Economists Discuss Cuba’s Current Economic and Political Situation

On July 28, Cuba’s “Current Economic and Political Situation” was the opening session of the annual meeting of the Association for the Study of the Cuban Economy, a U.S. non-political, non-profit organization dedicated to promoting “research, publications, and scholarly discussion on the Cuban economy in its broadest sense, including on the social, economic, legal, and environmental aspects of a transition to a free market economy and a democratic society in Cuba.”[1]

The presenters at this session were (1) Joaquín P. Pujol, International Monetary Fund (retired); (2) Omar Everleny Pérez Villanueva, Cuban Economist, Temas Magazine;[2] and (3) Jorge R. Pińón, Researcher, Center for International Energy and Environmental Policy, University of Texas at Austin.

Economists’ Comments

Joaquín P. Pujol discussed “Cuba: Great Expectations, but How Real Are They?” Cuba is facing problems in servicing its foreign debt, unifying its unwieldy dual currency system, fixing its decrepit infrastructure and promoting sluggish foreign investment. “The Cuban government now finds itself again in need of foreign financing and they’re not going to get it. In fact, it has turned to Miami” as Cuban relatives and friends have become an important source of funding for small start-up businesses in Cuba.

Omar Everleny Pérez Villanueva discussed “Cuba: Economia y Desafios” [Cuba: Economy and Challenges]. Although the government has projected the Cuban economy will grow by 1 percent this year, “I’m not sure it will reach that this year.”

Even though final figures for 2015 haven’t been announced yet, he said Cuba would show a deficit in goods and services trade. And even though tourism is growing briskly, he said taking into account expenditures in the tourism sector, the yield can be disappointing.

Jorge R. Pińón’s subject was “Cuba’s Energy Crisis: Truth or Fiction?” Faced with mounting energy problems, Cuban officials announced strict energy savings measures at state enterprises earlier this month in hopes of avoiding blackouts during the sweltering summer months. Officials have said Cuba will have to cut fuel consumption by 28 percent during the second half of the year.

Cuba produces about 50,000 barrels of crude oil a day and has relied on Venezuela for the other 80,000 to 90,000 daily barrels it needs. But with Venezuela on the ropes economically, continued oil supplies are uncertain. Indeed, over the last six months, he said, total Venezuelan oil production has come dangerously close to dropping below 2 million barrels a day. “In our business that’s catastrophic.”

“As of last week there was enough oil . . . [in Cuba] to keep the lights on,” Piñón said. “June and July deliveries were sufficient.”

Some analysts, looking only at declines in oil arriving in Cuba directly from Venezuela, have predicted an even worse outlook for the island, but Cuba also receives oil from offshore Venezuelan facilities.

Cuba also has been stockpiling oil, and there is an estimated 60-day supply on the island. The question is what happens with Venezuelan deliveries in August and September. “The [economic] hurricane is coming in Venezuela and it’s a Category 5 hurricane. The question is: Will it hit Cuba?”

Already hours have been cut for some state workers, fleets at nonessential enterprises have been parked and some neighborhoods have reported blackouts, drawing comparisons to the 1990s “special period” when after the collapse of the Soviet Union and the end of its generous subsidies, there were severe shortages in Cuba in everything from fuel to food.

Indeed, Raúl Castro in his recent speech to the National Assembly said, “There is speculation and rumors of an imminent collapse of our economy and a return to the acute phase of the special period.” Raúl Castro said during a recent speech to Cuba’s National Assembly. But he said the island was “in better conditions than we were then to face them.”[3]

The surge in Cuban tourism and the growth of private enterprise also is putting more pressure on Cuba’s energy sector. About 68 percent of oil consumption in Cuba is fuel oil for its inefficient electrical power sector. The government has said it will protect the tourism sector and private businesses from cutbacks.

If Venezuelan oil supplies dry up, it’s unlikely Cuba would be able to find another benefactor like Venezuela in Algeria, Angola, Russia, China or any other country, forcing it to go to the world market to buy about $1 billion worth of petroleum annually.

In recent years, Cuba has actually been receiving more oil from Venezuela than it needs and has been selling the excess on the world market as refined petroleum products. But Piñón suggests it would be cheaper and more efficient for Cuba to shut down its refineries and buy gasoline and jet fuel than buying crude and refining it.

Other Gloomy Outlooks [4]

An even gloomier outlook was voiced by Pavel Vidal, a former Cuban central bank employee who is now a professor at Colombia’s Pontificia Universidad Javeriana Cali. He said, “Under current conditions, [Cuban] gross domestic product will dip into negative territory this year and decline 2.9 per cent in 2017. If relations with Venezuela fall apart completely, GDP could decline 10 per cent.”

Another economic negative is anticipated declines in Cuba’s export of medical services (its foreign medical missions), especially to Algeria, Angola and Brazil. In 2014 such medical services earned Cuba about $8 billion or 40% of its total exports.

Karina Marrón, deputy director of Granma, has warned of possible street protests. “A perfect storm is brewing . . . this phenomenon of a cut in fuel, a cut in energy. This country can’t withstand another ’93, another ’94.”Rapid response brigades in the 1990s were formed to quell social unrest; they are now reportedly on alert.

“Just when we thought we were going forward, everything is slipping away again,” says Havana retiree Miriam Calabasa. “I am worried people are going to decide enough is enough: then what?” A mechanic, Ignacio Perez, stated, “Nothing will get better any time soon; it can only get worse. The roads won’t be paved, schools painted, the rubbish picked up, public transportation improved, and on and on.”

But foreign businesses hope these great economic challenges may speed economic opening. “Venezuela’s problems increase the chance of Cuban reforms. This government only acts when it has to,” says one Spanish investor on the island.

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[1] Whitefield, Economists debate how hard Venezuela economic storm will hit Cuba, InCubaToday (July 28, 2016).

[2] As mentioned in a prior post, Omar Everleny Perez was one of the Cuba’s best-known academics, an expert in developing economies and a consultant for Castro’s government when it launched a series of market-oriented economic reforms in 2011. This last April (three weeks after Obama’s visit to Cuba), he was fired by the University of Havana for allegedly having unauthorized conversations with foreign institutions and informing “North American representatives” about the internal procedures of the university. Perez said he believed he was fired because of his critical writings about the slow pace of economic reforms.

[3] President Castro’s recent speech to the National Assembly was discussed in a prior post. His earlier speech to the Congress of the Communist Party of Cuba also touched on Cuba’s economic problems; this speech was covered in another post.

