CUBA BRIEF: China, Iran, Cuba target American students. Appeal for Cuban student to UM President Julio Frenk.

CubaBrief: In this issue we bring to your attention today’s Mike Gonzalez article in The Federalist. Gonzalez is a senior fellow at The Heritage Foundation and when we met him many years ago he was at the Wall Street Journal in Brussels.

His article about China, Iran, and Cuba propaganda efforts in many American universities hits close to home because Frank Calzon, the Center for a Free Cuba Executive Director was “disinvited” to speak at American University on the same day of his scheduled lecture. According to the Latin & American Student Organization, [they] “decided to cancel today’s event… we do not feel comfortable brining (sic) an organization to campus whose values, or leader’s values, we are not completely familiar with or that might not accurately represent the values of our club and it’s (sic) members. Anything we bring to campus is a representation of LASO and we need to make sure we are without a doubt comfortable with the content that is being presented….”  We’re still hopeful that American University will look seriously into this matter.

Also in this CubaBrief

  • Why the Cuban economy has failed By Carlos Alberto Montaner*
  •  Prosecutors Demand Three Years in Prison for Karina Gálvez and the Confiscation of Her Home from 14ymedio
  • After speaking at the University of Miami, Cuban student expelled from Cuban university. Will UM President Julio Frenk speak out?
  • Cuba – The End Game Begins by Paul Meo (Some conclusions from Association for the Study of the Cuban Economy’s Annual Meeting: Cuba’s demographic situation, new government restrictions on the self-employed, the Venezuelan crisis and the energy situation on the island and the new tourists impact.)


The Federalist, August 10, 2017

Higher Education

How Foreign Governments Influence What Americans Learn In College

By Mike Gonzalez

If foreign dictatorships in the Middle East, Asia, and Latin America get a vote on what our students learn, America will have a problem for decades to come.

It isn’t just aging hippies burrowed deeply in academia who teach radical notions to gullible American college students. Foreign governments also often take in a hand. China has done it with its infamous Confucius Institutes. So have Arab states.

Now a New York congressman is demanding an investigation into whether Iran is following suit and funneling money to the Ivies. And none other than the University of Miami seems to be buckling to a long-standing desire by the dictators in Havana to close down its highly regarded Cuba studies center.

This is troubling on many levels. Radical professors have created a woefully misinformed generation of Americans who know little about the Constitution and what it takes to maintain a republic. But if foreign dictatorships in the Middle East, Asia, and Latin America also get a vote on what our students learn, America will have a problem for decades to come.

Controlling What We Learn about Foreign Countries

China’s attempt to influence how Americans think takes a multitude of forms. It has bought its way into big Hollywood studios, which kowtow to Beijing by submitting to its censorship if they want to play in the lucrative Chinese market. China has also taken over some American radio stations to spread its propaganda here.

The Confucius Institutes censor what American university students can learn about China. There are around 100 of these Chinese government-supported centers set up at American universities and some 400 “Confucius classrooms” in our K-12 schools.

In exchange for the money Beijing plunks down, these universities allow the Communist Party in Beijing to stifle teaching on such subjects as China’s occupation of Tibet, the Tiananmen Square Massacre, and Taiwan’s independence (China’s forbidden “Three Ts”).

The Saudis, too, have for years spent lavishly on American universities and organizations that design Saudi-friendly curricula. As Stanley Kurtz described it in a 2007 article in National Review Online, Middle East studies centers have “been serving as a kind of Trojan horse for Saudi influence over American K-12 education.”

Small wonder that Rep. Dan Donovan (R-N.Y.) is urging U.S. Education Secretary Betsy DeVos to investigate why the New York City-based Alavi Foundation, which is controlled by the Iranian regime, is funneling millions into Ivy League universities and pro-Iranian and anti-Israeli academics.

“Did this foundation attempt to subvert American academic institutions?” Donovan asked. “We need to investigate this, and universities have to do a better job of vetting their donors.”

We Disagree, So I’m Shutting You Down

That brings us to the curious case of the University of Miami, where President Julio Frenk is trying to close down its Institute for Cuban and Cuban-American Studies. Long a thorn in the side of the communist dictatorship in Havana, ICCAS has constantly received vituperative attacks by the regime’s propaganda outlets. Never before, however, has it come under the threat of the university’s own leadership.

