The major event of the first day (April 16) of the four-day Seventh Congress of the Communist Party of Cuba was the two-hour, live televised address by Raúl Castro, the First Secretary of its Central Committee (and also President and General of the Army).
A word of caution is necessary for my interpretation of what Castro had to say through an English translation and through his way of speaking about and around an issue. I especially invite corrections and amplifications.
The Congress’ Agenda
The Congress, Castro said, would consider theses principal draft documents: (1) a summary of the performance of the national economy over the five-year period from 2011-2015, including a report on the results of the implementation of the economic and social policy guidelines of the Party and Revolution and updating of the guidelines for the period 2016-2021; (2) the fundamental elements of the national economic and social development plan through 2030, the nation’s vision, priorities and strategic sectors; (3) the conceptualization of Cuba’s socialist socio-economic model of development; and (4) progress towards meeting the objectives agreed upon by the First Party Conference and directives of the Party Central Committee’s First Secretary.
These documents, he insisted, must not be considered finished works, or an ideological prism, but will be enriched during the Commission’s debates, and subsequently submitted to periodic review, maintaining a dynamic vision of their content.
On this occasion, he clarified, a major process of public debate and consultation on these documents was not held, because they are considered a continuation of the lines agreed upon five years ago, to update the country’s socio-economic model
Additionally, he said, these documents reflect the collective work of many different professionals, and were analyzed during two Central Committee Plenums, a process which led to the submission of 900 opinions and suggestions, included in the latest version.
Raúl noted that this is the first time a Party Congress has considered the conceptualization of the country’s socio-economic model, one which outlines the essential foundations of the society to which Cubans aspire, to be reached via the process of updating underway.
The conceptualization and the basis of the National Economic and Social Development Plan through 2030, following their analysis during the Congress, will not be approved at this event, but rather will go on to be debated by Party and Young Communist League members, representatives of mass organizations and different sectors of society, with the aim of enriching and perfecting said plan, Raúl noted.
Status of the Guidelines Established by Sixth Congress
Raúl noted that when the economic Guidelines were adopted five years ago at the prior Party Congress, it was made clear that “the process of implementation will not be an easy path, free of obstacles and contradictions,” and that the fundamental transformations in the updating of the economic model would take over five years to implement.
Efforts to implement the Guidelines have been systematic, he stated, although only 21% of the 313 approved guidelines had been implemented, while 77% are in that process and 2% have yet to be initiated. However, he admitted, the slow implementation of legal regulations and their assimilation have delayed approval of approved policies.
“The main obstacle we have faced, just as we had predicted, is the issue of out-dated mentalities, which give rise to an attitude of inertia or lack of confidence in the future. There also remain, as was to be expected, feelings of nostalgia for the less difficult times in the revolutionary process, when the Soviet Union and socialist camp existed. At the other extreme there have existed veiled ambitions to restore capitalism as a solution to our problems.” (Emphasis added.)
“When evaluating the pace of transformations underway, we must not lose sight of the fact that in Cuba, we will never allow so-called ‘shock-therapies’ to be applied, frequently used to the detriment of the poorest sectors of society. This premise, which corresponds to our principle that no one will be abandoned to their fate, greatly affects the speed of progress made in the process of updating the country’s economic model, while the impact of the global financial crisis and specifically the effects of the economic blockade against Cuba, are also undeniable.” (Emphasis added.)
“Neoliberal policies which encourage the accelerated privatization of state property and social services, such as health, education and social security, will never be applied under Cuba’s socialist model. Even with its current economic limitations, Cuba has preserved and perfected social services for the population in the spheres of Education, Health, Culture, Sports and Social Security. However, we must continue to stress the importance of progressively improving the quality of these services.” (Emphasis added.)
“Decisions made with regard to the Cuban economy will never, under any circumstance, mean a break with the ideals of equality and social justice of the Revolution and much less rupture the strong union between the majority of the people and the Party. Neither will we allow such measures to generate instability or uncertainty within the population.” (Emphasis added.)
Cuba’s Economic Performance
“Amid an unfavorable international environment, characterized by the global economic crisis that began at the end of the last decade, in the five-year period between 2011-2015 the gross domestic product of our country grew at an average annual rate of 2.8%.” But this was “not enough to ensure the creation of the productive and infrastructure conditions required to advance development and improve the population’s consumption.” (Emphasis added.)
