10764 REPORT ON CUBA Lcopy/ /95/ C'. , 0 'p -, p .NI I,':). I B R D SPECIAL PUBLICATION Sales Number: I BR D. 1951.3 Price, U.S. $7.50 Report on CU BA Findings and Recommendations of an Economic and Technical Mission organized by the INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT in collaboration with the GOVERNMENT OF CUBA in 1950 FRANCIS ADAMS TRUSLOW Chief of Mission INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT WASHINGTON, D. C. 1951 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT WASHINGTON, D. C. OFFICE OF THE PRESIDENT July 12, 1951 His Excellency Dr. Carlos Prio Socarras President of the Republic of Cuba Havana, Cuba Dear Mr. President: I have the honor to transmit to your Excellency herewith the Report of the Mission to Cuba, organized by the International Bank for Reconstruction and Development in collaboration with the Government of Cuba and headed by Mr. Francis Adams Truslow. As Mr. Truslow pointed out in his letter transmitting the Report to the International Bank a few days before his death, it was the purpose of this Mission to make an objective and thorough study of the economy of Cuba and to make practical recommendations for the furtherance of the economic development of your country. This purpose has been, in my opinion, ably fulfilled. It is my hope that the data presented in the Report will be of value and that the recommendations of the Mission will prove acceptable and helpful. The Bank has not yet had the opportunity to study in detail all of the recommendations made by the Mission in its Report. They must therefore be regarded as matters for study and future discussion with your Government rather than as recommendations of the Bank. We believe, however, that the Report is deserving of the most careful consideration by the Government and people of Cuba and I wish to assure Your Excellency of our readiness to assist in every appropriate way during this consideration. In the event that special committees are formed to accomplish particular purposes as recom- mended in the Report, or if Your Excellency sees fit to establish a general committee to develop a plan of action as suggested in Mr. Truslow's letter, we should be most happy to consult with members of such committees on how best to make available the facilities of the International Bank. V I wish to take this opportunity to express the Bank's appreciation for the many courtesies shown to the members of the Mission during their sojourn in Cuba. With the renewed expression of my highest sentiments, I am Sincerely yours, Eugene R. Black vi New York City, N. Y. July 1, 1951 The Honorable Eugene R. Black, President International Bank for Reconstruction and Development Washington, D. C. Dear Mr. Black: The Mission organized by the International Bank for Reconstruction and Development at the request of the Government of the Republic of Cuba has completed its investigations and prepared its Report. As you know, the purpose of the Mission was to make an independent study of the economy of Cuba in such detail as time permitted and, on the basis of its studies, to report its conclusions as to the more important economic problems aild feasible developments in Cuba. The precise terms of reference of the Mission will be found in Appendix I. As Chief of Mission I have the honor to submit the Report with this letter. In this Report the Mission has sought to express its findings with sufficient breadth to provide perspective and, at the same time, in sufficient detail to permit the effective application of its suggestions. The work of the Mission was carried out in three stages. After a week of preliminary conferences in Washington, the Mission devoted the months of August, September and part of October 1950 to investigations in Cuba. Thereafter, the Mission returned to the United States and individual members of the Mission assembled the data collected in Cuba and wrote reports appro- priate to their several fields of study. During the final stage, now completed, these several reports were correlated, edited and reworked into the final Report. The Mission received the utmost courtesy and every possible assistance from officials of the Cuban Government, from Cuban citizens in every walk of life and in every part of the island and from foreign residents. All who were approached by members of the Missiona gave their time and advice without stint. We could not have wished for more wholehearted cooperation and without it, of course, our task would have been impossible. In preparing the Report we have been greatly assisted by the books of a number of distinguished authors. It is impossible to mention them all but we are specially indebted to the works of the following: Mr. Lowry Nelson and Mr. Henry C. Wallich, who most kindly placed advance proofs of their books at the disposal of the Mission; Mr. P. G. Minneman; the Foreign vii Policy Association; Dr. Julian Alienes y Urosa; Dr. Ramiro Guerra y Sanchez; Dr. Jos6 Antonio Guerra and Dr. Casto Ferragut. At the request of the President of Cuba, members of the Mission worked in close collaboration with members of the staff of Price, Waterhouse & Co., who were also engaged, at the request of the Cuban Government, in making a most valuable Report on the public finances of Cuba. Their generous co- operation proved invaluable. It is our hope that this Report may provide the people of Cuba and their present and future governments with a detailed and candid appraisal of Cuba as it is today; and that from that appraisal may grow policies and actions which will measurably increase the productivity and, therefore, the standard of living of Cuba. It is also our hope that this Report will provide the International Bank with additional and useful knowledge of Cuba and so promote a sounder understanding