GOC ANNOUNCES SALARIES WILL BE BASED ON PERFORMANCE

C O N F I D E N T I A L HAVANA 000444 SIPDIS E.O. 12958: DECL: 06/11/2013 TAGS: ECON PGOV CU SUBJECT: GOC ANNOUNCES SALARIES WILL BE BASED ON PERFORMANCE REF: HAVANA 144 Classified By: COM Michael E. Parmly for reasons 1.4 (b) and (d) ¶1. (C) SUMMARY: In an understated article located in the middle of the Communist Party mouthpiece Granma, the GOC has made public a new pay for performance plan that stands some of the fundamental precepts of the revolution on their head. ¶2. (U) The Granma article cites an interview with Vice Minister of Labor Carlos Mateu Pereira who discusses Resolution 9 of 2008 entitled "General Regulations Concerning Forms and Systems of Payment." According to Mateu, the purpose of Resolution 9 is to bring the salary practices already used by the companies in the Business Optimization (Perfeccionamiento Empresarial) Program to all productive enterprises in the country. ¶3. (U) That the GOC was planning this move is not news. Indeed, we had heard about the existence of Resolution 9 some time ago, but were unable to obtain a copy. With the publication of the Granma article, the Gazeta Oficial issue containing Resolution 9, dated April 3, suddenly became available on the internet. The Resolution itself is dated February 2, about the time we first heard about its possible existence. ¶4. (U) Basically, Resolution 9 obligates employers (in practice this means government managers of state enterprises) to begin paying higher salaries and bonuses to employees who produce more and/or better quality goods and services. There are some exceptions, including government ministries and service providers, whose "products" cannot be measured as easily as a factory or retail outlet. There are also some unanswered questions about where the resources for additional compensation will come from if, in spite of increased productivity, revenue does not increase. ¶5. (C) COMMENT: Resolution 9 clearly fits in with Raul Castro's desire to increase productivity in all sectors. As with other measures that already have been announced or hinted at, it is a necessary but not sufficient response to the execrable state of the Cuban economy. Perhaps most noteworthy was the language used by Mateu in the press article. He says that "In general, there has been a tendency to give everyone the same pay, and this egalitarianism is not convenient. This is something that we have to resolve because at times there is too much paternalism and (managers) who can't be bothered simply say 'I'll pay everyone the same and no one can complain,' but this is not just."..."One has to guarantee a good design of (the salary system) and its appropriate control so that there is a correct distribution of salaries and people get more if they produce more." While couched in perfect Marxist terminology, these statements and the resolution itself, fly in the face of everything Fidel Castro tried to do for the last 50 years. Perhaps more than any other measure taken to date, this announcement is indicative of how far Fidel is fading in Raul's rear-view mirror. PARMLY