Economic Problems Bedevil Cuban Government and President Raúl Castro

A prior post reported that Cubans want greater economic growth and opportunity while also expressing pessimism about that happening. The grounds for that pessimism are highlighted in a Miami-Herald article about the many economic challenges facing President Raúl Castro In the last year of his presidency.[1]

This is the article’s big picture. “Many state enterprises are barely limping along, there are jitters as the economy of Cuba’s Venezuelan benefactor spirals downward, the rules of the road are murky for private businesses, salaries are low, a messy dual currency system still needs to be unified and Cuba is in dire need of much more foreign investment.”

These problems will not be easy to solve. “Many of Cuba’s economic problems are interrelated and the timing may not be good for any drastic moves — especially with Cuba’s relationship with the United States still up in the air.”

Yes, it is true that “Cuban officials are estimating economic growth of around 2 percent this year, but that figure is based on the assumption that oil prices will go up and tourism will keep growing.” According to Cuban economist Omar Everleny Pérez Villanueva, the 2 percent growth objective is “very ambitious.” He could have said “unrealistic” as His model puts the Cuban economy in negative territory with a decline of between .3 percent and 1.4 percent in 2017.”

Here are specifics on some of the economic challenges facing the island:

Maintaining Exports of professional services. Medical services by Cuban health care professionals on foreign medical missions in recent years have provided the Cuban government with a major source of foreign currency. In recent years, however, this source of foreign currency has declined with the implosion of the Venezuelan economy being a major factor.

Coping with Venezuela’s Economic Implosion. Venezuela’s problems for Cuba go beyond the decline in foreign medical mission income for Cuba. Since last July, oil deliveries from Venezuela have dropped as much as 60 percent. Venezuela used to send crude oil to Cuba for blending at the latter’s Cienfuegos refinery, but production at the Cuban refinery has fallen by half with the reduction in shipments from Venezuela.

Eliminating Cuba’s dual currency system. Cuba has two currencies: the Cuban peso (CP), which is generally used by the Cuban population and the Cuban convertible peso (CUC), which used by tourists and foreign companies, and the Cuban government for years has had a goal of eliminating this system. According to Carmelo Mesa-Largo, a Cuban economist and professor emeritus at the University of Pittsburgh, “In 2016, the budget deficit was 7.3 percent of GDP, and because of the already difficult economic situation, they have had to print money. The budget deficit may be even higher this year — perhaps 12 percent — generating even more inflation.”

Increasing public salaries. “There are constant complaints about low public salaries. A private cab driver, for example, can earn more than a physician or other professionals. According to Mesa-Lago, even though salaries went up in 2015, buying power was just 62 percent of what it was in 1989. Nominal salaries could be increased by printing more CP, ”but with inflation, they would have to raise salaries even more to have real wage growth.” And that could set off a further inflationary spiral.

Attracting foreign investment. The Cuban government has made it clear that foreign investment is a cornerstone of Cuban economic development going forward, but so far investment is lagging. “Diplomats, business executives and members of the U.S. Congress who favor lifting the embargo all concur that Cuba needs to reform its legal system to offer foreign investors better legal guarantees, make it easier to sign contracts and allow them to directly hire their Cuban employees.” The Cuban government, however, does not want to do anything that potentially could be destabilizing and cause a weakening of political control.

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[1] Whitefield & Torres, The next year will determine Raúl Castro’s economic legacy, Miami Herald (Mar. 23, 2017)   Previous posts in this blog have discussed many aspects of the Cuban economy as listed in the “Cuban Economy” section of List of Posts to dwkcommentaries—Topical: CUBA.

Cubans Want Economic Growth and Opportunity

A rare and limited public opinion poll of Cubans showed strong support for increased economic opportunity and growth. The poll in Cuba was a national random route-sample of 840 Cubans who were 18 years and older that was conducted between October 3 and November 26, 2016 by NORC, a respected public-opinion organization, at the University of Chicago.[1]

Cuban Economic Issues[2]

Many Cubans feel stuck in the current economic climate. Overall, 46 percent say the current condition of the Cuban economy is poor or very poor while 35 percent say it is fair. Only 13 percent of Cubans describe the condition of the Cuban economy today as good or excellent. Moreover, few Cubans think the economy is going to improve anytime soon: 47 percent say the economy will stay about the same and 8 percent say it is going to get worse while 33% say the condition of the economy is going to get better over the next three years,

Cubans have a slightly more positive view of the state of their family’s finances, though few anticipate improvement in the coming years: 24% rate their finances as poor or very poor while 18% rate the current condition of their family’s finances as good or excellent. Nearly 6 in 10 expect their finances will stay the same in the future.

