Thursday, July 19, 2012

Revenge of the nerds

New customs duties will go into effect in September and apply to goods carried or shipped into Cuba by individuals.  The losers will be those Cuban entrepreneurs who depend on imported supplies and the couriers outside who profit by carrying supplies into Cuba, not to mention the public that receives these goods for their own use.  Potential winners are the state stores that carry imported goods that entrepreneurs and the general public desire. 

Given the amount of commerce that takes place, one would think that the Cuban government would establish stores of its own, well stocked, that would take business away from Ño Que Barato, Home Depot, and many other stores in Miami, Mexico, and elsewhere that serve the Cuban market. 

But that has hardly been accomplished, so for now the new duties will raise the costs and crimp the growth of that part of the entrepreneurial sector that depends on imported supplies – unless, that is, those who send goods in from abroad send the same volume of goods and absorb the new costs themselves.  Doubtful. 

Café Fuerte has posted the issue of the Gaceta Oficial that includes the new norms –  good luck reading them. 

Café Fuerte reporter Ivette Leyva provides the most complete explanation of the measures that I have seen.  She says that 20 kilograms of personal luggage remains exempt, and so does medicine.  Those who import goods valued above 50 Cuban pesos will pay a duty of 10 pesos per kilogram above 20 kilograms.  That’s ten Cuban pesos for Cubans resident in Cuba traveling once per year; if they travel more than once per year the duty is denominated in convertible pesos, as it is for Cubans residing abroad and for foreigners.  As for those who receive packages shipped from abroad, packages of up to three kilograms are exempt, and for packages above that weight they will pay a duty equal to the value of the goods.

AP reports that the ten convertible peso per kilogram duty represents a twenty-fold increase.  BBC’s Fernando Ravsberg refers to the amount of parcels bought from Cuba through; this business stands to be wrecked by the new duties.  The Herald covers the story here.

Absent repeal of these duties, the only way that the adverse impact on the entrepreneurial sector can be neutralized would be for state stores to expand their supplies, in-store and on-line, and to expand its initial moves toward bulk pricing of goods needed by entrepreneurs.  But those things won’t happen overnight.  In whatever debate took place over these measures, the winners were those who put a higher priority on short-term revenue gain than on job generation.

Reuters' Marc Frank rounds up the (negative) local reaction here.

(Photos refer to the e-commerce site of the Carlos III mall in Havana.) 



Anonymous said...

if the exemption for personal items remains unchanged, what has changed? Are these new duties or what? It has always been if you're overweight you pay duties (i got nailed for $300 five years ago for being overweight in what I was bringing -- 10 chavitos per kilo)
aren't those current regs being applied by those bringing down or sending items to Cuba? or is it simply an increase in existing duties
the exemption for food has ended, isn't that more important?
very confusing all these regs, and trying to make sense of them, good luck,

brianmack said...

Another reason why bureaucrats are such incompetents. You have to wonder where the IQ's are when you read this. I've stated many times and reiterate that the old line
communist hierarchy, controlling Cuba, better understand that time is not on their side!

Anonymous said...

The Cuban government wants to step on the acelerator and press the brakes at the same time.

By raising tariff duties it makes it impossible for the private commercial sector to grow and increase employment.

It also decreases the demand for aid packages making the private weekly commercial boat service just inaugurated non profitable and forcing it to close down.

With that a necessary condition for the expansion of American exports to Cuba, the next probable step in the negotiated lifting of the embargo. is done away with.

Short run increases in the government's dollar stores will result but only at the cost of reducing the growth of the private sector and private employment and of fostering the gradual end of the embargo and bettering trade and relations with the US government.

In my view a very short sighted decision but one in line with the ruling elite's traditional policy of keeping the embargo in place to aid its continuation in power while proclaiming to the world hypocritically its desire to have it end.


Anonymous said...

you may be right, so if the cubans DONT want the embargo to end, why doesnt the US end it? there is no logic in saying Cuba doesn't want the embargo to end -- its just another ridiculous accusation. the new law on duties may be shortsighted, even stupid, but dont try and convince anyone that it is in any way an attempt to stop America's desire to end embargo. Because there isn't any -- if the US wanted to end the embargo, to hurt the Cuban govt by ending it(??) then all they have to do is end it. but they have no intention. so stop conflating two totally unrelated events. and please stop the utterly idiotic perspective that the Cubans want this criminal blockade to continue.

Anonymous said...

Terrible blow to the very same reforms the govt. says it wants to implement. These crippling measures could have been proposed by David Rivera himself. It just goes to show you there are Cubans on both sides who will make other Cubans' lives miserable for some egotistical/political/economic gain. Blackmail. Killing the goose that lays the golden eggs. Whatever it is, it's negative. I feel sorry for those entrepreneurs. Cubans can't get a break, either at home or abroad.

Anonymous said...

Anonymous, its not the Cuban people that want the embargo in its present form to continue but interest group on both sides of the Florida Straits that benefit from maintaining the present state of affairs.

Why doesn't the US simply lift the embargo unconditionally?

This would be much better than using it to subvert the Cuban government which is absolutely counterproductive.

However, it would probably lengthen unnecesarily the duration of a totalitarian regime in the island.

The optimal solution, in my view, is using the gradual lifting of the embargo's numerous provisions to negotiate the adoption of measures that will help Cuba to transition more quickly to become a multiparty democracy with periodic elections, a cosntitution, respect for the law and a market economy.

This is the middle of the road moderate policy that Barack Obama favors and which I think is the one most favorable not only for democracy but also for the most rapid successful insertion of Cuba into a competitive globalized economy.

My ranking of the relative merits of the three existing alternatives would therefore be:

1- A conditional negotiated lifting of the embargo.

2- Unconditional lifting of the embargo.

3- Continuing the embargo's present provisions to force a popular uprising that will bring about regime change in the island.


Anonymous said...

The elite circles that run Cuba probably are convinced that a socialist economy is dysfunctional and would like to transit gradually to capitalism.

But they would like to do so in such a way that they do not lose power in the island and are transformed form a nomenklatura to a neo bourgeouisie.

To do this they have to use the economic regulatory power of the government to help their members triumph in an uneven market competition and carry out a process of primitive capital accumulation.

The way to do this is not to apply the tax code and tariff duties to the members of the nomenklatura that operate new businesses so that they can overcome the competition.

In the same way that after a few years the existing paladares in Havana were mostly owned by ex members of the nomenklatura, the military and the security services because they either did not pay taxes or paid a much lower rate than non preferred paladares, we can expect a similar process to occur with private commerce.

The full tariffs will be charged to non members of the governing elite and the favored merchants will not pay any duties or much lower ones.

In this manner competition will take place in a non level playin field and the members or descendants of the ruling elite will become the country's neoburgeoisie.