people were motivated by the desire to exchange currency. Cubadebate points out that when the report was made after the announcement by the Central Bank of the delay in the monetary unification, the tensions of the first days had decreased notably and the pressure on the lines was much less.

This situation, described clearly in the article, confirms that the banking sector of the Cuban economy, as defended many times by Diaz-Canel, faces many obstacles. The first, and undoubtedly most important, is the distrust that exists in broad sectors of Cuban society towards banks, owned by the state and acting as lines of information transmission to political power.

Second, the computerization of society, so-often announced by Diaz-Canel, is a problem in the banking sector because people prefer to use cash for transactions and hence almost 30% of the GDP of the economy is in cash, possibly the highest percentage in the world.

Electronic innovations are long overdue and the population mistrusts them. Procedures consolidated in practically all countries, such as opening bank accounts in MLC online, through the TRANSFERMÓVIL application, haven’t gotten off the ground in Cuba because they lack support of broad sectors of the population, who don’t have the computer resources for such operations and therefore prefer to go to bank branches to do their business.

My friend told me that if all these people who go to the branches could formalize some operation with the bank, something important would have been achieved. He was amazed to see the few financial services offered in Cuba by financial institutions.

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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 ‘Coleros’ Are Winning the Propaganda Battle Against the Communist Regime

Cuban president Miguel Díaz-Canel appearing on an earlier Roundtable TV program — with its updated set — on Cuban State television (Twitter)

14ymedio bigger14ymedio, Eliás Amor Bravo, Economist, August 26, 2020 — Are the coleros (people who stand in line for others) so bad? Is the repression against them justified?

The unending lines that stretch for blocks in the early hours of dawn are a habitual phenomenon in the geography of Cuban commerce, above all for buying basic goods for the daily diet, like oil or chicken, and household cleaning products like detergent.

Many people detest these lines and can’t even get what they want after long hours of waiting. This happens not only to those who are last in line but also because the merchandise is limited and rarely responds to the needs of the population. Others simply can’t be in line, either because they’re at work or have family members who need attention, or simply because they have some disability that prevents them from standing in line.

In all these cases, which are many, the solution for avoiding the lines comes from anonymous citizens who provide them with a service in exchange for a remuneration. It’s normal. The cost of opportunity is fundamental for an economy to function. continue reading

The colero, which is the derogatory term used by the Government against these citizens, sells a place at the front of the line, which assures the buyer that he can get what he wants. But in order to formalize this transaction, the colero has to claim the space by spending the night outdoors in the line and sacrifice hours of his leisure time with his family. Nothing is free.

Seeing that these people have created an informal “market” and are satisfying the needs of citizens, the Regime decided to create “groups to confront coleros and resellers” throughout the whole island, accusing them in official propaganda of being guilty of creating the lines. The idea was that these intervention groups would reduce the participation of people in lines; especially because of Covid-19, since there’s a need to keep a safe distance.

Beginning August 1, the Regime created these groups for preventing and confronting the coleros, resellers and hoarders with the goal of “organizing the lines and eliminating the lists with names and identity card numbers and turns granted to some people for several days”. What’s curious is that these groups include bosses, officials and members of mass organizations, which shows the inability of the police and army to prevent crowds in the present situation of crisis. But there are also doubts about whether these people shouldn’t be at work instead of denouncing and repressing their fellow citizens. In spite of the repressive climate, the protests have been extended throughout the whole country.

However, as expected, these groups haven’t given the Regime the results it wanted, and the lines, each time longer and more disorganized, continue, and the informal commerce increases in a spectacular way. The repression doesn’t help solve problems that have to do, above all, with the scarcity of basic goods. The situation with imports got worse last year because of the Government’s lack of hard currency and the low general productivity of the economic system, especially in agriculture. In addition, the arrival of Covid-19 aggravated these structural factors even more.

Instead of trying to solve the main problems, the Regime goes back to its old ways: repression, denouncement and prison. What it’s always done in these cases. Thinking that the State Security police or the anti-colero groups will be the solution to the problem is stupid, since the problem’s origin is in the general shortages suffered by the country.

In addition, the Regime has failed in other ways with its actions against the coleros. It’s not a matter of isolated cases, and many people have discovered how profitable this activity is, as much for satisfying the needs of others as for earning a profit, the big enemy of the Cuban Communist Regime. Those who have been arrested return to the activity as soon as they can, as do those whom the Regime tries to “reorient” through the mass organizations.

The people who engage in this activity, selling a place in line as a way of life, agree that in spite of the risk of being arrested and prosecuted, they get paid better with this informal work than any employee in the budgeted sector, which is dominated by low salaries, precarious work, poor working conditions and a lack of opportunity for professional and social development.

The Government’s repression has been directed not only against the coleros but also against resellers and those they call “hard currency traffickers”, who offer dollars in exchange for Cuban pesos or Cuban convertible pesos so people can open an account in the banks, get debit cards and shop in the hard currency stores. Other citizens have been prosecuted for alleged crimes of “speculation and hoarding”, for having bought merchandise with the purpose of reselling it.

Some sources on the Island note that behind the shortages also exists “a scheme of misappropriation by corrupt leaders, who never have stood in line exposing their health or that of their family”. Luckily, many citizens have understood that the shortage of goods in the economy is the cause of the huge lines and not the acts of the coleros, hoarders and resellers, and they blame the Regime for not taking responsibility for its own inefficiency. Cubans in the diaspora rarely have to stand in line to buy in stores in Madrid, Hialeah or México. This evil is endemic in the economic system of the Island.

This concept has spread like wildfire in Cuba, and the Regime’s official propaganda hasn’t been successful in its campaign of harassment and denunciation of the coleros and resellers. Now there’s no Fidel Castro to reign in these actions with his traditional uproar, and president Díaz-Canel offers a different kind of authoritarian leadership. Rather, the opposite has been produced, now that the attacks of the official editorials, and on the episodes of the Roundtable program on Cuban TV, and in Party meetings, haven’t managed to exempt the Government leadership and divert attention from the reality, which is none other than the Government’s inability to satisfy the basic needs of the population. And this is good news. There are dangerous curves ahead.

Translated by Regina Anavy

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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.

Monetary Unification: The Story Never Ends


14ymedio biggerEliás Amor Bravo, Economist, August 24, 2020 — Perhaps, possibly, together with salaries, housing and the daily worry about food, monetary unification has become one of the main problems for Cubans. There is proof of that. The article published in Granma with the title “Monetary unification is on the horizon in Cuba”, in which several specialists from the Central Bank of Cuba analyzed this question, has had up to now 71 comments (a record for the official Communist Party newspaper). And if they’re analyzed in detail, they are critical and show that many Cubans are feeling hopeless.

With good reason. The Government has spent almost 10 years on this matter, since it occurred to Raúl Castro, in 2011, that he would have to unify the two currencies that circulated on the Island, recognizing that this anomaly created a lot of problems for the economy. Since then, the issue has been like the Guadiana River in Spain, which appears and disappears along its journey but always is there without anyone knowing very well what the result will be, and what Cubans most fear is the consequence of monetary unification on their lives.

Let’s put the problem in perspective. What’s certain is that monetary unification and exchange rates aren’t matters that concern the Government. If they were, it wouldn’t have taken nine years turning over something that, almost always, for one reason or another, keeps getting postponed. Now the justification is obvious, if you take into account the direct impact of COVID-19 on the Cuban economy. continue reading

If the Government doesn’t care, it’s because it benefits from the dual currency. To begin with, it doesn’t have to submit the Cuban peso (CUP) to the international demand for currencies, so, being isolated from international global markets, its value, credibility and responsibility pass to a second plane.

The Cuban convertible peso (CUC) becomes an “intermediary” between the world currency and the nation’s, and thanks to this, the Government keeps a part of any transaction. Hard currencies are needed to stay on the business circuit, which is cut off from the economy, and only small tourism companies have begun to participate, although in a limited way.

The problem is that the CUC loses value as a monetary unit because the relationship between money and production is unbalanced, and its depreciation is perceptible. The Government has adopted several measures to promote the weakness of the CUC in relation to the CUP. However, what has happened is that both monies are sinking. A bad business.

The explanation is found in the Cuban preference for the dollar. Not only because it gives access to a greater number of goods and services but also because it’s a guarantee of stability in the medium and long term. Some have wanted to see a return to the most difficult years of the Special Period, with an eventual dollarization of the economy. Without going to this extreme, the strength of the dollar presents notable challenges to the process of monetary unification.