Indeed, “wages and pensions are still unable to satisfy the basic needs of Cuban families. Although the average wage increased by 43% in the period 2010-2015, this was concentrated in the last two years, a result of decisions benefiting Public Health workers, foreign investment, the sports sector and through the decentralization of state enterprise sector payment systems. However, it has not been possible to extend wage increases outlined in the approved policy to the majority of budgeted activities.”(Emphasis added.)
Although “a set of measures are being introduced designed to remove obstacles that discouraged the different productive forms of our agriculture, . . . these have not yet matured, and the growth rate of agricultural production is still insufficient. . . . [As a result,] on average, each year the country must spend approximately two billion dollars on food imports, half of which we could produce in Cuba and even export the surplus.” (Emphasis added.)
There has been an “increase in prices for agricultural products.” The “fundamental factor in the rising prices resides in insufficient production levels unable to satisfy demand.” Rising prices, however, have resulted in “the resurgence of a trend of speculation and hoarding, benefiting the few and negatively impacting the majority of the population.” The Party and the government “cannot remain unresponsive to citizen’s frustration at the unscrupulous manipulation of prices by intermediaries whose sole consideration is to make more money.” (Emphasis added.)
As a result, “despite the reduction or elimination of certain subsidized basic family goods, that is, from the famous ration book, which are now available in the unregulated market at non-subsidized prices, a high number of basic products and services continue to be subsidized.” (Emphasis added.)
“The export of medical services and tourism continue to expand, contributing more than half of the hard currency earnings of the country, while the influence of [Cuba’s] traditional exports [nickel], hit by falling prices, was reduced.”
“The undeniable international prestige of Cuban medicine . . . holds huge potential which is still not exploited in all its dimensions, for example the provision of medical services to foreign patients in Cuba, for which investments are being made which will also ultimately benefit the Cuban population, which accesses public health care free of charge.” (Emphasis added.)
“In the national Public Health system, a series of measures designed to reorganize, rationalize and regionalize services is being carried out, with the aim of improving the health of the population, the quality of patient care and satisfaction, and the efficiency and sustainability of the sector, while also ensuring its continued development. The perfecting of management structures and adjustments to staff rosters led to a reduction of 152,000 [physician] positions and over 20,000 doctors reallocated. These decisions, in addition to others geared toward ensuring a more rational use of resources, saw the Health budget decrease by more than two billion pesos.” (Emphasis added.)
“In regards to tourism, [since 2011], more than 10,900 new rooms were put into operation and a further 7,000 were renovated, complemented by an increase of over 14,000 rooms rented in CUC by self-employed workers, and the deployment of additional hotel facilities and services, which have facilitated the continued upward trend in this important branch of the economy, which has great potential to promote the development of other sectors and generate production linkages.”
Future Issues for the Cuban Economy
“Cuba’s increasingly aging population and high number of people migrating from the countryside to the cities, due to a series of socio-economic and cultural factors which are difficult to reverse, represent a strategic problem to the nation’s development. A policy to combat this situation was created, which included 76 measures and 252 actions, to be implemented gradually and in accordance with the performance of the economy with results seen over the long-term.” (Emphasis added.)
Eliminating the duel currency system
Eliminating Cuba’s dual currency system–the Cuban Convertible Peso (CUC) and the Cuban Peso (CUP)–will continue to be difficult but necessary for “updating of the Cuban economic model.” Such a change “will contribute to establishing the necessary conditions to overcome the damaging effects of egalitarianism and fulfilling the socialist principle: ‘From each according to his ability, to each according to his work.’” (Emphasis added.)
Such a change will allow correction of the so-called “inverted pyramid” situation where lower-skilled workers like hotel bus boys and gas pump operators earn more through tips In hard currencies and illegal sales of gasoline than higher-skilled workers like physicians. This lamentable situation “does not allow work to be compensated in a fair manner, in accordance with its quantity, quality and complexity, or living standards to reflect citizens’ legal income.” This situation also generates “an unmotivated workforce and cadres, which also discourages employees from seeking out positions of greater responsibility.” (Emphasis added.)
Maintaining state ownership of the means of production
“We reaffirm the socialist principle of the predominance of the ownership of all the people over the basic means of production, as well as the need to relieve the State of other activities not decisive to the development of the nation.” Yet “state employment was reduced from 81.2% in 2010 to 70.8% in 2015.” (Emphasis added.)
“In socialist and sovereign Cuba, the ownership of the basic means of production by all the people is and will continue to be the main form of the national economy and the socio-economic system and therefore constitutes the basis of the actual power of workers.” (Emphasis added.)
