Cuban private sector – dwkcommentaries

New U.S. Sanctions Against Cuba

The U.S. recently has announced additional sanctions against Cuba. Here is a summary of those measures.

U.S.Sanctions Against Certain Cuban Hotels, Cigars and Alcohol[1]

On September 23 President Trump announced that the “Treasury Department will prohibit U.S. travelers from staying at properties owned by the Cuban government. We’re also further restricting the importation of Cuban alcohol and Cuban tobacco. These actions will ensure that U.S. dollars do not fund the Cuban regime and go directly to the Cuban people.”

Treasury Secretary Mnuchin said, “The Cuban regime has been redirecting revenue from authorized U.S. travel for its own benefit, often at the expense of the Cuban people. This Administration is committed to denying Cuba’s oppressive regime access to revenues used to fund their malign activities, both at home and abroad.”

A negative assessment of this move was made by Lawrence Ward, a partner in the international law firm Dorsey & Whitney, who said Trump’s action will make it nearly impossible for Americans to visit Cuba since the government owns or controls nearly all hotels. “Certainly, these new sanctions will have some minor impact on the Cuban government and Cuba’s economy but there’s a fair argument that the actions are more symbolic and political given that the United States stands nearly alone in its sanctions as to Cuba.”

Enrique Gutierrez, a spokesman for the Democratic Party said in an email, “This is a desperate and hypocritical attempt by Trump to pander to Cuban-American voters in Florida. American citizens are already banned from traveling to Cuba because of the coronavirus.” Mr. Trump was “using our foreign policy for his own political gain.”

U.S. Sanctions Against Cuban Debit Cards[2]

On September 28, the State Department added American International Services (AIS), a financial institution, to the Cuba Restricted List. According to Secretary of State Michael Pompeo, the stated reason for this action was AIS’ allegedly being “controlled by the Cuban military that processes remittances sent to the Cuban people” and its charging “fees and manipulat[ing] the remittance and foreign currency market as part of the regime’s schemes to make money and support its repressive apparatus. The profits earned from these operations disproportionately benefit the Cuban military, furthering repression of the Cuban people and funding Cuba’s meddling in Venezuela.”

The Secretary added, “Adding AIS to the Cuba Restricted List furthers the Administration’s goal of preventing the Cuban military from controlling and benefiting from the flow of remittances that should instead benefit the Cuban people. The people should be able to receive funds from their family abroad without having to line the pockets of their oppressors.” Therefore, the Secretary urged “anyone who sends remittances to family in Cuba to use means other than Cuban government-controlled remittance entities.”

This move against AIS hurts ordinary Cubans who receive remittances in hard currencies from families in the U.S. and elsewhere through AIS that are used to buy food in government-owned retail grocery stores. Bruno Rodriguez, Cuba’s foreign minister, said in a tweet, “it is a maneuver aimed at damaging the Cuban people and the family ties between both nations.”

List of Cuba Prohibited Accommodations and Entities [3]

In addition, on September 28, the Department published its initial list of Cuba Prohibited Accommodations. This is a “list of properties in Cuba owned or controlled by the Cuban government, a prohibited official of the Government of Cuba, as defined in 31 CFR § 515.337, a prohibited member of the Cuban Communist Party, as defined in 31 CFR § 515.338, a close relative, as defined in 31 CFR § 515.339, of a prohibited official of the Government of Cuba, or a close relative of a prohibited member of the Cuban Communist Party.” The list is by cities and towns that not in alphabetical order so it should be carefully examined by any U.S. citizen traveling to Cuba.

On September 29, the Department published the List of Restricted Entities and Subentities Associated with Cuba. This is a “list of entities and subentities under the control of, or acting for or on behalf of, the Cuban military, intelligence, or security services or personnel with which direct financial transactions would disproportionately benefit such services or personnel at the expense of the Cuban people or private enterprise in Cuba.” U.S. nationals are prohibited from having “direct financial transactions with these entities.”

Another Cuban “Blocked Person”[4]

On September 30 the Department added Luis Alberto Rodriguez Lopez-Calleja to the U.S. list of Specially Designated Nationals and Blocked Persons, which will block all transactions with “all assets, property and interests of property of Mr. Lopez-Calleja that are subject to U.S. jurisdiction, including within the possession or control of U.S. persons.” The stated reason for this action was his being the head of the Cuban military-owned conglomerate Grupo de Administración Empresarial S.A. (GAESA), which allegedly uses its revenue “to oppress the Cuban people and to fund Cuba’s parasitic, colonial domination of Venezuela. He also is the son-in-law of Raul Castro.

Other Reactions [5]

These new sanctions might seem inconsequential to someone in the U.S. But they are especially mean-spirited when directed at the much smaller and weaker island whose economy is suffering from the total collapse of foreign tourism and mismanagement and whose food is sold at high prices in government-operated stores only for U.S. Dollars as a way for the government to obtain Dollars it needs for other purposes.

