Wednesday, October 19, 2011

Small acts of free enterprise attest to reform looming large in Cuba


Small acts of free enterprise attest to reform looming large in Cuba
sonia verma
HAVANA— From Wednesday's Globe and Mail
Published Tuesday, Oct. 18, 2011 9:53PM EDT

Just off the Malecon, Havana's famous seaside corniche, Omar Gatierrez
strikes a deal to sell his '56 Oldsmobile for the rough equivalent of
$14,500. It's the most money he's ever made.

At a burger joint not far from there, Alfredo Garcia, an economist,
shells out twice as much as he normally would for a strawberry milkshake
just because it tastes good. Around the corner, Lazaro Rafael, a
mechanic, haggles over the price of repairing an infirm Peugeot on the
street near the sea where he lives.

Farmer Armando Roche and a farm hand use livestock to plow the fields
using surveys the land at his farm in Artemisa province located about an
hour outside Havana, Cuba Sept. 28, 2011.
Cuban farmers get a new lease on life
Cubans wait to order their meals at Tio Tito in Havana, Cuba Sept. 27,
2011. Taking its colour scheme from American fast food giant McDonald's
the small restaurant is one of many that have opened up since recent
economic reforms in Cuba have allowed for some private enterprise to exist.
Cuban entrepreneurs try their luck at private businesses
Motorists drive vintage cars past a billboard that reads 'Everything for
the Revolution' in Havana, Cuba Sept. 26/2001. For the first time since
the revolution Cuban's will have the right to buy and sell cars. Photo
by Kevin Van Paassen/The Globe and Mail
Images of the inherited cars of Cuba
In another sign that Cuba is trying to transform its economy, the
government will now allow all citizens to buy and sell cars.
Cuba lifts restrictions on car sales
Cuba's secret economy

These small acts of free enterprise would have been inconceivable in
Fidel Castro's Cuba. Under his younger brother, Raul, however, they add
up to dramatic economic reform that is quietly reconfiguring the country
into something altogether different. Cuban authorities are careful to
depict this restructuring as upgrading the revolution rather than
forsaking it, yet underpinning it all is an overriding sense of urgency
to change.

Floated by fickle Chinese credit and Venezuelan oil, the regime can no
longer afford to finance the socialist ideals upon which it was founded.
With Cuba at a crossroads, the future remains unclear. One path appears
to lead to nowhere, should the regime prove too brittle to allow private
enterprise to truly flourish. The alternative route, others worry, would
morph the island into something resembling a Floridian mega-mall.

Both outcomes would be disastrous. Most analysts believe the country's
true destiny lies in becoming a mixed economy where the state loosens
its grip over some sectors but maintains leverage over others. The aim,
Cuban sources said, is to have 35 per cent of the economy privatized by
2015. Achieving this elusive balance, however, will prove exceedingly
difficult. The reforms that have been rolled out so far – such as
allowing cars to be sold and licensing small businesses – have been
relatively painless, eclipsing more agonizing ones that lie ahead.

For Cubans, many of whom have virtually no memory of life before the
revolution, the reforms are confusing and their consequences unknown.
The regime has vowed to implement a progressive tax structure to avoid a
Russian-like result where vast amounts of wealth is concentrated in the
hands of the few. But a schism of class – however minor – would
symbolically violate Mr. Castro's symbolic contract with his people.

Over the next five years, for instance, the regime intends to lay off up
to a million public-sector workers, equalling 10 per cent of its work
force. Food rations, for which many Cubans rely on for their daily
sustenance, are also due to be phased out. Betting on an increase in
productivity, the government has promised to boost wages, but economists
doubt it will be enough to keep pace with a rising cost of living, as
goods are removed from the ration card.

"These larger state-led reforms are going to be wrenching," said
Christopher Sabatini, editor-in-chief of Americas Quarterly. One of the
biggest obstacles to real change in Cuba, he argues, is the awkward
paradox the regime finds itself in: Downgrading its leverage in order to
save itself from ruin.

"There's an inherent tension in any economic reform that involves the
Cuban state reducing its own authority over the economy, which is
[Fidel] Castro's real legacy," Mr. Sabatini explained.

Another problem is that while Cuban authorities seem to have a clear
idea of the main focus of the restructuring – reducing the state
payroll, nourishing the private sector, boosting food production – the
government is vague on its timeline for implementing the changes and
even more so on how it plans to deal with any fallout. The haphazard
transition means that whenever one of the 311 new decrees issued by the
Communist Party at its April Congress becomes law, few people on the
street in Havana seem to notice or understand why they should care.

Josefina Vidal, director of the North America Department for Cuba's
Ministry of Foreign Affairs, said the protracted rollout is deliberate:
"It's a slow process because we are very much interested in avoiding any
kind of social impact. We don't want anybody to be abandoned or left
behind," she said in a recent interview with The Globe And Mail. Some
measures, she acknowledged, were easier to implement than others.

When it comes to defining Cuba's end goal, officials are equally
open-ended, maintaining the state is not trying to emulate other
countries – such as China or Vietnam – but rather aiming to pursue an
entirely unique set of reforms. Observers, however, disagree.

"They want this to be a made-in-Cuba type of economic system. But if it
is made in Cuba it certainly resembles the Chinese approach, and it's
moving more and more in that direction," said Arch Ritter, an economist
at Carleton University who specializes in Cuba.

As he points out, Cuba's economy is nowhere near China's in terms of
scale or scope. Also, China's ruling Communist Party is less ossified
than Cuba's, which is still dominated by octogenarians. The recent death
Cuba's minister of defence, Julio Casas Regueiro, at the age of 75,
highlighted the frailty of the state's older generation of leaders who
are still firmly in charge.

Without political renewal, analysts say Cuba's economic reforms are
doomed. "They are trying to let the economic genie out of the bottle
while keeping the political genie in. That's not going to work,"
predicted Arturo Lopez-Levy, a former political analyst in the Cuban
Interior Ministry and a lecturer at the University of Denver.

Meanwhile it remains unclear how Cuban society, much less the regime,
will deal with social changes that will inevitably follow the economic
ones. How will the state prevent Cuba's new generation of entrepreneurs
from accumulating the kind of wealth that could give rise to a new upper
class? How will it ensure all Cubans have access to capital, not just
the ones with relatives in Europe or Miami? How will it provide
incentives for productivity and initiative if it plans to heavily tax
the rewards of that?

"Don't be fooled," Mr. Sabatini says. "They want to preserve the system
in many ways ... at least the perks of the system."

As sweeping as Cuba's current economic reforms are, key enterprises such
as mining, oil and sugar production will remain in the hands of the
state. Cuba's health system and its lucrative tourist industry will also
remain unchanged, at least for now. The rebranding of the revolution,
Mr. Sabatini argues, is still very much a work in progress.

"What was Castroism anyways? It was really about survival. Cuba's future
will boil down to whatever it needs for political and economic survival,
rather than any principled commitment to the revolution," he said.

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