Posts Tagged ‘economy’

Economic Reality is Complex, but with Good Signs

July 10, 2013


The economy had a positive first half year, although it is estimated that it will not be possible to fulfill the year plan. The GDP is expected to grow between 2.5 and 3 per cent. There is a surplus in the budget, however, underreporting of income and indiscipline in payment on time persist

By: José Alejandro Rodríguez, Margarita Barrios and Alina Perera –

The tensions caused by the global crisis and damage by Hurricane Sandy, that caused heavy losses in several provinces of the country, have not prevented the favorable behavior of the national economy, whose Gross Domestic Product (GDP) grew in the first semester by 2.3 percent, higher than the same period the previous year.
For the member of the Politburo and Minister of Economy and Planning, Adel Yzquierdo, this reflects an appropriate reaction in most of the economic activities of the country and that a positive economic development is occurring.
Despite this upturn, he acknowledged that a lower growth than planned is estimated for the year end. This will be as a consequence of the global situation, the difficulties in obtaining external finance, among other factors, including domestic, that will result, undoubtedly, in a failure to achieve the growth rate of 3.6 percent planned, and he only projected it to be between 2.5 and three per cent.
The Minister recalled that in the First Regular Session of the Eighth Legislature of the National Assembly of People’s Power, attended by the First Secretary of the Party and President of the Councils of State and Ministers, Army General Raul Castro, in the Council of Ministers and the Central Committee meeting, held recently, he gave a detailed report on the matter, to which all members had access, which allowed him not to detail every aspect.
He explained that 70 percent GDP growth is related to trade, transport and industry, and said that the latter also shows a positive trend, as its contribution to the GDP was more than four percentage points up compared to the same period in 2012.
As another expression of favorable economic development he mentioned the behavior of the trade balance of the country in the period. He said that we will increase exports and import less, although this benefit is relative, he said, because the money we do not spend is for investments that will not be realized, and these are important because they are what make development.
As a positive example of that correlation he mentioned the subject of food, because it is a key line. He noted that while we imported about 2,000 million dollars last year, in the first half of 2013 came a saving of 168 million, thanks to a joint effort between the Ministry of Foreign Trade and the Foreign Investment. Among the strategies to achieve this reduction he highlighted the incorporation of new suppliers and making purchases in other countries.
This could be more positive if the problems in the contracting and collection of products to be produced by the country could be solved, and for that reason nearly $ 47 million was spent on purchases over the plan, which involves a decrease in the savings that had been achieved.
With regard to external finance and the payment of debt, he pointed out that it has been in strict compliance with the commitments. There has been progress in the use of external credit, with better use of the capacity.
He also highlighted that the retail trade turnover in CUP and CUC, grew by six percent in the first half, although failures occurred in some lines, as in the sale of eggs.
In addressing this issue he specified that Hurricane Sandy caused heavy losses, which amounted to 7,000 million dollars, which negatively impacted on the country’s production results.
The Minister said that the generation and use of energy also had a positive result. Some 50 percent of the oil and gas used is produced in the country, and the use of electricity also has positive parameters.
Another area in which growth is being achieved, but where problems and defaults occur, especially through low technical availability, is in transport, which affects the public services. The bus passenger transportation is affected by the deteriorating technical condition of the equipment, especially in Havana.
Investments also achieved a significant increase, by 16 percent, lower than expected, but productivity remains low, the labor force has a deficit and there is poor planning of the works. He noted that the Ministry of Economy and Planning (MEP) is reviewing the investment plan, in conjunction with the Ministry of Construction, and this is not yet prepared and cannot be included in this document.
Yzquierdo specified negligence have been detected in the execution, for which help has been asked from the Attorney General, as this is an old problem that must be resolved, because the resources that the country has must used well and not used for other purposes .
Another negative note is the plan to build homes in the capital, which will be missed, because it was too ambitious and has lacked the resources, so about 500 of those planned will not be completed.
In Santiago, the plan is also strong, he recognized, and although they have had problems with the supply of resources there is a commitment to comply, and it is expected to complete all the planned homes, which also includes those which were lost by damage from Hurricane Sandy.
Private building has also failed in the first half, because people bought the resources mainly to improve the house they have, but have yet to fulfill the plan for the year, amounting to about 13, 000 homes.
Finally, the MEP minister stated that with regard to employment, this should decrease in the state sector and the non-state will grow, especially since the new management approved for self-employed.