Looking ahead, Cubans would like to see the government focus on economic growth and maintaining stability over the next 10 years. Fully 95 percent of Cubans say having a high level of economic growth is an extremely or very important goal. Nearly as many (87 percent) say it is very or extremely important that Cuba prioritize maintaining stability over the next 10 years.

Roughly two-thirds of Cubans (65 percent) say there should be more private ownership of business and industry, while 29 percent say there should be more government ownership. Many Cubans have entrepreneurial goals; more than half (56 percent) say they would like to start their own business over the next five years. Sixty-eight percent see competition within the marketplace as positive because it stimulates people to work hard and develop new ideas. One-quarter say competition is harmful and brings out the worst in people.

Over half of Cubans say they would like to move away from Cuba if given the chance. Of those who would leave, nearly 7 in 10 say they would want to go to the United States.

Other Cuban Problems

Crime is seen as the most serious issue facing Cuba today, with 51 percent of Cubans reporting that it is an extremely or very serious problem. Another 4 in 10 say that poverty (41 percent), lack of internet access (41 percent), and corruption (38 percent) are each serious issues in Cuba.

In day-to-day life, many Cubans proceed with caution in placing trust in others and in expressing themselves publicly. Just 21% say they can always express themselves freely, while 76% say they must be careful in what they say sometimes.

Most Cubans get their news from state-owned television stations and newspapers, Cuban radio, and family or friends. Just 1 in 4 use foreign media sources. But, even controlling for other demographic and socioeconomic factors, those Cubans who access foreign media are more positive about the national economy and their personal financial situations, more likely to be critical of some aspects of Cuban society, and more likely to set aspirational goals such as traveling abroad, starting their own business, and buying a car or home.

Cuba-U.S. Relations

Fifty-five percent of Cubans overall say that Cuba-U.S. normalization of relations will be mostly good for Cuba, while 3 percent say it will be mostly bad. Another 26 percent say it will have no impact. Thirteen percent aren’t sure what the impact will be.

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[1] NORC, A Rare Look Inside Cuban Society: A New Survey of Cuban Public Opinion (Mar. 21, 2017); Ahmed, In a Rare Survey, Cubans Express a Hunger for ‘Economic Growth, N.Y. Times (Mar. 21, 2017); Assoc. Press, Rare Poll Finds Cuban Citizens Favor Better US Relations, N.Y. Times (Mar. 21, 2017); A poll concludes Cubans want better relations between Washington and Havana, Diario de Cuba (Mar. 21, 2017).

[2] See this blog’s posts listed in “Cuban Economy” in List of Posts to dwkcommentaries–Topical: CUBA.

 

 

Granma’s Positive Views on Cuban Free Enterprise 

Granma, the official newspaper of the Communist Party of Cuba, recently praised the achievements of Cuban “small business” or free enterprise that have emerged over the five years since the 6th Congress of the Communist Party of Cuba permitted “economic activity by foreign investors, cooperatives, small farmers, those working land granted in usufruct, renters of state property, and the self-employed.”[1]

In those five years “the non-state sector has grown exponentially. While employment in the state sector constituted 81.2% of the total in 2010, it stood at 70.8% in 2015. Likewise, there were 157,371 registered self-employed in September of 2010, and more than 500,000 at the close of 2016.”

As Raúl Castro, First Secretary of the Party noted at its 7th Congress in April 2016, “The increase in self-employment and the authorization to hire a work force has led, in practice, to the existence of private medium sized, small, and micro-enterprises, which function today without the appropriate legal standing, and are governed by law within a regulatory framework designed for individuals working in small businesses undertaken by the worker and family members,” developing is an atmosphere which does not discriminate against or stigmatize non-state work.

The changes over the last five years include “’pay per performance,’” which means that wages for workers in state and non-state enterprises are increasingly linked to results obtained.” In other words, wages will not be equal, but instead will vary based on performance.

