Friday, September 17, 2010

As Cuba gives private sector a try, experts ponder future

As Cuba gives private sector a try, experts ponder future
By William Booth
Washington Post Foreign Service
Friday, September 17, 2010; A10

MEXICO CITY - As Cuba embarks on a bold new experiment - firing 500,000
state workers and letting them plunge into freer markets - experts in
the region are watching to see whether the communist government and its
baby entrepreneurs can salvage the economy without sacrificing the
nation's "socialism or death" model.

The government layoffs, amounting to 10 percent of the 5 million state
employees in Cuba, represent the most significant economic changes since
President Raul Castro took over from his ailing older brother, the
semiretired maximum leader Fidel, in summer 2006.

"It is a major step forward," said Wayne Smith, former chief of the U.S.
Interests Section in Cuba and a senior fellow at the Center for
International Policy. "But they have little choice but to try something
because the economy is going down the tubes."

Since assuming power, the younger Castro, 79, has pointedly complained
that the Cuban state can no longer employ its bloated workforce. "We
must erase forever the notion that Cuba is the only country in the world
where you can live without working," he said.

Many workers in Cuba barely show up and do very little productive work
when they do. In government offices in Havana, coffee and cigarette
breaks last hours, sometimes days. State-run cafeterias open for a few
hours, suddenly run out of bad food and close as lines of customers wait.

It is not that Cubans are lazy - just the opposite, economists say. But
even with their food ration cards, the average Cuban government salary
of $20 a month barely provides enough to live on, though the state
provides housing, education and medical care.

As Cubans like to say, "The government pretends to pay us and we pretend
to work."

The island is suffering a brutal economic crisis in which its official
gross national product has plummeted from 12 percent growth to 1
percent, as nickel prices, tourism and international investment all
slump. The Cubans were so desperate that they froze the accounts of
foreign investors on the island earlier this year. Independent
economists say that without subsidies of Venezuelan oil from Hugo
Chavez, the Cuban economy would flat-line.

Whether the state-run Cuban economy can really make space for a more
robust private sector remains unknown. According to a government
PowerPoint presentation, first published by the Associated Press, state
economists envision that the least productive, least disciplined workers
should be laid off, followed by others who perform unnecessary jobs. All
500,000 workers are scheduled to be pink-slipped by March 2011, the
government announced in Communist Party newspapers and on state
television Monday.

"It's a big deal, a big breakthrough, because for the first time the
government acknowledges that the private sector, the small-business
operators, are not bit players but a strategic part of the Cuban
economy, that they are the solution, that they will help save Cuba,"
said Philip Peters, a scholar at the Lexington Institute and adviser to
the Cuba Working Group in the U.S. Congress.

About 823,000 Cubans already have jobs in the private sector, most of
them working in government-approved cooperatives. But the state still
employs about 85 percent of the workforce.

What will the hundreds of thousands of Cubans who suddenly have no day
job do? The document suggests that they will have to hustle for
themselves. No plans have been announced for capital injections,
small-business loans, retraining or more opportunities for foreign
investment. No large, relatively successful state enterprises are for
sale or lease.

"Ideas for cooperative enterprises" include raising pigs or rabbits,
opening bars and cafes, and working as trash collectors, gardeners, car
mechanics, carpenters and taxi drivers. Also on the list: massage
therapists, wedding planners and winemakers.

The document warns that many workers lack initiative, skills and
experience. Many of the new enterprises "could fail within a year."

An economist who covers the region, who spoke on the condition of
anonymity because of his work in Cuba, said that "it looks like they are
giving people a shovel and telling them to find work."

The state pays workers in Cuban pesos, but foreigners and lucky Cubans
spend a convertible currency that is good in the shops that sell things
such as cellular phones, which have been available only for the last year.

"They are moving forward, they are discussing these things in a public
forum - that is a good thing. But the question remains, how will this
provide for real, sustainable economic growth?" said Rafael Romeu,
president of the nonpartisan Association for the Study of the Cuban Economy.

Cuba recently allowed beauticians and barbers to work for themselves,
renting parlors but keeping profits. Drivers can operate their own
taxis. Farmers have been given the opportunity to take over fallow state
lands - though they are struggling to get seed, fertilizer, tractors and
transport for their crops.

"The Cuban model doesn't even work for us anymore," Fidel Castro told
the American journalist Jeffrey Goldberg and Julia Sweig of the Council
on Foreign Relations this month. By this, Sweig thought Fidel meant not
that the revolution was a failure or that Cuba would rush to adopt
capitalism, but that the Cuban economic model was sputtering and needed
a serious tuneup.

Fidel Castro, however, said at a speech at the University of Havana last
week that he was quoted correctly but misinterpreted.

"In reality, my answer meant exactly the opposite of what both American
journalists interpreted regarding the Cuban model. My idea, as the whole
world knows, is that the capitalist system no longer works for the
United States or the world," he said. "How could such a system work for
a socialist country like Cuba?"

Three days later, Raul Castro's government announced that it was going
to give a little capitalism a try.

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