Elijah Love, a commentator in the private Diario de Cuba and generally supportive of U.S. restrictions on Cuba, says, “Unfortunately, private entrepreneurs have been especially harmed, and although the US government wants the sanctions applied to military companies and State Security to leave room for private entrepreneurs to occupy the place they deserve, it does not seem that this be the case.”

===================================

[1] White House, Remarks by President Trump Honoring Bay of Pigs Veterans (Sept. 23, 2020); Treasury Dep’t, Office of Foreign Asset Control, Cuban Assets Control Regulations, 85 Fed. Reg. 60068-72 (Sept. 24, 3030)(new prohibition on lodging and related transactions at certain Cuban properties; restrictions on U.S. imports of Cuban alcohol and tobacco products; ends authorization of attendance or organization of professional meetings in Cuba and participation or organization of certain public performances , clinics , workshops in Cuba); Yeginsu, Trump Administration Adds to US Travel Restrictions in Cuba, N.Y. Times (Sept. 24, 2020); Superville, Trump tightens Cuba sanctions as he woos Cuban-American vote, Wash. Post (Sept. 23, 2020).

[2] State Dep’t, Addition to the Cuba Restricted List (Sept. 28. 2020); Rodriguez, U.S. adds popular Cuban debit card to restricted list, Wash. Post (Sept. 28, 2020).

[3] State Dep’t, Cuba Prohibited Accommodations List Initial Publication (Sept. 28, 2020); State Dep’t, List of Restricted Entities and Subentities Associated with Cuba Effective September 29, 2020 (Sept. 29, 2020)

[4] State Dep’t, Press Statement (Secretary Michael Pompeo): Addition to the Specially Designated Nationals and Blocked Persons List (Sept. 30, 2020);Lee, US imposes sanctions on Cuba’s Raul Castro’s son-in-law, Wash. Post (Sept. 30, 2020)

[5] Augustin & Robles, Cuba’s Economy Was Hurting. The Pandemic Brought a Food Crisis, N.Y. Times (Sept. 20, 2020); Love, US sanctions on the Cuban economy create opportunities, but also risks, Diario de Cuba (Sept. 29, 2020).

Cuba Imposes New Restrictions on the Private Sector

On August 30, Cuba announced, effective November 1, new regulations on non-agricultural cooperatives (CNAs), which the government still regards as “experimental” seven years after their first authorization. A Cuban economist, Oscar Fernández, says it cannot be an experimental if, as here, there are no stated objectives and indicators to measure compliance.[1]

According to official data, there are more than 400 CNAs functioning across the island with over 17,000 members, mostly in the sectors of gastronomy (151), trade (81), construction (59) and industry (34). This total compares with the initial 126 in 2012. However, approval rates have declined since 2015, and only two new ones were authorized in 2018.

The changes freeze the creation of new CNAs, the government says, in order to concentrate on consolidation of existing ones. In addition, although the government states that, going forward, prices charged by CNAs will be determined by the market (supply and demand), the government is given control mechanisms over the prices that such cooperatives can charge for some goods and services and pay their directors, and it establishes limits to the number of partners they can have.

The new regulations also limit construction cooperatives to the provincial level but allow other types of service to be offered nationally, such as the repairing and restoration of machines for textile production, technology equipment, weighing equipment, equipment for refrigeration and climate control, and aluminum carpentry equipment.

The new regulations are intended to cutdown on “irregularities,” such as hiring excess employees and conducting activities outside a cooperative’s mandate. Some economists suggest that through these changes indicates the government’s intent to assert more control over the island’s growing private sector. Other economists criticized the government for ignoring the context in which these cooperatives have developed — with limited legal frameworks and an unsteady economy — that has caused some of the “irregularities” cited by the new regulations. Others suggest this could be an experiment to establish alternatives to small and mid-size enterprises in Cuba, which are not yet legal in Cuba.

According to Professor Ricardo Torres, the full development of CNAs will happen only “when the great imbalances of the Cuban model are noticeably reduced, there is a transparent legal framework, the playing field is leveled for all productive actors and the absurd restrictions are eliminated.”

===========================

[1] Reuters, Cuba Unveils Tighter Rules on Cooperatives in Clampdown on Non-State Sector, N.Y. Times (Aug. 30, 2019); The Government suspends the creation of new non-agricultural cooperatives, Diario de Cuba (Aug. 31, 2019); Control over non-agricultural cooperatives increases, Diario de Cuba (Sept. 2, 2019); Rojas, Economies designed for control do not produce development, Progreso Semanal (Sept. 5, 2019); Castro Morales, Legislation governing non-agricultural cooperatives updated, Granma (Sept. 10, 2019).