The article also emphasizes that the Cuban “economic system would continue to be based on the entire people’s socialist ownership of the fundamental means of production, governed by the principle that distribution (also socialist) would be based on ‘from each according to their capacity, to each according to their work.’”

These changes over the last five years and into the foreseeable future “are taking place within a reality marked by little population growth, with low birth rates and longer life expectancy, a negative migratory balance, increasing urbanization and aging of the population, which imply great social and economic challenges for the country.”

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[1] González, Small business in Cuba, Granma (Mar. 16, 2017).  Earlier blog posts about the Cuban economy are listed in the “Cuban Economy” section of List of Posts to dwkcommentaries—Topical: CUBA.

Trump and Rubio Share “Similar Views” on Cuba

At President Trump’s rambling press conference on February 16 he said that over dinner the previous night he and Senator Marco Rubio (Rep., FL) “had a very good discussion about Cuba because we have very similar views on Cuba.” Trump added that “Cuba has been very good to me, in the elections. . ., the Cuban people, Americans.” (Torres, Trump: Rubio and I have ‘very similar views on Cuba,’ Miami Herald Feb. 16, 2017).)

No details were provided on which views were similar, but Rubio’s opposition to former President Obama’s normalisation of U.S. relations with Cuba is well known, and during last year’s presidential campaign Trump voiced similar thoughts. (See posts listed in ¨ U.S. and Cuba in the Trump Administration, 2017¨section of List of Posts to dwkcommentaries.com–Topical: CUBA.)

As  an advocate of such normalization, this is disturbing, but unfortunately not surprising, news.

 

Senate Confirms Nomination of Rex Tillerson as Secretary of State

On January 23 the Senate Foreign Relations Committee by a straight party-line vote, 11 to 10, approved the nomination of Rex Tillerson to be Secretary of State. [1]  On February 1 the full Senate did the same, 56 to 43, which was the largest negative vote for confirmation for this position in the Senate’s history. [2]

Senate Foreign Relations Committee

Senator Bob Corker (Rep., TN), the Chair of the Committee, said the following:[3]=

  • “I personally have no doubt that Rex Tillerson is well-qualified. He’s managed the world’s eighth largest company by revenue with over 75,000 employees. Diplomacy has been a critical component of his positions in the past, and he has shown himself to be an exceptionally able and successful negotiator who has maintained deep relationships around the world.”
  • “The other absolute standard we apply to each of these nominees who come before us is to ensure they have no conflicts of interest related to their position.”
  • “The non-partisan director of the Office of Government Ethics (OGE) recently stated that Mr. Tillerson is making ‘a clean break’ from Exxon and is free of these conflicts. He has even gone so far to say that Mr. Tillerson’s ethics agreement ‘serves as a sterling model for what we would like to see from other nominees. He clearly recognizes that public service sometimes comes at a cost.’”
  • “I believe inquiries into Mr. Tillerson’s nomination have been fair and exhaustive. His hearing lasted over eight hours, and he’s responded to over 1,000 questions for the record. I’m proud of the bipartisan process, which is in keeping of the tradition of this committee that we pursued this, regarding his nomination, and I think that while our opinions and votes today may differ, that the process has been very sound.”

Senator Benjamin Cardin (Dem., RI), voting against confirming this nomination, said the following:[4]

