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Posted February 05, 2007 by publisher in Business In Cuba

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By Joseph Contreras | Newsweek International

Feb. 12, 2007 issue - After months out of the public eye, Fidel Castro was suddenly back last week, appearing on Cuban TV for a meeting with Venezuelan President Hugo Chávez. Though he’s put on some weight since his last appearance, the mumbling Cuban dictator was an apt symbol for the island he’s led for 48 years: too sick to function properly but not quite dead. Castro is like an ailing dinosaur; his Cuba remains stuck in the mud, with an antiquated government and a stagnant Soviet-style economy. On the surface, little seems to have changed in the six months since the 80-year-old Fidel ceded power to his brother Raúl.
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But look beneath Cuba’s petrified façade, and you’ll find changes afoot that foreshadow what will come when Fidel finally expires. Under the 75-year-old Raúl’s quiet stewardship, the country has begun to take a hard look at the many problems plaguing its 11.4 million inhabitants. And some Cuba analysts believe the younger Castro may have picked a new model to emulate: Beijing, where the Communist Party has maintained an absolute grip on political power while loosening the economic reins, encouraging foreign investment and private entrepreneurship—and making China an economic superpower in the process.

The most noticeable change so far can be seen in the way Havana has begun questioning its old methods—challenges that were unheard of in Fidel’s day and that have fanned expectations that Raúl aims to reorient the country. During a two-day meeting of Cuba’s rubber-stamp Parliament at the end of last year, a stern-faced Raúl blasted the “bureaucratic red tape” that was delaying prompt payment to farmers for their crops and described the public-transportation network as “practically on the point of collapse.” “We are tired of excuses,” he growled.

This followed a scathing exposé of theft, consumer rip-offs and incompetence at government-run enterprises that was published by Juventud Rebelde, the Communist Party’s youth newspaper. Under the headline the big old swindle, the newspaper reported that beer mugs at bars were routinely underfilled, restaurant sandwiches were light on ham and cabdrivers charged passengers four times the official fare. If employees really followed the rules, gave customers what they asked for and charged government-mandated fees, it continued, a large number of state-run businesses and services would go bankrupt. The newspaper was blunt about what was to blame for this mess, quoting a government economist who lamented the country’s “skewed” Soviet model.

Raúl, meanwhile, has been studying the Chinese alternative ever since he first traveled to Beijing in 1997, where he met Zhu Rongji, the prime minister credited with many of China’s most important economic reforms. Raúl later invited one of Zhu’s top advisers to Cuba to meet hundreds of officials and executives from state-run enterprises, and the visits have continued ever since. “The Chinese model ... has most impressed and influenced the current leadership in Cuba,” says former Cuban intelligence official Domingo Amuchástegui. “In the last 15 years, about 85 percent of the civilian and military leader[s] have gone to China.”

These trips are starting to bear fruit. Officially, Havana still insists it must maintain state ownership of more than 90 percent of the economy, and Raúl has never publicly endorsed Chinese-style “market socialism.” But his actions tell another story. Under his rule, the military has become the most important player in Cuba’s economy, running about a dozen companies that capture an estimated 60 percent of all tourism revenues and two thirds of hard-currency retail sales. These for-profit deals mirror those conducted by China’s Army in the 1980s and 1990s.

Other signs also point toward a shift to more market-friendly strategies. For example, a group of once influential economists who advocated the legalization of small and medium-size private businesses in the early 1990s—and were forced out of their jobs at a Havana think tank as a result—has recently resurfaced.
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Raúl has plenty of reasons to look to Beijing. Many of the problems facing Cuba today parallel those that gripped China after the death of Mao Zedong in 1976. Like Mao, Fidel Castro stubbornly clung to egalitarian, anti-market principles that stifled individual initiative. This created problems in Cuba so severe that even some Chinese started noticing. At the conclusion of a visit to Cuba in 2003, Xu Shicheng of the Chinese Academy of Social Sciences warned that Cuba must “establish the mechanisms of the socialist market economy ... and smash egalitarianism.”

Xu was right about the need for change. Under Cuba’s Soviet system, the economy has failed to meet basic needs. The country faces a housing shortage of 700,000 units, and despite free health care, education and rent, government employees struggle to survive on salaries averaging $17 a month. Many resort to stealing goods from their government workplaces and reselling them on the thriving black market. That has accelerated the deterioration of public services. Some experts say Raúl understands that to stay in power, he must ensure better living standards, which means opening up important sectors of the economy. Raúl’s message is: ” ‘Wake up, we’ve got to be honest and find ways to resolve these serious, systemic problems,’ and that’s all part of the Chinese model,” says William Ratliff of the Hoover Institution. “People won’t put up with this kind of squalor under anybody except Fidel, and [Cuban officials] know they’ve got to do something.”

