September 30, 2010

ELECTIONS WILL BE FOLLOWED BY A BOOM:

Towards a mixed economy: Economic reform begins in earnest (The Economist, Sep 16th 2010)

This amounts to the biggest shake-up of the economy since Fidel Castro expropriated small businesses in 1968, impressing his Soviet benefactors by bringing almost all workers, from shoeshiners to barmen, under state control. In the mid-1990s, when the Soviet Union and its subsidies to Cuba disappeared, Fidel reluctantly allowed Cubans to use the American dollar as legal currency and to engage in petty trade (such as renting rooms and setting up small restaurants). But many of those businesses folded because of high taxes and the complexity of obtaining licences to operate. When Venezuela’s Hugo Chávez became Cuba’s new benefactor, offering cheap oil, Mr Castro re-centralised the economy.

Raúl Castro has frequently expressed his exasperation at Cuba’s chronic inefficiencies. "We have to erase forever the notion”, he told the National Assembly last month, “that Cuba is the only country in the world where it is not necessary to work”. The country can no longer afford this: the price of nickel, the main export, has fallen. The world recession has cut tourist numbers. The island suffered hurricane damage in 2008. With half of its agricultural land unproductive, Cuba imports 80% of its food. It has struggled to make hard-currency payments.

Earlier this month Fidel Castro himself let slip to a visiting American journalist that the Cuban economic model “doesn’t even work for us any more”.

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Posted by Orrin Judd at September 30, 2010 2:29 PM
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