of its problems and its capacities. However, the true value of a Report of this sort must depend on the extent to which Cubans and their Government find the recommendations we have made acceptable and put them into practice. These recommendations are numerous, but wherever practical we have attempted to suggest ways in which they might be made operative. We have, for example, suggested in several cases that committees be established for the accomplishment of particular purposes. We feel sure that the specialized knowledge, technical personnel and other facilities of the International Bank would be most helpful to such groups if they are formed. We have not suggested the formation of any particular group in Cuba to study our recommendations and the Report as a whole, and to act as a source~ of initiative to press for the adoption of those parts which are con- sidered acceptable. Such a procedure might be extremely useful, however, and if the Cuban Government decides to initiate it, the assistance of the Bank in working with such a group might prove to be a most useful contribution. The offer of the Bank's services in connection with the work of any par- ticular groups or with such a general committee would, I feel sure, be most welcome in view of the interest shown in the work of the Mission by public and private groups in Cuba and by the highest officials in its Government. Respectfully submitted, 04a&J.4- FRANCIS ADAMS TRUSLOW Chief of Mission viii MEMBERS OF THE MISSION Walter J. Armstrong Herman A. Benton Jos6 Camacho Lorenzana Richard L. Funkhouser Philip J. W. Glaessner Francis W. Godwin Malcolm B. Lees William B. Mather Pentti Pajunen Edward W. Russell Charles L. Shrewsbury Eugene Staley Boris C. Swerling Francis Adams Truslow Simon H. J. Wijdenes Calvin 0. Williams Noel H. Wood ix CONTENTS BOOK I PAGE CHAPTER 1. GENERAL COMMENT AND DIAGNOSIS 1. A Problem and Opportunity .................................................. 3 II. Resources for Development .................................................. 4 III. Present Position and Problems ............................ 6 IV. Obstacles to New Growth .................................................8 V. The Choice before Cuba ................................................ 13 CHAPTER 2. OUTLINE OF MAJOR RECOMMENDATIONS 1. Basis for Recommendations ................................................ 14 II. Strategy for Development ................................................ 14 III. Standards for Action ................................................ 15 IV. A Course for Action to Foster Development .. 17 1. Applied Research ....................... ......................... 17 2. Education . ...... 18 3. Labor-management Relations ............................................... 18 4. Government Policies and Development . ................................. 20 5. Government Reforms ....................... ........................... 23 V. Actions to Increase Agricultural and Industrial Pro- duction ................................. .................. 25 1. The Sugar Industry ........................... ....................... 25 2. Non-sugar Agriculture . .................................................. 26 3. Agricultural Potential . .................................................. 26 4. Minerals and Forests .................................................. 27 5. Industry .................................................. 27 6. Aids to Production .................................................. 29 VI. Five Specific Projects .................................................. 29 1. Railroads ............ ...................................... 29 2. Roads .......... ..................................... . . 30 3. Pension Funds ............ ...................................... 30 4. Research ...... ............................................ 31 5. City of Santiago Water Supply .............................................. 31 VII. Conclusion .................................................. 32 xi BooK II-The Cuban Economy PAGE CHAPTER 3. THE ECONOMY I. Main Features ............................................ 35 1. National Income .............. ................................. 35 2. Structure of Production ............................................... 42 3. Sources of Insecurity ............................................... 46 4. Instability from Trade Cycles and Wars ........................: ..... 51 5. Structural Changes Causing Instability.... ............................ 52 6. Chronic and Recurring Unemployment ................................ 54 II. Reactions to Instability and Stagnation . . 57 1. Feelings of Insecurity ................................................ 57 2. The Gambling Spirit in Economics ..................................... 58 3. Preserving Status Quo and Make-work Practices .............. 59 4. Case of the Match Industry ................................................ 61 5. The Economic Problem in Cuba ............................. ............. 65 CHAPTER 4. RESOURCES FOR DEVELOPMENT 1. Natural Resources ............ ................................... 68 2. Labor ............................................... 69 3. Capital ............................................... 72 4. Business Initiative, Management, Technology ............................ 74 5. The Institutional and governmental Framework ........................ 77 BOOK III - Production PAGE CHAPTER 5. AGRICULTURE I. Introduction ................................................. 81 II. Resources ................................................. 81 1. Climate .................................................. 81 2. Land ................................................. 85 III. Problems ................................................. 