Frenk is a long-standing and well-known admirer of the Cuban regime’s health practices. As Mexico’s health secretary in 2001, he said Cuba had the best health indicators in Latin America, and Mexico would benefit from learning about Cuba’s success.

Unfortunately for Frenk, the ICCAS kept saying the truth about Cuba’s failed health system, as it did on July 20 in a report called “Cuba’s Silence is Dangerous to Your Health.” That report notes that “After a century hiatus, cholera, malaria and dengue have returned to Cuba.” I post the report here because it seems to have disappeared from the ICCAS website.

The move to close the ICCAS by Frenk, whose wife Felicia Knaul was installed as the university’s director of the Miami Institute of the Americas after he became president, proved highly controversial in Miami. He now says he never wanted to close the center at all, but only to change its leadership.

Frenk’s version of events is disputed by Jose Azel, one of the academics whom Jaime Suchliki, the esteemed ICCAS director, had to summarily dismiss when he was informed by the university’s provost on July 9 that he had to close the institute on August 15. In an article recently in El Nuevo Herald, The Miami Herald’s Spanish-language edition, Azel says “I have verified that Dr. Suchliki’s termination agreement explicitly requires him to ‘effect the cessation of operations for the Institute for Cuban and Cuban-American Studies’.”

“Those are the facts as I know them,” writes Azel. “Now we can ask: If Dr. Frenk did not intend to dismantle ICCAS, why did he find it necessary to fire, without the courtesy of an explanation, the entire ICCAS staff? Were they incompetent, or were they an impediment to the implementation of his plans? What were those plans?”

During a visit to Washington on July 19, Ofelia Acevedo, the widow of the slain Cuban dissident Oswaldo Paya, warned that one of the reasons Cubans have not received international solidarity despite 60 years of communist dictatorship is that cultural Marxists have taken over America’s universities.

“Cuban students at universities here tell me that whenever they try to say the truth about Cuba, they get shouted down,” she said. We shouldn’t blame our students, though. It’s their academics who’ve led them down.

Mike Gonzalez, a senior fellow at The Heritage Foundation, spent close to 20 years as a journalist, 15 of them reporting from Europe, Asia, and Latin America. He is the author of the new book, “A Race for the Future: How Conservatives Can Break the Liberal Monopoly on Hispanic Americans.”


Business Monkey News, August 10, 2017

Why the Cuban economy has failed

By Carlos Alberto Montaner*

The Internet carries an amusing parody of Despacito [Slowly], Luis Fonsi’s successful song, ridiculously danced by Raúl Castro, his son Alejandro, and his grandson and bodyguard, Raúl Guillermo, known as El Cangrejo [The Crab].

It’s Cuba’s imperial family. The three, like the entire population, perceive that the country is sinking into misery but are paralyzed by the fear they’ll lose power. By this time, Raúl has not the slightest doubt that the Military Capitalism of State (CME) does not work and knows that his reforms, the “guidelines,” have failed but insists on plodding toward the abyss “without haste but without pause.”

The CME is the economic model launched by Fidel in the 1990s, proudly different from the Chinese and Vietnamese models. Why doesn’t it work?

Essentially, for two reasons linked to human nature: first, because it’s not based on incentives but on fear of punishment. If we’ve learned anything with any certainty from behaviorism, it’s that positive reinforcements tends to reproduce, while negative reinforcements have the opposite effect. Second, the CME forbids and represses the momentum of the entrepreneurs, which is the main engine of the development and progress of any society.

Roughly speaking, the CME is based on the idea that Cuba’s main sources of wealth are the nation’s 2,500 midsize and large companies. All of them are protected by the state and preferably headed by military brass, while the minor service activities (restaurants, small hostels, clowns for private parties and an endless number of microenterprises) provide jobs for most of a population that’s closely watched so it won’t accumulate capital and barred from developing its own potential political power. 

