Cubans sense first moves towards economic change

Cubans sense first moves towards economic change
By Marc Frank in Havana
Published: February 15 2007 02:00 | Last updated: February 15 2007 02:00

Forty-eight years under Fidel Castro's Communist government have left
Cuba with an economy unlike almost any other in the world.

Other than a few restaurants run out of family homes, the retail sector
is state-owned. If you want your shoes shined or need services for a
birthday party, you must go to a state-run company. The musicians who
have made Cuban music famous around the world are paid by the government.

Overall, more than 90 per cent of the Cuban economy is controlled by the
state. A survey by Forbes magazine found it to be one of the least free
in the world, ranking close to North Korea.

But the declining health of Mr Castro has led many both inside and
outside the country to believe that Cuba's command economy could be on
the verge of change.

Since his brother Rául temporarily took over the government on July 31,
foreign and local experts have speculated that the younger Castro, aged
75, is more pragmatic and could move Cuba towards a more open Chinese
economic model.

He has expressed frustration with bureaucracy, demanded answers to
declining food output and urged the press to be more critical. In
October he ordered a commission of academics to carry out a more
sweeping study of the role of property.

The last such study to be undertaken by a Communist leader, says
commission member Luis Marcelo Yera, was by Mikhail Gorbachev in 1988,
but never got off the ground before the fall of the Berlin Wall a year
later.

Cuba's economy suffers from chronic disorganisation and low
productivity; high state prices and low state wages; bad accounting; lax
discipline; and graft. Some foreign experts predict Cuba's economic
model will soon follow China's example.

"These kinds of economic debates are the first step in a process in
which you will start to see some adjustments and reforms," says Cuba
expert Frank Mora of the National War College in Washington. "The
government will need to meet the frustrations [and] expectations [of the
people] in the economic realm."

Members of the commission are already being lobbied by their peers and
others, some pushing for market reforms and others warning that any such
change, with the US next door, could prove the revolution's end.

Local China expert and economics professor Evelio Vilarino says he
believes China and Vietnam have much to offer Cuba in terms of the
retail-level functioning of the economy. "It's the only way.
Inevitable," he says.

Frank Mora agrees. "[The commission's] model is the China-Vietnam model,
if by that you mean gradual deepening of reforms while maintaining a
tight grip on politics."

But the head of the Cuban parliament's economic commission, Osvaldo
Martinez, says casting the debate in the context of either a new Cuban
leadership or Chinese-style reforms is superficial. "We are not talking
about the Chinese model, but a Cuban model, the best way forward given
Cuba's possibilities, realities, resources and problems."

Cuba's strengthening economy, boosted by trade with Venezuela and China,
also means the country is in a stronger position to make improvements in
the way the economy functions.

The island's foreign exchange earnings have nearly doubled since an
integration agreement with Venezuela in 2004, due mainly to the export
of medical and other services to Venezuela and record-high nickel prices.

Economic growth has been three times what it was at the start of the
decade, when Cuba began to recover from the post-Soviet slump.

Mr Marceloinsists neither perestroika nor market communism are on the
agenda of the commission, though forming co-operatives, increased
grass-roots participation and deregulation are.

He says that with foreign revenues increasing, the goal is to make
better use of them by making the economy more efficient.

Phil Peters, of the US-based Lexington Institute, said the debate's goal
was to put socialism on a solid footing so it can survive when the next
generation takes over. "Castro, before he became ill, began the process
by stating revolutions have the capacity to destroy themselves," he said.

"Fidel blamed greed and mismanagement and prescribed greater control and
discipline. Rául's diagnosis seems to be that parts of the system itself
do not work. We will see what he prescribes."

Copyright The Financial Times Limited 2007

http://www.ft.com/cms/s/05351bbc-bc9a-11db-9cbc-0000779e2340.html