Since diplomatic relations were re-established with the United States, Havana has become the place to be for pop stars, politicians, film makers and the fashion industry. President Obama visited Cuba, followed swiftly by British Foreign Minister Philip Hammond, and French President François Hollande. The US blockade is being chipped away, with the first licence granted for a US company – a small tractor manufacturer – to set up in Cuba. Major developments are underway: the Mariel Special Development Zone and the new Investment Law are channelling foreign capital into Cuba; tens of thousands of workers have transferred from state to private or co-operative sector employment; Cubans are permitted to sell their homes and cars on an open market; and the economic and social Guidelines approved in 2011 and updated in 2016 have reduced state control of the economy. In this dynamic context, in April 2016, the Cuban Communist Party (CCP) held its 7th Congress. Its focus was to consolidate the process of changes formalised by the ‘Guidelines for Economic and Social Policy’ approved in the CCP’s 6th Party Congress in 2011. Helen Yaffe reports.
Guidelines for ‘updating the economy’
In the months preceding the 6th Party Congress, nearly nine million Cubans participated in grassroots debates about the draft Guidelines. This formidable democratic process legitimised the Guidelines, which serve as the template for ‘updating the Cuban model’; to improve economic efficiency and productive capacity within a socialist framework. Numerous measures have been introduced in the last five years. These include: 2012 New Labour Code (debated in 7,000 workplace meetings by two million workers); establishing non-agricultural co-operatives (now around 400 with 20,000 workers); permitting market exchanges of privately-owned houses and cars (for Cuban citizens only); permitting direct commercial relations between the non-state sector and state sector entities; opening the Mariel ‘super port’ and Special Development Zone (FRFI 238); 2014 New Investment Law to attract Foreign Direct Investment (FDI) (FRFI 240).
Policy changes and economic results 2011-2015
Of 313 Guidelines agreed in 2011, 21% have been fully applied, and 77% are in the implementation phase. 130 new policies and 344 new legal regulations have been approved. The Guidelines have now been updated for the 2016-2021 period.
Despite (restricted) openings to market forces, these reforms do not represent a rupture with the socialist revolution and Fidel Castro. They are necessary to deal with economic and financial crises rooted, first, in the Special Period of the 1990s when the disintegration of the Soviet bloc saw Cuban GDP plummet by 35%, and second, in the impact of the global capitalist crisis of 2007/8. The crisis affected Cuba through a 200-300% rise in food and fuel prices; it disrupted access to external financing, income from tourism and export earnings. Oil prices increased substantially. Also in 2008, two hurricanes caused $10bn worth of damage and led to emergency imports and expenditure on repairs. This was followed by a severe drought. The results were unsustainable fiscal and trade deficits. In 2008 Cuban banks froze the accounts of foreign suppliers and investors. Debt repayments were not met. All this was compounded by the US blockade, which by 2015 was estimated to have cost the Cuban economy $1.2 trillion.
Following the introduction of the Guidelines in 2011, Cuba’s macroeconomic situation has improved, rebalancing external finances, particularly through the renegotiation of foreign debt, as well as boosting FDI, reducing imports and cutting government spending without damaging health, education or social welfare. Cubans estimate that a minimum annual growth rate of 5% is required to see significant socio-economic improvements and the kind of infrastructural developments necessary to raise the standard of living for the entire population. However, in the 2011-2015 period, GDP growth averaged half that, at 2.7%. To achieve the 5% goal, an investment rate of 20% of GDP is required. But given that the Cuban rate of savings is half that, the government cannot find the capital it needs for investment internally. It needs FDI and is striving for $2 to $2.5 billion investments annually.
However, Cuba is unlikely to increase FDI flows without first settling old debts. Between 2013 and 2015, major advances were made in deals with: Russia – 90% of USSR-era debt ($35 billion) cancelled with 10 years to pay the rest on favourable terms; Mexico – 70% of 1980s-era debt ($487 million) cancelled, the rest to be paid over ten years; and the Paris Club – 70% (of $11.1 billion) cancelled, the rest to be paid over 18 years. Similar negotiations are underway with France, Spain and the London Club.
Other economic results from the 2011-2015 period include: Cuba’s international reserves increased 65.7%; success in reducing imports and increasing and diversifying exports; the average salary increased 43% (although this was not evenly spread and pensions lag behind). In 2015 GDP growth reached 4%, but it is predicted to be half that in 2016, partly reflecting the political turmoil in Venezuela. In 2010, before changes to the employment structure were announced (see FRFI 217), 16% of Cuban workers were in the non-state sector; that is, agricultural co-operatives, family farms or self-employment. Today 29% of Cuba’s workforce is in the non-state sector, which now also includes small businesses and non-agricultural co-operatives. Their contribution to GDP is 12%, so they can be considered as a solution to employment and incomes for those involved, but not as drivers of economic growth. They are in non-strategic, labour intensive areas, particularly catering, while strategic industries and social welfare remain firmly in state hands. Efficiency improvements are being made in the state sector. Of 3,900 state enterprises, only 70 did not produce a surplus in 2015 (in some cases this was planned), down from 900 in 2013. There has also been success in transferring revenue from the private to the state sector through the collection of taxes. For example, three billion pesos collected through private construction sales was used to subsidise home construction for poor families.