Objectively speaking, we’re facing a model of centralized and planned organization of the economy, based on the classic scholastic mechanism: all the truths have already been discovered by the fathers of the nation, and all that society needs to do is to constantly verify the wisdom of those heroes.

Out of that nonsense comes another: the 500 projects waiting in Cuba for those foreign capitalists who want to invest and profit from the docile and cheap manual labor that abounds in the country. The regime’s economists have planned this in great detail. That’s how central planning works: everything has been mulled over and sketched. There’s no space for improvisation. None for the market or competition, those diabolical inventions of neoliberalism.

I don’t know if Raúl Castro and his advisers have examined the profile of the successful modern nations, but all of them are subject to growth through what Hayek called “spontaneous order.” In them, the economy grows freely, subject to the mechanism of trial and error, guided by the impulse of the entrepreneurs with their spasmodic efforts, in which they sometimes “win,” sometimes “lose,” because the only sure thing in a regime of economic freedom is that there is not the slightest certainty. The consumers are the ones who decide — and they are unpredictable.

And who are those entrepreneurs who assume all the risks? Nobody knows for sure. In another context, economist Wilfredo Pareto launched the 80-20 hypothesis, and it is probable that the proportion is, more or less, the one found in all societies. Twenty percent chases dreams, works tirelessly, makes valiant efforts, invents, innovates, fails, picks itself up, and pulls ahead of the remaining 80 percent.

True, only a few in that 20 percent achieve a tremendous economic success, but to persecute them in the name of equality is more than a crime; it’s an absurd injustice. The fact that Jeff Bezos today is the world’s wealthiest man because he revolutionized direct sales through Amazon, or that Amancio Ortega is the most powerful man in Spain thanks to the Zara shops is something admirable, condemned only by the pea-brained leaders of the reactionary left who continue to ignore how wealth is created and distributed. 

It shouldn’t be so difficult for Raúl Castro and his family to understand this phenomenon. In the early 20th Century, an impoverished and semi-illiterate Galician who a few years earlier had fought in Cuba for his defeated Spain returned to the island. He had the inner fire of an entrepreneur. When he died, 50 years later, he left a fortune of 7 million dollars, several dozen workers, and a town that boasted a cinema, a post office and a school. His name was Ángel Castro, the father of Fidel, Raúl and ten other children. He died before his descendants invented the nefarious CME.

*Journalist and writer. His latest book is the novel A Time for Scoundrels.


14ymedio, August 8, 2017

Prosecutors Demand Three Years in Prison for Karina Gálvez and the Confiscation of Her Home

he indictment also demands the seizure of Karina Gálvez’s house. (14ymedio)

By Dagoberto Valdes

14ymedio, Havana, 5 August 2017 — Economist Karina Gálvez received the prosecution’s petition on Saturday for the alleged crime of “tax evasion.” According to this petition, the member of the Center for Coexistence Studies (CEC) could be sentenced to three years of house arrest and confiscation of her home, she informed 14ymedio.

“A messenger from the Tribunal, on a motorcycle, came to my mother’s house to give me a document that I had to sign as received,” she says. “The paper, sent by the Municipal Court of Pinar del Rio, details that the prosecutor has arrived at provisional accusations.”

The prosecution is asking for “three years of deprivation of liberty plus the same period of limitation of freedom.” This latter means a person cannot travel abroad, must inform the authorities when leaving the province, and is obliged to have work.

The accusation also requires the forfeiture of the house that Gálvez acquired after the flexibilizations for the purchase and sale of houses promoted by the Government of Raúl Castro at the end of 2011.

In the next five business days, her lawyer will present a plea to ask for acquittal or a lower penalty. “Starting with this communication, my lawyer will have access for the first time to the case file,” says the economist.

However, neither the lawyer nor the defendant has been informed of the date of the oral hearing.

In January, Galvez was arrested and taken to the headquarters of the State Security where she spent six days under arrest. The police searched her home and since then the house has been under investigation and is sealed, which prevents access for the owner or her family.

The economist has been under pressure from the authorities since last December when she was summoned to the Department of Immigration and Immigration (DIE), where she was questioned about her travels outside Cuba.

