Cuba -- A Nation of Closet Capitalists

They Communists always end up going with capitalism. It's human nature.

Cuba tries to drag shadow economy into the light

Cuban economic reform aims to bring a world of secret businesses into the light

July 3, 2011

HAVANA (AP) -- Want some paprika-infused chorizo sausage? How about a bit of buffalo mozzarella? Or maybe you just need more cooking oil this month, or a homemade soft drink you can afford on paltry wages. Perhaps you are looking for something more precious, such as an imported air conditioner or some hand-rolled cigars at a fraction of the official price.

In a Marxist country where virtually all economic activity is regulated, and where supermarkets and ration shops run out of such basics as sugar, eggs and toilet paper, you can get nearly anything on Cuba's thriving black market -- if you have a "friend," or the right telephone number.

A raft of economic changes introduced over the past year by President Raul Castro, including the right to work for oneself in 178 approved jobs, has been billed as a wide new opening for entrepreneurship, on an island of 11 million people where the state employs more than four in five workers and controls virtually all means of production.

In reality, many of the new jobs, everything from food vendor to wedding photographer, manicurist to construction worker, have existed for years in the informal economy, and many of those seeking work licenses were already offering the same services under the table.

And while the black market in developed countries might be dominated by drugs, bootleg DVDs and prostitution, in Cuba it literally can cover anything. One man drives his car into Havana each day with links of handmade sausage stuffed under the passenger seat. A woman sells skintight spandex miniskirts and gaudy, patterned blouses from behind a flowery curtain in her ramshackle apartment.

Economists, and Cubans themselves, say nearly everyone on the island is in on it.

"Everyone with a job robs something," said Marki, a chain-smoking 44-year-old transportation specialist. "The guy who works in the sugar industry steals sugar so he can resell it. The women who work with textiles steal thread so they can make their own clothes."

Marki makes his living as a "mule," ferrying clothes from Europe to Havana for sale at three underground stores, and has spent time in jail for his activities. Like several of the people interviewed for this article, he agreed to speak on condition he not be further identified for fear he could get into trouble.

Merchandise flows into the informal market from overseas, but also from the river of goods that disappear in pockets, backpacks, even trucks from state-owned warehouses, factories, supermarkets and offices.

There are no official government statistics on how much is stolen each year, though petty thievery is routinely denounced in the official news media. On June 21, Communist party newspaper Granma reported that efforts to stop theft at state-run enterprises in the capital had "taken a step back" in recent months. It blamed managers for lax oversight after an initial surge of compliance with Castro's exhortations to stop the pilfering.

"Criminal and corrupt acts have gone up because of a lack of internal control," the paper said.

An extensive study by Canadian economist Archibald Ritter in 2005 examined the myriad ways Cubans augment salaries of just $20 a month through illegal trade -- everything from a woman selling stolen spaghetti door-to-door, to a bartender at a tourist hot spot replacing high-quality rum with his own moonshine, to a bicycle repairman selling spare parts out the back door. He and several others who study the Cuban economy said it was impossible to estimate the dollar value of the black market.

"You could probably say that 95 percent or more of the population participates in the underground economy in one way or another. It's tremendously widespread," Ritter, a professor at Carlton University in Ottawa, told AP. "Stealing from the state, for Cubans, is like taking firewood from the forest, or picking blueberries in the wild. It's considered public property that wouldn't otherwise be used productively, so one helps oneself."

Cubans even have a term for obtaining the things they need, legally or illegally: "resolver," which loosely translates as solving a problem. Over the decades it has lost its negative connotations and is now taken as a necessity of survival.

"Turning to the black market and informal sector for nearly everything is so common that it has become the norm, with little or no thought of legality or morality," said Ted Henken, a professor at New York's Baruch College who has spent years studying Cuba's economy. "When legal options are limited or nonexistent, then everyone breaks the law, and when everyone breaks the law, the law loses its legitimacy and essentially ceases to exist."

There is evidence, however, that Castro is persuading at least some black market operators to play by the rules and pay taxes.

In the past seven months, more than 220,000 Cubans have received licenses to work for themselves, joining about 100,000 who have legally worked independently since the 1990s. Of those, 68 percent were officially "unemployed" when they took out their license, 16 percent had a state job and another 16 percent were listed as "retired," according to statistics on the government website Cubadebate.

Many of these jobless and nominally retired people were likely making ends meet by working in the informal market, and even the former government workers were probably connected in one way or another.

"You have to find a way to survive," said Manuel Rodriguez, the former head of a Cienfuegos medical center for children with disabilities. Rodriguez said his monthly government ration card plus his and his wife's meager salaries only covered two weeks' worth of food. "I sat in the park one day and thought, 'What can I do?'"

He began bicycling around town on Sundays, renting out bootleg DVDs of the latest Hollywood films, which others had downloaded from the Internet. Rodriguez, who moved to Miami in 2009, defended his decision to turn to the black market to put food on the table.

"I wasn't hurting anyone," he said. "It's not pornography. It's not drugs."

In fact, the sale and rental of pirated DVDs now is one of the 178 jobs that can now be done legally in Cuba, which ignores U.S. intellectual property rights in response to Washington's 49-year economic embargo.

New license holders complain the taxes and social security payments can be well over 50 percent of sales, raw materials are hard to come by because there is no wholesale market, and government promises to provide bank credits and retail space have been slow to develop.

But many say they jumped at the chance to go legit anyway, tired of always looking over their shoulder.

"We started off illegally, years ago, but when they started to give out licenses we got one because it means peace of mind," said Odalis Losano, a 46-year-old single mother who obtained a license in December to sell lunches she prepares on her home stove. "Now we don't have to be afraid of the police or the inspectors."

Paradoxically, the expansion of a legal free market may be increasing the size of the black market, particularly for the goods and services the new entrepreneurs need to survive. Newly legalized pizzerias must have a steady supply of cheese, flour and tomato paste, self-employed construction workers must have building materials, manicurists must find nail polish.

One man profiting off the legitimate economic opening, albeit illegally, is Roberto, who uses stolen canisters of CO2 to make carbonated drinks for sale to the scores of downmarket private cafes opening up all over Havana. He charges just 7 pesos (28 cents) for a 1.5-liter bottle, a sixth of what a bottle of state-made cola costs in the supermarket.

