Castro: Frozen assets to be released this year


Cuba Standard:

Cuba will free the remainder of hard-currency assets owned by foreign companies that have been held back in national bank accounts
since 2008, President Raúl Castro said in his closing speech after the National Assembly’s summer session.

A partial restructuring of foreign debt with Cuba’s main lenders has helped “reduce hold-backs of transfers abroad and put us in conditions to approve that they will be lifted for good before the current year ends,” Castro said, adding that a “tense situation” continues to affect the country’s external finances. ” We will persist in gradually recovering the international credibility of the Cuban economy.”

Cuba has not published comprehensive data about its foreign debt since 2007.

Hit by extensive hurricane damage, higher oil and food prices, and dropping tourism, nickel and sugar revenues in 2008, the government faced a cash crunch that has been gradually improving over the past two years, as Cuba cut back spending and imports, and exports have been rising.

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For Cuba, a real-estate revolution


The New York Times:

José is an eager almost-entrepreneur with big plans for Cuban real estate. Right now he works illegally on trades, linking families that want to swap homes and pay a little extra for an upgrade.

But when Cuba legalizes buying and selling by the end of the year — as the government promised again this week — José and many others expect a cascade of changes: higher prices, mass relocation, property taxes and a flood of money from Cubans in the United States and throughout the world.

“There’s going to be huge demand,” said José, 36, who declined to give his last name. “It’s been prohibited for so long.”

Private property is the nucleus of capitalism, so the plan to legitimize it in Cuba, a country of slogans such as “socialism or death,” strikes many Cubans as jaw-dropping. Indeed, most people expect onerous regulations and, already, the plan outlined by the state media would suppress the market by limiting Cubans to one home or apartment and requiring full-time residency.

Yet even with state control, experts say, property sales could transform Cuba more than any of the economic changes announced by President Raúl Castro’s government, some of which were outlined in the National Assembly on Monday.

Compared with the changes already passed — more self-employment and cellphone ownership — or proposed — car sales and looser emigration rules — “nothing is as big as this,” said Philip Peters, an analyst with the Lexington Institute, a think tank in Arlington, Va.

Back to the old days

The opportunities for profits and loans would be far larger than what Cuba’s small businesses offer, experts say, potentially creating the disparities of wealth that have accompanied property ownership in places such as Eastern Europe and China.

Havana in particular may be in for a move back in time, to when it was a city more segregated by class.

“There will be a huge rearrangement,” said Mario Coyula, Havana’s director of urbanism and architecture in the ’70s and ’80s. “Gentrification will happen.”

Broader effects could follow. Sales would encourage much-needed renovation, creating jobs. Banking would expand because, under newly announced rules, payments would come from buyers’ accounts.

Meanwhile, the government, which owns all property now, would hand over homes and apartments to their occupants in exchange for taxes on sales, impossible in the current swapping market where money passes under the table.

And then there is the role of Cuban emigrants. While the plan seems to prohibit foreign ownership, Cuban Americans could take advantage of Obama administration rules letting them send as much money as they like to relatives on the island, fueling purchases and giving them a stake in Cuba’s economic success.

“That is politically an extremely powerful development,” Peters said, adding that it could spur policy changes by both nations.

Unique complications

The rate of change, however, will likely depend on complications peculiar to Cuba. The so-called Pearl of the Antilles struggled with poor housing even before the 1959 revolution, but deterioration, rigid rules and creative workarounds have created today’s warren of oddities.

There are no vacancies in Havana, Coyula, the urban designer, pointed out. Every dwelling has someone living in it. Most Cubans are essentially stuck where they are.

On the waterfront of central Havana, children peek out from buildings that should be condemned, with a third of the facades missing.

The housing stock, already run down before the revolution, continued to deteriorate, the U.S. embargo choked off the supply of building materials, and new construction failed to keep pace with demand.

Empty lots dot the capital’s seaside Malecon Boulevard as once-stately mansions regularly collapse after heavy rains. Many of those still standing are merely facades or are propped up by scaffolding and wooden beams.

Blocks inland, Cubans such as Elena Acea have subdivided apartments to Alice in Wonderland proportions. Her two-bedroom is now a four-bedroom, with a plywood mezzanine where two stepsons live one atop another, barely able to stand in their own rooms.

Like many Cubans, she hopes to move: trade her apartment for three smaller places so the elder son, 29, can start a family.

“He’s getting married,” she said. “He has to move out.”