Other members of the Convivencia magazine have been cited by the police and have received warnings, including the director of the publication, Dagoberto Valdés, who last October was told by an official that “from today” his life will be “very difficult.”

Amid this wave of pressure, members of the CEC, which organizes training courses for citizens and civil society, issued a declaration of commitment to their work in the island. “We are not leaving Cuba, we are not leaving the Church and we will continue working for the country.”


After speaking at the University of Miami, Cuban student expelled from Cuban university. Will UM President Julio Frenk speak out?

Félix Llerena, 20 year old Cuban student expelled from his university after visiting Institute for Cuban and Cuban American Studies recently. We urge UM President Julio Frenk to ask his friends at Harvard and in the academic community to call on General Raul Castro to stop persecuting him and allow him to return to school.

In the appeal we reproduce below Felix denounces Cuba’s political police actions against him. The human rights activist says that he is “still needed on the streets of Cuba and not in a prison cell – even if that’s the price to be paid by those who want to see Castro-Communism disappear.”  Felix needs international solidarity. Please help us disseminate his appeal.

Dear friends,

First, a big hug from Cuba, which God willing will be free very soon.

Friends, I write to ask you for a favor.

If you can, of course, could you please print the statement I am attaching here and send it as letters to the addresses in Miami and Washington listed at the end. I believe they would never arrive if I send them from Cuba. It would be great if you could add your own notes to these letters. I am doing this because I am still needed on the streets of Cuba and not in a prison cell – even if that’s the price to be paid by those who want to see Castro-Communism disappear.

Hoping for your kind solidarity.

Your friend Felix Llerena



To all people of good will.

To everyone who loves peace, freedom and justice.

I am Félix Yuniel Llerena López, a 20-year-old Cuban patriot who visited the United States in March at the invitation of the University of Miami to take part in a seminar on Democracy in Cuba. After that event, I traveled to Washington D.C. where, together with other members of the Patmos Institute, I attended the Round Table on International Freedom of Religion. I also visited the U.S. Congress, including the Foreign Affairs Committee and the offices of Rep. Ileana Ros-Lehtinen and Sen. Marco Rubio. I also met with the Department of State’s Office of Religious Freedom and the U.S. Commission for International Freedom of Religion. In all those places, we spoke up for the suffering people of Cuba.

After my visit to the United States, I returned to my country on April 27, arriving at the Abel Santamaria International Airport in Santa Clara, in Villa Clara province. I was met there by agents of State Security agents (G-2) and was then searched and interrogated by customs officials. During the search they seized several personal items such as a book by Jose Marti, the U.S. Constitution, books on human values and democratic principles, a book on democracy in Cuba by prominent analyst Julio Schilling and a cap with the logo of Brigade 2506. They also seized several USB and microSD memory cards that contained photos with friends in Cuba and abroad and videos of the conferences in the United States, of the incident involving the tugboat 13 de Marzo and the program Voces de Cuba, because they contained materials considered to be “contrary to the best interests of the nation.”

They also seized a tablet because it contained a photo of the four Brothers to the Rescue young men who were assassinated as well as three radios – none of them satellite radios – and other items listed in the Certificate of Seizure that the customs agents handed me.

After the search I was approached by several State Security agents who told me that I had to appear the next day at the Interior Ministry headquarters or “risk my legal and migratory status in this country.”

On the 29th of April I went to the required office and after five minutes there they brought in my mother, Mileydis López Sosa, under arrest and in my presence they threatened and vilified her. After that I was taken to an office where I was interrogated by Captain Enrique of State Security and other agents, who accused me of having ties to terrorists and mercenaries. They interrogated me about any plans for terrorist attacks, they threatened me with death and told me that “if some peasant finds out that you have ties to terrorists and decides to attack you with a machete, don’t say it was us.” After three hours of interrogations, I was photographed like a common criminal and was handed a warning letter.

We were then freed and I left for Havana to continue my life, peacefully as always.

When I got to Havana, I was informed by the head professor of my university class that I had been dropped from the university because of my absences – absences that never reached 20 percent of the maximum allowed. She also told me that I could not enroll in any university for two years – a fact that was reported by several news media and international organizations.