“In an effort to strengthen the role of the socialist state enterprise and its autonomy, we have advanced in the separation of state roles from those of enterprises, gradually modifying relations between government bodies and enterprises, with directors afforded greater faculties in order to successfully carry out their responsibilities.”
“The state enterprise system, which constitutes the main management mode in the national economy, finds itself in at a disadvantage when compared to the growing non-state sector which benefits from working in monetary system with an exchange rate of one CUC to 25 CUP, while the state system operates on a basis of one CUC to one CUP. This serious distortion must be resolved as soon as possible and a single currency reestablished.” (Emphasis added.)
“This anomaly in addition to the modest performance of our national economy, has prevented us from making substantial progress in the implementation of guidelines linked to the gradual elimination of unnecessary gratuities and excessive subsidies, bearing in mind that a general salary increase for all workers has still not been achieved, nor has the stable supply of certain goods in the unregulated market.” (Emphasis added.)
Encouraging private ownership of property
“One of the novel aspects that has attracted the most attention and even some controversy, is the question of property relations, and logically so, as depending on the predominance of one form of ownership over another, a country’s social system is determined.”
The recognition of the existence of private property has generated more than a few honest concerns from participants in the discussions prior to the Congress, who expressed concerns that on doing so we would be taking the first steps towards the restoration of capitalism in Cuba. In my role as First Secretary of the Central Committee of the Party, I have the duty to assert that this is not, in the least, the purpose of this conceptual idea.”
“This is precisely about . . . calling things by their name and not hiding behind illogical euphemisms to mask reality. The increase in self-employment and the authorization to contract a workforce has led in practice to the existence of medium, small and micro private enterprises, which today operate without proper legal status and are regulated under the law by a regulatory framework designed for individuals engaged in small business conducted by the worker and his/her family.
“Guideline No.3 approved by the 6th Congress and which we intend to maintain and strengthen in the updated draft categorically specifies that ‘In the forms of non-state management, the concentration of property shall not be allowed’ and it is added ‘nor of wealth;’ therefore, the private company will operate within well-defined limits and will constitute a complementary element in the economic framework of the country, all of which should be regulated by law.” (Emphasis added.)
“We are not naive nor do we ignore the aspirations of powerful external forces [i.e., U.S.] that are committed to what they call the ‘empowerment’ of non-state forms of management, in order to create agents of change in the hope of putting an end to the Revolution and socialism in Cuba by other means.” (Emphasis added.)
“Cooperatives, self-employment and medium, small and micro private enterprise are not in their essence anti-socialist or counter-revolutionary and the enormous majority of those who work in them are revolutionaries and patriots who defend the principles and benefit from the achievements of the Revolution.” (Emphasis added.)
Encouraging private enterprise
Non-state employment increased from 18.8% in 2010 to 29.2% in 2015. “Just over half a million Cubans [now] are registered as self-employed; they provide services and generate much-needed production. An atmosphere that does not discriminate against or stigmatize duly authorized self-employment is being defined; however there have been cases of corruption and illegalities, the confrontation of which has proved, once again, to be too little too late, as is the example of evasive behaviors in terms of tax payments and illegal exercise of prohibited activities.” (Emphasis added.)
“Just as we aspire to greater efficiency and quality in state sector production and services, we also favor the success of non-state forms of management, on the basis, in all cases, of strict compliance with current legislation.” (Emphasis added.)
“The creation and operation of non-agricultural cooperatives continues in an experimental phase, mainly in trade, gastronomy, technical services, mini-industry and construction.” (Emphasis added.)
“Within this activity, some achievements have also been made, but deficiencies have likewise been revealed, which stem from insufficient preparation and dissemination of the approved policy and regulations issued . . .– inadequate organization and accounting control, price increases and limited access to supplies and services in the wholesale market.”
“At the same time, the management and control of this experiment by the corresponding bodies has been unsuitable, which is why we decided to focus efforts on consolidating already created cooperatives and to advance gradually.”
Recognizing the role of the market
“Recognizing the market in the functioning of the our socialist economy does not mean that the Party, government and mass organizations are no longer fulfilling their role in society – which is to combat any situation which may harm the population, nor must we adopt the attitude that ‘t’s a government matter, so I can’t get involved.’ We must remember that I, the party, I, the government, at any level, I, a member of a mass organization am involved in solving any problem that might affect our people.” (Emphasis added.)