More Details on New Cuban Regulations on Private Business

A prior post discussed Cuba’s new regulations for the self-employed sector (the private sector) of the economy. More details on these new regulations are provided by Nora Gámez Torres in the Miami Herald.[1]

She says that he new regulations limit a Cuban to owning only one private enterprise and impose higher taxes and more restrictions on many self-employment endeavors, including the arts. All of these measures are designed “to limit the accumulation of wealth by Cubans.”

As a result, a Cuban who runs a private restaurant (a paladar) will not be able to rent a room in his or her home. The Cuban Vice Minister for Labor and Social Security, Marta Elena Feitó Cabrera, explained that owning more than one business “is not the essence and the spirit of the TCP [self-employment], which consists of workers exercising their daily activities.”

The government also stated it would eliminate the tax exemption for businesses that have up to five employees and would instead impose a tax on a sliding scale that increases with each worker hired. It also ordered an increase in the required minimum monthly taxes of businesses in various categories. Economists, however, have warned that more taxes on hiring employees could dramatically hamper the development of the private sector at a critical moment.

To increase state controls, each authorized activity will be under the supervision of a state ministry, in addition to the municipal and provincial government entities, which can intervene to set prices. The level of control reaches such extremes that the Official Gazette published a table with classifications on the quality of public restrooms and the leasing rates that would have to be paid by “public bathroom attendants,” one of the authorized self-employment categories. Some public bathrooms are leased by the state to individuals who then are responsible for upkeep and make their money by charging users a fee.

The new regulations also could have a significant impact on the cultural sector with the Ministry of Culture empowered to increase control over artists and musicians and impose more censorship in the country.

For example, there now are fines and forfeitures, as well as the possible loss of the self-employment license, to those who hire musicians to perform concerts in private bars and clubs as well as in state-owned venues without the authorization of the Ministry of Culture or the state agencies that provide legal representation to artists and musicians. Many artists in urban genres such as reggaeton and hip-hop, who have been critical of the Cuban government, do not hold state permits to perform in public. However, many usually perform in private businesses or in other venues. Painters or artists who sell their works without state authorization also could be penalized.

Even books are the target of new censorship: private persons, businesses and state enterprises may not sell books that have “contents that are harmful to ethical and cultural values.”

==============================

[1] Gámez, Cuba imposes more taxes and controls on private sector and increases censorship of the arts, Miami Herald (July 10, 2018).

A Pessimistic Assessment of Cuba’s Economic Future

Jorge G. Castañeda, the Foreign Minister of Mexico from 2000 to 2003,[1] has rendered a pessimistic assessment of Latin American socialism, especially in Venezuela and Cuba.[2]

He starts with the assertion that the recent “Cubana de Aviación airliner’s crash in Havana . . . [was an] illustration of the utter bankruptcy of the 21st century socialism.” Later in the article he says, like “the Cuban economy, the plane was old, poorly maintained, leased by the national airline because it was the only one it could afford, and the rest of Cubana de Aviación’s domestic fleet had already been grounded.” (A subsequent article reported that Cubana de Aviación has suspended all domestic flights until September.[3])

Cuba, he says, “paid a heavy price for the initial, and perhaps enduring, successes of its revolution: education, health and dignity. But from the very beginning — with the exception of a few years between the collapse of the Soviet Union and the end of its subsidies to Cuba in 1992 and the advent of Venezuelan support in 1999 — it always found someone to pay the bills. The next option was meant to be the United States. That no longer seems possible.”

Now, with a new president, Cuba “again faces enormous economic and social challenges. They stem from three problems with no solutions.”

“First, says Castañeda, is the fall of tourism from the United States and the new tough line on Cuba adopted by the Trump administration. Through March of this year, the number of visitors from the United States is down more than 40 percent compared with 2017. This is partly because of travel warnings over safety issued by Washington, partly because of new travel restrictions put in place by President Trump [[4]] and because after the initial boom of nostalgic tourism, Cuba is now competing for normal travelers with the rest of the Caribbean. Its beauty and charm do not easily outweigh other destinations’ far superior services and infrastructure, and lower prices. Today myriad start-up businesses — always thought to be too small and numerous to survive — that sprang up for United States visitors are failing as a result of falling tourism.” [5]

Second, according to Castańeda, “American sanctions and Cuban fear of economic reforms have rendered the push for greater foreign investment somewhat futile. After an initial rush of highly publicized announcements, some United States companies have proved reluctant to run risks, particularly given Mr. Trump’s hostility toward all things Obama, and his dependence on Florida for re-election.”

As a result, he continues, the Cuban “economy has stopped growing, scarcities have re-emerged and new opportunities for employment and hard-currency earnings are not appearing. If one adds to this the government’s decision to suspend new cuentapropista or private self-employment permits, it is no surprise to discover that economic prospects are dim.”

Third, “Venezuela is no longer able to subsidize Cuba’s transition to a Vietnam-style socialist economy the way it did before.” In short, Venezuela cannot now provide oil to Cuba at below-market prices and on credit and cannot pay for Cuban doctors, teachers and intelligence personnel, which has been a major source of Cuban export earnings.

