From Chaos to a Socialist Market Economy: a Contribution to the Understanding of Current Changes and Trends in Cuba
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FROM CHAOS TO A SOCIALIST MARKET ECONOMY: A CONTRIBUTION TO THE UNDERSTANDING OF CURRENT CHANGES AND TRENDS IN CUBA Domingo Amuchastegui The final collapse of Cuba’s alliance with the former foreign investments, extremely limited approaches to Soviet Union—a process that unfolded between issues such as a new banking system, “finqueros,” co- 1979 and 1989—brought the Cuban economy to a operatives, self-employment, and other initiatives. In complete state of disarray, leading to an unparalleled essence, it was a lot of patch-work guided by two ba- chaotic set of developments. How to deal with them sic notions: scaffolding the crumbling system and became crucial and extremely conflicting. sheer survival. Fidel Castro’s strong refusal to give in to demands At this particular moment, society was faced with from various Cuban leaders and academics for signif- staggering shortages and needs, and regardless of the icant internal reforms and to similar friendly sugges- fact that most Cubans were demanding major chang- tions from abroad was based, essentially, on a new es aimed at surmounting the crisis and improving sort of “holy trinity”: reforms would inevitably lead their precarious livelihood and despite the threats of to a loss of control, and if we lose control, we lose social and political tensions, Fidel Castro persisted in power. A sequence of events was there to prove it: maintaining such a course of action. Finally, at the first and foremost, the events in Eastern Europe, the National Assembly, in 1995, he stated that the time Tiananmen Square events (1989), and the collapse of had come to put an end to the idea of more reforms. the Soviet Union (1989–1991) along with domestic Scaffolding the crumbling system proved to be a use- events such as the early warnings represented by the less attempt. A growing set of chaotic developments Mariel boatlift (1980), MGR (Navy)-Cuza case went from bad to worse: monumental inflation, (1988), Ochoa-Abrantes case (1989), the social acute financial instability, bloated exchange rates, clashes at Cojímar and Regla (1992), followed by prolonged default of its international obligations to what is known as the Maleconazo and the “balseros” foreign creditors, lack of international credit, very (rafters) crisis, both in 1994. few investments, extreme shortages in every area, Instead of a comprehensive and orderly redesign of bankruptcy and collapse of most of the existing in- the system—following, for example, the experiences dustries and services, followed by more unemploy- of FAR’s Perfeccionamiento Empresarial—Fidel ment and increased rates of poverty. Yet the system Castro resorted to a number of tactical moves known did not collapse and managed to survive. to all of us, such as massive public spending, in- A quarter of century later—and despite whatever creased subsidies, default of Cuba’s foreign debt, criticisms and objections we may have about Fidel temporary free circulation of the U.S. dollar, dual Castro’s handling of its most complex crisis—the currency system, promotion of the tourism industry, Cuban leadership, now under Raúl Castro, and in a growing role for remittances, a limited space for close consultation with his brother Fidel, remains 261 Cuba in Transition • ASCE 2012 very much in power and faces no significant chal- were organized in 1993, are moving from a very re- lenges from its local opposition or the United States, stricted framework of state regulation to a new legal and is currently engaged in an encompassing process framework of property and organizational setting, of reforms and changes that entail a complete rede- closer to family/private cooperatives, where the fami- sign of the economic, social, cultural, institutional, ly farms (“fincas”) become the basic unit of the new and political foundations of the Cuban experience, type of cooperatives. Members can set up small, indi- something that many in Cuba still believe should, vidual outlets to sell their output or sell it through and could, have been adopted since the late 1980s. the existing free markets. Many private farmers (“fin- queros”) and cooperative members are among the ECONOMIC CHANGES wealthiest within an expanding wealthy sector. Some Agriculture of the more visible evidence of this new wealth are Close to 1.5 million hectares of land have been grant- two-story houses, with garages, bought or built in ed in usufruct (Decreto-Ley 259/Decreto-Ley 282) towns nearby farms, cities, and beaches; ownership of to private farmers (“finqueros”) and to different types different vehicles, including automobiles and trucks; of cooperatives, with more than 70% of this land al- holiday vacations in Varadero or in other tourist re- ready under cultivation (produce, rice, sugarcane, sorts; and homes fully equipped with a range of coffee, and tobacco), animal husbandry, cattle rais- home appliances and electronic devices. These