“The introduction of the rules of supply and demand is not at odds with the principle of planning. Both concepts can coexist and complement each other for the benefit of the country, as has been successfully shown by China’s reform process and the renovation process in Vietnam, as they call it. We have used the term updating to describe our process as we are not changing the fundamental objectives of the Revolution.” (Emphasis added.)
“Positive aspects of this process are the experiences seen in several provinces with the recent adoption of a series of organizational measures, among them, an increase in stockpiling in order to guarantee products in state markets, prompting a reduction in supply and demand chain prices: a matter which requires constant monitoring by all institutions involved..”
Encouraging foreign investment
“The Foreign Investment Policy was approved, recognized as important and necessary to the development of the country, and a new law put into effect, which while offering incentives and legal protection to investors, also preserves national sovereignty, ensures the protection of the environment and rational use of natural resources.” (Emphasis added.)
“The Mariel Special Development Zone was built and offers additional incentives to attract national and foreign investors. The Zone also benefits from a legal framework and the necessary infrastructure to establish and expand production with the aim of generating exports and substituting imports; promoting exchanges of technology and management systems about which the country knows practically nothing; creating jobs and long-term sources of financing; and developing logistics to facilitate high levels of efficiency.”  (Emphasis added.)
“Without underestimating in the slightest the obstacles presented by the U.S. blockade and its extraterritorial application, we must do away with archaic prejudices toward foreign investment and continue to advance with the formulation, design, and establishment of businesses.” (Emphasis added.)
The destination of investments has changed substantially. “Five years ago the production and infrastructure sectors received 45% of investments, [whereas in 2015, it was] 70%. Furthermore, greater rigor and control in ensuring that investment plans are successfully carried out has also been seen, with an overall improvement seen in relevant indicators. However, issues still remain with regard to quality assurance and availability of a suitably qualified and motivated work force, while poor planning and a lack of comprehensiveness persist, the result of inadequate training, which leads to deadlines not being met and problems with the quality of work.” (Emphasis added
Limiting foreign indebtedness
“A series of measures aimed at the reorganization of the external finances of the country and in particular the restructuring of debt were implemented, an area in which significant results have been achieved which, together with the fulfillment of financial commitments made, contributes to restoring the international credibility of the Cuban economy and favors greater possibilities for trade, investment and financing for development.”
“We cannot pull back in this sphere and with this aim we must ensure a proper balance in the taking of loans and their structure, the payment of restructured debts, the current debt, and compliance with the plan. We must never again fall into debt.” Emphasis added.)
Issues for the Communist Party of Cuba
“In Cuba we have a single Party, of which we are proud, which represents and guarantees the unity of the Cuban nation, the main strategic arm on which we have relied to build the work of the Revolution and defend it from all kinds of threats and aggression. It is therefore no coincidence that we are attacked and demands made of us, from almost all over the planet, to weaken us, to divide us into several parties in the name of sacrosanct bourgeois democracy. These are concepts that should not give rise to confusion, not today, not ever. If they manage some day to fragment us, it would be the beginning of the end, never forget that! If they manage some day to fragment us, it would be the beginning of the end in our homeland, of the Revolution, socialism and national independence, forged with the resistance and sacrifice of several generations of Cubans since 1868.” (Emphasis added.)
The Party now has 670,000 members, which has declined, “impacted by the negative demographic trends affecting the country, a restrictive growth policy maintained since 2004, and shortcomings in efforts to train, retain, and motivate potential members. It is also true however, that this trend has decelerated over recent years.” (Emphasis added.)
“The existence of a single party presupposes stimulating the broadest and frankest exchange of views, both within the party organization and in its link to the grassroots with the workers and the population. The Party is obliged to permanently strengthen and perfect our democracy, for which it is essential to definitively overcome false unanimity, formalism and simulation. The Party has the duty to promote and guarantee the increasing participation of citizens in fundamental decisions of society. We have no fear of different opinions or disagreement, as only frank and honest discussion of differences between revolutionaries will lead to the best decisions. (Emphasis added.)
We know that the Party and the Revolution have the majority support of the people, this is a fact that nobody can deny, however, we are aware that in certain sectors of the population there are manifestations of a lack of commitment and interest in the affairs of our political life, and negative opinions remain regarding the merit of some members and cadres, as well as their disengagement from our people.” (Emphasis added.)
“In the most recent period we have seen an increase in actions aimed at fostering the values of a consumer society; division, apathy, discouragement, alienation, and a lack of confidence in the leadership of the Revolution and the Party, sowing a matrix of opinions that attempts to present us as a society without a future. (Emphasis added.)
