Tag: Emilio Morales

Another Indictment of the Cuban Economy

Cuba Siglo 21 has published a new dossier by economist Emilio Morales that provides a statistical x-ray of the collapse of the regime’s system on the island. [1]

“The Cuban economy is in a critical phase due to the drastic fall of more than 50% of its main sources of income: export of medical services, remittances and tourism. This financial collapse has accelerated the countdown of the governance regime.”

  • “The export of medical services, the country’s main source of income, has suffered a 78.12% dropsince its peak in 2013, when it reached 10.42 billion dollars.”
  • “Remittances, the second largest source of income, have also declined significantly. In 2023, remittances totaled $1,972.56 million, a drop of 3.31% compared to 2022 and 46.93% compared to 2019, before the pandemic. Morales attributes the decline to mass emigration that began after the crackdown on protests on July 11, 2021, which ‘has not only reduced remittances but has also resulted in a significant flight of human capital.’”
  • “Tourism, one of Cuba’s most promising industries, has failed to recover post-pandemic. Morales recalls that in 2023 Cuba received 2,436,979 tourists, a figure comparable to that of 2009, well below the expected levels. The economist points out that ‘the situation is aggravated by the decrease in Cuban tourists living abroad, a key segment for the Cuban tourism economy.’”
  • “The regime’s commitment to attracting Russian tourists has not compensated for the loss of European tourism, affected by the Cuban government’s support for Russia in the war against Ukraine. The arrival of tourists from the five main European issuers (Italy, France, Germany, Spain and England) has decreased by 67.45% in the last five years.”
  • “The Cuban regime has proven incapable of implementing effective mechanisms to transform the economy and overcome the current multi-systemic crisis. The fall of the three main sources of income by more than 50% reflects the total dysfunctionality of the governance regime.”

“Even the regime’s allied governments are not willing to carry out a large-scale economic rescue. The governance models of Russia, China or Vietnam have not been adopted, and the power elite in Cuba continues to resist any change.”

“Mass emigration has decapitalized the country financially and in terms of human resources, and the metamorphosis of Castroism into a mafia state, with GAESA as the center of true power, has led to the destruction of industries and the loss of political capital.”

“The Cuban Communist Party (PCC) has no retraining pool, with many members who no longer believe in the party or its ideology.”

“The economic crisis has had devastating effects on all sectors of society.There is an alarming shortage of teachers, health personnel , workers in the sugar industry, tourism and the energy system. Even the justice system is affected, with the Supreme Court of Justice operating at only 69% of its capacity.”

“With the celebration of the 71st anniversary of the attack on the Moncada barracks, Cuba finds itself in a deep humanitarian crisis, with 89% of the population living in poverty and 1.79 million citizens having left the country in recent years.”

Morales concludes, “the Cuban system has collapsed. The Cuban state is dysfunctional and bankrupt. The Cuban government is mediocre and lacks leadership. The Cuban power elite is impervious to criticism. Without some kind of radical transformation to prevent or postpone it, the final collapse, by one route or another, is inevitable.”[2]

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[1] 71 years after July 26: ‘The Cuban Economy has collapsed,’ Diario  de Cuba (July 25, 2024).  Cuba Siglo 21 is “a nongovernmental think tank based in Madrid, Spain that serves the forces that promote change in Cuba towards an open, democratic and prosperous society supported by the rule of law and a free market. ” (About Cuba Siglo 21.)

[2] See also ‘Distortion’ of employment in Cuba: army of inspectors, thousands less farmers, teachers and doctors, Diario de Cuba (July 25, 2024); The regime is forced to stop falsifying data on Cuba’s demographic crisis, Diario de Cuba (July 24, 2024); Industrial devastation in Cuba is worse than the agricultural catastrophe, Diario de Cuba (July 23, 2024).

 

 

Another Perspective on the Failure of the Cuban Economy

Emilio Morales, a Cuban-American and President & CEO of Havana Consulting Group, a Miami-based consulting firm specializing in market intelligence and strategy for U.S. and non-U.S. persons doing business in Cuba, offers a blistering appraisal of the current status of the Cuban economy.[1]

He begins his article with the following statement: “The Cuban government’s announcement that it is in a state of war economy is a public recognition of the failure of the Cuban model. In reality, the country has been in a state of war economy for more than six decades; it is not something that suddenly emerged at the last minute. The war economy is the very essence of the system, it is its genetic basis, it is the matrix of control that dictator Fidel Castro implemented since the triumph of the revolution in 1959 and that has lasted from then until today. It was the most effective way to achieve citizen control. Very simple: it was necessary to eliminate all sources of wealth creation in the hands of citizens, take control of them in their entirety and find someone to blame for the economic debacle that would follow.”