  • “I believe Mr. Tillerson’s demonstrated business orientation and his responses to questions during the confirmation hearing could compromise his ability as Secretary of State to forcefully promote the values and ideals that have defined our country and our leading role in the world for more than 200 years. I will therefore not be supporting his nomination with my vote in Committee or on the Senate floor.”
  • “The United States plays a unique and exceptional role in world affairs.  Our values are our interests, as I said at Mr. Tillerson’s hearing. And our leadership in supporting democracy, universal human rights, unencumbered civil society, and unabridged press and religious freedoms is indispensable if these ideas and ideals are to be real and tangible in the world.”
  • “Mr. Tillerson equivocated on these self-evident truths under direct questioning, repeatedly prioritizing narrow business interests ahead of these core national security interests.  The power of the Secretary of State to call out wrong, to name and shame, and to fight each day on behalf of the American people and freedom-seeking people the world over is an enduring symbol to the oppressed and the vulnerable that the United States has their back.”
  • “Mr. Tillerson was unwilling to characterize Russia and Syria’s atrocities as war crimes, or Philippine President Duterte’s extrajudicial killings as gross human rights violations. And he was not willing to dismiss with unqualified clarity a registry for any ethnic or religious group of Americans.”
  • “I also believe Mr. Tillerson misled the Committee regarding his knowledge of ExxonMobil’s [well documented] lobbying on U.S. sanctions [against “some of the worst human rights abusers in the world such as Sudan, Syria, and Iran”]. Additionally, ExxonMobil’s stance on U.S. sanctions against Russia for their illegal invasion and annexation of Crimea, Ukraine in 2014 was well known at the time . . . . This is why it is particularly concerning that Mr. Tillerson indicated during questioning that he was not willing to recuse himself from matters relevant to ExxonMobil for the entire duration of his term.”
  • “While I was pleased that Mr. Tillerson said that he would support the laws I have written to hold accountable human rights abusers globally and in Russia specifically, and that America should have a seat at the table when discussing climate change with the international community, merely being willing to uphold the law or being willing to participate in global diplomacy are simply the necessary prerequisites for the job, not sufficient cause for confirmation.”
  • “On Russia more broadly, I am concerned as to whether Mr. Tillerson would counsel President Trump to keep current sanctions in place. . . . He showed little interest in advancing the new Russia sanctions legislation I’ve introduced with Senator McCain and colleagues on both sides of the aisle. Russia attacked us through cyber warfare and has committed even greater atrocities in Ukraine, Syria, and Eastern Europe. They must be held accountable and our bipartisan legislation is an important tool to do so.”
  • “Strangely, he was quick to caution about easing sanctions on Cuba because it would benefit a repressive regime, but seemed indifferent to doing business with Russia knowing that that business helped finance their ongoing violations of international norms.”
  • “Finally, America deserves a Secretary of State who will take advantage of every smart power tool in America’s diplomatic arsenal before recommending the use of force. I was therefore disturbed when Mr. Tillerson signaled during the hearing he would have recommended using force sooner when asked about real-world scenarios. The Secretary of State must be the consistent voice in any Administration that ensures the President has exhausted all diplomatic efforts before we put our brave men and women in uniform in harm’s way.”

Senate Debate and Vote

During the debate, supporters stressed Tillerson’s qualifications and the importance of confirming the president’s choice or this important position.

The affirmative vote of 56 was recorded by all 52 Republican senators plus three Democrats (Heitkamp (ND), Manchin (WV) and Warner (VA)) and Independent King (ME).

The negative vote of 43 was registered by  the other 42 Democrat senators and Independent Sanders (VT).

Conclusion

In the meantime, there have been at least four major developments linked to the future role of the State Department and its new Secretary.

First, a White House post, “America First Foreign Policy,” has no specific references to Cuba. But it does have this helpful general statement: In “pursuing a foreign policy based on American interests, we will embrace diplomacy. The world must know that we do not go abroad in search of enemies, that we are always happy when old enemies become friends, and when old friends become allies.”

Second, the White House has informed at least 13 career Foreign Service officers in charge of the State Department’s bureaus responsible for policy, security and other matters that they will not be retained in those positions. A Department spokesman said, “These positions are political appointments, and require the president to nominate and the Senate to confirm them in these roles. They are not career appointments, but of limited term.” However, as Nicholas Burns, former under secretary of state for political affairs during the George W. Bush administration and a longtime diplomat, said, “Normally the outgoing person would stay in the job until his or her successor is confirmed. What you don’t want to have is a vacuum without senior leadership.”[5]

Third, the Trump Administration on January 27 issued an executive order banning admission into the U.S. of all refugees worldwide and all immigrants from seven states with majority-Muslim populations while simultaneously welcoming Christian immigrants from those same countries. This immediately prompted lawsuits in federal courts across the country with a federal court in Seattle on February 3 issuing a temporary restraining order against implementation of the executive order and the U.S. Court of Appeals for the Ninth Circuit the next morning denying the Government’s motion to stay the lower court’s order.[6]

Fourth, in another immediate reaction to that executive order, over 900 State Department diplomats prepared and submitted a dissent cable objecting to that same executive order because of its impact on “green card holders, visa holders, visa seekers, the young, the old, and the sick.” [7]

