Cuba’s Demographic "Winter" in the Times of the Pandemic

The number of births in Cuba in the first quarter of the year, 23,666, is clearly fewer than the number of deaths, 27,269.

14ymedio bigger14ymedio, Elías Amor, Valencia, 29 April 2020 — In the midst of the serious crisis of the Covid-19 pandemic, which, unfortunately, is starting to wreak havoc, not only in health but also in economic terms, the State newspaper Granma presents us on the cover with information that, of course, will go down in the history of journalism professional.

Nothing more nor less than a meeting with President Diaz-Canel is referenced to analyze the demographic dynamics of the country, and to report how population data from the first quarter show an absolute decrease in the population, given that the number of births (23,666) is clearly lower than deaths (27,269) and forecasts say that this trend will continue throughout the year.

Astonishingly, Díaz-Canel left the pressing problem of the pandemic for a few moments and devoted himself to evaluating, according to Granma, “the fulfillment of the program of attention to this important matter, in a context of population decrease, low fertility levels and increased aging.” continue reading

The data and information, drop by drop, were offered by the supposedly “disappeared” Mariano Murillo, who continues as “head of the Permanent Commission for Implementation and Development,” when we thought he had left office. He was in charge of showing the negative and tragic balance of 3,603 fewer Cubans, a part of the natural decrease of the population of Cuba.

They should have already addressed this problem a long ago. As should have Raúl Castro. Because the demographic “winter” of Cuba is not a phenomenon of now, but has been simmering for more than a decade. It is a problem that does not have an easy solution, but rather has very complex structural aspects and, what is worse, it will not be solved with patches and specific measures, no matter how much “intelligent, intensive work, with adequate follow-up, seeking to have more births, to stop the population decrease” is done by the authorities.

How have we gotten to this situation? What is the seriousness of the matter? And what solutions does the problem have?

The official argument is that we have reached this situation because the Cuban population ages due to a high life expectancy, a positive fact if there were a recovery of the demographic cohorts at the base of the pyramid. But since there are not enough births, the segment of the population of Cubans 60 years of age or older has increased to 20.8% of the total population; a figure that during 2020 will continue to grow up to 21.2%.

There is also talk of treatment for infertile couples, which according to Murillo’s data reached a figure of 138,977 couples, who show up at municipal and provincial consultations and high-tech centers, and it the success of this program is outstanding, having achieved, in 2019 and in the first quarter of 2020, 11,678 pregnancies.

Best of all, Granma announces (once again the propaganda reaches the inadmissible) that “to continue finding efficient solutions, around twenty measures are being studied to stimulate the birth rate, which include greater care and protection for pregnant women, for working mothers and fathers and for families responsible for the care of minors. “

The point is that these 20 or 30 measures are not going to solve the problem. In reality, the stagnation of the Cuban population has a lot to do with the terrible state of the economy, the general poverty of the population, the overcrowding of families in houses that are falling apart, the low purchasing power of wages and the absence of freedom of choice.

One would have to wonder who might want to bring their offspring into the world to see them spend their daily existence between ideological slogans and absurd lines to “resolve things” — the terminology used to define shopping for food and other necessities.

This is the main issue, that Cubans have lost faith in the future of their country, and that the youngest, as far as they can, choose the path of emigration to straighten out their lives. If they analyzed the birth rates of Cubans abroad, they would see big surprises.

Díaz-Canel is not right when he says that demographic dynamics is a matter of the greatest complexity, because it is one of those that most impacts the present and future life of Cuba, its economic and social development.

It is just the other way around, as one has to see. It is because of Cuba’s structural poverty, which its government neither acknowledges nor wants to fix, that demographics are sinking without remedy. The causality of economic relations, in this case, is fully justified.

For more than a decade, the Cuban population has grown little or not at all. Those who have tried to solve this problem without reforming the structures of the old and reactionary communist social system have failed. There is no point in “filling” the Constitution with rights for families if there is then no way to exercise them or to put them into practice.

