Recipe for revival

Cuba opts for tough policy measures, including lay-offs, to keep its economy afloat.

THE Cuban government has finally decided to bite the bullet in its efforts to keep the economy working and the socialist model afloat. In the middle of September, the National Secretariat of Cuban Trade Unions (CTC) announced that 500,000 state employees would gradually be laid off in the next six months. The CTC said that the move was necessary as inflated payrolls in state enterprises were burdening the economy and ending up being counterproductive. The decision was essential, the CTC statement said, to increase production and the quality of services.

The news was not a bolt from the blue. At the opening of the biannual session of Cuba's Parliament in August, President Raul Castro outlined plans to streamline the economy, which was reeling under the impact of the global recession and the tightened American blockade. Raul Castro then said that the government envisaged the phased retrenchment of 1.3 million state workers. Around 90 per cent of the Cuban workforce is employed by the state.

The President had pointed out that the bloated state apparatus employed a quarter of the economically active population. We have to wipe out forever the notion that Cuba is the only country in the world where you can live without working, Raul Castro said in his speech. The CTC statement said that 10 per cent of the workforce would be laid off between now and the end of March 2011 as there were more than a million excess jobs in the state sector. The changes in the employment pattern will be introduced in a gradual and progressive way over the next four years. Many of the workers will be absorbed in the police and tourism sectors. The government plans to increase the number of jobs in the private sector and will encourage more Cubans to be self-employed. Workers will also be given incentives to form cooperatives that will be run without government administrators. They will be allowed to lease state land and infrastructure.

The CTC statement, however, warned that the magnitude and impact of the current lay-offs would affect all sectors of the economy. Those who have lost their jobs will be encouraged to join the small private sector. Renting, usufructo (working on land leased to farmers), cooperatives and self-employment are where hundreds of thousands of workers will be moved in the coming years, the CTC statement said. The CTC said that the aim was to revitalise the socialist principles of distribution, of paying each according to the quantity and quality of their labour. The President had emphasised that the reforms the government was undertaking was not in any way connected to market reforms based on capitalist recipes. Foreign investments and joint ventures remain confined to the hydrocarbon and tourism sectors.

Raul Castro stated that the radical overhaul was necessary to overcome the paternalistic emphasis that discouraged the necessity to work for a living and with it reducing unproductive spending which is rooted in the egalitarian pay, independent of years of employment, in a salary guaranteed over long periods for people who don't work. Many state employees were moonlighting during official work hours in small unlicensed business enterprises. These enterprises, however, may soon be legalised.

The new measures, Raul Castro said, were only meant to update the socialist system. All Cuban workers are given free meals at their workplaces and even those who lose their jobs will anyway continue to avail themselves of the free high-quality health care and education facilities. An effective rationing system ensures that all Cubans get food at subsidised rates, but there are signs that the government may gradually start reducing the subsidies.

Biggest overhaul

All the same, the reforms announced on September 13 are being viewed as one of the biggest overhauls of the system since the 1959 revolution. The revolution had guaranteed full employment. The official unemployment rate last year was only 1.7 per cent. These figures are now bound to rise.

The government was running out of options as the price of Cuba's main export, nickel, had crashed in the international market by two-thirds. Tourism, another key sector of the economy, was also adversely affected by the global recession. A series of deadly hurricanes, combined with drought in the eastern part of the country, had earlier devastated agricultural production. Today Cuba imports around 80 per cent of its food.

Reforms have been under way in Cuba for some time. The collapse of the Soviet Union and the socialist Eastern Bloc, the country's main trading partners, had forced the leadership to innovate. The 35 per cent drop in the country's gross domestic product (GDP) that resulted after the break-up of the Soviet Union had made the government open up the tourism sector in the early 1990s. Cuba, despite the odds, survived the special period that followed. The economy had actually started growing in the middle of this decade.

But the past two years have been particularly difficult. The United Nations Economic Commission for Latin America forecast last year that the country will face a situation as adverse as the special period it experienced in the 90s. In the tourism sector, workers were not given their full pay during the slack period and instead encouraged to learn other skills. The official daily Granma reported that in the first quarter of the year, productivity had increased by 4.3 per cent even as the median salary went down by 1 per cent.

