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7. Economy and politics


In the post-Castro era, new questions arise that require new answers.

7.1. economic policy opening


On 19.04.2011 Fidel Castro was officially replaced by his brother Raúl as President and Chairman of the Communist Party of Cuba, after he had exercised these functions already provisional because of illness Fidel since 01.08.2006. On 19.04.2018 Miguel Diaz-Canel was elected President, Raúl Castro is still party leader.

Diaz-Canel cultivates a different style of politics. While the Castro brothers presented themselves on propaganda photos always oversized and the people felt at most in the background, shows Diaz-Canel mostly in the middle of citizens. Even in television pictures, he does not talk to the people, but answers their questions. Even if one assumes that such appearances are made by the propaganda and it has been ensured that the president can only give convincing answers, the message remains to want to approach the people. At the same time, a Gorbachev effect, ie a collapse of the system with too rapid reforms, should be prevented. Of course, one can not seriously recommend that political leaders follow perestroika and commit political suicide.

On the other hand, the need for modernization in the economy is obvious. The exciting question is how to organize this necessary modernization. With the opening of the economy to private small businesses, since 2010, cautious steps towards the market economy have been made. Today, the small private sector has around 600,000 employees and can contribute around 15% of tax revenues. Alternative concepts for a modernization of the planned economy are not recognizable. The fear of a Gorbachev effect may explain the seemingly contradictory behavior of the political leadership.

7.2. bureaucratic disability


The preparation of the project has overlapped with a change in the law. With effect from 7 December 2018, the rules governing self-employment in Cuba were changed, particularly with regard to short-term rentals, gastronomic services and transport. They have greatly unsettled the small business owners. Providers of gastronomic services in cafeterias and restaurants, bar and rest services, landlords of houses, rooms and rooms as well as construction service providers must maintain a tax bank account and maintain a credit balance of 2 monthly sales there. For the deposit a period of 90 days was granted. Business expenses are only recognized if they are transferred from the account. However, hardly anyone has a bank account.

The measure is likely to be based on the not-wrong state assessment that a large proportion of the cash-generating revenues are not reported as operating income. Of this, then operating expenses can be paid, whose receivers issue no receipt about it. The launch was preceded by a press campaign in the party newspaper Granma, which criticized the gaps in small business records. Some business professors want to divert attention to the question of how to help the Cuentapropistas accomplish their tasks rather than intimidate and gag them. They are in no way systemically critical. However, they realistically estimate that additional pressure provokes new evasive responses and that the political goal is not achieved unless it was already advanced. Given the Cubans' improvisational skills over the past 30 years, they estimated that the measures are more damaging than beneficial to the government.

The measure can not achieve the official goal of containing the shadow economy. It can only help banks to finance themselves from the compulsory contributions of small businesses and thus lend to state-owned enterprises. There are also rumors about an imminent currency reform. Unlike in January, there are queues in front of the banks and Cadecas (casa de cambio - bureaux de change). The Cubans exchange their money reserves in dollars or euros, because they fear a devaluation of the CUP / CUC. The obligation to hold a bank account in CUC compels small business owners to expose their cash reserves to this risk of devaluation, hampers investment opportunities and leads to significant mistrust of small business owners in politics.

The implementation of the project was severely hampered by the Cuban side. The assessment of Cuban colleagues that the author should present his project during a preparatory visit to the Office for International Relations and that they would issue him the necessary certificate for a scientific visa, has not come true. The full-time head of the International Office was not available. The academic director of international relations saw the problem that the Cuentapropistas were under the Ministry of Labor and the university also had to apply for the passive support of foreign research in this field. For this, a certificate from the University of Applied Sciences of Mainz had to be obtained.

The permit was obviously not granted. Instead, the two colleagues who accompanied the author in the university and the foreign contact as career-advancing, asked after the end of the preparatory visit by the State Security. Then they ended their support. Two older colleagues, who had been kept in the first place and used only private e-mail addresses and other detours for their communication, continued the communication in a conspiratorial way. At least one of them apparently had the goal that a foreign publication with his assessments of the Cuban Cuentapropistas should appear on the Internet, which he and colleagues could then cite extensively in their own publications. He would have bypassed the permit requirement for his own research in this area.

