CubaNews / September 2011
By Larry Luxner
Some 150 economists, political analysts, journalists and other Cuba experts gathered for their 21st annual Miami conference early last month, yet barely a word was uttered about Cuba’s ‘transition to democracy’ — a theme that in past years had dominated meetings of the Maryland-based Association for the Study of the Cuban Economy.
This year, ASCE’s theme was “Cuba’s Evolving Socio-Economic and Political Landscape.” Accordingly, ASCE members — meeting at the Downtown Miami Hilton — focused on the dramatic reforms now sweeping Cuba and whether they’d be enough to turn around an economy that everyone agrees is in very serious trouble.
From a timely presentation by Reuters correspondent Marc Frank, who had flown up from Havana for the occasion, to a talk by Cuba agricultural expert Jerry Hagelberg — who died barely three weeks later — the focus was not on what the United States should do to hasten democracy and a free-market economy on the island, but rather what the Cubans themselves are already doing.
Cuba scholar Joaquín Pujol pointed out the most serious deficiencies plaguing Cuba, including the inability to produce enough food; low worker productivity; the deterioration of infrastructure; Cuba’s dependence on imported energy; large fiscal deficits covered by monetary injections, and large balance-of-payments deficits which have resulted in the suspension of Cuba’s external debt obligations.
“The changes introduced over the past year have been billed by some as widely significant, but in reality, many of the new jobs — from food vendors to wedding photographers — have existed for years in the informal economy, and were already offering these services under the table,” he said.
“About two-thirds of the 171,000 new business licenses have gone to people who were already out of work, suggesting that the vast reforms may not be enough to satisfy a net reduction of half a million people who are expected to soon lose their government jobs.”
Pujol noted that the new small-business licenses give the Castro government a way to control the black market while capturing tax revenues. Yet the opposite could happen.
“Paradoxically, it might result in an expansion of the black market,” he told conference delegates. “Any activity not specifically listed is forbidden and illegal. And [the new rules] don’t allow any activities involving sophisticated technology. That leaves little room for personal initiative, and the continued existence of price controls is a disincentive — and this tends to promote corruption, because if you’re caught, you can pay off officials who are supposed to be looking after this.”
Veteran journalist Frank livened up his talk with colorful slides of life in Cuba — such as one of a woman along Calle Galiano peddling Mother’s Day cards sent to her from Miami.
“These women were there on every corner, and nobody was stopping them. This is a small example of what’s going on in Cuba today,” he said. “There’s been a change in the official line and the focus of the propaganda apparatus inside Cuba. And there hasn’t been one march in front of the U.S. Interests Section since Fidel got sick.”
Even more significantly, said Frank, “there’s been extraordinary interaction between Cubans on the island and Cubans from abroad. Nothing like this has happened since 1959.”
He said: “Cuban exiles are now financing and supplying a lot of the new non-state sector that’s developing, and it’s remarkable that the [regime] is letting that happen; 20 years ago, the government called anybody who left the island a worm, a scum or a traitor. They’ve gone from trying to force egalitarianism to extolling and rewarding individual initiative.”
Cuba expert Marifeli Pérez-Stable, a professor at Florida International University, told her audience that up until two years ago, she and other Castro-watchers were talking about a “paralysis” in the Cuban leadership.
“But we’re not saying that anymore. That’s out the window,” she warned. “The so-called elites are trapped. They speak of what the economy will be like in 2016, as if everything is going to go in the next five years as in the previous five.”
However, she said, the Cuban people are no longer the same. “They don’t trust one another, which is worse than not trusting the state. And that’s dangerous territory when a government — even a dictatorship — loses the ability to get people to listen to them.”
Case in point: “The people like that they might be able to buy and sell homes without 180 regulations, but then they immediately say ‘Why do we have these regulations in the first place?’ They’re playing with a very different emotional cycle than even after the early ‘90s.”
The ASCE conference this year hosted more diverse participants than usual, including analysts from more states and from more Latin American nations including Cuba itself.
It also featured more wide-ranging discussion, with participants bolder than in past years in suggesting new proposals for Cuba and its struggling economy.”
For example, University of Delaware professor Maria Aristigueta and retired U.S. Navy Capt. John Paron offered imaginative ideas on ways “to reinvent” the U.S. Naval Base at Guantánamo Bay.
In line with Pentagon plans to switch to renewable fuels, they proposed a biofuels center at Gitmo, initially processing Cuban sugarcane into ethanol for cars or other uses and later, developing algae farms in the ocean to convert algae to fuels.
But sugar and energy experts at the conference said that plan wouldn’t fly. Ethanol is best made where cane is grown and milled, and Guantánamo is arid and not good for cane farming. Plus, Cuban officials so far have rejected production of biofuels from food crops, including sugar, specialists said.
In his presentation on oil, energy analyst Jorge Piñón also dismissed arguments that big finds of offshore oil would produce a windfall for the Cuban government any time soon. While Spain’s Repsol YPF SA is set to start drilling for oil off Cuba later this year, using a $752 million rig custom-made in Singapore, it’ll take at least three to five years to monetize any big oil find, said Piñón.
Even then, Cuba’s government will have to share new oil revenues with the foreign companies drilling for oil. And the oil discovered likely will be used on the island, taking the place of oil imports now supplied by Venezuela at subsidized rates. It likely won’t be sold overseas to earn Cuba cash, said Piñón.
“The real beneficiary of this [major oil discovery] will be Venezuela, “because Venezuela will be able to sell oil it now sends to Cuba to other customers at higher prices,” he said. “Based on the data we have today, Cuba will not become a net exporter of oil long-term.”
Ted Henken, a sociology professor at New York’s Baruch College, shared results of an informal survey he took this April of “self-employed” entrepreneurs in Cuba. Respondents said they feel less stigmatized now than they were a decade ago.
Both officials and citizens now see entrepreneurs less as “parasites” and more as a “strategic necessity” to move the cash-strapped country forward, the survey found.
Government licensing and inspections are better now too, but shortages of wholesale markets and credit remain their biggest obstacle to developing their businesses.
Some participants asked if the Castro government might roll back market-oriented reforms again, as it did after Venezuela came to the aid of the credit-starved island by supplying subsidized oil for the past 11 years.
“It would really be a train wreck if they tried to move back again,” Henken said, adding that the prospect of self-employment offers hope for many Cubans — and killing off that hope would bring serious problems.
Emilio Morales, a researcher who left Cuba several years ago and now runs the Miami-based Havana Consulting Group, said he sees the Cuban diaspora as the largest factor in developing private business in Cuba near-term.
Cubans overseas provide not only money to family and friends for business; they also send supplies to Cuba, share know-how and monitor operations on the island.
Once homes can be bought and sold and other business-oriented reforms kick in, money sent to the island from Cubans abroad should soar — rising by perhaps $1 billion in 2012 to reach $3 billion, Morales estimated.
That’s in line with new research by remittance expert Manuel Orozco of the Washington-based Inter-American Dialogue.
Orozco’s study found that Cuban entrepreneurs plan to get most of their funds to start businesses from family and friends abroad.
“There’s a substitution of subsidies to the island — from the Soviet Union, then Vene-zuela and now, from the diaspora,” said Jorge Sanguinetty, a long-time ASCE officer. “Now, Cuba is more dependent on the United States than maybe ever.”