FIND THE BEST BOOKS ABOUT CUBA. YOUR PURCHASE PROMOTES HUMAN RIGHTS AND JUSTICE. HAVANA DREAMS: A STORY OF A CUBAN FAMILY GET IT!

NEW BOOKS Capitalism in Crisis: Globalization and World Politics Today: ‘To endure the global struggle between the superpowers is bad,’ Fidel Castro once said. ‘To live under total hegemonic domination by one of them is worse.’ Transcripts of the Cuban president’s speeches provide a wake-up call about the place of underdeveloped countries. By Fidel Castro. 2000. Ocean. 292 pages. $19.95 paper.  Castro and Cuba: From Revolution to the Present: This book spans more than 100 years, from the U.S. hijacking of the island’s independence in 1898, through the Cuban Revolution of 1959, to today. Weighs in on Cuba’s battle for survival as the hemisphere’s only socialist country. By Angelo Trento. 2000. Interlink. 128 pages. $15 paper. Cuba on My Mind: Journeys to a Severed Nation: Drawing from his personal experiences, de la Campa depicts two Cubas—Havana’s and Miami’s—while considering migration, nationalism, globalization and post-socialism. By Román de la Campa. 2000. Verso. 182 pages. $23 cloth. Cuba: Neither Heaven Nor Hell: A Cuban with extensive knowledge of Central America looks in-depth at the people and their revolution, examining ecology, women, elections and media. By María López Vigil. 1999. EPICA. 226 pages. $15.95 paper.   ACTION ALERTS Bridges to the Cuban People Act of 2001: The bill, introduced June 12 in the U.S. House and Senate, would remove travel restrictions, remove limits on remittances that Cuban Americans may send to their families, allow some U.S. imports of Cuban medical products, enable the U.S. president to waive parts of Helms-Burton (see U.S. Pressure Backfires), and expand U.S.-Cuba trade to include food, medicine, agricultural equipment and items for children. Urge your representative and senators to cosponsor the bill (find their contact information at Thomas). In the Senate, they should call Gregory Watson in Sen. Dodd’s office, 202-224-2823, or John Seggerman in Sen. Chafee’s, 202-224-2921. In the House, they should call Nadine Berg in Rep. Serrano’s office, 202-225-4361 or Allison Miller in Rep. Leach’s, 202-225-6576. Learn more at the Latin America Working Group.   TRAVEL U.S.-Cuba Youth Exchange: July 22–30. The second U.S.-Cuba Youth Exchange, initiated by Cuban organizations such as the University Students Federation and the Young Communists Union, will draw scores of young people from across the United States. The U.S. delegation is being coordinated by the Twin Cities–based Youth Exchange Information Center. The gathering will include political debates, educational forums and cultural activities. Participants will visit Cuban universities, meet with students and tour institutions such as the Latin American Medical School and the International Sports School. Discussion issues will include the student movement, environmental challenges and U.S.-Cuba relations. This project builds on activities against a U.S. blockade of information about Cuba. In 1996, almost 200 people from the United States participated in the first U.S.-Cuba Youth Exchange. The following year, a delegation of nearly 1,000 people from the United States participated in the International Youth Festival. Last year, more than 150 young people from the United States participated in a Latin American and Caribbean Students Organization meeting. Contact 763-443-8777 or youthexchange01@yahoo.com.  U.S.-Cuba Friendshipment: Challenging the U.S. blockade, a caravan delivers humanitarian aid and honors Cuban innovations in alternative energy and transportation. June 16–28: Educational presentations and aid collections across North America. June 29–July 2: Participant orientation in Texas and border crossing. July 4–11: Caravan program in Cuba. July 12: Cross the Mexican border into the United States, with aid from the Cuban people to the U.S. people. IFCO/Pastors for Peace. Cuba: Our Island Neighbor: July 16–24. Center for Global Education. Fiesta del Caribe: July 1–10. Global Exchange. Dispelling Myths of the U.S. Embargo: July 18–30. Witness For Peace.    RESOURCES Center For Cuban Studies: 212-242-0559. CubaWeb Cuban Medical Project: 212-475-3232. MORE LINKS

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JULY 2001

Internal Bleeding

Cuba’s economic policies encourage the best and brightest to wait tables. There’s another way.

