Thursday, February 8, 2007

Debate on Means of Economic Reform

Cuban economists are busy studying ways to rev up one of the world's last communist-run economies, a step encouraged by acting President Raul Castro since he took over from his ailing brother six months ago.

The debate is focused on how to make Cuba's inefficient command economy more productive and take advantage of newfound financial buoyancy in foreign exchange earnings.

"There is consensus on our goals: more popular participation, the country's development and a better material and spiritual life," China expert and economics professor Evelio Vilarino told Reuters this week at a globalization conference. "Where there is no consensus is on how best to achieve that."

In a series of end-of-the-year speeches, Raul Castro expressed frustration with bureaucracy, demanded answers to declining food output, urged Cuba's press to be more critical and authorized a study of socialist property relations.

Cuban economist and agriculture expert Amando Nova said agriculture reforms of the early 1990s -- when Cuba divided state farms into worker cooperatives and legalized private produce markets -- stopped halfway.

"We need farmers to participate more in production and price decisions, to be able to purchase inputs and in general enjoy more autonomy from the state," said Nova, who is involved in a report on agriculture commissioned by the government.

Similar reports are being prepared on other sectors of the economy where the state dictates most output and prices in exchange for inputs and credits.

Many experts view Raul Castro, 75, as more pragmatic than his brother and believe he could steer Cuba's 90 percent state-run economy toward one that resembles the more open Chinese model.


Luis Marcelo Yera of the National Economic Research Institute, a member of the panel looking into property relations, said Cuba is taking a path closer to one of his favorite Japanese sayings.

"Adapt, don't adopt -- we can adapt the best experiences but not adopt another's model," he said.

Marcelo said the panel was "looking at better defining property under socialism ... because experience has demonstrated it has many problems functioning."

Cuba's foreign exchange earnings have nearly doubled over the last two years, thanks mainly to the export of medical and other services to Venezuela and record-high nickel prices.

Economic growth has sped up to three times its pace at the start of the decade when Cuba was pulling out of the economic collapse that followed the collapse of its former benefactor, the Soviet Union, in 1991.

Nevertheless, the state has run into problems investing the revenues through its more than 3,000 state-run companies. The economy also suffers from chronic disorganization, bad accounting, poor quality, lax discipline and graft.

The head of parliament's economic commission, Osvaldo Martinez, told Reuters the debate over economic policy probably would be taking place even if President Fidel Castro were not too ill to govern.

"We are not talking about the Chinese model, but a Cuban model, the best way forward given Cuba's possibilities, realities, resources and problems," Martinez said.

Some Cuban economists believe that only by adopting China's model of a capitalist market under communist political control, or at a minimum by decentralizing and developing private cooperatives and markets in nonstrategic sectors, can internal production be improved.

Others say any opening would provide the United States with a chance to topple the socialist system.

Agriculture specialist Nova said taking steps to loosen the economy would not threaten his sector.

"Decentralization and more autonomy would result in more production and food security, consolidating our economy and making us less vulnerable," he said.

By Marc Frank

February 8th 2007

(c) Reuters 2007.

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