Why are the CUC and CUP losing buying power so quickly and the dollar now being exchanged at more than 1.25 in such a short time? The explanation is found in the economy. The Government collects CUC and CUP but lacks dollars. And people act in accord even more than is necessary by opening bank accounts to get the debit cards that allow them to buy goods and services, with a significant increase in buying power with respect to the rest of the population.

Some may believe that 1993 and 1994 are back, and they’re right. At that time, the Government stopped penalizing Cubans for having and using dollars; the shops collected hard currency; the export of services, especially tourism, was promoted; and, there was an opening to foreign investment and the authorization of remittances from abroad. In addition, the Government allowed the principal exporters to retain part of the hard currency that was coming in, and certain business transactions were done in dollars. Same lyrics, maybe different music, i.e. same argument, perhaps different implementation.

The problem then and also now is that the Government never adopted measures of discipline and economic control over salaries, subsidies and the other usual costs of the budget in order to cope with a deficit of two percentage points over GDP. This internal lack of control was perhaps the main obstacle to unification. In fact, the CUC rose precisely in an attempt to confront this internal and external lack of control. And thus, with the passage of time, a segment of “poverty” appeared in the Cuban economy, where salaries, security and social assistance, services, food products and many other activities were carried out in Cuban pesos, while another sector of the population enjoyed the advantage of having access to “strong” money and hard currency.

So that the Government has little interest in solving problems that are increasing, like the coexistence of the dual currency and exchange rate, which creates distortion in economic activity with one kind of exchange rate in the entrepreneurial sector (1 CUP=1 CUC=1 dollar), which doesn’t reflect reality and creates an obstacle for exports at the same time it stimulates imports. Problems arise with accounting, pricing, the use of currencies and their deposit, both formally and informally. The tsunami increases every time.

Karina Cruz Simón, a consultant at the Central Bank of Cuba, has explicitly reflected on the origin of the problem. In her opinion, the “stability” of the national money (CUP) is accomplished by ensuring that the printing of money corresponds with the evolution of the real or productive economy. A good choice, which makes us ask when this necessary equilibrium was produced in the Cuban economy.

We need only look at two points of data. With the economy growing at the end of last year by 0.5%, the participation of the money in circulation in the GDP approached 30%. It’s not strange that the spectre of structural inflation appeared from time to time and remains latent in the economy. The authorities solve this by undersupplying the shops. The inflation differential of the Cuban currencies compared to that of hard currencies (the dollar or euro, for example) helps explain the growing deterioration in the buying power of these currencies and, above all, in their credibility.

The bank consultant pointed out that “a favorable scenario for the Cuban peso to comply with its functions and manage to preserve macroeconomic equilibrium implies a type of change that approaches the offer and demand of hard currency, the existence of clear regulations for the printing of money, so that there is just the amount of money needed, and discipline between the Government’s income and expenses (control of the public debt).”

She adds that “it is important that there be coordination among the organizations charged with conducting macroeconomic policies, such as transitioning from an administrative direction to using financial instruments, so that prices can offer signs for a better performance for consumers, producers and the general planning of the economy”.

I’ll say it again: The lyrics are well written, the problem is the music. Or, in this case, the argument is very good, the problem is the implementation.

How can a monetary exchange like the offer and demand for hard currency be accomplished when the two Cuban currencies aren’t present in international markets, nor do they have that goal?

How can you establish clear regulations for the printing of money if the demand for money in the economy, especially coming from the State, doesn’t stop increasing?

What must be done to discipline the State in its management of income and public expenses, especially with a serious situation like the one posed by COVID-19?

The icing on the cake comes with that requirement of “coordination among the organizations charged” to achieve a “stable offer and quality of goods and services that can be acquired in the national money” and “the need to create conditions that stimulate people and businesses to save and obtain credit in the national money”. The question is, how is this supposed to happen? By Machado Ventura’s* “harangues”?

The conclusion is that the Central Bank of Cuba, dominated by the Communist Government and without the autonomy that monetary policy demands, cannot achieve monetary unification from the technical point of view, so this process will end up being the result of a policy decision some day when it’s least expected.

*Machado Ventura, Second Secretary of the Communist Party of Cuba, “harangued” the farmers in June 2020, calling on them to increase food production by cultivating all the land.

Translated by Regina Anavy

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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 Castro Regime Declares War on the ‘Coleros’

An “ordinary” line in Cuba in pre-pandemic days. (14ymedio)

14ymedio biggerElías Amor Bravo, Economist, August 4, 2020 — The Regime designed by Fidel Castro has been based historically on informing, pitting Cubans against each other. The Committees for the Defense of the Revolution (CDRs) were created to accomplish this mission. Denouncing deviant, non-revolutionary behavior was the slogan, so that then the authorities could take punitive measures. Snitching in itself became something inherent to the survival of the revolutionary Regime, a face of its identity that quickly obliged Cubans to react in order to survive.

With the passage of time, this system of informing acquired still more importance every time the country entered into crisis, as happened in different moments along its existence. Then someone “antisocial” was identified as the enemy and had to be harassed and have his life made impossible. Cubans know very well what I’m talking about, because that slogan of informing, repressing and expelling compatriots from Cuba has been happening for 61 years and has formed part of the DNA of three generations of Cubans. For the Communists, there’s only one model of society: theirs. The alternative isn’t admissible, and if it appears, it’s simply persecuted and eliminated. Cuba has been drained dry of its population because of the Regime’s ideological uniformity and policy of informing.

Now, in these most difficult moments with the economy moving towards collapse and the food crisis, the Castro Regime has identified a new enemy to destroy and has put all of the official press and propaganda at its service: the “hoarders”, resellers and coleros, (people who are paid to stand in line for someone else). This could become much worse if groups of “rapid response” are created, which has already been announced in Holguín. However, the Regime is surprised to see that the image of these citizens as “antisocial” and criminal collides with the extraordinary social acceptance of the services they provide. continue reading

Granma points out that attacks on hoarders, resellers and coleros are increasing on social networks, in Internet journals and television programs, and refers to multiple examples. But of course what they don’t say is that a good part of the complaints come from supporters and defenders of the Regime who have been instructed to post these messages. So far the waters are calm, but a storm may be coming.

Communist propaganda has put its point of view in a position that probably doesn’t coincide with most of the population. The criteria of the official Regime propaganda is based on a supposed nonconformity of the citizen affected by these behaviors associated with the “monopoly” of the lines that obliges them later to resort to acquiring products on the black market, at super-inflated prices. Certainly, this isn’t the order of things, as many Cubans explain.

On the contrary, the need to resort to those who “crash” the lines is motivated by the fact that, after several unsuccessful attempts, people are tired of wasting time and not getting what they want, because what exists in the shops is insufficient. Even more, people with physical difficulties can’t stand in line for hours.

Then along comes someone who offers his turn in line, generally among the first, so the consumer is sure of having access to the desired product. The early turn doesn’t fall from the sky, like manna. You have to fight for it, keep watch on the door of the establishment, spend one night or several out in the elements, sleeping the best you can and away from your family. The colero business, in the informal economy, is one of the most important that has existed in Cuba in its 61 years of lines and hardship.

What’s wrong with that? The line is nothing more than a consequence of the Regime’s poor economic management, and that’s where the responsibility lies, not with the people who dedicate time, strength, lack of sleep and the ability to manage a job that has a great social benefit, which, logically, should yield a private benefit, and which will last as long as shortages and poverty exist.

The Regime’s propaganda on this subject is so far off base that it even presumes that these behaviors are related to “the media war that has faced Cuba for more that six decades”. Incredible.

Coleros and resellers arise because there are lines. The hoarders, as Granma calls them, are people who fear that products will disappear from the store and simply won’t be there when you want them. The lines are caused by deficient economic management. Citizens who attack the coleros and resellers, if they even exist, should direct their anger at the Communist leaders, who, for sure, don’t have to spend long hours in the lines of misfortune. If someone doesn’t have access to “essential purchases” as a consequence of the monopoly and control of the lines, he should know that the only one responsible for that situation is the Communist leader at the head of the country, and he’s the one they should ask to explain.

