Tuesday, September 28, 2010

Odds and ends

  • CNN: The Havana archdiocese announces the release of three more political prisoners who will go to Spain, bringing the total to 39.

  • Some telling numbers: 21 of the political prisoners released by Cuba are seeking to come to the United States from Spain, accompanied by 120 relatives who left Cuba with them. Cuban Colada coverage here.

  • In the Sun-Sentinel, Carlos Saladrigas of the Cuba Study Group argues that an opening in U.S. policy, in this case an end to travel restrictions, will foster positive change in Cuba.

  • Europapress: Tourist visits up slightly in first eight months of 2010.

  • A press release from the Indian company Biocon announcing an expanded research and commercial partnership with Cuba’s Center for Molecular Immunology.

  • AP: Cuba hikes gas prices 10 percent.

Friday, September 24, 2010

Looking like a small business sector

In theory, the addition of 250,000 new licensed entrepreneurs to the 143,000 that now work in that sector, plus the creation of cooperatives in production, service, and retail businesses, can be a huge economic success – for the workers, for their customers, for tax collectors, for the productivity of the Cuban economy as a whole.

But it all depends on the policies and conditions under which they work. Looking just at the entrepreneurs, or trabajadores por cuenta propia, a few questions arise:

  • Will the government grant licenses to any and all who apply, or will priority be given to laid-off government workers?

  • Will the same municipal offices that have spent years turning down applications for new licenses now get the message and start enabling a big expansion of the sector?

  • Who will be allowed to hire workers – all cuentapropistas, or just those in certain lines of work?

  • How will the taxation system work? Now, cuentapropistas pay a progressive income tax – actually, it’s a tax on revenues with a minor deduction for expenses. What will be the new tax rates and at what levels of income will they kick in?

  • If someone has been working without a license and wants to start working legally, will a license be granted?

  • How will the government address cuentapropistas’ problems in getting supplies? (In two surveys I have done, they identify this as their top problem.)

The government begins to answer these questions in a Granma article today, and promises more information in the coming days. New regulations go into effect October 1. Coverage here from Reuters and AP.

Today’s article begins by promising a change in course. The new policies, it says, aim to “distance ourselves from those conceptions that condemned self-employment almost to extinction and stigmatized those who decided to join it, legally, in the 1990’s.”

As for the new rules, according to the article:

  • Now, only restaurants and small food-service operations such as sandwich stands can employ assistants. Come October, self-employment will be allowed in 178 lines of work (an increase), and in 83 of those, employees will be allowed.

  • No new licenses will be given “for now” in nine lines of work where there is no legal source of supplies, e.g. car body repair, metal working, sale of granite and marble items.

  • The economy minister says that stores that sell hardware and kitchen equipment are needed, ideally selling to cuentapropistas at wholesale. That won’t be possible in the next few years, he says, so “now we have to achieve a market” that sells these things at retail prices.

  • Restaurants will be permitted to seat 20 instead of 12. The prohibitions on serving beef and shellfish will end.

  • A change that seems designed to bring people in from the black market: the sector will be open to those without “vinculo laboral,”i.e. those with no current workplace.

  • People will be permitted to rent “housing, rooms, and spaces” for cuentapropistas to use as places of business.

  • Cuentapropistas will now be able to have licenses for more than one line of work and will be permitted to work outside the municipality in which they are licensed.

  • Cuentapropistas will be permitted to sell goods and services to state entities.

  • The Central Bank is studying “how to make viable the possibility” of providing loans to cuentapropistas.

  • The prohibition on renting entire houses or apartments for convertible peso rents is to be repealed.

  • Taxes will be calculated based on “personal income, sales, public services, use of the labor force [hiring], in addition to contribution to social security.” No details, such as tax rates, are provided.

Given the way this sector has been treated for the past 15 years – permitted, but not allowed to flourish and often viewed with suspicion – it is amazing to see a prominent article in Granma announcing a liberalization. The change in tone, and the acknowledgement of “stigmatization,” equally so.

