Dec. 31, 2011
An elderly woman stands in the balcony of a dilapidated building, on November 3, 2011, in Havana. The Cuban government has approved a law allowing individuals to buy and sell homes for the first time in 50 years, the official newspaper Granma said on November 3, 2011. The measure is part of a series of economic reforms aimed at reviving the economy of the communist-ruled island and easing a severe housing shortage. STR/AFP/Getty Images
Joe Garcia, a former executive director of the Cuban American National Foundation, likes to joke about the chat he might have today with the late Jorge Mas Canosa, founder of the powerful anti-Castro exile lobby.Garcia says he would tell Mas Canosa that Cuba’s rulers have abandoned their dream of an egalitarian utopia, and that even Fidel Castro had confessed that his model of sub-tropical communism “does not work.” He would add that Raúl Castro is now allowing Cubans to start more small businesses, recognizing their right to sell homes and vehicles and even embracing foreign investments in those icons of capitalism — golf resorts. “Jorge would immediately say, ‘It’s over. We won!’” said the smiling Garcia, a South Florida Democrat who keeps tabs on developments in Cuba and has made two unsuccessful bids for the U.S. House of Representatives. Castro critics would disagree strongly and portray the changes as nothing more than lipstick on the rotting corpse of a Soviet-styled economy. Raúl Castro himself timidly calls the changes not “reforms” but “updates” and has vowed to keep central planning as the backbone of the island’s economy and prevent any accumulation of private wealth. Yet the changes clearly reflect an ambitious effort to address the structural flaws of Cuba’s communist system, abandon its culture of paternalism and attack its parasitic bureaucracy — without risking the government’s power to repress dissent.
In a nutshell, Castro’s goal is to slash a bloated state sector that controls an estimated 80 percent of the economy, and to allow more space for small-scale enterprises that can produce more efficiently, pay taxes to the government and often can count on financial support from relatives or friends abroad.
It’s not been easy. Pushback from entrenched ideologues and bureaucrats appears to have undercut some of the changes, and cuts in the ration cards that provide basic food items at highly subsidized prices have pummeled Cuba’s neediest. A Catholic church in Havana reported a hefty increase in the number of people at its free lunches in recent months. And the government reportedly stopped disability and other aid payments to about 3,000 people in the city of Santa Clara this year. But many reforms are under way, and the pace of change increased after a congress of the ruling Communist Party of Cuba in April gave a broad endorsement to Castro’s 300-plus proposals for change.
SLOWLY UNDOING NATIONALIZATION
Perhaps the most important reform for the average Cuban was the decision in 2010 to permit an expansion of private economic activity in a country that nationalized every single business in 1968, down to push carts that sold hamburgers. Today, 357,000 people have licenses for “self-employment” — in tightly controlled categories such as party clowns and street vendors of music CDs — and most have incomes well above the official average salary of $20 a month. For the first time this year, private entrepreneurs were allowed to hire employees — previously “the exploitation of man by man” — rent some state-owned storefronts and even list their services in the island’s phone book, which once rejected them as too “consumerist.” Many state-owned businesses, such as locksmiths, carpentry shops and repair centers for electrical appliances such as rice cookers, will be turned into private businesses, according to an official announcement a month ago. The government also postponed some taxes and fees and reduced others when it became clear they would drown the new businesses, and promised bank loans to the enterprises and to hire some of them to work in areas like construction. But the initial rush to obtain self-employment licenses appeared to be slowing down, and official figures indicate that nearly 20 percent of those who recently received licenses in Havana surrendered them later, apparently because they could not make a profit. Cubans complain that the permitted activities are too limited, that there are no legal wholesalers for the raw materials they require — lumber for carpenters, for instance, — and that some taxes and fees remain unfair. Those who rent rooms to tourists pay the same fees regardless of their occupancy.
0BTAINING LOANS TO FIX UP A HOME
Changes in the government’s banking monopoly, which has never offered credit cards, never mind a toaster, also mean that Cubans can now obtain loans to build or renovate homes and pay for materials as well as labor. Private farmers can open previously unavailable bank accounts to handle their money, and loans can rise above the old limits — and go even higher if the borrower has a co-signer or collateral.
Some of the new entrepreneurs are eager to apply for those loans but less eager to put their money in government banks, amid fears that the government could seize their accounts in case of a financial crisis.
PUTTING FALLOW LAND TO BETTER USE
Castro also stepped up his attack on Cuba’s second most vexing problem: the myriad failures in agriculture that forced the island to import $1.5 billion in food last year — estimated at 60 to 80 percent of its total consumption. As of November, 3.4 million acres of fallow state lands had been leased to 170,000 private farmers. Farmers also were permitted to sell directly to consumers and tourist centers, which pay better prices and therefore help to increase production. Another change coming soon will increase the limits on the leases from 33 to 165 acres and from 10 to 25 years, and will allow relatives and in some cases laborers to inherit the leases, according to news media reports. The upcoming change also for the first time would allow the farmers to build homes on the leased land, and promises the government will reimburse the farmers for any improvements should they lose their leases, added the reports. Yet nearly two million acres still remain fallow and farmers must do most of their business through Acopio, the notoriously inefficient state agency in charge of buying their products and getting them to market — but which regularly allows them to rot on the way to market and fails to pay the producers. Communist Party officials in some provinces are alleged to be grabbing the best leased acres for themselves and getting all the supplies they need, like seeds and fertilizers, while other farmers get only part of their needs.