Budget surplus in the first half year

The news was given by Lina Pedraza, Minister of Finance and Prices, reporting on the implementation of the state budget at the end of the first half of 2013: there is a surplus, that is, net income was over-fulfilled by 4.3 percent, and expenses are estimated to be 92.4 percent. Put more clearly: less was spent than came in.
The main excess incomes are those from the corporate income tax, the extraordinary taxes from state enterprises, and those related to social security contributions, among others.
She said, however, there have been failures in planning and there are aspects that have not been considered, which explains certain levels of overachievement.
In terms of personal income tax, which taxes the self-employed and artists, there is a surplus of almost 40 percent. But there have also been unfavorable elements, like underreporting of income and indiscipline in the payment on time.
“So-she said- the actions that the National Tax Administration Office (Onat) has developed must be deployed, and that henceforth must be implemented, with all the strength that our country needs.”
There has also been a default in taxes on services of 50 million pesos, essentially the payment and below by housing landlords according to their income statements. In this regard, he said, the Onat must make a special and d ifferentiated work to discipline and bring order.
Breaches are present also in the circulation and sales tax. Although at the level of the economy commodity circulation overfulfilled the plan, internally, in certain facets, there have been shortcomings. Therefore, these arrears that are presented in some products in the first half, have caused deficits of 388 million pesos.
Other breaches come from contributions from state enterprises that have claimed lack of liquidity.
As for the spending, he said that the 92 percent compliance can be interpreted as a bonus, but this is not always positive. Among the causes for not reaching the amount of planned expenditure are problems such as the non- completion of the payrolls, market shortages, low implementation of building maintenance as well as shortcomings in the planning and budget programming.
Pedraza recognized the need to review everything, because cracks were detected in the execution of the budget, which must be designed in a more realistic and scientific manner.
He noted that the deficiencies in the accounting records continue to occur and kept gravitating to the results of the budget execution.
The expenses of business activity were 100.7 percent, which was expected. And, this is because subsidized retail prices cost 2,104 million pesos as expected. In the enterprise system the budget has supported in this stage what has corresponded to ensure they meet their commitments.
It is estimated, he said, that the execution of the state budget at the end of 2013 will conclude with a budget deficit of 388 billion pesos. Everything depends on how we manage performance levels of the economy and the income expected.

