Elías Amor Bravo, Economist, 28 March 2023 — Local development projects are untenable in Cuba’s communist economy. They need a foundation and a substrate. What are we talking about? Much has been written about local development as a tool for spurring economic activity. Essentially, it is a complex process, a result of local initiative, whose objective is to direct and deploy a region’s resources to a designated business project, with special consideration given to the those living in the area.
This definition is broad enough to indicate that, in general, local development is not working in Cuba’s communist regime. The problem is that these projects rely exclusively on collective initiatives, which should play only a small roll in local development, when what is needed is private initiative. Once again, Cuban communists copy what other countries do but copy it badly.
That is why, thirteen years after the launch of the first development projects on the island — these were part of an attempt to “update” the Cuban economic model — the results leave much to be desired. Many projects have been implemented but, on balance, the results are disappointing.
An article in the state newspaper Granma looks closely at the results of one such project — La Época, a mini-industry in Consolación del Sur, a town in Pinar del Rio — that began operations four years ago but has not been successful.
Its failure is a result of all the usual problems: a shortage of raw materials, new technology that was not a good fit, production levels that did not justify the amount of capital being invested, all of which has allegedly brought operations to a halt. The energy shortage, for example, led to blackouts, which led to shutting off the plant’s furnace, which led to shutting down the automated machines that were supposed to bottle and package items such as fruits, vegetables, jams and mayonnaise, which the foreign specialists in charge could not get to work.
Initially, there was clear interest in the project given the very precarious conditions of the old plant, whose operations were unproductive and inefficient. The thought was that, with modernization, it could provide food to the local population and even to the province. But that is not what happened.
As the Granma article points out, and I quote, “The reality could not be more different and today the small Pinar del Rio factory is, if anything, an unfortunate example of something that did not have to happen.” In fact, the most obvious example of failure lies in the fact that, of the twenty-seven employees on the payroll, only five currently remain at La Época, while the rest have been transferred to other units due to the lack of things for them to do.
Granma questions the decisions of the management team, who wanted to build a factory without having first found a reliable source of raw materials to keep things running smoothly, an oversight that is not unique to La Época. But this is not just a management issue. What happened to this company is a good example of the consequences of central planning and of the hierarchical structure that plagues the Cuban economy on all fronts, including local development.
The Granma article also looks at reasons behind the failures of other local development projects in Pinar del Rio, such as the carpentry shop that opened in La Palma in 2010. Equipped with up-to-date furniture-making equipment, it was the first local development project in Vueltabajo. It was unable to reach its production goals because the agency that promoted the project failed to secure an allotment of wood.
Another example is the paint factory in the provincial capital’s industrial zone. While it did manage to turn out a high-quality product, the operation was ultimately unsustainable. The article also mentions the example of a jewelry studio in Consolación del Sur. Launched ten years ago as a local development project to make belts, purses, wallets and other leather goods, it went bankrupt long ago because it could not get raw materials. Then there is the old guayabera factory in the town of Los Palacios. The facility was operating at full capacity from the moment it opened, handling big orders like the one for 14,000 garments, including pants and shirts, for the workers at the Mariel Special Development Zone. Now, it’s all just a memory.
All these projects failed for reasons such as inadequate planning, shortage of raw materials, systematic failure to stick with a plan, difficulty importing equipment and supplies, and loss of markets. In reality, they confirm that collective and state enterprises ultimately do not amount to anything and end up dying of success.
A director from the provincial government’s development office has no problem acknowledging that all the projects, which from the beginning depended on some imported element, had to close. He states, “In commercial terms, they are projects that failed, and they were all involved in local light industry or food services.” And of course, since everyone else invested all the money and assumed all the risk, he is not bothered by this.
It is then that Granma asks, How is it possible for there to be so many failures in one province, which, “paradoxically, has accumulated twenty years’ experience in the field of local development? As the old saying goes, in the blacksmith’s house, there’s only a wooden knife.” And so it goes.
To address these issues, the communist regime has come up with a strategy for decentralizing this year’s budget. The hope is that this will substantially change the way things are done by giving localities a tool that would allow them to plan development “on the basis of previously conceived actions.” Is this the long-awaited solution localities have been been hoping for? Will it serve to guarantee local development?
In numerical terms, there is no shortage of projects on the books. It seems 347 development initiatives have been proposed in Pinar del Rio, which translates to a whopping 250 project ideas that have resulted in 78 local development projects. One would think at least some should be successful. But not necessarily. In the thirteen years of the program’s existence, Pinar del Rio has completed only twenty-two projects, one of them being La Época, which has clearly been a failure.
The difference that exists between possibilities identified by bureaucrats and the realities on the ground leads to two possible conclusions: either planning is badly done or it’s not worth promoting economic activity. Or perhaps both.
Local development needs solvent private initiative to achieve success. Making it soley reliant on collectivist proposals leads to failure. Insuring that investments of time and resources are made efficiently is best done through private initiative. Without a doubt. To avoid disaster and make local development a tool for bettering the lives of Cuba’s citizens, it is essential to involve the private sector. The state must give up its role in this area, the sooner the better.
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