Daycare centers, grandparents’ houses, attention to conciliation, protection of pregnant women and infertile couples, yes, all that is very good as subsidies that fatten the state budget, but the objective must be to improve the living conditions of Cubans, and that depends on economic forces, especially the private ones.

And to achieve this goal of improving the productive structure, unfortunately, nothing new is on the horizon. Next year, Murillo’s data will be much worse. You can be sure of it.

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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.

Blackouts in Sight in the Midst of COVID19

A blackout in the city of Camagüey. (14ymedio)

14ymedio biggerElias Amor Bravo, Economist, April 20, 2020 — Unión Nacional Eléctrica, the state enterprise that has a monopoly over Cuba’s electrical supply, wants people isolated in their homes due to the quarantine as a consequence of COVID 19 to consume less electricity. Let’s go, turn off the lights.

The company declared in the state-run newspaper Granma that there has been an uptick in electrical consumption in the residential sector and that’s inadmissable. They declared, “the consumption of electrical energy accumulated in the first 13 days of April surpassed the levels of consumption compared to the same period last year (1% more and 6.3 Gigawatt hours (gwh)), similar to the electricity consumed in the months of July and August.”

The immediate question is, is there a reason for alarm with this small increase in consumption? Do they lack solutions to this problem?

Well, no. It appears that the entire system may collapse. continue reading

And here’s the worst part. Threats of this caliber, published in the official Communist newspaper daily, don’t do anything more than to raise the anxiety of a society worried by COVID19 and the destruction it could cause on human life.

In any other country in the world, exceptional circumstances like the one we’re living in demand answers in accord with government agencies. But, here there is an electric company that, according to the Communist constitution, is public property, insisting on threatening blackouts if energy is not saved as soon as possible. Nobody can deny that quarantine requires a greater amount of energy consumption to store food products in the refrigerator, to beat the heat, to be able to read and pass the time more comfortably, to work remotely (those who can), and so on.

Why does the least powerful sector, the people confined to their houses, have to reduce their electricity consumption? The same as usual. The production of electricity in Cuba depends on petroleum. There are no renewable energy sources and they’re not on the way.

As a consequence of the fuel shortage, due in part to the systematic reduction of supply from Venezuela, and the difficulties Cuba has in gaining access to global markets due to its nonexistent financial standing, the only solution is to save, save, and continue to save. Sure, turn everything off. Because the alternative is clear, blackouts. And while everyone is locked in at home, in a moment especially complicated like this one, this approaches a Dantesque situation.

COVID19 is bringing to light, one by one, how the measures taken by the communist regime the last few years have been resolute failures. Now it’s the energy plan’s turn. The image of change and liberalization that the communist propaganda machine has wanted to associate with Raul Castro’s reforms is smoke and mirrors. It evaporates while COVID19 wreaks havoc.

The Cuban economy is worse off than in 2008, the reforms have not improved anything, and Cubans have barely experienced and well-being in their standard of living. The Plan 2030 is not worth anything either, the way things are changing and the pace at which they change.

In the meantime, and waiting for all this to happen, the communists are doing the same as usual: sending people home so that the productive sector can reduce electricity consumption. Paralyzing or freezing the economy here matters little, because everything is state-run.

And then, of course, a lot of control or something like that. Precise instructions to the heads of administration to carry out with the utmost responsibility controlled compliance with their energy plans, “by taking daily self-readings of the meters and measures to reduce consumption, depending on the authorized energy-consumption measures.” Instead of concentrating efforts on producing more with less, they create daily scandals about electricity consumption. And then they wonder why the economy doesn’t work.

The last straw is transferring the need to save electricity to Cuban families, under the threat of impending blackouts. This communist blackmail is inadmissible in any society with recognized economic rights, even more so when the current system does not allow for alternative suppliers and everyone must pay their rates to the National Electric Union. It’s the same as with ETECSA — the state telecommunications monopoly — but at least that company works a little better.

Some of the actions that have been established belong to the barracks logic of the communist economy that has presided over Cuba for the past 61 years, such as, for example, “taking advantage of the final heat of the electric stove, once the cooking is finished, and turning it off a few minutes before finishing.” Or even, “turning on the air conditioning, preferably after 10 at night. After 12:00 at night, turn the air conditioner to the fan position” and even “close the refrigerator and avoid opening it frequently,” and others that tell people how to live. It’s unacceptable.