Reasonable performance, but there are still shortcomings

Another point discussed by the deputies was the liquidation of the state budget at the end of 2012. In presenting the Report on the State Budget settlement for that year, Lina Pedraza Rodriguez, Minister of Finance and Prices, said that such execution is recorded in the midst of adverse conditions due to the effect of rising food prices in the world market, the tightening of the U.S. blockade, and the impacts of the global economic crisis of capitalism.
She reported net revenue to the State Budget is executed one hundred percent, though there were defaults on contributions from sales of building materials and agricultural inputs, uncommitted sales achieved, which was offset by revenue collection released on product sales, from the domestic industry, which overachieved.
The proceeds from concept of Income taxes that are associated directly to the business efficiency obtained were exceeded. However, the expected levels in the Ministries of Internal Trade and Agriculture and on the Boards of Directors of the provinces of Pinar del Rio, Havana and Las Tunas were not achieved. And, revenue from the State Investment Performance was more than 570 million, down, mainly due to the creation of voluntary reserves higher than expected.
Through the Personal Income Tax 870 million pesos was propduced to the budget. The contributions from the self-employment and other forms of non-state management maintained their upward trend, mainly, in their participation in local budgets.
However, problems are evident in the fiscal discipline of individuals. The National Tax Administration Office, through audits conducted, determined debts amounting to about 10 million pesos, and among the causes are included the failure of payment of taxes on time, underreporting of income to pay less taxes and the illegal practice of activities in order to avoid obligations
Still, we managed to close the year with the fiscal deficit approved by the Budget Act, which represents 3.8 percent of GDP. Discrete overachievements were achieved in several areas that allowed compliance of tax revenues at 100.7 percent. However, the minister of the MFP noted that there are still many potential reserves of revenue in the budget, both in taxable items as in other contributions.
Pedraza emphasized, as an essential task, the deepening in the control of the state budget on different scales and in reducing expenses in budgeted activity.
The minister said that to ensure adequate control of the state budget, they continue working and studying in depth the methodological issues through phased implementation of Governmental Accounting and updating the procedure for verification of expenditures at all levels, among other actions made in the period.
She noted that the budget performance shows weaknesses in the planning and in the quality of accounting budgeted units and enterprises as well as deficiencies that denote superficiality in the analysis of the causes of deviation, revenues and expenditures with respect to activity levels executed. And in this regard, we can see that the internal regulations to control the budget allocated to payments to the self-employed have not been adopted.
The lack of control of material and financial resources remains, and gaps in previous years on the control of the Work and Wages category have been identified and the absence of effective economic contracting.
Breaches of Treasury system procedures were detected and in the financial information that is provided contained errors and is not consistent with the accounting.
Added to this were the existence of breaches of legal rules, inadequacies in the accounting records, absence of updated internal procedures, among other deficiencies, which have been revealed in the results of the audits.
They identify that the main causes and conditions conducive to such results are staff turnover, lack of completeness in the payrolls, inadequate working conditions in the municipal and base units, as well as inadequate technical and managerial training, a situation sustained for years, and it is necessary that at every level solutions are prioritized.
After the filing of the report of the Committee of Economic Affairs by its president, Grisel Castro Alfonso, the deputies undertook a thorough analysis of the challenges to the country’s fiscal policy.
Armando Utrera warned that to strengthen the culture and rigor of controls raising the technical mastery and preparation of specialists of the economic-financial and accounting is required, and at the same time. the preparation and information of the population in such disciplines.
In this regard, the first vice president of the Councils of State and Ministers, Miguel Diaz-Canel, stressed the importance of such training to make the transformations that the updating of the Cuban economic model involves. He proposed that the Ministry of Finance and Prices, in conjunction with the Ministries of Education and Higher Education, organize programs and actions for improvement in this regard.
On this, the parliament member Gilberto Andrés Miranda highlighted the ever increasing potential of having higher education increase the self-financing of the sector and generating more revenue to the economy, a development supported by the Higher Education Minister, Rodolfo Alarcon, who said the purpose of the Cuban universities is to lessen the budgetry burden of the country, after the elimination of the obstacles and mechanisms that bind it.
For his part, Rep. Jose Luis Toledo gauged the importance of information, communication and training on an issue as crucial as tax, which can not stick to temporary campaigns and be isolated when they reach settlement times, but must become ongoing and systematic.
Deputy Regla Martinez also said that in order to encourage the culture and rigor of taxes, they must include in these programs priorization of the self-employed, so that those who shirk their duties and do not contribute as unfair competition to the exchequer can be neutralized.
Marino Murillo, Politburo member and head of the Standing Commission for Implementation and Development of the Guidelines of the Economic and Social Policy of the Party and the Revolution, subject to consideration of the deputies the progress report of that process.

Parliament received a Hero

René González, the first of the five Cubans who returned to the country after serving unjust sentences in U.S. jails, Hero of the Republic of Cuba, spoke on Saturday at the First Session of the Eighth Legislature of the National Assembly of People’s Power.
Before that the deputies had observed a minute of silence in tribute to Jaime Crombet, who for 19 years was vice president of the legislative body.
Esteban Lazo, Parliament President invited René to address the deputies. The Hero thanked them for the support of the highest organ of state power of our country to the cause of the Five, and said that this is a commitment by the members and all the people.
The case of the Five is a crime committed against all mankind, and is already 15 years old, he argued. The crime is a deliberate, methodical, not a case of mistaken justice, but those representing the justice of a country using it to protect their terrorists.
I’m here, he said, because we could wrest from the prosecutors and judges a year and half of my supervised release, and for that my father had to die and I had to give up the citizenship of the country where I was born.
This indicates the blindness of the U.S. government with the case of the Five, they are committed to Gerardo dying in prison and that each meets every day of their sentence, he argued.
He stressed that there are no legal considerations that will correct this injustice. This is a political case for revenge against Cuba and its people, and only international pressure on the U.S. government can make it untenable to continue this injustice.
René said, on behalf of his four brothers still prisoners, that their dignity will never be compromised. If we have resisted so far, it has been with morality, that which is our people have and that prosecutors may never understand.
But that’s not enough, he argued, we must bring them back to be with their family, with their people, and that will not succeed if international public opinion does not commit to it.
The Assembly announced a call to the parliamentarians of the world to support the cause of the Five, in which they also appreciated the solidarity shown in this subject by many honest people who have already joined this struggle.
Also on this day the deputies approved the creation of the Standing Committees and their main officials.
These ten commissions, involving 355 deputies engaged in analysing, proposing and providing input on the highest governance body, with its ongoing work between plenary sessions, and performing their work divided by topics of interest to the Cuban economy and society.
Some 80 parliamentary friendship groups were also made, which reciprocate with those that exist in other countries. That is five more than in the previous term, and in total 400 deputies are included.

