Does the Cuban Economy Really Demand Big Changes?

By Alejandro Langape

HAVANA TIMES – The new draft Constitution, being proposed to Cubans in a referendum set for February, 2019, is being debated between two dichotomous positions that are forced to stand side by side: change and continuity. Two slight amendments can be seen as early on as Article 5 and become a symbol of this rivalry.

On the one hand, the adjective “fidelista” has been added to describe the Cuban Communist Party, while the reference to “moving towards a Communist society” has been erased. Therefore, the new Constitution would be a reflection of the Cuban revolutionary process in circumstances that impose social, political and economic changes in Cuba and the world in recent years.

While most of us understand that economic changes need to be reflected in a new Constitution that clarify how we should act as citizens in a country where an economic system based on socialist property rules, the reality is that the draft Constitution continues to leave us with many doubts (at least yours truly) about the extent to which the constitutional committee understands our new reality.

Under Title II (Economic Principles), corresponding to Chapter 1, we come across ambiguous Article 22 which stipulates that: “The State regulates that natural or legal persons from the private sector cannot accumulate assets, in order to preserve limits that are in keeping with socialist values of social equity and justice.”

In a country where many people have managed to gather together a significant amount of capital (whether that’s because they were able to get different businesses up and running, or because of their talent as artists, athletes or something else), banning the existence of multiple ownership is a pipe-dream, because what would the owner of the restaurant where Fresa y chocolate was set, the musicians in Gente de Zona or baseball player Alfredo Despaigne do with the considerable sum of money they receive?

However, there aren’t only doubts about what asset accumulation means and what kind of assets it refers to, but also about what kind of regulations this will involve.

Thus, I find myself wondering whether it wouldn’t be a lot clearer and less speculative if the Article that defines that the State recognizes and respects the existence of multiple ownership (which is a reality today and covered up using friends and relatives names) and regulating its existence with an incremental tax, with a cap if they want to establish these ambiguous “limits that are in keeping with values of socialist equity and justice”, which is another phrase that is open to many different interpretations.

Does it then make sense for the Article to appear in the Constitution as it is? Can the government regulate asset accumulation without turning “regulation” into a witch hunt of so-called “entrepreneurs”, who are having a more and more important influence on the national economy? I repeat, what would happen to those who have accumulated wealth in an honest way and now want to invest it in other kinds of assets? Will we go back to the days of expropriations?

Reading on, Article 25 of the Constitution leaves us with further doubts about how Socialist state-owned companies work. In Paragraph 105 (which corresponds to this article), it stipulates: “The State is not liable for the obligations entered into by the companies (…),” which refers us back to Article 17 of the current Constitution in force where it states (in the exact same words), that it is clearly referring to the fact that “These enterprises and entities will only pay their debts as far as their financial resources allow for.” 

If Article 22 is chaotic and ambiguous in its conception, it at least recognizes Cuba’s new reality and the existence of a social group with greater economic means, while Article 25 seems to ignore them. The thing is, today, many of Cuba’s state-owned companies that contract production and/or services from natural persons (including any kind of cooperative) need to be sure that their work will be compensated in time and money. Come on, in a world where States have gone and saved private banks, it’s contradictory that the Cuban government (owner of these companies) doesn’t answer for the obligations that these take on, understanding these to be such payments.

In other words, imagine that a dog bites you and when you complain to the owner they just shrug their shoulders and point to the dog. And the reality is that more than one Cuban citizen has found themselves on the receiving end of state-owned companies’ indolence, who fail to respect their contracts (not only with natural persons, but with other state companies) repeatedly, failing to make payments when they are due or failing to collect produce that has been ordered beforehand.

This has happened with harvests of vegetables, fruits and other things, but it has also happened with craftsmen and other economic players of this diverse group called the “self-employed”, not to mention cooperatives.

What alternative will they have when the companies that contract their produce and/or services with go bankrupt? Will they enact a Bankruptcy Law that forces defaulting companies to pay off their tangible assets to honor their commitments? Would this situation fit in with what is set out in Article 30 that proposes and establishes that: “The expropriation of property is authorized only for reasons of public utility or social interest and with due compensation”? Does this indifference go hand-in-hand with efficient management control and audit?

The reality is that socialist state-owned companies aren’t the only ones that exist in Cuba, but it’s also true that many thousands of Cubans continue to work in these kinds of companies day in day out, which are poorly managed economically, incapable of bringing in profits and offering better wages to its employees in turn. This leads me to look at the last article that touches on the economic section, Article 31, which is the one that mentions labor and has given rise to many reflections at the neighborhood discussions held to debate the draft.

Many of us support labor being considered a fundamental value in the Constitution, but some people are going one step further and demanding that work be considered an obligation and not just a duty. However, this would contradict ILO’s international agreements which Cuba has ratified, as well as social reality because it isn’t absurd for us to ask ourselves today: is labor really the main source of income that helps Cubans realize their personal projects?

With a minimum wage of just 10 CUC (=USD) per month and an average salary that doesn’t exceed 30 CUC, for any Cuban who gets a little bit more because of remittances, dedicating at least 44 hours per week to any job, with the obligations and risks that this might imply, doesn’t make sense, and labor as a value succumbs to our socio-economic reality.

How do we change this reality then? Will this new series of articles stop or encourage the economic boost that Cuba needs? To what extent can change and continuity be compatible? Please, think about this while I take a look at other points in the Constitution.