The great irresponsibility of the official press is to use this scenario to pit Cubans one against the other, promote snitching and accusations, and ultimately, return to more of the same, always. This isn’t good for a country, nor should it continue in these times of special gravity. In addition, if the Regime continues forward with its plans to eliminate coleros, hoarders and resellers, as the Cimex stores have announced, the economic situation for many Cubans will get worse, and the need to “resolve” [ed. note: the all-purpose Cuban word for figuring out how to get by] will again become a difficult problem.

Lastly, Granma has to be told that of course Cubans have the right to complain about shortages in the shops, without the need to ridicule anything. The Regime’s errors in economic management are very visible here. In the stores that accept only dollars and a few other foreign currencies there is no problem with buying what you want; in the State stores there is greater injustice. In Cuba, as much as the State declares that no one will be abandoned, the coleros, hoarders and resellers help resolve the need for food and cleaning products. More than a negative social attitude, they offer a service to society. They don’t abandon anyone.

Thus, there is no historic duty for revolutionaries to close the way to those Cubans who want to offer solutions to their compatriots. Those who close the way are precisely those who cause the lines, and they need to understand this in order to break the chains that bind the Cuban people to a policy and ideology that is contrary to human reason.

Translated by Regina Anavy

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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.

Salaries in Cuba: Source of Injustice and Social Inequality

“Does anyone actually believe this?”(ONEI)

14ymedio biggerElías Amor Bravo, Economist, July 30, 2020 — The recent publication of the National Office of Statistics and Information (ONEI), “Average Salary in Figures. Cuba 2019” has confirmed what is more or less already known.

In the first place, average nominal monthly salaries in Cuba have grown since 2015, when they were a little more than 687 Cuban pesos (roughly $28 US), up to 879 pesos in 2019. The growth accelerated that year by 192 pesos, 28%, showing a necessary evolution, if salaries are to mean anything.

Secondly, the same as before, this average salary in 2019 is the equivalent, according to the present exchange rate, to a little more than 37 dollars, and given the prices in the convertible-money stores, it’s obviously not enough. The buying power of salaries for daily basic necessities outside the subsidized “basket”, despite having increased, continues to be insufficient.

The combination of these two tendencies explains why salaries are one of the main concerns for Cubans, a result obtained in all the known opinion polls about the social reality of the Island. continue reading

Salaries are a double-edged sword in an economy.

On one hand, excessive growth has a negative effect on external competition, driving up production costs, limiting profits and generating inflationary pressure. Equally, higher salaries (with inflation under control) create high levels of buying power in the population, which leads to a succession that, in the words of Díaz-Canel, is fundamental for stimulating consumption and production. In this case, inflationary tension also appears.

Growing salaries are the main threat to inflation. For this reason, economists insist on the need for salaries to correlate with labor productivity. If the two variables keep pace, unit costs remain stable, competition is not eroded, businesses produce more to meet increasing demand, and this results in greater buying power. Managing this virtuous circle isn’t easy and depends on policies of growth and well-being, plus the R and D (research and development) of technological innovation.

How much have prices increased in Cuba since 2015? And what has productivity done?

The question of prices is complicated, because the Consumer Price Index refers only to the national market. In such conditions, you have to refer to the GDP deflator, which offers official data only up to 2018. Taking into account these limitations, a growth in prices of 20% (possibly more) can be estimated between 2015 and 2019, which leaves a real salary increase of 8% in these years, around 1.6% annually. Barely perceptible.

The indicator for labor productivity is obtained from dividing GDP in constant prices by the occupation level. In accord with our estimates, which include up to 2019, productivity increased in the same period by 12%, as a result of the decrease in occupation level. This indicates that the growth in unit costs has been 16% between 2015 and 2019, the equivalent of 3.2% per year. There have been inflationary tensions on the cost side.

In sum, salary increases since 2015 have had limited impact on real buying power, but, through the weak growth experienced by productivity, have generated inflationary pressure on costs, above all on the budgeted sector [that is operations included in the State budget that do not return revenue to the State, including: public health, education, culture and sport, public administration, community services, housing and defense]. The policy of central planning has ended up being, in terms of salaries, another resounding failure.

In addition, other results arise from the analysis of the official ONEI data.

For example, salary inequality among Cubans is increasing.

By territory, the distance between the lowest salary earned in 2015 on the Isle of Youth, barely 617 pesos, and the highest in Ciego de Ávila, with 752 pesos (equivalent to 135 pesos, or 22%) in 2019, hasn’t been corrected. Just the opposite. Ciego de Ávila loses first position at the expense of Artemisa in 2019, with an average salary of 989 pesos, while the lowest corresponds to Santiago de Cuba, with 757 pesos, a difference of 232 pesos (double what it was in 2015), the relative equivalent of 31%.

In addition, in Artemisa, the increase in salaries in those years approached 50%, (specifically, 48%), while on the Isle of Youth, salaries increased by only 24.3%, below the average. The provinces that experienced higher salary growth are those that had the highest levels, and at the same time, those in which the lowest salaries were paid have been those that registered less growth. Santiago de Cuba, for example, barely saw growth of 20% for salaries in this period, clearly lagging behind. So what kind of central planning is this?

It’s easily observed that salary inequalities in Cuba are a function of where you live. And then Díaz-Canel goes and announces that development in his strategy should be launched from the municipalities, a clear bet for keeping and increasing these unjust inequalities. The economy of central planning, without ownership rights or a market, cannot ensure salary justice among the territories of the Island. On the contrary: it increases the differences.

Salary inequalities for Cubans are greater still when distribution by economic activity is analyzed. In this case, the difference in 2019 between construction, which paid 1,597 pesos, the highest salary, and hotels and restaurants, with 529 pesos, the lowest, reached 1,068 pesos. A Cuban who works in construction receives a salary three times greater than someone who works in tourism.

As for trends, there are activities that gain and others that lose in regard to salaries. For example, the sugar industry, which paid 1,238 pesos in 2017, barely paid 1,062 in 2019, a decrease of 14% in this period. Even hotels and restaurants, which had the lowest average salary in 2019, had a downward trend in salaries after 2017, from 546 pesos to 529, or -3.1%. For education and health professionals, the results are contradictory. While the first receive salaries lower than the average 783 pesos, the second receive 965 pesos. The increase in salary for educators since 2017 has been 47% and for health workers, 16%.

One last inequity. The official statistics for salaries support the observation that the high intensity of non-State activities, private or self-employed, like hotels and restaurants, transport and trade, shows lower salary levels (and fewer salary increases) than in the budgeted sector that depends on the Government. Does anyone actually believe this?

Translated by Regina Anavy

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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.

Defending the ‘Coleros’ and ‘Dishonest Speculators’

Cubans spend a huge part of their lives standing in line to meet their everyday needs. (14ymedio)

14ymedio biggerElías Amor Bravo, Economist, 29 July 2020 — Granma, on its website, says that complaints from readers about so-called “dishonest speculators” are accumulating. Really, you can’t fall much lower or be worse. On the part of Granma, of course.

The article, I can’t remember the author, describes the long lines and the coleros, who are people who are paid by others to stand in line for them. Both things are plentiful in these months of COVID-19 in Cuba, but the most important question isn’t asked: Why do the lines and coleros exist? It’s curious that the article doesn’t mention Miami, Madrid or Mexico City, where no Cuban has to get up at dawn and spend sleepy hours of sweat standing in interminable lines in order to get groceries. It’s unthinkable.

In Cuba, the line is a hardship, something that can’t be avoided if you want to eat every day and have some basic cleaning product to combat the dirt. And Granma, instead of going to the root of the problem, which they know perfectly well, attacks and insults the “dishonest speculators”, who are just the tip of the iceberg. continue reading

The article describes the numerous and varied behaviors of “resolving” that Cubans practice, as if it were a matter of a crime, “like standing two or three times in line for several people, selling their spots to anyone who can pay at high prices, to accelerate their moment of buying”.  Serious crimes, no doubt. They don’t say, however, that this happens when the consumer, after desperately trying to buy a product for several unfruitful days of standing in line, ends up running to the service that assures him of being among the first to have access to one of the scarce products for sale.

Equally condemned are those who “whisper in your ear that you can have what you want (wet wipes, diapers, chicken, picadillo, oil, air conditioners, freezers…), but only if you’re ready to pay double, triple or who knows how much in Cuban convertible pesos (CUC) over the price in the State stores”. It’s normal; for a start, these people can communicate their services however they find it convenient, and, in addition, they have every legitimate right in the world to profit from an activity in which they spend time, strength and, in many cases, economic resources.