Despite reassurances — on Monday, Marino Murillo, the country’s economic czar, said selling would not need government approval — Acea and many neighbors seemed wary of the government’s promise to let go. Some Cubans expect rules forcing buyers to hold properties for five or 10 years. Others say the government will make it hard to take profits off the island, through exorbitant taxes or limits on currency exchange.

Still more, like Ernesto Benítez, 37, an artist, cannot imagine a real open market.

“They’re going to set one price, per square foot, and that’s it,” he said.

He added, Cubans would respond by setting their own prices, and that might be enough to stimulate movement, he said.

He hopes so. Benítez and the woman he has lived with for nearly a decade broke up 18 months ago. Each is dating someone new and there are nights, they admit, that get a little awkward. Only a narrow bathroom separates their bedrooms.

Katia González, 48, whose parents passed down her apartment before they died (which Cuba allows), said she would consider selling for a fair price. What did she think her two-bedroom just blocks from the ocean, in Havana’s best neighborhood, could command?

“Oh, $25,000,” she said. “A little more, maybe $30,000.”

In Miami, a similar apartment might cost nearly 10 times that, which is what many Cuban Americans seem to be thinking. José and several other brokers in Havana said real-estate transactions on the black market routinely involved money from Cubans overseas, especially Florida.

“There’s always money coming in from Miami,” said Gerardo, a broker who withheld his full name. “The Cuban in Miami buys a house for his cousin in Cuba, and when he comes here in the summer for a couple of months, he stays in that house.”

Murky rules

Technically, this is a violation of the trade embargo that began under President Eisenhower. According to the U.S. Treasury Department, deals or investments with Cubans are prohibited. Receiving money or profit from Cuba is also illegal.

But the rules are muddy in practice. Family transactions — mainly involving recent emigrants — seem to be expanding with a wink from the Obama administration.

Supporting private business is now encouraged under the general license that lets Cuban Americans visit relatives, and in 2009, President Obama established a policy of letting Cuban Americans visit the island whenever they want and send unlimited remittances to relatives.

Beyond that, enforcement against individuals, as opposed to businesses, is practically nonexistent. In the past 18 months, one American was penalized for violating the sanctions, with a fine of $525, according to a congressional report published last month.

One thing that isn’t expected to be a topic of debate in Cuba is exile claims on homes.

Over time, said Antonio Zamora, a Miami lawyer who specializes in foreign investment, families that occupied the homes of Cubans who left the island have essentially become the owners of the dwellings.

Experts say the Cuban diaspora has begun to create a tiered social system in Cuba. Cuban emigrants sent back about $1 billion in remittances last year, studies show, with an increasing proportion of that money financing budding capitalists in need of pizza ovens or other equipment to work privately. Homes would simply expand the bond, experts say, and offers are already arriving.

Ilda, 69, lives alone in a five-bedroom, ninth-floor apartment with views of the sea. A visiting Cuban-American couple — “chic, very well dressed,” she said — recently asked to buy her apartment for $150,000, with little care for any bans on foreign ownership.

“I told them I can’t,” Ilda said. “We’re waiting for the law.”

Even when the law changes, she said, she would prefer a “permuta,” a trade, because she would be guaranteed a place to live.

Nowhere to go

Her fear of having nowhere to go is common. One recent study, by Sergio Díaz-Briquets, a Washington-based demography expert, found that Cuba has a housing deficit of 1.6 million units. The government says the number is closer to 500,000, still a serious problem.

Coyula said money from sales might not be enough to fix the shortage, since there is almost no construction industry, permitting process or materials to build with.

Other thorny issues might have to be revisited.

“Evictions haven’t happened here since 1939,” he said. “There’s a law forbidding them.”

For now, Cubans are trying to grasp basic details. How will the mortgage system work? How high will taxes be? What’s a fair price?

There is even a question of how buyers and sellers will come together.

Classified listings are illegal in Cuba, which explains why brokers such as José, known as corredores, spend their days moving through open-air bazaars with notebooks listing apartments offered or desired.

He already has two employees, and when the new law arrives, whether his services are legal or not, he expects to hire more.

“We have to get coordinated,” he said. “It’s coming.”

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Cuba revising travel policies: Raul Castro


HAVANA (Reuters) – Cuba will revise its travel and immigration rules as part of a broader reform of its economic and social policies, Cuban President Raul Castro said on Monday.

He spoke after the Cuban Parliament approved Communist Party proposals to overhaul the country’s stagnating, state-dominated economy and lift some restrictions on citizens’ personal lives.

“The country is modifying decisions that played a role at a certain moment and unnecessarily were never changed,” the Prensa Latina news agency quoted Castro as stating.