“Today, the macabre plan executed by Fidel Castro since January 1, 1959 has had a great result: the Cuban economy is a disaster, its industries are in ruins, its banks are bankrupt , the state enterprise is totally decapitalized, foreign investment is scarce – in the last five years it has been practically zero -, more than 80% of the population lives in poverty, the country practically does not export because it does not produce. The productive forces are gagged by the system, by a legal system that does not allow free enterprise and limits the generation of wealth by citizens. Today the country depends on imports of products and raw materials, but does not have the financing to maintain them, because it has lost its lines of credit for not paying its external debt with creditors. This, added to the debacle of agricultural production has led to a deep shortage of products that has generated the worst inflationary crisis in the history of the country.”

“As a result of this debacle, a multi-systemic crisis has been unleashed in the country unprecedented in history, which has given rise to massive citizen protests never seen in more than 60 years of tropical communism , such as those that occurred on July 11, 2021 (11J) and which, given the current circumstances, can be repeated at any time, since the country has become a true social powder keg, which can explode under any circumstance. As part of this crisis, the largest wave of migration in the country’s history has been unleashed, which has resulted in the emigration of more than 850,000 Cubans to the United States alone by various means in the last three years. According to a recent study, 1.79 million people have left the country between 2022 and 2023.”

Morales ends the article with the following conclusions:

  • “Once again, the Cuban regime is entangled in its clumsy strategies. The announcement that they are going to a war economy —when they have always been one— has a clear objective: to blame the embargo for the ills that afflict the Cuban economyand to try to influence the strategists who dictate the Biden Administration’s policy towards Cuba to somehow loosen the sanctions currently in force and the embargo.”
  • The U.S. “embargo has little weight in the collapse of the Cuban economy,since in practice the country that supposedly blocks them is one of their main suppliers, not only of food products, but also of financial capital (remittances) that Cuba acquires abroad. For example, the United States is the main supplier of chicken to the Island. 95% of the remittances that arrive in Cuba come from the United States.”
  • “It is obvious that the collapse of the Cuban economy and the multi-systemic crisis that is ravaging the country is a purely internal problem. The inflationary crisis that is ravaging the country, plus the rest of the crises that are occurring in the internal economy: the collapse of the transportation system, the collapse of the energy matrix, the collapse of the water supply, the collapse of the health system, the lack of food and medicine, the housing problems, the low agricultural production, the shortage of food products and other types of products, are the sole and exclusive responsibility of the Cuban regime. Its policy of coercion of citizens, based on terror, by limiting their rights to political and economic freedom, freedom of association, expression and movement.”
  • “The only way to stop the inflationary explosion and all the ills that plague the country’s economy is to get out of this parasitic and hegemonic system under which the Castro family has been exploiting Cubansand stealing the country’s wealth for 65 years.”

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[1]   Morales, ‘War economy’: the Cuban regime’s psychological torture mechanism, Diario de Cuba (July 12, 2024).

 

More Cuban Comments on J11 Anniversary

Michel Suarez, a journalist for Los Puntos a Las ies, offered the following comments on the third anniversary of J11.[1]

“Three years after the historic protests of July 11 and 12, 2021 in Cuba , the living conditions of imprisoned protesters have worsened, in a scenario of blackouts, lack of food and more repression , activists and journalists denounced in the program Los Puntos a las Íes , from DIARIO DE CUBA.”

“There are more complaints about mistreatment and retaliation for having denounced the conditions in prison, and the State has not undertaken any procedure to review the processes and violations of guarantees that occurred during the trials and the subsequent sanction,” said Laritza Diversent, executive director of Cubalex.”

“Javier Larrondo, president of Prisoners Defenders, noted that between July 2021 and June 2024, his organization counted 2,331 political prisoners in Cuba, with 1,573 new additions to the list during the three years.”

“’Over the past 12 months, the trend has continued with more than 15 new people being imprisoned each month , so the list continues to grow and repression is increasing in Cuba without any apparent restraint.’ the activist denounced.’