"This business is not totally legal," he said. "I can't get a license for it because the state will not sell me the CO2. I need to get it on the black market."

And then there are the many activities that by their nature must remain hidden under Cuba's controlled system.

The Internet is strictly regulated in Cuba, so those who sell time on accounts that belong to doctors, professors and computer technicians do so on the sly. The government maintains a monopoly on that most quintessential of Cuban products, the cigar, so the hundreds of underground stogie-rolling factories will stay underground.

Likewise, the sale of gold is regulated, so those who melt it down for false teeth won't get licenses anytime soon.

"Even if they legalize this, it wouldn't be worth getting a license," said one practitioner, who spoke on condition of anonymity for fear of earning the ire of the state. He charges up to $40 per tooth, using gold melted down from jewelry and trinkets he buys from secret suppliers. "They would regulate it so much it would be impossible to get the gold and other materials I need. The authorities would bother me so much it would be worse than doing it in hiding."

Marki, the mule, said he would happily open an imported clothing boutique if the island's leaders ever scrapped Cuba's Marxist economy for capitalism. Until then, he said, he and many of his countrymen will carry on living and working on the margins of the law -- and no amount of fines, seizures or jail time will dissuade them.

"Half of Cuba lives off the black market," he said with a gruff smile. "And the other half depends on it. To me, it is unstoppable."

Cuba inches toward Libre

At least Fidel has admitted that his communist experiment has failed. That's a start. Pretty soon, the captives on the island prison will begin to act like the people of Egypt, Tunisia and elsewhere when they too demand freedom. Imagine a Cuba once again available to Americans. Of course the time to see it is now, before the decaying state is wiped away and replaced with something healthier, but lacking the seedy charm it has now.

Castro resigns as party head as Cuba mulls reforms

by Isabel Sanchez Isabel Sanchez – Tue Apr 19

HAVANA (AFP) – Fidel Castro confirmed his exit from the Communist Party leadership on Tuesday, ceding power to his brother Raul as delegates prepare to vote on changes that could bring term limits to key posts.

The move came after the sixth Communist Party Congress approved a flurry of measures on Monday aimed at keeping Cuba's centrally planned economy from collapse but without any broad embrace of market-oriented change.

"Raul knew that I would not accept a formal role in the party today," Fidel wrote in an article on the Cubadebate.cu portal, referring to his absence from the party's new Central Committee, elected on Monday.

Castro, 84, had served as first secretary in the Central Committee of the party -- which underpins the country's Communist government -- since the party's creation in 1965.

Fidel said he had handed over the functions of the party head to Raul when he ceded power to his brother because of his own declining health in 2006, though he retained the first secretary title.

"(Raul) has always been who I described as First Secretary and Commander in Chief," Fidel wrote in the article.

"He never failed to convey to me the ideas that were planned," he added.

Castro said he supported the stepping aside of some of the older luminaries in the party, adding that "the most important thing was that I did not appear on that list.

"I have received too many honors. I never thought I would live so long."

The 1,000 delegates gathered in Havana for the four-day party congress have meanwhile approved some 300 economic proposals.

The reforms promise to inject a modicum of the free market into the island's economy ahead of a vote Tuesday expected to officially relieve Castro of his position as party head.

Reforms include the eventual trimming of a million state jobs and the decentralization of the agricultural sector.

Many of the measures have already been adopted over the past year, with the Congress now formally approving them.

Results of the voting on leadership term limits will be presented Tuesday, when Fidel would be finally officially replaced as party chief.

Raul, who turns 80 on June 3, was expected to take over as the party's new first secretary.

Raul said on Saturday that he backed term limits of 10 years for the top leadership spots, in a country he and his brother have led for more than five decades.

Fidel said he "liked the idea. I thought long and hard about the subject."

Cuba watchers were meanwhile focused on who would ascend to the party's number two position, which could signal the direction of an eventual transfer of power in the coming years.

Raul has rejected broader market-minded reforms like those adopted by China, saying they would be "in open contradiction to the essence of socialism... because they were calling for allowing the concentration of property."

Cubans have reacted to the reforms with cautious optimism, hoping that the government follows through with its pledges without harming those who depend on the public sector for employment and other basic needs.

Mikaela, the 28-year-old owner of a small beauty salon in the old city of Havana, hoped they would "give us the means to work and earn a living.

"That is all we need," she told AFP.

Herminia Diaz, 40, who left a career as an engineer and now rents out her house to earn a living, was skeptical that change would actually come.

"I like Raul's frankness in dealing with our problems, but when you think that they have been going on for 30 years, and that we've done nothing to resolve them, you just lose hope," she said.

"It leaves a bad taste in my mouth, that we've wasted all these years."

Pandora's Box to Arrive Soon in Havana

This oughta be good. Cuba is about to a get high-speed broadband Internet, a gift from Venezuela. With the arrival of this portal to the world, Cubans will discover things at home are worse than they ever knew.

How much of the content can Cuban censors block? Probably a lot. But not all, which means the deprived people of Cuba will swallow another dose of the reality imposed on them by the dictatorial Castro regime that exists only to perpetuate itself.

Broadband cable on its way to unplugged CubaFibre-optic cable laid from Venezuela brings the promise of speedy internet to one of the world's least connected countries

Sunday 23 January 2011

Cuba is set to join the high-speed broadband era with an undersea fibre-optic cable laid from Venezuela, bringing the promise of speedy internet to one of the world's least connected countries.

A specialised ship sailed from Camuri beach, near the Venezuelan port of La Guaria, this weekend, trailing the cable from buoys on the start of a 1,000-mile journey across the Caribbean sea.

Venezuelan and Cuban officials hailed the project as a blow to the United States' embargo on the island. It will make Cuba's connection speed 3,000 times faster and modernise its economy.

"This means a giant step for the independence and sovereignty of our people," Rogelio Polanco, Cuba's ambassador to Caracas, said at a pomp-filled ceremony in tropical sunshine.

The ship, Ile de Batz, owned by the French company Alcatel-Lucent, will lay the cable at depths of up to 5,800 metres and is expected to reach eastern Cuba by 8 February. Cuba's government said the cable should be in use by June or July.

Cuba has some censorship restrictions but the impact could be profound. The country has just 14.2 internet users per 100 people, the western hemisphere's lowest ratio, with access largely restricted to government offices, universities, foreign companies and tourist hotels.

