Cubas Strategic Economic ReOrientation for: Governance and Social Justice in Cuba: The International

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Cubas Strategic Economic Re-Orientation for
Governance and Social Justice in Cuba The
International DimensionSymposium organized by
FOCAL, Canada CRI-FIU, United States and
FLACSO, Mexico.June 9, 2006Archibald Ritter,
Carleton University, Ottawa Canada.
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• Outline
• Introduction
• Origins of the New Development Strategy
• Castros Vision
• The New Geopolitical Context
• Economic Recuperation
• III. Cubas New Development Strategy
• New Export Foundation
• A Knowledge Economy and Society
• Institutional Strategy
• Rebuilding the Infrastructure La Revolucion
  Energetica !
• Renewed Sucrophilia ?
• Socialist Purification Combating Economic
  Illegalities and Corruption
• IV. Central Problems
• President Castro
• US Policy towards Cuba
• Openness Transparency Accountability Democracy
• VI. Conclusion

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• I. Origins of the New Development Strategy
• 1. President Castros Vision

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1. President Castros Vision
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• 1. Castros Vision
• Not clearly articulated, but expressed piecemeal
  on numerous occasions especially Speech of
  November 17, in the Aula Magna, U de la Habana
• Probable fixation on his Legacy
• Main Elements
• Personal and National Leadership in Anti-US
  Anti-Imperialist Crusade
• Irrevocable Socialism and Political Continuity
• Socio-Economic Purification
• Re-ordering of Cubas Place in the International
  System
• Return to Prosperity.

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• 2. The New Geopolitical Context
• The US in Trouble
• Incapacitated in the Iraq quagmire
• Economic vulnerability with external deficits and
  debt
• Loss of reputation and moral authority in much of
  the world
• Emergence of China and spin-off benefits for
  Cuba
• A Chinese depot for the Caribbean area?
• Chinese resource investments (nickel oil
  exploration)
• Major new credits
• Like-minded re Governance and Human Rights

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• A Latin American Opening for Cuba ?
• Chavez as a new Sugar Daddy or Petroleum Papa
• Evo Morales
• Ollanta Humala in Peru? No.
• Colombia Uribe
• Ecuador Mexico (Lopez Obrador?)
• Centre-Left friendly regimes Argentina Uruguay
  (entry into Mercosur?)
• Social Democrat, friendly regimes Brazil, Chile
• Good Caribbean relations
• Major US unpopularity in Latin America

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3. Economic Recuperation

• Economic Recovery is real, but Slow.
• Official GDP numbers suggest that GDP of 1989 has
  just been surpassed in 2006 by 14.
• The Economists GDP estimates (5.2 growth in
  2005 4.5 probable in 2006) suggest that the
  1989 level of income per capita has just been
  reached. i.e. 16 lost years
• Recuperation makes reversal of earlier reforms
  easier for Castro.

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• III. Cubas New Development Strategy
• Past Strategies
• 1961-1964 Instant Industrialization
• 1964-1970 the 10 Million Tons Obsession, plus
  the New Man Extreme Centralization
• 1970-1989 Soviet Model patronage
• emphasis on sugar, nickel and minor
  (never-emerging) exports
• 1992-2005 emphasis on tourism, remittances,
  nickel, with a weakening sugar sector
• 2005- Onwards A New Approach

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• III. Cubas New Development Strategy, continued
• 2. New Export Foundation
• Continuous problem for Cuba since 1961 paying
  its way in the world
• Merchandise Trade Deficits have persisted and
  will continue

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• III. Cubas New Development Strategy, continued
• 2. New Export Foundation, continued
• Nickel Major expansion expected
• Sherritt Expansion (450 million)
• Chinese Investment Prospect a doubling of
  production? (?? 500 million?)
• Medical Services already well-launched
• Doctors for Rent - Medical Tourism
• Biotechnical Exports Pharmaceuticals etc. , some
  potentialities
• Petroleum Extraction and Processing
• Refining of Venezuelan Oil in Cienfuegos for the
  Caribbean ?
• Increased extraction, self sufficiency and export
  ??
• Prospects for Major New Oil Discoveries ???