And of course, immediately the Ministry of Interior arrived and ended the fun, with the emission of sanctions for more than 1,285 coleros from the beginning of the pandemic, with the certainty that not everyone who received a fine actually engages in these activities. There’s always a threat of repression thrown in, just in case.

So that, in order to be prepared for what the Ministry views as a growing phenomenon, and thus nothing is said about how to address it with economic measures that are necessary and advisable, the Government announces through Granma more repression against what it calls “the indolence of people with no social commitment, dedicated to accumulating products needed by families in the midst of a context of shortages and a national health emergency”. Once more, incredible but true. Insults, condemnations, judgments about presumed crimes, lack of respect for the principle of presumed innocence. For the Communists, the guilty are the innocent.

The columnist even “doubts the humanity of these beings, who, motived by individualism, forget that the children, elderly, pregnant and sick won’t have the opportunity to get what they need”, without realizing that thanks to these dehumanized beings, many of the above-mentioned people now manage to have access to the goods and services they need but can’t get in any other way, not even in their dreams. Rather than committing crimes, these beings are providing a benefit to many people who are willing, logically, to pay for that. Nothing is free, and the Communists know it, although they toe the Party line when it’s convenient.

The amount of the fines is also questionable, because they don’t bring in a lot of money. If the fines were excessively high, the sanctionable act would demand a higher price from the client, which would reduce the size of the demand and, thus, the potential capacity of the offer. So these fines of 100 to 300 pesos are perfectly designed by the Government to keep the coleros and “dishonest speculators” continue to offer their services. Ask the authorities why.

The article continues along other paths, pointing out that many coleros are the same people in charge of organizing the lines in these establishments, which makes the crime worse, but without recognizing that the problem could be solved by supplying enough products in the shops. Then in Havana, as in Madrid, the lines would disappear, along with the coleros and the speculators. An impossible dream for several generations of Cubans who know that their economic system is incapable of accomplishing this basic life goal.

Proposals like scanning identity cards to organize the lines, improving control inside the shops, using the ration card, administrative surveillance of workers, etc. are the Communist solutions to this phenomenon, which, if applied, would surely multiply. Don’t be deceived. These proposals are the ones that Granma says must reach online readers of the newspaper. I’m afraid there are many people who are ignorant about economic matters and only see the situation through an absurd ideological lens that has reached its end. Perhaps the moment for education has arrived.

Translated by Regina Anavy

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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 Adventure of Opening an Account in Cuba in MLC (Hard Currency)

Waiting in line. A daily fact of life in Cuba.

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, July 26, 2020 – Imagine that you’re going to your bank to open an account. One of the simplest operations in any country in the world.

You really could save yourself the trouble, if you want, because online banks offer a way to do that. In Cuba, it’s more complicated, although this option also exists.

On the Island, it’s normal to have to visit the bank, and in addition, to hurry, because there are only three places where you can open the account, and you will probably have to wait in long lines. Specifically, you can open the account in the Bank of Credit and Commerce (BANDEC), the Metropolitan Bank (BM) and the Peoples’ Savings Bank (BPA), all of them State controlled.

After waiting for hours, you address the employee and tell him you want to open an account in freely convertible money (MLC — moneda libremente convertible) so you can buy goods and services in the MLC shops, which are usually better supplied than the regular State stores. Your goal is to get the debit card associated with the MLC account, so you can buy everything.

The first thing the employee clarifies is that the MLC shops are accepting U.S. dollars and euros. You can forget about using any money from Cuba’s commercial friends, like Venezuela, China and even Russia. They also accept, with a certain reluctance, Canadian dollars, British pounds and Swiss francs. And other currencies, like the Mexican peso, the Japanese yen, the Danish crown, the Norwegian crown and the Swedish crown, but they tell you that the account will be denominated in U.S. dollars, in accordance with the official exchange rates.

You’ve come well prepared, with your identity card (for example, your drivers’ license won’t work, but it’s okay, irregularities are thereby avoided), and you’re surprised when the employee informs you that you don’t need money to open the account. What’s more, don’t worry because the account can be opened with a zero balance. You don’t understand anything, and the wad of bills you have in your pocket is worrisome, because the employee is blunt when he tells you that the account has to be supplied with transfers made from the exterior – from abroad – whether through a bank or by Fincimex (the financial arm of CIMEX, a State entity) with remittances.

With a certain resignation you sign the first pile of papers, and stamps and other administrative elements are added. In the conversation with the employee, he suggests that you use the AIS USD card, which Fincimex offers the population, and he even promotes your request from overseas; in other words, the possibility exists that remittances from the exterior can be requested in the country where you are located. The employee can’t avoid commenting that my card might take a long time, we don’t do well with plastic here so it’s better to get the card outside, you would be able to make purchases sooner.

While the employee introduces the information into a computer, which crashes several times (the network is slow and the employee complains), he comments that BANDEC (a credit bank) offers anyone the possibility through the Transfermóvil application to request an MLC card without having to come in person to the bank branch (the online option). You think it’s a pity you didn’t know this before. You could have saved a lot of lost time, but in Cuba now it’s understood. And besides, you want to go with your card in hand to teach your friends and family how to use it.

But then comes the critical moment. When it seems that everything is ready and that the card is now within reach, the best part arrives. The employee tells you that the card won’t be there for 7 to 10 days, and it could be longer, and he asks for your phone number so he can call you when it arrives. Resignation. It’s not possible to leave the bank with the card.

Then you remember a similar transaction performed by a relative in a bank in Hialeah some months before, and how he left triumphant with the card, with assurance, with a policy of credit and several gifts from the bank. A different system. Once more, the employee whispers, to avoid being heard, deficiencies exist in the deliveries, and we’re continuing to work on this.

The fact is that when Monday comes you still don’t have the card, and when you consult with friends from work you realize that some have spent two weeks waiting, without news. The shops are open, but people can’t buy with cards that were issued by the banks. The lines shown on Cuban television are due to the fact that many buyers have other cards that can be used the same way.

In effect, in addition to the cards from BANDEC, BM and BPA, there are the AIS USD cards of Fincimex, which function in these shops and also in the other electronic payment channels of the Cuban banking system. You thought about the Visa card that was brought back from one of your trips to Miami, which you couldn’t find anywhere.

The employee has you sign several papers, while he gives final instructions. With this account and debit card you can go to another shop, not only to the USD one, and use it the same way. You also can access ATM machines and withdraw money, but be careful, you won’t get dollars or euros, only Cuban convertible pesos (CUCs), at the same exchange rate that the bank has right now for the U.S. dollar.

Then, you dare to formulate a question, only one. Are you sure that the tax on the dollar has been eliminated? The employee smiles and informs you that it was eliminated on Monday, July 20, in accordance with the measures approved recently by the Cuban Government. Before, if you came to the bank with North American dollars in cash, a 10% discount would apply. For example, if you brought 100 dollars they would deposit 90 in your account. Now that doesn’t happen. And he goes back to insist, again, that the account is now open and you don’t need to deposit cash right now.

However, he reminds you again about the three ways to have funds on the MLC cards. He recommends a bank transfer from the exterior and also by way of remittances through Fincimex.

The second can be through a transfer you receive from another USD account, between individuals.

The third is cash, and it can be in North American dollars or other currencies.

At this point, you wonder why they rejected your cash deposit and whether you understood anything at all.

Translated by Regina Anavy

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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.

"Where are the Chinese trains?": Transport in Post-COVID Cuba

Cycle rickshaws, known as bicitaxis, are common in Cuba; and the country has received a donation of 23 “auto” rickshaws, which are similar but powered by a motor.

14ymedio biggerElías Amor Bravo, Economist, 24 July 2020 – A few days ago, a post-COVID update on the interventions of the state in the transport and tourist industries was held at the round table. In today’s article, we will look at the former, an area within the Cuban economy with closer ties to the private sector and thus particularly relevant for discussion.

The paralisation of transport following the confinement measures and the resulting decrease in tourist arrivals since the start of the year have determined the results of a sector now on the brink of collapse. Especially vulnerable to this situation are the private brokers who rely on loans and charging the public for their services.