The 50-year-old US embargo prevented Cuba tapping into Caribbean fibre-optic cables, forcing it to rely on a slow, expensive satellite link of just 379 megabits per second.

Venezuela's president, Hugo Chávez, Havana's closest ally, funded the $70m (£43.8m) cable and named it Alba-1, after the region's Caracas-led leftwing alliance. Improved communication is necessary to effect "historic, political and cultural change", said Ricardo Menéndez, Venezuela's science, technology and industry minister.

The cable should boost President Raúl Castro's drive to modernise Cuba's centrally planned economy and make state enterprises slimmer and more efficient. About 500,000 state workers will lose their jobs this year. In addition to broadband, the cable will let Cuba's creaky telephone system handle millions of calls at once. It will be extended to Jamaica next year.

Cuban officials said the priority would be improving communications for those who already had access to the island's intranet, a government-controlled version of the internet. Broadband would mean higher quality communication but not necessarily "broader" communication, said the communist daily newspaper Granma, dampening hopes of an information explosion.

Most Cubans would still have to rely on state media for news,, meaning a diet of propaganda about government successes and distorted reporting of the outside world, said Antonio González-Rodiles, 38, a scientist in Havana. "I think it's pretty unlikely they are going to let Cubans access this immense information source, given there's no clear [state] desire to democratise our society and reduce censorship. A lot of things are going to have to change before Cubans will be able to navigate this sea of information."

The recent lifting of a ban on mobile phones and personal computers means more information is bypassing state channels, especially through the use of memory sticks, but high costs and state monitoring may have limited the impact.

Bloggers such as Yoani Sánchez have won attention and plaudits abroad for their chronicles of daily life, but they remain a marginal force at home.

Cuba's usual form of international communication – post – received a setback at the weekend when Havana suspended all deliveries to the US.

Authorities said sacks of mail were being returned from the US because of tighter counter-terrorism restrictions, following an attempt to smuggle explosives in cargo from Yemen.

Returning the packages was costing Cuba's postal service, prompting the abrupt suspension until further notice of a service which only resumed in 2009 after a 42-year gap during the cold war. The Obama administration lifted the postal ban in what was seen as a cautious effort to improve ties with Havana.

Karl Marx and Fidel Castro dying in Cuba

If Cuban leaders really cared about Cuban people, they would convert Cuba into the Norway of the Caribbean. How so? Norway owns vast tracts of oil-bearing territory in the North Sea. It extracts a lot of oil and uses very little. Norway consumes 10% of its North Sea oil production and sells the other 90% to the world, including the US. That money goes a long, long way toward covering the bills of running Norway.

Cuba is positioned to do the same. But not with oil. With ethanol. If Cuba were to meet US demands, the embargo would end and the US would buy its sugar-based ethanol output -- if there were an output to buy.At this point there is no ethanol production. But if Cuba were to re-eneter the world economy and begin the modernization process, an ethanol industry would emerge.

Of course Cuba would first have to get over its self-defeating obsession with Marxism. But after shedding that skin, the island prison would most likely become a state of rising prosperity.

Obama could, if he were not so fearful, bring about this change with relative ease. He could campaign to end the embargo and defeat an enemy government without firing a shot. Seems that's a far better scenario that firing shots and wasting American lives in Afghanistan, where the meaning of winning is unknown.

US cable: Cuba to be insolvent within 2-3 years

Associated Press – Fri Dec 10

HAVANA – A newly released confidential U.S. diplomatic cable predicted Cuba's economic situation could become "fatal" within two to three years, and detailed concerns from other countries' diplomats — including China — that the communist-run country has been slow to adopt reforms.

The cable was written in February, months before Cuban President Raul Castro announced a major revamp of the island's economy, laying out plans to fire a half-million state workers and open up the island to expanded forms of private enterprise.

The cable, sent by the U.S. Interests Section in Havana, which Washington maintains instead of an embassy, was released Friday by WikiLeaks. It was apparently written by America's chief diplomat on the island, Jonathan Farrar.

There was no immediate reaction from the Cuban government, but the cable's release is not likely to help improve U.S.-Cuban relations already strained by the long detention of an American contractor on suspicion of spying — not to mention 50 years of Cold War animus.

It details a breakfast meeting held by the Interests Section's chief economic officer with diplomats from some of Cuba's main trading partners, including China, Spain, Canada, Brazil and Italy, as well as France and Japan, both of which are among the island's top creditors.

"All diplomats agreed that Cuba could survive this year without substantial policy changes, but the financial situation could become fatal within 2-3 years," the cable said, adding that Italian diplomats cited sources within the Cuban government as predicting that the island "would become insolvent as early as 2011."

Even the Chinese diplomat expressed what the cable referred to as "visible exasperation." It said the Chinese were particularly annoyed by Cuba's insistence on retaining majority control of any joint venture.

"No matter whether a foreign business invests $10 million or $100 million, the GOC's (Government of Cuba's) investment will always add up to 51%," the cable quoted the unidentified Chinese commercial counselor as saying.

The Chinese also complained about problems getting loans repaid, and in particular a Cuban request to extend from one year to four years the amount of time it has to repay credit.

It is no secret that Cuba's financial situation is increasingly dire. Raul Castro has warned that the state can no longer afford to subsidize nearly all forms of Cuban life. The government provides free health care and education, and nearly free transportation, housing and utilities. All Cubans also receive a ration book that provides them with some basic food, though not enough to live on.

Most islanders work for just $20 a month in a state-dominated economic system riddled with inefficiency.

Yet the country has survived the collapse of the Soviet Union, which caused the near-failure of its economy, as well as a 48-year U.S. trade embargo, the retirement of revolutionary leader Fidel Castro in 2006 and countless other bumps along the way.

And the cable's confidence that the government would not enact economic reforms did not pan out. The reforms announced by Raul Castro in September are considered the most significant in a generation. Still, it is unclear if they will be enough to save the island's perennially weak economy.

The cable said Cuba's attempts at agricultural and other reform up to that point had been ineffective, and said more changes were unlikely. It said the country seemed determined to give the more control over state-run businesses to the military, and particularly Agriculture Minister Ulises Rosales del Toro, whom the cable described as Raul Castro's most trusted general.

