Transcript cuba_Ritter_Social Justice International CRI Ottawa June 9

Cuba’s Strategic Economic ReOrientation
for: “Governance and Social Justice in Cuba: The
International Dimension””
Symposium organized by FOCAL, Canada; CRI-FIU, United
States; and FLACSO, Mexico.
June 9, 2006
Archibald Ritter,
Carleton University, Ottawa Canada.
Outline:
I.
II.
Introduction
Origins of the New Development Strategy:
•
•
•
Castro’s Vision
The New Geopolitical Context
Economic Recuperation
Cuba’s New Development Strategy
• New Export Foundation
• A Knowledge Economy and Society
• Institutional Strategy
• Rebuilding the Infrastructure: La Revolucion
Energetica !
•
Renewed “Sucrophilia” ?
• Socialist Purification: Combating Economic Illegalities and
Corruption
IV. Central Problems
• President Castro
• US Policy towards Cuba
• Openness; Transparency; Accountability; Democracy
VI. Conclusion
III.
I. Origins of the New
Development Strategy
1. President Castro’s Vision
1. President
Castro’s Vision
1. Castro’s Vision:
Not clearly articulated, but expressed piecemeal
on numerous occasions; especially Speech of
November 17, in the Aula Magna, U de la Habana
Probable fixation on his “Legacy”
Main Elements:
–
–
–
–
–
Personal and National Leadership in Anti-US &
Anti-Imperialist Crusade;
Irrevocable “Socialism” and Political Continuity;
Socio-Economic Purification;
Re-ordering of Cuba’s Place in the International
System;
Return to Prosperity.
2. The New Geopolitical Context
– The US in Trouble:
• Incapacitated in the Iraq quagmire;
• Economic vulnerability with external deficits and debt;
• Loss of reputation and moral authority in much of the
world
– Emergence of China and spin-off benefits for
Cuba:
• A Chinese depot for the Caribbean area?
• Chinese resource investments (nickel & oil exploration
• Major new credits
• Like-minded re Governance and Human Rights
A Latin American Opening for Cuba ?
– Chavez as a new Sugar Daddy or Petroleum
Papa
– Evo Morales
– Ollanta Humala in Peru? No.
– Colombia: Uribe
– Ecuador & Mexico (Lopez Obrador?)
– Centre-Left friendly regimes: Argentina &
Uruguay
(entry into Mercosur?)
– Social Democrat, friendly regimes: Brazil, Chile
– Good Caribbean relations
– Major US unpopularity in Latin America
3. Economic Recuperation
• Economic Recovery is real, but Slow.
• Official GDP numbers suggest that GDP of
•
1989 has just been surpassed in 2006 by
14%.
The Economist’s GDP estimates (5.2%
growth in 2005; 4.5% probable in 2006)
suggest that the 1989 level of income per
capita has just been reached. i.e. 16 lost
years
• Recuperation makes reversal of earlier
reforms easier for Castro.
III. Cuba’s New Development Strategy
1. Past Strategies
• 1961-1964: Instant Industrialization
.
• 1964-1970: the “10 Million
Tons” Obsession, plus the
“New Man” & Extreme Centralization
• 1970-1989: Soviet Model & patronage;
emphasis on sugar, nickel and minor (neveremerging) exports;
• 1992-2005: emphasis on tourism, remittances, nickel,
with a weakening sugar sector
2005- Onwards: A New Approach
III. Cuba’s New Development Strategy,
continued
2. New Export Foundation:
• Continuous problem for Cuba since 1961:
paying its way in the world
• Merchandise Trade Deficits have persisted
and will continue
III. Cuba’s New Development Strategy, continued
2. New Export Foundation, continued:
1.
Nickel: Major expansion expected
– Sherritt Expansion; ($450 million)
– Chinese Investment Prospect: a doubling of production?
(?? $500 million?)
2. Medical Services: already well-launched
– Doctors for Rent;
- “Medical Tourism”
– Biotechnical Exports: Pharmaceuticals etc. , some
potentialities
3. Petroleum Extraction and Processing:
– Refining of Venezuelan Oil in Cienfuegos for the
Caribbean ?
– Increased extraction, self sufficiency and export ??
– Prospects for Major New Oil Discoveries ???
