Cuba looks at trimming social welfare

by Richard Lapper

Published: August 18 2008

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.

Copyright The Financial Times Limited 2008