[4] Frank, Venezuela’s Economic Woes Send a Chill Over Closest Ally Cuba, Fin. Times (July 25, 2016).

 

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Grim Cuban Economic News 

Grim news over Cuba’s economy was delivered in July 8 speeches to the country’s legislature (the National Assembly of People’s Power) by Cuba’s President, Raúl Castro, and by Cuba’s Minister of Economy and Planning, Marino Murillo. Naturally the Cuban people are worried. Here is a summary of those developments.

President Castro’s Report[1]

Raúl Castro
Raúl Castro

“In December 2015 I [projected that we would experience] financial constraints as a result of declining export revenue . . . [due to] falling prices for our traditional items as well as damages [to our] relations of mutually beneficial cooperation with various countries, particularly with Venezuela, which is being subjected to an economic war to weaken popular support for its revolution.”

“In the first half [of 2016] GDP grew by only one percent, half of what we had projected. This is the result of worsening external financial restrictions, driven by the decline of export earnings, coupled with the constraints faced by some of our major trading partners, due to falling oil prices.”

“There also has been a contraction in fuel supplies that had been promised by Venezuela, despite the firm will of President Nicolas Maduro and his government to fulfill that commitment. Obviously this has caused additional stress on the functioning of the Cuban economy.”

“Nevertheless, Cuba has managed to maintain compliance with the commitments made in the process of restructuring of debts to our foreign creditors. However, I must admit that there have been some delays in current payments to suppliers and I thank our partners for their confidence and understanding of this situation and reaffirm the commitment of the Government to meet the outstanding maturities and to continue restoring the international credibility of the Cuban economy.”

“Nor can we ignore the harmful effects of the US blockade and the US ban on Cuba’s use of the US dollar in its international transactions.”

“In these adverse circumstances the Council of Ministers adopted a set of measures to address the situation and ensure the main activities that ensure the vitality of the economy, minimizing the effects on the population.”

“As expected, in order to sow discouragement and uncertainty among citizens, there have been speculations and predictions of an imminent collapse of our economy with the return to the acute phase of the special period. These dire warnings have been overcome thanks to the resilience of the Cuban people and their unlimited confidence in Fidel and the Party. We do not deny damages that may occur, even higher than at present, but we are prepared and better able then to reverse them.”

“Faced with these difficulties and threats, there is no room for improvisations and much less for defeatism. In the short-term, we face the situation with great energy, fairness, rationality and political sensitivity; and we continue to strengthen coordination between the Party and the Government with much optimism and confidence in the present and the future of the Revolution.”

“We must reduce expenses of all kinds that are not essential, to foster a culture of saving and efficient use of available resources, concentrating investment in activities that generate revenue from exports, substitute imports and support strengthening of infrastructure, ensuring sustainability of electricity generation and better use of energy carriers. These programs will ensure the development of the nation, in short, non-stop.”

“At the same time, the social services that the revolution has obtained for our people and measures to gradually improve their quality are preserved. In the midst of these difficulties were made several measures aimed at increasing the purchasing power of the Cuban peso, including the decrease in prices of a set of products and articles of broad demand for our population.”

“Similarly, despite the prolonged drought plaguing us, we begin to see the fruits of other actions to ensure better collection and distribution of agricultural products, confirming greater presence of these markets and a slight but progressive reduction of selling prices. These measures have been welcomed by the population as relief to Cuban families.”

“In addition, these measures have guaranteed the internal financial balance through appropriate levels of supply in the retail market, while progress is being made in the implementation of pay systems linked to productive results, all of which has enabled us to avoid inflationary pressures.”

“This morning the National Assembly of People’s Power agreed to support in its spirit and letter the update of the Guidelines for Economic Policy and Social Party and the Revolution for the period 2016-2021 that were adopted by the Seventh Congress of the Communist Party of Cuba. This will entail the legislative development and adoption of legal standards required to continue improving the legal and institutional basis in the interests of economic changes in the country.”

“We reaffirm that we will continue updating our economic model at our sovereignly determined pace, forging consensus and unity of Cubans in the construction of socialism.”

“The rate of change will continue to be conditioned by our ability to do things right, which has not always been so. This requires ensuring the preparation of policy documents, training and mastery of content, conducting monitoring and implementation and timely rectification to any deviations.”

“As clear evidence of our strength and experience, we have had favorable results in implementing the plan of prevention and confrontation of mosquito-borne diseases.

“The complex circumstances of the national economy will not weaken in the least, the solidarity and commitment of Cuba to the Bolivarian Revolution and Chavista with President Maduro and his government and the Civic Union Military brother Venezuelan people. We will continue lending to Venezuela, to the best of our ability, collaboration agreed to help sustain the achievements in social services that benefit the population. True friends are known in difficult times and Cubans will never forget the support of Venezuelans when we faced serious difficulties.”

“In commemorating the Day of National Rebellion [on July 29] we will do so with the conviction that the Cuban revolutionary people will again face difficulties without the slightest hint of defeatism and full confidence in the Revolution.”

Economy and Planning Minister’s Comments[2]

 Marino Murillo
Marino Murillo

In his July 8 speech to the Cuban legislature, Marino Murillo, a member of the Politburo, Vice President of the Council of Ministers and Minister of Economy and Planning, essentially repeated the main points of President Castro’s report.

Conclusion [3]

The 1% increase in Cuban GDP for the first half of 2016 stands in contrast to the 4.7% increase for the first half of 2015. According to Reuters, Venezuelan shipments of crude oil and refined products to the island nation decreased around 20% for this period.

As a result of these economic problems and challenges, Cuba is concentrating on reducing expenses, promoting conservation and efficient use of available resources; concentrating investments on activities that generate exports and replace imports; strengthening infrastructure; assuring the sustainability of electrical generation; and facilitating better use of energy resources. The plan is to reduce total electricity consumption by 6% while not cutting residential use and key revenue-generating sectors such as tourism and nickel production.

