CUBA-ECONOMY: Gov’t Confirms Continuity of Reform Process

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Oct 6 1997 (IPS) - One of the biggest question marks surrounding this week’s fifth congress of Cuba’s Communist Party was cleared up Monday with the official confirmation of the continuity of the economic reform process.

The continuation of the State as a guiding force of the economy, structural changes, an expanded but limited space for private initiative and a greater opening to foreign capital can be expected in the next few years.

Those conclusions emerged from a press conference given by Cuba’s Minister of Economy and Planning, Jose Luis Rodriguez, on the performance of the Cuban economy since the start – in 1990 -of the worst economic crisis faced by the government of Fidel Castro.

“The process of economic reforms has not concluded,” said the minister, who added that the party’s fifth congress (to be held Oct. 8-10) would pronounce itself on the follow-up to the reforms implemented so far and the economic outlook for the next five years.

“A more or less gradual expansion” of activities in which self-employment is allowed will take place, but neither that sector nor small and medium-sized private companies are seen as one of the country’s “development priorities,” he said.

Through self-employment, the Cuban government aims to fight parasitism and illicit enrichment and bolster the concept of income generated by labour, he added.

In 1993, the range of activities in which self-employment was permitted was expanded in order to meet people’s demands for a range of scarce services.

Rodriguez denied that any “setback” had occurred in that sector, which also constitutes an alternative source of jobs in the midst of a restructuring of the labour market which experts say could affect some 700,000 of the Caribbean island nation’s roughly 11 million people.

There is no evidence “to prove that we are restricting” self- employment, said Rodriguez, alluding to allegations that the tax system seeks to discourage private initiative.

According to government figures, the number of self-employed workers climbed from 46,000 in 1993 to 170,000 late last year. But the number had expanded to 208,000 before the government raised taxes on the sector.

Cubans can exercise a broad range of vocations on their own, although university graduates cannot work in areas related to their professions outside of state employment.

The famous ‘paladars’, home-based cafes and restaurants which took their name from a Brazilian TV series popular here early this decade, are allowed as small private family businesses.

The government also authorised home-owners to rent rooms, houses and apartments to foreigners this year, and implemented taxation of that activity.

Local observers say the increasing permissiveness of private initiative is essentially government recognition and regulation of activities that already existed in the informal economy, but without contributing funds to the State.

The reforms, which mainly affect the urban sector, were led by wide changes to the agricultural property system which Rodriguez said should give rise to a gradual transformation of the Cuban economy, whose results may not be felt for years.

While in 1992 the Cuban State controlled 75 percent of all land, this year it controls 22 to 25 percent, the minister underlined.

The restructuring of property schemes in the Cuban countryside has included the free usufruct by agricultural cooperatives and some 60,000 families of private producers of the majority of state- owned tracts.

Cuba’s economic reform process has also included measures for the cleaning up of domestic finances, the opening of free farmers, craft and industrial markets, and the gradual introduction of changes in the banking system, business sector and job policy.

Cuba began to open up to foreign capital in 1990, and gave the green light to a restructuring of its foreign trade, focusing mainly on decentralisation.

One of the most significant results of the reform process was the reduction of the budget deficit from 33 percent of the Gross Domestic Product in 1993 to 2.4 percent last year, said Rodriguez.

The number of companies authorised to do business outside of Cuba has soared from 50 to 281, while foreign trade with countries in the Americas rose from 6 or 7 percent of Cuba’s total turnover in the late 1980s to 40 percent today.

Some 300 accords for foreign investment have also been signed, and a large part of the two billion dollars committed has already been disbursed, the minister added.

The government has made a “positive evaluation” of the opening of the Cuban economy, said Rodriguez, who stressed that the process was ongoing and permanent, and that measures would be taken to make the country even more attractive for foreign capital.

Rodriguez acknowledged that the U.S. Helms-Burton law, designed to curb that process, had increased Cuba’s perceived risk level for potential investors.

The past year has been “complex” for the Cuban economy, he added, citing the effects of a hurricane that swept the island last year, the higher cost of credit and the deteriorating terms of exchange. But the minister concluded on an optimistic note that the recovery of the Cuban economy would continue.