BY THAD DUNNING
HAVANA

The last few years have been kind to Orlando. Trained as an engineer, he sells secondhand books to tourists in the Plaza de Armas, a square in this city’s colonial quarter. Among hundreds of thousands of Cubans who’ve left government employment to work where U.S. dollars circulate freely, he can earn far more in one sale than he earned in months of state work.

“One day a German lady bought three fine-art books for $40 apiece,” said Orlando, who declined to give his full name for publication. “That’s as much as I would make in a year.”

The Cuban government legalized bookselling and other forms of self-employment in 1993 in response to the Soviet Union’s disintegration, which wreaked economic havoc on the island. Another response that helped Orlando was a state initiative that brought foreign investors to develop Cuba’s tourism sector. Thanks to this initiative, the country expects 2 million tourists this year, five times more than in 1989. These and other pro-market reforms have enabled the Cuban economy to grow for the last seven years.

But most Cubans still work for pesos in the state sector, where fewer benefits of the recovery have trickled down. They can’t survive on their meager paychecks and government food rations alone. Some Cubans supplement their earnings with foreign remittances—dollars sent from friends and family members abroad. Others pilfer from the government to supply a dollar-driven underground economy. Still others earn greenbacks under the table from the foreign investors.

And, perhaps most damaging for the nation’s future, Cubans such as Orlando are migrating from highly skilled state professions to tourism jobs, where a little hustle and a little English can pay off in dollars. The nation’s renowned “human capital”—the healthy and educated workforce that could be Cuba’s advantage in the global economy—is corroding.

To give locals such as Orlando incentive to use their skills, some Cuban economists are pressing the government to allow Cubans to create businesses in knowledge-based export sectors. The idea is for Cuba to leverage its human capital rather than entrenching itself as a sun-and-beach enclave. This private investment, the economists say, could generate a surplus enabling the government to preserve key socialist achievements such as free education and health care.

A major obstacle to the reform path, ironically, is persistent hostility from the United States. History has proven that U.S. efforts to oust President Fidel Castro and strangle the Cuban economy merely provide Havana with pretexts to maintain the status quo.

Das Kapital

Beginning shortly after the Cuban Revolution’s 1959 triumph, preferential trade and credit arrangements with the socialist bloc enabled the country to elevate living standards dramatically despite an economy that ran primarily on sugar exports. By 1990, however, Soviet aid had dried up, heightening the cost of importing oil and other agricultural resources and exposing Cuba to depressed world prices for sugar. Between 1989 and 1993, Cuba’s gross domestic product plummeted by about 35 percent.

The island’s 11 million inhabitants suffered. Average daily caloric intake dropped from 3,130 in 1988 to 1,863 in 1993, according to the Public Health Ministry. And spending for health care imports fell from more than $227 million in 1989 to less than $56 million in 1993; hospitals lacked vital medicines, equipment and supplies.

The government’s initial response was to stave off pro-market reforms and concentrate resources on tourism, domestic food production and biotechnological exports. But policymakers eventually reached consensus that Cuba needed stronger links to the world economy and that workers needed material incentives. In 1993, Cuba legalized dollar transactions and self-employment and began turning state farms into private cooperatives. The following year, the government opened marketplaces for the agricultural entrepreneurs. To rein in a budget deficit that had reached more than 30 percent of production by 1993, the government began cutting subsidies to state enterprises, hiking prices of state-supplied goods and instituting new taxes.

And, to boost a range of exports, Cuba turned to foreign investors. The government required most foreign companies to enter a joint venture in which a state agency provided land and facilities and the company paid for capital and labor.

With 370 such ventures today, Cuba’s foreign investment totals more than $4 billion. The largest investor is Spain’s Altadis, which spent a reported $500 million for half of Habanos S.A., Cuba’s tobacco and cigar export marketer. Second is a Telecom Italia subsidiary that bought a 29 percent interest in the Cuban telephone company for a reported $400 million. The third largest is Canada’s Sherritt International Corp., which has invested in Cuban nickel, oil, gas and electricity. A leader in tourism is Spain’s Sol Meliá, which runs 19 hotels on the island.