“Today the overwhelming majority of Cuban immigrants leave for economic reasons and almost all of them maintain their love for family and the country where they were born,” Castro said.

He said rules still in place dated back to the earlier years of the revolution when immigration was largely political and manipulated by the United States.

It was not immediately clear what the changes in travel and immigration policy would entail. But Cuban regulations, which make it difficult and expensive to travel or move abroad, have long been criticized by local residents and human rights groups.

The economic reform plan approved by the National Assembly includes more than 300 points. It was first approved at a Communist Party Congress in April and would definitively do away with the decades-old paternalistic society built under Fidel Castro’s leadership.

Foreign journalists were not invited to the parliamentary meeting addressed by Castro. But he was paraphrased by state-run media as urging lawmakers and all citizens to adjust to the new times and model he is pushing by shedding bureaucratic habits.

“President Raul Castro said today that a change in mentality is indispensable to put into practice the changes the country needs,” Prensa Latina said.

ECONOMY SEEN IMPROVING

The measures, some already being implemented, were improving economic performance, Castro said, with growth at 1.9 percent in the first half of 2011 and on track toward 2.9 percent for the year, compared with 2.1 percent in 2010.

The reforms, to be implemented over five years, slash more than a million government jobs and reduce the state’s role in sectors such as agriculture, retail services, transportation and construction in favor of private small businesses, cooperatives and leasing.

Larger state companies are freed up to make more of their own decisions and take into account market forces, while regulations that prohibit normal personal affairs such as buying and selling cars and homes would be loosened.

At the same time state subsidies for everything from food to utilities will be gradually eliminated and state wages, which average the equivalent of $18 per month, increased.

The state has monopolized more than 90 percent of all economic activity and employed a similar percentage of the labor force since the earliest days of Fidel Castro’s 1959 revolution.

The country, which faces a stiff U.S. trade embargo, has yet to fully emerge from a two-decades-old economic crisis sparked by the demise of former benefactor the Soviet Union.

Castro has pushed for a new economic and social model based on individual effort and reward with targeted welfare, to replace one based on collective labor and consumption.

Raul Castro first replaced his ailing brother Fidel five years ago and then became president in 2008.

The single chamber parliament meets two times a year for only a few days and just about all of its members hold positions in, or are members of, the Communist Party, the only legal political organization in the country.

www.particularcuba.com

Cuba Renews Appliance Sales Amid Economic Changes


AP:

Cuba is renewing sales of energy-sucking appliances, reversing a pillar of Fidel Castro’s “energy revolution” in response to popular demand and to support the growing ranks of independent workers under an economic overhaul launched by President Raul Castro.

The measure covers appliances such as air conditioners, electric stoves, coffee makers, grills and sandwich makers. The appliances will begin going on sale gradually as they become available, according to a notice published in the Official Gazette and dated Friday.

It said the action was aimed at “supplying products to the population and independent workers.”

Appliance sales have been largely restricted since 2003, and they were key targets of former President Fidel Castro’s “energy revolution.”

That initiative sought to replace aging, inefficient kitchen appliances that taxed Cuba’s shaky electrical grid and contributed to frequent summer blackouts that lasted for hours.

The former leader regularly appeared on television to push conservation measures and flog less-power-hungry rice steamers and pressure cookers. Government workers went door to door in many neighborhoods to replace incandescent light bulbs with more-efficient alternatives. Officials also overhauled the antiquated electrical grid.

Blackouts are not as frequent or severe today, though officials still urge conservation. While most of Cuba’s electricity is generated by crude oil, there have been efforts to increase renewable sources like solar.

Raul Castro launched an economic overhaul last year that aims to rescue Cuba’s perennially weak economy by including a taste of the private sector, though Castro stresses that the government is “updating” its socialist model, not embracing capitalism.

The state is planning to slash expenses, subsidies and payroll, while allowing more islanders to open their own businesses and hire employees. Many of the independent business licenses are for restaurants, cafeterias and home-based snack bars, where something like a sandwich maker or an electric coffee pot could come in handy.

Friday’s note in the Gazette specifically mentions the needs of the small business owners, and says the appliances will be available on the domestic retail market.

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A Cuban housing market? Govt is lifting a taboo


HAVANA (AP) — Each morning before the sun rises too high, Cubans gather at a shaded corner in central Havana, mingling as though at a cocktail party. The icebreaker is always the same: “What are you offering?”

This is Cuba’s informal real-estate bazaar, where a chronic housing shortage brings everyone from newlyweds to retirees together to strike deals that often involve thousands of dollars in under-the-table payments. They’re breaking not just the law but communist doctrine by trading and profiting in property, and now their government is about to get in on the action.

