Category — Economy

Via Financial Times:

Cuba, one of the world’s last surviving Communist states, is looking at watering down the generous social welfare system that has been a cornerstone of its economy for nearly 50 years, according to a senior government official.

Alfredo Jam, head of macroeconomic analysis in the economy ministry, told the Financial Times that Cubans had been “over-protected” by a system that subsidised food costs and limited the amount people could earn, prompting labour shortages in important industries.

“We can’t give people so much security with their income that it affects their willingness to work,” Mr Jam said. “We can have equality in access to education and health but not in equality of income.” He said the emphasis on equality had helped maintain social cohesion during the 1990s when Cuba’s economy came close to collapse after the withdrawal of Soviet assistance, but “when the economy recovers you realise that there is [a level of] protection that has to change. We can’t have a situation where it is not work that gives access to goods,” he said.

Mr Jam’s remarks represent a rare and unusually frank insight into official thinking on Cuba’s future economic direction in the wake of the resignation of its long-time leader, Fidel Castro, in February.

Under Cuba’s new president, the former leader’s younger brother Raúl, the country has eased restrictions on bonuses that can be paid to workers and lifted bans on products such as mobile phones and DVD players.

Mr Castro also decentralised the country’s agricultural system and said idle land would be offered to co-operatives and private farmers to lower dependency on imported food.

However, the welfare system has remained almost intact. Under it, all Cubans are entitled to basic foods, including bread, eggs, rice, beans and milk, at much cheaper prices than those elsewhere in the world. Rents and utilities are extremely cheap and education and healthcare are free.

Any reform of these universal benefits would be controversial within the governing Communist party and unlikely to happen quickly.

But Mr Jam’s comments reflect growing frustration in official circles about poor performance in agriculture, construction and manufacturing. “There isn’t motivation to work in these sectors,” he said.

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Reuters reports:

The United States ranked among communist Cuba’s top five trading partners for the first time in 2007 despite the decades-old U.S. trade embargo, as U.S. agriculture sales increased by $100 million.

Trade data for 2007 posted on the Web site of Cuba’s National Statistics Office (www.one.cu) placed the United States fifth at $582 million, compared with $484 million in 2006, including shipping costs.

The United States, which began selling food to Cuba in 2002 under an amendment to the embargo, placed seventh in 2006 and 2005.

Revolutionary ally Venezuela and communist China were Cuba’s top trading partners at $2.698 billion and $2.457 billion respectively, with Canada placing third and Spain fourth, each at more than $1 billion.

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The Economist has a piece on the effects of the embargo and foreign investment in Cuba:

FOR almost half a century, the United States has imposed a trade embargo against Cuba. And yet it sometimes seems barely visible. Across the island, American brands are ubiquitous. Tourists can order a Coca-Cola (made in Mexico) in state-run hotels. Computers running Microsoft software have appeared in the capital’s few electronics stores. A fleet of Ford tankers refuel aeroplanes at Havana’s airport. Taking advantage of an exemption introduced in 2000, American farmers have become Cuba’s biggest source of food imports, a cash trade worth $600m a year. No wonder that some Cubans wonder whether the “blockade” which the government blames for nearly all of Cuba’s problems might be some sort of Orwellian trick. “Does it really exist?” asks a medical student in Havana. “I don’t know what to believe anymore.”

But plenty of companies that deal with Cuba have recently been reminded that the embargo is real. Last month, the United States’ Treasury’s Office of Foreign Asset Control, which is responsible for enforcing it, fined Minxia, a Maryland-based subsidiary of China’s MinMetals Corporation, $1.2m for dealing in Cuban metals. Gate Gourmet, a Swiss-American group, was ordered to pay $600,000 because it supplies in-flight meals to Cuba’s national airline.

Although the embargo has manifestly failed in its objective of removing Fidel Castro’s communist regime, in 1996 it was tightened by the Cuban Liberty and Democratic Solidarity Act (better known, after the legislators who sponsored it, as Helms-Burton). This attempts to apply the embargo to foreign companies and individuals. Its extraterritorial pretension riles even many of America’s closest allies. It has notably been invoked to ban the directors of Sherritt, a Canadian firm which runs Cuba’s nickel mines, from entering the United States. (They included a former editor of The Economist). But in deference to those allies, the Act’s draconian Title III, which gives Americans who owned property in Cuba before the revolution the right to sue foreigners who now invest there, has been waived every six months, first by Bill Clinton and then by George Bush.

[Read more →]

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La Razon reports on the creation of a super-ministry charged with overseeing the production of food (a vital national security issue for Cuba):

While rumors of a next government crisis runs insistently throughout Havana, the name of Ulises Rosales del Toro is beginning to be heard with greater impetus among diplomats and journalists.   Rosales del Toro is the current Minister of Sugar, a two star general, 66 years-old with a brilliant service record for the regime.

According to unofficial sources, it seems Rosales del Toro will play a vital role in the restructuring of the Cuban government once Raul Castro sends the plan to parliament (National Assembly) before the end of the year.

“I know what you know,” responded Vice-Minister of Sugar Juan Godefroy to a query made by a US news agency interested in the role of that ministry in the unification of four ministerial posts that are linked to the production of food in the country.

Expected unification

Even though there is speculation without official confirmation point to Rosales del Toro, former chief of the General Staff of the Armed Forces, as the center of the expected unification or reorganization of the Ministries of Agriculture, Sugar, Food and Fishery.

The restructuring of the departments linked to the production of food which is a national security issue in Cuba began with sharing by municipalities of “many decisions that have been up to now made centrally in the Ministry of Agriculture,” opined Cuban economists who asked to remain anonymous.

“Unification of decision making” in the sector will be reached through that path but they declined to advance the names of who will head the new structure.

[H/T: La Nueva Cuba.]

[Photo: BBC.]

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Houston Chronicle reports on the Cubans’ apathetic feeling and prices spiraling upward even for a mango yet the Cuban government has a difference view:

Cubans face economic difficulties, but “there are no tanks on the street corners,” said Miguel Alvarez, chief adviser to Ricardo Alarcon, president of Cuba’s National Assembly. Cuba, Alvarez said, is a “stable country, a tranquil country.“

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Via Bloomberg:

United Aircraft Corp., the Russian state aerospace group, and OAO Aviaexport agreed with Cuba’s Civil Aviation Institute to sell the Caribbean nation airplanes and set up service centers for local clients.

A memorandum of understanding was signed last week during Deputy Prime Minister Igor Sechin’s visit to Cuba to deliver models including OAO Tupolev Co.’s Tu-204 mid-range planes and Antonov An- 148 regional jets, Russia’s Industry and Trade Ministry said in a statement on its Web site today.

Russian drugmakers OAO Pharmstandard and OOO Pharmapark also agreed with Cuba’s Center of Genetic Engineering and Biotechnologies to cooperate on producing vaccines in Russia, according to the statement.

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