4. Sugar Revival?
5. Continuing Tourism, Remittances,
Cigars, etc. but de-emphasized
III. The New Central Development Strategy, continued:
3. A Knowledge Economy and Society:
Major Expansion of Higher Education:
• 500,000 plus university students, says Castro ( 60%
of the population aged 18 to 23 )
• 122,000 ”professors;” student faculty ratio: 4.1/1
[ Does Castro understand the phenomenon of “diminishing
returns”? ]
• 958 University Campuses
( 1 for every 11,700 persons )
• Universidad de Ciencias de Computacion,
– established September 2005;
– Former Lourdes military base
– 2,000 students
– Focus on distance education and curriculum for literacy
….for
Exportation of Educational Services
4. Institutional Strategy:
• Return to Centralization;
• Intense containment of self-employment
• The “Battle of Ideas”
– A Personal Extra-Party, Extra-State Parallel System managed
by Castro
• War Against Corruption
• Los “Trabajadores Sociales”
– Anti-corruption monitors or police
– Key operatives in “La Revolucion Energetica”
– “Redeemed Youth” with special functions and status
• Patriarchal Distribution of goods by the State
– Plus the “Political Patronage Economy”
In sum: more “voluntarism;”
less “market”
more Presidential central control
5. Rebuilding Infrastructure
– Urgent needs in Housing:
• A state of disastrous disrepair and collapse in
many areas
• Major campaign announced;
• But do-it yourself in a normal way continues
impaired
Plus:
water systems;
sewage systems;
streets & sidewalks;
public buildings etc.
All require urgent maintenance and reconstruction;
Plus: Personal infrastructure such as homes
generally have major maintenance backlogs
5. Basic Infrastructure, continued: :
La Revolucion Energetica
- Frequent failures and blackouts impose major
costs on citizens
- Major elements:
1. Conservation measures:
-
replacement of light bulbs, fans, refrigerators, etc
pressure cookers, and electric rice makers provision’
courtesy of Fidel;
2. Shift of cooking from gas to electricity
3. Increased Investment in Repairs and Maintenance
4. New Generating Capacity: small & mini generators;
5.
gas-fired generation
Alternate energy sources, namely wind
The Small Generator Option
(“Grupos electrogenos de emergencia”)
- a.k.a.: The “Home Depot Solution” to
electricity generation::
- Replacement of Thermo-electric Plants
with small generators
- Plus 4148 mini-generators for back-up
purposes
- At a cost of around $2 billion ???
- Dispersed around the Island
The Small Generator Option
-
-
(“Grupos electrogenos de emergencia”)
A quick fix for energy provision to ensure Fidel’s
Legacy
Economically silly
- Economies of large scale generation will be
foregone;
- Petroleum feed-stock will have to be transported by
truck around the Island to the generators;
- Large collateral investments needed for storage and
protection of diesel fuel
- Maintenance problems will be multiplied
- Potential for theft is increased;
- Synchronization of electrical supply to changing
demand throughout the day will be more difficult
Another of Fidel’s “good ideas”?
5. Renewed “Sucrophilia”
1961-1963: Instant Industrialization
plus Sucrophobia I : Ignore sugar
1964-1970: Extreme Sucrophilia I
• “Honour & prestige of the Revolution” are based on
producing the 10 million tons
All non-sugar sectors sacrificed
•
1970-1985: steady role for sugar economy;
1985-2003: “Milk the cash cow to death”
• Extract foreign exchange for investment elsewhere;
• Starve the sector of resources through exchange
•
rate treatment:
– $US 1.00 sugar exported earns Cu Peso 1.00
for the sector
Other countries capture Cuba’s market share
2003 – 2006: Sucrophobia II : “Shut it down”
– About 70 of 156 sugar mills were closed;
– Only about 30 of the remainder were actually in
operation
– Results:
• collapse of sugar harvest (1.1 m tons, in 2006)
• Ghost towns and regional dislocation;
• Probable unemployment, but not in Cuban
statistics;
• Collapse of the whole sugar “cluster” of activities
• Irreversability?
2006 Onwards: Sucrophilia II: a return to sugar?
- Provoked by high sugar prices
- arising from Brazil’s sugar-ethanol link);
- But not linked to ethanol production in the energy
-
strategy;
Probably too late to revive the sector.
6. Socialist Purification Combating
Economic Illegalities and Corruption
Character and Dimension
Innumerable varieties. A few that I have
observed directly:
•
•
•
•
•
•
•
Security guards at cigar factory sell cigars to passersby
Security guard at dollar store pilfers an item to sell to a client at
20% of the official price
An official at a state institution uses the public vehicle and its
chauffeur as private property
A taxi driver provides a ride with the meter off and for a fee
A foreign organization pays a salary supplement in Convertible
Pesos to its Cuban employees
A citizen buys a birthday cake from an unlicensed baker
A citizen sets up a satellite dish, receives foreign, and provides 24
hour cable service to neighbours
How significant are these illegalities?