The cable said the situation would worsen dramatically should there be economic or political problems involving Cuba's top ally, Venezuela, which the dispatch said was "increasingly unstable." It quoted the French diplomat at the meeting as saying Hugo Chavez's country "is in flames" and "a source of serious concern for Cuba."

Cuba receives billions of dollars worth of oil a year from Venezuela at greatly subsidized prices in exchange for the services of Cuban doctors and other help.

"There is little prospect of economic reform in 2010 despite an economic crisis that is expected to get even worse for Cuba in the next few years," the cable said, citing Cuba experts. It closed with a scathing criticism of the leadership of a government ruled by aging brothers Fidel and Raul Castro since they overthrew dictator Fulgencio Batista in 1959.

The government's "direction and leadership remains muddled and unclear, in great measure because its leaders are paralyzed by fear that reforms will loosen the tight grip on power that they have held for over 50 years," it said.

Cuba -- Soon to be a nation of Tax Evaders

If Cubans can build rafts and sail them to Florida, they can outsmart Castro's tax collectors. Unfortunately, the overbearing weight of a communist dictatorship crushes the creativity out of most Cubans. They must do what they can do to survive, which means they cannot do what they would like to do and thrive. The endless support for the regime takes most of the little they have. And the great fear of the regime that its citizens are not loyal has stopped the government from allowing the development of a fishing industry and an offshore oil & gs drilling business. There's no chance a suspicious government would allow some its most valuable citizens a chance to cross the Gulf in a work boat pointed north into the open waters.

Cuba self-employed to pay taxes up to 50 percent

Oct 25, 1:41 pm

HAVANA (Reuters) – Cuba has set income tax rates at 25 to 50 percent for its soon to be expanded private sector, with the biggest earners paying the most taxes, according to official decrees published on Monday.

The rates will range from nothing for those making 5,000 pesos -- equivalent to $225 -- or less a year to 50 percent for those in the highest bracket, which is more than 50,000 pesos, or $2,252.

The new tax rates came out in the Official Gazette as the government prepares to cut 500,000 workers from state payrolls and issue 250,000 new licenses for self-employment to create new jobs in President Raul Castro's biggest economic reform so far.

Those making more than 5,000 pesos will have to pay taxes, starting at a rate of 25 percent and rising from there as income increases.

The cash-strapped government is looking to the self-employed to increase tax revenues to help pay for expensive social programs such as free health care and education.

Last week the government, in a story in Communist Party newspaper Granma, warned that tax scofflaws "will feel the weight of the law imposed upon them by those mandated to enforce it, the National Tax Office."

The gazette, where the government publishes in thick legalese its new laws and decrees, is not usually a hot seller, but on Monday in Havana people could be seen lining up at newsstands to buy copies, then quickly leafing through them on the street.

INTEREST IN STARTING BUSINESSES

Many Cubans have expressed interest in opening their own businesses, with the hope of earning more than the country's $20 a month average salary.

Currently, about 85 percent of the country's labor force of more than 5 million works for the state. Castro, who took over from his ailing older brother Fidel Castro in 2008, wants to trim that number and cut costs.

As of the end of 2009, there were only 143,000 licensed self-employed, although thousands more worked for themselves illegally.

Reaction on the street to the thick decrees, which came out in two separate editions of the gazette, was mixed.

Antonio Soria, a shoemaker working for the state, said he intends to start his own business and views it as a chance to help both himself and the state.

"As a private shoemaker I can retire and have financial support for the future," he said.

"This is a way to contribute to the state's income. Remember that health care and education are free and now that we have the chance to have small businesses, we have to help the country."

Transport worker Ibrahim Fernandez said he supports the private sector expansion, but worried taxes will be too high to encourage small businesses.

"From what I've been able to understand, the topic of the licenses has a defect, which is that they are overcharging taxes. Very expensive, the taxes," he said.

In last week's Granma story, the government outlined a new tax code it said was friendlier to small businesses because while it requires new taxes, it also allows bigger tax deductions.

For the first time since Cuba nationalized small businesses in 1968, the self-employed will be able to legally hire workers.

The regulations issued on Monday said they would have to pay a labor tax amounting to 25 percent of the average salary for their work.

The Old Man and the Oil Under the Cuban Sea

It takes a lot to keep a bootheel on the necks of every Cuban. That's one reason Fidel gets along without an oil industry. However, life in Cuba is getting tougher. Partly because life in those nations that have been Cuba's benefactors is getting tougher too. Especially Venezuela, where Chavez will soon begin to struggle over how to finance his failing socialist experiment.

Cuba needs oil but lacks the competence to find it. Moreover, the Cuban leaders trust no Cubans out on the open sea in boats that might sprint for the US. Hence, Fidel has tried to force his 11 million island prisoners to live an oil-free life. Too bad he and his comrades lack the expertise to convert Cuba's sugar crop into ethanol. But, that's what happens when the state spends everything on perpetuating itself.

Castro is 84, and his health is slipping. Thus, one of these days, he'll croak and his brother Raul will most likely liberalize the economy. Drilling for oil will hlep. But the lack of refineries in Cuba means the only way to convert oil into something useful is to sell it for cash and buy refined products which will power the antique vehicles that still provide most individual transportation. Then, if the state can buy enough diesel fuel, it can unhitch the mules from the city buses and once again use the engines to power them.

Cheap energy is essential to building a prospering economy. But it's not possible to produce and use cheap energy when dictatorships rule.

HOUSTON — Five months after the BP oil spill, a federal moratorium still prohibits new deepwater drilling in the American waters of the Gulf of Mexico. And under longstanding federal law, drilling is also banned near the coast of Florida.

Cuba currently produces little oil. But oil experts say the country might have reserves along its north coast as plentiful as that of the international oil middleweights, Ecuador and Colombia — enough to bolster its faltering economy and cut its dependence on Venezuela for its energy needs.

The advent of drilling in Cuban waters poses risks both to the island nation and the United States.

Ocean scientists warn that a well blowout similar to the BP disaster could send oil spewing onto Cuban beaches and then the Florida Keys in as little as three days. If the oil reached the Gulf Stream, a powerful ocean current that passes through the region, oil could flow up the coast to Miami and beyond.

The nascent oil industry in Cuba is far less prepared to handle a major spill than even the American industry was at the time of the BP spill. Cuba has neither the submarine robots needed to fix deepwater rig equipment nor the platforms available to begin drilling relief wells on short notice.