Nevertheless, Venezuela is “Cuba’s only unconditional ally in the world.” Hence, the first foreign leader to visit Cuba’s new president, Miguel Diaz-Canel, was Venezuela’s president, Nicolás Maduro, and Diaz-Canel returned the favor by making his first foreign visit to Venezuela.[6]

Now the U.S. is pressing for increased hemispheric sanctions against Venezuela with U.S. Secretary of State Mike Pompeo on June 4 being expected to drop the next shoe in an address to the General Assembly of the Organization of American States.[7] If any of those anticipated U.S. requests are met, this will increase the pressures on Cuba.

Conclusion

In partial response to these issues, on June 2 Cuba started the process for revising its constitution with the agenda for an extraordinary session of its national legislature (the National Assembly of People’s Power) including approval of “the process to be followed in carrying out Constitutional Reform and the commission of deputies responsible for drafting and presenting the proposed Constitution of the Republic.” This first step was the approval of a commission to prepare a draft of a revised constitution that will be headed by Raúl Castro, the former president, Diaz-Canel, the current president, and 31 others. Once the constitutional draft is ready, it is slated to be discussed first by the national legislature and then by the broader population, before being submitted to a referendum.[8]

One of the major anticipated challenges for drafting the new constitution will be validating private ownership of property and businesses while simultaneously upholding the “irrevocable nature of socialism.” Perhaps the selection of Castro as the chair of this constitutional commission is not as anti-economic reform as might appear to outsiders. After all Raúl first announced the need for a new constitution in 2011 after embarking on a series of reforms cautiously opening up the economy to foreign investment and the private sector in order to make Cuban socialism sustainable. And at the Communist Party’s Congress in 2016, Castro praised the innovations of the private sector and criticized the “outdated mentalities” and “inertia” of state-owned enterprises.[9]

Such a change will have to delete or modify a current constitutional clause forbidding Cubans from “obtaining income that comes from exploiting the work of others.” “According to Julio Perez, a political analyst and former news editor at state-run Radio Habana, said “Cuba has to make substantial changes to the constitution that endorse private property, self-employment and cooperatives as part of the Cuban economy.”

Simultaneously there are reports that the government is preparing decrees regarding norms for 2,386 Cooperatives of Credit and Services (CCS), 650 Cooperatives of Agricultural Production (CPA) and 1,084 Basic Units of Cooperative Production (UBPC) operating in the agricultural sector and producing 92% of the island’s food.[10]

=====================================

[1] Castañeda now is Associated Professor of Public Service, New York University (NYU) Wagner; Global Distinguished Professor of Politics and Latin American and Caribbean Studies, NYU Faculty of Arts and Science. He also is a former member of the board of Human Rights Watch and a noted author.

[2] Castañeda, The Bankruptcy of 21^st Century Socialism, N.Y. Times (June 2, 2018).

[3] Cubano de Aviación will maintain the suspension of domestic flights at least until September, Diario de Cuba (June 2, 2018).

[4] This blog has criticized the 2017 State Department’s urging Americans to reconsider traveling to Cuba because of the still unresolved medical problems experienced by some U.S. (and Canadian) diplomats in Havana and the U.S. cancellation of individual person-to-person travel to Cuba. (E.g., A New Travel Warning for Americans Traveling to Cuba, dwkcommentaries.com (Sept. 19, 2017); New U.S. Regulations Regarding U.S. Travel to Cuba and Transactions with Cuban Entitles, dwkcommentaries.com (Nov. 8, 2017).)

[5] As this blog has reported, Cuba’s private sector was flourishing in 2015-2016, but has fallen into hard times as a result of new Cuban restrictions on such enterprises and the decline of American visitors, a result that should be contrary to the normal Republican promotion of entrepreneurship and of a potential challenge to Cuba’s socialism. (See., e.g., Why Is the Cuban Government Trying To Slow Down the Private Sector? dwkcommentaries.com (Aug. 3, 2017).)

[6] E.g., Cuba’s New Leader Praises Maduro in ‘Solidarity’ Visit to Venezuela, N.Y. Times (May 30, 2018); Why did Díaz-Canel make his first state visit as President to Venezuela?, Granma (June 1, 2018).

[7] U.S. State Dep’t, Secretary of State Pompeo to Lead U.S. Delegation to the Organization of American States General Assembly (June 1, 2018).

[8] Reuters, Cuba Set to Launch Constitutional Rewrite to Reflect Reforms, N.Y. Times (June 2, 2018); Raúl will lead the Commission in charge of the project of Constitution of the Republic (+ Video), Granma (June 2, 2018); Díaz-Canel: The new Constitution will take into account the principles of our political system, Granma (June 2, 2018); Deputies will continue meeting following extraordinary session, Granma (June 1, 2018); Romero, Constitutional Reform in Cuba: Priority for ANPP commissions, Cubadebate (June 2, 2018); Assoc. Press, Cuba Forms Commission to Update Soviet-Era Constitution, N.Y. Times (June 2, 2018); Reuters, Raul Castro Appointed to Head Rewrite of Cuba Constitution, N.Y. Times (June 2, 2018).