94 1. Diversification .............. ................................... 94 2. Mechanization .................... ............................. 97 3. Erosion and Depletion ................................................. 101 4. Fertilization .............. .................................... 104 5. Irrigation .......... ....................................... 108 6. Crop Storage .... ............................................. 115 7. Farmers' Cooperatives ................................ .................. 116 8. Agricultural Education, Research and Extension Service.. 116 IV. Reconnuendations ............... ...................... ............ 124 xii PACE CHAPTER 6. INDUSTRY I. Role of Industry in Cuba ................................................ 127 II. Cuban Industry Today ................................................ 128 1. Production ................................................ 128 2. Seasonal Industrial Activity ................................. ............... 129 3. Inducements to Industry ......... :1 ....... . 131 4. The Handwriting on the,Wall .......................... ..................... 135 III. Factors Influencing Industrial Development ................... 136 1. Capital and Credit ................................................ 136 2. Labor ................................................ 138 3. Nationalism ................. ............................... 154 4. Industrial Technology ................................ ................ 157 5. Technical and Specialized Industrial Training ................ 160 6. Raw Materials .............. .................................. 167 7. Power and Fuel ................................................ 170 8. Water ................................................ 172 9. Transportation .............. .................................. 172 10. Taxes Affecting Industry ................................................ 173 11. Government Controls ................................ ................ 175 12. Protective Tariff and Subsidies .......................................... 182 13. Marketing Practices ......................... ....................... 187 IV. Recommendations ................................................ 191 CHAPTER 7. PROBLEMS OF THE SUGAR INDUSTRY 1. Part Played in the Economy ............................................... 194 2. Controls versus Efficiency ............................................... 195 3. Technological Stagnation ..................... .......................... 197 4. Apathy toward By-products ............................................... 198 5. Mechanization and Improvement ............................................... 200 6. Recommendations ............ ............................. ..... 201 CHAPTER 8. MINERAL RESOURCES I. A General Review ............................................... 202 1. Introduction ............................................... 202 2. Studies of the Past ............... , 204 3. Types of Mineral Resources ............................................... 206 4. Past and Present Developments .............................................. 208 5. Future Potentalities-Metallics .............................................. 210 6. Future Potentialities-Non-metallics ........................ ............ 212 7. Future Potentialities-Fuels ................................................ 214 8. Future Potentialities-W ater ............................................... 215 II. Reconnnendations ............................................... 215 xiii PAGE CIIApTER 9. APPLIED RESEARCH 1. Vital Principles ............ ...............................I... 223 2. Objects of Proposed Organization ............................................... 226 3. Typical Research Program ............................................... 229 4. Essentials to Success ................................................ 230 5. Recommended Form of Organization ......................... .................. 231 BOOK IV -Aids to Production CIAPTER 10. THE PUBLIC SERVICE RAILWAYS I. Essentiality of the Public Service Railways .......... ........ 241 II. Difficulties Faced by the Public Service Railways 248 III. Recommendations ............................................... 260 CllAPTERt 11. TRANSPORTATION I. Highways and Roads . ..................................... 264 1. Introduction . .............................................. 264 2. Basic Defects .............. ................................ 264 3. Suggested Principles for Development ...................I.......... 273 4. General Recommendations .............................................. 281 5. Detailed Recommendations .............................................. 283 II. Highway Transportation . .................................. 300 1. Description of the Industry ............................................... 300 2. Government Regulation of the Industry ............................ 308 3. Recommended Changes in Transportation Policy .......... 315 4. Recommended Changes in Administration ...................... 321 CHAPTER 12. POWER 1. Industrial Requirements ........................ ....................... 323 2. Non-industrial Needs ......... ...................................... 325 CHAPTER 13. SANTIAGO WATER SUPPLY 1. Reason for Study ............................................... 328 2. Present Sources of Supply ..................... 328 3. History of the Problem. ............................................... 329 4. Ing. Salcines' Proposal ............................................... 331 5. Potential Productivity of Basins to East and West .................... 332 6. Condusions ............................................... 334 7. Recommendations . ............................................... 335 xiv PAGE CHAPTER 14. TELEPHONES 1. Service ............................................... 