Skeptics warn that all the talk about reform will come to naught unless the regime finds ways to curb corruption and boost efficiency. The heads of a state-run computer-supply firm and the telecommunications company ETECSA were recently sacked for scandals involving kickbacks and chronic incompetence. But the more deep-seated scourge of corruption involving Cubans from all walks of life won’t go away until they are given tangible inducements to work harder and stop raiding the government warehouses that employ them.

One option would be to allow members of agricultural cooperatives to choose their own crops and sell produce to whomever they want at prices set by the market. “They will have to move to what you have in China and Vietnam, and privatize agriculture,” says University of Pittsburgh economist Carmelo Mesa-Lago. “If they do that, there will be a phenomenal incentive for cooperative members to increase production.”

But as someone who has spent his entire life in the shadow of his charismatic, domineering brother, Raúl Castro seems unlikely to take bold action as long as Fidel keeps breathing. “[Fidel’s] illness has [left] the country semi-paralyzed,” says Héctor Palacios, a dissident who was released from jail in December—the only political prisoner Raúl has had the courage to free. In the meantime, “there is a vacuum of power,” says Palacios, “and people are awaiting the measures that will get us out of this situation.” Until Raúl finds the political will to take these long overdue steps, Cuba will remain in an economic ice age, waiting for its last dinosaur to die.

  1. Follow up post #1 added on February 06, 2007 by Pete Chavez

    Good article, a very sober analysis.  Raul and the innercircle know very well they are going to have a French Revolution on their hands (guillotine and all)
    if they don’t act.  One would be surprised how fast everyone is going to forget their professed love for Fidel on the island if in the ensueing months after his death people are still living in squalor including the priveleged class.  I see it as a no win situation for him.  Once he budges the population will want more and get emboldened.  They will see his budging as weakness, blinking first (so to speak).  Then the actual middle to upper ranks that hold things together will be wondering “what the hell are we running this thing like this for, it doesn’t work for anyone, including us.”  And that will be the end.  History will be repeating itself in Cuba as in the former Soviet/Eastern block.

  2. Follow up post #2 added on February 06, 2007 by publisher with 3905 total posts

    Especially if the world offers a few billion dollars in aid and Raul rejects it. I agree, Cubans will get a taste for something different and they are going to want to try different things. Being locked down will no longer be an option.

    And this snipet of a story about the old culture minister showing up on television. I guess he was a bad guy from the past who arrested artists and the like. Raul had to call a meeting to calm everybody down. The article says it may have just been a ploy to identify dissenters but this was still a revolt. Maybe the first of more to follow.

    “In the first sign of internal dissent since Fidel Castro ceded power six months ago, intellectuals furious over the television appearances of 1970s era government officials responsible for a crackdown on intelligentsia convened a conference to discuss it. But while the event was an extraordinary display of criticism, opponents of the Castro brothers point out that the conference was not open to the public, suggesting the steps the government has taken toward discussion are small and wobbly.

    The flare-up was triggered when Cuban TV ran a laudatory profile last month of Luis Pavon Tamayo, the former chairman of the National Culture Council. Pavon’s five-year reign was dubbed “The Gray Quinquennium”—The Five Gray Years—for its record of arrests and censorship.

    A flurry of e-mails condemning the TV appearances swept Cuba’s cultural community, leading to a rare statement by the artists’ guild published in the state-controlled newspaper, Granma, which denounced the TV shows.


    “The act established a turning point that we hope will be irreversible,” writer Reynaldo Gonzalez, winner of the 2003 National Literary Prize, said in an e-mail to The Miami Herald. “And it has created an echo that will be difficult to stifle, even if someone tries to do so.”

    A magazine editor convoked a conference led by writer Ambrosio Fornet and attended by Culture Minister Abel Prieto to debate the topic. But tickets were only given to some 450 people.

    Reports from Cuba say young writers who were not invited protested outside.

    Portela, 34, wasn’t invited, and viewed the conference as a whitewash. “A half-century of lies is not something that can change overnight,” she said.

    Former Cuban political prisoner Manuel Vasquez Portal agreed, saying it was nothing but a political ploy aimed at identifying dissenters.”


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