The President is giving particular importance to agricultural reforms. He has said that producing food is a national security issue as billions of dollars in scarce hard currency is being drained from the country's coffers by food imports. It is not a matter of shouting homeland or death', down with imperialism', the blockade is hurting us', while the land is lying there, waiting for our sweat. There is no other remedy for us than to make our land produce, he said in a speech last year commemorating the 50th anniversary of the revolution.

Since 2008, Raul Castro has taken steps to expand the economy. He has announced more concessions to foreign companies to attract investments. Computers and cellphones are now freely available to Cubans who can afford them. There already is limited privatisation of land. Some of Raul Castro's close advisers seem enamoured of the Chinese and Vietnamese economic models. Raul Castro himself had expressed his admiration for China's dramatic economic growth, after a visit to the country in 2005.

Fidel Castro

On the diplomatic front, it is Fidel Castro who has been generating much of the news. He has been actively involved in writing and speaking in the past couple of months. In early September, he invited Jeffrey Goldberg of The Atlantic magazine to interview him. Goldberg, a neoconservative ideologue who once served in the Israeli army, told the American media after his return that Fidel Castro had told him that the Cuban model does not work for us anymore and therefore there was no question of exporting it to other countries. According to Goldberg, Fidel Castro also criticised the Iranian President, Mahmoud Ahmadinejad, for his hard-line stance on Israel. In his last article in The Atlantic, Goldberg advocated war against Iran over the nuclear issue.

Fidel Castro was quick to clarify that he was misunderstood on the socialism issue. He said that he had told the visiting journalist that the capitalist model had failed everywhere and was not a model for any country to emulate. However, he has been conspicuously silent about his statement on the Iranian President. Fidel Castro has said that he will react fully after Goldberg's article and interview appeared in print. Both Fidel Castro and Cuba have taken a principled stand on Israel on issues ranging from Palestine to Iran. Fidel Castro, in many of his recent reflections, has strongly criticised the West's efforts at regime change in Iran and supported Iran's right to develop a peaceful nuclear programme.

Cuba broke diplomatic relations with Israel after the 1973 Yom Kippur war. In fact, Cuba sent a military brigade to help Syria in that war. Israel, on its part, is the only country that has consistently supported the American blockade on Cuba.

The Cuban government is also going the extra mile to mend diplomatic fences with the European Union (E.U.). Havana has allowed 52 dissidents serving in Cuban jails to leave the country for Europe after Spain, the E.U. and the Vatican interceded on their behalf. Cuba expects the E.U. at least to ease its economic sanctions as a goodwill gesture.

U.S. attitude

The Cuban government had expected some changes in the United States' attitude after Barack Obama became President. However, the new American President has only toughened some of the blockade restrictions.

Cuban Foreign Minister Bruno Rodriguez said that under the Obama administration, the U.S. authorities were levying bigger fines, applying sanctions more firmly and investigating those doing business with Cuba even more vigorously. Rodriguez said that the illegal blockade of his country by the U.S., which had started in the early 1960s, had cost the country $751 billion so far. It is, without any doubt, the primary obstacle to the economic development of our country, he said. President Obama has said that the U.S. embargo will be lifted only after Cuba improved its human rights record and released all political prisoners. Cuba today has only a handful of political prisoners.

The U.S. continues to incarcerate the Cuban Five the five patriotic Cubans who helped prevent terrorist attacks against their country from U.S. soil. They have been in U.S. prisons for the past 12 years. A Florida court had, on the basis of dubious evidence, convicted them of spying on the U.S. and of conspiring to commit terrorist acts. In Cuba and in Latin America, the Cuban Five are considered political prisoners. The Cuban government has given the utmost priority to their release. Many prominent U.S. personalities, among them eight Nobel laureates, have signed a petition asking Obama to issue a pardon.

The Obama administration is also not using its influence to get the case of the Cuban Five heard by the U.S. Supreme Court. Many U.S. legal experts have opined that the case against the Five is not a tenable one. The U.S. has exchanged political prisoners and convicted spies on a regular basis with countries such as Israel and Russia. Cuba too is ready for an exchange of prisoners. It currently holds a U.S. contractor, Alan Gross, who was caught distributing laptops to Cuban dissidents in December last year. Raul Castro offered a prisoner exchange in April 2009. Raul Castro has expressed the hope that the five Cubans will return home before the end of the year.