President Raul Castro has pledged to legalize the purchase and sale of homes by the end of the year, bringing this informal market out of the shadows as part of an economic reform package under which Cuba is already letting islanders go into business for themselves in 178 designated activities, as restaurateurs, wedding planners, plumbers, carpenters.

An aboveboard housing market promises multiple benefits for the cash-strapped island: It would help ease a housing crunch, stimulate construction employment and generate badly needed tax revenue. It would attack corruption by officials who accept bribes to sign off on illicit deals, and give people options to seek peaceful resolutions to black-market disputes that occasionally erupt into violence.

It’s also likely to suck up more hard currency from Cubans abroad who can be counted on to send their families cash to buy, expand and remodel homes, especially since President Barack Obama relaxed the 50-year-old economic embargo to allow unlimited remittances by Cuban-Americans.

“All these things are tied in,” said Sergio Diaz-Briquets, a U.S.-based demography expert. “They want expatriate Cubans to contribute money to the Cuban state, and this is one big incentive for people who want to help their families.”

But few changes are likely to be as complex and hard to implement as real estate reform.

From the earliest days of the revolution, Fidel Castro railed against exploitative, absentee landlords, and enacted a reform that gave property ownership to whoever lived in a home, regardless of who held title. Most who have left the island forfeited their properties to the state. The government, Castro preached, would provide everything a citizen could need: employment, food, education and housing, all for little or no money at all.

But the housing stock, already run down before the revolution, continued to deteriorate, the U.S. embargo choked off the supply of building materials, and new construction failed to keep pace with demand.

Meanwhile, cyclones and salty air can start eating through metal bars in a year and have decimated rural shanties and older quarters of Havana. Empty lots dot the capital’s seaside Malecon boulevard as once-stately mansions regularly collapse following heavy rains. Many of those still standing are merely facades or are propped up by scaffolding and wooden beams.

While they wait for the new law to be enacted and the specifics to be announced, Cubans have few legal options. They can enroll in cooperative construction projects, build on existing properties or join the long waiting list for government housing. Or they can head to the open-air real-estate market in hopes of negotiating a “permuta,” which officially is a swap of equal-value properties but in reality usually involves illegal cash on the side.

Many enlist the services of “runners” like Manuel Valdez, an 83-year-old ex-military man who has been brokering the transactions for four decades. At the downtown bazaar, Valdez holds court on a concrete bench, keeping track of real estate offers in a tattered notebook and on posterboard that he tapes to a tree.

Gesturing at the people milling around hoping to strike a deal, Valdez said housing is such a problem that legalization was inevitable: “This is a situation that the state had to get off its back one way or another.”

There’s also www.revolico.com, a kind of Cuban Craigslist that has real estate ads asking tens of thousands of dollars. Site operators claim the real estate section alone gets 30,000 unique visits a month even though islanders must find a way around the Web censors.

Some Cubans enter into sham marriages to make deed transfers easier. Others move into homes ostensibly to care for an elderly person living there. They register at the address and, after enough time passes, can legally claim the “inherited” title. Nowhere is there an official record of the money changing hands.

A Havana professional with a job that pays far more than most salaries on the island told of swapping his tiny apartment about 10 years ago for a bigger, historic home whose bathroom and roof were falling apart, and whose occupants, a 60-something couple, could no longer manage.

The couple took over his recently remodeled and repainted flat. They also received $1,200 in cash — something that will no longer be illegal once Castro’s housing reform takes effect.

The professional reflected on the anomaly of people with money but no home to buy, and people with bigger homes than they need, and the risk they all run trying to change their circumstances. Some Cubans have had their homes confiscated when their illegal sales came to light.

“It would be so helpful if you could do that legally,” he said, speaking on condition of anonymity because of the transaction’s illicit nature.

“It is such a big problem, the housing situation,” said Diaz-Briquets, who estimated in a recent paper that the country of 11 million people was short 1.6 million units of “adequate housing” in 2010. “They have been trying for years to solve it, and it’s finally dawned on them that the state is never going to do it.”

The Cuban government puts the shortfall at closer to 500,000 homes. Still, the result is legions of bickering divorcees trapped under the same roof; newlyweds forced to bunk up with siblings, cousins, uncles, and aunts; and elderly people unable to repair their crumbling homes.

Juana Ines Delgado’s plight is typical. She shares her tiny studio in Old Havana with her grown son, married daughter and 4-year-old granddaughter, while her son-in-law spends nights at his aunt’s place down the street.