newly ing, production of timber, and other activities. wealthy have been investing in restaurants, trucks Terms of usufruct will be extended from 10 years to and cars, construction, and money lending; they also 30, including family inheritance rights but without own a large percentage of the savings accounts in the fragmentation. The consensus seems to be that the Cuban banking system. land will eventually become family/private property sooner rather than later. The best individual per- Services formers are being rewarded with additional land con- Turning over hundreds of services to individuals, cessions (from 13.45 to 40.26 hectares). Permission families, and coops (barbershops, beauty parlors, has been granted for the construction of homes and restaurants, repair shops, garage services, and many other shelters on the allotted land. The ability to others) has been another major change in govern- market products grown on this land to the tourist in- ment reforms. dustry, directly to hotels, resorts, and restaurants, Major public transportation services connecting without any sort of state mediation, is another major towns, cities, and provinces are currently in private incentive. hands, by individuals operating cars and trucks they The forced government procurement mechanism— own, or by small companies owning three, five or six the much hated ACOPIO—is being downsized and vehicles. These transportation services providers are increasingly replaced by free market relations regard- making thousands of pesos a day. The adoption of ing the products that can be grown on the land, to Decree-Law 292 (permitting the sale of vehicles) has whom products can be sold, and prices. The govern- given rise to thousands of transactions involving ve- ment is also increasing support to farmers in the form hicles, many of which are being bought in order to of new lines of credit and loans, tax reductions, as expand private options in the transportation and car- well as expanded supplies for the special needs of go sectors. farmers (farm tools, equipment, seeds, fuel, etc.). Significant private services can also be found in the State farms are rapidly disappearing, either because tourist industry. Approximately 30% of rooms, they have been broken down into cooperatives or be- apartments and houses rented involve private hands cause they have transformed themselves into cooper- (in towns and small cities in the countryside percent- atives known as “integrales.” The UBPCs (Unidades ages are much higher), providing “bread and break- Básicas de Producción Agropecuaria), which held al- fast” (B&B) facilities (lunch and dinner are option- most 50% of the most productive land when they al). Foreigners who have bought new apartments 262 Understanding of Current Changes and Trends in Cuba from government real-estate projects have the right following reasons: (a) waiting to see if he/she is suc- to subcontract their property. The owners of real es- cessful in managing the trade or business that is being tate rentals have high incomes and can afford to trav- started; (b) gauging if the new business is going to be el abroad and even have bank accounts in foreign sufficiently profitable; and (c) lack of trust in govern- countries. With the approval of Decree-Law 288, the ment policies, fearing that at some point there might housing sector has become part of the expanding be some sort of reversal of policies as happened in the market relations and thousands of apartments, hous- past. es, and even mansions are being sold at very high Small businesses (which are very different from prices, from 50,000 to 250,000, 500,000, 700,000 “cuentapropistas”) in the form of start-ups are flour- CUC and even more. An important indicator of this ishing everywhere and in every field. Examples are emerging real estate market is the number of people many: making furniture (doors and windows includ- who are hurrying to register their homes. Having an ed), fences (one of the main urbanization features official property deed was completely irrelevant in nowadays), mattresses, shoes, clothing, leather bags, the past, but now things are changing rapidly. Tens luxury items like jewelry and sculptures, construction of thousands have registered before and after the companies/coops, and production of many other housing legislation. Before 2010, only 92,500 fami- commodities, including religious items, and services lies had registered their homes (at the time, 70% of such as gyms and wedding planners. Some small Cubans had not registered their homes), but in 2011 business owners have become already extremely alone 140,000 did so; in the first quarter of 2012, wealthy by Cuban standards, such as those engaged 133,000 had already registered their homes. Property in furniture and fence-making, construction, and ar- rights are becoming extremely important. tisans. The latter have already achieved one import- The size of the paladares (private restaurants) is an- ant goal: to get organized and build their own arti- other clear indicator of the pace of reforms.