“In these circumstances, it is necessary to strengthen intelligent, solid and systematic preventive work and raise the demands and supervision by the bodies responsible for confronting political and ideological subversion, and increase the combativity of members, vigilance in work places and ideological work with younger generations, strengthening the irreplaceable role of the family and school. I repeat: Strengthening the irreplaceable role of the family and school!”
“In the Central Report to the 6th Congress[ in 2011] I referred to the need to gradually undertake, without precipitation or improvisations, the creation of a properly prepared reserve of cadres, with sufficient experience and maturity to take on the new and complex tasks of leadership in the Party, the state and the government. I also expressed the benefit and need to limit the exercise of fundamental political and state positions to a maximum of two consecutive five-year terms, which will be determined by the Central Committee in the case of the Party and mass organizations, and our Parliament as regards the State and government. (Emphasis added.)
“I believe that this matter of strategic importance has also advanced, although the next five years, for obvious reasons, will be decisive and we must introduce additional limits on the composition of the higher bodies of the Party, that is to say, the Central Committee, the Secretariat and the Political Bureau, a transitional process that should be implemented and conclude with the celebration of the next Congress. This is a five-year period of transition to avoid doing things in haste. It is not about getting rid of one person to replace them with another who is 10 years younger and so on. We are behind, and what we want to do, precisely, is to ensure that this flows naturally, and it must be well stipulated in the laws or regulations to be established.”
We propose establishing 60 as the maximum age to join the Central Committee. (Emphasis added.)
The inclusion of younger alternate members on the Central Committee could also be established at another time. The idea is to have a method, a route, a proposal to ensure that we are never surprised by things,that they evolve naturally. In this case, in the future, new members must be less than 60 years of age. No one should think that if you can’t be at a certain leadership level of the country, you can’t do anything, but the experience of some countries has shown us that this is never positive, and even though it is a well-known secret, never forget, that during the final stage of the Soviet Union, over a short period of time, three First Secretaries of the Party died.” (Emphasis added.)
That is why we propose establishing 60 as the maximum age to join the Central Committee, and 70 to assume a leadership position in the Party, which in addition to the limit of two consecutive terms in political positions will guaranteethe systematic rejuvenation of the entire system of Party cadre, from the grassroots. And I repeat that subsequently this will need to be regulated precisely, because there will be those who at 75 or 80 years of age can undertake an important task, but not an important leadership activity, for obvious reasons, and because of the very experience with which we are speaking to you.” (Emphasis added.)
‘If this proposal is approved by the Congress, appropriate modifications will be made to the Party Statutes. We believe that this same policy must be implemented in state and government institutions, and in mass organizations.”
“In my case, it is no secret that my second term as President of the Councils of State and Ministers will conclude in 2018, and I will relinquish these responsibilities to whoever is elected.” Emphasis added.)
“These modifications in the area of positions and age limits on the assumption of leadership roles must be established in the Constitution of the Republic, which we propose reforming in the next few years, taking into account the important transformations associated with the updating of our economic and social model, and its conceptualization. Everything we have been doing must be reflected in the Constitution, at the moment that modifications which must be included are ready, and above all, when they have been discussed by the population.”
“The current Constitution, approved by popular referendum in 1976, 40 years ago, and partially reformed in 1992 and 2002, reflects historical circumstances, and social and economic conditions, which have changed with the passing of time, and the current implementation of the Economic and Social Policy Guidelines of the Party and the Revolution.”
“The process of reform, which must be previously approved by the National Assembly, in accordance with its constituent powers, implies broad popular participation, including the holding of a constitutional referendum.”
“This will be an opportunity to codify in our Magna Carta other issues which require a constitutional foundation.”
“I must emphasize that within the scope of these constitutional changes, we will propose reaffirming the irrevocable nature of the political and social system established in the current Constitution, which includes the leadership role of the Communist Party of Cuba in our society, which is Article 5 in the current Constitution.” (Emphasis added.)
Issues for Workers’ Central Union of Cuba (CTC)
“In any Western press agency where you might read something that refers to [the CTC] . . . they add in parentheses: ‘the only one,” as if that were a crime. They want to shape the world – you already know who I mean: the [U.S.] and all those accompanying them – to adjust the world to their advantage, that is what they want to do, and that’s why today we must be more alert than ever. They themselves have said: 50 years of blockade did not work and we could not isolate Cuba, on the contrary, we were running the risk of isolating ourselves in Latin America. We [the U.S.] must change that. And how [is the U.S.] . . . going to change this? With other methods, more difficult to combat. Hence the importance of these issues which must be sufficiently clear in our minds and in our people. (Emphasis added.)