More than 450,000 U.S. citizens or residents were among the 3.5 million tourists to visit the island last year, when the total number of visitors rose 17% from 2014, and the number of U.S. visitors for the first half of 2016 was up 26% to 304,000 out of a total of 2.1 million visitors to the island. Those numbers are likely to rise further when commercial flights from the U.S. begin later this year.[1]

Cuba’s future exemption from electricity restrictions for privately-owned businesses that cater to tourists could be seen as a Faustian bargain. Cuba desperately needs the hard currencies that tourists bring and spend on the island. On the other hand, the increasing numbers of U.S. visitors are tending to spend their money on Cuban bed-and-breakfasts, taxis, meals in privately-owned restaurants and other services that will increase demands for electricity and nurture Cuba’s nascent urban middle class and increase pressures for political and economic change.

Signs of these changes already can be seen. Public offices and state-run companies have cut work hours and are limiting the use of air-conditioning. Cinemas have cut the number of film screenings, and petrol stations are running out of fuel more frequently than in the past few years.

According to a New York Times journalist, many Cubans now fear “a return to the days when they used oil lamps to light their living rooms and walked or bicycled miles to work because there was no gasoline.” Regina Coyula, a blogger who worked for several years for Cuban state security, voiced one aspect of that fear: “We all know that it’s Venezuelan oil that keeps the lights on. People are convinced that if Maduro [the President of Venezuela] falls, there will be blackouts here.”

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[1] Castro, Faced with the difficulty, there is no room for improvisation or defeatism, Cuba Debate (July 8, 2016)(English translation of text of Castro speech), http://www.cubadebate.cu/opinion/2016/07/08/raul-castro-la-velocidad-de-los-cambios-seguira-estando-condicionad a-por-nuestra-capacidad-de-hacer-las-cosas-bien/#.V4Tyf5MrLj0;There is no room for improvisation or defeatism, Granma (July 8, 2016)(report about Castro’s speech), http://www.granma.cu/cuba/2016-07-08/el-pueblo-revolucionariocubano-nuevamente-se-crecera; Reuters, Castro Admits Cubans Face Hard Times as Economy Slows Sharply, N.Y. Times (July 9, 2016), http://www.nytimes.com/reuters/2016/07/09/world/americas/09reuters-cuba-economy.html?_r=0; Assoc. Press, Raul Castro Says Venezuela’s Crisis Hurting Island Economy, N.Y. Times (July 9, 2016), http://www.nytimes.com/aponline/2016/07/08/world/americas/ap-cb-cuba-parliament.html.

[2] Murillo, Cause the least possible services to the population, Granma (July 9, 2016); Marino Murillo: Come adjustments in the economy, without affecting basic services to the population (+ Video), Cubadebate (July 8, 2016) (the English translation of his speech in the Cuban press is impossible for this blogger to follow and understand); Reuters, Cuban Economy Minister Details Dire Economic Measures, N.Y. Times (July 9, 2016), http://www.nytimes.com/reuters/2016/07/09/world/americas/09reuters-cuba-economy-austerity.html.

[3] Burnett, Amid Grim Economic Forecasts, Cubans Fear a Return to Darker Times, N.Y. Times (July 12, 2016), http://www.nytimes.com/2016/07/13/world/americas/cuba-economy-venezuela-power-cuts.html?ref=world; Althaus, Growing Flow of Americans Remakes Cuba, W.S.J. (July 12, 2016), http://www.wsj.com/articles/growing-flow-of-americans-remakes-cuba-1468365712.

 

 

Cuba and Nine Other Countries Reject Accreditation of Free Press Group To Participate in U.N. Meetings 

On May 26, a United Nations committee rejected, 10 to 6, an application for accreditation to attend U.N. meetings from the Committee to Protect Journalists (CPJ), an international, independent group that monitors attacks on journalists around the world and campaigns for the release of those who are jailed.[1]

The 10 negative votes came from Cuba along with Azerbaijan, Burundi, China, Nicaragua, Pakistan, Russia, South Africa, Sudan and Venezuela. The yes votes came from Greece, Guinea, Israel, Mauritania, the United States and Uruguay. The abstentions were by India, Iran and Turkey, the latter two having reputations for persecuting journalists.

At the committee meeting U.S. Ambassador Sarah Mendelson made a lengthy statement advocating accreditation for CPJ, which, she said, is “a reputable non-governmental organization that promotes press freedom worldwide and defends the right of journalists to report the news without fear of reprisal.” Such a group has shown that “a free press remains a critical foundation for prosperous, open, and secure societies, allowing citizens to access information and hold their governments accountable. Indeed, the Universal Declaration of Human Rights reiterates the fundamental principle that every person has the right ‘to seek, receive, and impart information and ideas through any media and regardless of frontiers.’”[2]

Afterwards the U.S. Ambassador to the U.N., Samantha Power, said, “It is increasingly clear that the NGO committee acts more and more like an anti-NGO committee.” She also said that the U.S. would appeal the committee’s decision to the full 54-member U.N. Economic and Social Council.

CPJ stated, “It is sad that the U.N., which has taken up the issue of press freedom through Security Council and General Assembly resolutions and through the adoption of the U.N. Action Plan, has denied accreditation to CPJ, which has deep and useful knowledge that could inform decision making. A small group of countries with poor press freedom records are using bureaucratic delaying tactics to sabotage and undermine any efforts that call their own abusive policies into high relief.”[3]

This April CPJ’s annual report ranked Cuba 10th on its list of the 10 Most Censored Countries. Key for this ranking was Cuba’s having “the most restricted climate for press freedom in the Americas. The print and broadcast media are wholly controlled by the one-party Communist state, which has been in power for more than half a century and, by law, must be ‘in accordance with the goals of the socialist society.'” In addition, CPJ stated, “The government continues to target critical journalists through harassment, surveillance, and short-term detentions.”[4]

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[1] Sengupta, Press Freedom Group’s Application for U.N. Accreditation is Rejected, N.Y. Times (May 26, 2016); Assoc. Press, UN Committee Denies Credentials to Press Freedom Group, N.Y. Times (May 26, 2016); Reuters, U.N. Panel Rejects Press Freedom Watchdog Accreditation Request, N.Y. Times (May 26, 2016).

[2] Mendelson, Remarks at the UN Committee on Non-Governmental Organizations Regarding the Accreditation of the Committee to Protect Journalists, U.S. Mission to the U.N. (May 26, 2016).

[3] CPJ, CPJ denied ECOSOC consultative status after vote in UN NGO Committee (May 26, 2016).

[4] Cuba Gets Low Marks on Press Freedom from Committee to Protect Journalists, dwkcommentaries.com (April 18, 2016).