[9] Raúl Castro Discusses Socio-Economic Issues in Report to Seventh Congress of the Communist Party of Cuba, dwkcommentaries.com (April 19, 2016); President Raúl Castro Affirms Importance of Cuba’s Private Sector, dwkcommentaries.com (July 18, 2017).

[10] The government prepares laws for Cuban agricultural cooperatives, producers of 92% of food, Diario de Cuba (June 2, 2018).

Argument Between Wall Street Journal and Cuba’s Ambassador to U.S.

The Wall Street Journal and the Cuban Ambassador to the U.S. are engaged in an argument that started with the newspaper’s April 22 editorial.

The Editorial[1]

“Eighty-six-year-old Raúl Castro grabbed headlines last week when he ceded the title of president to 58-year-old civilian Miguel Diáz-Canel. Too bad this change at the top is nominal when it comes to freedom for the Cuban people.”

“Mr. Diáz-Canel is . . .[not] an independent thinker. Cubans have every reason to believe him when he says, as he did in his acceptance speech, that he is committed to preserving a police state. If Mr. Diáz-Canel wants to keep his job and privileges, human rights won’t be on his agenda.”

“Raúl still leads the Communist Party and has kept the two most powerful regime positions under his control. Col. Alejandro Castro Espín, his son, runs counterintelligence for the Interior Ministry that controls the secret police. Gen. Luis Alberto Rodríguez López-Callejas, Raúl’s former son-in-law, is top dog at GAESA, the military’s holding company that owns the tourism industry, the shipping company, the airline, construction companies, auto imports and sales, the real-estate business, the banks and control of container traffic at the Port of Mariel. Ramiro Valdés, a regime enforcer, still sits on the Council of State, Cuba’s highest government body.”

. . . .

“Now Havana’s crime family has again run out of other peoples’ money. Its largest sources of hard currency are the doctors and nurses who live in poverty while Cuba “rents” them to countries around the world. Yet even this multibillion-dollar human trafficking isn’t enough to support the broken Cuban economy.”

“President Trump has reined in some of Barack Obama’s executive orders that made it easier for Americans to travel to Cuba. But the regime’s bigger problem is that investors who kick the tires on the Castro jalopy increasingly walk away. There are plenty of opportunities in emerging markets these days, and the smart money doesn’t want gangsters for partners.”

“Promises of greater economic freedom for Cubans have never materialized. Small businesses can operate as long as they are subsistence operations. But they can’t hire and the regime has again cracked down on permitting lest it lose control. Cuba’s poverty suggests something has to change. But liberalization is not in the interests of the Castro family or the military. And they’re still in charge.”

The Cuban Ambassador’s Response[2]

On May 6 Cuban Ambassador José Ramón Cabañas Rodríguez responded to this editorial with the following letter to the Journal.

“The U.S. corporate press has always been predictable in its articles on Cuba and even more so when it comes to its editorials. Newspapers such as yours were against Cubans being free from Spanish power in the 19th century. Later on, they commended local corrupt politicians who supported the invasion—first militarily and then economically by American companies during the first half of the 20th century. Finally, those newspapers relentlessly demonized the Cuban Revolution since 1959.”

“However, I was caught off guard by the sordidness of the language used by your editorial board when referring to my country. It is the typical exercise of those who are left without arguments. There is still a financial, economic and commercial embargo imposed on Cuba intended to starve our population into submission. However, the information blockade has decreased. Americans massively travel to Cuba and 75% of them support a better relationship with our country.”

“Your renewed efforts to promote the business of the ‘dissidence’ in Cuba will not have the slightest success. History is wise and has forgotten (and will forget) the names of the annexationists of Cuban origins, but any educated human being who inhabits the earth today will be able to tell you about Carlos Manuel de Céspedes, José Martí, Antonio Maceo, Julio Antonio Mella, Ernesto Guevara and Fidel Castro; those are the names of the pro-independence figures.”

“To maintain a part of the audience you still have, before criticizing Cuba again, or any other Latin American or Caribbean country for that matter, please start by looking at yourselves in the mirror.”

Conclusion

Although I believe that U.S. policies regarding Cuba are heading the wrong direction in the Trump Administration and deplore its abandonment of many (but not all) aspects of the Obama Administration’s opening of relations with Cuba and although I have met and respect the Cuban Ambassador, this exchange or argument is unsatisfying.[3]

The Journal, given its general support of free markets and capitalism, should have (a) encouraged the Cuban government to engage in further efforts to promote the expansion of its private sector of bed-and-breakfasts, restaurants and other ventures and (b) criticized some of the Trump Administration’s policies that discourage such Cuban expansion of free enterprise and markets.

