By Marc Frank in Havana | Financial Times
The Cuban government is considering easing its stranglehold on the retail sector in an effort to legalize the underground economy and reduce massive theft. It is President Raul Castro’s second big economic reform after last year’s decentralization of agriculture and the leasing of idle state land.
A recent communiqué from the Communist party’s central committee suggested change was coming to one of the world’s two remaining Soviet-style command economies, the other being North Korea.
“Raul stated the key premises for economic policy to the end of the year and next were decentralization of the assignment of resources to services and production that generate the most earnings for the country and the search for new formulas that free up productive potentials,” it said.
Cuba is battling a liquidity crisis, shrinking production and increased pressure from a frustrated public and creditors. The government cut imports 30 per cent and the state budget 10 per cent this year, and reduced its growth forecast from 6 per cent to 1.7 per cent. Policymakers believe that up to 20 per cent of supplies flowing to thousands of retail businesses and cafeterias are stolen – from bags of rice and beans, wheat and yeast to merchandise and tools, parts and cement. Much of the remainder is poorly used, Cuban economists said.
“The only way to stop theft is to give workers an incentive not to steal and to work, and that means they have to have a real interest through a co-operative form of property or small business,” said one of the economists, who asked to remain anonymous.
Phil Peters, Cuba analyst at the Virginia-based Lexington Institute, said Cuba “long ago acknowledged state management failures in retail and service businesses, where workers are paid little, cheat consumers and resort to black market supplies to keep cafeterias and repair shops operating. The government would be smart to abandon these businesses.”
At a recent closed door meeting of accountants in Havana, a presentation by the ministry of planning and economy appeared to advocate co-operatives, if not small private businesses. The ministry has become the center of efforts to improve the economy since earlier this year Raul Castro replaced the entire economic cabinet, inherited from his ailing brother Fidel who retired in February 2008.
“State-run socialist companies must be efficient and what they need for their optimal performance must be guaranteed,” the report said. “The remainder of the economy must adapt to a form of property better suited to the resources available.”
The PowerPoint presentation, obtained by the Financial Times, blamed the centralized economic model’s “low efficiency” and “excessive state protection of the population’s consumption” in part for the country’s economic problems.
Some Cuban economists have long argued that the state should focus on large companies and wholesale trade and get out of the retail business, which it has monopolized since 1968.
Now the state-run media have taken up the refrain in earnest. Juventud Rebelde, the official newspaper of the Union of Young Communists, and Ariel Terrero, state-run television’s popular economic commentator, are leading the charge.
“Why should there be co-operatives only in agriculture? It is an organizational principle valid for other sectors,” Omar Everleny, an economist, told Juventud Rebelde.