Cuba: Changing Times and the Need to Hasten Reforms

Fernando Ravsberg

Venezuelan President Nicolas Maduro with Cuban doctors.

HAVANA TIMES — I don’t like to be the bearer of bad tidings, but the results of Venezuela’s elections should make us entertain the possibility that Chavismo could lose the next presidential elections, depriving Cuba of its main economic partner, which supplies the island with oil.

The agreement has been highly advantageous for both countries. Caracas has had tens of thousands of medical doctors, teachers and sport trainers, while Cuba has been able to cover two thirds of its total energy needs, paying the bill with the sale of professional services.

This agreement, however, may now be in danger. With 112 seats in congress, the opposition can “subject international treaties, conventions or agreements that undermine national sovereignty or transfer faculties to supranational organizations to a referendum.”

Many believe the defeat of Chavismo could bring back the economic crisis that scourged Cuba in the 1990s, when the USSR collapsed. The situation, however, is fairly different, though it will still undeniably have serious repercussions for the island’s economy.

The chief difference is that Cuba has since diversified its commercial relations internationally. China, Brazil, Russia and Angola are its better known partners, but there economic agreements and projects with numberless other countries.

When business people interested in investing in Cuba arrive at Mariel, they become mired in complicated bureaucratic processes. Photo: Raquel Perez Diaz.

The change in the United States’ policy towards Cuba favors investments by companies in third countries that refrained from dealings with the island fearing reprisals from Washington. European and Latin American companies are today looking for a niche in the country’s economy, particularly in the tourism sector.

Today, Cuba has sources of revenue that did not exist in 1990. Even if it was forced to withdraw its medical doctors from Venezuela, incomes in the sector would continue to be in the billions, while tourism takes in more than 3 million visitors a year and family remittances are estimated at over US $ 1.5 billion.

A change of government in Venezuela, however, will be a blow that is sure to shake the whole of Cuba. There’s very little time left to prepare ourselves for the worst possible scenario and to try and reduce the social, economic and energy repercussions of this to a minimum.

Cuba’s reform process no longer has all the time in world to move things about and there many important issues pending. Cuban economists insist that the country needs to diversify more and balance the productive sector in relation to the services sphere.

The numbers say that, to achieve this, foreign investment is vital, but, contradictorily, the process continues to be slow and the bureaucratic hurdles that stand in its way are maintained. Some entrepreneurs have returned to their countries, telling Cuba to let them know “when it’s ready.”

When an investor comes to Cuba, they are faced with a two-currency system and multiple exchange rates, the high prices of electricity and water, ridiculous automobile prices and the generalized corruption of State importing companies.

If the interested party arrives at the Mariel Zone, they will also run into the lack of facilities, a mechanism for hiring personnel through intermediaries that pocket most of the salary and a government that processes their requests unhurriedly.

Venezuela is Cuba’s main economic partner and the source of the oil that powers the island. Photo: Raquel Perez Diaz.

On December 17 last year, a window with a view to the future was opened for Cuba. The US economic embargo is still effective, but the business world regards it as a terminally ill patient. Companies are starting to lose their fear and to redirect their gaze towards the island.

But, after they’ve leapt over the fence set up by the United States, they land in a swamp where they find it next to impossible to make progress. It is the same swamp that Cubans wishing to set up cooperatives have to wade through, to have their right to create a “collective socialist company” recognized.

That is where the self-employed are mired and the reason the sector hasn’t grown in years. Despite the fact the State needs to downsize, it still refuses to open wholesale markets, no new trade licenses are authorized and a gang of corrupt inspectors are deployed to attack existing businesses.

Cuba’s evolution is begin sabotaged from within. It is a war without any frontal combats, a strategy aimed at wearing down the opponent, where they would seek to meddle in all changes and drive sticks through the wheels of the reforms to “demonstrate” that these do not work.

They have been fairly successful in this: increasingly, more and more Cubans believe the changes aren’t making their lives any better. Some hope they will begin to look back on “real socialism” with nostalgia, but, if the reforms fail, what the nation will reap is frustration, hopelessness and emigration.

19 thoughts on “Cuba: Changing Times and the Need to Hasten Reforms

  • This week a Chinese company announced a new container port for Halifax – Canada. My gut feeling are it will be tied to the Mariel port in Cuba. Your opinion ?

    Reply
    • The port in Mariel is a bust. Ports, in general, are profitable when the host country produces in excess for export or consumes in excess to require imports. Cuba fits neither profile. A container port in Canada? Gordon, really? If Canada had the economic power to jumpstart Cuba, it would have already happened.

      Reply
      • Good news here :::

        ench
        Finance Minister Michel Sapin attends a news conference on financing of
        militant groups in the aftermath of the Paris attacks by Islamic
        State-backed gunmen and bombers, at the Bercy Economy and Finance
        Ministry in Paris, France, November 23, 2015.

        Reuters/Charles Platiau

        Cuba has reached a deal with its
        creditors under which they will forgive $4 billion of late payment
        charges and Cuba will pay $2.6 billion of arrears over an 18-year
        period, French Finance Minister Michel Sapin said in a statement on
        Saturday.

        Sapin
        said that of the $470 million in principal and original interest
        payments that Cuba owes to France, $240 million will be repaid, while
        the rest will be converted into development projects for Cuba.

        “This agreement opens a new era in the relations between Cuba and the international financial community,” Sapin said.

        France is Cuba’s main creditor.

        The statement did not specify the amount of principal that has been forgiven.

        Earlier
        this month, diplomats said Cuba was nearing a deal with 15 rich
        creditor nations of the Paris Club to restructure $16 billion in debt
        stemming from a 1986 default, with creditors expected to forgive most of
        the amount owed.