“Journalist Waldo Fernández Cuenca described the current situation as ‘very complicated, because there is still a lot of repression.’ He recalled that ‘many relatives do not want to talk to the press, because they are still afraid and do not want to report.’”

“Cubalex announced the upcoming publication of a study on retaliation against prisoners and their families for reporting abuses from prison . ‘There is a significant increase compared to 2022,’ Diversent said.”

“For Fernández Cuenca, the international reaction has been ‘forceful, especially from democratic countries,’ but Diversent considered that ‘there is still much to do, because the international community still does not have enough information to provide such solidarity.’”

“Assessing the provisional repressive data for the first half of 2024, offered by the Cuban Observatory of Human Rights – 1,792 repressive actions, of which 432 were arbitrary arrests – Waldo Fernández considered that ‘the conditions are in place for another social outbreak’.”

“’This has always been there after July 11, and it has been seen with protests in Nuevitas, Santiago de Cuba, Bayamo, Matanzas, Caimanera… And now, if the blackouts and chronic shortages continue, there will be new protests.’ warned the journalist.”

“At the end of the program, [Laritza] Diversent said that in Cuba ‘we are facing a humanitarian crisis’ due to the State’s demonstrated inability to resolve the basic problems of the population.”

“’People will go out to seek sustenance and demand that the government resolve their situation. If they cannot do so through official channels, protest is the only remedy left to them,’ said the director of Cubalex.”

     Other Comments

Several Cuban and international civil society organizations said that “more than 650 Cubans remain in prison for [the J11 protests]. And this April “the Cuban regime threatened “to apply severe sanctions, including the death penalty” to people who promoted or participated in demonstrations.[2]

Juan Antonio Blanco says that “this great national rebellion “showed that the majority of the [Cuban] population rejected a failed and repressive regime. The idea that the people lived happily in that society was a fabricated fallacy exported to the world. . . . The great lesson that was reiterated on July 11 is that nothing is achieved from a dictatorship without confronting it. . .  J11 brought about—finally—the long-delayed approval of MSMEs . . . [and] led the government to consider that by facilitating a mass exodus to the US it would get rid of all the rioters and even reap financial benefits.” . . . [Yet] the regime has not metabolized the essence of the new phenomenon that it is facing” and [all] the country’s laws have been strengthened to penalize the slightest expression of opposition, but also of dissent. . . . To gain governability, the only thing that could be done is to change the governance regime, the system of government that has ruled until today and that remains basically totalitarian.” [3]

Emilio Morales says Cuba “has been in a state of war economy for more than six decades; it is not something that suddenly emerged at the last minute. The war economy is the very essence of the system, it is its genetic basis, it is the matrix of control that dictator Fidel Castro implemented since the triumph of the revolution in 1959 and that has lasted from then until today. It was the most effective way to achieve citizen control. Very simple: it was necessary to eliminate all sources of wealth creation in the hands of citizens, take control of them in their entirety and find someone to blame for the economic debacle that would follow.”[4]

Now, according to Morales, “the Cuban economy is a disaster, its industries are in ruins, its banks are bankrupt, the state enterprise is totally decapitalized, foreign investment is scarce . . . more than 80% of the population lives in poverty, the country practically does not export because it does not produce. The productive forces are gagged by the system, by a legal system that does not allow free enterprise and limits the generation of wealth by citizens. Today the country depends on imports of products and raw materials, but does not have the financing to maintain them, because it has lost its lines of credit for not paying its external debt with creditors. This, added to the debacle of agricultural production has led to a deep shortage of products that has generated the worst inflationary crisis in the history of the country.”

Morales concludes, “The only way to stop the inflationary explosion and all the ills that plague the country’s economy is to get out of this parasitic and hegemonic system under which the Castro family has been exploiting Cubans and stealing the country’s wealth for 65 years.”

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[1] Suarez, Third anniversary of 11J: ‘The only remedy in Cuba is protest,’  Diario de Cuba (July  9, 2024).

[2] More than 650 Cubans remain in prison for the 11 J protests, three years later, Diario de Cuba (July 12, 2024).

[3] Blanco, Cuba, three years after 11J, Diario de Cuba ( July 11, 2024)

[4] Morales, ‘War economy’: the Cuban regime’s psychological torture mechanism, Diario de Cuba (July 12, 2024).