– Pervasive
– Cuban citizens assert that everyone is
involved.
– It is often stated that everything imaginable is
available on the black market, via pilferage
from the state sector.
– Examples of magnitude:
• Gasoline theft and replacement of all “pisteros”
• Charcoal and wood provision provide most cooking
fuel in some rural areas
• Messengers and coleros: one on every block in
some areas
• Cigar making and vending
Causes:
1.
Colonial roots: Contraband trade with the French,
British and later the United States as well as with
pirates;
A large informal economy existed in the 1950s
attracting the attention of the 1951 IBRD (Truslow)
Mission to Cuba
2.
Central Planning System
The rationing system, forced many people to become
became mini-capitalists,
Planning system also promoted illegalities:
Enterprise managers must resolve problems via the
illegal exchange of goods.
3. Common Property Resource Phenomenon:
state property belongs to no one and to everyone; if
one person does not help himself to it, someone else
will instead.
4. Economic Arbitrage and
Monetary/Exchange Rate Duality
5. Limitations and on Restrictions on legal
Micro-enterprise promote underground activity
and illegal actions:
Restrictive licensing
Excruciating regulations
Heavy taxation
6. Economic Necessity and Illegalities
– Illegal economic actions are necessary to
survive. Why?
– The central reason: people earn "Moneda
Nacional" "old pesos" but their earnings are
insufficient to purchase the basic foodstuffs.
– People must find additional income in "old
pesos" or convertible pesos.
The Campaign since October 2005:
– October 17: some 15,000 “Social Workers” take
over the gas stations to prevent pilfering of
gasoline
– October 17: Military intervention in the
management of the Port of Havana
– October: fulminations about the “new rich” from
cuenta propismo and corrupt practices;
– November 7-9: raids on “mercados agropecuarios”
(aimed at sales by farmers prior to fulfilling their
state quotas)
– November 17-18: Castro’s 5-6 hour speech
• aims at legal micro-enterprise
• alludes to deficient Ministers and officials;
• Late November: “Operacion Arana” against illegal
•
•
satellite TV access;
November 29: Operation against un-licensed
bicycle taxis in Havana
November 22: electricity, pensions and salary
increases:
• Pensions (minimum): from 150-164 pesos per
month
• Electricity rates: increasing plus escalation
• Wage increases averaging 43 pesos per
month
•
• March 22: Ejercito Nacional de Vigilancia, within the
CDRs
Consequences of Economic Illegalities::
Complex and Mixed.
– Truly criminal activities are socially and economically
noxious.
– Widespread low-level pilferage from the enterprises and
institutions:
– noxious though necessary: helping "make ends
meet."
– SELF-DEFENSE IN A DYSFUNCTIONAL SYSTEM ?
– Other types of illegalities (payment of income
supplements in cash or in kind)
largely benign.
– Unlicensed (and thence illegal) self-employment:
mainly positive consequences
Basic economic reforms are required
Preaching, policing punishment and proscription are
unlikely to work effectively
Necessary Reform measures
– liberalizing the licensing, tax and regulatory regimes for
all legitimate micro-enterprise;
– reducing the scope for arbitrage by unifying the current
dualism or the Cuban economy;
– reducing the all-encompassing role of the state so as to
reduce the inclination to pilfer.
– Achieving real improvements in living standards so that
people's survival imperatives no longer require illegal
actions is also necessary.
Unfortunately, these economic reforms and a return to
prosperity are some distance away.
V. Central Problems
1 Comandante en Jefe Fidel Castro
– Economic Savoir-Faire Unimproved:
• “We have cost the people too much in our process of
learning…..The learning process of revolutionaries in
the field of economic construction is more difficult
than we had imagined.”
Speech, August 2, 1970
• “The price of oil nowadays is not in keeping with any
supply and demand rule; it’s not a price that is in
keeping with economic rules either…. The reason
behind it is the shortage of this product together with
the increasing and extraordinary demand for it.”
Speech, Nov 17, 2005
VI. Conclusion
1. Is Cuba in Transition? To What?
• Political Paralysis;
• Institutional Regression
• Geo-Political Reorientation
• Strategic Economic Reorientation
“In Transition to No-where.”
2. Prospects?
•
•
•
Some Economic Recovery;
Task of Economic Transition: More Difficult
Task of Political Transition? Even More Difficult
3. Hope for the Future?
–
In the Short Term? Modest
3. Hope for the Future?
In the Longer Term?
Yes!
Thank you very much;
Arch Ritter