        One diplomat said
        that Cuba had agreed to pay the principal of around $5 billion owed
        since its 1986 default in exchange for forgiving $11 billion in service
        charges, interest and penalties, with talks focused on how long Cuba
        would take to repay and how much of the money would be reinvested in
        Cuba.

        Most of the
        creditors are willing to show flexibility due to their increased
        interest in doing business in Cuba following the Communist-run island’s
        detente with the United States and continuing domestic reforms.
        Read more at Reutershttp://www.reuters.com/article/us-cuba-debt-idUSKBN0TV0J320151212#8ck0ILU43FaXzKkM.99

        Reply
        • Gordon, you really don’t understand capitalism at any level. When a creditor writes down a debt, he is recognizing that the debtor is a dead beat, is cutting his losses and well, usually won’t lend money again.

          Reply
    • Grupo Unidos por el Canal, S.A. (GUPC),
      the contractor responsible for the Panama Canal’s third set of locks has
      said the project completion date remains April 2016 despite the
      localised seepage in August 2015.

      Reply
    • No. It has nothing to do with Mariel.

      First of all, the container port is in Sydney, not Halifax. The Chinese corporation planning to build it is looking to gain low cost access to North American markets for Chinese exports, and the export of Canadian raw materials.

      Reply
  • Why so glum Fernando? Could it be that the socialist credo of using ‘other peoples money’ has run its course? I believe that what Cuba needs to do is face the reality that a little bit of capitalism just won’t do. It’s time to put up or shut up. That’s to say that it’s time to completely set free the marketplace or stop blaming everybody else that life sucks in Cuba.

    Reply
    • I’m not sure why the Cuban feel that Mariel will be such a huge deal-Cuba doesn’t produce nor buys anything in any quantity that justifies the investment. Further, Obama is pretty much toast here in the States and it appears the Republicans (ie Ted Cruz/Marco Rubio) will win the Presidency. What many in Cuba think is a new beginning through Obama’s executive orders, can be gone just as quickly with an executive order from a new President. While there has been a wild rush over the past year for politicians and businessmen down to Cuba to see the sites, it still isn’t China and they are recognizing that business opportunities are very limited. As far as the only viable option of tourism, its controlled by the gangsters at MINREX/MINCEX (aka Castro Corp.) who demand a 51% interest in ventures, don’t expect any real money in-bound from Wall Street. Perhaps the most astounding thing in Cuban tourism numbers is the lack of repeat business (less than 10% of UK tourist ever go back) due to horrible facilities, lack of technology and well, there are better places to go. Even with some “humanitarian” tourist from the US, it’s still one and done. The newness wears thin, franken-cars, rum and cigars get old quick. Wall Street (American Capital) has already classified Cuba as 3R rated-Rum, Risk and Ruin.

      Reply
      • I am interested to hear that only 10% of tourists from the UK go back to Cuba. What is the source for that information? How does that compare with other countries?
        While my own experience of Cuba (2 1/2 years ago) was mixed, I was told by more experienced travellers that the street hassle in Havana was not near as bad as that in Mexico.
        More than once I have met Canadians who are quite enthused about their experience in Cuba. I would go back, but I’d try to stay away from the tourist hot spots.

        Reply
    • There has been Capitalism of State in Cuba since the 90’s.

      Reply
  • Real Socialism did not exist. It was a mirage funded by the Soviet Union. There is nothing to go back too. The economy needs to modernize to get competitive on world markets. Cuba needs to make money to buy oil. Doctors for oil, not long term solution.

    Reply
    • The newly elected Venezuelan Congress is already planning to end it’s subsidized oil program and keep the oil for domestic use. Caprieles has also discussed reducing Cuban doctors, killing Russian weapons deals and kicking out military advisors. Times are a changing.

      Reply
      • The Cuban’s will do everything they can to slow this transition. The oil is too important and Cuba does not have an answer just yet. They need to get tourism and domestic production working. A second special period is not survivable for the current leadership. They know it.

        Reply
  • A market economy takes time to develope – you only have one to do it correctly the first time. There are 4.2 million Americans that have lineage to Cuba and they a and their families would control the economy.
    I estimate family remittances and gifts to Cuba are greater than $ 3.5 billion.

    Reply
    • ….and by what econometric model do you arrive at your estimate? Are you just making this stuff up as you go?

      Reply
  • Economies grow pretty much the same everywhere, a few very large initiatives and a lot of small ones. The best way is to attract the right kind of business to Cuba and try and make sure most of the foreign money that comes in never leaves the Island or that it ends up fueling medical, environmental and other research that benefits the world community and leaves the Island in that way. Everyone in Cuba needs to think about everything that they do with foreign investors and ask themselves. First is the business in question good for the Cuban people and second is there anything that they can do to speed it up or make it go smoother.

    Reply
  • Funny thing is that Fernando is not cuban. He has all the freedoms and privileges that cubans don’t have in our own country, yet he has a voice on the internet and 11 million cubans don’t. Wait until all these cubans have access to information and communications, people like this non-cuban will be ignored completely. Sorry if it sounds xenophobic, but he is not cuban.

    Reply
  • The Economist Magazine 20016 had a great story about the new Panama Canal :::
    Cost + – $ 6 b. – to be completed Apr. 2016 new canal will handle ships with 13,000 containers. Many of these ships will off load at Mariel and then return directly to Asia with Atlantic cargo. China owns the most merchant ships. U.S. is no. 8 in tonnes.

    Reply
  • Once the new Panama Canal is completed the mega container ships from China will port in Marial and their containers will be put on smaller ships for – Canada – Europe – Africa – South America – Mariel is the Hub.

    Reply

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