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### Viewing cable 09HAVANA631, THE END OF THE "PAPA" STATE IN CUBA? THE GOC TELLS

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09HAVANA631 | 2009-10-19 12:12 | 2011-02-04 21:09 | CONFIDENTIAL | US Interests Section Havana

`

    VZCZCXRO3409
    RR RUEHAG RUEHROV RUEHSL RUEHSR
    DE RUEHUB #0631/01 2921245
    ZNY CCCCC ZZH
    R 191245Z OCT 09
    FM USINT HAVANA
    TO RUEHC/SECSTATE WASHDC 4848
    INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
    RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
    RUEHBS/USEU BRUSSELS
    RUCOWCV/CCGDSEVEN MIAMI FL
    RUEAIIA/CIA WASHINGTON DC
    RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
    RUCOGCA/COMNAVBASE GUANTANAMO BAY CU
    RHMFISS/HQ USSOUTHCOM MIAMI FL
    RHMFISS/JOINT STAFF WASHINGTON DC
    RHEFDIA/DIA WASHINGTON DC
    RUEATRS/DEPT OF TREASURY WASHINGTON DC
    RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

` `

    C O N F I D E N T I A L SECTION 01 OF 03 HAVANA 000631

    SIPDIS

    DEPT FOR WHA/CCA

    E.O. 12958: DECL: 10/18/2019
    TAGS: ECON EAGR PGOV PREL PINR CU
    SUBJECT: THE END OF THE "PAPA" STATE IN CUBA? THE GOC TELLS
    CUBANS TO FEND FOR THEMSELVES

    REF: HAVANA 490 ("CUBA'S ECONOMY: WHERE TWO PLUS TWO
    EQUALS THREE"

    HAVANA 00000631 001.2 OF 003

    Classified By: COM Jonathan Farrar for reasons 1.4 (b) and (d)

    ¶1. (C) SUMMARY. The Government of Cuba (GOC) appears to be
    seriously considering removing, or at least restricting, its
    national ration card system (libreta), one of the main
    pillars, along with education and healthcare, of Cuba's
    socialist state. The libreta is also one of the GOC's more
    effective tools to micro-manage nearly every aspect of its
    citizens' lives. Facing a serious financial crunch and low
    productivity, the GOC officially put all subsidies on the
    table in President Raul Castro's August 1 speech to the
    National Assembly (Reftel). The experiment to end free
    workplace lunches is the latest sign, along with the
    distribution of idle land, the right to fix one's own house,
    introducing a merit-based pay system, permission to work more
    than one job, and general encouragement of discussion on how
    to solve local problems, that the GOC is preparing Cubans to
    do officially what many already do unofficially: fend for
    themselves. The next question is how far is the GOC willing
    to expand the private sector in order to fill the gap. END
    SUMMARY.

    -------------------
    STARTING WITH LUNCH
    -------------------

    ¶2. (SBU) On September 25, the official daily Granma
    confirmed rumors that, on an experimental basis, the GOC
    would no longer provide heavily subsidized lunches at four
    central government ministries starting October 1. Instead,
    the GOC will provide each worker with 15 pesos (67 U.S.
    cents) per workday to spend at local state-run or privately
    licensed food vendors. If successful, the GOC will roll out
    this plan, or something similar, to all of the 24,700
    workplace cafeterias that feed 3.5 million government workers
    across the nation. The 15 peso daily stipend represents, on
    average, a 75% pay raise to nearly three-quarters of Cuba's
    labor force. For many employees, the stipend more than
    doubles their daily wage.

    ¶3. (SBU) The subsidized lunches cost only 1 peso (4 U.S.
    cents) but workers frequently complain of poor quality,
    limited variety, and suspect hygiene. The new stipend was
    designed to cover the cost of one of the cheaper
    non-subsidized lunch options, although many Cubans will no
    doubt find ways to spend less and supplement their otherwise
    paltry income with the balance. It is also an incentive for
    Cubans to show up at work and take less vacation and sick
    time since they only receive the stipend on days they are
    present.

    ¶4. (SBU) The official reason for the end of the subsidized
    lunch program is to save foreign currency by cutting imports
    and stimulating local demand. The press quotes the high cost
    of the subsidy ($350 million per year in imports alone, plus
    local administration and supplemental food costs), however
    the new measure is likely to be just as expensive (67 U.S.
    cents for 3.5 million workers over a low estimate of 240
    workdays = $567 million). Another GOC explanation for the
    change is that the ministry-operated cafeterias are
    inefficient and funnel supplies to the black market.

    ¶5. (SBU) If expanded across the country, lunch stipends will
    inject millions of dollars into the local economy creating
    significant inflationary pressures. This measure will also
    create additional demand for an expanded private sector.
    Cuban economist Oscar Espinosa Chepe pointed out that unless
    the GOC starts licensing more private vendors, the current
    problems with inefficiency and corruption will simply shift
    from the ministry-operated cafeterias to the state-operated
    food service providers. In fact, at least one of the
    recently closed ministry-operated cafeterias was simply taken
    over by a state-operated restaurant. As of yet, the GOC has
    not made any announcement regarding new licenses for private
    food service providers.