And marshaling help from American oil companies to fight a Cuban spill would be greatly complicated by the trade embargo on Cuba imposed by the United States government 48 years ago, according to industry officials. Under that embargo, American companies face severe restrictions on the business they can conduct with Cuba.

The prospect of an accident is emboldening American drilling companies, backed by some critics of the embargo, to seek permission from the United States government to participate in Cuba’s nascent industry, even if only to protect against an accident.

“This isn’t about ideology. It’s about oil spills,” said Lee Hunt, president of the International Association of Drilling Contractors, a trade group that is trying to broaden bilateral contacts to promote drilling safety. “Political attitudes have to change in order to protect the gulf.”

Any opening could provide a convenient wedge for big American oil companies that have quietly lobbied Congress for years to allow them to bid for oil and natural gas deposits in waters off Cuba. Representatives of Exxon Mobil and Valero Energy attended an energy conference on Cuba in Mexico City in 2006, where they met Cuban oil officials.

Right now, Cuba’s oil industry is served almost exclusively by non-American companies. Repsol, a Spanish oil company, has contracted with an Italian operator to build a rig in China that is scheduled to begin drilling several deepwater test wells next year. Other companies, from Norway, India, Malaysia, Venezuela, Vietnam and Brazil, have taken exploration leases.

New Mexico’s governor, Bill Richardson, a Democrat who regularly visits Cuba, said Cuba’s offshore drilling plans are a “potential inroad” for loosening the embargo. During a recent humanitarian trip to Cuba, he said, he bumped into a number of American drilling contractors — “all Republicans who could eventually convince the Congress to make the embargo flexible in this area of oil spills.”

“I think you will see the administration be more forward-moving after the election,” Mr. Richardson said.

Despite several requests in the last week, Cuban officials declined to make anyone available for an interview.

Currently, the United States, Mexico and Cuba are signatories to several international protocols in which they agreed to cooperate to contain any oil spill. In practice, there is little cooperation between Washington and Havana on oil matters, although American officials did hold low-level meetings with Cuban officials after the BP blowout.

“What is needed is for international oil companies in Cuba to have full access to U.S. technology and personnel in order to prevent and/or manage a blowout,” said Jorge Piñón, a former executive of BP and Amoco. Mr. Piñón, who fled Cuba as a child and now briefs American companies on Cuban oil prospects, said the two governments must create a plan for managing a spill.

Several American oil and oil service companies are eager to do business in Cuba, Mr. Piñón said, but they are careful not to identify themselves publicly because they want to “protect their brand image in South Florida,” where Cuban-Americans who support the embargo could boycott their gasoline stations and other products.

There are signs the Obama administration is aware of the safety issues. Shortly after the BP accident, the Office of Foreign Assets Control, the agency that regulates the embargo, said it would make licenses available to American service companies to provide oil spill prevention and containment support.

Charles Luoma-Overstreet, a State Department spokesman, said licenses would be granted on a “application-by-application basis,” but he would not comment on the criteria.

Mr. Piñón said it appeared that an American company could apply for a license before an emergency but that a license would be issued only after an accident had occurred. “We’re jumping up and down for clarification,” he said.

One group — Clean Caribbean & Americas, a Fort Lauderdale cooperative of several oil companies — has received licenses to send technical advisers, dispersants, containment booms and skimmers to Cuba since 2003. But it can only serve the member companies Repsol and Petrobras, not Cuba’s government.

Economic sanctions on Cuba have been in effect in one form or another since 1960, although the embargo has been loosened to allow the sale of agricultural goods and medicines and travel by Cuban-Americans to the island.

Mr. Hunt of the drillers’ group said that the association had sent a delegation to Cuba in late August and had held talks with government officials and Cupet, the Cuban national oil company.

He said that Cuban officials, including Tomás Benítez Hernández, the vice minister of basic industry, asked him to take a message back to the United States. “Senior officials told us they are going ahead with their deepwater drilling program, that they are utilizing every reliable non-U.S. source that they can for technology and information, but they would prefer to work directly with the United States in matters of safe drilling practices,” Mr. Hunt said.

Mr. Benítez became the acting minister last week when the minister of basic industry, the agency that oversees the oil industry, was fired for reasons still unclear.

Donald Van Nieuwenhuise, director of petroleum geoscience programs at the University of Houston, said that if an accident occurred in Cuban waters, Repsol or other companies could mobilize equipment from the North Sea, Brazil, Japan or China. But “a one-week delay could be disastrous,” he said, and it would be better for Havana, Washington and major oil companies to coordinate in advance.

Opponents of the Cuban regime warn that assisting the Cubans with their oil industry could help prop up Communist rule. Instead of making the drilling safer, some want to stop it altogether.

Senator Bill Nelson, Democrat of Florida, is urging President Obama to recall a diplomatic note to Havana reinforcing a 1977 boundary agreement that gives Cuba jurisdiction up to 45 miles from Florida. “I am sure you agree that we cannot allow Cuba to put at risk Florida’s major business and irreplaceable environment,” he wrote the president shortly after the BP accident.

Castro's Useful Idiots

Weekend at Fidel's Jeffrey Goldberg is not the first American journalist to cuddle up to Castro.

By MARY ANASTASIA O'GRADY

At most marine parks in the world the animals provide the entertainment. But at the Havana aquarium last month, Fidel Castro had a couple of humans eating out of his hand and clapping like trained seals.

I refer here to the Atlantic Monthly's Jeffrey Goldberg, who traveled recently to Cuba at Castro's invitation with his friend Julia Sweig of the Council on Foreign Relations. Mr. Goldberg has posted a two-part report from his lengthy conversations with the dictator online for the magazine. One part includes details of a day at the aquarium, where Mr. Goldberg, accompanied by Ms. Sweig, seems to have experienced more than one "thrill going up [his] leg" in the presence of Fidel.

The reporter "hope[s] to be publishing a more comprehensive article about the subject in a forthcoming print edition of the Atlantic." I'm guessing that anyone who actually knows something about Castro's Cuba is not the target audience.

Castro again has an urgent need to put a smiley face on his dictatorship. The economy is in dire straits. Food is scarce, electricity is a rarity, and soap and toilet paper are luxuries. Cuba produces almost nothing and this makes it difficult to get hard currency—aka real money—which in turn makes it tough to buy from abroad. Lending sources have dried up.