“These are concepts that should not give rise to confusion, not today, not ever. If they manage some day to fragment us, it would be the beginning of the end in our homeland, of the Revolution, socialism and national independence, forged with the resistance and sacrifice of several generations of Cubans since 1868.”
The influence on our reality of the complexities of the world in which we live, the [U.S.] policy of hostility and harassment, the actions aimed at introducing platforms for neoliberal thought and the restoration of capitalism supported by a perverse strategy of political-ideological subversion, which undermine the very essence of the Revolution and Cuban culture, history and the values forged within it, the undeniable existence of accumulated problems in society, to which are added the process of the implementation of the Guidelines itself and the profound changes in which we are immersed, as well as the new scenario of relations between Cuba and the [U.S.], are facts that present greater challenges to ideological efforts. These programs target sectors that the enemy identifies as the most vulnerable and include young people, intellectuals, workers associated with non-state forms of management, and communities with greater material and financial difficulties. (Emphasis added.)
At the same time as we safeguard the historical memory of the nation and perfect differentiated ideological work, with special emphasis on youth and children, we must reinforce anti-capitalist and anti-imperialist culture among ourselves, fighting with arguments, conviction and resolve the attempts at establishing patterns of petty bourgeois ideology characterized by individualism, selfishness, the pursuit of profit, banality, and the intensifying of consumerism. (Emphasis added.)
The best antidote to political subversion is working with integrity and without improvisation, doing things well, improving the quality of services to the population, not allowing problems to accumulate, enhancing knowledge of the history of Cuba, national identity and culture, exalting the pride of being Cuban and fostering an atmosphere of legality, defense of public property, respect for the dignity of people, values and social discipline across the country. (Emphasis added.)
It was not easy to unpack Raúl Castro’s lengthy address, which came without any captioned divisions and subdivisions and which, in my judgment, did not have a precise logical structure. The above is my attempt to add such captions, highlighting and structure to better understand what he was saying.
Obviously Cuba is struggling with how to integrate free enterprise and free markets into its state-run economy. It is finding that is not an easy endeavor.
However, I am reminded that as a senior college student in 1960-61 I read a book on that very subject by a Polish economist, Oskar Lange, The Economic Theory of Socialism, in which heput Marxian and neoclassical economics together. He advocated the use of market tools (especially the neoclassical pricing theory) in economic planning of socialism and Marxism. He proposed that central planning boards set prices through “trial and error”, making adjustments as shortages and surpluses occurred rather than relying on a free price mechanism. Under this system, central planners “would arbitrarily pick a price for products manufactured in government factories and raise it or reduce it depending on whether it resulted in shortages or gluts. After this economic experiment had been run a few times, mathematicians capable of solving complex simultaneous equations would be able to plan the economy If there were shortages, prices would be raised; if there were surpluses, prices would be lowered. Raising the prices would encourage businesses to increase production, driven by their desire to increase their profits, and in doing so eliminate the shortage. Lowering the prices would encourage businesses to curtail production in order to prevent losses, which would eliminate the surplus. Therefore, it would be a simulation of the market mechanism, which Lange thought would be capable of effectively managing supply and demand. Proponents of this idea argue that it combines the advantages of a market economy with those of socialist economics.
I also was struck with Castro’s frank admissions of the many problems in the economy and the Party: failure to provide most Cubans with an adequate income, inadequate production of food, declining Party membership and the competing ideology of capitalism, wealth and consumerism. There was some irony to Castro’s admissions or complaints. As president of Cuba and head of the Party, he maintains near-total control of the country. And the slowness he derided is an essential part of his own policy. Castro repeated Saturday that Cuba’s reforms would be “with neither haste nor pause” and that the country would never feel the “shock therapy” experienced by other socialist states.
Castro touched on the problems associated with an aging and urbanized population. However, he did not connect the increasing departure of young Cubans seeking better economic opportunities, such as those recently transiting through Central America, as contributing to the aging population. Aren’t those young Cubans voting with their feet on the current and future economic prospects in Cuba? And there is no countervailing movement of great numbers of young people to come and live in Cuba. Neither of these groups see Cuba as utopia.
Like most observers, I was surprised to hear Castro, age 85, call for term and age limits for future leaders of the Party and the government.
Unsurprising was the continued hostility towards the U.S. and its ideas.