On June 17, at the Jose Marti International Airport in Havana, I was prevented from boarding Aero Mexico flight AM448 to Cancun and after one hour waiting in a small room I was told that I was banned from traveling abroad because I was under investigation due to the items seized when I arrived in March.

After appealing to the customs office in Villa Clara province, I received a reply from Jesus Antonio Calvo Marcelo denying my appeal.

Three months after I returned to my country, and at the same time that my friend Rosa Maria Paya Acevedo was visiting Cuba, I was arrested and taken to the Interior Ministry offices in the Encrucijada municipality, province of Villa Clara. After waiting for three hours, a criminal investigator who called himself Captain Oscar told me that pornographic materials had been found in the USB memories seized at the airport on my arrival – which is totally FALSE and which I FLATLY DENIED in my statement because that type of material goes against my morals and prestige.

The MININT official also told me that was why I was under investigation, and that provincial prosecutors could decide to file charges against me and send me to prison.

That’s my current situation in Cuba, facing possible charges for a false crime that I never committed, but which is a clear sign that the Castro regime is very upset with my daily service to the Cuban people and of course to the work I performed in the United States.

That’s why I appeal to everyone who knows me, personally or not, to help me, to support me, and I hope that each day there will be more of you ready to show your solidarity

Hoping to be able yo count on you,

Félix Yuniel Llerena López
Coordinator, Patmos Institute
Activist in the Cuba Decide campaign
Latin American Network of Youths for Democracy.

+011-53 58481477

Cuba – The End Game Begins by Paul Meo

(Some conclusions from ASCE’s Annual Meeting)

    The Twenty Seventh Annual Meeting of the Association for the Study of the Cuban Economy (ASCE) was held, as usual, in late July in Miami. But it was a bit different this year; most participants–paper presenters, discussants, and audience members–seemed to agree that significant “reforms” of the Cuban economy would not only be limited in the next few years, but because of the slow and partial implementation of those that have occurred, inequality was increasing.  But even more conclusive was the general belief that not only could no major changes be expected until the dictatorial regime was changed, although  as forces beyond the dictatorship’s control, now unleashed, continue steadily there may be some hope in the further future for a more open and prosperous Cuba.  I’m not betting on that yet.

   It is the gravity of Cuba’s present economic/social situation that leads to this conclusion; the situation is so bad, so extreme, that it is difficult to believe the present regime could–let alone want to–ameliorate this mess.  In spite of a boom in US visitors (both Cuban-Americans and other Americans) as well as a clear expansion of private restaurants, B&B’s, and other services stemming from President Obama’s 2014 opening measures, Cuba’s GDP fell last year and may continue to fall this year.  Export and import of goods has fallen. Liberalizing reforms in agriculture have been reversed.  No action has been taken to unify the perverse dual exchange rate.  Petroleum imports from Venezuela have almost been halved; Cuba had to buy some oil from Russia recently but paid cash for the purchase.  Housing construction has faltered; emphasis is now placed on upgrading some of Old Havana’s deteriorated buildings to please tourists. The medical system used by most Cubans is in a state of chaos; hospitals are being closed and consolidated. Equally discouraging, the quality and resources dedicated to education have greatly deteriorated.

    The external factors that Cuba confronts also lead to pessimism, at least in the short term.  Venezuela’s political turmoil means its highly subsidized oil deliveries to Cuba will not increase; they will likely continue to decline.  President Trump’s minor adjustments to the Obama actions will not lead to a continued boom of US tourists; at worst it may well lead to a decline in non-Cuban-American tourists as the 12 reasons to justify visiting the island are more carefully monitored and payment to military-owned hotels and services is restricted.  Russia, now under EU and US sanctions and with a declining economy, is in no position to bail out Cuba, and China seems more interested in commercial activities than grant assistance. Then there is the demographic problem.  Cuba now has the highest proportion of elderly residents in the hemisphere.  And the open travel policies Raul Castro put in place a few years ago seem to be accentuating the issue as all those youths who can flee the country. Finally, last year Cuba negotiated (another!) US$11 billion debt extension/forgiveness deal with the Paris Club but recently Raul Castro announced it would be difficult for Cuba to pay its reduced debt service.

