Havana eyes easing of retail sector controls

Havana eyes easing of retail sector controls
By Marc Frank in Havana
Published: September 1 2009 20:43

A woman arranges the loaves of bread displayed in a bakery
A bakery in the Cuban capital: policymakers believe up to 20 per cent of
supplies such as wheat and yeast are stolen

The Cuban government is considering easing its stranglehold on the
retail sector in an effort to legalise the underground economy and
reduce massive theft. It is President Raul Castro's second big economic
reform after last year's decentralisation of agriculture and the leasing
of idle state land.

A recent communiqué from the Communist party's central committee
suggested change was coming to one of the world's two remaining
Soviet-style command economies, the other being North Korea.

"Raul stated the key premises for economic policy to the end of the year
and next were decentralisation of the assignment of resources to
services and production that generate the most earnings for the
country . . . and the search for new formulas that free up productive
potentials," it said.

Cuba is battling a liquidity crisis, shrinking production and increased
pressure from a frustrated public and creditors. The government cut
imports 30 per cent and the state budget 10 per cent this year, and
reduced its growth forecast from 6 per cent to 1.7 per cent.
Policymakers believe that up to 20 per cent of supplies flowing to
thousands of retail businesses and cafeterias are stolen – from bags of
rice and beans, wheat and yeast to merchandise and tools, parts and
cement. Much of the remainder is poorly used, Cuban economists said.

"The only way to stop theft is to give workers an incentive not to steal
and to work, and that means they have to have a real interest through a
co-operative form of property or small business," said one of the
economists, who asked to remain anonymous.

Phil Peters, Cuba analyst at the Virginia-based Lexington Institute,
said Cuba "long ago acknowledged state management failures in retail and
service businesses, where workers are paid little, cheat consumers and
resort to black market supplies to keep cafeterias and repair shops
operating. The government would be smart to abandon these businesses."

At a recent closed door meeting of accountants in Havana, a presentation
by the ministry of planning and economy appeared to advocate
co-operatives, if not small private businesses. The ministry has become
the centre of efforts to improve the economy since earlier this year
Raul Castro replaced the entire economic cabinet, inherited from his
ailing brother Fidel who retired in February 2008.

"State-run socialist companies must be efficient and . . . what they
need for their optimal performance must be guaranteed," the report said.
"The remainder of the economy must adapt to a form of property better
suited to the resources available."

The PowerPoint presentation, obtained by the Financial Times, blamed the
centralised economic model's "low efficiency" and "excessive state
protection of the population's consumption" in part for the country's
economic problems.

Some Cuban economists have long argued that the state should focus on
large companies and wholesale trade and get out of the retail business,
which it has monopolised since 1968.

Now the state-run media have taken up the refrain in earnest. Juventud
Rebelde, the official newspaper of the Union of Young Communists, and
Ariel Terrero, state-run television's popular economic commentator, are
leading the charge.

"Why should there be co-operatives only in agriculture? It is an
organisational principle valid for other sectors," Omar Everleny, an
economist, told Juventud Rebelde.

FT.com / In depth - Havana eyes easing of retail sector controls (1
September 2009)
http://www.ft.com/cms/s/0/2fdfb5c8-972d-11de-83c5-00144feabdc0,dwp_uuid=3d806e42-a627-11db-937f-0000779e2340.html