Shamefully, the ministro (transport minister) did not produce any contingency measures, such as reimbursement of the lost revenue suffered by transport carriers who now find themselves on the verge of bankruptcy. This is unlike other countries, where governments have offered temporary loans to help combat the complex situation caused by the pandemic. Instead, private carriers in Cuba have been left to their own fortune by the government. continue reading

Instead, the transport minister was quick to proclaim, at the very beginning of his presentation, that “the reactivation of public transport in La Habana was the greatest challenge, requiring the guidance of the Ministerio de Transporte (Ministry of Transport), the Consejo de Defensa Provincial (Provincial Defense Council) and of bodies with the Ministerio del Interior (Ministry of the Interior)”. What else is to be expected? Even during periods where none of the problems created by COVID-19 existed, the industry has long resented the various difficulties weighing it down that are caused by chronic structural deficiencies, such as weak demand and an inflexible operating framework in the provision of of public and private services.

This raises the question, how are problems within the sector being addressed? For the transport minister, the answer is simple, “by guaranteeing compliance with the measures, by the posting of inspectors at stations and by the establishing of a youth force in collaboration with la Unión de Jóvenes Comunistas (the Union of Young Communists) aimed at identifying problems and sharing them via a WhatsApp group”.

In other words, monitoring and informing on private brokers. A cocktail of increased order, discipline and obedience is the speciality of a ministry seeking to eliminate what it calls “irregularities” in the capital, such as playing music at a high volume or staging protests against the inspectors on behalf of the population. If someone complains about the transport service, they are deemed responsible for an “irregularity”, which could then be classified as a offence. A masterclass in the handling of complaints and demands by the communist government. It is incredible that situations such as the one outlined above can still arise in the 21st century.

The transport minister repeatedly described the problems within the sector, which “require the understanding of the public during this period”, and added that “a systematic reform of the stops is underway with the active involvement of the Defence Council”, another one of the regime’s informants. Images of the long queues of Cubans waiting to use a public transport network running at full capacity all throughout the day have been widely circulated on social media sites during the pandemic, images that are also notable for the complete lack of social distancing.

Given the severity of the situation, confronting statements made by the Ministry of Transport can seem like some kind of a sick joke. One such statement is “the establishment of a reinforced service to the beaches. This has involved the reorganisation of the entire flow of transport based on the fact that the beaches are an area where people tend to congregate”. In particular, the Ministry referred to the “9 a.m. Tuesday-Sunday train to Playas del Este that leaves from the loading bay of the Central Station, La Habana Vieja“.

It highlighted that services were restricted during the pandemic in line with the confinement measures taken by the government. Consequently, the interprovincial lines have been running at 30% of normal as 70% of these lines are connected to the capital. The Ministry also signalled “difficulties with airplanes” when discussing air transport, which explains the focus of the ministry on buses and trains. It confirmed that the ticket sales would be made through the app “Viajando” (Travelling) and las Agencias de Venta (Sales Agencies) while marking the recent “significant investment in the Terminal de Ómnibus Nacionales (National Bus Terminal)” as a success. This investment includes a refurbishment of the terminal with the goal of improving ventilation and with it the passenger experience.

Also emphasised was how “the initial phase will soon put into service the 23 ‘electric trikes'” (small 3-wheeled motorized carts also commonly called auto rickshaws) that were donated to the country; these will operate along routes in Centro Habana and Habana Vieja. Likewise, an app will soon be made available for users of the “gazellas” (metropolitan taxis), allowing them to check prices, routes and even the real time location of the taxis, in addition to other features currently being finalised. The figure of 23 auto rickshaws in a city of more than 2 million inhabitants is somewhat perplexing, to say the least.

Having reached this point, the minster began to explain the integration of transport within the context of the revitalisation plan for the Cuban economy that was recently approved by the Consejo de Minsistros (Council of Ministers).

At its most basic, the measures proposed are designed to “make the most of what we already have”, taking into account that the “financial resources will be limited”. Furthermore, the interventions in transport must “give priority to exports and import substitution, as well as providing the scope for improved management and greater efficiency. This will generate incentives and management strategies that mutually support one another”. All this is accompanied by the potential of “science, digitalisation and other alternatives that prioritise greater efficiency”.

Having finished his presentation, the minister then provided additional detail on the measures.

With regard to freight transport, it was announced the publication of “a series of guidelines establishing the responsibilities of all actors involved in internal port-freight economic activity that would improve control and management systems for GPS-equipped fleets”. It is unbelievable that this technology needs to be improved, or worse, that it does not already exist in the first place.

Secondly, the minister signalled the adoption of additional measures to “restructure the transport network, because there are cases where the means of transport are not in the hands of the state entities that most need them”, which could be interpreted as an increased centralisation of services that were previously offered by private brokers.

Next, an increase in “the more efficient mode of cabotage transport (management, manufacturing and maintenance of small boats)” was announced, a service that the government is constantly trying to secure but is usually hindered by the insular structure of the country.

Fourthly, and with respect to passenger transport, the minister indicated that “there will be a reorganisation of routes in order to adjust schedules in line with demand during peak hours. The use of bicycles, auto rickshaws and electric motorcycles will also be encouraged, all of which are expected to improve traffic flow in the upcoming months”. The consequences of these initiatives that interfere with the autonomy of private enterprise while increasing state control are well known.

The fifth presentation follows its predecessors, with what the minister called “the establishment of an organisational task force to facilitate improvements to the efficiency of the railway system, including the transport of sugar”, as if the problem of the Cuban rail network could be resolved through organisation and nothing else, given the constant delays and abysmal quality of an infrastructure left to decay because of a lack of state investment.

Almost slipping under the radar was the minister’s announcement of a new railway operator “to provide services to the Zona Especial de Desarrollo Mariel (the “Mariel” Special Development Zone). Meanwhile, the transportation of passengers and cargo via an express service will continue to be developed. This is the development that had previously been put on hold, but should soon restart with better organisation”. The minister concluded the section about the railways by indicating that “work will be done to transform the railway maintenance networks, which had seen delays due to the current constraints.”

Finally, and forming part of the additional measures taken within the industry, the minister highlighted the “work being done to fine tune the necessary protocols for the sale of internal combustion engines within the country”. It is expected that they will be available in shops dealing in MLC (moneda libremente convertible, freely convertible currency). In this sense, the minister highlighted the need to “provide incentives that will increase the production of spare parts both in the public and private sector”, without going as far as to indicate what these incentives might be.

In line with the introduction of MLC in all areas of the economy, the minister affirmed that work is being carried out in the “promotion of various enterprises that currently provide services in the public sector so that they can continue to provide the services in MLC. Foreign companies will also receive assistance”.

With regard to the service in state-owned workshops that are privately run, featuring as one of the few references to the private sector, it was remarked that “there will be an evaluation to determine which state-owned workshops would be able to pass into private management (of which La Habana already has experience in this)”. There was little more, if anything at all, on the matter. It was also said that “cooperatives will continue to be actively promoted, and modes of transport will be loaned by state entities to individually selected productive activities”. Once more, precious little detail was provided on what form this would take.

There was also time to dangle a carrot in the direction of one of the nation’s great powers. This carrot consisted of an increase in support from the Ministry of Transport to the Unión de Industrias Militares (The Union of Military Industry) with the aim of “boosting the number of drivers, chauffeurs and crew members who are competent with the latest technologies”.

Finally, the minister heralded the arrival of e-commerce to the transport industry, encouraging private carriers who provide interprovincial services to register with the “Viajando” application, as well as incorporating the sale of airplane tickets to e-commerce platforms.

By way of a summary, the minister asserted that mass transport, both by train and bus, had now been restarted, as had the sale of interprovincial tickets through “Viajando“. Despite being relatively a relatively new platform, approximately 26,000 bus tickets have already been sold via the application. He went on to state that the Cayo, Coco, Cayo Largo del Sur and Villa Clara airports were ready and waiting for when international flights are permitted and begin arriving once more, adding that all of the services comply with the health procedures put in place. This includes the obligatory use of facemasks, the disinfection of transport facilities and capacity limits placed on terminals around the country.

The minister affirmed that “all the freight transportations scheduled by the country have had safety checks performed as part of the process in which begin provide their services once more. This process includes an update of the fuel cards to the latest version”. On that note, it was shown that more than 70% of freight carriers had updated their cards, which can now be used in conjunction with the Transfermóvil application to carry out transactions on the go. The remaining workers in the industry, totalling more than 70,000 (including mechanics and repair technicians), are able to continue working without any issues.