 

 

Cuba’s Worsening Economic and Political Crisis 

Emilio Morales, a Cuban who has had wide-ranging marketing experience on the island, is now the President and CEO of Havana Consulting Group, a Miami-based consulting firm specializing in market intelligence and strategy for U.S. and and non-U.S. persons doing business in Cuba.[1]

Morales has provided a detailed analysis of Cuba’s worsening economic and political crisis.[2] The following is part of that analysis.

“The multi-systemic crisis that overwhelms Cubans and that has been caused by the ineptitude and mediocrity of those in power (shielded by lunatic ideological fanaticism and the ambition to control all the country’s wealth, leaves no room to make structural changes that are required to get out of the crisis) has generated a chaotic situation that seems to have no way out.”

‘The country is bankrupt, it has no lines of credit, its energy matrix is ​​collapsed, the three main areas of income have fallen precipitously: tourism, remittances and exports of medical services. The agricultural system is practically paralyzed, the sugar industry is destroyed. The health system, the education system and the transportation system suffer the same fate. There is nothing left to destroy. The only thing that is increasing is poverty and citizen anger, which so far in the last two years more than 600,000 Cubans have resolved by leaving the country.”

“Faced with this reality, the ruling leadership has postponed any forum for debate that exists in the political structures authorized in the country to address the economic, political and social issues that affect the country and its citizens. Months ago, the party apparatus suspended the Second National Conference of the Party, invoking the need to ‘be consistent with the economic situation of the country.’ Some time later, the Council of State announced the suspension for the second consecutive quarter of the so-called Accountability Assemblies of the delegates to his voters, an activity through which the Castro regime has tried for decades to illustrate its alleged model of ‘popular democracy’.”

“In other words, Cubans are mired in poverty, and the regime has closed the forums where they can channel their complaints, even though these have never really worked and have always been pure circus. But the leadership no longer even dares to put on its circus.”

“In this sense, the call for unity made by Raúl Castro on January 2, meant a strong alarm signal. At such a crucial moment, when what the people need is a message of hope, the nonagenarian dictator used his speech to instill fear in the already decimated partisan troops and in the military who no longer believe in the obligatory loyalty and obedience for which They once swore an oath to which they have been subjected for decades. Raúl Castro knows that this is the last bastion that apparently keeps them in power. It is what he has left before leaving this world, in his last-minute fight to avoid the collapse of the legacy that the revolution has kept alive with the historical generation.”

“Without a doubt, the country is not only experiencing a great multisystem crisis, it is also experiencing a great leadership crisis. In the ranks of the PCC and in the Armed Forces themselves there is a great feeling of discontent, and a high level of fatigue that manifests itself in apathy, harsh criticism of the system and the actions of the country’s leaders. This explains Raúl’s defeatist speech on January 2, calling for unity that no longer exists, and remembering that he will get out of the way of anyone who opposes the changes they order.”

“It is obvious that Counterintelligence has deeply penetrated the unrest that exists right now in the military and partisan ranks themselves . Hence, the sudden operation to reverse the package. A rebellion like the one on July 11, 2021 with the accompaniment of dissatisfied soldiers and militants of the party in rebellion would be the end of the dictatorship, and that reality is taking a toll on Saturn in these crucial moments.”

“GAESA collapses and the Russian bailout evaporates.”[3]

“The manifest insecurity at the top of power is related, among other factors, to two key factors: the lack of financial resources and the absence of a patron to keep it afloat at this stage of such political vulnerability. In this sense, the financial collapse of GAESA and the evaporation of the Russian bailout have suddenly triggered an increase in the level of vulnerability that the Cuban regime presents today. Certainly the largest it has had in more than six decades of communist dictatorship.”

“GAESA’s financial collapse is a key factor. In this sense, it should be noted that the death of General Luis Alberto Rodriguez López Callejas, CEO of GAESA, has generated a great disaster in the megaholding of the Cuban oligarchs. The verticality in decision-making and the management of the country’s finances and investments at its own convenience has turned out to be an indecipherable riddle for the substitutes that Raúl Castro has placed in his replacement strategy. Apparently no one gives a clue about how GAESA is managed.”

