Snowden's Cuba problem

Reuters notes a Russian newspaper report that NSA rat-on-the-run Edward Snowden got stuck in Moscow because Cuba denied him permission to enter its territory, even for transit purposes.  The denial reportedly followed U.S. appeals to Cuba (and to many others) not to let him go anywhere but straight back to the United States.

The newspaper report is sourced to someone “close to the State Department,” which is a little loose.  But it’s plausible because once he landed in Moscow, a flight to South America through Cuba was his best option, and something clearly went wrong.

Cuba and the United States cooperate on a number of security issues: drug interdiction, migration, search and rescue at sea, hurricane preparedness, and selected law enforcement matters.  A Cuban gesture such as this, declining to help an enemy of U.S. intelligence agencies, would be quite a different kind of security cooperation.  But stranger things have happened.

Odds and ends

• Juventud Rebelde: There are now 436,432 Cubans working in the small entrepreneurial sector, nine percent more than were working last November.  18 percent of that number are employees, mainly in food service and transportation businesses.

• Reuters: 46,662 Cubans emigrated in 2012, the most since 1994.

• In Havana Times, Emilio Morales of the Havana Consulting Group estimates the economic impact of the half-million U.S. visitors to Cuba each year.

• In the Herald, columnist Fabiola Santiago writes that it is wrong for the United States to be granting larger numbers of visas for Cubans to visit or immigrate to the United States at a time when the Cuban government is engaged in misdeeds.  It’s hard to find a clearer argument in favor of punishing the people for their government’s actions.  Ugly.  She doesn’t mention ditching the sacrosanct Cuban Adjustment Act.

• Buy a fake birth certifícate for $10,000 or more, get yourself a bad sunburn, and present yourself as a Cuban – CNN on how non-Cubans fake Cuban citizenship to gain admission to the United States.

• CNN: Alan Gross was examined by U.S. doctors who traveled to Havana last month.  Background from last fall here.

• Internet monitor Renesys says that the Internet is getting faster in Cuba as satellite links are increasingly replaced by undersea cable connections.  (If you read the report, “latency” refers to speed of connection between a user in Cuba and a point outside Cuba; lower latency means higher speed.)

• Reuters on slugger Jose Daniel Abreu of Cienfuegos, who left Cuba and seems headed to the big leagues.  More from USA Today.

• This letter to the Economist from Stephen Purvis, the British businessman released from jail in Cuba, is well worth reading.  Note his observation that more are in jail than have been reported, and that there seems to be a particular risk for those who don’t come from Brazil, China, or Venezuela, i.e. those whose investments are not part of a government-to-government assistance program.

• AP: Some munitions are turning up in the Panamanian search of the seized North Korean freighter.  Panama’s work is done, CNN reports, and UN offials are now examining the cargo.

• Florida International University is digitizing interviews from its oral history project and has posted two about Operation Peter Pan: with Monsignor Brian Walsh and James Baker, director of an American school in Havana, both from 1997.

• Cuban American trumpet virtuoso Arturo Sandoval will receive the Presidential Medal of Freedom.

Visa news

The State Department announced today that for certain Cubans who qualify, the United States will issue five-year multiple entry visas rather than six-month single-entry visas, as has been the custom until now.  The spokeswoman was asked in today’s briefing if this step was the result of the recent migration discussions with Cuban officials, and didn’t answer directly. She said it is part of the Administration’s broader policy of increasing people to people contacts.  AP Spanish here, English here.

The hard part

“Now comes the hardest stage” of Cuba’s economic reform process, Vice President Diaz-Canel recently said in Havana.  Others of higher and lower rank have been saying the same thing.  What do they mean?

State enterprises may be the toughest nut to crack.  Many are not profitable, and if the government proceeds with its plan to shutter those that lose money, it will realize fiscal savings but also put people out of work.  Easy for an accountant, tough for a politician.

In recent National Assembly sessions (see coverage in Reuters, Granma, Juventud Rebelde), reform czar Marino Murillo indicated that the government will proceed along these lines in 2014.  Enterprises will receive greater autonomy, he said, by being permitted to use half of their after-tax profits either for investment or to increase worker pay, and through other measures.  As for the unprofitable companies, he said, “We can’t make a plan that includes companies like these.  Either they downsize, or they merge with another enterprise, or they undergo a process of investment to improve them, because otherwise the phenomenon of having to finance these losses will persist.”

As the government downsizes its bureaucracy and its enterprises, it needs a strong private sector that generates jobs for excess state sector workers.  In that connection, it’s good news that the entrepreneurial sector, now triple its size in 2010, continues to grow. 

But more is needed, larger-scale enterprises that can employ professionals and others in larger numbers, including in production of high-value-added goods and services.

The new law on private non-farm cooperatives is in effect, moving slowly in its pilot project phase.  197 have been authorized, according to a labor ministry official; in the Artemisa province there are 15 – 12 farmers markets plus a bus cooperative, another that recycles and sells construction materials, and a construction cooperative.