The original plan to develop after the initial visit sample files in the Spanish version of Open Office for small business owners and to advise them after their first experiences with it in a long stay of 12 weeks intensive and the user experience while also improving the files used, could not be implemented in this form. Although the sample files were explained on the subpages of the website https://mueller-consulting.jimdo.com/investigación/ayuda and offered for download at https://www.noteninflation.de/cuba in the ods format. However, the constant support of the users could not be organized due to the lack of a certificate from the University for a scientific visa and because of the impossible long-term stay.

The Cuban professors were faced with the problem that they are part of the system as servants of public universities and the small business owners also distrust them. For these motives, the Cuban colleague had endorsed a project by a foreign scientist who could have had open talks without being close to the government. But that would have required a longer stay and a science visa. The lack of cooperation of the university administration was perhaps also embedded in the political decision that after the introduction of tightening the discussion should be ended. Nevertheless, some of them were prepared to continue conspiratorial contact and to quickly propose an alternative solution should the policy fail with the publisher's internet publication.

After the tightening on 07.12.18, the small business owners were no longer willing to give the foreigner comprehensive insight into their business. At the same time, they were interested in suggestions for improving their operational procedures with the sample files. With the download offers a way was created for this. The clicks suggest that the URLs were redistributed and the files were also downloaded by Cuentapropistas, with whom no contact was previously made. Also, they were interested in the free software of Open Office and a briefing in spreadsheets and word processing.

On a second visit, the author, following a council of Cuban colleagues, booked a stay at an all-inclusive hotel facility in the neighboring province. The concern did not seem unfounded, because information system at the border were obviously purposeful questions about the purpose of travel deposited. The major tour operator and the fear of causing a stir, the passport controllers but then may have deterred by a refusal of entry.
 
As a precaution, the author assumed that he was also observed in the hotel complex. The feedback from the small business owners could now only be made during conspiratorial meetings outside their companies during tourist trips. The low traffic density made the finding that the author was not prosecuted, however, easy. More precise statements are omitted here for understandable reasons.

7.3. Experiences of participating small businesses


A total of 123 self-employment activities are authorized, of which 52 are subject to the simplified scheme and 71 to the general scheme. Small business owners need an explicit license.

During the preparatory visit, contacts were made with two restaurants, two retailers, two taxi operators, a craftsman, a wholesaler (formally retailer but sold to other entrepreneurs) and a boarding house (tourist lodge). After the emergence of bureaucratic difficulties, the search for additional entrepreneurs had to be stopped, so that the target of 20 small business owners was not reached.

Of the 9 participants, 6 had a computer - the others got one, but only 3 had previously used a spreadsheet; the possibility for free download of Open Office was unknown to the rest. None of the participants was able to adapt the templates to their own needs. Here basics were laid.

Because of the tightening of the rules, the participants' questions also went in one direction, such as separating the bookkeeping into an official part of the tax return and a hidden part on a separate medium to cover the cash expenditure. The political goal, which was connected with the new regulation, therefore probably could not have been reached. The Cuentapropistas have recognized the potential that a micro SD card from a tablet computer can absorb much information and be easily hidden. However, the questions raised in this connection are not the subject of economics textbooks, even if the author was not completely unfamiliar with such topics from the field of practice during his activity before the professorship. Nevertheless, they were not included in the technical treatise of Chapter 6.

The participants agreed that the templates offered would sufficiently reflect their requirements. Parts would not be needed; Additional requests (with the exception of the black boxes) you do not have.

Because the young and ambitious computer science professor jumped off the project after visiting the state security, the possibility of an upload was not tested. A simulated with a data import function of an outdated German financial accounting upload was not possible because of the lack of a prerequisite for a science visa. Also one would not have been able to expect the small business owners that they would have been indirectly in the observation of the state security.

As an alternative to the upload, a balance sheet, income statement and cash flow statement could also be generated by means of a file reference with the tables for the operative business. However, because the small business owners are only guided by the tax regulations, there was no such need. Such a file could also be easily separated into an official and a covert part of the business, which could then be consolidated in the evaluation of the hidden part for an evaluation of the entire company. However, in order not to provoke the Cuban authorities further elaboration of this idea was waived.

