Cuba still allergic to private property as reforms creep forward

Cuba still allergic to private property as reforms creep forward
By Marc Frank

HAVANA (Reuters) - Every Monday in the bowels of Cuba's Palace of the
Revolution, a group of men and women charged with revamping the island's
moribund economy meets to review progress in building what they have
dubbed "a prosperous and sustainable socialism."

They have their work cut out for them, as demonstrated by the recent
discovery by Panama of decrepit Cuban weaponry on its way to North Korea
for repair, a walk down any potholed Havana street or the Cuban
government's admission that 58 percent of water pumped from reservoirs
is lost to leaky pipes.

The men and women are members of a Communist Party commission charged
with carrying out a 313-point, five-year plan to modernize the economy
that was adopted in 2011.

First Vice President Miguel Diaz-Canel, in a recent interview with Cuban
journalists, said the weekly gathering was chaired by the man he is in
line to succeed, 82-year-old President Raul Castro, and reviewed "all
the advances in terms of designing policy."

Talk of selling the state's more than 90 percent stake in the economy is
apparently not on the agenda of the Monday meetings, according to the
head of the party's reform commission, Marino Murillo.

Murillo told National Assembly deputies earlier this month that those
outside and inside the country who thought his commission was restoring
capitalism or planning a fire sale were terribly mistaken.

"You can't confuse transformation of property with modernization of its
management; they are two different things," Murillo said in a two-hour
speech.

"It (modernization)... does allow for new actors in the non-state sector
(farms, small businesses, cooperatives and joint ventures)," Murillo said.

The non-state sector, which includes employees of small businesses and
many people "working for themselves," such as taxi drivers and produce
vendors, currently comprises 23 percent of the 5.1 million member labor
force, according to Carlos Mateu Pereira, an adviser to the minister of
labor and social security.

Murillo said central planning still ruled but would become more of a
"regulator, not administrator" as the market was given more sway in
pricing and other business decisions.

Murillo used agriculture to illustrate what he meant. He said 70 percent
of the land is leased to co-operatives and small farmers while 20
percent is owned by private farmers and their cooperatives. State
companies occupy 10 percent of the land.

Murillo said an increasing amount of what the farms produce was being
sold on the open market, about 47 percent currently, bypassing the
state's wholesale trade monopoly.

CAUTION RULES

To those who believe modernizing the economy is moving too slowly
halfway through the five-year Party plan, Cuba's president at the July
parliament meeting said, "There will be no shock measures here like in
Europe."

Economic growth in recent years has averaged around 2.5 percent despite
reforms, compared with the 5 to 7 percent economists believe is needed
for development. Achieving that will require significant foreign
investment, they say.

No speaker at the week-long National Assembly meeting dedicated to the
economy mentioned foreign investment.

None of the foreign companies managing and participating in joint
ventures in Cuba, 190 at last count, own any property outright, nor do
they have the right to sell shares except with the authorization of
their state partner.

According to Diaz-Canel, reform is indeed a painstaking process as it
moves from lifting prohibitions on personal property, travel, minor
economic activity and farming, to "a crucial and defining stage" where
such thorny issues as the island's dual monetary system and the
inefficiency of state companies are the focus.

Since the fall of the Soviet Union Cuba has had two currencies in
circulation - the peso, valued at 25 to the dollar, and a dollar
equivalent called the convertible peso, making accounting, budgeting and
other matters extremely cumbersome.

Policies are proposed at the Monday meetings by commission
subcommittees, he said, and then experiments launched to prove their
efficiency, with studies to examine the impact of cutting subsidies and
unleashing market forces on a society unaccustomed to living this way
for the past 50 years.

There are many pilot projects these days.

For example, a wholesale market where farmers can buy supplies, instead
of the inputs being assigned by the state, or an experiment in two
provinces aimed at downsizing government.

At the same time, earlier pilot projects are now being generalized, such
as the leasing of thousands of tiny state retail services to employees
and larger ones to cooperatives, or allowing state companies to sell
excess product on the market and keep 50 percent of their profits after
taxes.

"This is very much like the early days of reform in Asian communism,
when the Communist Parties tried to hold on to everything and restrict
all investment," a western diplomat said.

"They soon learned that it wouldn't work and opened up further."

(Editing by David Adams and Cynthia Osterman)

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