If the regime is to stay in power, it needs a new source of income to pay the secret police and keep the masses in rice. The best bet is the American tourist, last seen circa 1950 exploiting the locals, according to revolutionary lore, but now needed by the regime. It wants the U.S. travel ban lifted. To prevail, Castro needs to counteract rumors that he is a dictator. Solution: a makeover in the Atlantic. In Mr. Goldberg, he no doubt recognized the perfect candidate for the job.

Fidel's step one was to tell Mr. Goldberg that he is outraged by anti-Semitism. "I don't think that anyone has been slandered more than the Jews," the old man proclaims to his guests. And by the way, Mahmoud Ahmadinejad should "stop picking on the Jews." When Mr. Goldberg asks whether Castro will tell the Iranian himself, Castro says, "I am saying this so you can communicate it." Translation: This should be the headline of your piece so that the American people will recognize my benevolence. Mr. Goldberg complied.

We are supposed to conclude that Cuba is no longer a threat to global stability and that Fidel is a reformed tyrant. But how believable is a guy whose revolution all but wiped out Cuba's tiny Jewish community of 15,000, and who spent the past 50 years supporting the terrorism of the Palestinian Liberation Organization, Syria, Libya and Iran? And how does Castro explain Venezuela, where Cuban intelligence agents run things, Iran is an ally and anti-Semitism has been state policy in recent years? Mr. Goldberg doesn't go there with Fidel.

It also is passing strange that we hear nothing from Mr. Goldberg about poor Alan Gross. Mr. Gross, a U.S. government contractor and a Jew, has been languishing in a Cuban prison since December. His crime: distributing computers to a handful of Cuban Jews who want to establish contact with the diaspora. Is that any way to show love for the Jewish people?

It never seems to cross Mr. Goldberg's mind that he is being used in a manner Communists first learned at Lenin's knee. Or perhaps he is happy to be useful. In a follow-up post he explains that since Fidel is not as bad as Pol Pot, Cubans should stop complaining. And to demonstrate further how little he knows about the plight of the Cuban people, he says that the "release" of political prisoners "is currently being negotiated." Wrong. Some have been exiled; some others may receive conditional parole meaning that they can be returned to prison at any time if the regime disapproves of their activities.

Mr. Goldberg is peddling his Castro interviews as serious journalism. But while he was "curious" to get a "glimpse of the great man," he was ill-prepared for the job. Presumably he knew this, which is why he allowed Ms. Sweig to lead him around Havana by the nose.

This set him up for failure because Ms. Sweig—an academic with easy access to the island while critics are banned—is a trusted friend of the dictatorship. "Fidel greeted Julia warmly; they have known each other for more than twenty years," Mr. Goldberg reports.

When Castro declares that the Cuban model no longer works, Mr. Goldberg turns to Ms. Sweig, as if there is something profound to be grasped. He is not saying "the ideas of the Revolution" have failed, she explains, but only that the state "has much too big a role" in the economy. Right, except that the state-owned economy is the idea of the revolution.

It is hardly surprising, then, that what we get from this interview is warmed-over Barbara Walters, another whose heart went pitter patter when she got close to the Cuban despot. This encounter also produced nothing of substance.

Cuban Capitalism is Coming

Fidel can call it whatever he likes, but the word is capitalism. The Cuban dictator may not admit it, but capitalism is the force that puts food on the table, a roof over one's head and a little money in the bank. He can continue his failing experiment in Marxist madness till he dies. But after he's gone, the US is likely to end the embargo of Cuba and thereby start a capitalist revolution on the island. That might bring McDonalds to Havana, but it will also bring Cubans everything they've lived without for 50 years. For example, common US products such as house paint. And cars built after the 1950s.

Remarkably, Obama is positioned to defeat Cuban communism by simply declaring an end to the US embargo. By putting Cuba on the same footing as China, the Cuban government would crumble as American tourists and opportunists swarmed over the island, making it impossible for Castro to police the economic activities inside his national prison. Even though Obama has the opportunity to win a war with a pen rather than a sword, he is doing nothing.


Cuba Resets the Revolution

Cuba allows private enterprise, but on a very restricted scale.

September 18, 2010

For first-time visitors, one of the most striking things about Cuba is the lack of advertising on the landscape. The Socialist government has billboards bearing Fidel Castro’s likeness and his most quotable quotations. But one does not see roadside signs pitching much else.

Could the Cuba of the not-too-distant future feature signs touting “Joel’s Moving Company,” “Dayana’s Furniture Repair,” “Julio’s Boutique”?

Probably. And there will be other changes, bigger and more wrenching, if harder to see. On a scale not known for half a century, Cubans will be hiring other Cubans for small-scale enterprises, creating boss-employee relationships without the direct involvement of the Communist Party. The idea of receiving a paycheck whether one loafs, sleeps or shows up at all will be under a new challenge. And it is possible that creating a cadre of quasi-capitalists could unleash forces that the Castros or their successors will prove unable to control.

But is Cuba approaching a transformation of the kind that swept Russia and China? It is tempting to imagine so, if only because the news about a move to private employment seems so startling.

Nevertheless, experts on Cuba warn against reading any such far-reaching expectations into last week’s announcement, no matter how ambitious a task it seems to recondition Cubans for a system that will require some to sink or swim.

Yes, the Castro government is acknowledging a deep problem. But it has also always linked its core ideology to its fear and disdain of the United States and the American economic system. So its ferocious pursuit of independence from American economic influence — even as it denounces Washington’s embargo on trade — would make a radical shift to joining the global free-trade system that the United States dominates particularly difficult to explain.

A Cuban sociologist, Haroldo Dilla, predicts that in the end the new system will not enable Cubans to rise too far out of poverty, and that the government will resist a true economic opening with the world.

Which is not to say that the leadership wants no change at all. Over the two decades since Communism collapsed in the Soviet Union, Cuban officials have visited Russia, Vietnam and China and undoubtedly have taken some lessons from each. President Raúl Castro has made it plain that he views Mikhail Gorbachev’s efforts to reinvigorate the Soviet political system, which led to Communism’s collapse, as a cautionary tale. The mix of consumerism and authoritarianism that one finds in Vietnam and China is presumably a more palatable model — privatization, but with the state in firm control.

