Cuba Providing Loans to Bankroll Reforms

Fernando Ravsberg

Cuba’s banks will begin making loans to the self-employed workers. Photo: Raquel Perez

HAVANA TIMES, Dec 26 — At 500 bank branches throughout Cuba, on-going credit commissions are being set up to begin making loans for business start-ups and expansion.

These commissions will be charged with conducting a risk analysis of each application received, which will be crucial since the law does not allow banks to confiscate collateral from debtors.

In fact, there are many Cubans who have received loans to buy their houses and appliances but have never made payments on their debt.

The purpose of these loans appears to be the “capitalization” of self-employed workers and small farmers so they will become the ones who occupy the space of [private sector] “businesses” in Cuba in the long-term.

Presently, most of those Cubans with capital are people who have managed to accumulate funds illegally – some as simple criminals, others as corrupt officials.

“The only way for us to avoid the same thing that happened to the Soviet Union is distributing the “kake” (cake) among the workers,” said an economist at the University of Havana.

This is the latest of the reforms adopted by Raul Castro since he officially assumed the presidency of Cuba four years ago. The kickoff was land reform, which involved taking away unproductive parcels from state farms that left more than 50 percent of their arable land unsown, which ultimately cost the country $1.8 billion in food imports.

It didn’t require a major study to realize that these lands needed to be turned over to small farmers who produce 70 percent of the nation’s food on only 20 percent of the land. Such farmers were recently granted 3.2 million acres and production immediately began to increase.

Nonetheless agricultural activity continues to suffer serious problems. The first is the weight of a huge bureaucracy; the Ministry of Agriculture alone has 1.2 million employees.

They are the ones who have created a complicated centralized distribution system that has caused the decline and even the loss of crops.

At the same time, they’ve been incapable of guaranteeing basic tools and inputs for farmers for their work, meaning that if there’s nowhere to buy these, not even bank loans will solve that problem.

Self-employed workers and prohibitions

Another significant reform was the authorization of self-employment in a country where 90 percent of the workers were government employees.

Within a few months the number of self-employed individuals increased from 100,000 to 300,000 – not counting the new farmers, which added another 150,000.

This self-employed segment of the Cuban economy is expected to expand by a half a million more workers who will be laid off from government employment in the coming years.

With this change, the state is reducing it payroll while increasing its tax revenue, since government workers don’t pay taxes but the self-employed do.

For many years in Cuba, appliances and homes were sold with bank loans. Photo: Raquel Perez

Shortly after being elected president, Raul Castro began eliminating prohibitions that — in addition to being absurd — were unconstitutional, economically counterproductive and socially painful.

He reopened hotels to Cubans and authorized the use of cellphones and the purchase of computers.

He immediately increased the collection of hard currency, which citizens had been keeping “under their mattresses.”

By 2010, Cubans living in Cuba became the second largest group of tourists lodging in hotels, behind the Canadians but ahead of emigrants returning to visit the country.

The opening of the automotive and real estate markets — closed for half a century — will also generate revenue since the 4 percent tax levied on those transactions will go into the government’s coffers.

For citizens, this is the beginning of an era of peace since previously all of these transactions were made on the black market, which involved substantial risks.

Human rights and corruption

Following an agreement with the government of Spain and the Catholic Church, Havana released its political prisoners. More than a hundred prisoners were freed, including all described by Amnesty International as “prisoners of conscience.”

Remaining behind bars are those convicted of violent actions such as planting bombs in hotels or killing civilians. Nonetheless, they benefited from a pardon that commuted the death sentence.

Dissidents insist that there are still political prisoners being held, though they don’t agree on the numbers. Berta Soler, the leader of the Ladies in White explained to us that “we also consider those who steal a boat in order to leave the country to be a political prisoner because they are stealing something from the government.”

Nevertheless their calls lack resonance; Cardinal Jaime Ortega told the foreign press that the matter of political prisoners “is now a closed issue.”

The government seems to have realized that the dissidents are not their most dangerous enemy; rather, it’s the corrupt bureaucracy, which has become the major obstacle to the reforms that would limit their power and make it difficult for them to embezzle.

The bureaucrats are powerful because they operationally control the entire economy. They consist of everyone from the managers of enterprises and farms to the directors of hotels and some ministries.

The government is waging the battle through the newly created Comptroller’s office, whose work has led to the discovery of fraud in the aviation, tobacco and nickel industries, in telephone services and within some of the major foreign companies operating in Cuba.

As a result, dozens of domestic and foreign entrepreneurs — including a government minister — now occupy the cells of the released dissidents.

The 2012 in the Cuban calendar

This year will be crucial for Cuba. At the end of January, a conference of the Communist Party is expected to give the ideological, political and legal framework to the reforms.

For example, the authorization for “self-employed workers” to hire other workers will involve changing the article of the constitution that prohibits human exploitation.

It is also hoped that some members of the Sierra Maestra (pre revolution) generation will retire, opening the way for younger cadres who will be called on to replace the current circle around Raul Castro in a few years.

Raul Castro’s government initiated the reforms to transfer land to small farmers. Photo: Raquel Perez

Citizens expect to start the year with a new immigration law that will eliminate the long, cumbersome and expensive procedures to which they’re subjected every time they leave the country.

It’s speculated that both the Permiso de Salida (Exit Permit) and the Carta de Invitacion (Letter of Invitation) will disappear, which cost close to $200 each.

Children will be able to travel with their parents and the maximum time abroad will be increased beyond the current limit of 11 months.

In addition, while the Communists discuss these matters at their Conference and citizens enjoy greater freedom of travel, the Repsol oil company (Spain) will be conducting its first drilling in Cuban waters.

Several companies are in line hoping to use Repsol’s Chinese made platform in other areas off the Cuban coast.

If significant reserves of oil and gas are found, the economic and financial situation of the island will improve immediately.

3 thoughts on “Cuba Providing Loans to Bankroll Reforms

  • if the u.s. geological survey is right cuba will be the next saudi arabia.

  • This is a heartening article. It reveals that the Cuban economy is no longer in a nose dive, and may be able at some point to level off and avoid a crash.

    Leveling off however is not enough. The economy will have to gain altitude and lift the people out of their social malaise.

    I think that the PCC ideologues need to revolutionize their thinking with regard to private land ownership. Small farmers can do without that unbelievably massive Ministry of Agriculture bureaucracy that has 1.2 million employees. All that is needed is for them to be given, or sold at reasonable prices, their own plots.

    It is not landed property that constitutes capitalism; it is private land ownership under a capitalist state power. Since Cuba has a socialist state, and can guide production–of all sorts–through democratic and scientific planning, private plot ownership would eliminate the bureaucracy and quadruple agricultural production.

    A Cuba in which private plots are legally owned by small farmers would make the country rich in short order.

  • This is exactly what I believe will happen, Drilling will be crutial for the Island

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