Such efforts enable Cubans to increase their financial circumstances and offer better-paying jobs to other Cubans and thereby provide the Cuban economy with desperately needed boosts. Cuba’s efforts last year to restrict such expansion were misguided out of fears of changes.

This would have forced the Cuban Ambassador into the difficult position of trying to justify the regime’s clamp-down last year of expansion of the private sector. The Ambassador in this hypothetical, however, could have argued that the Cuban Government needed to be cautious on these issues because of illegitimate U.S. efforts, overtly and covertly over many years, to promote regime change in Cuba.

======================================

[1] Editorial, Cuba Gets a Castro Convertible, W.S.J. (April 22, 2018).

[2] Letter to Editor, Cabañas to W.S. J., W.S.J. (May 6, 2018).

[3] See List of Posts to dwkcommentaries—Topical: CUBA.

Vietnam Communist Official Advocates Economic Reforms for Cuba

Vietnamese Communist Party General Secretary Nguyen Phu Trong, who is visited Cuba this week, said in a lecture at Havana University, “The market economy of its own cannot destroy socialism. But to build socialism with success it is necessary to develop a market economy in an adequate and correct way.” He added, “ With the clear vision of the [Communist Party of Cuba the island] . . . will surely reach great achievements and successfully reach a prosperous and sustainable socialism.”[1]

Vietnam in the 1980s started to open up its centralized economy and as a result has lifted around 30 million Vietnamese out of poverty.

Interestingly Cuban media had many reports about Mr. Trong’s visit, but this blogger has not found any coverage of the above speech and its implicit criticism of Cuba’s failure to fully embrace market economic reforms.[2]

The closest it came was the report that Mr. Trong “expressed his full conviction that, guided by the decisions adopted in the VI and VII PCC Congresses, Cuba will continue to successfully implement the updating of the social and economic model of socialist development” and the statement that the two countries had an “Intergovernmental Commission for Economic and Scientific-Technical Cooperation” and exchanges on “the socio-economic models of the respective countries.”[3]

This soft pedaling of Mr. Trong’s comments contrasts with the Cuban Communist Party’s own recent admissions of mistakes in its liberalizing of the Cuban economy as discussed in a prior post.

=================================

[1] Reuters, In Cuba, Vietnam Communist Party Chief Advocates Economic Reforms, N.Y. Times (Mar. 29, 2018). A more complete report of Mr. Trong’s speech is contained in a Vietnamese source: General Secretary Nguyen Phu Trong received an honorary doctorate in Cuba, Zing (Mar. 30, 2018).

[2] The General Secretary of the Communist Party of Vietnam to arrive in Cuba today, Granma (Mar. 28, 2018); Ten landmarks in Cuba-Vietnam relations, Granma (Mar. 28, 2018); Peraza, Vietnam and Cjuba: Examples of what socialism can achieve, Granma (Mar. 29, 2018); Peraza, Cuba and Vietnam have the common goal of advancing in the construction of socialism, Granma (Mar. 29, 2018); Univ. Havana, He receives honorary title “Doctor Honoris Causa” in Political Science Mr. Nguyen Phu Trong (Mar. 29, 2018); Peraza, The youth of Cuba and Vietnam have the mission to keep alive the flame of brotherhood, Granma (Mar. 30, 2018); Castro, To the people, to the communist Party and to the Government of the Socialist Republic of Vietnam, our eternal gratitude, Granma (Mar. 30, 3018); Cuba and Vietnam: a brotherhood that takes hold (+ Photos), Granma (Mar. 31, 2018); Gómez, A path of success, Granma (Mar. 31, 2018). New stage of development in its historical links, Granma (Mar. 31, 2018).

[3] New stage of development in its historical links, Granma (Mar. 31, 2018).

Cuba’s Communist Party Admits Errors in Liberalization of Economy

On March 25-26 the 142-member Central Committee of the Communist Party of Cuba met to discuss the status of economic reforms during President Raúl Castro’s 10-year mandate to open up the economy with greater roles for the private sector and foreign investment.[1] Below is a photograph of the Party’s First Secretary, Raúl Castro, and to his left Miguel Diaz-Canel, the expected next President of the Cuba Council of State.

From 2012 through 2015 the reforms were implemented swiftly with the number of self-employed worked more than tripling to 580,000.

But since then implementation has slowed in the due to the complexity of the process, mistakes in oversight and low engagement of the bureaucracy. Further reforms also were hampered by economic and financial limitations. The Central Committee recognized Cuba lacked a fiscal culture and accountancy tools to make a serious economic analysis as well as difficulties communicating the complex process. This included the absence of a culture of paying taxes.

Now the Party and the Government are reviewing studies on unification of Cuba’s dual currencies and different exchange rates and the National Economic and Social Development Plan through 2030. There will be the implementation of the country’s self-employment policy after a training process that will include some 580,000 self-employed workers and more than 30,000 public officials.