On December 15th a New York Times editorial, “Cuba’s Economy at a Crossroads,” called for the U.S. to end its designation of Cuba as a “State Sponsor of Terrorism.” This recommendation first was made on October 11th in the Times’ initial editorial in its series “Cuba: A New Start.”
Summary of the Editorial
Now, however, ending the designation is seen as a way the U.S. could assist a struggling Cuban economy. Surprisingly this editorial does not mention ending the U.S. embargo of the island as another, and more important, way the Cuban economy could be aided by the U.S. Instead the Times makes a vague suggestion of the U.S.’ “relaxing sanctions through executive authority and working with the growing number of lawmakers who want to expand business with Cuba.”
Most of the editorial is devoted to discussing the many problems of the Cuban economy.
The 1959 Cuban Revolution’s “[c]ommunism brought an ever more anemic and backward economy, one propped up largely by Moscow. But after the Soviet Union collapsed in 1991, so did Cuba’s economy.” After that collapse, Cuba found Venezuela as a “new benefactor” that provided “heavily subsidized oil” to the island, but now that country’s “worsening economic and political crisis” threatens that subsidy.
Low wages and poor prospects have forced many Cubans to leave the island “in recent years in search of a better life.” This could be accelerated by the elimination of the country’s two-currency system, which the government plans to do.
“The country’s birthrate is declining, while its elderly are living longer.” Couple these facts with the exodus of working-age citizens presents Cuba with an enormous demographic challenge.
“The agricultural sector remains stymied by outdated technology and byzantine policies. A foreign investment law Cuba’s National Assembly approved in March has yet to deliver a single deal.”
Cuba’s leaders have adopted various measures to reform the economy, but the “pace [of economic reform] has been halting, with plenty of backtracking from the government’s old guard.”
Yet these reforms have created a “small but growing entrepreneurial class.” All of them “struggle with the [Cuban] bureaucracy, since they are unable to import legally items as basic as mattresses and pillows. Bringing items from the United States is onerous and complicated by American sanctions.” Changes in U.S. policies could make “it easier for Americans to provide start up-capital for independent small businesses. Doing that would empower Cuban-Americans to play a more robust role in the island’s economic transformation. More significantly, it would gradually erode the Cuban government’s ability to blame Washington for the shortcomings of an economy that is failing its citizens largely as a result of its own policies.”
Continuing U.S. antagonism, on the other hand, “is only helping the old guard.”
I concur in the Times’ call for ending the U.S. designation of Cuba as a “State Sponsor of Terrorism.” It is an unfounded, stupid, absurd action that is only counter-productive as has been argued in posts in 2010, 2011, 2012 (with supplement), 2013 and 2014.
But I do not see ending this policy as the linchpin for the U.S.’ helping the Cuban economy. Instead it is ending the embargo, which the Times on October 11threcommended, but which is not mentioned in the latest editorial.
Moreover, I think the latest editorial understates the troubled state of the Cuban economy even though a prior post expressed optimism about Cuba’s attracting $8.0 billion of foreign investment for the Mariel port’s industrial park now under construction. Further reflection raises the following points that question that optimism:
First, the Cuban economy by itself is obviously unable to afford to purchase the many commodities that presumably will be unloaded from the new super-container ships that will be able to cross the expanded Panama Canal.
Second, for the commodities to go elsewhere will require the unloading of the super-container ships at Mariel and then reloading those commodities in smaller container vessels to go to the major countries on the northern and eastern sides of the South American continent: Venezuela, Brazil, Argentina, Uruguay and Paraguay. How big are those markets?
Third, presumably the major Latin American countries with coasts on the Pacific Ocean like Mexico, El Salvador, Costa Rica, Colombia, Ecuador, Peru and Chile will not be markets for commodities transshipped from Mariel.
Fourth, unless there is U.S.-Cuba reconciliation, the largest potential market for such transshipment, the U.S., presumably would not be importing commodities from the Mariel port.
Similar skepticism about Cuba’s ability to attract foreign investment for other reasons have been voiced by foreign investment experts. The Inter-American Dialogue, which is the leading U.S. center for policy analysis, exchange, and communication on Western Hemisphere affairs, has provided the following four such skeptics.
Matthew Aho, consultant in the corporate practice group of Akerman Senterfitt in New York, said, “While the [Cuban] rhetorical message was positive: ‘Cuba is open for business,’ little has changed to improve Cuba’s general investment climate, and foreign companies there report few changes to their dealings with Cuban counterparts. In fact, many businesses say the same bottlenecks, delays and idiosyncrasies that have long frustrated investors have been exacerbated recently by growing wariness among major banks to handle legitimate Cuba-related transactions.” He added, “While Cuba clearly has potential, most mainstream investors will steer clear until the Cubans define clearer rules of the road and improve their track record with new and existing partners.”
