NEW MEASURES: WINDOW DRESSING OR SIGNIFICANT?

C O N F I D E N T I A L SECTION 01 OF 03 HAVANA 000288

SIPDIS

SIPDIS

DEPT FOR WHA/CCA

E.O. 12958: DECL: 03/25/2018
TAGS: ECON PGOV PINR PREL CU
SUBJECT: NEW MEASURES: WINDOW DRESSING OR SIGNIFICANT?

REF: A. HAVANA 257

B. HAVANA 279

Classified By: COM: Michael E. Parmly: For reasons 1.4 b/d


1. (C) SUMMARY: A seeming barrage of new economic measures
has appeared since mid-March. Most are characterized by easy
implementation, quick hard-currency generation and (the
regime hopes) high political payoff -- for the GOC. Some
seem to be plausibly integrated pieces of a larger and
multifaceted economic plan, but one that is, as yet,
impossible to define. The measures are significant insofar
as they indicate the direction the GOC may be planning to go,
but they are not the structural reforms the Cuban economy
desperately needs. End Summary.


2. (C) Following is a listing of the new economic measures
that have come to public light since mid-March:

-- Consumer electronics: GOC allows the sale of consumer
electronics in hard currency stores, as delineated on
Resolution 43/08 of the Ministry of Interior Commerce. GOC
allows Cubans to own cell phones.

-- Agriculture: GOC offered tracts of unused land in
"usufructo" (for use but without title of ownership) to
interested farmers who could clear the land and make it
productive (see Reftel A). GOC allows farmers to buy their
own agricultural supplies, tools and equipment, instead of
relying on the GOC to supply them (see Reftel A). GOC offers
to pay 20 to 30% more to tobacco farmers for their product.
According to our contacts and official GOC press, the GOC
seems to have initiated a limited decentralization in
agriculture by delegating some decision-making authority down
to the municipal level -- authority that was formerly held at
the central government level.

-- Hotel access: GOC lifted its ban Cubans staying in hotels
and renting cars on the island (see Reftel B). The measure
will be economically and politically beneficial for the GOC
and to a small number of Cubans. However, a vast
purchasing-power gap remains between the average Cuban and a
hotel stay.

-- Prescriptions: GOC lifted restrictions on pharmacy sales.

-- Market prices: GOC releases its National Statistics
Office's economic survey of prices in the informal market.
(Comment: The GOC has always carried out such surveys as a
way of monitoring the condition of average Cubans' daily
lives and thereby maintaining its level of control. However,
releasing the survey for the first time is significant. The
survey, which evaluates goods and services spread among all
of Cuba's markets -- rations, agromercados with limited
supply and demand pricing, high-priced hard currency stores,
and the black market -- is vital to any attempt to bring the
two currencies closer to each other. Nevertheless, there has
been no evidence that the GOC has begun to implement any such
attempt. End Comment.)

Implementation without GOC fanfare:
--------------


3. (C) None of the new measures was published in the Justice
Ministry's Gaceta Oficial, where traditionally all new
measures -- including the most insignificant ones -- are
published. Some measures, such as the sale of consumer
electronics, were spelled out on internal ministry documents
that were eventually leaked. Although the leaks themselves
could be deliberately carried out by the GOC, there seems to
be -- we believe intentionally -- no GOC propaganda campaign
in conjunction with the introduction of the measures.
Indeed, the international press -- not the GOC -- has been
the main source of publicity for the measures, and especially
responsible for the spotlight coverage the measures have
received.

Calculated use of the official press:
--------------


4. (C) Though some of the measures have been mentioned in

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articles of the official GOC press, the coverage has been
minimal and always after implementation of a given measure --
after knowledge of it has leaked informally and sometimes
spread widely. In other instances, there seems to be a
deliberate use of the official press. Several unusually
blunt articles -- such as those on unemployment as well as on
the misalignment between the most prevalent career tracks in
the Cuban education system and needed "productive" or
income-generating careers -- seem to support the "need to
increase productivity" theme of Raul. Likewise, in a clear
attempt to temper expectations in the weeks following Raul's
February 24 speech, official newspaper Granma's editor
published a letter reinforcing the long term and gradual
aspects of economic reforms, specifically as it pertains to
the unification of the dual currency.

Details of most measures limited:
--------------


5. (SBU) The sale of consumer electronics was the only
measure fully laid out in Resolution 43/08, an internal
document of the Ministry of Interior Commerce which was
leaked. Its specifications follow and provide a valuable
window into the limitations that may be inherent in all the
new measures.

-- The list of products to be initially phased in includes:
computers, video equipment, televisions, pressure cookers,
electric bicycles, and car alarms.

-- The resolution calls for the gradual introduction of these
products commensurate with projected capacity of Cuba's
electricity grid.

-- Prices for the products will be set by the Ministry of
Finance and Prices.

-- Brands, models, spare parts, and accessories must be
similar to those sold under the GOC's Energy Saving Program.

-- Diversity among the products shall be minimized, in order
to ensure an adequate supply becomes available to provide
proper warranty service and repairs.

-- In addition to the commercial enterprises selling the
product, provincial repair shops (small state enterprises
currently used for the repair of state-subsidized electronic
products sold to the population under the GOC energy-saving
plan) shall be incorporated to provide after-sale services
for the products.

-- Commercial enterprises shall guarantee the supply of
repair and warranty spare parts and accessories.


6. (C) Comment on Resolution 43/08: The new products will
be sold under a clearly socialist framework: Prices will be
set by the GOC; goods will be limited in type and variety,
thereby limiting quality and competition; the introduction of
goods will be driven not by consumer demand, but rather in
conformance to a centralized GOC energy plan; the
government's ubiquitous presence will continue to overburden
the process, from intense oversight and regulation to
requiring the integration of GOC state enterprises. This may
turn out to be an efficient way for the GOC to sell --
instead of rationing -- centrally-purchased imports for hard
currency. While Cubans have gained access to some formerly
prohibited goods, the process will continue to miss one
critical aspect: a market mechanism. End Comment on
Resolution 43/08.


7. (C) Overall Comment: These measures may be part of a
much larger economic plan aimed at increasing productivity.
To achieve this the GOC will need to introduce many more new
incentives. These measures could be the first of many to
come or, given the absence of publicized GOC rollouts, the
only ones which have come to public light thus far. They
could also be the only measures that were uncontroversial
enough to gain a consensus of approval within the GOC. For
now, the key questions on economic reform remain unanswered:
How far from the socialist model/how fast toward the free
market model will the GOC be willing to go, how much control

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will it be willing to risk, and will it be able to keep up
with growing expectations.
PARMLY