U.S. State Department Announces Free the Press Campaign

On April 26, the U.S. Department of State announced the launching of its fifth annual Free the Press Campaign “to highlight emblematic cases of reporters from around the world who are imprisoned, harassed, and otherwise targeted for doing their jobs, just by reporting the news.” This is a prelude to World Press Freedom Day on May 3.[1]

This year the Department “will highlight journalists and media outlets that we have identified in previous years that were censored, attacked, threatened, imprisoned, or otherwise oppressed because of their reporting whose situations have not yet improved. And we’re going to spotlight these various cases in three ways: one, by raising them from behind the podium at the top of each daily press briefing; two, by spotlighting them on http://www.humanrights.gov and social media; and then third, by using the hashtag #freethepress to spread the word and message on Twitter.”

The “campaign’s goal is straightforward. It’s to call the world’s attention to the plight of these reporters and to call on governments to protect and promote the right to promote – to – let me do that again – call on governments to protect and promote the right to freedom of expression.”

The first case thus highlighted is “Jose Antonio Torres, who’s a journalist for Granma, the official communist daily newspaper in Cuba. And he was arrested in February of 2011, after Granma published his report on the mismanagement of a public works project in Santiago de Cuba, and subsequently [he was] sentenced to 14 years in prison for allegedly spying.”

“This is the kind of reporting that promotes transparency and makes government accountable to its people. We take this opportunity to call on the Government of Cuba to release him. You can learn more about this case and others involved in Free the Press on our website, again, www.humanrights.gov.”

The subject of this State Department announcement, Senor Torres, apparently published in Granma a 5,000-word article on the mismanagement of an aqueduct project. Afterwards President Raúl Castro reportedly wrote that “this is the spirit that should characterize the (Communist) Party press: transparent, critical and self-critical.” Four months later, Torres published another critical report, this about the installation of fiber-optic cable between Cuba and Venezuela. Torres noted that the Vice President Ramiro Valdės was responsible for the supervision of both projects.

On February 8, 2011, Torres was arrested and detained and put through intense interrogations. In June 2012, he was convicted of espionage and sentenced to 14 years imprisonment for the crime of espionage. Torres, however, has continued to maintain his innocence, called his imprisonment a “mistake,” and expressed confidence that the government would eventually realize its mistake. Torres reportedly has said that he “trusts in the revolution’s justice, and…does not want any relations with counter-revolutionaries.” [2]

World Press Freedom Day is a project of the United Nations Educational, Scientific and Cultural Organization (UNESCO) headquartered in Paris, France. It “celebrates the fundamental principles of press freedom; to evaluate press freedom around the world, to defend the media from attacks on their independence and to pay tribute to journalists who have lost their lives in the exercise of their profession.” The Day also is “a reminder to governments of the need to respect their commitment to press freedom” and to “media professionals about issues of press freedom and professional ethics.This special day was first proclaimed by the U.N. General Assembly in 1993.[3]

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[1] U.S. State Dep’t, Daily Press Briefing (April 26, 2016).

[2] Josė Antonio Torres (Cuban Journalist), Wikipedia.

[3] UNESCO, World Press Freedom Day 2016.

Cuban Communist Party Holding Its Seventh Congress

CongressOn April 16-19 the Communist Party of Cuba will hold its Seventh Congress to set the country’s economic path through 2030.[1]

Granma, the Party’s official newspaper, reported that he Congress will work in four commissions or committees on the following topics: (1) “the conceptualization of Cuba’s socio-economic model;” (2) “the development plan . . . for the nation’s vision, priorities and strategic sectors” through 2030; (3) “the implementation of the Guidelines approved by the 6th Congress [in 2011] and their updating for the next five years;” and (4) analysis of “progress made toward meeting the objectives agreed upon by the First Party Conference [in 1975].”

The Guidelines approved at the last Congress included legalizing home and car sales, encouraging the development of mid-size cooperatives with dozens of employees and eliminating exit permits for Cubans to travel outside the country.

There will be 1,000 delegates, including “Party cadres, deputies to the National Assembly, representatives from Central State Administration bodies, our civil society, combatants, researchers from scientific centers, university professors, intellectuals, and press editors.” Women constitute 43% of the delegates, while 36% are Black or of mixed race. In addition, there will be 280 invitees, including 14 “members of Party units in our international solidarity missions, from five countries: Venezuela, Brazil, Haiti, Bolivia and Ecuador.”

In anticipation of the Congress, some “party members [have been] complaining about a lack of the advance debate on economic and social reforms seen in the past.” In response, Granma published a lengthy article admitting it had received “expressions of concern from Party members (and non-members, as well) inquiring about the reasons for which, on this occasion, plans were not made for a popular discussion process, similar to that held five years ago regarding the proposed Economic and Social Policy Guidelines of the Party and Revolution.”

Such expressions of concern said Granma, were seen as “a demonstration of the democracy and participation which are intrinsic characteristics of the socialism we are building.” Nevertheless, after reviewing the elaborate processes leading up to the decisions of the prior Congress and the difficulties in implementing all of its resolutions, Granma said that “rather than launching another process of discussion on a national level, half way along the road, what is more appropriate is finishing what has begun – continuing to carry out the people’s will expressed five years ago, and continuing to advance in the direction charted by the 6th Congress.”

This Granma article also stated that the forthcoming Congress would be evaluating six documents: (1) evaluation of the national economy’s performance during the five year period, 2011-2015; (2) progress in the implementation of guidelines [set in 2011]; (3) an updating of these guidelines for 2016-2021: (4) the conceptualization of Cuba’s socio-economic model of socialist development; (5) the Economic Development Program through 2030; and (6) the implementation status of the First National Conference’s objectives approved in January of 2012. As a result, according to Granma, the Seventh Congress “will give continuity to the previous Congress and the First National Party Conference [in 1975], and provide a much more precise definition of the path to be taken by our country – sovereign and truly independent since the triumph of the Revolution, January 1, 1959 – in order to build a prosperous and sustainable socialism.”

U.S. observers thought Party officials have been “particularly secretive” about this meeting and wondering whether the party signals it wants faster steps toward a more free-market system—such as allowing Cubans to operate more types of businesses—or if it keeps the current pace or even slows things down.” So far, however, “the only article in the official Granma newspaper to deal substantially with the congress made no mention of new initiatives” and instead said that “officials will review the implementation of economic guidelines adopted in 2011, only 21% have been put fully into practice.” [2]

Some believe President Obama’s March visit to the island “stirred great enthusiasm among ordinary people who do want change and are pushing for a better life, thereby putting pressure on Cuba’s leaders. Related to this thought is speculation that there might be a move to more selection of leaders by popular vote. Doing so for the National Assembly seems exceedingly unlikely, but such a move might come with direct election of mayors.