Cuban communists in Congress
The 7th Congress of the Cuban Com munist Party (CCP) took place on 16-18 April 2016. It was attended by 1,000 delegates representing over 670,000 Party members. In the run-up to the Congress, four documents were discussed by these delegates and some 3,500 invited guests representing different sectors of Cuban society. These documents were: 1) An evaluation of the national economy 2011 to 2015 and the updated Guidelines for 2016-2021; 2) The ‘fundamental elements’ for a national economic and social development plan through to 2030; 3) The ‘conceptualisation’ of Cuba’s socialist socio-economic model of development; and 4) a report on progress made towards objectives agreed on by the First CCP Conference.
The documents were discussed in work commissions during the Congress and the ‘conceptualisation’ document will now be circulated more broadly: ‘to continue discussion in municipalities, and with the democratic participation of the entire Party, youth, representatives of mass organisations, etc, in order to complete its elaboration…it will be presented to the National Assembly, the supreme organ of state power, responsible for providing it with it legal validity’ (Raul Castro).
The Congress also agreed that key positions in the state and political organisations would be subject to term limits (two terms of five years) and age restrictions. No-one aged over 60 can join the CCP’s Central Committee. No-one over 70 can assume a leadership position in the Party. The newly-elected Central Committee (142 members) now has an average age of 54. 44% are women and 36% are black and mixed-race Cubans. Raul reflected: ‘Higher than those of the previous Congress, but we are not satisfied’. Three of the five new members on the 17-member Political Bureau are women. All are ‘from humble backgrounds, [who] worked in the grassroots’. Raul insisted: ‘there can be no preconceived leaders, everyone who graduates must work five years at least at the basic level in the specialty which they studied at university’. The Cuban Constitution will be changed to reflect these new rules, and ‘the important transformations associated with the updating of our economic and social model, and its conceptualisation.’ Raul stated ‘Everything we have been doing must be reflected in the Constitution… [once the modifications] have been discussed by the population.’ Raul will step down in 2018, and he is clearly focused on strengthening the institutional basis of the socialist revolution to help safeguard its future when Cuba is no longer led by the ‘historic generation’ who carried out the Revolution.
The limited openings to the market in Cuba, along with rapprochement with the US, leads some commentators to assert that the Cuban government is re-introducing capitalism. But the question is whether these measures fundamentally change social relations in Cuba. In 1995, during the Special Period, when similar reforms were introduced, Fidel Castro stated: ‘The key to everything is the matter of power. Who has power [in Cuba]? The large landowners, the bourgeoisie, the rich?...Is power in the hands of the capitalists, for the capitalists and on their behalf? No! The key issue is who has power’. The power structure remains unchanged today.
In 2016, under circumstances complicated by rapprochement with the US, Raul addressed this concern in his Central Report to the Congress:
‘One of the novel aspects that has attracted the most attention and even some controversy, is the question of property relations, and logically so, as depending on the predominance of one form of ownership over another, a country’s social system is determined. In socialist and sovereign Cuba, the ownership of the basic means of production by all the people is and will continue to be the main form of the national economy and the socio-economic system and therefore constitutes the basis of the actual power of workers. The recognition of the existence of private property has generated more than a few honest concerns from participants in the discussions prior to the Congress, who expressed concerns that on doing so we would be taking the first steps towards the restoration of capitalism in Cuba…I have the duty to assert that this is not, in the least, the purpose of this conceptual idea.
‘The increase in self-employment and the authorisation to contract a workforce has led in practice to the existence of medium, small and micro private enterprises which today operate without proper legal status and are regulated under the law by a regulatory framework designed for individuals engaged in small business conducted by the worker and his/her family.
‘Guideline number 3 approved by the 6th Congress and which we intend to maintain and strengthen in the updated draft categorically specifies that “In the forms of non-state management, the concentration of property shall not be allowed” and it is added “nor of wealth”; therefore, the private company will operate within well-defined limits and will constitute a complementary element in the economic framework of the country, all of which should be regulated by law. We are not naive nor do we ignore the aspirations of powerful external forces that are committed to what they call the “empowerment” of non-state forms of management, in order to create agents of change in the hope of putting an end to the Revolution and socialism in Cuba by other means.
‘Co-operatives, self-employment and medium, small and micro private enterprise are not in their essence anti-socialist or counter-revolutionary and the en ormous majority of those who work in them are revolutionaries and patriots who defend the principles and benefit from the achievements of this Revolution.’
The US blockade remains the principal obstacle to development, but there are many internal challenges: the inadequacy of Cuba’s productive infrastructure and low efficiency in economic management; increasing labour productivity through technology; preventing speculation by private producers to hike prices; halving Cuba’s food imports which cost $2 billion a year; compensating poorer sections of society as income inequality grows; and the complex issue of unifying the national and convertible pesos.
It is clear that Raul and the CCP are acutely aware of these challenges and have set out to tackle them ‘without haste, but without pause’ and within the framework of the socialist system.