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• 4. Sugar Revival?
• 5. Continuing Tourism, Remittances, Cigars, etc.
  but de-emphasized

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• III. The New Central Development Strategy,
  continued
• 3. A Knowledge Economy and Society
• Major Expansion of Higher Education
• 500,000 plus university students, says Castro (
  60 of the population aged 18 to 23 )
• 122,000 professors student faculty ratio
  4.1/1
• Does Castro understand the phenomenon of
  diminishing returns?
• 958 University Campuses
• ( 1 for every 11,700 persons )
• Universidad de Ciencias de Computacion,
• established September 2005
• Former Lourdes military base
• 2,000 students
• Focus on distance education and curriculum for
  literacy .for
• Exportation of Educational Services

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• 4. Institutional Strategy
• Return to Centralization
• Intense containment of self-employment
• The Battle of Ideas
• A Personal Extra-Party, Extra-State Parallel
  System managed by Castro
• War Against Corruption
• Los Trabajadores Sociales
• Anti-corruption monitors or police
• Key operatives in La Revolucion Energetica
• Redeemed Youth with special functions and
  status
• Patriarchal Distribution of goods by the State
• Plus the Political Patronage Economy
• In sum more voluntarism
• less market
• more Presidential central control

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• 5. Rebuilding Infrastructure
• Urgent needs in Housing
• A state of disastrous disrepair and collapse in
  many areas
• Major campaign announced
• But do-it yourself in a normal way continues
  impaired
• Plus water systems
• sewage systems
• streets sidewalks
• public buildings etc.
• All require urgent maintenance and
  reconstruction
• Plus Personal infrastructure such as homes
  generally have major maintenance backlogs

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• 5. Basic Infrastructure, continued
• La Revolucion Energetica
• Frequent failures and blackouts impose major
  costs on citizens
• Major elements
• Conservation measures
• replacement of light bulbs, fans, refrigerators,
  etc
• pressure cookers, and electric rice makers
  provision courtesy of Fidel
• Shift of cooking from gas to electricity
• Increased Investment in Repairs and Maintenance
• New Generating Capacity small mini generators
  gas-fired generation
• Alternate energy sources, namely wind

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The Small Generator Option (Grupos
electrogenos de emergencia)

• a.k.a. The Home Depot Solution to electricity
  generation
• Replacement of Thermo-electric Plants with small
  generators
• Plus 4148 mini-generators for back-up purposes
• At a cost of around 2 billion ???
• Dispersed around the Island

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• The Small Generator Option
• (Grupos electrogenos de emergencia)
• A quick fix for energy provision to ensure
  Fidels Legacy
• Economically silly
• Economies of large scale generation will be
  foregone
• Petroleum feed-stock will have to be transported
  by truck around the Island to the generators
• Large collateral investments needed for storage
  and protection of diesel fuel
• Maintenance problems will be multiplied
• Potential for theft is increased
• Synchronization of electrical supply to changing
  demand throughout the day will be more difficult
• Another of Fidels good ideas?

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• 5. Renewed Sucrophilia
• 1961-1963 Instant Industrialization
• plus Sucrophobia I Ignore sugar
• 1964-1970 Extreme Sucrophilia I
• Honour prestige of the Revolution are based
  on producing the 10 million tons
• All non-sugar sectors sacrificed
• 1970-1985 steady role for sugar economy
• 1985-2003 Milk the cash cow to death
• Extract foreign exchange for investment
  elsewhere
• Starve the sector of resources through exchange
  rate treatment
• US 1.00 sugar exported earns Cu Peso 1.00 for
  the sector
• Other countries capture Cubas market share

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• 2003 2006 Sucrophobia II Shut it down
• About 70 of 156 sugar mills were closed
• Only about 30 of the remainder were actually in
  operation
• Results
• collapse of sugar harvest (1.1 m tons, in 2006)
• Ghost towns and regional dislocation
• Probable unemployment, but not in Cuban
  statistics
• Collapse of the whole sugar cluster of
  activities
• Irreversability?
• 2006 Onwards Sucrophilia II a return to sugar?
• Provoked by high sugar prices
• arising from Brazils sugar-ethanol link)
• But not linked to ethanol production in the
  energy strategy
• Probably too late to revive the sector.

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• 6. Socialist Purification Combating Economic
  Illegalities and Corruption
• Character and Dimension
• Innumerable varieties. A few that I have observed
  directly
• Security guards at cigar factory sell cigars to
  passersby
• Security guard at dollar store pilfers an item to
  sell to a client at 20 of the official price
• An official at a state institution uses the
  public vehicle and its chauffeur as private
  property
• A taxi driver provides a ride with the meter off
  and for a fee
• A foreign organization pays a salary supplement
  in Convertible Pesos to its Cuban employees
• A citizen buys a birthday cake from an unlicensed
  baker
• A citizen sets up a satellite dish, receives
  foreign, and provides 24 hour cable service to
  neighbours

