Tuesday, April 24, 2012

Cuba plans massive shift to "non-state" sector

Cuba plans massive shift to "non-state" sector
Marc Frank Reuters

2:59 p.m. CDT, April 23, 2012

HAVANA (Reuters) - Cuba will move nearly 50 percent of the state's
economic activity to the "non-state" sector, a senior Communist party
official said at the weekend, the latest signal the island is headed
toward a mixed economy.

Cuban President Raul Castro has hammered away at the need for the state
to become more efficient and get out of secondary economic activity such
as farming and retail services since taking over for his ailing older
brother, Fidel, in 2008.

China and Vietnam adopted similar measures in the last few decades of
the 20th century as they began to shift to what is known as market

"Today, almost 95 percent of gross domestic product is produced by the
state. Within four or five years between 40 percent and 45 percent will
result from different forms of non-state production," a long-time
Communist party political bureau member, Esteban Lazo Hernandez, said in
a speech to the Havana city government.

Lazo, who is considered by many to be the Communist party's top
ideologue, said the increased private business and the tax revenue the
move would generate meant local government needed to improve its
efficiency in order to cope with the shift, according to clips of his
speech broadcast by state-run television on Sunday.

The Cuban Communist party approved a comprehensive plan to revamp its
Soviet-style command economy in April of last year.

The 311-point document calls on authorities to support and encourage,
"mixed-capital companies, cooperatives, farmers with the right to use
idle land, landlords of rental properties, self-employed workers and
other forms that contribute to raise the efficiency of social labor."

The plans envision the reduction of the state workforce by at least 20
percent, or a million workers, the elimination of subsidies in favor of
more narrowly targeted welfare programs and granting state-run companies
more autonomy.

"The question will be to see how this 'non-state' production will be
split between real private property and cooperatives, and how
independent from the state the cooperatives really are," a Western
diplomat said.

Since Castro took office the number of self-employed, often a euphemism
for small businesses, has doubled to more than 300,000, and some 200,000
people have taken advantage of a land grant program to encourage small

Small state retail services - from barber shops and beauty parlors to
taxis and tiny cafeterias - have already been leased to employees. But
local economists said a major shift to the "non-state" sector, like the
one outlined by Lazo over the weekend, meant larger chunks of the
state's economic activity would be peeled off.

"Such a shift means not just tiny mom-and-pop operations and small
businesses such as restaurants and hostels, but mid-sized companies
operating as cooperatives and individually owned," said a local
economist who asked his name not be used.

Skeptics question how quickly Cuba's centrally planned economy can
manage such a radical transformation. "I think a shift of this magnitude
in such a short time period would be highly unlikely for Cuba," said
William Messina, agricultural economist with the Food and Resource
Economics Department at the University of Florida.

"Even though Raul is trying to implement a number of changes that could
move the country in this direction, the bureaucratic resistance that
there appears to be (at least within agriculture) will certainly slow
the process," he added.

(Editing by David Adams and Leslie Adler)


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