And best of all is the example they cite to save no less than 26 tons of diesel fuel used to produce electricity. Well, according to Granma, that saving, which is certainly important, is achieved “if each consumer in the national territory turns off a 20 watt lamp, which will allow for a decrease in the demand for electricity by 80 megawatts.” 11 million Cubans turning off 20 watt lamps? The truth is that they no longer know what to say. Above all, to justify the unjustifiable.

 Translated by: Rafael Osorio

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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 Communist Regimea€’s First Measures for Cuban Entrepreneurs: A Small Step

Passengers getting out of a private shared-taxi operated by a ‘botero’ in a time before the Covid-19. (14ymedio)

14ymedio biggerElías Amor Bravo, Economist, March 21, 2020  — Gradually we are learning about some of the measures the communist Cuban government is using to reduce the impact of COVID-19 on the activity of the private sector on the Island, led by the small businesses of self-employed workers.

In particular, apparently the Regime has approved a series of tax, work and lending measures that, generally, resemble those that other countries have adopted for self-employed persons and independent professionals. The details are given below.

The measures have already received positive reviews by some Cuban businessmen on Twitter and are considered “an important support for the thousands of enterprises that right now are completely affected by the world epidemic situation,” says Oniel Díaz, co-founder of AUGE and MP de Kreab in Cuba, which does consulting for private businesses. continue reading

“Furthermore,” he adds, “it was a wise decision for the prime minister to obtain cooperation from the private sector to make it possible for the more than 11,000 tourists who are staying in private rentals to leave Cuba. It’s not a minor detail.”

And, he emphasizes finally, that “cooperation, alliances and dialogue are the tools we have at hand to face together, in addition to this challenge, everything  ahead of us on the national economy front.”

I’m afraid that we must greatly lower expectations and say that with these measures, what’s most probable is that the entire Cuban private sector will have to struggle with an elevated mortality rate for small businesses and establishments. I have the impression that the measures have been designed specifically for the tourism sector, and they haven’t taken into account the fact that self-employment in Cuba is really much more diverse and varied, fortunately. What we need is reflection and a more accurate approach.

I understand that mortality won’t happen, for example, in the case of the high official of the Regime who rents rooms in his residence in Havana’s Plaza or Miramar neighborhoods to foreign tourists, because the income he gets from this activity complements his salary, which is higher than average. And he can even benefit from the fiscal cuts announced, because foreigners are not going to be arriving in the next months and his income will be temporarily crushed. The renegotiation of a loan, for those who are credit-worthy, can also benefit him.

In the case of many retired business people, the impact of COVID-19 and the measures detailed below can be inconsequential if the government keeps their employment and salaries intact.

Those Cubans who bet exclusively on self-employment activity and not only on tourism will have problems.

We are thinking, for example, about the thousand brave Cubans who travel every day with Spanish passports to the duty-free zones in Cancún, the Dominican Republic and even Haiti to bring back every kind of provision to be sold on the island. The brakes will abruptly be put on this channel because of the general closing of borders, and this was the main way for many small businesses to get goods and services. Without this supply, more small businesses will fail, since we can’t wait for the Communist Regime to improve the logistics of distribution in Cuba.

And what can the tenant farmer hope for when he can’t find the supplies he needs for production in the local economy? He has been forgotten, except for his debts with the bank which could be renegotiated. The crops will have to be harvested and brought to the markets, and in a situation of isolation and extreme hygiene measures, you have to ask what will happen to the small business workers who bring the merchandise and food to homes, like the pushcart vendors.

Even the brave taxi drivers (known as “boteros” or “boatmen”) in the Havana tourist zones could benefit from the planned measures for the reduction of income or exchange for credit, if they existed. In this case, the question is that if the boteros not only drive tourists but also a good part of the population, why is adequate public transport lacking? When isolation begins and the demand for national trips no longer exists, the situation will be much more serious. It won’t seem fair to the boteros, and they are right to ask why their monthly taxes aren’t reduced by 50% like they are in the case of food service activities. Why not them, too?