    Finally, there is the intransigence of the Government.  Raul Castro had said he would step down as President in 2018; he left his possible continuation as Communist Party Chairman in doubt.  He has now emphasized that all senior Party and Government members must join him in stepping down as well. But in 2019.  Who knows what will happen then if Raul stays in good health. The Obama moves were based on a hope that the Cuban Government, if reciprocity were not mandatory, would relax some if its strong political/economic controls and move towards a mixed economy model.  This proved optimistic.  While the Government did free some dissidents, soon thereafter many were detained again or encouraged to leave the country. 

    But this is only a summary.  Given the focus of the US press on the growing American tourist boom and the new Trump policies, as well as anecdotal trivia, background may be most useful.

    First, demography, both macro and micro.  Demographers have long known that Cuba’s population was aging fast, but in 2016–a few years earlier than expected–it passed Uruguay as the hemispheric country with relatively the largest elderly population.  Not only has the birth rate fallen to 1.04 per woman (replacement is about 2.1), but net immigration exacerbates the situation.  With the exception of 2013/14, when the statistical office–mysteriously–claims there was a slight net surplus in migration flows, the recent net outflow has been over 50,000/yr.   Cuba’s population decline may accelerate in the future. The economically active population is falling faster, of course, as youths abandon the country; it fell from 5.17 million in 2011 to about 4.87 in 2016.  This, however, has not led to increased employment ratios.  Open and “hidden” unemployment is now estimated at about 28 percent.  While the state enterprises and governments down-size, the expansion of the private sector has been less buoyant.  Then there is the effect of age on the Nomenklatura.  Weekly, the newspapers print obituaries of “heroes of the Revolution.” Most such heroes are in their late 80’s or 90’s, so it is reasonable to expect that by 2020 virtually few of the original Revolutionaries will be in Government.  Their departure, accompanied by Fidel’s death, reduces the legitimacy of the Government, since given the disastrous economic/social/political situation after 58 years of Revolution, this legitimacy is based almost solely on historic memories.  And, of course, on force.

    Cuba’s economic situation is dire. And although the support from President Obama’s late 2014 decisions has borne fruit, even that has not stopped the slide. Cuban GDP data are chronically untrustworthy, so the minus 0.9 percent real decline published for 2016 is surprising.  Usually the Cuban statistical office favors upticks. One careful analyst suggested the decline was likely closer to 2.5 percent and–given the news we have received so far–a similar decline is likely this year. Carmelo Mesa-Lago, known for his neutrality and care with data, points out that real wages are about one third what they were in 1989, before the implosion of the Soviet Union. This is after a recovery from the “Special Period” that followed that implosion. The drop in Venezuelan oil has likely been accompanied by its payments to Cuba for security troops and “mission” doctors and teachers, but data is unavailable. Goods exports in 2016 were down 12 percent in dollars.  To understand how bad the economy is, all one needs to know is that merchandise exports in 1958, the last year before Fidel’s advent, were higher in nominal dollars than those of last year.   Housing construction continues to decline; annual construction during 2010-15 (28,500/yr) averaged half the 1984-90 level, but 2017 may see only 6,000 completions.  The estimated housing deficit has risen from 550,000 in 2006 to 888,000 last year.  The fiscal deficit has risen from 2.9 percent of GDP in 2007 to an estimated 15 percent of GDP this year as the economy contracts.  Public services–particularly health and education–have dropped apace; education outlays, for example, have dropped by 4 percent of GDP in the last ten years. The minimum wage (about US$25/month) remains so low that no-one on it can afford even a basic basket of food.  While a new foreign investment law was passed three years ago, the response has been limited. About 395 projects were proposed in the past two years, but only 83 were approved and far less are underway.  One hope, a major port and free zone at Mariel, is stalled.  After three years only 8 firms are now operating in it, and some are simply plants that transferred operations within Cuba.