Still, the plan announced so far is much more modest than what the Asian countries have done. Instead, it seems designed simply to boost Cuba’s economic productivity in small-scale enterprises and thus loosen up a state-run economy and work force that have been sputtering for more than a decade. That goal is in line with what Raúl Castro himself said last month: “We have to erase forever the notion that Cuba is the only country in the world where one can live without working.”

The announcement of layoffs also does not represent the first time that Cuba has experimented with privatization. A host of small-scale occupations is already allowed on the island, including pizza deliverymen and party clowns. And Cubans can, if they jump through enough bureaucratic hoops, open restaurants in their homes or house guests in spare bedrooms.

It would be far more difficult for either Fidel or Raúl Castro to emulate their neighbors in the Caribbean, without challenging the basic precepts of the Cuban revolution. For decades now, many of those countries have been taking advantage of their ties to the West and the United States to diversify their economies. Cuba, instead, continued to rely on one export commodity — sugar — which the Soviet Union bought at subsidized prices. Only relatively recently has it invited some European partners for joint ventures; for example, in tourism.

But a broad opening to new manufacturing, for example, would be different. That would presumably mean welcoming an influx of private capital from abroad to produce export goods on Cuban soil. It would also probably require normalizing trade and diplomatic relations with the world’s biggest consumer market, the United States. And it might even invite efforts to return to Cuba by exiles who still have claims on industrial enterprises they left — or were forced to leave — as enemies of the revolution.

What’s more, in China and Vietnam the path toward a modern economy was carefully coordinated with a series of steps toward normalization of relations with the United States. Could Cuba’s new economic strategy be a signal of readiness for such a package? That would be difficult to say this early. Some Cuba-watchers suggest that a mass release of political prisoners from Cuban jails in recent months is such a signal. But the history of Cuban-American communication since 1958 is rife with the misreading of oblique signals, even if the prisoner release qualifies as one.

Of course, Cuba and the United States are more linked than government officials in both capitals like to admit — through family bonds, for example.

“If fully carried out, a major expansion of Cuba’s private sector will benefit many thousands of Cuban families and give Cuban-Americans opportunities through remittances to help relatives in Cuba who will be working on their own,” Philip Peters, who follows economic matters in Cuba for the security- and free-market-oriented Lexington Institute in Arlington, Va., wrote in a post on his blog, the Cuban Triangle, on Thursday.

Ted Henken, a professor at Baruch College who studies private enterprise in Cuba, epitomizes the ambivalence with which prudent Cuba-watchers are assessing the latest news. He said he was thrilled by it, but was hedging his bets on how transformative the change would be.

“This is the beginning of what we’ve all been waiting for,” he said. “It’s a major change in the way the Cuban economic system will work. It will be felt by every Cuban.” But, he added, “they still want to maintain state control. We’ll see how this plays out.”

The real test of Cuba’s latest experiment will be in how it is implemented and whether work will have a correlation with wealth, Professor Henken and other experts said. Under previous privatization campaigns, he said, “people were so hobbled by regulations that self-employment was rife with illegality and corruption because that’s the only way people could make their businesses float.”

They also had to keep wary, as all Cubans do, of the secret police, given the regime’s attitude toward private property and enterprise in general. Yoani Sánchez, a dissident Cuban blogger, cited this when she wrote the other day: “Under the strict canons of the socialist economy — planned, centralized and subsidized — self-employment has always been seen as an undesirable species of pest that periodically needs to be abated and occasionally even exterminated.”

The result has been the development of a singularly Cuban style of being enterprising — somewhere between furtive and legitimate, with the real object being to simply get along. Ms. Sánchez described one man who runs a restaurant in his house and had outlawed items on his menu. He tried to persuade his daughter to marry a top chef, the blogger wrote, to get around a rule that employees must be family members.

Earlier this month, when Jeffrey Goldberg interviewed Fidel Castro for The Atlantic magazine, one comment — hinting that the Cuban system wasn’t working for Cubans any more — drew the most attention. The former president later said that he had been misinterpreted, but within days came the announcement of the layoffs and the opening toward private employment.

Still, none of the power brokers in Cuba were calling this capitalism, and most close observers don’t expect them to use that word, whatever other changes unfold. “Overhauling their model does not necessarily mean they are importing ours,” was the way Julia Sweig, a Cuba expert at the Council on Foreign Relations who was at the interview, interpreted Mr. Castro’s comments.

Which brings us back to the matter of public relations, and those billboards: Even their presence could raise issues that Cuba’s economic planners probably have not fully thought through: Is a billboard company legal in the new Cuba? Would residents living along highways be able to rent out the land alongside their home for such advertising?

And, above all, could a privately run restaurant advertise that its rice and beans were better than those offered down the street by the state-run competition?

Cuba: The Bill for the Free Lunch has Arrived

Cuba’s Public-Sector Layoffs Signal Major Shift

September 13, 2010

MEXICO CITY — In perhaps the clearest sign yet that economic change is gathering pace in Cuba, the government plans to lay off more than half a million people from the public sector in the expectation that they will move into private businesses, Cuba’s labor federation said Monday.

Over the past several months, President Raúl Castro has given stern warnings that Cuba’s economy needs a radical overhaul, beginning with its workers. With as many as one million excess employees on the state payroll, Mr. Castro has said, the government is supporting a bloated bureaucracy that has sapped motivation and long sheltered a huge swath of the nation’s workers.

“We have to erase forever the notion that Cuba is the only country in the world where one can live without working,” he told the National Assembly last month.

Since permanently taking over from his brother Fidel two years ago, Mr. Castro has often pledged to make Cuba’s centralized, Soviet-style economy more efficient and open up opportunities for people. The government has handed tens of thousands of acres of state-held farmland to private farmers and begun freeing up a market for agricultural supplies. It has loosened restrictions on cellphones and other electronics, and created a few areas for private business, allowing barbers’ shops to become cooperatives and giving more licenses to private taxi drivers.

But these initial reforms have been comparatively limited, many analysts contend, and Cuba’s economy — grappling with the fallout from the global financial crisis and the aftermath of devastating hurricanes in 2008 — appears to be in dire shape.

Tourism revenues have flagged, the country has faced rice shortages and its sugar crop has been disastrous. Last year, as the government tried to hold onto desperately needed hard currency, imports fell by 37 percent.

In its statement Monday, the Cuban Workers’ Central, the country’s only recognized labor federation, openly acknowledged the nation’s troubled economy, saying that changes were “necessary and could not be delayed.”