On the other hand, the idea of the young professor of computer science to develop an open ERP into which the Cuentapropistas could have uploaded their data would have blocked the possibilities just mentioned, because the combination of the data would have eluded the control of the Cuentapropistas. The development of a Cuban Open ERP with the possible introduction of a commitment for small business owners to use this system would have made a greater contribution to curbing the shadow economy than undifferentiated political pressure.

In summary, and perhaps reconciling, it can be said that the state distrusts small business owners, and small business owners distrust the state. They fear the control of the state and therefore deliberately refrain from a meaningful bookkeeping. This attitude is short-sighted, because: "If you can not see well, you should not drive a car! Who has no accounting should not lead a company! Both are driving the cart against the wall! "

On the other hand, the emerging inequality and hard-to-explain wealth of some Cubans is a valid reason to develop mistrust. The widespread belief in the common people that this cannot be right is putting the government under pressure. The general suspicion against small business owners is probably unjustified, even if imaginative designs are widespread in response to the bureaucracy.

The way out could lie in a mutual yielding. The state should start with a de-bureaucratization of the private sector and give the small business owners an advance of trust. On the other hand, an Open-ERP should also be set up and operated by a non-governmental organization based on the author's suggestions in this book. The small business owners would then have to be obliged to participate. However, control by the authorities should be limited to spot checks. This would create a system of accounting obligations and tax audits, as is customary internationally. Veiling revenues would be more difficult, but never completely excluded. The small business owners would be supported in their corporate governance and could generate higher income in the longer term, which would then lead to an increase in tax revenues.

7.4. disorganization


Improving business organization is not an exclusive concern of small businesses. In a seemingly state-owned business (even though prices in CUC were excellent), only a very limited number of customers were left in the business. Other customers were only allowed to enter the store when other customers had left. Thus, a socialist waiting community formed in front of the entrance and the customers extended their stay later, given the previous waiting period, which prolonged the queue further. Some people have left the queue again. The store was big enough and equipped with enough staff to let in and serve almost all customers who wanted to look around themselves anyway. This process organization was a sales prevention, not a sales promotion.

In the all-inclusive facility, where the author lived during his second visit, some uneconomic structures were also observed. At the entrance hangs a golden sign: "Property of Cubanacan", the state tourism company. However, the owner does not sufficiently care about the preservation and propagation of his property.

Fig. 103: Logo of the hotel and the cubanacan group

(Source: https://www.cubanacan.cu/en/hotelview/carisol-los-corales)


The Club Amigo Carisol - Los Corales Playa Cazonal is a twin hotel made up of Carisol and Los Corales. The Hotel Carisol is closed and the hotel Los Corales has 144 double rooms and 28 bungalow apartments. The closed neighboring hotel has 120 double rooms and 46 junior suites. On the grounds of Los Corales are still two four-storey buildings, each with 36 apartments in the shell. According to an employee who has been working at the hotel for 22 years, the facility is about 30 years old and the two shell buildings have been in existence since that time. After the completion of the apartments - if the structural condition should still allow after 30 years - and a renovation of the hotel Carisol would therefore be 968 places available. Then it would be very crowded and existing expansion areas would have to be used.

There were only about 30-40 guests in the hotel, of which about 80% Cubans. At this capacity, the hotel can not operate economically. Nevertheless, the number of staff was apparently measured at a capacity of perhaps 80% instead of 10%. So the own employees were also the most frequent guests at the hotel bars. Because the hotel also had to deliver the evening entertainment advertised in the catalogs, performances were purchased from the outside, which were then performed in front of almost empty tables. The obvious catastrophic economic results do not seem to have interested anyone. Maybe the decision makers will not even be informed. Of course, the author can not know which regular evaluations are presented to whom. It is also a debt of corporate governance. Under market conditions, the plant should have closed completely.

This poor utilization and especially the lack of foreign guests is completely incomprehensible. The hotel is located 46 km east of Santiago de Cuba. Most tourists want variety on vacation. A cultural trip with a narrow sightseeing plan is too exhausting for many and a pure beach holiday too boring. The hotel could fill this gap in the market. A shuttle service that would allow guests to make day trips to the touristically interesting Santiago could even be set up at almost no additional cost. The hotel has organized a bus transfer from Santiago for its employees. The morning shift will be picked up at 5:00 am from the residential areas. For picking up the late shift, which starts at 2:00 pm, an empty journey must be carried out. The same applies to the drive home of the early shift. If the empty run to Santiago at about 9.30 and the empty run from Santiago at about 16.30 would be carried out, about 50 tourists in this case could be brought to Santiago and picked up again. For a low fare could be required. The reduced comfort of the local buses would not disturb the tourists who want to get to know the country. 50 day tourists would not change the cityscape of Santiago either.