As for the specifics, they are promising in that they begin to remove some arbitrary limits on good, productive work. The permission for Cuban citizens, rather than the state, to hire workers in 83 lines of work is a big ideological step. The tax system remains a big question mark.

Yet it looks as if Cuba’s days of having a small, stagnant self-employment sector is over. Looking ahead, if you take entrepreneurs and their employees, and add the yet-to-be-defined new cooperatives in production, retail, and service businesses, it appears that a small and medium-sized business sector is on the horizon.

Odds and ends

  • The wife of detained USAID contractor Alan Gross visited him in Cuba last month, the two apparently spending time at a beach house. Details from Reuters and AP.

  • Reuters: House Foreign Affairs Committee Chairman Howard Berman schedules a vote next Wednesday on the bill to end Cuba travel restrictions.

  • Herald: Attorney Carlos García-Pérez has been named to head Radio and TV Marti. Upholding tradition, he has no apparent journalism or broadcasting experience.

Thursday, September 23, 2010

No surfing on weekends

Penultimos Dias posted this Google chart on the volume of “traffic to our services” from Cuba. The data is available for all countries.

If you take traffic to Google as a reliable proxy for Internet use, my guess is that the regular dips in weekend volume tell you that Cubans mainly use the Internet from their offices. Whether they use it for work is another matter.

Odds and ends

  • The Spanish and Cuban foreign ministers met in New York, and El Pais cites Spainish government sources saying that Cuba will release from jail those political prisoners who have turned down the offer to move to Spain with their families. They will be freed within a month on licencia extrapenal, a sort of parole that is given to prisoners permitted, for health or other reasons, to serve out their sentences out of jail.

  • ESPN Deportes reports a rumor that Cuba is “studying seriously the possibility of approving a regulation that would give its ballplayers the status of free agents to sign with professional clubs, in the United States or other countries, after eight years of service in the local league.” They would pay 40 percent income tax.

  • El Pais: The United Stages in joining Spain in supporting a Cuban initiative to rebuild the main hospital in Port-au-Prince.

  • BBC: Brazil is offering to help Cuba develop a small business sector; the offer was carried by the foreign minister in a visit to Havana.

  • I wish I had flagged this magnificent documentary about the late Cuban bassist and composer Cachao before it aired on public television last weekend. The link takes you to previews and to the entire program. Actor Andy Garcia produced the documentary, which also highlights his friendship and assistance to Cachao in the final stages of his long career.

Tuesday, September 21, 2010

Suggestions for Obama

Cuba’s foreign ministry last week released its annual report on the U.S. embargo in preparation for the UN General Assembly debate this year.

This chapter discusses the “continuity” in President Obama’s policies and offers a list of steps that President Obama could take on his own, without Congressional action, to ease sanctions. AP story here.

Odds and ends

  • The Atlantic’s Jeffrey Goldberg discusses U.S. policy toward Cuba and argues that “China’s human rights record, in particular, makes Cuba’s look like Norway’s.”

  • The new edition of Vitral, the magazine published by the Pinar del Rio diocese, has contributions from Cuban-Americans Uva de Aragon, Carmelo Mesa-Lago, and Jorge Dominguez.

  • NPR looks at Cuba’s new farmers.

  • AP: Workers’ assemblies are meeting across Cuba and discussing the layoffs and shift to the private sector.

  • The Economist on Max Marambio, the Chilean businessman who did very well in Cuba, until about two years ago.

Monday, September 20, 2010

High-level layoff

Cuba’s Minister of Basic Industries was fired, and not with the usual bland announcement that will be waiting “until she is assigned other tasks.” This was for cause: “deficiencies in management” and “weak control over resources.”

The ministry’s portfolio includes the mining and energy industries.

Announcement in Granma here, Reuters story here.

Prisoner releases continue

Four more political prisoners are to be released, according to an announcement last Friday from the Havana Archdiocese. This brings to 36 the number of those who, in the announcement’s words, have “accepted the proposal to leave prison and move to Spain.” AP story here.

