Cuba reinstating economic
controls
Cuba is gradually returning
to tight state control of its whole economy.
Some analysts say it's preparing for a day
when Fidel Castro no longer rules.
By Nancy San Martin, nsanmartin@herald.com.
The
Miami Herald, March 7, 2005.
As Cuban leader Fidel Castro put it recently,
the revolution will no longer allow any
blandenguería -- wimpiness -- at
home to go unpunished.
More and more, the Cuban government is
tightening its political and economic controls
-- from ordering tourism workers to spy
on clients to canceling foreign companies'
checkbooks -- in what analysts believe is
a campaign largely designed to prepare the
island for Castro's eventual death.
''This is a very well thought-out policy.
In the long term, it sets up the state for
succession,'' said Hans de Salas del Valle,
a researcher at the University of Miami's
Institute for Cuban and Cuban-American Studies.
''It works like this: They tighten the
screws politically, improve the economic
situation slightly and, thereby, ensure
control'' when Castro passes on, de Salas
added. The 78-year-old Castro, who has ruled
Cuba for 46 years, has suffered a couple
of fainting spells in recent years and a
fall in which he shattered a kneecap and
broke an arm.
The new restrictions hark back to the Cuba
of the 1960s, '70s and '80s, when the central
government controlled virtually everything,
took a dim view of foreign tourists and
investors and outlawed the holding of U.S.
dollars.
The end of the Soviet Union's massive subsidies
forced Havana to open its economy somewhat
in the early 1990s, legalizing the dollar,
encouraging foreigners to visit and invest
and giving managers of state enterprises
more leeway to grow profits.
BENT ON CONTROL
But now Castro is bent on regaining control
of a population and government agencies
that grew accustomed to a measure of independence
-- and on cracking down on the widespread
corruption and black-market activities that
the economic reforms fueled.
Castro emphasized those points in a recent
six-hour speech to economists in which he
asserted that the Cuban economy had finally
come out of its post-Soviet abyss -- in
essence arguing that the 1990s reforms were
no longer needed.
The U.S. dollar had been recently ''dishonorably
discharged'' from circulation -- shops no
longer accept them from Cubans -- and control
of the economy was shifting back to the
the hands of central government planners
where it belongs, Castro said.
Cuba's economic ''motor,'' he added, would
be revved up not by open-market reforms
but by deals with China and Venezuela --
the former ruled by the Communist Party,
the latter by President Hugo Chávez,
Castro's top ally and a regional economic
powerhouse while oil prices remain high.
In a separate speech to health workers
three days later, Castro angrily complained
about an increase in the street availability
of medicines -- at dollar prices -- that
are difficult to find at government-subsidized
peso prices.
''Don't let anyone believe that la blandengueria
can continue without repercussions,'' Castro
said, according to a report by the news
agency EFE. "We will not stay with
our arms crossed.''
Indeed, Castro has been busy in recent
weeks and months putting more controls on
his people and his economy.
Effective in mid-February, the Tourism
Ministry ordered all workers in the industry
to report to state security agents any critical
words or actions by their clients, to reject
all tips and to avoid personal interaction
with foreign visitors -- all to protect
the purity of Cuba's socialist values.
At the same time, the Central Bank began
requiring prior approval for most foreign
exchange transactions. Cuba analysts saw
the move as an attempt to increase the government's
control of foreign currencies and attack
corruption, but predicted it would also
slow Cuba's already sluggish international
business relations.
A few weeks earlier, all state enterprises
were ordered to deposit all the U.S. dollars
they obtain -- usually through exports --
into a single government bank account, then
request bank permission to withdraw dollars
when needed for imports.
Controls on the dollar accounts of foreigners
in Cuba were also tightened and some of
the checkbooks were withdrawn, apparently
to force the foreigners to physically go
into the banks to do their business.
FEWER JOINT VENTURES
Insiders say some economic tightening adopted
in 2003, and other factors, had led foreigners
to shut down many of their companies in
Cuba -- all joint investments with the government
-- even before the latest round of controls.
One report issued in 2004 said the number
of active joint ventures had fallen from
a high of 585 to 342, but analysts say the
number today is now even lower.
In November, U.S. dollars in circulation
were replaced with government-created ''convertible
pesos'' -- pegged at one-to-one but worthless
off the island. The government also slapped
a 10 percent fee on converting dollars to
pesos.
And in October, the Labor Ministry strengthened
its controls over the labor market by halting
the issuance of new licenses for about 40
categories of self-employment -- from magician
to used-book vendor and funeral wreath maker.
Cubans' ability to work for themselves
and not the state, legalized in 1993, at
one point allowed up to 209,000 people to
earn a living outside some government controls.
The number was down to 150,000 last year.
Cuba analysts say the governments is putting
aside the sort of small-scale economic reforms
that helped it through the 1990s in the
belief that the island will be better off
if it makes larger deals with the likes
of China and Venezuela.
''The investors that Cuba wants now are
those that can bolster the state sufficiently
in order to sustain political stability,''
said UM's de Salas. "They won't sacrifice
the political system for the sake of economic
growth. . . . The political system is not
negotiable.''
Paolo Spadoni, a University of Florida
professor who closely follows Cuba's economy,
agreed that Castro is now betting that he
can improve the economy by recentralizing
the government's controls rather than adopting
new reforms.
''The path is clear: recentralization,''
Spadoni said. "It's been incremental
with more restrictions and more control.''
But analysts say the new regulations are
short-sighted and risk even tougher times
ahead for the already struggling nation.
''What they are doing does not make economic
sense,'' said St. Thomas University economist
María Dolores Espino. "They
have decided that what is important is [domestic]
efficiency and not the [foreign] markets.
The problem is you can't be efficient without
the markets.''
''The bottom line is that it looks very
bad in the long term,'' Espino added.
But not if Castro cares only about a peaceful
assumption of power by his successors once
he dies, de Salas said. ''I think where
it's all headed is a likely authoritarian
succession modeled after China and Vietnam,''
he said. "Time is on the regime's side.
All they have to do is stay afloat.''
Herald translator Renato Pérez
contributed to this report.
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