Currently, guests have to rent a car for about 100 CUC per day or call a taxi from Santiago by phone, which is a bit cheaper considering the return trip. The cheaper option, to rent a motorcycle for 30 CUC a day, requires a lot of motorcycle driving experience in view of the poor condition of the roads and is not recommended for pure motorists. Therefore, such day trips hardly take place. Also, you hardly see any tourists in the cityscape of Santiago.

The fact that such marketing concepts have not been developed so far could be due to the lack of interest of Cubanacan's management. The tourism services are considered by the supply side and not by the demand side. From the lack of own country one is used to it, that all products are bought. The analysis of customer requirements is not used. Lack of demand is met with incomprehension, but not with a changed offer.

But there could also be a political intervention. After Internet forums it should give the shuttle service, which is however unknown on-site. The already quoted longtime employee has remembered that a few years ago, a Canadian tour operator had offered such a service for his guests. It can be speculated that these activities may have been politically undesirable. The money of the tourists is desired, but contacts with the local population are not.

However, the result is the same for both explanations. Thirty years ago, a lot of money was invested in a holiday resort, which could generate profits, but which currently only makes losses and which is slowly letting go. Thus, the assets of the Cuban people, which should be managed by the national Cubanacan only in trust for the people, wasted. If this happens even in the strategically important tourism sector, then similar mismanagement can be suspected in other state-owned enterprises. The reasons can not be explained plausibly with the blockade of the USA; they are homemade.
 

7.5. Supply Crisis and Helms-Burton Act


In a report on a research project in Cuba, the current events during this time should not be hidden.

On 11/05/19 it was reported on https://www.tagesschau.de/ausland/kuba-rationen-lebensmittel-101.html that food and hygiene articles had been rationed. The measure was taken by official Cuban authorities with the tightening of the US Embargoes have been declared, while the cited source saw the cause in reduced oil supplies from Venezuela because of the local economic and political crisis.

The background of this report is first to explain the supply of the population. Cuba has two currencies, the Peso Cubano (CUP) and the Peso Convertible (CUC). Salaries and pensions are paid in CUP. The CUC is equal to one dollar (USD). In the banks, the CUC can be bought for 25 CUP and sold for 24 CUP. For the basic supply a voucher booklet (libreta) is issued, with which limited quantities of goods of everyday need can be bought at low prices. So for a small bread 0.05 CUP is required. Outside the libreta, this bread is sold for 1 CUP (4 US cents) and another white bread, externally comparable to a baguette and not to the libreta, for 3 CUP (12.5 US cents). The available quantities are sufficient. The rationing means a cancellation of sales against CUP outside the libreta.

There are also shops where other goods are bought for CUC or a corresponding amount in CUP. Here, the prices are often even higher than those in Germany. In these shops, the offer has decreased. But with monthly wages of 500 to 1,000 CUP, shopping in these stores also requires an additional source of income. This is especially true for the visit to the mentioned in section 7.3 all-inclusive facility, which according to the Internet page requires 2-3 Cuban monthly wages per day; at Neckermann one day cost only a third. This suggests that some Cubans are likely to have substantial additional income, be it from the shadow economy or from corruption.

In December 2018, the shortage of food and daily necessities, such as flour, cooking oil, eggs and bread, became apparent first. Despite interim improvements, with the purchase of new machinery for the food industry and additional import contracts, the overall retail situation has continued to deteriorate. The product range in the foreign-currency stores has been thinned out, while consumers in the farmers' markets are struggling with rising prices. The most important German news program quoted a young man from Holguín on 07-08-19: "In the last four months, life in Cuba has become even more difficult, there's just no food anymore, not even money, the doors to start your own business have closed, I repaired mobile phones, but because of the high taxes I close my shop." (https://www.tagesschau.de/ausland/mexiko-kuba-ausreise-101.html)

The Cuban economy is structurally vulnerable to fluctuations in world market prices and, in the case of international sanctions, which significantly increases the cost of imports and interest rates on trade credits due to its high import requirements (around 70 per cent of domestic consumption alone is required for food) Height. Following the recent sanctions against Venezuela, which also targeted several maritime transport companies delivering oil to Cuba, the situation has continued to tighten.

