Wednesday, March 31, 2010

What About the Changes?

"What About the Changes?"
By Patricia Grogg

HAVANA, Mar 31, 2010 (IPS) - Changes to improve the Cuban economy are
not happening fast enough to satisfy people's expectations, and instead
appear to have got bogged down due to the international financial crisis
and the island's internal difficulties in overcoming the impact.

Economists say the modifications adopted so far, some within the
institutional sphere and others of a more structural character, do not
cover the country's total needs, nor do they represent a substantial
transformation of the Cuban economic model.

"'What about the changes?' is the question we are always asked by
colleagues in other countries," an academic who preferred to remain
anonymous told IPS. In his opinion, the economy needs to eliminate a
number of restrictions and to liberate productive forces, but the
authorities are proving unwilling to speed the pace of change.

Cuban President Raúl Castro himself encouraged hopes when he announced
in July 2007 that "structural and conceptual changes" were needed to
increase farm productivity, after recognising that access to food and
low wages were among people's primary concerns.

One of the most important structural reforms adopted since Raúl Castro
became president of Cuba in February 2008, following a period as interim
president during his brother Fidel's illness, has been turning over idle
land to private farmers and cooperatives.

By the end of 2009, 100,000 beneficiaries had received a total of
920,000 hectares, equivalent to 54 percent of the country's unused
agricultural land. But the process is slow and fraught with
difficulties, partly because of excess paperwork and red tape and the
lack of agricultural equipment, researchers say.

Ownership has changed, but no market system has been permitted for
purchasing inputs, equipment or technology, for credit, buying hard
currency and final sales, according to an article on the subject by
Cuban economist Pável Vidal.

Vidal and other experts say that one of the basic factors conspiring
against agricultural productivity is state control of final sales in the
sector, and the inefficiency of Acopio, Cuba's state purchasing and
distribution agency.

The centralised state buying system requires producers to sell up to 70
percent of their crops to the state, at excessively low prices, leaving
some with only 30 percent of their produce to sell at higher prices in
the farmers' markets.

In the two years since he took office, Raúl Castro has also eliminated
restrictions against Cuban residents' staying at hotels formerly
reserved for foreign tourists, and opened up access to cell-phones.

At the same time, state shops began selling imported items that
previously could not be sold to Cubans.

This measure particularly benefited people earning higher wages, in
convertible Cuban currency (CUC). "However, development of the domestic
market may ultimately favour the national economy by boosting production
and employment," Vidal wrote.

According to some observers, local free-market experiences are producing
good results and could be expanded this year.

But the most highly regulated consumer markets are those for buying and
selling houses and cars, Vidal's article says.

Although rumours have circulated about modifications to these
regulations, so far no changes have been made, he writes.

In terms of employment there has been little progress, in spite of a
resolution which instituted a system of payment based on results and
eliminated wage caps so that workers' incomes should depend directly on
their individual productivity and performance.

Neither has the new multiple jobholding rule, which allows people to
legally hold more than one job, fared any better. The external and
internal circumstances are not favourable to these labour
flexibilisation policies, which seem out of place in a centralised
society where companies have a low degree of autonomy.

The economic crisis is also having a negative impact on the operations,
availability of raw materials and overall profitability of Cuban
companies. In periods of recession, new difficulties arise for companies
to earn profits that can be used to sustain the new wage system, Vidal's
article says.

According to official sources, Cuba continues to have problems securing
international financing, a situation that is exacerbated by the fall in
prices of its major export products. This effect of the global crisis
forced the country to reduce imports by 37 percent last year.

Lack of liquidity has also led to non-payment of debts, and to the
withholding of funds in the bank accounts of foreign partners with
business activities on the island. However, at a meeting in Havana in
mid-March, Spanish entrepreneurs were given assurances that Cuba would
meet its obligations.

"The situation we are facing in regard to bank withholdings has been
improving in recent months and I can assure you that we are working
constantly on the solution to this problem," said Minister of Foreign
Trade and Investment Rodrigo Malmierca.

Spain is Cuba's third largest trading partner, after Venezuela and
China. Small and medium businesses in Spain have been particularly
affected by these financial problems.

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