The Congress will be facing a vastly different economy than when it met in 2011. Now about a quarter of the labor force are working in a growing private sector, many in the booming tourist trade and are doing well financially The other 75% of the population who depend on state-sector jobs are struggling to survive on salaries that average about $25 a month, as consumer prices spike.

Many of those in the private sector now are limited to an odd list of 201 occupations that runs from cutting hair to acting as clowns in parties and want to see a greater liberalization that would permit professionals, such as lawyers, engineers and architects, to strike out on their own.

Other economic issues facing the Congress are (a) whether foreign joint ventures will have the freedom to hire Cuban workers directly, instead of having to go through state employment companies that keep most of their salaries; and (b) whether the government will create a legal framework for small and medium-size businesses to be able to export and buy supplies from a now largely nonexistent wholesale sector.

Observers also are watching to see if Miguel Diaz Canel, who was named first vice president of Cuba’s Council of State three years ago, and is widely regarded as Raúl Castro’s successor, will be promoted to second secretary of the Communist Party, succeeding the 85-year-old hard-liner José Ramón Machado Ventura.

A New York Times’ editorial complained that any economic reforms to come out of the Congress “remain a mystery to all but a few senior leaders of the party. While the policy review that preceded the last party conference, in 2011, included broad debate by rank-and-file party members, this time top officials have not shared information with them or solicited their views.” [3]

This “surreptitious approach,” says the Times, “s shortsighted at a time of change and rising discontent. Ordinary Cubans, including those who are critical of the Communist Party, should have a say in how the country will be run and by whom, without fear of reprisal and persecution.” Moreover, “If reforms continue at a glacial pace, young Cubans will keep fleeing the island in droves, fueling a exodus that has become a referendum of sorts.”

Now we wait to see what happens.

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[1] Morales, Looking toward 7th Party Congress, Granma (Feb. 29, 2016); Party congress less than a month away, Granma (Mar. 28, 2016);Eight questions about the Party Congress, Granma (April 14, 2016); 7th Party Congress begins, Granma (April 16, 2016). Here is more general U.S. information about the Communist Party of Cuba and its Sixth Congress.

[2] Assoc. Press, Cuba’s Future Economic Model in Spotlight at Party Congress, N.Y. Times (April 8, 2016); Padgett, Party Time In Cuba—With Marx, Not Mojitos. Here is What the Congress Might Do,,WRLN (April 12, 2016); Córdoba, Post-Obama Visit, Cuba’s Communist Party to Signal Next Steps, W.S.J. (April 15, 2016); Whitefield, Cuba’s Communist Party meets at critical time for country, Miami Herald (April 15, 2016); Assoc. Press, In Slow Dance With Capitalism, Cuba’s Communists Turn to Future, N.Y. Times (April 16, 2016).

 

 

 

 

 

[3] Editorial, Cuba’s Path to the Future Is Shrouded in Secrecy, N.Y. Times (April 15, 2016) http://www.nytimes.com/2016/04/16/opinion/cubas-path-to-the-future-is-shrouded-in-secrecy.html?ref=opinion

Cuban Realities Adversely Affecting Normalization with the U.S.

Underlying Cuba’s desire for normalization with the U.S. and its ability to achieve this goal are two realities that do not receive the attention they deserve. First, Cuba has a rapidly aging and declining population. Second, Cuba has very little cash to purchase goods and services in international markets. Both of these adversely affect Cuba’s desire and ability to achieve normalization.

Aging and Declining Cuban Population

Cuba already has the oldest population in all of Latin America. Experts predict that 50 years from now, its population will have fallen by a third and more than 40 percent of the country will be older than 60.[1]

This is a demographic crisis with both economic and political consequences. The aging population will require a vast health care system, the likes of which the state cannot afford. And without a viable work force, the cycle of flight and wariness about Cuba’s future is even harder to break, despite the country’s halting steps to open itself up to the outside world.

“We are all so excited about the trade and travel that we have overlooked the demographics problem,” said Hazel Denton, a former World Bank economist who has studied Cuban demographics. “This is a significant issue.”

Young people are fleeing the island in big numbers, fearful that normalization of relations with the U.S. will lead to the end of a policy that allows Cubans who make it to the U.S. to become naturalized U.S. citizens.

Over the past two years, an estimated 100,000 Cubans have streamed into the U.S., legally and illegally. Most of them fly to another country in Latin America and then make treacherous journeys by land to the U.S. border with Mexico. Thousands of others obtain family reunification visas and travel directly to the U.S. Those without money or helpful relatives flee Cuba on rafts.

The surge began in 2013 after the Cuban government eliminated the need for exit permits, and got bigger after Washington and Havana announced plans in late 2014 to end 50 years of hostility and re-establish relations.

For the fiscal year that just ended on September 30, nearly 4,500 Cubans reached U.S. soil in rafts, were caught at sea by the U.S. Coast Guard or were otherwise thwarted while trying to flee.

The younger people remaining on the island are reluctant to have children, citing the strain of raising an infant in a country where the average state salary is just $20 a month. Scant job opportunities, a shortage of available goods and a dearth of sufficient housing have encouraged younger Cubans to wait to start a family, sometimes indefinitely. In addition, abortion is legal, free, without stigma and commonly practiced. Cuba’s reported birth rate is one of the lowest in the world while its abortion rate is one of the highest.

One possible response to this demographic challenge is for the Cuban government to encourage the vast Cuban expatriate population to come home. But such an effort, in my opinion, would have to be backed by realistic opportunities to thrive and succeed economically, and this does not appear likely in the near future at least.

