Cuba determined to perfect statist economy

Cuba determined to perfect statist economy

By Marc Frank in Havana

Published: June 23 2008 19:04 | Last updated: June 23 2008 19:04

At the recent metal workers' union congress in Havana little seemed to
have changed since Fidel Castro, former Cuban president, became ill
almost two years ago, temporarily handing power to his brother Raúl
before resigning and leaving the country's leadership to him last February.

There was no jockeying among cadres for a piece of privatised industry
pie. There was no talk of competition, markets, strikes or other action
against management, or turning state-owned businesses into
co-operatives. Speeches calling on members to work harder for Cuba,
Fidel, Raúl and revolution resounded through the hall as they have for
decades.

"The key is in perfeccionamiento empresarial" – perfecting the state
company system – read the banner headline in Workers, the trade union
federation's weekly newspaper.

The union meeting was the latest evidence that a debate fostered by Raúl
Castro has for now been settled in favour of those who want to improve
one of the world's most statist economies – not dismantle it – using a
business model developed when the president was defence minister to
improve the performance of armed forces suppliers.

Perfeccionamiento empresarial is based on adopting modern management and
accounting practices, often gleaned from the study of private
corporations, for state-run companies. It grants management more
authority over day-to-day decisions and imposes more discipline on
workers while also increasing their participation in decisions and
incentives for labour.

"Perfeccionamiento empresarial has no exact analogy in capitalist
economies and is not borrowed from other socialist countries' models of
reform," Phil Peters, an expert on Cuba at the Lexington Institute in
Virginia, wrote in a study of the military's economic model.

Raúl Castro signed a 200-page law last August ordering all 3,000
state-run companies to adopt the model. He also promoted General Julio
Casas Regueiro, who was in charge of the military's businesses, to
defence minister and top spots in the Communist party and government
when he officially became president on February 24.

The policy does not contradict Raúl Castro's recent moves to lift
restrictions on the use of mobile phones, computers and other goods and
services, nor partnerships with foreign companies and more private
initiatives. The bulk of the economy and its core industries and
finances will remain in state hands.

Raúl Castro is not waiting for all companies to adopt his model – a
lengthy process of sorting out bad books, Soviet-style management and
paternalism.

Cuba's economy is on a better footing than in the 1990s. Foreign
exchange earnings are relatively strong due to the export of medical and
other professional services – mainly to Venezuela – as well as tourism,
high nickel prices and soft Chinese loans.

But the state has had problems investing these revenues through its many
companies, many of which suffer from poor accounting and management.

"Perfeccionamiento does not aim to turn Cuba into a China or Taiwan in
terms of level of development and integration into globalisation. In the
end, the objective is political," said Frank Mora, Cuba expert at the
War College in Washington.

"Raúl Castro needs to defuse the social, economic and political pressure
of rising expectations and increasing food costs by implementing and
broadening a set of very focused economic reforms."

http://www.ft.com/cms/s/0/bd027fb8-414c-11dd-9661-0000779fd2ac.html