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Cuba loosens economic latches

A bank worker counts convertible pesos in Havana on Thursday. Newly available goods can be bought with this currency.

Associated Press

A bank worker counts convertible pesos in Havana on Thursday. Newly available goods can be bought with this currency.

Starved of consumer durable goods for decades, Cubans are finally getting a taste of what most Americans take for granted.

In a series of economic reforms announced in recent days, Cubans are being given access for the first time to cell phones, computers and other electronics, as well as tourist hotels and rental cars.

Most Cubans on the island welcome the reforms, which come after months of unprecedented public debate about the country's economic ills. But it's hard to see how many Cubans will actually be able to take advantage of them. Buying a cell phone and staying in tourist hotels are beyond the reach of most Cubans, who struggle to make ends meet on salaries worth only $15 to $20 a month.

"It's a limited step forward," said Oscar Espinosa Chepe, a dissident former Cuban diplomat and economist, who warns that Cubans will need to be patient as the impact on most people's lives will be painfully slow. "It's insufficient, but it's something," he added. "Many people can't afford these items, but at least now they have the right to buy them."

Some also question how much real economic impact the reforms will have. "These are not bread-and-butter issues," said Phil Peters, a Cuba expert with the Virginia-based Lexington Institute. "These measures do not tackle the big problems of growth, new jobs and fixing the purchasing-power problem that affects most Cubans."

• • •

The electronics reform, which went into effect Tuesday, will let Cubans buy computers, microwave ovens and car alarms, among other items. But how much demand will there be? All the items will still only be available in Cuba's so-called convertible currency, or CUC, which is what tourists receive when they exchange their money.

Cuban salaries are paid in the national peso currency, which is virtually worthless, except for the purchase of heavily subsidized state rations, as well as utility bills. For example, the $120 fee to activate a cell phone is the equivalent of six months' salary.

Even so, the end of the restrictions will benefit a surprising number of Cubans, according to Antonio Zamora, a Cuban-American lawyer in Miami who visits the island frequently.

"This is something that a lot of people will be appreciative of," he said. "People are going to start spending their wedding night at hotels. There are people with money to spend in Cuba."

An estimated 60 percent of families in Havana are believed to have some kind of access to the convertible currency, either through family or friends who send money from abroad, those employed by foreign companies and a small domestic private sector, as well as tips at tourist hotels, restaurants and bars. A raging black market also provides another source of illegal income.

"There is an upper class in Cuba of sorts," Zamora said. "There's a lot of people doing business, legally or not."

About 15 percent of the population has 85 percent of the pesos in the banks, according to the government. The key, say Zamora and others, is getting them to spend their money.

If these new rich Cubans can be persuaded to exchange their pesos for convertible currency to buy goods, this would reduce the pesos in circulation and thereby raise their value. This in turn would strengthen the purchasing power of average Cubans.

"If they can improve the parity of the peso to the convertible currency, that will make a huge difference," Zamora said.

But that remains an enormous task, one that cannot be solved simply by putting material goods in people's hands.

• • •

Less heralded reforms also announced in Cuba's agricultural sector could produce longer-lasting economic results, analysts say. Cuba announced this week a major redistribution of state land to private farmers, which it hopes will raise domestic food production and reduce the country's $1.6-billion annual bill for imported food (one-third from the United States).

"The drive is clearly new," said Johannes Werner, the Sarasota-based editor of Cuba Trade and Investment News. "It's about production and efficiency."

Even so, the official thinking behind the reforms is not easy to gauge, most analysts concede. The official announcements have been few and brief, with little fanfare. Other more ambitious measures are believed to be in the pipeline, including reform of immigration laws and ownership of homes and cars.

"They trickle them out one by one," said Peters. "I don't get a sense of the end point. They are not framing a policy."

Some clues do exist, suggesting new pragmatic thinking at Cuba's highest levels.

The state media has notably refrained from highlighting the social inequalities the new measures will inevitably create. Denial of access to these goods was long seen as part of Fidel Castro's Marxist disdain for private property. But Cuba's new government appears to have dropped much of the ideological resistance to the capitalist notion of people making money and getting rich.

"All of this was impossible under Fidel," said Brian Latell, a former CIA Cuba analyst now teaching at the University of Miami. "This shows Raul is clearly in charge."

A recent essay by Lazaro Barredo, editor of official Communist party newspaper, Granma, noted that the reward of economic improvement will only come when Cuba produces more. "May he who produces more earn a higher salary," he wrote.

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>>fast facts

Recent reforms

Since Raul Castro became president on Feb. 24, his government has instituted a number of economic reforms:

April 3 — a new 24-hour TV channel with foreign content.

April 1 — Citizens given access to shops selling DVDs and DVD players, computers, microwaves and other electronic goods.

April 1 — Farmers permitted to cultivate unused state land and buy farm tools and supplies at state-run stores.

March 31 — Citizens given access to luxury hotels, including hotel gyms, hair salons, beaches and other facilities, as well as car rental agencies.

March 28 — Cubans allowed to own cell phones.

Possible reforms ahead

• Let Cubans travel abroad freely.

• Reduce restrictions on free enterprise that would allow more Cubans to start their own small businesses.

• Grant greater autonomy to managers of state-owned companies to make business decisions.

• Allow retired doctors and nurses to offer private health services.

• Allow Cubans to buy and sell their own homes and cars.

• Eliminate state-subsidized food rations, except for the most needy.

Source: Cuban government, staff

Cuba loosens economic latches 04/04/08 [Last modified: Monday, April 7, 2008 10:24am]
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