There is no doubt that the reactivation of the transport industry is crucial for the national economy, and there is a lot at stake. Most important are the interests of the state and the private sector. Supported by the WHO, the gradual, phase by phase restarting of services according to the regulations established by Salud Pública (Public Health) follows a path that attempts to limit new outbreaks.

However, the process is by no means free of contradictions. To that end, since regular flight schedules were suspended on March 24, the minister has confirmed that there have been more than 300 “humanitarian flights” chartered for various reasons. The flights have carried more than 30,000 Cubans and foreign citizens abroad, while more than 7,000 have entered the country.

The minister indicated that local trains have their services up and running again, as do a number of interprovincial lines linking together more than one province. On the subject of the Chinese trains, the minister had to explain that these were still not in service “since that all of the national routes start from La Habana, which is still in phase 1. Additionally, the establishing of interprovincial lines that do not include La Habana is complicated, especially since all of the trains are based in the capital”. It is precisely the capital where these dormant Chinese trains can be found.

 Translated by: Andy Barton

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Elimination of the 10% Tax on the Dollar

The Cuban convertible peso and a US two dollar bill. (EFE)

14ymedio bigger

14ymedio, Elías Amor Bravo, Economist, July 17, 2020 – Let’s imagine a government that spends 61 years calling another government an enemy, accusing it of economic harm. That includes, among other things, a prohibition against using the other country’s money. It also condemns to prison those who are caught transacting on the informal economy (the black market). Then, having said this, the government has no other solution but to return to authorizing transactions in said prohibited money for the purchase of food and cleaning products that are basic to the population.

And in addition, the authorities of this government maintain that the same old measure is fair and benefits all Cubans inside and outside the country. Incredible, because this is Cuba in the time of Díaz-Canel, and this is how the international communication media have covered this news coming from the Island.

Fidel Castro did it another way. When, in the middle of the Special Period he saw that the dollar was devouring the Cuban peso and that the national money was scorned by the population in the face of the free-for-all that brought with it the collapse of the Berlin wall, he created a fictitious currency, the CUC (Cuban Convertible Peso), in order to collect hard currency directly, and he didn’t bat an eyelid. continue reading

The dual currency in Cuba has been here for a quarter of a century and could continue indefinitely, in spite of the strain it puts on the functioning of the economy.  But Fidel Castro created the CUC, and no one up to now has had the courage to eliminate it. The CUC won’t survive the present measures. That’s for sure.

But let’s go to the heart of the matter, which has attracted the attention of the international media. It’s clear that this country, which had prohibited the use of the foreign enemy’s money, had established a tax of 10% on transactions, generally on remittances made in said currency. All of a sudden they decide to eliminate this tax. As there are few governments that act this way, you have to ask why the Cuban Regime has decided not to charge this 10% on transactions in dollars.

The question is easy to answer. Basically, a system of commercial intermediation was conceived last year with the sale of appliances, air conditioners, computers, auto parts, refrigerators, etc., and now they want to extend it to basic goods and cleaning products in 72 shops that will certainly have everything, as opposed to the State stores where, after long lines and wait times, you normally can’t get the product you want. Let’s say that, in addition, they have announced more products and shops for August. The Cuban Government sees commercial transactions with hard currency as a way to overcome the present Covid-19 crisis.

Why are we saying this? Basically, because now food can be imported and paid for with the hard currency that’s collected in the dollar stores by the sale of products—hard currency that doesn’t exist in the national economy because tourists haven’t come to the Island in four months, as the Minister of the Economy recognized. Thus, the dollars needed to buy corn or rice from the U.S. can be obtained in the shops which sell in Moneda Libremente Convertible [Freely Convertible Money). These shops are being inaugurated on Monday, July 20, by the Communist Regime, and everyone is very happy because the threat of a food crisis is thereby removed from the dismal scenario of the Cuban economy.

But this same measure has two sides, like the money. Side A is positive, because it allows Cubans who have access to dollars to open accounts in certain banks, obtain debit cards and embark on buying what they want in the stores. But the question is, what happens to the 80% of Cubans who have no access to the dollar, nor family in the exterior to send remittances?

This is Side B. They would have to save a lot, which is very complicated with the salaries they are paid, and they would have to exchange Cuban pesos with the dollar. The Cuban peso will be the first to notably depreciate in the informal market, and, most probably, these Cubans won’t be able to buy anything in these stores.

Surely Cubans will regulate this injustice in the informal economy, with creative formulas that show us how clever and capable they are. Meanwhile, State Security is training to put an end to the so-called “illegalities”, which are nothing less than a cry for freedom.

For the moment, let’s say adiós to the 10% tax on transactions with dollars, which Fidel Castro also established in 2004 to respond to what he called “attacks of the embargo”. The reality is that nothing has changed since then, even if the application of Title III of the Helms Burton Law has made things more complicated. Now the Cuban Communist Regime has decided to eliminate the tax so people won’t lose that 10%, which still doesn’t make anyone jump for joy.

No one should expect these measures to revolutionize an economy that, according to the latest data from CEPAL (the Economic Commission for Latin America and the Caribbean), will sink to -8% in 2020 (remember that in April they had estimated only -3.8% because things were going badly, and what is worse, much worse, is that this decline will continue). The Government has reacted by applying, inside the profit margins allowed, a measure that tries to obtain all the hard currency circulating in the country from remittances (the only hard currency that presently comes in).

The older generation remembers Fidel Castro’s dialectic against the U.S. and the threat of the dollar. Decriminalizing the possession of dollars took place in 1993 during the so-called Special Period, but before that date many Cubans suffered imprisonment and heavy fines for having dollars. History can’t be easily forgotten, and much less should it fall into oblivion when the past is reconstituted.

Before 1959, the U.S. wasn’t insulted for meddling in the Cuban economy. Prices in stores were established in dollars, and the peso was on a parity with the dollar. The Cuban economy rested on more solid fundamentals.

So much demagoguery and long hours with speeches empty of content in order to stop selling pork, shampoo and hamburger meat in dollars to Cubans in a series of select shops. Basic products in prices given in dollars in a country with two official currencies in circulation, the historic Cuban peso and the Castro invention called Cuban Convertible pesos. Sometimes history goes backwards from good sense to those who offend it by playing Russian roulette. What’s going to happen in Cuba starting from next Monday, July 20, has a lot to do with those lost battles by governments and political regimes, in which there is no type of justification for supporting them.

What’s bad about all this is that they want to present these measures as something beneficial for the Cuban people, when they aren’t. That 80% of Cubans don’t have access to the dollar leaves many people on the margin of this commercial system oriented to capturing hard currency. This causes discontent, because no one is going to understand this difference. In Cuba, the access to buying goods and services that don’t exist in other shops isn’t going to be a function of the value of work, strength, motivation or performance, without having family or friends in the exterior to send dollars. Is this the moral lesson that the Castro Regime wants Cubans to have? If those who govern the country have nothing better to do than insult those who question these measures, let them retire and make way for others. They are losing very valuable time that can’t be recovered. Luckily, Cubans know it.

Translated by Regina Anavy

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A New Call For Possible Dialogue In Order To Overcome The Crisis

Masked police agent controls line to buy food in Havana (File photo)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, July 8, 2020 — The virulence of the economic crisis that is battering Cuba, as a consequence of containment measures for the Covid-19 pandemic, is becoming more serious and profound than expected. Spaces for dialogue are opening up because of the surge in outbreaks, which create uncertainty about the future.

The data and information trickle in drop-by-drop for the authorities to confirm. And if it’s true that no data exist on the economic situation, some that are known, like the statistics on travelers, are frightening. In May, only 993 visitors arrived, which represents a decrease of 99.7% compared to the same month last year. Tourism has disappeared from the Island, and possibilities for recovery are scarce.

Certainly it won’t happen in 2020. The authorities will go back to their sales pitch to explain the failure, but they won’t have far to go. The forecast for economic development in Cuba has to be revised downward and thus assumes that the economy can collapse, given the great importance of the State in all economic activity. continue reading

There is nothing now that allows anyone to have any real confidence in the future of the economy. Our estimate of the drop in the economy’s GDP was initially situated around -6.2% when CEPAL* showed only -3.8%. The data and information that come from the Island require caution and point to a particularly important decline, probably in the neighborhood of -10%, almost three points lower than the initial estimate. This puts Cuba among the countries that could be the most affected by the crisis in Latin America, although it won’t be the only one.