According to José R. Cárdenas, director of Visión Américas in Washington, “Eight billion dollars is a wildly exaggerated figure that Cuba has no chance of ever realizing. [Foreign investors] demand such things as transparency, legal guarantees and predictability, which the Cuban government is incapable of providing. Witness the widely publicized ordeals of Canadian businessman Cy Tokmakjian and Englishman Stephen Purvis, among others, who wound up in incarcerated in Cuba’s Kafkaesque legal system for unclear reasons. There may as well be a ring of flashing red lights surrounding the island warning foreign investors of the exorbitant risks to doing business in Cuba. . . . Any progressing economy needs the freedom to innovate, take risks and guarantee that one will reap the benefits of their efforts. Cuba, like China, cannot ultimately offer such conditions. As long as the primacy of the Communist Party remains the Cuban lodestar, the country will continue to head into an uncertain future.”
Scott J. Morgenstern, associate professor and director of the Center for Latin American Studies at the University of Pittsburgh also was skeptical. He said, “Cuba must create new opportunities for private employment. Thus, while the reforms are making some investment possible, investors will not find wide-open markets and streamlined bureaucratic procedures. In many areas, there are severe limits concerning where people can invest and the types of businesses they can open. Currency convertibility will also be a critical issue for any business; currently there are two currencies, only one of which is convertible. Foreigners, formally, are only allowed to use the convertible currency, and the official exchange rates distort the currency values. Reforms are promised, but the uncertainty will likely discourage some investors. One other important concern for investors is the size of the Cuban domestic market. The country is attracting several million tourists per year, and many Cubans do receive financial support from abroad, but purchasing power is still limited.”
Carlos A. Saladrigas, chairman of the Cuba Study Group and Regis HR Group offered these comments. “Cuba’s economic reforms so far have been too little, too late and too timid to result in significant economic performance . . . . [Cuba’s] continuing economic mismanagement, the numerous distortions in Cuba’s economic and political systems, a stubborn ideology, an obtuse and weighty bureaucracy and the fears of change harbored by Cuba’s leaders all play even more heavily in keeping Cuba’s economy from reaching its full potential. Cuban leaders continue to expect ‘silver bullet solutions’ to their economic woes. The port of Mariel is a perfect example. Pinning hopes of an economic recovery on mega-projects or a few foreign investments take attention away from the core distortions and inefficiencies plaguing the entire domestic economy. Fear of change and ideological rigidity can be clearly seen in Cuba’s eight-month-old foreign investment law. Since the law was passed, Cuban authorities still don’t have any significant major investment projects to report. The foreign investment law was a great missed opportunity to really send a message to the world, and specifically to the United States, that Cuba is ready for business. Such a message would have added great momentum to the anti-embargo movement, which is building momentum in the United States and in Miami. Yet, they chose more of the same, leaving arbitrariness, lack of clarity and burdensome regulations.”
Similar skeptical opinions about the Cuban efforts to develop the Mariel port were expressed by Richard Feinberg, the Brookings Institution’s Nonresident Senior Fellow, Foreign Policy, Latin American Initiative. He said, “the industrial sites are not yet fully leveled nor are they hooked up to basic infrastructure! But the problems run much deeper: previous Cuban efforts to launch free trade zones floundered on the requirement of hiring expensive labor through government employment agencies, and the continuing closure of the most logical export market, the nearby [U.S.]. Cuba’s newly revised foreign investment laws appear to allow investors greater flexibility in setting wage scales, but this potentially promising reform, and its impact on labor costs, remains to be fully tested in practice.”
Finally, Miguel Coyula, a retired Cuban government official on a trip to Washington before returning home to the island, stated ““Mariel is the most promoted place in Cuba, with special development zones for investors. But soon it’ll be a year after the opening of Mariel, and there is absolutely nothing. Even the container terminal in Havana was moved to Mariel to give it a sense of activity, but no one will invest there. For one thing, potential foreign investors in Mariel don’t like the fact that they can’t hire employees on their own, but instead must pay a government employment agency in dollars for that labor. The agency, in turn, pays workers in Cuban pesos. That’s because the Castro government wants to avoid creating a class of highly paid Cubans who work for foreign companies, ‘but inequalities are there whether you like it or not.’”