With these considerations, what I want to convey is that the measures of the Cuban Communist Regime are interesting for private tourism and are focused on something less than 3% of the economy’s GDP. The private activity in restaurants and lodging are important, but the reality is that most tourists stay in the hotels owned by the conglomerates of State Security and the Army, and they use the services of these networks.

The rest of the rich and varied private economy of professionals, designers, sellers and providers of personal services, in the spheres described and in others, find themselves abandoned and with an evident lack of response on the part of the authorities, who should be planning as the crisis advances. If this continues, the emerging private sector in Cuba will be pitiful after COVID-19.

Taxation

  • Extend the time for tax payments for businesses that suspend activity on their own or by governmental decision.
  • Reduce by 50% the payment of monthly fees for food service activities.
  • Authorize a reduction in monthly fees for administrators of tourist centers and sites with a high concentration of tourists.
  • Decrease to one single minimum payment the tax on bank accounts.

Employment

  • Protect the salary for contracted workers who continue to work at no less than the minimum wage of the country.
  • Extend the period of authorization for designated workers who fill in for an owner who is out of the country and unable to return for 3 months.

Loans

  • Stop collecting on authorized loans that can be restructured.

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.

Cuban Government Begins to Adopt Measures Against Economic Crisis: Trade

A private fruit and vegetable seller with a makeshift cart in Havana.

14ymedio biggerElías Amor Bravo, Economist, 24 March 2020 — Regarding the measures adopted by the regime in Cuba, the state newspaper Granma dedicates space to those published by the Ministry of Internal Trade to prevent and confront COVID19. There is everything, but if you are looking for a headline, it is clear: Cubans are going to have a very bad time.

It is commendable that the regime has decided that hygiene and personal protection in services that handle food is the priority for attention, but this, being important, in Cuba has a second derivative, which is who cares previously about producing food and bringing it to stores and establishments, so long as it is not in short supply and sufficient for the duration of the pandemic and afterwards. And I think this is where the regime’s measures are not sensible.

The health crisis is going to bring about a paralysis of production. This should be the main challenge for the economic authorities. For this reason, these measures of the Ministry of Commerce are aimed only at regulating the activities of the sale of merchandise, food services and hotel accommodations, as well as personal and technical services, during the period of struggle against COVID 19. continue reading

But they do not address the technical-productive considerations, and in the face of an alarm such as the one we are now facing, and with a centrally planned and state-based economy, it makes little sense to approve trade-related measures of arguable impact, such as those announced by Granma, without resolving first question of production.

If the regime wants to face the serious situation it has ahead, must first of all address the ministries related to production so that they will be ableto generate goods and services in large quantities, and also quickly and urgently, if they don’t want the pandemic to end in hardship.

I believe that this matter is important enough to warrant more than just a general consideration, such as “ensuring, in accordance with the availability of essential products, the re-provisioning of the network.” And: “Avoid the concentration of goods in one place, in order to reduce crowds and the movement of goods.”

Unfortunately, Cubans know from their own experience that this replenishment of stocks sometimes takes time to arrive and, in the worst case, it never arrives. The actions to be carried out in this production and logistics area need to be more clearly defined, without attacking the rights of those who work, to provide a solution to meeting the needs of the population.

Granma echoes Cuban President Díaz-Canel’s statements on this point, stating that “a stock-taking of supplies will be made, taking into account what can be use can be made of the supplies dedicated to the activities that will now be stopped.” Granma suggested “regulating sales, regulating lines, avoiding disorders and encouraging meals and home delivery services.”

And it continues, “the productive and service activities that will be maintained and those that are not must be defined immediately; as well as the rapid importation of certain products. At the same time, food production will be intensified and the use of inputs will be frozen in the processes that, due to this situation, will be paralyzed and will be destined for retail merchant circulation.*”

In other words, all of these statements from Díaz-Canel confirm that the economic authorities are still at a very early stage, and certainly late, in addressing the problems of the economy that are going to occur, so one must hope that something could happen. The statist bureaucracy has a hard time getting going.