The fact that we’ve revised our initial prediction downward shows the lack of confidence and credibility in the authorities to surmount the present crisis. It’s difficult for any country to try to confront such a situation on its own, so this whole experience is going to be harder and more complex than was believed.

In reality, there isn’t any analyst who thinks that a true recovery of the Cuban economy will happen in the last two quarters of the year, so 2020 will be remembered as a time when the Cuban economy came close to collapse, because of the intensity and unexpected origin of the crisis.

The updated forecast contemplates a complex international scenario for tourism, with risk factors of difficult control from the Cuban perspective, which will have a potential negative effect on recovery. This downward trend of tourism will coincide with lower remittances, a low level of foreign investment and fewer exports of minerals and tobacco.

As a consequence, hard currency will be scarce, and that will put the brakes on imports. In addition, on the internal front, the agricultural sector won’t be capable of producing sufficient food for the whole population. The authorities know this, and the building industry isn’t going to bail out the economy because the State’s budget has committed resources to current expenses, which will have limited impact in terms of growth.

In sum, these factors, together with inattention to the self-employed, abandoned to chance by the Government, depend on the political goodwill of the leaders and their ability to promote measures that really serve to bring the economy out of the hole it’s in. Perhaps if, instead of making individual decisions based on communist orthodoxy, all sectors of the economy, State and private, came to the table for a dialogue, the Regime leaders would realize the enormous importance and the social support they would have; for example, if they approved a special fund to help the economy recover.

Decisions of this type could serve to establish the basis of an economy centered on a common goal, incorporating an integral plan of reforms and support for the private entrepreneurial fabric. At the same time, resources could be generated for the social protection of the least-favored groups because of the crisis.

The authorities of the Cuban Regime still haven’t accepted that they have a long and difficult process of recovery ahead of them, a great challenge in the coming months, which will demand far-reaching measures that, alone, might not give them the results they need. The moment for dialogue and consensus has arrived.

Unilateral Communist decision-making must end. If they want to light the way to the first fruits of recovery, they have to participate in all the plans for aid proposals, and they must have the funds and tools available to transform the economy. Díaz-Canel’s government must understand that the survival of the Cuban economy depends on being able to confront the task of economic reconstruction by collaborating with all State and non-State economic agents, and by promoting  a climate of political and social dialogue on new foundations, which will help Cuba return, as soon as possible, to a sense of sustainability and fiscal consolidation.

The challenge in the next few months is to support a progressive return to growth and consolidate the first fruits of the recovery. Without dialogue, it will be impossible.

*The United National Economic Commission for Latin America and the Caribbean

Translated by Regina Anavy

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‘Scientific’ Meetings Don’t Put Food on Cuban Tables

Current Cuban president Miguel Díaz Canel, when he was vice-president, with then General-President Raul Castro. (Archive)

14ymedio biggerElías Amor Bravo, Economist, 11 July 2020 — A brief note in the state-owned newspaper Granma, reports on a meeting between Cuban president Díaz-Canel and scientists and experts from prestigious Cuban institutions, held to discuss issues of food and nutritional sovereignty. The article offers an analysis of the problem that has always affected the Cuban economy, exacerbated as a consequence of COVID19, and all of this, says Granma, “from an integral point of view, where all the links with regards to food and nutrition are considered.” Pure propaganda.

On this occasion, experts from the Soil Institute addressed the analysis of the needs of Cuban agriculture, from the perspective of fertilizers and pesticides. Nothing new. These are intermediate products that have to be imported because they are not produced on the Island, but which, in the absence of foreign exchange cannot be imported, thus limiting the objective of producing more. As usual. A problem caused by the poor development of an economy subsidized and led by the state for too many years, with criteria that are not the most appropriate. While these issues are addressed, valuable time to take action is lost.

But no. It does not seem that this is the objective of these type of meetings with scientists, but that there is a certain disposition in the official propaganda to follow a script already written in the “scientific” article that Díaz-Canel published some time ago. The matter goes a long way, without a doubt. continue reading

And from this “scientific” perspective that Díaz-Canel wants to use to analyze the problems that affect his government, it was said at the meeting that the traditional unproductiveness of Cuban agriculture to generate food for the entire population must be “addressed taking into account other processes that also intervene, such as the introduction of scientific results, problems in marketing and distribution, affordable consumption, nutrition, good habits and, ultimately, the role of food and nutrition in the health of our people.”

Believe it. Said and done. Not a single reference to the crucial issue that grips the Cuban countryside and prevents it from being prosperous: the legal framework of property rights, the land tenure regime, in short, allowing Cuban farmers to truly be the owners of the production factor and to freely decide what they want to do, without interference from the communist state.

This question, essential for sufficient food to be produced, was not raised at Díaz-Canel’s “scientific” working meeting, and I am very much afraid that it is beyond any consideration under official communist doctrine. In fact, at the first “scientific” meeting, similar issues such as “the design of policies and legal norms for agricultural extension and also for bioproducts” were discussed, but nobody raised the need to return the ownership of the land to those who work it and produce Strange as it may seem, there is not a single jurist in Cuba who publicly defends this need, which the longer it goes on, makes it increasingly difficult to avoid the imminent collapse.

In the same issue of Granma, there is a report of a visit to the provinces of Artemisa and Mayabeque by Machado Ventura (age 89 and serving as second secretary of the Cuban Communist Party). At the time of the visit, recent rains had had a negative impact on the supply of food products to the capital. The problems of Cuban agriculture come from yesteryear, and they no longer respond to the proclamations and messages of leaders such as Valdés Mesa (age 75, Politburo member), Marrero (age 57, prime minister), Machado or himself. All these messages fall on deaf ears and lose their validity because numerous problems accumulate in the countryside that have to do, essentially, with the legal framework of property rights.

The Raulista reforms — implemented under former president Raul Castro — based on the delivery of land under lease, have not served to increase production, because the farmer legitimately aspires to be the owner of his land, and not a mere tenant of the state. We must review the model, and stop talking about nonsense, such as bioproducts, local food production in pots in the cities, the cultivation of pineapple by the local CDRs (Committees for the Defense of the Revolution) and other nonsense that we have heard from leaders of the communist regime.

The issue is that in 2020 there is no pork, nor rice, fruit trees are scarce and vegetables even more so, while state security represses and denounces the road workers for doing their work serving the population, and the markets are empty because nobody moves the products from the fields to the city. That Díaz-Canel tells me that this whole and very real problem has to do with scientific research, undoubtedly of quality, that is carried out in the country. Nada.

If the Cuban leader really wants to undertake the production of food he needs to meet with the independent agrarian producers, who have already created associations to defend their interests outside the communist government. He needs to listen to what they are going to tell him, and he needs to willingly accept their advice, and if he sees fit, he needs to arrange for the adoption of some of their proposals, and things will go much better.

This, and no other, is the dialogue that is urgent in Cuba, and as soon as possible, to avoid the food crisis announced by the United Nations World Food Program.

By meeting with independent producers, he will get first-hand information about what is happening in the Cuban countryside, and not the distorted advice that comes from Machado Ventura or Valdés Mesa.

The Cuban guajiro knows what has to be done to produce more and is aware that, if the accounts don’t balance, it is the fault of the government, which subjects him to ideological obedience, aggressive taxation and local communist control, to prevent him from prospering. The food crisis is not only due to a problem of importing fertilizers and pesticides for the soil, but there is much more, and that even though scientific contributions can help, there are many other things that need to happen to solve the problem of producing enough food for everyone.

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Without The Countryside There Is No Country

Hoeing weeds. (EFE)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, July 6, 2020 —  There are serious challenges in the Cuban agricultural sector for more and better production, and Diario de Cuba has confirmed the discontent in large sectors of the campesino population over the repressive measures being applied by the Communist government.

These measures go beyond the precariousness that exists in the country, and what are considered “illegal” practices in Cuba are accepted practices by everyone who farms in countries where the free market regulates production.