Uncommon Sense has a list of those who want to leave prison and remain in Cuba rather than moving to Spain.

If the process of prisoner releases takes three to four months, as stated in the announcement of the commitment made by the government last July, then it will conclude in October or November.

It’s not hard to figure out that the government’s preference is for the prisoners to leave Cuba; that fits with decades of practice. It’s also very plausible that the majority of those receiving the offer to leave jail and go to Spain with their extended families would take it in a minute.

The Damas de Blanco, EFE reports, are charging that the government is pressuring the prisoners to go to Spain, but the report doesn’t provide much detail. A spokeswoman for the group says that the prisoners who want to stay are placed with those who want to go, and the families (no surprise) are tipping the scales in favor of going to Spain.

Parliament chief Ricardo Alarcon has indicated that those who want to stay in Cuba will be able to do so. We will know by November how that works out.

The text of last Friday’s announcement follows:



En continuidad con el proceso de liberación de prisioneros, se informa que otros cuatro (4) serán excarcelados próximamente. Ellos son:





De esta forma suman treinta y seis (36) los prisioneros que han aceptado la propuesta de salir de la prisión y trasladarse a España.

Orlando Márquez Hidalgo

La Habana, 17 de septiembre de 2010

George Will, off the reservation

From his Washington Post column: “Today, the U.S. policy of isolating Cuba by means of economic embargoes and travel restrictions serves two Castro goals: It provides an alibi for Cuba's social conditions, and it insulates Cuba from some of the political and cultural forces that brought down communism in Eastern Europe.”

Thursday, September 16, 2010

More details on new entrepreneurship policy

Here’s another document (pdf), apparently a Cuban government briefing paper that is being used to explain the policy announced Monday to move a half-million government and state enterprise employees to an expanded private sector.

It was first posted at the German-language site kubaforum.com and then at Penultimos Dias, and adds some new details.

The layoffs and expansion of trabajo por cuenta propia begin in October.

The government is apparently going to address the problem of supplies, which has resulted in many licensed entrepreneurs resorting to black-market sources. This would be a big step forward, in both practical terms and in political terms, because it would show that the government is interested in creating conditions for entrepreneurs to succeed. The new policy, the document explains, is “to maintain limits on granting new licenses only for those activities that don’t now have legal means for acquiring raw materials and other materials they need, and to create conditions for the sale of these resources, which will allow the elimination of this restriction.”

Several prohibitions that now affect cuentapropistas will be eliminated. Eligibility for new licenses will no longer be limited to retirees and those with a current workplace (vinculo laboral), which would appear to open the door to those who have been working without a license and now want to join the legal system. Among other changes, they will be permitted to sell goods and services to government entities, and they will not be limited to doing business in their own municipio.

They will also be eligible for bank credit, another important change.

There is also a discussion of taxes. In addition to the current tax on income, taxes will be based on sales, the hiring of labor, and social security contributions.

The real economic impact of taxes on the sector is a function of two factors: the tax rates themselves, and the honor system where entrepreneurs (whose transactions are almost entirely in cash) keep the books on which their taxable income is based. If you document and declare less than your real income, a high tax rate is much easier to swallow.

Wednesday, September 15, 2010

Odds and ends

  • Livan Hernandez helps the Nats beat the Braves with a 61-mph fastball, a double, and a jonron.

  • Cuban economist Pavel Vidal on Radio Rebelde: “There has to be a commitment that this is a structural change that the economy is undertaking, that is to say it’s not tied to the moment, we’re not doing it for reasons tied to the moment, rather we accept that the Cuban economic model needs this non-state sector.” (H/t Penultimos Dias.)

  • In yesterday’s Granma, a handy quote from Fidel in 1971 about the “battle for the correct use of human resources.”

  • Yoani Sanchez writes about her neighbor Humberto who runs a private restaurant. (In English at Huffington Post.) She describes trabajo por cuenta propia as a “denigrated, but successful, creature.”

