Category: Elias Amor Bravo

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And we continue.

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

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

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

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

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

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

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

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

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

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

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

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

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

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