Factbox: Less state, more private role in Cuban party plans

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  • Posted on April 16, 2011


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    HAVANA | Wed Apr 13, 2011 3:52pm EDT

    HAVANA (Reuters) – Cuba’s ruling Communist Party plans to chart a new economic and social course for the Caribbean island at a congress which begins this weekend.

    The only item formally on the agenda is “updating” the economic model of what is one of the last one-party communist states of its kind left in the world.

    The Sixth Cuban Communist Party Congress is considered the most important since the current Soviet-style system was adopted at the first party congress in 1975.

    The following are major economic policy themes up for discussion, according to draft proposals circulated:

    ECONOMIC RELATIONS, NEW FORMULAS

    The proposals to improve Cuba’s economic situation aim at paying back creditors and funding development projects. They back efforts to substitute imports and increase exports.

    “Work with the maximum rigor to increase the country’s credibility in international economic relations through the strict fulfillment of contractual obligations,” one states.

    But then it goes on to call for restructuring of the foreign debt. There is also little mention of easing regulations to attract more foreign investment.

    One proposal however does call for the development of “special economic zones to promote development”, and others for the promotion of tourism activities beyond hotels, such as golf courses, amusement parks and marinas.

    According to the proposals, state companies will continue to dominate the economy.

    But, recognizing the existence of new private initiatives in the previously heavily centralized Cuban economy, the proposals now talk of encouraging “mixed capital companies, cooperatives, farmers with the right to use idle land, rented property landlords, self-employed workers and other forms that contribute to raise the efficiency of social labor”.

    REDUCED STATE ROLE

    The state should get out of administering the economy in favor of regulating it through taxes and other mechanisms.

    “Control of state business activity will be based principally on economic-financial mechanisms instead of administrative mechanisms,” one proposal states.

    Yet, according to an introduction to the proposals, planning will still predominate. “In the updating of the economic model, planning will be paramount, not the market,” it says. Although given there are virtually no completely free markets in Cuba, this implies they will play a larger role.

    State-run businesses are to be granted more autonomy to make day-to-day decisions, handle personnel, set prices, reinvest their profits and trade abroad and at home, though still under guidelines imposed by the government.

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    Retail sales up modestly; growth forecasts paredWed, Apr 13 2011Obama sets deficit target, rips Republican planWed, Apr 13 2011Apple iPhone-maker Foxconn ponders big Brazil moveTue, Apr 12 2011Special Report: The U.S. and China start an M&A Cold WarTue, Apr 12 2011Obama wants deficit legislation this yearMon, Apr 11 2011 Analysis & Opinion Obama vs Ryan: how the deficit plans compare Muni sweeps: Christies battles are not credit positive Related Topics World » Politics » Cuba »

    HAVANA | Wed Apr 13, 2011 3:52pm EDT

    Bankrupt businesses would be considered as just that, and “liquidated” instead of endlessly subsidized as before.

    DECENTRALIZATION

    Economic decisions should be decentralized where possible to provinces and municipalities and revenue flows shifted to strengthen local governments, the proposals recommend.

    Localities are called on to become self-sufficient in food, promote small scale manufacture and processing, and participate more directly in investment decisions. State businesses would pay a new local tax to area governments where they are located, as would the self-employed and small businesses.

    PRODUCTIVITY, LABOR, WELFARE

    The proposals call for the eventual lay off of 20 percent of the state labor force of some 5 million workers, and drastic cuts in unemployment benefits. These measures were first announced in September and began to be implemented in October.

    The goal appears to be the creation of a labor market and freeing up funds to pay remaining workers more in hopes of improving productivity. Reorganized free healthcare and education systems would remain, along with social security, low cost sports and culture, according to the proposals.

    But the “libreta” food ration, a trademark of the paternalistic Cuban socialist system, would be phased out, prices of subsidized utilities increased and other state subsidies and gratuities gradually ended and replaced with targeted welfare.

    PRIVATE INITIATIVE

    The state plans to cede large portions of the farming and retail sectors to private entrepreneurs, cooperatives and leasing arrangements. The “non-state” sector would eventually account for close to 35 percent of the labor force, compared with the current 15 percent.

    The proposals repeatedly refer to supporting small private businesses and farms, cooperatives and other “non-state activities”, while making clear profit-taking will be capped.

    “In the new forms of non-state economic activity the concentration of property by businesses and individuals will not be permitted,” the proposals state.

    DOMESTIC TRADE

    One proposal calls for a “review of current prohibitions that limit internal trade,” referring among other matters to a ban on buying and selling cars and homes. Looser restrictions on such sales would be warmly welcomed by ordinary Cubans.

    (Reporting by Marc Frank; Editing by Pascal Fletcher)

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    Reuters/AC