In Cuba, the Government’s denunciations against the farmers have their origin in the terrible and deficient administrative judicial structure of the country, which, far from contributing to tackle the problems, makes them worse in an exorbitant way. There are all kinds of denunciations. The League of Independent Farmers, one of the organizations that promote the campaign, “Without the countryside there is no country”, has offered us some clues. continue reading

If there are problems in the food and feedstuff supply for animals, why does the Government have to sanction and repress an efficient producer who has a surplus and sells it to other producers? What reason prevents a pig farmer from obtaining some income from the sale of excess food that will certainly end up being allocated to other intermediate suppliers or the needs of the business itself? But no. This practice has been repressed by the authorities as a consequence of the denouncements that are multiplying among the producers themselves, pressured by the Communist organization, which at the local level maintains an iron control over operations to prevent them from being profitable and growing.

Another example has been the State’s intervention in harvests. Who said that expropriations don’t exist in Cuba? Far from advancing toward a necessary liberalization of the production and commercialization of agricultural products, the Government, in a return to the Communist norm since June 18, has reinforced centralization and State control over economic activities. In reality, intervention in the harvest of a producing farmer means his ruin and the impossibility of resuming the activity, in addition to the sanctions that can be applied.

Moreover, the Regime uses its communication media to blame the producing farmer as someone guilty of hoarding food and creating hunger. Instead of promoting the social image of the campesinos, as agents charged with sustaining the population in these difficult times, they are converted, in the eyes of the population, into thieves whose goal is to hide the harvests dedicated to Acopio, Cuba’s State Procurement and Distribution Agency. An injustice.

This campaign by the authorities to undermine the social base of the free campesinos in Cuba is provoking the first fears founded on the continuous aggression and the instruments of repression that exert a chilling effect on the freedom of economic participants. A sale of a product at a price which doesn’t agree with Acopio, for example, results in the immediate confiscation of the harvest. And the problem is none other than Acopio’s prices. While Cubans have to face elevated prices in the markets where they make their purchases, the producer is barely paid for his work, and furthermore, the debts of the State, prolonged in time, end up generating problems of solvency.

The League has denounced equally the scant attention paid by the Communist leaders to the needs of the farmers, something so simple as repairing a roof by supplying the construction material that the farmers can’t freely acquire. Rains affect the harvest, but without insurance that covers the damage, the losses ravage the field, and the State doesn’t assume its part of the responsibility. This occurs even with tobacco, a product intended for export that provides very important hard currency to the Government, income which barely reaches the producer.

To these problems are added infestations and infections that can’t be combatted because of the lack of pesticides and treatments that, instead of being produced in the country, have to be imported from the exterior. I don’t know what they are waiting for to advance in creating substitutions for imports. The Government is limited to blaming the embargo, but it doesn’t provide solutions to the problems.

Many of us ask how it’s possible that agriculture in Cuba produces these types of problems. That campaign, “Without the countryside there’s no country” is fully justified, because it looks for a 180-degree change in present conditions, certainly complicated, in those who engage in agricultural activity in Cuba.

The demands for freedom by food producers and the suspension of taxation for at least 10 years to strengthen development have been answered with more vigilance and repression. The consequence is that the shortage of food will increase, and Cuba will approach that food crisis spoken about by the United Nations World Food Program, which the Cuban authorities don’t want to recognize.

Time is running out for urgent changes, and hardship approaches. The problem of food is not going to be solved by planting in the yards of city homes, or in pots or on balconies. It cannot be solved until the ownership of the land is returned to the farmers and the free market in order to decide what they deem appropriate for their production and harvests.

It’s not a matter of leasing more land. Raúl Castro’s formula hasn’t given the predicted results. What needs to be done is to reverse the Communist agrarian reform, which has been a big historic fraud for Cuban campesinos, and which has prostrated the formerly competitive Cuban agriculture, in a structural crisis. The Cuban countryside can return, but it needs support and freedom. And thus, it has to be said very clearly, “Without the countryside there is no country”.

Translated by Regina Anavy

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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.

Machado Ventura Harangues The Countryside: You Have To Cultivate All The Land

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

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, June 27, 2020 – Machado Ventura, Second Secretary of the Communist Party of Cuba, is relentless. His call for Cuban farmers to cultivate all the land is repeated over and over in the pages of the official Communist newspaper, Granma, which has carried this message for weeks and months.

“The whole land must be productive,” Machado Ventura said in Holguín, accompanied by Valdés Mesa, the First Vice President of the Republic, recognizing the contribution of the credit and services cooperatives (CCS) in agricultural production.

This is one more chapter in the episode of desperation on the part of the Cuban authorities to make food production reach the whole population, and thus avoid the imports for which they can’t pay since they don’t have hard currency, and to remove the possibility of a food crisis that the World Food Program of the United Nations has anticipated for Cuba in a recent report, which has been noted in this blog. continue reading

Machado’s idea of making the whole land productive has a flip side, showing the harsh and harmful reality of the Cuban countryside: the land isn’t fully used at 100% of its capacity. Nor are the rest of the resources and production factors of the Cuban economy used, and the needed capital isn’t expected.

Machado should ask himself why the Cuban economy doesn’t take full advantage of the resources it has, including the talent, entrepreneurial spirit, assumption of risks and innovation, and he should conclude that if this isn’t happening, as it is in most countries in the world, it’s because the economic and social system imposed by the Communist Regime doesn’t allow it. There is no other possible explanation. Harangues won’t do it.

Recent history shows us that when a communist country gets rid of ideological pressures that prevent it from optimizing the use of productive resources, it leaps into development, like what occurred with Vietnam and the reforms of Doi Moi or the countries of Eastern Europe, where a powerful modernization took place once the chains that tied them to the Iron Curtain were broken.

There is no alternative for having an economy function at 100% other than putting resources at the disposition of the productive process efficiently. And thus, Machado ought to listen to, not direct or control, what the National Association of Small Farmers tells him, along with other organizations of independent farmers, who can explain to him why and how to increase food production in Cuba, by cultivating all the land.

And Machado has to stop, once and for all, asking for the impossible.

If he really wants to cultivate all the land, he has to bet on formulas other than those announced in the Granma article.

Agricultural production can’t be increased with the so-called “State productive poles”; this collectivist formula controlled by the State is a failure. The Cuban agricultural sector must have an open road to allow the cooperatives of agricultural production and the CCS to deploy their plans with total autonomy and freedom, depending only on the democratic and free decisions of their members, as happens in Spain, where the cooperative sector is playing a fundamental role in the present crisis provoked by Covid-19, as it always has in moments of economic difficulties.

Also, forget State enterprises, because their results are well known in Cuban agriculture. The lack of incentives and stimuli prevents the land from being prepared, and precisely-determined fixed work is falsely assumed to give results for the Cuban farmer.

And above all, a new legal system must be given to the farmers, so they can have autonomy and freedom to buy supplies, pesticides, tractors and all types of equipment with the resources generated, not mandated by the State.

The State shouldn’t be the unique “client” for Cuban farmers. The only client should be the consumer, who has to have freedom of choice to consume and be ready to pay, and not bother again with the regulated canasta [the basket of rationed basic goods].

Thus, Machado Ventura’s “request” of the State for increases will only create problems for the farmers, and later there will be defaults, terrible wholesale distribution by Acopio [State Procurement and Distribution] and all the evils derived from the State’s intervention in the economy.

Corollary: Cuban agriculture and livestock breeding should be in the hands of private enterprise, as in China and Vietnam, and other alternatives must be discarded because they have no future. And the example is more than evident.

A warning: What Machado Ventura calls “technocratic problems,” referring to the financial matters of the banks with the farmers, is not going to be solved with harangues. Because really, if the farmers need credit to develop their fields, the banks should be in a condition to help them, as they are in other countries. And credit shouldn’t be granted by political and ideological criteria, but with technical methods and efficiency, because it could be a potent stimulus not only for agriculture but also for the development of the Cuban financial system, which needs it. Certainly the term “technocratic problems” cited by Machado Ventura is terrifying.

Lastly, forget about stopgap solutions like the programs of municipal supply, if you want to feed the whole population. These programs end up giving food to people on three or four blocks in the large cities, but in no way can they meet growing needs. It’s not possible for them, by function and scale.

On the contrary, the solution lies in privatizing Cuban agriculture, increasing parcel size, promoting the merger of campesinos’ land without cooperatives, facilitating free choice for providers and buyers and giving the farmers what they want to plant and harvest. Commercial economic relations and private property rights must be extended to the farmers as soon as possible. It’s obvious that leasing the land doesn’t help. Repetitive harangues are exhausting and draining. And what is worse, they lead nowhere.

Translated by Regina Anavy

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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.