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