“At first glance, internally there is disorder, abandonment, undersupplied stores, and management personnel setting up their own MSMEs . A kind of mafia stampede is taking place, trying to create new small fiefdoms. The loss of suppliers, the company’s large debts with them, and the Government’s immobility in making decisions have generated an internal piñata that does not seem to be controlled. The level of control that existed in the company when López Calleja was there has disappeared. This is a very strong sign of internal collapse, of breaking the chain of command.”

“What happened recently at FINCIMEX on the eve of the package, with the issue of computer systems that control banking connections and the issuance of magnetic cards, is a good example of the breakdown of order within GAESA. As a result, the Western Union company has had to suspend remittance shipments to the Island until further notice and the issuance of cards for the sale of gasoline in dollars has stopped.”

“Obviously, something big is happening internally at GAESA . The last-minute problems that arose with their computer systems paralyzed the operations of stores, gas stations and remittance shipments. This unusual misfortune “coincided” with the abrupt abortion of the package, which has generated countless speculations. The truth is that a big sinkhole has suddenly occurred in GAESA and this further stirs up the uncertainty of what may happen in the coming days.”

“On the other hand, the announced Russian rescue has been much ado about nothing. Apparently the Russians do not trust the twisted Cuban legal system and have contained the investment drive that initially seemed to encompass several of the most important sectors of the Cuban economy. However, nothing is moving in the direction of investments.”

“Given the little movement seen so far, it is understandable that the Russian side is being very cautious when it comes to making decisions about million-dollar investments on the Island . The Russian side knows perfectly well that the Cuban regime is not a reliable partner in economic terms. On the other hand, it has realized the precariousness of the Cuban model and the primitive mentality when doing business on the part of the Cuban nomenclature. In that sense, the old and obsolete Cuban economic model does not fit with the Russian model. This disparity does not allow for faster progress in the negotiations. That is why everything remains speculation and promises that do not seem to be fulfilled. In reality, the true rapprochement has been on the military geopolitical level, in the game of the new Cold War unleashed by the Russian invasion of Ukraine, and proven in practice with the support that the Cuban regime has given to Russia by sending mercenaries. Cubans to war and making Cuban territory available to receive visits from Russian bombers and submarines carrying nuclear weapons.”

“Very little has happened, however, in the economic and commercial sphere. A company has been created in Mariel for the storage and distribution of merchandise, but so far nothing moves in that warehouse. Russian banks have been connected with Cuban banks to allow the use of Russian cards on the Island. The most significant thing has been the increase in the number of flights from Russia to Cuba, which has meant an increase in Russian tourism by 3%. compared to the previous year. There have been approaches to explore investments in the energy sector, but nothing concrete so far. Not even Russian oil reaches Cuba anymore . Outside of that, from a commercial point of view nothing significant has transpired.”

“The current situation in the country is extremely critical. Without a doubt, the current crisis far exceeds that of the Special Period, at the beginning of the 90s. This is a multi-systemic crisis for which the Government has not yet found a way out. The incompetence of the ruling leadership that holds power, added to the lack of existing leadership in the country, the state of bankruptcy in which finances find themselves, the deterioration of the main industries, the 75% decrease in the income of the economy compared to 15 years ago, have buried all hope in Cubans for a solution to this crisis. As a consequence, more than 80% of the Cuban population today lives in poverty.”

“At a time when GAESA, the oligarchic octopus that controls 95% of the finances and more than 70% of the main sectors of the country’s economy, is collapsing internally and the Russian financial bailout evaporates, everything indicates that the country It is heading towards total collapse. Faced with this reality, the Cuban people must understand that the sudden abortion of the package was a desperate action to avoid an imminent large-scale social outbreak, which would surely be joined by dissatisfied partisan militants and a large number of dissatisfied military personnel. Something very different from what happened on July 11, 2021.”

“The fear that the ruling leadership has of the people’s anger is evident . The nonagenarian dictator is very clear and knows that, given the current circumstances, the probability that the system will break down before his own death is real. That is why he has launched a plan B, removing ministers to try to clean up the face of the Government. However, the Cuban people no longer swallow this type of makeup as solutions to appease emergencies, which can only be overcome with a change in the system.”

“Meanwhile, the uncertainty of what may happen on the Island in the coming days increases to the extent that blackouts, shortages of fuel, food and medicine, as well as inflation, continue to increase.”

