Cuba still allergic to private property as reforms creep forward

Reuters, July 22, 2013 - Every Monday in the bowels of Cuba's Palace of the Revolution, a group of men and women charged with revamping the island's moribund economy meets to review progress in building what they have dubbed "a prosperous and sustainable socialism." They have their work cut out for them, as demonstrated by the recent discovery by Panama of decrepit Cuban weaponry on its way to North Korea for repair, a walk down any potholed Havana street or the Cuban government's admission that 58 percent of water pumped from reservoirs is lost to leaky pipes.

The men and women are members of a Communist Party commission charged with carrying out a 313-point, five-year plan to modernize the economy that was adopted in 2011. First Vice President Miguel Diaz-Canel, in a recent interview with Cuban journalists, said the weekly gathering was chaired by the man he is in line to succeed, 82-year-old President Raul Castro, and reviewed "all the advances in terms of designing policy." Talk of selling the state's more than 90 percent stake in the economy is apparently not on the agenda of the Monday meetings, according to the head of the party's reform commission, Marino Murillo.

Murillo told National Assembly deputies earlier this month that those outside and inside the country who thought his commission was restoring capitalism or planning a fire sale were terribly mistaken. "You can't confuse transformation of property with modernization of its management; they are two different things," Murillo said in a two-hour speech. "It (modernization)... does allow for new actors in the non-state sector (farms, small businesses, cooperatives and joint ventures)," Murillo said.

The non-state sector, which includes employees of small businesses and many people "working for themselves," such as taxi drivers and produce vendors, currently comprises 23 percent of the 5.1 million member labor force, according to Carlos Mateu Pereira, an adviser to the minister of labor and social security. Murillo said central planning still ruled but would become more of a "regulator, not administrator" as the market was given more sway in pricing and other business decisions.

Murillo used agriculture to illustrate what he meant. He said 70 percent of the land is leased to co-operatives and small farmers while 20 percent is owned by private farmers and their cooperatives. State companies occupy 10 percent of the land. Murillo said an increasing amount of what the farms produce was being sold on the open market, about 47 percent currently, bypassing the state's wholesale trade monopoly. To those who believe modernizing the economy is moving too slowly halfway through the five-year Party plan, Cuba's president at the July parliament meeting said, "There will be no shock measures here like in Europe."

Economic growth in recent years has averaged around 2.5 percent despite reforms, compared with the 5 to 7 percent economists believe is needed for development. Achieving that will require significant foreign investment, they say. No speaker at the week-long National Assembly meeting dedicated to the economy mentioned foreign investment. None of the foreign companies managing and participating in joint ventures in Cuba, 190 at last count, own any property outright, nor do they have the right to sell shares except with the authorization of their state partner.

According to Diaz-Canel, reform is indeed a painstaking process as it moves from lifting prohibitions on personal property, travel, minor economic activity and farming, to "a crucial and defining stage" where such thorny issues as the island's dual monetary system and the inefficiency of state companies are the focus. Since the fall of the Soviet Union Cuba has had two currencies in circulation - the peso, valued at 25 to the dollar, and a dollar equivalent called the convertible peso, making accounting, budgeting and other matters extremely cumbersome.

Policies are proposed at the Monday meetings by commission subcommittees, he said, and then experiments launched to prove their efficiency, with studies to examine the impact of cutting subsidies and unleashing market forces on a society unaccustomed to living this way for the past 50 years. There are many pilot projects these days. For example, a wholesale market where farmers can buy supplies, instead of the inputs being assigned by the state, or an experiment in two provinces aimed at downsizing government.

At the same time, earlier pilot projects are now being generalized, such as the leasing of thousands of tiny state retail services to employees and larger ones to cooperatives, or allowing state companies to sell excess product on the market and keep 50 percent of their profits after taxes. "This is very much like the early days of reform in Asian communism, when the Communist Parties tried to hold on to everything and restrict all investment," a western diplomat said. "They soon learned that it wouldn't work and opened up further."

(Editing by David Adams and Cynthia Osterman)