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Cuba’s New Economy

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Posted on Apr 14, 2011
© Reese Erlich 2011

Ernestina Ford’s mother was a domestic servant before 1959. Today Ernestina is a college professor and her daughter Yoama is a translator.

By Reese Erlich

Havana has a familiar feel by now. It’s my 12th visit since 1968. By 11 a.m. the temperature hits 95 degrees. I sweat like Sydney Greenstreet in “The Maltese Falcon.” Some Cubans cheerfully walk with their children. Although others fill the street corners with nothing to do, I see significant changes since my last reporting trip, in 2008.

A hardware store and a furniture store have popped up near the corner of 17th Street and M. They are no big deal by U.S. standards, but I remember when a friend had to spend months finding black market cement, iron and paint to remodel his house. Now all these items are for sale in stores, even if they cost a lot by Cuban standards.

Privately owned snack bars, restaurants and B&Bs have cropped up all around town. Starting Jan. 1, a change in government rules encouraged the creation of small businesses, in part by lowering the cost of business licenses.

A privately owned snack bar in Havana. © Reese Erlich 2011


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Last year President Raul Castro announced the biggest economic reforms since the 1959 revolution. The retirement age was raised by five years (it’s now 65 for men and 60 for women). Cuba planned to lay off 500,000 state workers by March 2011 in an effort to reduce government spending. The expanding private sector was supposed to absorb the unemployed and stimulate the economy.

So far, however, only a few thousand have been laid off, out of a workforce of 5 million. About 80 percent of Cubans work for the state. To date, more than 113,000 people nationwide have taken out business licenses, and 100,000 plan to lease government land as small farmers.

On April 16 the Cuban Communist Party will begin its congress to decide which economic reforms to implement and how quickly. But ordinary Cubans, including rank-and-file communists, are raising objections to the layoffs and elimination of the ration card system.

From all indications, some reforms that were supposed to take months to implement will now take years. Cubans are cautiously optimistic about the changes, but they’re also scared.

Everyone I spoke with agrees the centralized Cuban economic model isn’t working. Economist Blanca Munster, who works at a government institute, tells me that 70 percent of the country’s food is already produced by private farmers and co-ops. She says the state farms, which the government promoted for years, are very inefficient.

“The state farm produces tomatoes and fruit, but there are no boxes to ship them and no trucks to take the produce to the city,” she says.

Economist Blanca Munster. © Reese Erlich 2011

Under the new reforms, state companies will have to show a profit or face possible bankruptcy. Cuban authorities are finally admitting that free markets are a much more efficient means to operate small farms, restaurants, bicycle repair shops and similar enterprises.

But since the early 1960s, when Fidel Castro announced that Cuba would follow a Marxist model, Cubans have received subsidized food, utilities, housing, education and medical care. What will happen to these pillars of the revolution under the new reforms?

I drive out to Villa Panamericana to meet the Ford family once again. Villa Panamericana, on the eastern outskirts of Havana, was built to house athletes for the 1991 Pan American Games. The government later gave the apartments to ordinary Cubans.

I first met Angela Jimenez 20 years ago. As a black woman living in Havana before the 1959 revolution, she could find work only as a domestic servant. Her daughter, Ernestina Ford, received a free university education and became a professor.

Her granddaughter, Yoama Ford, could have left the country but chose to stay in Cuba. She works as a translator. Yoama welcomed me into the two-bedroom apartment that she shares with her husband, mother and father.

Combining all the family members’ incomes, plus a few dollars received from relatives living abroad, the Fords do OK economically. But prices for some essentials remain high. Yoama notes that high cost makes “it very difficult to buy beef in the market.”

Gasoline has hit almost $5 a gallon due to the Middle East crises. That would be expensive in the U.S., but in Cuba, where the average monthly salary is $18, it’s a catastrophe.

We walk down the street to a government-owned beer and pizza restaurant that charges affordable prices, something new for the neighborhood. Yoama Ford likes the competition between private and state-owned restaurants, which she thinks will improve both.

In general she’s optimistic about the economic reforms. “I’m trying to go with the flow, trying to see the good side of it—even if sometimes there are things that aren’t working.”

In another town outside Havana, a college professor named Marta tells me about the discussions taking place in her Communist Party chapter. She asks that her full name not be used. Marta says the discussions before the start of the party congress have focused on the layoffs.

“We worry about the middle-income people, the workers, people who don’t have options to find other jobs,” she says. “There is support for the changes because it’s the right thing, but people worry about not having a job.”

Manuel Yepe smiles when he hears Marta’s comment. He’s a former ambassador and former ranking Communist Party official.

“Everyone has a general view favorable to the changes,” he notes with a chuckle. “But when it comes to their personal situation, they would like it not to affect them directly.”

