Convertible Castro's?

[El Presidente]

Convertible Castros?

THE Wall Street Journal SEPTEMBER 16, 2010

http://online.wsj.com/article/SB1000142405...2058317110.html

An old joke from the Soviet era had it that "We pretend to work and they pretend to pay us." Most Cubans stopped pretending to work a long time ago, and this week the Castro regime announced that it will now stop pretending to pay them.

That might be the best way to think about the news, reportedly contained in an Aug. 24 internal document, that Cuba's Communist Party is proposing to lay off more than 500,000 workers by March 2011 because it can no longer afford to maintain its "bloated payrolls." If nothing else, this is an historic acknowledgment that the revolution has failed—and from its own architects.

But the news may be less momentous than the headlines. Raúl Castro, who took over as president from his ailing brother Fidel in 2006, has given numerous speeches bemoaning the low productivity of Cuban workers and the government's fiscal straits. Two hurricanes last year and the global recession have hit revenues from tourism and nickel mining. The government and the country—once the third richest in Latin America—are as decrepit as the '57 Chevys on Havana's streets.

This is also not the first such bow in the direction of market reform. After the fall of the Berlin Wall and the end of Soviet subsidies, Castro courted foreign investment and allowed Cubans to open small restaurants, ferry foreigners as taxis and use the U.S. dollar.

But as the state recovered financially and Hugo Chávez appeared as a new source of subsidy, Cuban perestroika was put on ice. The limited privileges of small entrepreneurs were withdrawn. Not coincidentally, a crackdown on political dissidents began in 2003.

Now the regime claims it will again allow entrepreneurship. Cubans will be allowed to raise rabbits, make bricks, collect garbage and grow vegetables, among other things. And the state will again welcome foreign investment.

Is Cuba moving in a new direction? Surely it wants the world to think so. But the lack or property rights remains. Foreign investors from the likes of Chile and Spain have learned the hard way that Fidel's inner circle has the ultimate control about profits. That reality will deter foreign investment until it changes.

The lesson of economic reform in China, Vietnam and other Communist regimes is that they must include the genuine freedom to make and trade goods, earn money and keep the profits. Cubans can only do that now on the black market. The dual currency system, in which they can earn money only in non-convertible pesos but must shop for most items priced in the dollar-linked peso, condemns most Cubans to poverty.

The talk of reform is also an attempt to encourage the U.S. Congress to drop the travel ban on Cuba. We long ago supported dropping the entire embargo on Cuba, but the U.S. ought to at least get something for this concession if the Castros are so eager for it. The deal could include releasing political prisoners, repealing the laws that landed them in jail and allowing foreign investors to directly hire and pay workers. Meantime, we doubt Cuba will really change until Fidel finally goes to his eternal punishment.