Maritime, River and Lake Law Approved

The Law of Shipping, River and Lake was approved on Saturday by the Cuban parliament, after an analysis that suggested some modifications to the project, and that did not ignore the idea expressed by the President of the Councils of State and Ministers, Army General Raul Castro Ruz, that any law that comes into forceshould do so with the corresponding Regulation.
The House approved the proposal that the Act, accompanied by Regulation, expected to come into force within 90 days from its passage through Parliament.
At this point in the agenda, the Minister of Transport, Cesar Ignacio Arocha, presented the Bill, and in doing so, reminded them that the first works related to this type of law were made in late 1989, between the National Department of the Harbormaster’s Office and the Ministry of Transport.
The minister said the main problems that supported the need for a Navigation Act, including the lack of maritime legislation in line with the economic, political and social changes occurring in the national and international stage, “since the Cuban Maritime Law was governed by outdated legal instruments.”
Another argument that supported the need for this type of legislation, Arocha said, was the significant increase in vessels for various reasons tacitly abandoned by their owners at port facilities or in Cuban waters. Similarly weighed the need to support the implementation of international maritime treaties and conventions to which Cuba is a party, with a higher standard of legal hierarchy.
The deputy and lawyer Jose Luis Toledo Santander read the draft opinion of the Committees on Constitutional and Legal Affairs, Care and Services, concerning the Navigation Bill. In his speech, he said that the legal standard under discussion develops implements and Guidelines 269, 270 and 273 of the Economic and Social Policy derived from the Sixth Party Congress, alluding to recovery, modernization and reorganization of shipping, use of the advantages of cabotage, and development of national merchant fleet and shipbuilding.
The deputies had conducted a thorough examination of the Bill prior to regional meetings, which had its continuity during the analysis of the parliamentary committees held on Thursday and Friday last.

Translated by ESTI

These reforms will update the Cuban model and spur economic growth.

May 13, 2013

_1-illustration by Yasser Castellanos
(illustration by yasser castellanos)

BY Omar Everleny Pérez

Will Cuba’s Economic Reforms Succeed? Yes !

Cuba’s recent economic reforms to its economic model are not entirely new. What is new is the perception and the importance placed on them, especially on the role of the non-state sector. Once implemented, these reforms will update the country’s economic model.

In announcing the “Draft Guidelines for Economic and Social Policy”—upon which the reforms are based—at the Sixth Congress of the Cuban Communist Party in October 2010, Cuban officials acknowledged inefficiencies in the economic model. These included: low economic growth, especially in industry and agriculture; inefficiencies in investment; low levels of investment in productivity and infrastructure; the gap between workers’ incomes and the rising prices of goods and services, both in markets free from price controls and the state foreign currency, and convertible peso markets; lack of connection between workers’ productivity and salaries; excessive economic centralization; increased state restrictions on certain goods and services; the low level of housing construction; and the foreign and domestic deficits.

To counter these inefficiencies, the government proposed a series of adjustments designed to improve productivity by promoting entrepreneurship, establishing a more efficient tax system, and balancing public finances.

The most important adjustments focus on incentives for creating non-state employment. For instance, the government will now recognize 178 categories of work or trade. In the agricultural sector, it promises to put unused land into productive use. Cubans will no longer be forbidden from selling homes and vehicles—even to foreigners or temporary residents. Businesses will be granted greater autonomy, and multiple licenses will be available for conducting business not only in one’s hometown but anywhere in the country. Private restaurants can expand from 12 to 20 seats. And in a move toward ensuring food self-sufficiency and eliminating rationing, individuals will be allowed to lease state facilities, including those in the food industry.