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By Terrence V Sawyer, April 20, 2011 at 3:26 pm Link to this comment
(Unregistered commenter)

Keep Cuba barefoot and pure.  Oh please.

Tourism is the lifeblood of the Cuban economy.  4 major flight routes originate in Canada and several others in Europe, taking millions of tourists to Cuba every year, including thousnads of Americans. 
Working in the Dollar economy there is the ticket to success.  Sadly, the sex trade is a major component of that economy. 
The Cuban economic model suffers from these incredible contradictions where the ordinary Cubans are shooed away from the “tourist beaches” and doctors can make more money hustling bags in the airport than treating the sick.
As far as being an environmental paradise, this is true in a time warp sense.  Conch thrive within easy diving depths because there has been no market in the US for Cuban conch, while the rest of the Caribean has been fished out for Miami Conch Fritters.
However, the city of Havanna and most other cities use the old fashioned burnpile for solid waste disposal and I suspect, there has been little money in the coffers of the revolution for sewage disposal, what with the ocean right there and all.  Urban vehicles range from diesel tractors pulling passenger wagons to a large fleet of cobbled together cars from prerevolutionary days to Russian imports and late model cars, (I was puzzled to see motorcycles that looked like early BMW’s, then I remembered the Soviet army dismantled and shipped whole factories to Russia as reparations after WWII.)  few catalitic converters there, but good trade winds disperse the air polution.  Sugar is still king, being the only export of value, so the ag economy is a monoculture, crowding out local food markets and bringing the usual erosion and soil depletion.

Cuba has a lot of potential as her people are the healthiest and best educated in the hemisphere. The US embargo has kept that nation “pure” and free of the taint of Capitalism that makes Truthdig possible and provides one or three computers for each of your readers, but it has been hard on the people, as shown by their choices to vote with their feet and innertubes over the years.

I hope change comes there peacefully, but I do not idealize the place.

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By ryan32515, April 20, 2011 at 2:15 pm Link to this comment

I agree robertbeal, the last thing cuba needs is millions of post - embargo u.s tourists

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By Shelley, April 19, 2011 at 4:10 am Link to this comment
(Unregistered commenter)

I’m right here with the commenters.

This article is a little too breathless about capitalist “development” (read devastation) for my taste.  Trade does not bring happiness.  Learn the lessons from all the unhappy and angry Americans.

Cuba has been incredibly, astoundingly lucky to have escaped the environmental degradation USAns spread around the world. 

It would be nice if Cuba would follow Ecuador and Bolivia and put Nature at the center of their changes, fully articulating what will be destroyed and damaged as the changes are considered.  Your countries were close once and could share a vision of health and wellness for all peoples again.

Plan for ameliorating the damage from US-induced climate change and possible oil/dispersant contamination of your ocean from the Gulf.

Cuba could be an incredible world leader and with vision and intelligent planning away from a petrol culture.  You could be a brilliant gift to the planet.

Don’t let millions of tourists in!  Know your value and charge the heck out of a strictly limited number of tourists who really should pay a fortune to luxuriate on your extraordinary island.  There are plenty of folks looking for bliss away from oil and pollution.  Market what you have to the world of folks eager to experience such breathtakingly glorious nature.  Industry is absolutely not the solution when you have such a rare commodity.

Make the tourists sail over and bring solar panels and other goods.  Don’t allow genetically modified seeds, pesticides and other pollutants.

Make the universities who want to do research provide funding and scholarships for the education of the Cuban citizenry.

You should skim off the best of the earth as you have the corner on pristine.  Good luck.

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By maruata, April 15, 2011 at 12:19 pm Link to this comment

It’s amazing how many commentators on Cuba are frothing at the mouth to talk
about Cuba finally waking up to the splendours of capitalism…

... that somehow if they had followed the U.S. model from the start Cuban’s too
could be borrowing huge sums from banks that have only the interest of the
people at heart (yeah, right!).

Sad to think this so-called embrace of capitalism could be enough to make
Obama lift the embargo and unleash all the seething Miami Cubans back to
their homeland where they will proclaim the 50 year embargo as a great

Cuba is pristine indeed, a last refuge, don’t think for a second the adoption of
the U.S. system will save the country, McDonalds billboards will replace Castro’s
cheerful revolutionary placards, it will be a noisy massacre.

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Paul_GA's avatar

By Paul_GA, April 15, 2011 at 9:26 am Link to this comment

Times change; too bad they don’t seem to change in Mordor-on-the-Potomac, too ...

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By robertbeal, April 14, 2011 at 7:49 pm Link to this comment

per year

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By robertbeal, April 14, 2011 at 7:48 pm Link to this comment

Please please please—do not let 1 to 2 million post-embargo U.S. tourists ruin the pristine UNINDUSTRIALIZED ecosystems of Cuba.

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