    HAVANA 00000631 002.2 OF 003

    ----------------------------------------
    DISCUSSING THE LIBRETA AND OTHER TABOOS
    ----------------------------------------

    ¶6. (SBU) October 15 concluded the GOC-mandated 45 days of
    "debate" at workplaces, universities, and community
    organizations to discuss, among other things, the possibility
    of eliminating or at least restricting Cuba's food ration
    system, public transportation, utilities, and other heavily
    subsidized goods (not including healthcare, education, or
    social security). Increasing productivity and savings, in
    addition to ending workplace corruption and black market
    activity are also among the discussion items. (Note: There
    are rumors that the GOC is also discussing the end of Cuba's
    two currency system, which is a publicly stated goal but
    always mentioned as at least 4-5 years down the road. End
    Note)

    ¶7. (SBU) According to a Reuters report, the Communist Party
    has been distributing an instruction guide for the
    discussions, encouraging participants to debate freely on
    economic efficiency and even private sector participation,
    but letting it be known that questioning the one-party
    political system or calling for the restoration of capitalism
    are off limits. This discussion follows a similar process as
    in 2007 when Raul Castro called for meetings across the
    country to analyze the country's problems and offer
    solutions. According to Espinosa Chepe, the 2007 debates
    created great expectations for structural changes that are
    still wanting. Few expect the results of this year's debates
    to be any different.

    ¶8. (SBU) Amidst the formal debates, the official press has
    uncharacteristically published letters to the editor both in
    favor and against changes to the food ration system or
    libreta. On October 9, the GOC position was made known
    through a full-page article by Lazaro Barredo Medina, the
    editor of Granma and a member of the National Assembly.
    Barredo wrote that the libreta was once necessary but has now
    become an impediment to Cuba's economic goals. He said that
    the country should guarantee access to a food basket for low
    income Cubans, but otherwise remove the subsidy to stimulate
    Cubans to work harder in order to be rewarded with better
    salaries.

    ¶9. (SBU) The libreta provides 10 to 15 days worth of basic
    food (rice, beans, bread, etc.) and supplies (tooth paste and
    soap, when available) at heavily subsidized prices (the
    entire basket costs less than $1.50 per person per month).
    The quality and quantity of items has been declining for
    years. Nevertheless, most Cubans still rely heavily on the
    libreta for basic nutrition. Retirees and Cubans without
    access to foreign currency (through remittances or work for a
    foreign company or embassy) often must stretch their rations
    to last the whole month. Outside of the libreta, Cubans take
    their $18 average monthly salary and look for food at the
    non-subsidized farmers' markets or, if possible, the stores
    that sell products only in convertible pesos (worth 24 times
    the peso used to pay salaries.) The subsidized prices and
    lack of affordable alternatives has created an extensive
    black market supplemented by whatever workers can pilfer from
    their workplaces.

    ---------------------
    TAKE CARE OF YOURSELF
    ---------------------

    ¶10. (SBU) Turning the libreta into a means-tested system
    would be a further sign that Cuba's socialist state is no
    longer willing or able to provide for each and every
    citizens' basic needs. Historically, those needs included:
    education, healthcare, social security, food, employment and
    housing. After last year's brutal hurricane season and the
    latest economic crisis, the GOC appears to be saying that
    enough is enough. Cuba has a housing deficit of well over
    500,000 homes and the GOC has long given up any claim to
    provide housing for everyone; earlier this year it allowed

    HAVANA 00000631 003.2 OF 003

    individuals to fix their own houses. GOC agricultural
    reforms like the leasing of idle land and permission to buy
    supplies are placing a bit more responsibility and burden on
    individual farmers. The GOC is also trying to introduce a
    pay-for-performance system, with limited success, that may
    put some government-provided salaries at risk. Earlier this
    summer, the GOC granted Cubans permission to work more than
    one job and for students to work part-time. Now, removing
    lunch subsidies and talking about removing or restricting the
    libreta may finally take the GOC out of the mass catering
    business.

    ¶11. (SBU) The GOC, both directly and indirectly through the
    official press, is also speaking more openly about individual
    responsibility and rethinking Cuban socialism. In September,
    revolutionary leader Ramiro Valdes said in characteristic
    gruff manner that people should solve their own problems and
    not expect the "Papa State" to resolve them. Barredo in his
    Granma article spoke out against paternalism and said Cubans
    have to get out of the habit of going to a store simply to
    pick up government handouts rather than buy goods. The GOC's
    pushback has even touched on healthcare as a TV moderator
    recently commented that many individuals have come to trust
    the Cuban healthcare system so much that they now neglect
    even the most basic sanitary practices.

    ------------------------
    NOT ALL CUBANS ARE EQUAL
    ------------------------

    ¶12. (SBU) The Cuban state claims to offer every citizen
    basically the same level of education, healthcare, social
    services and basic goods, even if that level has deteriorated
    in recent years. The proposal for a means-tested ration
    system is recognition of the economic stratification in Cuban
    society that has taken place over the past few decades as the
    result of a little more space for private sector activity,
    remittances, black market earnings and significantly higher
    salaries from foreign firms and embassies. In addition, Raul
    Castro and other Cuban leaders have been repeating the phrase
    that an egalitarian society does not mean that everyone
    receives equal pay and benefits, but rather that Cuba is a
    society of equal opportunities.

    -------
    COMMENT
    -------

    ¶13. (C) The GOC appears to be urging Cubans, even pushing
    them, to accept the notion that they need to fend for
    themselves. Most Cubans have been doing so for years with
    the help of family overseas and a pervasive black market. It
    would seem that some limited expansion of the private sector
    is required to complement reductions in state subsidies, but
    complaints about corruption in the supply-and-demand farmers'
    markets is raising doubts as to how far the GOC is willing to
    go.
    FARRAR

`