“Not one, but several black swans flutter over the sky of the dying revolution, at a time when the internal fissures within the ranks of power are increasing and putting the Palace oligarchs in maximum tension. The Cuban people and the living forces of society must be alert to events that may occur at any moment. When the river sounds it is because it brings stones.”

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[1] Emilio Morales, Biography, Linkedin.

[2] Morales, Why is the Cuban regime aborting the package with such urgency?, Diario de Cuba (Feb. 17, 2024).

[3] “Grupo de Administración Empresarial S.A. (GAESA) is a Cuban military-controlled umbrella enterprise with interests in the tourism, financial investment, import/export, and remittance sectors of Cuba’s economy. GAESA’s portfolio includes businesses incorporated in Panama to bypass CACR-related restrictions.” (U.S.Treasury Dept., Press Release: Treasury Identifies Cuban State-Owned Businesses for Sanctions Evasion (Dec. 21, 2020).)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cuba’s Current Economic and Political Crises

Introduction[1]

At least by early December 2023, it was evident that Cuba was experiencing a horrible economic crisis. One commentator put it this way: “Cuba is going through the worst crisis it has experienced in decades, with widespread shortages of food and medicines, rolling blackouts and a sky-high 400% annual inflation rate. The calls on the communist leadership to open up the economy to the market are getting loud, even from close political allies.”

t also was a Cuban political crisis on how to respond to this economic crisis.  As John Kavulich, the president of the U.S.-Cuba Trade and Economic Council based in New York City, said in early December, Cuban “bureaucrats have become more reluctant to take risks since there is uncertainty about who is really in charge.” They are “either frightened or untrusting, and certainly not risk-takers.”

The most vivid criticism of this situation came from Roberto Alvarez-Quinones, a Cuban journalist, economist and historian who after working in Cuba for Granma and Cuban television stations has been doing that work in Los Angeles, California. He said, “Never in the history of the entire West has there been such an overwhelming economic and social crisis that it has affected practically 99% of the total population of a country, without having been caused by a natural catastrophe or a war, but by the Government of the nation.”

Cuban Government’s Response[2]

 At a December 20-22, 2023, meeting of Cuba’s National Assembly, the Minister of the economy and planning, Alejandro Gil Fernandez, reported that for 2023 Cuba’s GDP fell almost 2%; exports were $770 million below predictions; food production was less than that for 2022;  tourism, although more than the prior year, had a yield only 69% of the 2019 figures; overall production was down; there were shortages of supplies and fuels; and health care and education sectors where harmed by loss of workers to emigration.

Fernandez attributed Cuba’s inflation to international price hikes, the government’s release of money to finance its budget deficit, fewer goods being produced, the agricultural sector being burdened by labor shortages, high costs and low yields and Cuba being forced to import over 70% of the food that [was] being consumed.

Prime Minister Manuel Marrero Cruz said the government’s lack of control over production and distribution “adversely affects production by state entities and lets currency exchanges on the illegal market determine the pricing of products from the non-state sector.”

President Diaz-Canel, of course, criticized the U.S. embargo (blockade), but admitted that the Cuban government had made some errors in the “design and implementation of currency unification,” “approving new economic actors without performance norms having been established” and “the complexity of making decisions in a context of extreme tension [and of] commitment to preserving social conquests.”

All of these “difficult realities” were summarized by W.T. Whitney, Jr. (an U.S. political journalist focusing on Latin America) as “the adverse effects of diminished tourism, inflation, and emigration; social inequalities based on varying access to resources; production stymied by shortages of resources; inadequate food production; lack of buying-power for most Cubans, and for importing necessary goods; and the near impossibility of securing foreign investment.”

To meet these problems, Whitney said, Cuba was preparing these responses: “further decentralization of political and economic administration; cutbacks on the expenditure of central government funds; reduced subsidies for the purchase of water, fuel, transport, and electricity by business entities; adjustment of import tariffs to favor the availability of resources for production; capturing more tourist dollars; protecting state-operated production entities; fixing prices; and producing more food.”

Moreover, Whitney said, the U.S. needs to cancel its embargo (blockade) of Cuba and remove Cuba from the U.S. list of countries that are sponsors of international terrorism.