“It’s a marriage that’s not the way a marriage should be, you know what I mean?” said Delgado, 61. “My situation is what it is. … But I hope my children don’t have to end their days here.”

Cuba experts caution that the new measure is just a first step toward solving the housing crisis, and note that it deliberately stops short of creating a freewheeling, capitalist real estate market.

Raul Castro has said home ownership will be limited to one per individual to avoid accumulation of wealth. The government has announced plans to extend credit for purchasing building materials, but specifics are still unknown and no mechanism is in place for home loans. Duties will be levied on both sellers and buyers, and if taxes are too steep it could provide enough incentive to underreport transactions.

Only islanders and permanent residents will be able to buy property, but there’s at least a potential for Cubans to front for foreigners keen on owning a waterfront art-deco masterpiece.

“You start down a path of property accumulation and who knows where that’s going to lead,” says Rafael Romeu, a U.S.-based expert on the Cuban economy.

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Cuba cuts bulk prices to support private workers


HAVANA (AP) — Cuba is lowering bulk prices for goods ranging from marmalade and mayonnaise to tools and CDs to support newly independent workers and small businesses that lack a wholesale market, official news media said Monday.

The measure addresses a central complaint by many operators of private restaurants, cafeterias and other operations authorized under a wide-ranging economic overhaul launched last year by President Raul Castro.

Under an order from the Ministry of Finance and Pricing, a 1.3-gallon (5-liter) container of cooking oil that used to sell for $11.50 can be had for $9.80, labor newspaper Trabajadores reported. A 7-pound (3-kilogram) container of tomato pure formerly worth $8.70 now goes for $7.00.

“The measure also includes tools and pneumatic and electrical equipment, all with the goal of enhancing sales to independent workers,” the article said.

Other products like tobacco, alcoholic beverages and bottled water are not covered by the order. Trabajadores did not say when it took effect.

Although the initiative targets private businesses, the same prices will apply for anyone making bulk purchases.

Cuba began allowing increased private enterprise at the end of 2010, issuing licenses for people to launch small businesses and hire employees independently of the state.

The government, which currently employs 80 percent of the labor force, plans massive layoffs although those plans have been put on hold.

Many entrepreneurs have complained about a lack of access to a wholesale market or to credit, as well as high tax rates. Cuba has said it plans to extend loans, but details have not been released.

The government fixes prices, and while some products are heavily subsidized and discounted, many other imported goods go for more than double their value elsewhere.

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Marketplaces dot Havana for new private vendors


HAVANA (AP) — Marketplaces full of vendors hawking everything from food to religious items may be common sights across Latin America, but they’re springing up for the first time in the Cuban capital as the island’s Communist government opens its tightly controlled economy to some private-sector activity.

Nearly 140 official points of sale in abandoned structures, parking lots and crumbling old buildings have been established in recent months and are accommodating about 2,600 independent vendors, the Communist Party newspaper Granma reported Friday. The number of markets “should grow steadily,” Luis Carlos Gongora, vice president of Havana’s Provincial Administration Council, told the newspaper.

Cuba only recently began licensing a broad spectrum of private sector activity, giving rise to a nascent and growing class of self-employed people.

Former health care worker Andres Lamberto Diaz, who took out a license for to sell clothes, shoes and jewelry, said he pays 40 pesos ($1.60) a day — on top of his taxes and license fees — for the right to set up shop on a lot where few traces remain of what was an old mansion in busy Central Havana.

“Things are organized here, and the flow of people along the avenue is good,” Diaz said. “Nevertheless, I think it’s a lot to pay each day for the space.” Official salaries average about $20 a month in Cuba.

Faustino Agramonte, the state administrator of the market, said it houses 21 independent merchants, and officials are looking at possibly expanding into a little-used parking lot on the site of another collapsed building.

Buckets, spatulas, cheese graters and soup pots hung from one stand Friday. Colorful clothing was on offer at another, strung up underneath a canvas tarp to protect it from the intense tropical sun. The market launched in early 2010.

Under the new rules governing independent businesses, many people have set up shop in their own houses. Not all Cubans, however, live in spaces appropriate for home businesses, and many are taking to the streets. The government has accomodated the trend by creating authorized vending zones where sellers can gather.

Officials are considering adjustments to the tax structure for independent operators, Granma said.

Mired in deep financial woes and hamstrung by inefficiency in state-run businesses, Cuba announced last August that it would be implementing major changes in hopes of rescuing its troubled economy. From the end of 2010 through May, more than 200,000 Cubans became licensed independent workers.

President Raul Castro insists that the new private-sector activity is meant to “update” Cuba’s socialist model, not replace it with the free market.

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