Cuba still searching for economic model that works

Posted on Thursday, 08.02.12

Cuba still searching for economic model that works

At annual conference on Cuba's economy, experts discuss current state of
reforms, future prospects and look for similarities in other countries.
One possibility: Vietnam.
By Juan O. Tamayo And Mimi Whitefield
jtamayo@elnuevoherald.com

Cuba faces a difficult economic situation despite Raúl Castro's reforms,
and a military-led economic transition appears more likely than a
Vietnamese or Chinese model of change, Cuba analysts said Thursday.

"The reforms haven't provided results. There are too many limitations …
there's an enormous stagnation in society," said dissident Havana
economist Oscar Espinosa Chepe in a speech recorded for the opening
session of the annual meeting of the Association for the Study of the
Cuban Economy.

Some 100 economists, social scientists, and other Cuba experts gathered
at The Hilton Miami Downtown hotel to present their work on the policy
challenges facing Cuba. This year's topic: Where is Cuba going?

Cuba's situation is "very delicate and difficult," Chepe said. Among the
problems he cited in Cuba's plan to move massive numbers of state
employees into self-employment is the lack of materials they need to run
their businesses and the competition this creates with the rest of the
population trying to make purchases for daily living.

Joaquin Pujol, a retired International Monetary Fund economist, said
that very few of the people who have joined the ranks of the
self-employed were really working for the government before. Most, he
said, were unemployed, already working for themselves under the table,
were retired or are students.

Vegard Bye, a Cuba expert at the Norwegian Institute of International
Affairs, said Vietnam more than China is a model for the Castro
government as it pushes toward a more market-oriented economy, although
Cuba is unique in many ways.

"Cuba is different from everybody," he said, adding that it will be
difficult for island leaders to copy anyone else's economic model during
a transition.

Cuba, for example, hasn't done as well as China or Vietnam in recruiting
new generations of leaders and managers, Bye said, and as it reforms the
economy, it is less likely to be able to maintain political controls as
easily as Vietnam has done.

Bye noted that the thrust of Castro's recent visit to China, Vietnam and
Russia seems to be an effort to figure out how a market economy can be
implemented and institutionalized without losing political control.

He said that the Cuban military and former military officers who have
had vast experience in managing a large majority of the island's
state-owned enterprises are likely to have a strong voice in the
island's economic future.

Cuba, Bye said, essentially faces two scenarios: a Vietnam-like shift
toward a more market-oriented economy with space for small- and
medium-sized private businesses but with the government clearly in
political control or the perhaps more likely "authoritarian militarized
transition" in which military technocrats take control through cronyism
and corruption.

"I hope for No. 1, but the tendency is very much toward the second one,"
Bye noted.

He pointed out that in the economic transitions in Russia and Eastern
Europe, three-quarters of the current economic leaders were previous
party leaders during the Communist regime. In Russia particularly, he
said, the old party chiefs became the owners of formerly public
property, while in the other countries the trend has been for them to
form the new managerial class.

In Cuba there is a "strong tradition for small-scale capitalism," said
Pujol. But he said, "There is no way the Cuban economy can recover
without strong foreign investment."

Several analysts said they thought Cuban membership in international
financial institutions could aid in its transition.

"Cuba needs foreign direct investment" and membership in international
financial institutions "is vital for Cuba eventually," said Richard
Feinberg, a professor of international political economy at the
University of California, San Diego. Feinberg has laid out a strategy
for Cuba's reconnection with international financial institutions such
as the International Monetary Fund and the World Bank.

"Membership [in the IMF] does not require you be a liberal democracy,"
he said. "A lot of strange governments and rogue governments are in the
IMF and the World Bank."

But one big problem is that a country must express a desire to join the
IMF, and at this point Cuba, which left the fund in 1964, hasn't shown
interest in applying, said Lorenzo Perez, who retired from the IMF after
a 30-year career. Cuba would also need a sponsor. Countries such as
Brazil and China that are friendly with Cuba might be willing to fulfill
the role, he said, although at this point they might have to bring Cuba
"kicking and screaming into the IMF."

While IMF membership wouldn't immediately promote democracy in Cuba,
Perez said it could promote political reform in the longer term by
forcing Cuba to adopt a more rational economy policy and by encouraging
policy transparency and government accountability.

http://www.miamiherald.com/2012/08/02/v-fullstory/2928266/cuba-still-searching-for-economic.html