  • At Diario de Cuba, writer Miguel Suarez looks ahead to Cardinal Ortega reaching retirement age in October of next year.

  • AP’s Will Weissert talks to some Cubans already in business for themselves.

  • In this post, Ted Henken provides links to several of his papers on Cuba’s entrepreneurs.

The Plan for Havana

AP reported yesterday on a briefing document that explains the decision announced Monday to move a half-million Cuban workers from the state sector to the private sector, which Cuban officials and media prefer to call the “non-state” sector.

Penultimos Dias did us all the service of finding and posting it here. It’s titled “Process of reduction of payrolls,” which isn’t very inviting, but it’s worth a read because it sheds light on the much more interesting part of this story – not the downsizing of government offices and state enterprises, but where workers will go in the private sector.

The document applies to the City of Havana province. There are some unknown acronyms and some items without context or explanation, but plenty of the information is clear.

The document continues to explain that the root of this action is a realization on the part of the government that unless Cuba produces more and cuts excessive government spending, the problems affecting the family economy cannot be solved. There are quotes from Raul Castro, saying that if Cuba continues to maintain “inflated payrolls in almost all areas” and to “pay salaries with no link to results,” prices will continue to rise and purchasing power will continue to erode. Also, salary reform will remain impossible.

But a bigger breakthrough in government thinking is the idea that the country will benefit and productivity will increase if hundreds of thousands of workers move to the private sector.

There is some tough love. Again, there is a quote from Raul indicating that no worker will be abandoned – “but this is not about the State taking charge of placing everyone through several job offers. The first ones interested in finding a socially useful job should be the citizens themselves.” There is also a hint that benefits have been too generous to laid-off workers and those whose work is interrupted by natural disasters or other causes.

In Havana, 85 percent of the 64,546 new private jobs that this paper envisions are expected to be in individual entrepreneurship, or trabajo por cuenta propia. As I read the document, it assumes that these entrepreneurs will be able to hire workers (no specifics provided), it points to changes in the tax system (again, no real specifics), and it seems to say that 31 categories of jobs eligible for licensing will be reinstated, and six new ones added.

It seems that Cuba’s cuentapropistas, long viewed by officials as bit players, now have starring roles in a big government strategy.

As for cooperatives, the document lists dozens of ideas for businesses that can be performed by cooperatives in five areas: agriculture, construction, construction materials, transportation, and food production. Some are services for individuals, others (cleaning crews for parks, rivers, and beaches, bridge repair) sound like municipal governments would be the customers. I noticed many (and readers may note more) where I know Cubans already have illegal de facto companies, such as laundry services, car repair, body shops, moving companies, and caterers. In those cases, it’s an opportunity for people to come out of the black market and join the legal economy.

The document doesn’t discuss how many jobs are expected in newly created cooperatives, and how many in cooperatives that will be formed by converting small state enterprises such as cafeterias, light manufacturing operations, repair shops, etc.

But since the actions are to take place in the coming months, the answers to these and other questions will become evident.

In the meantime, if you add it all up, it sounds like an outline for a small and medium-sized business sector, regardless of what they call it down there.

Monday, September 13, 2010

Cuba's soon-to-expand private sector

A few more thoughts on today’s announcement that Cuba will lay off 500,000 workers in the government and state enterprises by April 1, and expand a number of varieties of private employment to take up the slack:

  • In the past I have characterized Raul Castro’s economic reforms as gradual. I stand by that. But today’s announcement opens a new chapter, one that has a deadline, that will be felt and seen in every town, and that promises to create a much more substantial private sector inside the socialist economy.

  • When self-employment was last expanded in the early 1990’s, the government seemed to view it as a necessary evil or, at best, a small-potatoes option for providing a few services in which the state had no interest. This is different. The expansion of self-employment and cooperatives today is subsidiary to a larger goal, which is to shed unproductive people and activities from government payrolls. “We have to erase forever the notion that Cuba is the only country in the world where one can live without working,” Raul Castro said last month.

