Tuesday, December 31, 2013

Property Rights in Cuba & AP article on cuentapropistas - A Reader Responds...

Earlier this week, the AP put out an article on self-employment in Cuba entitled, "Lack of Customers Dooms Many Cuban Businesses,"(Spanish version in El Nuevo Herald here).

The article reported on follow-up visits their team of reporters did with a number of cuentapropistas whom they had first interviewed 3 years ago in 2011 (go here and here for previous articles in the series).

I was proud to be interviewed and quoted in the article along with the sharp, young Cuban economist Pavel Vidal Alejandro - who now teaches at the Universidad Javeriana in Cali, Colombia and is a visiting scholar this winter at Columbia University in New York City.

Below is an interesting and provocative note I got from a reader about the article.

Further comments welcome...

***

Ted,

I read in the paper that you were writing a book on private enterprise in Cuba. I will be curious to read it.

The AP article skirted the fundamental issue in Cuba (which I am certain you will cover in your book), which is also the answer to the article’s query as to why the private economy is floundering:

The property rights situation in Cuba.

This begins with the confiscation of property beginning in 1959 (“uncompensated expropriations”). It is the white elephant in the room.

As you know, in Cuba all transactions are in cash (which you correctly point out is lacking) largely because there is no credit. There is no credit because there is no secure collateral. There is no secure collateral because there is no clear title to any property.

I was an invited speaker this April at the quadrennial Neurosurgery Neurology and Psychiatry meeting in Havana (I am a neurosurgeon and my father, an American trained Cuban neurosurgeon, was widely considered Cuba’s premier neurosurgeon and the father of “modern” Cuban neurosurgery).

I had a very interesting and enlightening conversation with a Cuban entrepreneur who ran a private car service with a few other Cubans (with actual authentic American cars). He was doing very well and quite happy.

However, he was worried. The bottom line was he feared that "cuando el gobierno ya no les conviene, me quitan todo”. That is, there will be capricious criminalization of his activity to justify the confiscation of his assets.

There were no laws or precedents to protect him and the “wealth” he had created. He couldn't deposit money in the bank (like all Cubans, he under-reports his income) or spend it conspicuously for fear of the government. He worries other Cubans will not be so careful.

He gets it. Why most Americans don’t is a mystery.

I gave him the history of property expropriation in Cuba and it dawned on him that he has the same protections from the government my antecedents had: essentially none.

Ironically, if these claims are treated fairly, he would receive the best insurance any business can have: protection through the rule of law. Settlement of the outstanding claims is the single most powerful economic stimulus the Cuban government can institute.

As luck would have it, Cuba is so broke (bankrupt, actually) that the only way to do so is reconciliation through restitution with the exiled diaspora. They have a great opportunity, but are too proud to take it. 

The taxista found God, so to speak, that night. How the property claims are settled will directly correlate to the strength of the Cuban economy and civil society.

Sorry for going on and on.

Best regards and Happy New Year.

Javier

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