Another facet of Cuba’s aging population is the dying of those who fought with Fidel and Ché in the Revolution of 1959. In short, “the revolution and its heroes are fading.” According to a journalist, “many younger Cubans feel the weight of the revolution as a challenge to their future rather than as its foundation.” They “have little patience for revolutionary rhetoric, and they are frustrated by the dearth of economic opportunity in the country, despite the diplomatic thaw with Washington. They want to see change in their lives, and revolutionary talk sounds to many like a distraction from their struggles.”[2]

Cuba’s Financial Problems

Cuba is now finding it difficult to purchase goods and services from foreign suppliers. It has little cash to do so. This is resulting from low prices for nickel, which is one of its main exports; the economic crisis in Venezuela, which is one of Cuba’s major allies; and a Cuban drought. These adverse factors apparently are not offset by increased foreign tourism on the island after the U.S.-Cuba rapprochement. State companies are being forced to cut imports and to seek more liberal payment terms from foreign suppliers.[3]

The financial arrangements with Venezuela are complicated. First, Cuba receives oil on favorable terms and refines and resells some of it in a joint venture with its socialist ally, but prices for refined products are down in tandem with crude prices. Second, Cuba sends medical professionals to Venezuela, but experts believe the amount paid to Cuba for their services is tied to oil prices, meaning Venezuela would pay less to Cuba when such prices are down.

Another sign of these economic challenges is Cuba’s recent agreement with Spain to restructure Cuba’s short-term debts. Spain forgave Cuba for its defaulted interest and principal; restructured the residual principal payments for a period of ten years; and granted a three-year grace period for repayment of principal. The total principal of this debt was 201.5 million Euros.[4]

Earlier other countries also wrote off significant Cuban indebtedness: Russia, $32 billion in July 2014; Mexico, $487 million in December 2013; Japan, $1.4 billion in 2012; and China, $6 billion (restructuring) in 2010. Cuba’s debt problem with Japan, however, was not resolved after the 2012 agreement when Cuba failed to make payments thereunder, and this year the two countries are trying to resolve the debt issue as they seek to expand trade.[5]

Conclusion

These two realities, in my opinion, help to explain why normalization is not producing immediate expansion of business between the U.S. and Cuba.[6] Yes, the U.S. embargo, which is still in place, adversely affects Cuba’s foreign trade and should be ended by the U.S. as soon as possible. But ending the embargo does not directly affect these two realities that are major impediments to such trade.

Once again I invite comments of supplementation or correction, especially on Cuba’s foreign indebtedness.

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[1] Ahmed, An Abundance of Love but a Lack of Babies, N.Y. Times (Oct. 27, 2015); Assoc. Press, Historic Surge in Cuban Emigration Divides Families, N.Y. Times (Nov. 6, 2015); Dominguez, What You Might Not Know About the Cuban Economy, Harv. Bus. Rev. (Aug. 15, 2015); CIA World Factbook: Cuba.

[2] Ahmed, Cuban Revolutionaries Hope Their Legacy Won’t Fade Away, N.Y. times (Nov. 7, 2015).

[3] Reuters, ‘There is no money:’ cash-strapped Cuba is forced to cut vital imports, Guardian (Oct. 16, 2015); Three million tourist arrivals: A target in sight, Granma (Nov. 11, 2015) (three million tourists by second week of November, more than 90 days earlier than 2014); Cruise ship tourism expanding in Cuba, Granma (Nov. 9, 2015) (20,000 cruise ship visitors to Cuba so far this year).

[4] Spain agreed with Cuba to refinance short-term debt of the island, El Pais (Nov. 3, 2015)  This agreement may have resulted from a June 2015 Cuban agreement with the Paris Club of 16 wealthy nations, including Spain, that fixed Cuba’s total indebtedness to them at $15 billion (13.7 billion Euros) and that was seen as an important step towards renegotiating those debts. (Reuters, Cuba and Paris Club members agree on debt total of $15bln (June 8, 2015)

[5] Russia writes off 90% of Cuba’s debt ahead of Putin’s ‘big tour’ to Latin America, RT (July 12, 2014); Russia writes off $32bn Cuban debt in show of brotherly love, Guardian (July 10, 2014); Cuba; Mexico: 70% of Debt Forgiven, Global Legal Monitor (Nov. 8, 2013); Russia, Japan and others want to do business in Cuba, Internet in Cuba (May 4, 2015); Forte, Cuba and Japan expanding economic and trade ties, Granma (Nov. 9, 2015); Reuters, China restructures Cuban debt, backs reform (Dec. 23, 2010).

[6] E.g., Reuters, U.S. Companies Drawn to Cuba, Unsure if Profits Will Follow, N.Y. Times (Nov. 6, 2015).

Joint Press Conference of U.S. Secretary of State John Kerry and Cuba Foreign Minister Bruno Rodriguez  

On the morning of July 20, 2015, Cuba officially opened its Embassy in Washington, D.C., and the United States did likewise in Havana although the ceremonial opening of the latter will be on August 14 when Secretary of State John Kerry goes to Havana to preside that event. A prior post discussed the ceremonial opening of the Cuban Embassy. This post covers that afternoon’s joint press conference at the U.S. Department of State by U.S. Secretary of State John Kerry and Cuba’s Foreign Minister Bruno Rodriguez.[1] Subsequent posts will review comments about U.S.-Cuba relations offered by the White House Press Secretary at a July 20 press conference and the reactions to these events.

Bruno Rodriguez & John Kerry @ U.S. State Department
Bruno Rodriguez & John Kerry @ U.S. State Department

Secretary Kerry’s Opening Statement

The conference was opened by Kerry, saying it was “an historic day; a day for removing barriers.” This day was welcomed by the U.S. as a “new beginning in its relationship with the people and the Government of Cuba. We are determined to live as good neighbors on the basis of mutual respect, and we want all of our citizens – in the U.S. and in Cuba – to look into the future with hope. Therefore we celebrate this day . . . because today we begin to repair what was damaged and to open what has been closed for many years.”

His prior discussion with Minister Rodriguez, Kerry said, “touched on a wide range of issues of mutual concern including cooperation on law enforcement, counter-narcotics, telecommunications, the internet, environmental issues, human rights, including trafficking in persons. And of course, we also discussed the opening of our embassies.”

This milestone, however, Kerry added, “does not signify an end to differences that still separate our governments, but it does reflect the reality that the Cold War ended long ago, and that the interests of both countries are better served by engagement than by estrangement, and that we have begun a process of full normalization that is sure to take time but will also benefit people in both Cuba and the United States.” Indeed, “the process of fully normalizing relations between the United States and Cuba will go on. It may be long and complex. But along the way, we are sure to encounter a bump here and there and moments even of frustration. Patience will be required. But that is all the more reason to get started now on this journey, this long overdue journey.”