    One sector of the economy is, however, expanding rapidly–tourism.  Visitor arrivals have risen from 2.0 million to at least 2.6 million between 2010 and 2016.  (One Cuban economist put the number at almost 4 million in 2016!).  The Central Bank reports tourism expenditures; they were over US$2.7 billion in 2016.  About 350,000-370,000 Cuban Americans visit Cuba yearly and can now bring more money for their family and friends.  But other American visitors have risen from 160,000 in 2015 to over 300,000 in 2016, and arrivals from the US during the first half of 2017 have risen even faster, almost 50 percent. A Caribbean-wide gravity model predicts that without any US governmental constraints, US tourists to Cuba would eventually reach between 3 and 5 million yearly.  Canadians have long been the most important tourists to Cuba by market nation, but their numbers dropped slightly in 2016 when the Government began to quote packages in US$ instead of the depreciating Canadian dollar.          

    Trump’s recent moves–to prohibit Americans from purchasing services from military-owned places (most hotels and some clubs) as well as dropping Obama’s “honor-system” for reasons to visit Cuba–could dampen the non-Cuban-American travel growth but Cuba’s economy, like much of the Caribbean, has become vitally dependent on tourism and immigrant remittances.  Some examples: The attractive colonial town of Trinidad now receives over half its (admittedly low) municipal taxes from what the authorities call the “non-state sector.” Raul Castro’s decision over five years ago to allow private sales/purchases of housing has led to a growing market.  Foreigners are excluded from the market, but many Europeans and Americans use Cuban “presta-nombres” (borrowed names) to buy property, fix it up, and then rent it out to tourists.  One researcher noted there are about 20 multi-staffed real estate agencies in Havana (some transactions occur in Miami); there house prices range from US$5,000 to US$1.5 million.  Most agencies average only two or three sales a month; they make their money on rentals of the newly purchased and rehabilitated property to tourists.  While the use of presta-nombres is known to the authorities, they so far have turned a blind eye to the process, but any dispute will leave the foreign investor without any claim on his/her property. The tourism boom has led the Government to emphasize rehabilitation of Havana’s main tourist areas; so much so that one researcher severely lamented the deviation of resources from housing for the common Cuban to aesthetic renewal. The tourists’ desire to use the internet and cell phones in Cuba, combined with the regime’s allowance of cell phone usage by Cubans has led to a major increase in cell phone usage.  The Cuban diaspora either sends the phones to friends and family members or the funds to buy such (their cost, of course, is well above that payable by a Cuban state worker).  Blogs by Cubans have sprung up, and internet journalists now compete openly with governmental media.  Warnings, discriminatory regulations, and even occasional jailings have so far not deterred this growth.

    The tourism has also led to a boom in private restaurants, tours, B&Bs (AirB&B is very present in Cuba), mini-hotels, taxis, beauty salons, etc., all directed towards foreign tourists. While remittances are not reported specifically, Obama’s removal of a cap, the closer relationship between Cuban-Americans and their families on the island, and the great increase in small private activities (and investment) means they are likely in the range of US$3.5 billion.  But many European and American family members send equipment to their Cuban small entrepreneurs.  If you add in-kind transfers–everything from small generators, commercial water filters, kitchen appliances, etc. directed to the private “Paladares” (small private restaurants),  B&Bs, and other private activities, remittances could equal US$ 6 billion. One researcher calculated thatPaladares pay about 280 percent the minimum wage (often close to the average in the state sector).  Teachers, doctors, and other professionals have often fled their professional activities to work in the private sector. 