Criticism of Cuban Government Responses[3]

Javier Perex Capdevila, Doctor of Economic Sciences and Professor at the University of Guantanamo, said the Government measures are based on cutting subsidies, but “there are no measures to get out of economic stagnation and . . . to reduce inflation, accompanied by a fiscal deficit that entails generating more liquid money which does not stimulate the economy, but rather inflation. The measures that have been announced in a confusing and ambiguous manner are supposed to achieve macroeconomic stabilization, but that is not a real solution . . and there is no guarantee that they will work.”

In addition. Capdevila noted that increases in long-distance transportation rates will adversely affect many people who have to use such transportation to reach competent medical personnel. He said, “You cannot save a country if you do not save the people.”

Pedro Monreal, a Cuban economist, criticized the purported justification for increasing black market prices for currencies by saying the government had not designed that market. Monreal said this was “a fig leaf to cover up the poor design of the ‘organization that made this informal market necessary.’”   The Cuban State did something worse in 2020 when “it designed a defective official exchange market with an overvalued [peso].” Monreal also “predicted more inflation” this year with a government deficit of 18.5% of gross domestic product.

Cuban economist Emilio Morales commented on the continued emigration of Cubans in 2023 while there was a 3.3% decrease in remittances to those on the island due to the need for those now in other countries to pay for their outbound transportation and expenses of living in other countries on their “march for family freedom.” Morales concluded that this result shows “the systemic crisis demands radical reforms and the entrenchment of the mafia regime in its totalitarian model blocks any possibility of survival. History teaches that bayonets cannot sustain a regime for long, indefinitely without fundamental reforms.”

The most recent news about Cuba’s laws affecting private enterprises was the January 16th announcement of new income tax regulations. Now “private sector employees will have to pay a 20% income tax on earnings above 30,000 Cuban pesos, about $109 per month. That’s a 15% tax rate increase from the previous scale set up in 2021, which imposed a 5% income tax for earnings over 9,510 Cuban pesos. Business owners must automatically deduct the tax payments monthly, the decree says.”

This recent announcement is in addition to the tax burden on Cuban private businesses: 35% tax on profits, a 10% tax on sales or services provided, a 5% payroll tax, a one percent revenue tax to support local governments and contributions to social security equal to 14% of workers’ salaries. Owners of the [private businesses] also have to pay up to 20% taxes on dividends.

Such private businesses “cannot hire more than 100 employees, they cannot be involved in economic activities handled by the state, such as telecommunications, and must import products and supplies through state companies working as intermediaries. According to the new regulations published this week, they can also be hit with price controls at any time ‘when circumstances advise it to achieve more favorable prices for the population.’”

At about the same time as this announcement of new taxes on private enterprises, the Cuban government announced a new “’ethics code’ for government officials and members of the Communist Party and similar organizations that mandate them to ‘be faithful to socialism,’ fight against the ‘genocidal’ U.S. embargo and ‘be loyal to the Cuban Communist Party, the Revolution… and to the Revolution´s Commander in Chief, Fidel Castro.”

Conclusion[4]

This blog consistently has advocated for U.S. repeal of the embargo (blockade) of Cuba and the U.S. designation of Cuba as a state sponsor of terrorism. However, all of the blame for Cuba’s current crises cannot be attributed to these U.S. measures. Indeed, the U.S. now is the sixth largest exporter to Cuba.

Moreover, now the U.S. is preoccupied with the Israel-Hamas and the Russia-Ukraine wars, problems with Iran, North Korea, China, Yemen and the Red Sea and the problems created by large number of immigrants at our southwestern border. As a result, the U.S. does not have the time and resources to devote to Cuba’s problems and U.S. policies regarding same.

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[1] Analysis of Cuba’s Current Economic Crisis, dwkcommentaries.com (Dec. 5, 2023); Almost All Cubans Suffer Worst Economic Crisis in the History of the Western Hemisphere, dwkcommentaries.com (Dec. 11, 2023);

[2] Whitney, A revolution in trouble: Cuba’s government, People’s World (Jan 8, 2024).

[3] ‘You can’t save a country if you don’t save the people.’ a Cuban economics doctor explodes in response to the package, Diario de Cuba (Jan. 13, 2024); Another rise in the price of the dollar and the euro on the Cuban black market, Diario de Cuba (Jan. 15, 2024); Emigration grows, but remittances to Cuba sink, Diario de Cuba (Jan. 16, 2024);Through resolutions, the Castro regime intends to stop the astronomical fiscal deficit that it approved, Diario de Cuba (Jan. 17, 2024); Reyes, The economic package opens a political crisis in the Government of Cuba, Diario de Cuba (Jan. 17, 2024); Torres, As the economy craters, the Cuban government hits private-sector workers with tax hike, Miami Herald (Jan. 18, 2024).

