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Cuba: Saving socialism, with help from the market

Changes include more investment, ending ration system and liberalizing real estate market.

Cuba economy, economic reforms
A Cuban reads the Project for Economic and Social Politics in Cuba, on Nov. 9, 2010, in Havana. (STR/AFP/Getty Images)

HAVANA, Cuba — With Raul Castro warning that Cuba will fall “off a cliff” if it does not fix its floundering economy, his government has issued a rescue plan to pull the country back from the edge, offering some of the most significant policy changes in a generation.

In a 32-page booklet titled “Guidelines for Economic and Social Policy,” the Western Hemisphere’s last communist government has laid out a 291-point plan for a reformed Cuba. It doesn’t exactly embrace capitalism, but still represents a major departure from the egalitarian ideology that has ruled the country for decades. Copies of the booklet have been sold out at newsstands in Havana since its release on Nov. 9.

The guidelines call for an expanded private sector and opening the country to greater foreign investment, as well as the elimination of the long-standing food ration system and a liberalization of the real estate market. They propose to build golf courses and marinas for tourists, liquidate state-owned companies that don’t turn a profit and create Vietnamese-style “special investment zones” to attract global industry.

The Economist magazine called the measures “bold changes intended to preserve Cuban communism,” that, nevertheless, “may herald the beginning of its end.”

Sensitive to such I-told-you-so jeers from critics abroad, and stung by detractors on the left who accuse Cuba of “abandoning” socialism, the guidelines insist the firm hand of central planning will remain at the tiller, not the market’s invisible one.

"The economic policy in this new phase will follow the principle that socialism is the only way to overcome our difficulties and preserve the gains of the Revolution, and that as we update our economic model, planning will be paramount, not the market," it states.

Still, the measures aim to reduce state bureaucracy and create a more heterogeneous economy, with mix of public-private business, cooperatives, private leases on state property and self-employed entrepreneurs, while making clear that the government won’t allow anybody to get too wealthy.

“The concentration of property will not be allowed,” the guidelines firmly declare, lest anyone think Cuba might try to copy China.

The proposals were printed after Castro announced that Cuba will hold its sixth Communist Party Congress in April, the first since 1997. The occasions are typically used to unveil new policy and personnel changes, and supposed to be held every five years.

While some have speculated that 84-year-old Fidel Castro may use the event to formally retire from his position as the Communist Party’s top official, his 79-year-old brother said economics, not politics, would be on the agenda.

Over the next five months, Raul Castro has said, Cubans will have a chance to weigh in on the proposals in their neighborhoods and workplaces, calling for “open discussions with the people on any topic, no matter how sensitive.”

The guidelines present a grim portrait of a failing economic model. Exports have plunged. Fifty percent of state-owned land is idle and unproductive. The country suffers from “inefficiency, underinvestment in infrastructure and productivity, and an aging population that is stagnant," the booklet reads.

Cuba plans to lay off 500,000 state employees by April, and another 800,000 might also be trimmed in coming years, so the proposals indicate how the government expects to create jobs for those workers. Even after the cuts, some 60 percent of Cubans will continue to be employed by the state.

University of Havana economist Juan Triana called the proposals were the most important government document since 1975. “It reaffirms the revolutionary essence of our political system, but changes the philosophy of our economic management,” he said in an interview with Venezuela’s TeleSur.

Several of the proposals would have an immediate impact on the everyday lives of Cubans, such as the government’s plan to eliminate the food ration system that has been the cornerstone of the Cuban diet since 1962. The guidelines describe the ration system as one that “caters to those who need it as well as those who don’t, encouraging barter, resale, and black market practices.”

Item #278 proposes to allow Cubans to buy, sell and rent properties, transactions that now occur largely through underground, off-the-books deal. That would create the potential for a much more dynamic real estate market, but it’s not clear if Cubans will be able to sell their properties to foreigners, or Cuban emigres looking to return to the island or invest here.

Dissident economist Oscar Espinosa Chepe said he though the proposals amounted to a “wish list,” and called the proposed measures “superficial,” saying they didn’t go far enough to deliver the radical changes Cuba needs. “They don’t get to the root of the problem,” he said. “The mentality continues to be the same, he said: tight control by the State and the Party."

“These are changes designed to make sure that nothing really changes,” Espinosa Chepe added.

Editor's note: This story was updated to correct the date the guidelines were released. It was Nov. 9, not Nov. 8.

http://www.globalpost.com/dispatch/cuba/101115/cuba-economy-reform