  • The 500,000 figure is alarming – it conjures up an image of 500,000 Cuban workers going home with a pink slip, not knowing where they will go the next morning, and of the economy suddenly needing to create 500,000 new jobs. In fact, many workers will go to the same workplace as ever, but the business arrangements will be different. We have seen this with barbers – one day they stopped being salaried employees, and they now rent their locale, pay tax, buy supplies, set their prices, and keep their profits. A similar thing will happen in service and retail enterprises (cafeterias, repair shops, etc.) that will be converted into cooperatives. If these conversions are carried out at a serious pace, a substantial number of those 500,000 workers will move from state payrolls to non-state payrolls without dislocation. Then, they will have to be profitable.

  • Self-employment, or trabajo por cuenta propia, is another source of new employment. Many will surely welcome the ability to get a license so they can stop working in the shadows. There are many thousands of Cubans in this category – I know of moving companies, car repair shops, small construction crews, and others that work without licenses. If the government gets these entrepreneurs onto the license and tax rolls, that will take care of another big chunk of the 500,000.

  • But there will be layoffs from government jobs, and self-employment will be an important option for those ex-government workers, as it was in the early 1990’s. A new option, if Raul Castro carries out what he said last month, will be for currently licensed entrepreneurs to hire workers.

  • In the letters to the editor of Granma and elsewhere, Cubans have been calling for the government to turn small state enterprises into cooperatives in the cities; cooperatives, after all, are a form of property that Cuba has allowed in the countryside for years. This will be interesting to watch. Conversion is easy, but profitability will depend on the workers and the rules under which they work. For example, if a small furniture manufacturing operation is turned into a cooperative, will it be free to sell to any customer it can find – individual, state, state enterprise, tourist hotel, foreign business, joint venture?

  • Last time I surveyed Cuba’s cuentapropistas, I found that those whose businesses operated in pesos were earning more than three times the average state salary. The income and the attractiveness of working independently are strong incentives for more Cubans to turn to licensed self-employment. Here again, the rules will matter; for example, wholesale supply stores would be appreciated by these entrepreneurs and would obviate the need for black-market supplies. More background on this sector is here (pdf).

  • I’ve said it before, I’ll say it again: All Republicans should now go to Cuba to see what cutting the size and scope of government is really about.

Now it gets serious (Updated)

Regardless of what Fidel Castro may have said or meant about Cuba’s “model,” today’s Granma contains an important announcement about what the government means when it discusses the “development and updating of the economic model that we should follow.”

The headline is bland: “Announcement of the Central de Trabajadores de Cuba.”

The news is huge: 500,000 layoffs by next April, with a “parallel increase in the non-state sector.”

For laid-off workers, the announcement says, “the current set of options will be broadened and diversified with new forms of non-state labor relations as an employment alternative: among them renting, usufruct, cooperatives, and self-employment, toward which hundreds of thousands of workers will move in the coming years.”

That means a large expansion in Cuba’s private sector: “renting” refers to the leasing of state installations such as barber shops and beauty shops where the workers now operate as small entrepreneurs; “usufruct” refers to long-term leasing of land or other means of production as in farm cooperatives; “cooperatives” sounds like a decision to use in the cities a model already working in the countryside; and “self-employment” is Cuba’s small entrepreneurial sector, which has accounted for about three percent of the labor force.

The announcement notes that “it is known” that the government and its enterprises have more than one million excess workers. It says that the state sector will only be able to absorb laid-off workers in certain sectors: agriculture, construction, teachers, police, industrial workers.

The outlines of this action have been presented in various settings, but the details presented today – the numbers and the date – are new and mark a new phase in Cuba’s economic reform, one that will be readily observable across the island.

If fully carried out, a major expansion of Cuba’s private sector will benefit many thousands of Cuban families and give Cuban Americans opportunites through remittances to help relatives in Cuba who will be working on their own.

(Update: Reuters is reporting: "According to Communist party sources who have seen the detailed plan to 'reorganize the labor force,' Cuba expects to issue 250,000 new licenses for self-employment by the close of 2011, almost twice the current number, and create 200,000 other non-state jobs.")

