As Cuban economy stagnates, economists press for deeper reforms

As Cuban economy stagnates, economists press for deeper reforms
BY MARC FRANK
HAVANA Fri Oct 24, 2014 12:46pm EDT

(Reuters) - Some of Cuba's best-known economists are openly questioning
the very core of the Soviet-style command economy and saying market
reforms under way are too modest to boost weak growth.

Emboldened by freer debate in the country, they are increasingly vocal
in criticizing rigid instructions coming down from the top and the
uneven management of policies across the economy, from banking to
agriculture.

Their influence on government policy-makers is difficult to gauge due to
the secretive nature of the ruling Communist Party, but they clearly
have been given leeway to call for changes.

Seeking to build a "prosperous and sustainable" socialism, President
Raul Castro pushed through a 311-point reform agenda that was adopted by
the Communist Party in 2011.

It has led Cuba to liberalize farming and retail services by turning
much of them over to cooperatives and allowing small private businesses.
The Caribbean island is also actively seeking foreign investment.

Castro, who took over from his older brother Fidel in 2008, has
repeatedly said he despises false consensus and has encouraged debate as
long as it takes place within the system.

The economists now talking out are generally members of the Communist
Party and some have contact with high-ranking officials, suggesting they
may be able to influence the debate inside government on the speed and
scope of reforms.

They have called for economic reforms for years, but never targeted so
sharply the very pillars of the system.

Juan Triana, one of the best-known and most influential economists, says
the government's reforms have signaled a reliance on market mechanisms
but officials have still not embraced competition for core parts of the
economy and more than 2,000 state companies.

"The cost of not recognizing the importance of competition for
development are paid in lower rates of growth than the potential, the
incorrect assigning of resources, lower than possible rates of
productivity and efficiency, and most of all a lack of incentives for
innovation, one of the principal motors of development," he said in a
recent presentation to mid-level government officials and peers at a
seminar in Havana.

The seminar was hosted by the Havana University Center for the Study of
the Cuban Economy, known for its bold stand for reform over the last 15
years and its criticism of the status quo.

Speaker after speaker joined Triana in urging deeper reform, according
to copies of presentations seen by Reuters. Central planning, the
government's sway over strategic company decisions and the state's
monopoly in foreign trade were all criticized.

"Probably, the so-called state monopoly on foreign trade is a big
obstacle to the diversification and growth of exports," said Miguel
Alejandro Figueras, winner of Cuba's top economics prize in 2007.

While Castro's reforms have raised the expectations of many Cubans, they
have largely disappointed. Public frustration over a lack of well-paid
jobs has contributed to a sharp increase in the number of Cubans risking
dangerous and illegal journeys on home-made boats in search of better
opportunities in the United States.

"Most Cubans support the reforms but are coming to realize that much
more needs to happen. I think everyone from top to bottom is concerned
with the numbers and reality on the ground," said one Cuban economist,
who asked to remain anonymous due to a prohibition on talking with
foreign journalists without permission.

FOLLOWING CHINA AND VIETNAM

The economists generally believe Cuba's leaders are listening, in part
because the reforms so far have failed to lead to growth. They say they
hope to reinforce the more reform-minded leaders in closed-door debates
at the highest levels.

Many liken Cuba's process to the first years of reform in China and
Vietnam, when partial measures proved ineffective and eventually gave
way to deeper reforms.

But Castro has moved at a deliberate pace, and despite official calls
for a more critical press unorthodox views rarely get aired in the
state-controlled media. The government revised down its economic growth
forecast for this year to 1.4 percent, a second straight year of slowing
growth, and food prices are rising on average 10 percent a year.

Meanwhile, more than 70 percent of the economy remains in state hands,
usually in the form of monopolies.

At the recent seminar, economist Jorge Mario Sanchez criticized state
monopolies as out of step with a growing mixed economy and international
competition.

"The state-centrist culture of production and trade by the state and for
the state should begin to transition to another broader mode from and
for society," he said.

Others say harsh U.S. economic sanctions against Cuba are only partially
to blame for a lack of state financing and delays in the arrival of
supplies and parts, which lead to disruptions in production and shortages.

"Our top leaders are very aware of these problems, but unsure how to
proceed without creating greater inequality," said the economist who
asked to remain anonymous.

Hal Klepak, a Canadian military historian and author of two books on the
Cuban military and Raul Castro, said he thought Castro and other leaders
"find criticism welcome not because it is comfortable but because it
allows them to push for more and faster movement of a deeply cutting kind."

"There will be more and deeper reform since there is really little hope
for any other option," Klepak said.

Another outside expert differed, doubting that major changes were coming
any time soon.

"There is still no blueprint as to where the major state-controlled
sectors will be in 5 or 10 years time," said Paul Hare, a former British
ambassador to Cuba who now teaches at Boston University.

(Reporting by Marc Frank; Editing by Daniel Trotta and Kieran Murray)

Source: As Cuban economy stagnates, economists press for deeper reforms
| Reuters -
http://www.reuters.com/article/2014/10/24/us-cuba-economy-idUSKCN0ID1OA20141024