Most of these new cooperatives are converted state enterprises.  An official told state media that if the government decides to convert a state enterprise into a cooperative and the workers are not interested, then “the building and the equipment are put out to public bidding.”

But Presna Latina reported July 8 that the new cooperatives include 12 start-ups from the “non-state sector,” these consist “of self-employed workers mainly.”  (See coverage from AFP, Juventud Rebelde, and the Economist.)

Another way to generate jobs is through foreign investment, an issue that introduces a tension between the benefits of using foreign capital and know-how, and the risk – from the Cuban socialist perspective – of ceding a little bit of economic sovereignty in every joint venture.  This conflict surely explains, to take one small example, the decade-long wait between the tourism ministry’s identification of the need to build new golf courses and the recent approval of the first project.

The economic policy guidelines approved by the Communist Party in 2011 call for increasing foreign investment by adding new criteria by which projects may be approved, by seeking partners from new countries, and by shortening the time the government takes to make decisions on projects.

Recently there has been lots of talk in Havana about updating the 1995 foreign investment law.  But a vice minister told AP this month that a new law is not in the cards; instead, Cuba is likely to “update certain regulations” to accomplish the job.  Projects are being prepared in mining, tourism, renewable energy, and the food industry, he said.

Finally, in his July 7 speech to the National Assembly, Raul Castro called Cuba’s dual-currency system “one of the most important obstacles to the progress of the nation,” causing an “inverted pyramid” where people with greater responsibility are paid less.  It also means that Cuba lacks a functioning price system, which means distortions in both the state and private sectors that impede efficiency, competitiveness, and rational allocation of resources.

Unification of the currency, Raul said, will allow “more far-reaching and deeper transformations in questions of salaries and pensions, prices and fees, subsidies and payments.”  The result will be that “all able citizens feel an inventive to work legally once the law of socialist distribution is re-established: from each according to his capacity, to each according to his work.”

The problem is how to get there.  A sudden unification of the currency would create winners and losers – for instance, if the convertible peso were to become the new currency at the rate of ten Cuban pesos per convertible peso, those earning state salaries would gain and those earning convertible pesos would lose.  Someday, the government will have to manage the politics of that. 

Then there is the problem of state enterprises, which use a 1:1 exchange rate instead of the 25:1 rate in currency exchange houses.  In recent briefings for foreign journalists, Cuban officials told the Economist that the first step toward currency reform is about to take place, where state enterprises will have new exchange rates for their foreign trade.  They will be, a Cuban economist speculated, 12:1 for exports and 7:1 for imports.

So this is the hard part, not least because these and other changes are being pushed through a bureaucracy steeped in 50 years of centralization.  But these changes can also put the Cuban economy on a stronger footing than before, ending the policy patchwork that has held things together since Soviet support ended two decades ago.

Odds and ends

• Your tax dollars at work: American Express pays a $5.2 million fine because its offices overseas sold airline tickets from third countries to Cuba – 14,000 tickets over six years.  AP notes that the Cuban government has complained about this and other fines, including one against an Italian bank for transactions it made between 2004 and 2008, before President Obama took office.

• Former players for the Industriales, the Havana baseball club, plan to play two games in Miami to celebrate the team’s 50^th anniversary.  The games will be part of a reunion celebration, with former players from Cuba coming to join others who now live in the United States.  Florida International University agreed to allow the use of its ballfield, but cancelled meekly at the last minute due to “contractual” reasons.  Pathetic.  The U.S. organizers are determined to find another venue but the dates and the event itself are in doubt.  (AP, El Nuevo Herald)  Attorney Jose Palli sums it all up in Diario las Americas.

• Dissident Oscar Elias Biscet, in El Nuevo, argues that Cuba should join NATO someday.

• In Juventud Rebelde, Fidel Castro writes a letter to the foreign delegations visiting Cuba for the celebration of the 60^th anniversary of the attack on the Moncada Barracks.  He gives a long account of the events of 60 years ago.  He also makes brief reference to the North Korean ship detained in Panama: “In recent days slander has been attempted against our Revolution, trying to present the chief of state and government of Cuba as tricking the United Nations and other chiefs of state, imputing two-faced conduct.”

• The International Court of Arbitration issued a $17 million judgment in favor of Chilean businessman Max Marambio, who ran a food company in Cuba, was accused of corruption in 2010, and was convicted in absentia in a Cuban court.

• For the record, here are the statements issued at the end of the U.S.-Cuba migration talks that took place in Washington earlier this month: the Cuban and the U.S. statement.  The migration accords provide for periodic talks to discuss migration issues and the functioning of the accords.

• Reuters: Just-published data on 2012 farm production show mixed results that are not enough to reduce food import costs significantly.  Looking at the data, production of root vegetables was up 4.5 percent over 2009, plantains up 32 percent, garden vegetables down 17 percent, grains up 15 percent, beans up 15 percent, citrus down 51 percent.  Sugar production remains low by historical standards at 1.4 million tons, but that amount is grown on one third the land in sugar production a decade ago and the yield per acre, while lower than that of the 1980’s, is higher than at any time in the past 20 years.