336 2. Telegraph Competition .................. ............................. 336 3. Installations ............................................... 336 4. Problems ............................................... 338 5. Future Growth ...... ......................................... 339 CHAPTER 15. ALCOHOL-GASOLINE BLENDS 1. Introduction .......... .............................. . ..... 341 2. Use of Alcohol and Gasoline ............................................... 341 3. Cost of Alcohol Production ....... ........................................ 344 4. Some Hypothetical Examples ............................................... 347 5. The Problem of Octanes ............................................... 349 6. Recommendations . ............................................... 353 BooK V -Human Problems CHAPTErx 16. LABOR-MANAGEMENT RELATIONS I. Introduction ............................................. 357 II. The Vicious Circle ............................................. 357 III. Background ...................... . 360 1. A Legalistic Approach ...................... . ; 360 2. Leadership of Labor ............................................... 364 IV. Employers' Point of View ............................................... 366 1. Common Grievances ..................................... .......... 366 2. Some Personal Opinions .......................................... ..... 366 3. Government v. Employers ............................................... 369 V. Point of View of Organized Labor . ......................... 370 1. Lack of Confidence in Employers and Investors ........... 371 2. Effects of Past Abuses .... ........................................... 372 3. Mechanization and Productivity .............................. ...... 372 4. Comments on Job Tenure ............................................... 374 VI. Case Study in Successful Relations ................................. 375 VII. Conelusions and Suggestions ... ....................................... 380 1. General ........... .......................... . ........ 380 2. Action by Government ............................................... 381 3. Action by Management ........................... .................... 383 4. Action by Organized Labor ............................................ 385 5. Joint Action ............... ...................... . ........ 387 VIII. Summary of Recommendations ............................... ....... 388 xv PACE CEIAPTER 17. PORT LABOR 1. Uncertainty and Arbitrary Requirements . .......... ...... 391 2. Low Efficiency and Make-work . ................................ 392 3. Irrational Wage System .............................................................. 395 4. Conclusions ............................................................. 400 5. Recommendations ........................................................ ...... 401 CHAPTER 18. EDUCATION 1. Introduction ........ ...... ................................ ... 403 2. The Situation in Brief ............................................................. 404 3. Extent of Educational Opportunity .......................... ..................... 406 4. Field Observations . ............................................................. 414 5. Why Present System is Inadequate .............................................. 422 6. Expenditure on Education ............................................................. 432 7. Conclusions and Recommendations ................................................ 434 8. Summary of Recommendations .................................................. ..... 439 CHAPTER 19. HEALTH 1. General Impression . ............................................... 441 2. Malnutrition ................................................ 441 3. Living Conditions ........... ..................................... 443 4. Importance of Enriched Rice .................................... ............ 447 5. Conclusions and Recommendations ................................................ 449 BOOK VI- Administration CHAPTER 20. GOVERNMENT ADMINISTRATION 1. Relation to Economic Development ................................................ 453 2. Present Weaknesses . ............................................................. 453 3. Causes ............................................................. 454 4. Proposed Legislation ............................................. ................ 456 5. More than Legislation Needed .... ................................................... 456 6. Transitional Arrangements ............................................................. 457 7. Summary of Recommendations ........................................................ 458 CHAPTER 21. PUBLIC WORKS AND MUNICIPAL SERVICES 1. The Public Works "Cycle"........ ...... 459 2. Public Works Expenditures ............................................................. 461 3. Municipal Services . ............................................................. 463 4. Municipal Self-help ....... ...................................................... 464 5. Private and Semi-private Ownership of Utilities. 467 6. Municipal Works by National Government ........... . .................... 468 7. Division of Duties . ............................................................. 470 8. The National Development Commission ................. . ..................... 471 9. Recommendations ............................ ................... . ............. 472 xvi PAGE CHAPTER 22. SOCIAL SECURITY FUNDS-PROBLEMS OF ADMIN- ISTRATION AND INVESTMENT 1. Introduction .............................................................. 475 2. Problems Facing Government Pension Funds .............................. 476 3. Recommendations ( .............................................................. 