The foreign infusion has had dramatic impacts. Tourism revenue reached $2 billion last year, up from $243 million in 1990, according to the government. “In 2000, we did well, and in 2001 we are growing,” Tourism Minister Ibrahim Ferradaz said at an annual international tourism fair in Havana this May.

Driven by tourism, Cuba’s economy has expanded by an annual average of 4.7 percent in the last five years, compared to 3 percent in Latin America as a whole. The government expects this year’s gross domestic product to reach 85 percent of the 1989 level.

The recovery is palpable. New and refurbished power plants built with outside investment have cut the number of days with partial blackouts from 344 in 1994 to 20 last year, according to the monthly newsletter CubaNews. Cuba has expanded its renowned family doctor program and its AIDS care (see ‘REPRESSION’ SAVED LIVES). And the government has raised salaries.

Drawing attention to Cuba’s achievements, eight disadvantaged U.S. students arrived here in April to begin a six-year program at the Latin American School of Medicine. They became the first U.S. citizens in the program, in which Cuba has trained more than 4,000 medical students from 24 nations in Latin America and Africa, free of charge. “I have no reservations about my education,” Karima Mosi, 22, told an Associated Press reporter after arriving from San Diego. “The medical school in Cuba is among the best in Latin America and the world.”

Zig Zag

Orlando, the Havana bookseller, shows how much and how little life has changed in Cuba. In the early 1960s, he studied in Hungary and traveled around Europe. By the time he returned home, he was advocating a mixed socialist economy for Cuba, prompting his fellow Communist Party members to brand him a social democrat. He was evicted from the party in 1966.

The tables turned in 1993, when Cuba legalized more than 100 varieties of self-employment. The cuenta propistas (people who work on their own account) ranged from plumbers to families that rented out a spare bedroom.

Orlando regained his party membership and launched his book business. When sales were slow, he freelanced as a tour guide. In an economy like what he had envisioned decades earlier, he deposited pesos at the state-run Popular Savings Bank and dollars at a local branch of a Canadian bank.

But the Cuban leadership quickly backtracked on the reforms, instituting onerous self-employment taxes, licensing fees and regulations. Private taxis were banned from stopping at hotels or airports where government cabbies worked. Home restaurants known as paladares weren’t allowed to seat more than 12 customers at a time. Artisans had to document that they purchased their raw materials from the government.

“At first I complained,” Orlando said, “but I learned I would just have to work harder if I wanted to make money.”

The levies and regulations have taught thousands of other Cuban entrepreneurs a different lesson. Instead of becoming more productive, like Orlando, they’re running their businesses clandestinely. The number of registered self-employed workers has declined from a peak of 210,000 in 1996 to about 162,000 today. More entrepreneurs seem to be playing cat-and-mouse games with authorities and engaging in petty corruption such as police bribery and smuggling. Cigar factory workers, for example, supply illegal street vendors who deal in dollars.

Corruption on a larger scale has plagued the government’s ventures with foreign corporations. Officially, a company pays dollars to the government, which then pays pesos to the project’s Cuban workers. With few exceptions, however, the companies flout hiring laws, paying Cuban employees directly and paying them in dollars.

Acknowledging such problems, a May 3 government communiqué announced a new Auditing and Control Ministry to “raise and preserve integrity and discipline in the administration of state funds.”

Cuba’s economic reforms also have widened income inequality. Everyone still receives free health care, schooling and food staples, and pays almost nothing for housing, transportation and utilities. But the food rations cover only about half of what’s necessary for a healthy diet, and many consumer goods—from cooking oil to rum to clocks—aren’t available for pesos. And the salary hikes for state employees leave them with still just a third of what the typical self-employed worker earns.

Economy Minister José Luis Rodríguez acknowledges that the recovery has benefited Cubans unequally. “Important limitations are still faced when it comes to people’s daily lives,” he said in his annual report to the National Assembly this year.

To make ends meet, roughly a third of Cubans can rely on the overseas remittances. The government collects no data on the income, which has reached an estimated $1 billion per year. But many economists speculate that remittances only worsen Cuba’s inequity. Most of the money, they say, comes from the pre-revolutionary elite that fled to the United States four decades ago. These Cuban Americans, overwhelmingly white, tend to support light-skinned families in a country where most people have African ancestry.