Of the measures related to trade, some propose that “priority be given to the commercialization of agricultural products through the retail network of state markets, supply and demand, kiosks and carts. Avoid the use trade fairs, with the aim of minimizing the risks due to the concentration of people.”

In this sense, I consider it positive that the regime has decided to maintain all the commercial forms of agricultural products, including the vendors who sell from rolling carts, the carretilleros. Until they are immobilized, if the advance of the pandemic requires it, these sellers will solve many feeding problems, especially for older people with mobility difficulties. It would be good if the regime lowered the repression against the carretilleros and allowed them greater freedom in acquiring provisions to attend to their duties.

Honestly, with these two general measures alone, little can be resolved in relation to supplies. And I am concerned with the measure of “creating conditions in all merchandise sales units so that access to the public is staggered (in correspondence with the unit’s capacity)” and that of “reducing the participation of competitors (self-employed worker-vendors) to 50%, in centers, commercial areas and high concentration services, alternating their days of participation in the week.”

These are measures that seek partial confinement and reduce exchanges and provoke higher average purchases than usual, which can end up creating supply problems, lines, rationing and angry protests by citizens if the products do not appear.

As far as the measures concerning state restaurants, road units and workers’ canteens are concerned, I honestly think they are wrong. Specifically, “the opening of these establishments is allowed, applying only methods of rearranging the tables, placing them with a separation of two meters (limiting capacities to 50%) and the recommendation to avoid crowds.”

If the pandemic progresses, this restored activity will most likely decline completely, basically due to the fears of the population, and sales from home will increase, if there is something to sell, because it should not be forgotten that the problem remains the same: that the goods and services are obtained through the production system.

They have only given a certain priority to the family care system, “with the delivery of lunch and dinner, either at home, or picked up by a relative of the beneficiary, or a representative authorized by the social worker.” However, it is known that all the “freebies” of the regime have experienced a notable decline in recent years, and nothing suggests that this has changed with respect to these meals.

It should be noted that the measures have been more forceful with hotel activity (including recreation, tourism and leisure), perhaps taking into account that tourism forecasts will clearly go down in the short term.

In this sense, “self-employment activities for tourism and recreation purposes have been suspended for the rental of homes, rooms and spaces, to people from abroad, foreigners or Cubans.” Technicians or temporary resident foreigners living in homes that provide these services are excluded from this suspension.

Regarding bars and cafes, state accommodation has been suspended in the interior trade system for tourism and recreation purposes for people from abroad, foreigners or Cubans.

Likewise, activities that generate concentration of people have been suspended, such as popular camping, and all those that take place in theme parks, leisure clubs, wedding palaces, dance floors, workers’ social circles, cinemas, theaters, cabarets, sporting events and others. However, food service and merchandise sales are maintained in compliance with the indications established for these activities.

They have also planned to increase home services for the repair and maintenance of minor equipment and fixtures.

*Translator’s note: Official government speak…

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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 Slow Agony and Death of Fidel Castro’s Currency

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Government Unveils New Measures to Control Cuba’s Private Sector

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Cuatro Caminos Market clock.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

All the rest is a fairy tale.

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

King Felipe VI: A Brave and Democratic Speech in Cuba

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

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

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

The King has lived up to the moment. continue reading

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Is the Dollarization of the Cuban Economy Possible?

Photo: Rolando Pujol, EFE

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

Some data.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Why Are There No Canned Tomatoes in Cuban Stores?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The example of the situation of the industry and canned tomato is well worth it. You have to get out of the Castro time capsule and take a deep breath. The future is much better than the past.
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The 14ymedio team is committed to practicing serious journalism that reflects Cuba’s reality in all its depth. Thank you for joining us on this long journey. We invite you to continue supporting us by now becoming a member of 14ymedio. Together we can continue transforming journalism in Cuba.

The Extraordinary Resemblance Between Tourism in Nazi Germany and Communist Cuba

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Varadero Melia International Hotel (Trivago)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

E-Commerce in Cuba with Nothing to Buy

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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