Foreign Minister Rodriguez’s Opening Statement

Rodriguez opened in English by saying he had “a constructive and respectful meeting with [the] Secretary . . . [and] an exchange on the issues discussed by Presidents Raul Castro and Barack Obama during their historical encounter at the Summit of the Americas in Panama, the current status of the bilateral relations, and the progress achieved since the announcements of December 17th, 2014, including Cuba’s removal from the list of state sponsors of terrorism and the expansion of official exchanges on issues of common interest, and the re-establishment of diplomatic relations and the reopening of embassies.”

The Cuban people and government recognize “President Obama for his determination to work for the lifting of the blockade, for urging Congress to eliminate it, and for his willingness to adopt executive measures that modify the implementation of some aspects of this policy. Their scope is still limited, but these are steps taken in the right direction.”

Cuba also “emphasized that, in the meantime, the President of the [U.S.] can continue using his executive powers to make a significant contribution to the dismantling of the blockade, not to pursue changes in Cuba, something that falls under our exclusive sovereignty, but to attend to the interests of U.S. citizens.”

Rodriguez also “emphasized that the total lifting of the blockade, the return of the illegally occupied territory of Guantanamo, as well as the full respect for the Cuban sovereignty and the compensation to our people for human and economic damages are crucial to be able to move towards the normalization of relations.”

“We both ratified our interest in normalizing bilateral relations, knowing that this will be a long and complex process, which will require the willingness of both countries. There are profound differences between Cuba and the [U.S.] with regard to our views about the exercise of human rights by all persons all over the world, and also issues related to international law, which will inevitably persist. But we strongly believe that we can both cooperate and coexist in a civilized way, based on the respect for these differences and the development of a constructive dialogue oriented to the wellbeing of our countries and peoples, and this continent, and the entire world.”

He also “expressed to the Secretary of State that he will be welcome in Cuba on the occasion of the ceremony to reopen the U.S. embassy in Havana [on August 14].”

Rodriguez then essentially repeated these comments in his native Spanish language. He also “reiterated our invitation to all U.S. citizens to exercise their right to travel to Cuba, as they do to the rest of the world, and to the companies of that country to take advantage on an equal footing of the opportunities offered by Cuba.”

Question and Answer Session

The press then asked the following questions, and the two officials provided these answers.

  1. QUESTION: The first question had the following three parts: (a) What was the U.S. position with respect to Rodriguez’ statement that only the lifting of the trade embargo and the return of Guantanamo Bay would lend meaning to today’s historic events and that Cuba did not want any U.S. interference in its domestic policies? (b) What changes in Cuban human rights would the U.S. be pursing? (c) What changes would Cuba be willing to make at the request of the U.S. before the lifting of the embargo and return of Guantanamo?

SECRETARY KERRY: “[T[here are things that Cuba would like to see happen; there are things the United States would like to see happen.” But that does not mean that these things will happen.

“With respect to the embargo, President Obama . . . has called on Congress to lift the embargo.” The Administration hopes “that the embargo at the appropriate time will in fact be lifted and that a great deal more foundation can be built for this relationship.”

At this time, there is no discussion and no intention on our part at this moment to alter the existing [Guantanamo Bay] lease treaty or other arrangements with respect to the naval station, but we understand that Cuba has strong feelings about it. I can’t tell you what the future will bring but for the moment that is not part of the discussion on our side.”

The U.S., on the other hand, has “expressed and we will always express – because it’s part of the United States foreign policy; it’s part of our DNA as a country – and that is our view of human rights and our thoughts about it. We have shared good thoughts on that. We’ve had good exchanges. And as you know, part of this arrangement that took place involved an exchange of people as well as the release of some people. And our hope is that as time goes on, we’ll continue to develop that.”

What we did talk about today was how to further the relationship most effectively, and perhaps through the creation of a bilateral committee that might work together to continue to put focus on these issues.”

FOREIGN MINISTER RODRIGUEZ: “In recent times, the U.S. Government has recognized that the blockade against Cuba is a wrong policy, causing isolation and bringing about humanitarian damages and privations or deprivations to our people, and has committed to engage Congress in a debate with the purpose of lifting the blockade. . . . [T]he President of the U.S. [also] has adopted some executive measures which are still limited in scope but which are oriented in the right direction.”

In exchanges with Secretary Kerry we “have not spoken about conditions but rather about the need to move on through the dialogue on the basis of sovereign equality and mutual respect and create a civilized behavior, despite the profound differences that exist between both governments, to better attend to the interests of our respective peoples.”

“[I]t is very important that today a [Cuban] embassy was reopened in Washington and that diplomatic instruments could be created ensuring full mutual recognition, which is a practical contribution to the development of bilateral dialogue. . . . [For] Cuba, the normalization of relations presupposes the solution of a series of pending problems, [including] “the ceasing of the blockade against Cuba, the return of the territory of Guantanamo, and the full respect for the sovereignty of our country.” We also confirmed “that there are conditions . . . [for expanding] the dialogue . . . with the purpose of expanding mutually beneficial cooperation between our . . . countries and, of course, taking into account the fact that the situation between the U.S. and Cuba is asymmetric because our . . . country has not implemented any discriminatory policy against American citizens or enterprises. Cuba does not implement any unilateral coercive economic measure against the U.S. Cuba does not occupy any piece of U.S. territory. Precisely through the dialogue, we are supposed to create the proper conditions to move on towards the normalization of relations.”

  1. QUESTION: This was a three-part question: (a) What are the advantages [for Cuba’s having an embassy in the U.S,] taking into consideration that the blockade is still in place? (b) What are the advantages for the U.S.’ having an embassy in Havana? (c) Will the U.S. in the future respect the Vienna Conventions on Diplomatic Relations?

FOREIGN MINISTER RODRIGUEZ: “The fact that diplomatic relations have been re-established and that embassies have been reopened in both capitals shows first and foremost the mutual willingness to move on towards the improvement of the relations between our both countries. Second, new instruments are [being] created to further deepen this dialogue. . . . Third, . . . the basis for the normal functioning of these diplomatic missions would be the purposes and principles enshrined in the U.N. Charter: the principles of international law and the regulations containing the Vienna Conventions on diplomatic and consular relations. Therefore, we have reached agreements in these areas, and I can say that Cuba would absolutely respect those provisions. Cuban diplomats will strictly abide by those rules, and we will create in Cuba every necessary condition for the normal functioning of the new U.S. Embassy in our country.”