A model retraction

Maybe we should take bets on whether Fidel Castro’s nine-word quip about the Cuban model can get two weeks of coverage – he is now saying he meant “exactly the opposite” of what he told an American journalist. AP story here.

Friday, September 10, 2010

Fidel, vivito y coleando

Fidel Castro should have been long departed by now, according to (among so many others) U.S. Director of National Intelligence John Negroponte. “Everything we see indicates it will not be much longer . . . months, not years” before Castro would die, Negroponte told the Washington Post. That was December 14, 2006.

Nearly four years later, it hasn’t quite turned out that way.

For a long time, while remaining out of public view, Fidel eased back into the public discussion with his newspaper commentaries, which certainly sound like him but were never enough to convince about the state of his health.

Then the public appearances started picking up. Most recently, there was an interview with the editor of Mexico’s La Jornada where he explained his trip to the brink and back. (AP summarizes here.)

Then there are the interviews with the Atlantic’s Jeffrey Goldberg, who was invited by the big guy himself on the strength of his article about the possibility that Israel might attack Iran to destroy its nuclear program. Goldberg’s initial accounts are here and here.

Coming late to the discussion, I’ll just say a few things.

Fidel Castro’s ability to draw media attention remains formidable as ever, as does his knack for exasperating his opponents.

In his recent appearances he has continued to focus on big-picture global affairs, now emphasizing the Mideast. He continues to stay away from domestic policy; not one word on the prisoner releases or economic policies. So intense is the curiosity about his views on those issues that one remark to Goldberg set off tons of speculation and analysis; here’s how Goldberg wrote it up:

But during the generally lighthearted conversation (we had just spent three hours talking about Iran and the Middle East), I asked him if he believed the Cuban model was still something worth exporting.

“The Cuban model doesn't even work for us anymore,” he said.

This has been interpreted as a green light for economic reform, as a signal to the European Union, and more. This essay on Fidel’s return says it’s all “an act of desperation by a ruling clique unable to control a fast-moving chain of events and looking to shore up a wobbling regime facing unprecedented threats.” Well, why not?

For my part, I find it hard to read much of anything into such a short quip.

If you want to go out on an optimistic limb, you can assume he is talking about Cuba’s economic model, which isn’t clear from those nine words. Regardless, you can go on and interpret that Fidel agrees with everyone else that the Cuban economy needs fixing, which he has said before. Further, you can take it as a sign of support for changing the model itself – which would be progress, because Fidel’s prescriptions in the past have centered not on changing structures and incentives, but rather on the government enforcing the law and the people working harder.

What counts, as always, are policies rather than words.

Cuban media, to date, have not reported on Fidel’s remark.

Odds and ends

  • Penultimos Dias links to video of protests by Pakistani medical students in Jaguey Grande, Matanzas that resulted in deployment of anti-riot units. The video was shown on MegaTV’s Maria Elvira Live program in Miami. Ernesto also digs up this link to a petition (in English) that these same students apparently wrote last September complaining respectfully about the conditions under which they live and study – including a lack of normal Internet access. Herald story here.

  • In baseball: The Nationals brought up pitcher Yuniesky Maya, 29, and he took a loss to the Mets in his first outing….Aroldis Chapman, brought up by the Reds as a reliever, is dazzling. This column from MLB.com includes video of his “cartoon-like slider” and says Chapman’s debut “puts a greater emphasis on the remaining talent” in Cuba….And Orlando “El Duque” Hernandez ended his minor league assignment and went home upon learning that the Nats were not going to bring him up to the majors this month.

  • The magazine Poder360 looks at TV Marti, and follies such as the news crew arriving late to the Obama inauguration. Meanwhile, director Pedro Roig has resigned, giving President Obama an opportunity to name his own Cuba broadcasting chief.

  • The Calle Ocho of the north, Bergenline Avenue in Union City, New Jersey, profiled in the Wall Street Journal.