480 4. Problems of Reserves of Non-governmental Pension Funds ..... 485 5. Recommendations (II) .. .............................. : 487 6. General Problems of the Non-governmental Funds...... ............... 488 7. Recommendations (III) ............................................................. 494 8. Investment of Fund Reserves .......................................................... 496 CHAPrER 23. AIDS TO ECONOMIC POLICY 1. Introduction ................ ............................................. 499 2. National Economic Council ............................................................. 499 3. Representation on the Comisi6n de Fomento .............................. 501 4. Better Inter-agency Coordination.................: ....... 502 5. Need for Better Statistics ................................................ 502 6. Recommendations ............ .................................... 505 BOOK VII-Finance CHAPTER 24. WHAT CUBA EARNS, INVESTS AND SAVES 1. Gross National Product and Its Components ..................... ...... 509 2. Capital Outlay by the Government .............................................. 511 3. Private Capital Outlay ................................................. 512 '4. Capital Outlay in Sugar Industry ......................................... ...... 514 5. An Estimate of Gross Savings ................................................. 515 6. Uses of Savings ................................................. 517 7. Who Are the Savers? ................................................. 522 CHAPTER 25. WHY CUBANS INVEST AS THEY DO 1. Introduction ................................................. 524 2. Craving for Liquidity ................................................. 524 3. The Capital Market ................................................. 526 4. The Banking System ................................................. 527 5. Attitude of Capital and Labor ................................................. 528 6. Possible Remedies .............. ................................... 528 CHAPTER 26. THE CUBAN MONETARY BACKGROIJND 1. Introduction .................................................. 530 2. 1937-1940, A Period of Depression . ........................... 530 3. 1941-48, The War and Postwar Boom ........... ..................... 531 4. 1948-1949, The Readjustment ............................................... 534 5. The Present Monetary Position . .............................. 535 Note on the Cuban Money Supply . .............................................. 540 xvii PACE CHAPTER 27. THE CENTRAL BANK-PROBLEMS AND OPPORTUNITIES 1. Introduction . ................... .................................... 546 2. The Present Position of the Central Bank ............................... 548 3. The National Bank and the Commercial Banks ....................... 550 4. Developing Specialized Credit Institutions.. .............................. 554 5. The National Bank as Government Banker and Adviser ...... 555 6. The National Bank and the Peso Exchange Rate .................. 556 7. Technical Problems ............................................. ................. 557 CHAPTER 28. THE COMMERCIAL BANKS 1. Size and Structure of the Present Banking System ............... 562 2. Characteristic Features of Banking System ................. ........... 566 3. Reserve Position of the Banks ..................................................... 566 4. Volume of Commercial Bank Loans ............................................ 571 5. Forms of Bank Credit ............................................................. 574 6. Term of Loans ............................................................. 576 7. Distribution of Bank Credit .......................................................... 579 8. Level of Interest Rates .................................................. ............ 585 9. Conclusions ......................... .................................... 587 10. Recommendations ........ ..................................................... 587 CHAPTER 29. AGRICULTURAL AND INDUSTRIAL CREDIT 1. Introductioi ............................................................. 590 11. (1) Present Agricultural Credit System ........................ 590 (2) The Present Industrial Credit System ................... 596 (3) Towards Specialized Credit Institutions ............... 597 III. The New Agricultural and Industrial Credit Bank 599 1. Structure and Administration ......... . ............................. 599 2. Control by National Bank .................................................... 600 3. Capital Structure and Source of Funds ........... ............. 600 4. The Agricultural Credit Division ................................... 601 5. Industrial Division ............................................................. 602 6. Operating Procedures ........................................................... 604 7. Legal Changes .............................................................. 604 8. Government Warehouses To Be Taken Over .................... 605 IV. Comments and Recommendations . .....I.......... ....... 605 1. Structure ............................................................. 606 2. Administration ............................................................. 607 3. Sources of Funds .............................................................. 608 4. Credit Operations .... ...... ... 609 5. No Political Loans ............................................................. 609 6. Loan Guarantees .............................................................. 610 xviii PAGE 7. Need for Rehabilitating Mortgages .............. .................. 610 8. Encouragement of Cooperatives........... ..... . ..... ... 610 9. Interest Rates .............. 611 10. Importance of Technical Advice............... ...... 