[4] E.g., posts listed in sections “Cuba: State Sponsor of Terrorism?” and “U.S. Embargo of Cuba” in List of Posts to dwkcommentaries—Topical: CUBA [as of 5/4/20]; Cuba Still on U.S. List of State Sponsors of Terrorism, dwkcommentaries.com (Dec. 2, 2023);U.S. Senators and Representatives Demand Ending of U.S. Designation of Cuba as State Sponsor of Terrorism, dwkcommentaries.com (Jan. 12, 2024); COMMENT: Another Congressman Calls for Ending Cuba as a State Sponsor of Terrorism, dwkcommentaries.com (Jan.13, 2024); U.S. Increasing Exports to Cuba, dwkcommentaries.com (Jan. 12, 2024).

Cuba To Legalize Small and Medium-Sized Private Businesses

On May 24, the Communist Party of Cuba announced that its Seventh Congress this past April had decided that the Party supports legalization of small and medium-sized private businesses, a move that could significantly expand the space allowed for private enterprise.[1]

The Party’s report said categories of small, mid-sized and “micro” private business are being added to its master plan for social and economic development. These categories of business will be recognized as legal entities separate from their owners, implying a degree of protection that hasn’t so far existed for self-employed workers.

The Party justified this decision by saying, “Private property in certain means of production contributes to employment, economic efficiency and well-being, in a context in which socialist property relationships predominate.”

Until now, the government has allowed private enterprise only by self-employed workers in several hundred established categories like restaurant owner or hairdresser. Many of those workers have become de-facto small business owners employing other Cubans. But there are widespread complaints about the difficulties of running a business in a system that does not officially recognize them. Low-level officials often engage in crackdowns on successful businesses for supposed violations of the arcane rules on self-employment.

Cuban business owners and economic experts said they were hopeful the reform would allow private firms to import wholesale supplies and export products to other countries for the first time, removing a major obstacle to private business growth. Most of these de facto businesses currently are forced to buy scarce supplies from state retail stores or on the black market, increasing the scarcity of basic goods and driving up prices for ordinary Cubans. Many entrepreneurs pay networks of “mules” to import goods in checked airline baggage, adding huge costs and delays.

“This is a tremendously important step,” said Alfonso Valentin Larrea Barroso, director-general of Scenius, a cooperatively run economic consulting firm in Havana. “They’re creating, legally speaking, the non-state sector of the economy. They’re making that sector official.”

Similar reactions came from people in the U.S.

“It is about time,” said Emilio Morales, a former senior official in a Cuban government commercial conglomerate who is now president of the Havana Consulting Group in Miami. “They are realizing that the economy is not going to move without this.” Cuban leaders “have seen that all their [international] allies they had are disappearing.”

Richard Feinberg, an economist at the University of California San Diego., said these changes should enable private companies to open bank accounts, do business with state-owned enterprises and engage in international trade. The move should give entrepreneurs “all sorts of rights and capabilities that are critical to running a business.”

These changes will require new legislation by the country’s National Assembly, which is expected to hold one of its biannual meetings by August.

The Party’s report was the first comprehensive public accounting of the Congress, which was closed to the public and international press. It was made publicly available for sale in Cuba in a special tabloid with an announcement that the report will be “democratically debated by the militancy of the Party and the Young Communist League, and representatives of mass organizations and large sectors of society in order to enrich and perfect the report.” The full report has not yet been found on the Internet.[2]

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[1] Weissenstein, Cuba to legalize small and medium-sized private business, InCuba Today (May 24, 2016); Assoc. Press, Cuba to Legalize Small and Medium-Sized Private Businesses, N.Y. Times (May 24, 2016); Althaus, Cuba Moves to Legalize Small-and Medium-Size Businesses, W.S.J. (May 24, 2016); de Llano, Cuba announces that legalize SMEs, El País (May 24, 2016).

[2] For sale tabloid containing special projects on the Conceptualization of Social and Economic Model and the foundations of the National Development Plan, Granma (May 23, 2016).