China sees silver lining in Cuban economy

Before rounding up the economic news from Cuba, which isn’t too good these days, let’s start on the bright side.

In China, they seem to be optimistic about economic reform in Cuba, or maybe they’re trying to nudge the process along. At least that seems to be the message from this article from Beijing’s Xinhua news agency, which sums up a recent essay by Gramna editor Lazaro Barredo like this: “The Cuban government announced that it will soon make ‘inevitable’ reforms in the country to tackle the international economic crisis.”

I didn’t quite get the same message from Barredo’s essay. The (run-on) sentence that caught Xinhua’s eye was as follows: “These days numerous tense analyses are taking place throughout the government apparatus that will carry forward inevitable readjustments and that will not be impossible to overcome if, along with the incentive of citizen mobilization, businesses accomplish an in-depth review of their inventories, we know what reserves we can count on so as to work with what we have for the rest of the year and thus avoid imports, and all budgeted activities are aware that in every workplace we should fight against wasteful tendencies.”

To me, that’s not exactly a call for reform, much less an “announcement.” It sounds more as if Barredo is exhorting everyone to work harder and setting the stage for belt-tightening. “One of the things that the difficult economic situation most demands is that we confront that spendthrift mentality,” Barredo said in the same essay. His other essays in recent weeks have driven home the same message.

If the Chinese know something we don’t know, so much the better. But so far, as the effects of the world economic crisis continue to pile up in Cuba, it appears that outside the farm sector where results are mixed, reform is not on the menu.

So what about the economic news?

• Reuters, June 14: “Cuban factories are closing down and production is being cut at other workplaces as the international financial crisis weighs on the import-dependent Caribbean island, the official media said on Sunday.” This article is based on a long Juventud Rebelde article that details closings and slowdowns in Cuba’s industrial sector.

• AFP, June 10: Power is being cut, use of air conditioning is being limited, and rations of some basic staples are being cut by a third or more.

• EFE, June 12: The budgets of regional government entities and some economic sectors are being cut by six percent.

• La Jornada, June 10: Cuba, a net importer of oil, has turned to selling some of its domestic production to address a hard currency cash crunch. The oil would otherwise be used to generate electricity, presumably to avoid blackouts.

• Reuters, June 9: Cuba is seeking new terms on its foreign debt, seeking to roll some over and to restructure other bonds.

• Reuters, June 1: Cuts are everywhere: in urban bus service, in intercity train service, in lunches provided in workplaces, in the economy ministry’s 2009 economic growth forecast for Cuba (cut from six percent to less than three percent), and in imports of meat from U.S. producers.

• Reuters, May 26: Cuba’s 2009 foreign exchange income could drop by about one fourth, about $1 billion, due mainly to lower nickel prices and declining tourism income.

• Finally, there were the reports last month that the salary reform initiated more than one year ago and intended to give every Cuban worker a flexible pay scale that rewards productivity, is moving very, very slowly toward implementation. Articles from Reuters here and La Jornada here, and the Bohemia articles that broke the story are here and here.

And in the agriculture sector, where sound steps have been underway since last year to distribute idle lands and increase private farming, the Cuban media is reporting problems.

This article in Juventud Rebalde reported last month that farmers are doing their part, vastly increasing tomato production, but hundreds of tons of tomatoes from the recent harvest rotted due to lack of transport by the state agency that is supposed to collect the crop and bring it to processing centers. One cooperative is suing that agency for 146,343 pesos for 2,610 quintales of tomatoes (a quintal is a 100-pound unit of measure).

On June 7, Juventud Rebelde reported that an experiment will begin August 1 in two provinces – the city and province of Havana – to improve the collection, transport, and sale of food. Under the new structure, the paper reports, the agriculture ministry will be out of this business, and will be supplanted by 23 financially independent state enterprises, which will make contracts with producers and handle transportation. In the article, a farmer complained that his cooperative has not been permitted to make a contract for direct sales of vegetables to “an organization” that wanted to do so. But an official explained that under the new structure, the cooperative will be able to make such contracts after its obligations to the state enterprises have been met. We’ll see how it goes.

Where does this leave things? Well, if there’s an optimistic reading, it’s not the one in Xinhua that seems to add pro-reform tendencies to articles in Granma. It would be that Raul Castro is starting with agriculture and will get to other sectors when agriculture is done. He certainly has identified agriculture as a priority.

A more realistic reading, I think, would be that not even the pressure of a global economic slump has shaken the Cuban government from a very deliberate approach to economic reform.

As I have written before, I think the moves in agriculture are interesting not because they create free-market agriculture on our terms – as if we ourselves had free-market agriculture! – but because they are expanding the reach of private farming in Cuba, and expanding incentives in that sector. Other sectors, if they get to them, will take time. Would that Lazaro Barredo would fill us in on the government’s thinking on that.