SECRETARY KERRY: Part “of the negotiations leading up to the opening of the embassies was . . . coming to agreement with respect to all of the diplomatic functions. . . . [That led to an] “agreement which is in accord with the Vienna Conventions and meets both of our countries’ understandings of what is needed and what is appropriate at this moment in time. It could be subject to change later in the future, obviously, but for the moment we are satisfied and we are living within the structure of the Vienna Convention.”

  1. QUESTION: A three-part question: (a) In “your discussions today, did you establish any sort of road map for talks going forward? (b) If so, what are your priorities? (c) As a result, do you envision a political opening in Cuba on issues such as greater freedom of speech and assembly, and also the legalization of opposition parties?”

FOREIGN MINISER RODRIGUEZ: We will “welcome Secretary Kerry in the next few weeks in Havana to continue our talks, to establish the appropriate mechanisms to expand the dialogue in areas related to bilateral cooperation oriented to the common benefit, and to retake our talks about the substantial aspects of the bilateral relations I have mentioned before, which will determine this process towards the normalization of relations.”

The “political opening in Cuba happened in the year 1959. . . . We Cubans feel very happy with way in which we manage our internal affairs. We feel optimistic when it comes to the solution of our difficulties and we are very zealous of our sovereignty, so we will maintain in permanent consultations with our people to change everything that needs to be changed based on the sovereign and exclusive willingness of Cubans.”

  1. QUESTION: A four-part question: (a) Is “this new era of relations with Cuba [based on a] recognition that the U.S. policies of isolating countries in Latin America that differ from . . . [U.S.] political views don’t work?” (b) “Do the recent trips to Caracas of Mr. Thomas Shannon [of the U.S. State Department] . . . [constitute a] beginning of trying to rebuild the relationship with Venezuela?” (c) Is it possible [for Cuba] to have relations with the U.S. when the U.S. is giving every signal that it is not willing to lift the blockade or the embargo as it is called here and cannot withdraw from Guantanamo?” (d) Has the U.S. after failing to change Cuba from the outside “now implemented a creative way to try to change Cuba from the inside?”

FOREIGN MINISTER RODRIGUEZ: The “fact that diplomatic relations are being established and that we are reopening both embassies is a show of the mutual willingness to move on towards the normalization of bilateral relations.” [Last] December President Obama recognized that the U.S. policy against Cuba had been wrong, causing damages and hardships to the Cuban people, and causing isolation to the U.S.”

The “re-establishment of diplomatic relations and the opening of embassies are appreciated by my country as a signal of progress towards a civilized relationship, despite the differences, and it would lend some meaning only if the blockade is lifted, if we are able to solve the pending problems for more than one century, and if we are able create a new type of relationship between the U.S. and Cuba different from what has existed all along the history.”

Cuba feels “that [President Obama’s] recognition of the need to lift the blockade against Cuba, that during the talks that we have had, including this morning’s talks, we have perceived respect for Cuba’s independence to the full determination of our people, [that the two countries] have talked, on the basis of absolute equal sovereignty despite differences shows that the dialogue is fruitful and that the U.S. and Cuba, by a mandate of the American people and the Cuban people, are in the condition to move on towards a future of relations different from the one accumulated throughout our history, responding precisely to the best interests of our citizens.”

“There is an international order. International law is recognized as the civilized behavior to be adopted by states. There are universally accepted principles, and these have been the ones who have allowed us to reach this date and the ones that . . . will reorient our behavior in our relations in the future.”

SECRETARY KERRY: With respect to Cuba, “passions ran deep . . . to this day in the [U.S.]. There are many Cuban-Americans who have contributed in so many ways to life in our country, some of whom are still opposed to a change, some of whom believe it is time to change.”

“When I served in the [U.S.] Senate, there were many of us who believed over a period of time that our policy of isolating [Cuba] was simply not working; we were isolating ourselves in many ways. And we felt that after all those years it was time to try something else. President Obama is doing that now. And it is clear that we have chosen a new path, a different path. Already, people tell me who have visited Cuba that they feel a sense of excitement, a sense of possibility. And I am convinced that as we work through these issues we are going to find a better path forward that speaks to the needs of both peoples, both countries.”

With respect to Venezuela, Counselor of the State Department, Ambassador Tom Shannon has had several conversations with the Venezuelans. We had a very productive conversation prior to the Summit of the Americas in Panama. The [U.S.] has said many times we would like to have a normal relationship with Venezuela and have reached out in an effort to try to change the dialogue, change the dynamics. There are differences that we have with President Maduro and his government, and we raise those differences and we talk about them.”

“Just today, Foreign Minister Rodriguez and I talked specifically about Venezuela and our hopes that we can find a better way forward, because all of the region will benefit if no country is being made a scapegoat for problems within a country, and in fact, all countries are working on solving those problems.”

“We hope that our diplomatic relations with Cuba can encourage not only greater dialogue with Venezuela but perhaps even efforts to try to help Colombia to end its more than 50-years war and perhaps even other initiatives.”

“It’s clear that Cuba has significant progress to make in all of those areas.  What’s also clear is that the previous [U.S.] . . . [did not] really make much progress [on these issues].  The President believed that a change was necessary.  And we’re hopeful that in the coming years we’ll start to see the kind of respect for basic human rights on the island of Cuba that the U.S.] has long advocated.”

[Moreover, an] overwhelming percentage of the Cuban people are supportive and optimistic about this change in policy because of a chance that is has to improve their prospects on the island nation of Cuba.”

“So the President is looking forward to these kinds of changes taking effect [so] that the Cuban people and the Cuban government start to enjoy the benefits and see the results from greater engagement with the [U.S.]”

“In the days after this agreement was announced back in December, a substantial number of individuals who had previously been held by the Cuban government for their political views were released.  And that’s an indication that the Cuban government is trying to at least change their reputation when it comes to these issues.“

“But we have got a long list of concerns.” In addition, “for a long time the U.S. policy of trying to isolate Cuba became a source of irritation in the relationship between the [U.S.] and other countries in the Western Hemisphere.  And by removing that source of irritation, the [U.S.] can now focus attention of . . . other countries in the Western Hemisphere on the Cuban government’s rather sordid human rights record.”

“And again, that is part of the strategy for seeking to engage the Cuban people more effectively, and bring about the kind of change that we would like to see inside of Cuba.”

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[1] U.S. Dep’t of State, Press Availability with Cuban Foreign Minister Bruno Rodriguez (July 20, 2015). A video and audio recording of the press conference is available on C-Span.