611 11. Investment Banking Function ............................. ......... 612 CHAPTER 30. A CAPITAL MARKET FOR CUBA? 1. Why Essential Conditions Are Absent: ......................................... 613 2. A Significant Case ............................................... 617 3. Long-term Remedies ......... ...................................... 618 CHAPTER 31. SAVINGS AND INVEST-MENT INSTITUTIONS 1. Im portance of Collective Savings ...................... ......................... 620 2. Commercial Banks as Savings Institutions ..................... ............ 620 3. The Insurance Companies ................................................ 621 4. The Postal Savings System ............. .................................. 625 5. Recommendations for Postal Savings System .............................. 627 6. Capitalization Companies ...................... ......................... 627 CHAPTER 32. THE MARKET FOR REAL, ESTATE 1. Attractions as Investment ................ ... 630 2. Financing of Building ................................................ 630 3. The Mortgage Moratoria ................................................ 632 4. Recommendations ................................................ 635 CHAPTER 33. THE GOVERNMENT BOND MARKET 1. Introduction ................................................. 636 2. Size and Composition of Outstanding Government Debt .... ....... 636 3. Who Holds the Debt? ................................................ 637 4. Why Do Cubans Hold So Much of the External Debt?..9.......... 638 5. Market for Outstanding Government Bonds ................................. 639 6. The 1948 Veterans' Bond Issue and the 1950 Internal Loan .... 640 7. Outlook for Further Issues ................................................ 644 8. Recommendations for Further Action ............................................ 646 CHAPmTEi 34. PUBLIC FINANCE - GENERAL CONSIDERATIONS 1. Unprecedented Responsibilities ................................................ 647 2. Weaknesses and Problems .................................................648 3. Recommendations . ................................................ 651 CHAPTER 35. BUDGETARY PRACTICES 1. Constitutional and Other Legal Provisions .................................. 652 2. Practical Results ..... ............................................ 653 xix PAGE 3. Lack of Controls ............................................... 655 4. The Tribunal of Accounts ............................................... 655 5. Extra-budgetary Operations .............................. ................. 657 6. Need for Unified and Intelligible Budget ................................... 659 7. Summary of Recommendations ........................................ ....... 661 CHAPTER 36. PUBLIC REVENUES AND EXPENDITURES 1. Scope of Exam ination ............................................... 663 2. Level of Receipts and Expenditures ............................................. 663 3. The Cuban Tax System ............................................... 665 4. Direct Taxes . ................................. .............. 668 5. Tax Incentives to Domestic Investment .... ................................... 673 6. Sugar Taxes ................. .............................. 675 7. Simplification of Tax System ............................. .................. 676 8. Tax Administration .............. ................................. 6 78 9. Government Expenditures ............. .................................. 679 10. Summary of Recommendations . ............................... 683 CIHAPTER 37. TAXATION OF PETROLEUM PRODUCTS 1. Introduction ................................................. 685 2. Examples of Complexity ................................................ 685 3. Subsidies, Concessions and Evasions .......... ......... ......... .... 686 4. The Need for Review . ............ ................................... 689 5. Recommendations . ......................................... . .... 692 CHAPTER 38. PRESENT FINANCIAL -STATUS 1. Position in 1945 ............................................... 693 2. Position in 1950 ............................................... 693 3. The Floating Debt ................................................ 695 4. Recommendations on Financial Policy .......................................... 697 CHAPTER 39. MONETARY AND FISCAL POLICY I. Objectives ................................................ 699 1. Scope of Discussion ............................................... 699 2. Why Exchange Rate and Price Stability Are Important. 699 II. Real and Financial Resources ............................................ 701 III. Three Possible Contingencies ............................................... v702 1. Advantages of Flexible Program .................... ................... 702 2. Three Alternatives ................... ................. . ......... 703 3. Measures for Prospect A ............................................... 704 4. Measures for Prospect B .................................. ............. 710 5. Measures for Prospect C ............................................... 714 IV. Long-term Policies ............................................... 719 xx BooK VIII-International Economic Relations PAGE CHAPTER 40. CUBA'S INTERNATIONAL POSITION 1. An Export Economy ........................................................ 723 2. Balance-of Payments-Past and Present ...................................... 728 3. Foreign Indebtedness and Investment ........................................... 731 4. Foreign Trade-Trends and Problerns .738 5. Outlook for Foreign Trade and Payments ................................. 747 6. Commercial Policy . ............................................................. 