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Cuba's economy rife with corruption

By DAVID ADAMS
Published January 15, 2007


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HAVANA - A common refrain heard on Cuban streets is that the difficulty of making ends meet has turned ordinary Cubans into petty criminals.

Stealing from state workplaces or operating small, illegal businesses is so common that Cubans dismiss it as an almost acceptable part of daily life.

They even have a phrase for these underhand deviations: por la izquierda, on the left.

Before he was hospitalized in July, Fidel Castro had raised the anti-corruption battle cry. In a major speech in November 2005 he warned that the revolutionary process "could fall apart" if corruption was not aggressively tackled.

He calculated that "rerouting of resources" could be costing the state as much as $200-million.

But putting a stop to it hasn't proved easy. Cuba's interim leadership, led by Armed Forces Minister Raul Castro, Fidel Castro's brother, is redoubling efforts to crack down. Raul Castro has encouraged the nation's best minds to come up with solutions, setting off a quiet debate about the country's economic policy.

The seriousness of the problem was highlighted in October, when a team of reporters from one of Cuba's main state-run newspapers, Juventud Rebelde Rebel Youth, wrote a series of long articles accusing state workers of routinely cheating cash registers.

In one case in which workers were caught underserving patrons at a state cafe, the paper calculated that each employee was pocketing the equivalent of one worker's monthly pay every day.

The cheating was widespread, the paper found, affecting 52 percent of state retail establishments it inspected. Another government investigation found that revenue from state-owned gas stations doubled after student "social workers" were assigned to monitor them.

'Perceptible evil'

The paper warned that the problem was "a perceptible evil" eating away at the country's revolutionary principles. "Some state services are being used for personal profit by insensitive people who rig the prices and quantities of products, crossing the boundary between what belongs to the state and what is private," it said.

The Cuban government blames corruption on the weak moral values of a few slackers. But critics of government economic policy say the illegal activity is as much a product of the state's licensing restrictions on all kinds of private enterprise. State salaries also don't come close to living costs.

In his November 2005 speech, the aging Cuban leader blamed the problem in part on the so-called "Special Period," Cuba's term for the austerity after the collapse of the Soviet bloc, its main trading partner.

"In this period we saw the growth of much inequality and certain people able to accumulate a lot of money," he told an audience of students and party leaders at the University of Havana's Aula Magna.

Castro described witnessing state workers at a construction site for a new biotechnology center selling the building materials at a nearby market. "Just how many ways of stealing do we have in this country?" he said.

The Juventud Rebelde articles showed that the problem goes deeper than mere theft from the state.

"Many of the central state enterprises are dysfunctional, unable to supply essential products and maintenance materials to their retail outlets," said Philip Peters of the Lexington Institute, who has closely studied Cuba's business economy.

"These are bitter facts to air in a place where socialist state enterprises are said to represent the revolution's values, delivering services at fair, controlled prices without the exploitation or inefficiency of capitalist systems."

It's not hard to find someone working illegally in the streets, either riding an unlicensed bicycle taxi or selling pirated satellite television hookups. Most defend their actions by saying that excessive state regulations give them no alternative.

For instance, those with licenses to operate small 12-seat restaurants in their homes or rent rooms to foreigners may only employ members of the family household.

In reality, many of these licensed establishments pay secret wages to outside help. "Everyone becomes a family member," said one restaurant worker, who said he made a far better salary illegally preparing hamburgers than he could working in a state job.

Petty corruption is also said to be rife in the state sector, where better-paid jobs are allegedly traded for money. Average state salaries are about 250 pesos a month (roughly $10), though better paid jobs can run to 500 and 600 pesos. But, as Juventud Rebelde discovered, state jobs are often sought less for their official salary than the access to state resources.

This situation has also spawned official corruption, previously a rarity in Cuba. Some municipal officials who handle the licenses are accused of taking bribes. State tax inspectors can also be bought off.

One illegal bicycle taxi driver said he had tried to obtain a license but could not afford the $150 bribe demanded by municipal officials. He said he made 30 to 40 pesos a day (about $1.25) after paying 30 pesos to rent the bicitaxi from its owner, who manages a fleet of 15 unlicensed bikes. The racket nets the bike owner, a state university professor, up to 10,000 pesos ($400) a month.

The acting leadership seems aware of the gravity of the problem and is planning to act. In October the government announced new workplace regulations would go into effect in January "to confront indiscipline and illegalities" in state enterprises. This included punishing workers who failed to clock in on time.

But the plan was delayed until April after officials recognized that poor public transport was to blame for much of the problem.

Academics' view

Cuban academics are busy discussing remedies, including allowing greater autonomy to managers of state businesses, as well as expanding private enterprise.

"These are necessary things that have to be done to reduce the bureaucratic shackles of the state," said Armando Nova, a senior researcher at the Center for the Study of the Cuban Economy in Havana, reflecting a widespread opinion among Cuban academics.

One solution favored by some would allow the creation of private cooperatives, which are by their nature socialist enterprises. Another solution involves providing greater financial incentives to the most qualified state employees, a practice already implemented in some state companies, but on a very limited scale.

Back in November 2005, Fidel Castro offered these words of encouragement: "The abuses will end; many of the inequalities will disappear, as will the conditions that allowed them to exist," he said. "That is what true and irreversible socialism demands."

David Adams can be reached at dadams@sptimes.com or (305) 361-6393.

[Last modified January 15, 2007, 01:17:16]


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