‘Black holes’ detected in Cuban economy
By Gerardo Arreola
From the Mexican newspaper La Jornada
HAVANA – In their attempts to apply market rules, some state-owned businesses have had to pay a high cost that includes millions of dollars paralyzed, lawsuits, trials, seizures of accounts, idle inventories and virtual bankruptcy, the local press reported.
More than one year after the Communist Party Congress confirmed President Raúl Castro’s economic reform plan, some of the system’s “black holes” came into public knowledge when business relations among state-run companies collapsed in a chain reaction.
It’s “a kind of economic iceberg,” the official daily Granma said, suggesting that behind the lack of control in accounting lurks a nest of corruption. “What’s most dangerous is that we can’t see it,” Granma says.
The paper told of the situation in the central province of Ciego de Ávila, where in the first five months of the year local businesses had accumulated the equivalent of 4.2 million U.S. dollars in accounts receivable, $8.12 million in accounts payable and $1.6 million in overdue accounts.
The figures were calculated at the rate of 25 Cuban pesos equal to 1 convertible peso equal to one dollar.
Granma blamed the business managers “whose mind is focused on fulfilling the production plan, yet they push the rest of the process to the background.”
‘In the end, the public budget resolves everything’
That’s how the newspaper alluded to the practice of the model of centralized economy, where every company was measured by the volume of its final production, without taking quality and cost into equal account.
For decades, the idea predominated that, at the end of a business exercise, the public budget would resolve everything. Now, the managers of state-run enterprises are asked to keep profits in mind.
According to an expert quoted by the newspaper, the managers “disregard” vital elements of the mercantile chain, such as the proper execution of contracts, quality control and accounting. “The money is not theirs, so they’re not concerned in whose hands or where it is,” the expert said.
Granma also noted that, in addition to the disdain over costs and collections, miscalculations in the contract deadlines occur, bank credits are not utilized, and bills of exchange are used indiscriminately to conceal overdue accounts. Other irregularities abound.
More examples:
• The Eastern Container Company operated by the Ministry of Steel Industry had to take three food producers to court when their combined debt exceeded one million dollars.
• The Vice Minister of the Food Industry, Betsy Díaz, said that its producers have to pay their debts 30 days from date of invoice, but the tourism sector pays the producers 50 days from date of invoice, a situation made worse by overdue accounts.
• Villa Clara stores have idle merchandise, such as Soviet-era cameras, deteriorated volleyballs, useless toys, boots that fall apart in a week. Needless to say, nobody buys this merchandise.
The retailers can only contract for generic items, not knowing what they will receive. The intermediary collects 30 days from date of invoice, whether he delivered the merchandise or not, and he’s the one who decides the details, a local official said.
“Sometimes they sell us a pig on a poke,” said the province’s Trade Director, Digna Morales. The director of the intermediary Universal Products, Antonio Pérez López, admitted that products of very low quality are often bought or imported and they seldom sell.
“There’s still a long way to go to come up to the expectations of the market,” he said. In the first quarter of the year, Villa Clara had the equivalent of $21 million in paralyzed payments and collections.
In Granma province, a battery manufacturer, 20th Anniversary Batteries, sold 160,000 units in 2011, more than half the nation’s total demand. But the import companies brought in 309,000 units that same year. Because the market became artificially saturated, the local manufacturer’s orders plunged in 2012.
The estimate of losses may be greater than it is because the government maintains a kind of privileged exchange for its companies (one Cuban peso equals one dollar). Therefore, the amounts that have been paralyzed or contested could rise to the hundreds of millions of dollars.
