Cuban Soldiers in Business: A Bad Deal

Tuesday, May 31, 2016
By Luis Cino Alvarez in Cubanet (via Translating Cuba):

Soldiers in Business: Bad Deal

The survival of the Castro regime increasingly appears to be in the hands of the Revolutionary Armed Forces (FAR). And not only because of the generals who run some of the most important ministries but also because of the general-businessmen of the Enterprise Administration Group (GAESA).

GAESA, whose managing director is Colonel Luis Alberto Rodriguez Lopez-Callejas, father of one of Raul Castro’s grandsons, invoices more than a billion dollars a year. It has sugar plants, the TRDs (Hard Currency Collection Stores), Caribe and Gaviota, which impose abusive taxes on commodity prices, the Almacenes Universales SA, farms, mills, telecommunications and computer industry, trade zones, etc. And if that were not enough, having most of the hotel and marina capacity, it governs tourism, one of the country’s main sources of foreign income.

Some things borrowed from capitalism have functioned successfully in FAR’s enterprises.

At the beginning of 1985, after the shipwreck of the Economic Planning and Management System copied from the Soviet model, FAR implemented the Business Improvement System on a trial basis in the company “Ernesto Guevara,” in Manicaragua, Villa Clara, the largest facility of the Military Industries Union.

The experiment was supervised by General Casas Regueiro, who kept General Raul Castro, then FAR Minister, regularly informed about the matter.

Two years later, the experiment was extended to the military industries throughout the country.

The Business Improvement System (SPE), which Raul Castro called “the most profound and transcendent change to the economy,” copied capitalist forms of organization and administration: corporations, joint stock companies, management contracts and partnerships with foreign companies.

SPE permitted the Cuban army to ride out the worst years of the Special Period. If it was not introduced on a national level it was for fear of its consequences, which would have been worse than those of shock therapy.

In 1994, Fidel Castro, pressured by the deteriorating situation, agreed that a group of businesses from the Basic Industry Ministry would enter the SPE on an experimental basis. Later 100 more businesses were incorporated.

In 1997, the Fifth Congress of the Communist Party adopted the SPE as an economic strategy. After Raul’s succession, the extension of business improvement to the entire Cuban economy was conceived as a long-term strategy for preserving the status quo.

At the end of the last decade, when more than 400 businesses that implemented SPE were the most efficient in the country in terms of costs and results, it seemed that the Cuban economy was beginning to move to general application of that system. But it was a too-artificial model to extrapolate it to the rest of the national economy. To begin with, the unaffordable and disastrous enterprise system in Cuban pesos was not compatible with business improvement in dollars.

With SPE, the military men played the economy to advantage. Their businesses bore fruit in a greenhouse environment. They did not have to face labor or capital competition, they had unlimited access to state resources and benefitted from disciplined labor accustomed to obeying orders. Production factors, prices and marketing were at their disposal. Investments were provided by foreign businessmen prepared for unscrupulous deals in exchange for a minimum participation in the businesses.

Although they have had relatively modest success, there is not much to learn from the FAR businesses. And that is because a nation is not governed as if it were an armored division.* War is one thing, and managing a country’s economy efficiently is something else, although both things use bellicose language interchangeably.

FAR, dragging its old slogans and obsolete Soviet weapons, also reflects the system’s wear and tear and the distortions of current Cuban society.

Military men crammed into businesses can become problematic in the not-too-long term. Distanced from the interests of the people, they contribute to the system’s continuity. But they will always be stalked by temptation. Contact with foreign capitalists foments greed and corruption. This has been happening for some years.

When they feel their privileges and properties granted by the proprietary state threatened, their loyalty to the bosses or their successors will be put to the test. We will see what will happen then.

*Translator’s note: An allusion to Cuba’s hero of independence José Martí’s words to General Maximo Gomez during the independence struggle: “A nation is not founded, General, as a military camp is commanded.”

Translated by Mary Lou Keel.