On May 2, 1919, the US President enacted the third chapter of the "Helms-Burton Laws" of 1996, which was signed by its predecessors but suspended for violations of international law. Since the beginning of May 2019, legal disputes over goods expropriated by the Cuban Revolution have been possible in the USA. In addition, the limit on family money transfers has been halved and tourism has been further restricted for US citizens.

Section I of the Law contains measures to strengthen the economic embargo and a ban on indirect financing in favor of Cuba. Section II defines minimum requirements to be met by the Cuban State before the embargo is lifted. Section III gives US citizens (including naturalized persons) the right to sue foreign companies for alleged expropriation of property in US courts. Section IV authorizes the Secretary of State to exclude foreigners participating in or benefiting from expropriations of US citizen property in Cuba from residing in the USA.

It is incomprehensible that the Cuban people are always finding ways to tackle the problems that arise and to circumvent the demands of their government, but the government is not capable of equal creativity. The Helms-Burton bill was drafted past the then government by a senator and a member of the House of Representatives to serve populist sentiments. There are ways to circumvent this law. Any circumvention of an embargo is based on the following basic pattern:

Fig. 104: Bypassing an embargo

(Source: own illustration)


The relationship (1) between A and D is interrupted by an embargo. As an alternative reaction, A takes on the relation (2) to B. The content of the relationship (1) is now provided with the relationship (3) in a country for which the embargo does not apply. D forwards the content of the relationship (1) to D with the relation  (4). While the relationships (2) and (4) are openly maintained, the relationship (3) must be carefully masked. The relationships (2) and  (4) are to be designed as normal business relationships, so that there are no indications as to where exactly the relationship (3) is to be sought. For understandable reasons, no further thoughts should be presented here.

But the main problem is not the law itself, but the unpredictability of US justice. In the meantime, every economic exposure of foreign companies in the US poses a high economic risk. The attractiveness of the US market, which is repeatedly stated, can only exist if profits can be made higher there than, for example, in Europe, and thus consumers in the US through higher prices bear the cost of their insane legal system.

But not only the US judiciary is unpredictable, but also its current government, and voters in the US! Not only the embargo policy of the United States against Cuba, but also against Iran is disapproved by the rest of the world. Tools to circumvent the Helms-Burton Act could also be used to trade with Iran.

In the long term, the world, especially Europe, Russia and China, should organize a world economy without the US and the US dollar, e.g. with the euro as world reserve and reserve currency or an international monetary system with a computing unit, similar to the ECU before the introduction of the euro and without an embargo on Iran and Cuba. The Cuban government could only develop ideas for this and discuss them with the governments of Russia and China. They would have to convince by their quality; otherwise Cuba would only be a spectator.

But then the cheap explanation would be omitted, which is also distracted by homemade economic problems. Even if the Cuban government does not want to commit a political suicide, it must already modernize its economy and organize it more effectively.

7.6. summary criticism


It is sad that loyal colleagues also need a foreign spokesman for their factual and constructive criticism. Any government should first examine impartial opinions before they are considered anti-state. This also applies to states with democratic deficits. A blanket response to criticism with repression is an indication of paranoia.

One can summarize this state-bearing criticism of the government-loyal Cuban professors in the following 5 points:

The measures from 07.12.18 are unsuitable for the achievement of the official goal. Appropriate measures are proposed in the report. The pressure on private companies must stop.

Especially in state-owned enterprises, there are a variety of uneconomic structures. The socialist economy needs a thorough improvement of the organization and economically efficient structures, without questioning socialism itself. But a badly organized economy is a waste of national wealth.

The small business owners should set up a non-governmental professional organization for practical support, which should also operate an OPEN-ERP. The state-owned enterprises should also use it. The professional organization should have a scientific institute at a university that is constantly improving the procedures.

The supply of the population must be oriented as in marketing to the wishes of customers. Too often astronomically high prices are demanded that nobody can pay. A symbolic supply of products that nobody can buy will not benefit anyone.

The government should not confine itself to politically criticizing the US blockade. Effective measures must be developed to circumvent the blockade and thereby improve the situation of the population.