Brain Drain

Years into Cuba’s Faustian bargain with the dollar, government leaders remain ambivalent about the small-scale capitalists that work the fringes of the tourism sector. “We believe there’s no reason for the self-employed sector not to exist, if it follows certain regulations,” said Rodríguez in a March television interview. “But we don’t stimulate it because we don’t think it’s the solution to our economic problems.”

Behind the ambivalence are debates about how much to allow locals to accumulate savings and whether to broaden their investment options. Many Communist Party stalwarts say pro-market reforms erode revolutionary values, discouraging personal sacrifices for the collective good. The Workers Central of Cuba, the country’s only trade-union federation, warns that reforms are encouraging “egotism” and “the cult of capitalist fetishes.” The political dimension of this belief, as U.S. scholars Manuel Pastor Jr. and Andrew Zimbalist note (see “Has Cuba Turned a Corner?” September 1997, Connection to the Americas), is fear that the new businesses would pool resources to challenge Cuba’s one-party state. Another political factor is U.S. pressure, which fosters a siege mentality in Cuba and hardens the opposition to reform (see U.S. PRESSURE BACKFIRES).

On the other side are Cuban economists who see no choice but to integrate further into the world economy. The challenge, they say, is to do so in a way that preserves the revolution’s gains. One leading economist, speaking privately, complained that Cuba wouldn’t benefit from its famous educational system if some highly skilled workers didn’t emigrate to Europe and the United States, where they could earn enough to send back remittances. Such cynicism stems from the reality that an increasing number of Cuban professionals, ranging from lawyers to laboratory technicians, are throwing away their training and experience so they can earn dollars by waiting tables or even selling sex.

This phenomenon, the economists say, owes to the government’s monopoly of knowledge-based sectors and its insistence on paying workers in pesos. In their chapter of Globalization and Third World Socialism (Palgrave, 2001), Cuban economist Pedro Monreal and Danish researcher Claes Brundenius argue that the monopoly thwarts the “mobilization and effective utilization of existing resources in the country.” The skills most vital for sustainable and equitable growth, in other words, are the ones the system rewards the least.

To a degree, the Cuban leadership has recognized the incentive problem. In 1999, the government raised salaries by 30 percent in professions such as health, education, policing and the judiciary. The state also has begun to experiment with paying dollars as bonuses to employees in key export sectors. But even after these changes, highly skilled workers such as physicians earn a monthly paycheck of, typically, just 390 pesos ($19), a fraction of what low-skilled self-employed workers can earn.

For a solution, the reform-minded economists point to the success of private agriculture. By 1996, families and private cooperatives were harvesting almost 17 percent of Cuba’s cultivated land. After they supplied government production quotas, they were allowed to sell to consumers in the new markets. The private farms have boosted the nation’s agricultural productivity and outpaced state farms in reinvesting their surplus. The market produce is expensive and the entrepreneurial farmers are among the wealthiest Cubans, but food scarcity has diminished since the early 1990s and fewer Cubans are hungry.

The government could apply this experience to knowledge-intensive export sectors, allowing Cubans to create companies for contracting with state agencies and foreign investors. The companies could provide a range of services, from information management to editing, from laboratory specialties to legal representation. Allowing medium-sized businesses would exacerbate inequity, but also enable Cuba to add value to the global production chain and, many economists say, generate a surplus that the state could redistribute to restore income parity.

If Cuba doesn’t allow such investment by locals, it risks an eventual takeover by Cuban Americans, whose wealth and management experience would be unrivaled on the island. Cuban Americans, though constituting just 3.4 percent of U.S. Latinos, own 138 of the 500 biggest Latino-owned U.S. companies, according to Hispanic Business magazine. From luxurious perches in Miami and New Jersey, they hatch schemes to swoop down on Cuba and capitalize on the revolution’s spoils. Their anticipation was the subject of a May 15 USA Today report, “Hungry Eyes Look Toward Cuba as Sun Sets on Castro.”

Locally grown investors, in contrast, would owe their health and education to socialism and would be more interested in preserving it. Until another Soviet Union comes along, cultivating them may be the only way to transform an economy based on tourism, remittances and sugar into a sustainable and egalitarian model.

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