Among the measures, those targeting self-employed workers will undoubtedly have the greatest positive impact. The policy is being encouraged at all levels of government, and for good reason. Under its reorganization plan, the Cuban state intends to move between 1 million and 1.3 million state workers off state payrolls within the next few years, making self-employment policies the most urgent.

The openings providing for self-employment will permit the creation of microenterprises. Since October, the number of licenses granted to micro-enterprises has surpassed 113,000, a nearly 50 percent increase from before the start of the reforms.

These developments will expand supplies of consumer goods and services. There are already signs that the measures have had a positive impact. The number of workers hired by other self-employed workers has increased. So has the number of microenterprises dedicated to the preparation and sale of food, the manufacture of household goods and transportation. For many people, microenterprise has constituted an alternative source of income to state salaries and pensions. For the state, it will provide a source of new tax revenue.

The new measures also focus on balancing public finances by decreasing public payrolls and unemployment compensation. And as the state reduces total payroll expenses and increases revenue from taxes on self-employed workers, it will be able to increase public-sector salaries.

To improve productivity, details have also emerged about a more efficient form of contracting labor. Companies will be able to count on greater funds for salaries to distribute among fewer employees.

This will be done through a system of results-based payments, which will mean an increase in productivity and, consequently, growth in the economy as a whole. Under the proposed adjustments, it has been estimated that new non-state annual tax contributions will exceed $1 billion per year.

At the core of the reforms is an acknowledgement by the Cuban state that it must relinquish control over those activities and sectors, such as retail, that do not serve it strategically and that it believes have the capacity to absorb the growing labor force in coming years.

However, the proper functioning of the private sector depends on nondiscrimination and competition. For this, a number of conditions will be important. Among them: access to technical and material supply markets; access to sources of financing and insurance to cover risk; access to fair and competitive domestic consumer markets and export markets; regulations that do not impose undue burdens in their compliance or administration; and a tax burden consistent with the desired activity and size of the project.

If these conditions are established, non-state employment will meet its expected contribution to the economy, above all in terms of job creation and the production of goods and services. I estimate Cuba could grow at a rate of 5 percent after the reforms.

It will be a complex task to effectively design and implement the steps needed to unleash the production forces of a “handmade” economy, where discretion has prevailed over rules, institutions and respect for regulations.

Time has changed the functions and needs of our socialist project. Those changes, along with the success of other countries’ experiences, demonstrate that the Cuban state is in vital need of updating its economic model.

This means the market must play an ever-increasing role in the Cuban economy, even if planning will officially prevail over the market. The measures that the authorities have taken are a first step in the right direction.

– from Americas Quarterly

Cuba to Diversify Export Markets, Services

May 13, 2013


Minister of Foreign Trade and Foreign Investment Rodrigo Malmierca (photo) said here in this capital that the diversification of export markets and services to support Cuba”s socio-economic development is a priority.

During the most recent meeting of the Council of Ministers, the minister described the promotion of these sectors in Cuba’s current economic situation as “vital,” as the island updates its economic model and faces the impact of a global crisis.

According to the summary of the meeting, as reported by media here, Malmierca said that the export of services has become the main source of foreign currency for Cuba, with its human capital representing a “great potential for continued increases.”

Some 68 percent of these exports are provided by health and tourism, with the possibility of adding computer services, communications, education, and sports services, he said.

For Malmierca, particular emphasis should be placed on the training of those involved in exported services.

In his speech, Malmierca also presented a report on irregularities affecting the Cuban economy that have been detected in the businesses operating with foreign capital and international contracts.

According to Malmierca, among the main causes and conditions that bring about the occurrence of these events are lax oversight and control mechanisms throughout the business, as well as problematic behavior and attitudes from managers and officials involved, either as a result of ignorance, inability or ethical violations.

The expanded Council of Ministers meeting, held on Friday, May 10, also analyzed issues such as the marketing of agricultural products, the investment process, the efficient use of machines, tools, and equipment, and how to face criminal activity in fuel sales.

Regarding the issues discussed, Cuba’s President Raul Castro called for placing due importance on resource conservation and the training of managers and employees in the updating of the economic and social model underway on the island.


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