Raúl Castro said that all Communists needed to confront problems without hesitation, right away; planning more carefully to direct resources to where they are truly needed; and not waiting for solutions from above, but rather contributing creative, rational ideas.

Related to these problems of implementing economic reforms, only this year did Cuba open its first wholesale market for beans, beer, sugar, cigars and other staples for 20 to 30 percent less than the retail prices in the country. It will be open to 35 worker-owned cooperatives in Havana.

======================================

[1] The Party Central Committee, meeting in its Fifth Plenum, analyzed important issues related to the updating of Cuba’s socio-economic model, Granma (Mar. 27, 2018); Reuters, Cuba’s Communist Party Admits Errors, Slowdown in Reforms, N.Y. Times (Mar. 27, 2018); Assoc. Press, Cuba opens wholesale market to sell basic staples, Wash. Post (Mar. 19, 2018); Pėrez, Cuba expanding wholesale markets? (Granma (Feb. 6, 2018). Issues about Cuba’s economy have been addressed in the posts listed in the “Cuban Economy” section of List of Posts to dwkcommentaries–Topical: CUBA.

Congressional Delegation Visits Cuba

A delegation of six U.S. senators and representatives, all Democrats, visited Cuba from February 17 through 21. They were Senators Patrick Leahy (VT), Gary Peters (MI) and Ron Wyden (OR) plus Representatives Jim McGovern (MA), Kathy Castor (FL) and Susan Davis (CA). [1]

Leahy, the leader of the group, announced that the purpose of the trip was “to meet with U.S. and Cuban officials, officials of other governments, and Cubans in the emerging private sector to discuss: the presidential transition in Cuba; U.S. and Cuban investigations of health incidents involving U.S. government personnel in Cuba; cooperation on maritime security, search-and-rescue, narcotics and human trafficking, and migration issues; the impact of the withdrawal of U.S. Embassy and Cuban Embassy personnel and of revised Treasury Department regulations on U.S.-Cuban relations; and opportunities for public health, law enforcement, scientific, environmental, commercial, educational, cultural, and other engagement with Cubans.”

Meeting at Cuba’s Foreign Ministry

On February 20 they met with the Director General of the United States of the Cuban Foreign Ministry, Cárlos Fernández de Cossío.

They discussed, among other topics, the medical problems of certain U.S. diplomats that occurred in Cuba. Cossío emphasized that there was no evidence of attacks on the diplomats and Cuba’s difficulties of carrying out a rigorous investigation.

Meeting with President Raúl Castro

On February 20 the delegation also met with President Raúl Castro, who was joined by Foreign Minister Bruno Rodriguez and Director General Cossio. Below is the official photograph of the meeting. The Cuban release about this event merely stated, “During the meeting they exchanged about matters of interest to both countries.”

Other Activities

The delegation met with Cuban entrepreneurs who said Trump’s Cuba policy was hurting their businesses. Surprisingly there have been no reports that there was discussion of last year’s actions by the Cuban government to curtail the growth of the private sector or its new proposed regulations to impose even more onerous restrictions on that sector that apparently were leaked to the public the day after the delegation left the island as discussed in a prior post.

An objective of the delegation was not met. They wanted to meet with Vice President Miguel Díaz-Canel, Castro’s presumed successor, but he was not available.

Press Conference

At the conclusion of their trip, on February 21, the delegation held a press conference at the U.S. Embassy in Havana, and below is a photography of the delegation at this event.

According to Diario de Cuba, Senator Leahy said, “The embargo does not make sense and the reversal of the policies negotiated by Barack Obama and Raúl Castro does not help the US or Cuba.” In fact, he said, President Trump’s retreat from engagement with Cuba was “erroneous” and “stupid.”

Leahy also addressed the medical problems of some U.S. diplomats who had been stationed in Cuba. He said, “If we have to find out if something happened, it is a big mistake to close our embassy or to pretend that the Cubans close theirs. How are you going to get visas? How to maintain medical cooperation? What about the students? Of the projects in agriculture? There are many projects that are paralyzed.”

Moreover, according to Leahy, the Cuban government has been cooperating in trying to ascertain the cause of these medical problems and he believes the island’s authorities do not have the slightest intention to harm U.S. citizens who visit Havana. Indeed, not a single one of his colleagues had any fears about traveling to Cuba as they believe the island to be a safe place, and have even travelled here with their spouses, and in Leahy’s case, with his 13 year-old granddaughter.

Leahy added that there are many American diplomats who want to work in Cuba despite the symptoms that Washington previously said affected 24 U.S. government officials and spouses. As a result, Leahy urged the State Department on Wednesday to restore embassy staff in Havana as soon as possible.

Leahy also stated, “”Whoever is [the new] president in Cuba will make a mistake if he thinks we should maintain tensions between our countries, which is easy to say, but we have to go back to the dialogue we had between Obama and Castro.”