On the periphery perhaps of the above turmoil is whether the Trump Administration will abandon or alter the Obama Administration’s pursuit of normalisation of relations with Cuba. As noted in a prior post, the Administration recently stated it has commenced an overall review of U.S. policies regarding Cuba, which in the abstract sounds like a reasonable thing to do. Previous statements by President Trump and Mr. Tillerson, however, suggest that a significant retreat is on its way, a development that would be very troubling to this blogger and other supporters of normalisation.[8]

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[1] Flegenheimer, Mike Pompeo Is Confirmed to Lead C.I.A., as Rex Tillerson Advances, N.Y. Times (Jan. 23, 2017); Schor, Senate panel approves Tillerson nomination, Politico (Jan. 23, 2017); Cama, Senate panel votes to confirm Tillerson, The Hill (Jan. 23, 2017); Demirjian & Sullivan, Tillerson approved by Senate panel as secretary of state, Wash. Post (Jan. 23, 2017).

[2] Harris, Rex Tillerson Is Confirmed as Secretary of State Amid Record Opposition, N.Y. Times (Feb. 1, 2017); Assoc Press, Senate Confirms Tillerson To Be   Secretary of State, Wash. Post (Feb. 1, 2017); Assoc. Press, Senate roll vote for Rex Tillerson for Secretary of State, Wash. Post (Feb., 1, 2017).

[3] Corker, Senate Foreign Relations Committee Approves Nomination of Rex Tillerson to Be Secretary of State (Jan. 23, 2017).

[4]Cardin, Cardin Statement on Tillerson Vote (Jan. 23, 2016).

[5] Gearan, Trump administration choosing to replace several senior State Department officials, Wash. Post (Jan. 26, 2017); Schwartz, Facing Replacement, Top State Department Officials Resign, W.S.J. (Jan. 26, 2017).

[6] E.g., Full Executive Order Text: Trump’s Action Limiting Refugees Into the U.S., N.Y. Times (Jan. 27, 2017); Ländler, Appeals Court Rejects Request to Immediately Restore Travel Ban, N.Y. Times (Feb. 4, 2017).

[7] Reuters, Trump’s Early Moves Spark Alarm, Resistance, N.Y. Times (Feb. 1, 2017); Biddle, New Memo from State Department Dissent Chanel Describes Anguish of Spurned Refugees, The Intercept (Jan. 31, 2017).

[8] These posts to dwkcommentaries.com have discussed preliminary indicators for the future of U.S.-Cuba relations: The Future of U.S.-Cuba Normalization Under the Trump Administration (Dec. 22, 2016); Secretary of State Nominee Rex Tillerson Addresses U.S. Policies Regarding Cuba (Jan. 12, 2017); Rex Tillerson, Secretary of State Nominee, Provides Written Responses Regarding Cuba to Senate Foreign Relations Committee (Jan. 23, 2017).

Trump Administration Reviewing U.S. Policies Regarding Cuba

At the February 3 White House press conference, Press Secretary Sean Spicer said the Trump Administration was engaged in “a full review of all U.S. policies toward Cuba” with a focus on its human rights policies as part of the Administration’s “ensuring human rights for all citizens throughout the world.”

Such a comprehensive review has been anticipated. So far, however, no details have emerged as to how those policies might be changed.

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White House, Press Briefing by Press Secretary, Sean Spicer, 2/3/07, No. 8; Reuters, Trump Administration Reviewing Cuba Policy: White HOuse, N.Y. Times (Feb. 3, 2017).

Fraud in Cuban Foreign Medical Mission

Cuban medical professionals who have served in Cuba’s medical mission to Venezuela (Barrio Adentro) have reported fraudulent overstatement of the mission’s statistics.[1]

Venezuela pays Cuba on the basis of the number of patients the medical professionals treat or the educational workshops they teach. As a result, the Cuban authorities do not want low numbers of such patients to affect their income and, therefore, set daily quotas for the number of patients that are seen and treated.

According to some Cuban dentists and ophthalmologists in particular, they were unable to meet their quotas and, therefore, regularly submitted reports that falsely overstated the number of patients they had seen.

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[1] Wyss, Bario Adentro Mission in Venezuela: Lying White Lace, el Nuevo Herald (Jan. 28, 2017).