    What is impressive, however, is that the tourist expansion–accompanied by an equally strong expansion of private activities linked to it–has not led to overall GDP growth.  Part of the explanation is the strong comparative advantage Cuba has in sandy beaches, agreeable climate, and affable citizens.  But much of it stems from poor economic policies.  As mentioned the timid liberalization of some agricultural production and marketing has been reversed.  Far more important has been the delay in addressing the dual foreign exchange rate.  The Cuban Peso is about 24/US$1.  The CUC, another currency, is supposed to be equal to the US dollar, but the authorities charge an exchange tax of 10 percent.  Tourists are charged in CUCs, Cubans are also charged in CUCs for specific, mostly imported, items.  The disparity in exchange rates, of course, has led to massive corruption, economic “rents,” and economic perversions.  (Remember that the Cuban military control virtually all foreign-exchange earning activities! Also remember the average monthly state wage is less than CUC 30!) For years, the Government has claimed it would unify the currency, but so far all it has done recently is to transfer some more minor transactions into CUCs. This has led to the boom in employment in tourism-related private services, where the authorities–much as they would love to–cannot totally control the abundance of dollars and Euros, let alone CUCs spent by foreign tourists.  It has also led to an obvious and growing income disparity between Cubans.  The political leaders have always fared well, and so have those with family members in the US or Europe, who have sent them dollars or Euros.  But now entrepreneurial taxi-drivers, barbers, restaurant or mini-hotel owners, B&B operators and other so linked to direct payments of foreign currency are also thriving.  And the elderly (the average pension is about US$10/month), rural farmers, urban poor with no employment linked to foreign currency, and government workers remain abjectly poor.  I suspect, given that the most emigres were white, there is also a racial disparity underway as well.

    The arrival of some Cubans to ASCE meetings has made its member fully aware that Cubans know exactly what is wrong with their economy and what to do about it.  Indeed, one Cuban participant will be going on to Harvard as a visiting professor.  This knowledge has made most ASCE members increasingly reluctant to prescribe actions as they conclude their analyses; the necessary actions are obvious so there is no need to lecture.  But the corollary of this understanding is that the lack of action stems solely from political reasons. I have already mentioned the military gain immensely from the dual exchange rate.  Party leaders, and their families, would obviously lose from a regime change.  And both groups have learned strong lessons from the demise of the Soviet Union and Kadaffi in Libya; they have also learned much from the impotence shown by the US, EU, and “international community” when faced with strong, unyielding governments.  North Korea, Iran, even little Honduras, have ignored international resolutions, diplomatic demarches, and sanctions successfully, while Cuba is confronting an environment where such actions against it are being reduced. There seems little reason for the regime to relax its political controls, and the Government has so responded.  But the rapid growth of the private “cuenta-propistas” (own-account workers) is creating a dual economy more closely linked to foreign suppliers and finance.  The poverty of governmental resources and its loss of respect among many mean the authorities are increasingly irrelevant to more and more Cubans.  Some ASCE participants expressed the hope that the increased tourism, increased international exchanges, unabated economic depression, and continued growth of the private sector would force change, particularly as the “old Guard” died off and a newer generation of leaders have to confront the economic disaster caused by the Revolution.

    This may happen.  And it may not. Political repression remains strong. Soon after Obama’s visit, the Seventh Communist Party Congress was convened; its importance underlined by the fact there have been only seven such meetings in the 58 years of the Castro Regime.  The Congress firmly repeated that state ownership and management would remain paramount.  Private ownership or management of fundamental means of production would be “temporary.”  Foreign investment (easily controlled) would be the incremental stimulus to economic growth, not private enterprise.  In short, the Chinese model was firmly rejected. Cuba’ poverty restricts aggregate private savings, and the country’s lack of creditworthiness, bizarre exchange rate policy greatly restricts fiscal borrowing abroad.  This has consequences, since the transport, electricity, sewerage, water, and other systems have declined so greatly they will be a major restraint on future tourism and private activities.  One study noted that over 40 percent of Cuban Americans returning from visiting Cuba had heard of someone close becoming sick because of poor water.  It is hard to see how Cuba could marshal a quarter of its GDP in savings to finance the necessary investment to attain, say, a 5 percent GDP growth target. As one participant noted, small scale private businesses, often family run and staffed, cannot liberate Cuba from the disaster caused by dual exchange rates, governmental control of all foreign exchange, transport, construction, most housing and commerce, a stubborn bureaucracy, and a fear and rejection of market forces. Moreover, the authorities remain ambivalent even about the country’s major growth sector. The Government has continued to delegitimatize the growing squadron of private sector NGOs that have arisen.  It continues to jail dissidents who challenge it, often about perverse private incentives. And, strongly united, it continues to underline the importance of the Revolutionary myths and the socialist command of the economy.  While major reforms and change are thus unlikely in the next five years, after that all will depend after that on the determination of the Nomenklatura, military, and Socialist leaders of Cuba.  So far, bets against them have been losing propositions.