“Cuba faces the urgency to advance economically,” the statement said. “Our state cannot and should not continue supporting companies” and other state entities, “with inflated payrolls, losses that damage the economy, which are counterproductive, generate bad habits and deform the workers’ conduct,” the labor federation added.

To that end, the government has previously said that it would grant new licenses to entrepreneurs, vastly expanding the kinds of businesses that can be run privately. But the announcement on Monday — saying that the layoffs would be completed by next March — suggested that Mr. Castro now intended to move ahead vigorously.

“What’s stunning today is that they put a date and they put a number on it — 500,000,” said Philip Peters, who follows Cuba for the Lexington Institute. “It’s a very substantial decision,” he added. “It’s a major shift towards a larger private sector in a socialist economy.”

New openings in the private sector would be welcomed by many Cubans, who are weary of the island’s stagnation and desperate for new opportunities.

Even so, the disappearance of hundreds of thousands of jobs — and with them the security of a salary, workplace meals and the chance to make extra money through tips in some cases — would come as a shock.

While Cubans have access to free health care, education and subsidized food and housing, the government has already cut some of the subsidies that many Cubans rely on to supplement their average monthly wage of about $20. And given the government’s record of introducing new areas for enterprise only haltingly, it is unclear that new jobs can be created as quickly as the public sector positions will be cut.

“They are in the process of massively reducing the size and participation of the state in Cuban life,” said Julia E. Sweig, a Cuba expert at the Council on Foreign Relations who was in Havana a couple of weeks ago. “There is a belief that there is so much pent-up demand on the one hand and so much skill on the other that the private sector will absorb them pretty rapidly.”

Ms. Sweig said that it appeared the government was preparing to open up a vast range of activities, including light manufacturing like furniture making and garment production. Cuba’s underground economy already provides a broad array of products, she said, but under the new arrangement the government would begin to tax those new businesses.

To absorb all those workers who will be laid off, the federation said that hundreds of thousands were expected to move into some form of private enterprise over the next few years.

Just how strongly the government plans to hold onto its traditional economic philosophies are a matter of debate.

In an interview published online by the Atlantic last week, Fidel Castro said that the Cuban model no longer worked. But in a speech at the University of Havana shortly after his remarks were published, he said that he had been misinterpreted and that what he meant was that capitalism did not work.

Ms. Sweig, who was present for the first interview, said that Mr. Castro’s speech correcting himself was not backtracking. Instead, she said his words were most likely intended to reassure Cubans that he did not intend to import American-style capitalism. “It is a hybrid that is evolving,” she said.

Still, John Kavulich, a senior adviser for the U.S.-Cuba Trade and Economic Council, warned that it would be difficult for Cuba to follow through on the full scale of its announcement. On a practical level, he asked, would the government be able to import all the tools the new entrepreneurs or small manufacturing cooperatives will need?

There is also a larger question that goes to the heart of Cuba’s ideology, Mr. Kavulich said. “The Cuban government is going to allow and by definition encourage people to go into private sector opportunities,” he said. “What happens when some people get rich?”

“The government is going to have to determine whether it will allow and embrace success, not just opportunity,” he said.

It's Official: Castro admits Cuban Economics are a failure

As if we didn't know. Maybe now Fidel is going to tell the world he was just a young idealist who wanted to give Marxism the old college try before it was too late. Here we are, fifty years down the road, and everyone who's looked at the Cuban model has pronounced it a failure. What else do we need to know?

Should we examine every aspect of the Cuban economy? Should we ask why an island nation sitting in an oil-rich body of water has no oil? Should we ask why this island nation has no fishing industry? Should we ask why a nation capable of producing huge quantities of sugar cane is not in the ethanol business?

We know why. The cost of maintaining a dictatorship is high. It takes a lot to keep a tight squeeze on the necks of 11 million prisoner-citizens. After protecting itself from any hints of opposition, there's no money around to build the nation. Thus, Cuba languishes.

However, by the time the Castros are gone, the biggest land boom of the 21st century will have begun in Havana.

Report: Castro says Cuban model doesn't work
September 7, 2010

HAVANA – Fidel Castro told a visiting American journalist that Cuba's communist economic model doesn't work, a rare comment on domestic affairs from a man who has conspicuously steered clear of local issues since stepping down four years ago.

The fact that things are not working efficiently on this cash-strapped Caribbean island is hardly news. Fidel's brother Raul, the country's president, has said the same thing repeatedly. But the blunt assessment by the father of Cuba's 1959 revolution is sure to raise eyebrows.

Jeffrey Goldberg, a national correspondent for The Atlantic magazine, asked if Cuba's economic system was still worth exporting to other countries, and Castro replied: "The Cuban model doesn't even work for us anymore" Goldberg wrote Wednesday in a post on his Atlantic blog.

He said Castro made the comment casually over lunch following a long talk about the Middle East, and did not elaborate. The Cuban government had no immediate comment on Goldberg's account.

Since stepping down from power in 2006, the ex-president has focused almost entirely on international affairs and said very little about Cuba and its politics, perhaps to limit the perception he is stepping on his brother's toes.

Goldberg, who traveled to Cuba at Castro's invitation last week to discuss a recent Atlantic article he wrote about Iran's nuclear program, also reported on Tuesday that Castro questioned his own actions during the 1962 Cuban Missile Crisis, including his recommendation to Soviet leaders that they use nuclear weapons against the United States.

Even after the fall of the Soviet Union, Cuba has clung to its communist system.

The state controls well over 90 percent of the economy, paying workers salaries of about $20 a month in return for free health care and education, and nearly free transportation and housing. At least a portion of every citizen's food needs are sold to them through ration books at heavily subsidized prices.

President Raul Castro and others have instituted a series of limited economic reforms, and have warned Cubans that they need to start working harder and expecting less from the government. But the president has also made it clear he has no desire to depart from Cuba's socialist system or embrace capitalism.

Fidel Castro stepped down temporarily in July 2006 due to a serious illness that nearly killed him.

He resigned permanently two years later, but remains head of the Communist Party. After staying almost entirely out of the spotlight for four years, he re-emerged in July and now speaks frequently about international affairs. He has been warning for weeks of the threat of a nuclear war over Iran.

Castro's interview with Goldberg is the only one he has given to an American journalist since he left office.