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• How significant are these illegalities?
• Pervasive
• Cuban citizens assert that everyone is involved.
• It is often stated that everything imaginable is
  available on the black market, via pilferage from
  the state sector.
• Examples of magnitude
• Gasoline theft and replacement of all pisteros
• Charcoal and wood provision provide most cooking
  fuel in some rural areas
• Messengers and coleros one on every block in
  some areas
• Cigar making and vending

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• Causes
• 1. Colonial roots Contraband trade with the
  French, British and later the United States as
  well as with pirates
• A large informal economy existed in the 1950s
  attracting the attention of the 1951 IBRD
  (Truslow) Mission to Cuba
• 2. Central Planning System
• The rationing system, forced many people to
  become became mini-capitalists,
• Planning system also promoted illegalities
  Enterprise managers must resolve problems via the
  illegal exchange of goods.
• 3. Common Property Resource Phenomenon state
  property belongs to no one and to everyone if
  one person does not help himself to it, someone
  else will instead.

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• 4. Economic Arbitrage and Monetary/Exchange Rate
  Duality
• 5. Limitations and on Restrictions on legal
  Micro-enterprise promote underground activity and
  illegal actions Restrictive licensing
• Excruciating regulations
• Heavy taxation
• 6. Economic Necessity and Illegalities
• Illegal economic actions are necessary to
  survive. Why?
• The central reason people earn "Moneda Nacional"
  "old pesos" but their earnings are insufficient
  to purchase the basic foodstuffs.
• People must find additional income in "old pesos"
  or convertible pesos.

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• The Campaign since October 2005
• October 17 some 15,000 Social Workers take
  over the gas stations to prevent pilfering of
  gasoline
• October 17 Military intervention in the
  management of the Port of Havana
• October fulminations about the new rich from
  cuenta propismo and corrupt practices
• November 7-9 raids on mercados agropecuarios
  (aimed at sales by farmers prior to fulfilling
  their state quotas)
• November 17-18 Castros 5-6 hour speech
• aims at legal micro-enterprise
• alludes to deficient Ministers and officials

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• Late November Operacion Arana against illegal
  satellite TV access
• November 29 Operation against un-licensed
  bicycle taxis in Havana
• November 22 electricity, pensions and salary
  increases
• Pensions (minimum) from 150-164 pesos per month
• Electricity rates increasing plus escalation
• Wage increases averaging 43 pesos per month
• March 22 Ejercito Nacional de Vigilancia, within
  the CDRs

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• Consequences of Economic Illegalities Complex
  and Mixed.
• Truly criminal activities are socially and
  economically noxious.
• Widespread low-level pilferage from the
  enterprises and institutions
• noxious though necessary helping "make ends
  meet."
• SELF-DEFENSE IN A DYSFUNCTIONAL SYSTEM ?
• Other types of illegalities (payment of income
  supplements in cash or in kind)
• largely benign.
• Unlicensed (and thence illegal) self-employment
• mainly positive consequences

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• Basic economic reforms are required
• Preaching, policing punishment and proscription
  are unlikely to work effectively
• Necessary Reform measures
• liberalizing the licensing, tax and regulatory
  regimes for all legitimate micro-enterprise
• reducing the scope for arbitrage by unifying the
  current dualism or the Cuban economy
• reducing the all-encompassing role of the state
  so as to reduce the inclination to pilfer.
• Achieving real improvements in living standards
  so that people's survival imperatives no longer
  require illegal actions is also necessary.
• Unfortunately, these economic reforms and a
  return to prosperity are some distance away.

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• V. Central Problems
• 1 Comandante en Jefe Fidel Castro
• Economic Savoir-Faire Unimproved
• We have cost the people too much in our process
  of learning..The learning process of
  revolutionaries in the field of economic
  construction is more difficult than we had
  imagined. Speech, August 2, 1970
• The price of oil nowadays is not in keeping with
  any supply and demand rule its not a price that
  is in keeping with economic rules either. The
  reason behind it is the shortage of this product
  together with the increasing and extraordinary
  demand for it.
• Speech, Nov 17, 2005

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VI. Conclusion

• Is Cuba in Transition? To What?
• Political Paralysis
• Institutional Regression
• Geo-Political Reorientation
• Strategic Economic Reorientation
• In Transition to No-where.
• Prospects?
• Some Economic Recovery
• Task of Economic Transition More Difficult
• Task of Political Transition? Even More Difficult
• Hope for the Future?
• In the Short Term? Modest

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• 3. Hope for the Future?
• In the Longer Term?
• Yes!

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• Thank you very much
• Arch Ritter