Representative McGovern, again as reported by Diario de Cuba, offered that protection of U.S. diplomats is “paramount,” but it was an “error” by the Trump Administration to cut the Embassy’s staff and to expel Cuban diplomats in Washington. Moreover, “US policy toward Cuba has been guided by paranoia and suspicion,” which he described as “stupid” because it has not yielded any fruit in more than fifty years of hostility. “Cuba is changing, it will soon elect a new president and it will have a generational change of leadership. Unfortunately, at that historic moment for Cuba, the involvement of the United States will be limited.”

Senator Wyden added that the delegation had stressed the importance for Cuba to unify its two currencies and “Cuba officials repeatedly said that this was the year to get it done.” Representative Castor subsequently added that the delegation asked the Cuban government to eliminate the 13 percent exchange tax on the U.S. dollar with respect to the CUC, the local convertible currency. The Cuban officials responded by saying “they would like to do that, but they have said that in the past,” said Castor.

======================================

[1] Press Release, Leahy To Lead Congressional Delegation To Cuba (Feb. 16, 2018); Delegation of the United States Congress Visits Cuba, CubaDebate (Feb. 18, 2018); Senator Leahy visits the MINREX headquarters in Havana, Martí (Feb. 20, 2018); Raúl received a delegation from United States Congress, Granma (Feb. 21, 2018); US congressmen criticize Trump’s turn toward politics as “erroneous and stupid,” Diario de Cuba (Feb. 21, 2018); US congressional delegation reaffirms need to improve relations with Cuba, Granma (Feb. 21, 2018); US Congressmen insist on the need to improve ties with Cuba, CubaDebate (Feb. 21, 2018); Assoc. Press, US Lawmakers Say It’s Time to Restore Staff at Cuba Embassy, N.Y. Times (Feb. 21, 2018); Marsh, Cuba tells U.S. delegation monetary unification on cards this year, Reuters (Feb. 21, 2018); Torres, Cuba shares plans for single currency and more during a visit by U.S. lawmakers, Miami Herald (Feb. 21, 2018).

Upcoming Cuba Restrictions on Free Enterprise?

As has been discussed in previous posts, in recent years Cuba has seen a growing private sector of its economy. For example, the number of Cubans working with self-employment licenses rose to 567,982 people in mid-2017, compared with 157,731 in 2010. In response to this growth the Cuban government over the last year has imposed various restrictions on this sector. [1]

Although President Raúl Castro at the 2016 Congress of the Communist Party of Cuba criticized the lethargy of many of the state-owned enterprises and praised the innovations of the growing private sector, Cuba has been struggling with the challenges of creating and managing a mixed economy. The biggest challenge for the regime has been the increasing wealth of those in the private sector and thus the rising economic inequality on the island. [2]

New Draft Economic Regulations [3]

Now Reuters reports that a “draft of new Cuban economic regulations proposes increasing state control over the private sector and curtailing private enterprise.”

The 166-page document “would allow homes only one license to operate a restaurant, cafeteria or bar. That would limit the number of seats per establishment to 50. Many of Havana’s most successful private restaurants currently hold several licenses enabling them to have a seating capacity of 100 or more.”

This draft, which is dated Aug. 3, 2017, and signed by Marcia Fernández Andreu, deputy chief of the secretariat of Cuba’s Council of Ministers, states that it ”strengthens control at a municipal, provincial and national level.” In addition, it provides that enforcement against infractions will be more “rigorous.”

The draft apparently was recently sent to provincial and national organs of administration for consultation. Its leak is suspected to gauge public opinion and could lead to revisions.

Reactions

Even before this new draft was released, the Miami-based Havana Consulting Group had warned that the recent Cuban restrictions on the private sector would generate an annual “flight of local capital abroad” of between 280 and 350 million dollars. Those restrictions also probably would be a negative factor for new foreign investment on the island. [4]

In addition, the new proposed regulations probably would prompt some younger Cubans to lose hope of change in their country and prompt their desire to emigrate, thereby exacerbating Cuba’s problems associated with an aging and declining population.

Finally for the very reasons that Raúl Castro advanced at the recent Party Congress, the proposed regulations could adversely affect Cuba’s employment opportunities and gross national product.

==========================================

[1] See posts listed in the “Cuban Economy” section of List of Posts to dwkcommentaries—Topical: CUBA.

[2] Raúl Castro Discusses Socio-Economic Issues in Report to Seventh Congress of the Communist Party of Cuba, dwkcommentaries.com (April 19, 2016).

[3] Reuters, Exclusive—Cuba Draft Rules Propose Curtailing Fledgling Private Sector, N.Y. Times (Feb. 22, 2018).

[4] Study: The obstacles of the regime to the private sector generate a flight of millions abroad, Diario de Cuba (Feb. 20, 2018).