HOMES FOR SALE — AND ALSO CARS
Also generating a buzz has been Castro’s easing of the restrictions on the sale of homes and vehicles — at times hailed as an unprecedented recognition of private property rights, at times dismissed as merely legalizing what had been going on illegally for years. The permission to buy and sell homes immediately turned the properties into potential cash and erased the unwieldy requirements for the previously allowed permutas — swaps of homes of roughly equal size or value. More than 4,000 “for sale” signs had gone up as of late December and the government lifted most restrictions on the sale of construction materials to private buyers, cut prices and made a deal with Brazil’s version of Home Depot to import supplies.
The government reported last week that since the change went into effect it had registered 360 homes sales and nearly 1,600 “donations” — most likely efforts to legalize previous sales that did not fulfill all government requirements. Cuba faces a critical housing shortage, officially put at 600,000 units in a country of 11.2 million people. Many properties have been subdivided many times over the decades to accommodate more families, making for a messy trail of ownership rights. The government also announced that it registered 3,310 sales of vehicles and 994 “donations” in just the first month of the new regulations allowing the sale of all used cars and trucks. Previously, only pre-1959 vehicles could be bought and sold without restrictions. Today, all used vehicles can be sold. But new vehicles are sold only to Cubans who are approved by the government and earned their money working for the benefit of the country — like doctors who work in Venezuela.
THE SAME INEFFICIENT CENTRAL PLANNING
Less clear is the impact of Castro’s campaign to reduce the direct controls that the government exercises over the economy, and to give the managers of state-run enterprises more autonomy to run their business more efficiently. The Ministry of Sugar, for example, which ran Cuba’s once-premier industry as it plunged into disaster over the past decade — the 2006 harvest was the worst since 1905 — was turned into a state enterprise. So was the island’s postal service. But the new “enterprises” apparently will still depend on the same central government planning system that proved inefficient in the past — in the case of the sugar harvest, failing to ensure the timely delivery of supplies like fuel and spare parts. Government officials have raised the possibility of allowing foreign investments in the sugar sector, and already have approved foreign financing for half-a-dozen golf resorts to be built on state lands leased out for 99 years.
NEXT UP? MAYBE UNFETTERED TRAVEL
Castro also has said that he’s working on the one reform unquestionably and most urgently desired by Cubans — the right to travel abroad without an exit permit that is expensive and must be approved by State Security agents. Most Cubans also want to ease the restrictions on the return of relatives and friends living abroad, and an abolition of the “definitive exit” category, which punishes those who leave the island to settle permanently in another country. Castro told Cuban lawmakers on Dec. 23 that he understood the calls for reforms of the migration policy, but said that changes will have to come slowly because of the continued hostility of the U.S. government. Any Cuban who sets foot on U.S. territory is allowed to remain and receives U.S. residency.
CLOSING CLINICS, CUTTING SPENDING
Raúl Castro’s reforms have come at a price. As he slashed government subsidies, he had to cut spending on some of the sectors the revolution still holds out as its iconic “victories” — health, education and welfare — greatly damaged since the end of the Soviet Union’s massive subsidies in 1991. Several neighborhood clinics are being closed in favor of more regional facilities, universities are cutting enrollment in some study areas and a dozen or so food items once sold through the ration cards are now available only at much higher prices. What’s more, some of the reforms announced by Castro, now in his sixth year in power after succeeding ailing brother Fidel, were postponed or dropped amid reports of stiff opposition from within the ruling hierarchy. A plan to lay off 500,000 state employees — a whopping 10 percent of the public payroll — between October of 2010 and April 1 of 2011 was postponed without a new deadline. And a scheme to tie wages to a worker’s individual productivity, announced with much fanfare in 2008, has not been mentioned for nearly two years. Meanwhile, the basic outline of Cuba’s political system has not changed: one-party rule, tight controls on of the mass media and varying levels of repression for those who actively oppose the government.
WHAT IT ALL MEANS STILL HARD TO SAY
To Castro’s critics, all the changes amount to worthless cosmetic surgery, a confession of failure in 53 years of what the Castros call “building socialism.” After all, they say, private enterprise existed and houses could be bought and sold under the Batista dictatorship, before the Castros’ 1959 revolution. To supporters, they are part of a slow but sure-footed campaign to eliminate a number of senseless economic constraints, move toward a more productive brand of socialism and keep the Cuban Communist Party in power. The only certainties are that Cuba is in the midst of complex changes — which may or may not lead to a more productive brand of socialism — and that the Castro government has no intention of easing its authoritarian and coercive political system.