751 7. Diversification, Development and Foreign Trade ................ ...... 757. CHAPTER 41. TOURISM 1. A Conflict of Opinion ..... ......................................................... 766 2. Resources and Capacity ............................................................. 767 3. Deficiencies . ............................................................. 770 4. Unfortunate Attitudes ............................................................. 772 5. Basic Difficulties ........................... ...................... ........... 774 6. Conclusions and Recommendations ............................................... 775 BOOK IX CHAPTER 42. STRATEGY FOR ECONOMIC DEVELOPMENT 1. Need for Dynamic Policy ................................................ 779 2. Urgency of Beginning Now ................................................ 783 3. A Development Strategy................ ... 785 4. Criteria for Putting First Things First ...................................... ... 789 5. An Opportunity for Leaders . ................................................ 792 BOOK X Technical Problems and Possibilities CHAPTER 43. THE SUGAR INDUSTRY 1. Present Cuban Production and Practices ........................ 795 1. Requirements .............. ................................ 795 2. Land Areas ............. ................................. 795 3. Organization of the Industry ....................................... ..... 795 4. Sugar Cane Varieties .............................................. 798 5. Yields ......... ....................... . ............ 799 6. Mechanization ............... ............................... 800 7. Processing and Handling .............................. ................ 802 8. By-products .......... .................................... 802 xxi PAGE 9. Sugar Control Machinery ........................8....................... 04 10. Production ............. .................................. 806 11. Comments on Sugar Costs ............................................... 807 12. The Export Market ............................................... 808 II. Lessons of History ........................................ 810 1. Early History ......... ...................................... 810 2. Twentieth Century Influences ............................................ 811 3. Attempts at Market Control .............................................. 812 4. The Changing Balance of Power ....................... .............. 816 5. The Changing Balance of Ownership ............ -.............. 821 CHAPTER 44. OTHER AGRICULTURAL CROPS I. Cacao .............................................. 823 11. Coffee .............................................. 824 111. Corn .............................................. 828 IV. Fibers .............................................. 832 V. Fruits .............................................. 844 VI. Rice ................................................ 849 VII. Tobacco ............................................... 856 VIII. Vegetable and Root Crops .............. .... - v 864 CHATrEit 45. LIVESTOCK, MEAT AND DAIRY PRODUCTS 1. Introduction ............................................... 869 11. Feeding of Livestock . ............................................... 869 III. Slaughter and Meat Packing ................................... ......... 876 IV. Beef and Dairy Cattle ..................... .......................... 878 V. Dairying and Dairy Products ........................................... 889 VI. Hogs ............................................... 895 VII. Sheep and Goats ................................................ 897 VIII. Poultry ............................................... 898 IX. Reconnuendations ............................................... 901 CHAPTER 46. FORESTS AND FOREST PRODUCTS 1. A D epleted A sset ............................................... 903 2. Government Regulations . ............................................... 906 3. Economic Possibilities ....................... .................... ... 907 4. Potential Importance of Bamboo ................................................ 909 5. Conclusions ................................................ 912 6. Recommendations . ............................................... 912 xxii PAGE CH.iAPTER 47. FISH AND FISHING 1. Introduction ............................................. .. 914 2. Examination of Fishing Ports ................................................ 917 3. Opportunities for Expansion ........................ 920 4. Recommendations ............ .......................... . ........ 924 CHAPTER 48. INDUSTRIAL PRODUCTS I. Candy ............................................... 925 II. Canning ......... ......................... ............ 927 III. Heavy Chemicals ................ .................... .......... 934 IV. Fertilizers .......... ..................................... 937 V. Leather and its Products ............................................... 940 VI. Salt and Salt Production ............................................... 945 VII. Starch ............................................... 951 VIII. Textiles ................................................ 953 IX. Vegetable Oils ............... ................................. 965 X. Miscellaneous Industrial Activities ..................... ........... 970 CHAPTERt 49. MINERAL PRODUCTION I. Metallic Deposits ............... : 981 1. Manganese ......... ................................ 981 2. Chromium ....... ; 986 3. Copper .......................................... 992 4. Iron .......................................... 995 5. Nickel and Cobalt .......................................... 997 6. Gold and Silver .......................................... 998 7. Lead and Zinc ........ ................ : 1000 8. Tungsten .1001 II. Non-metallic Deposits . . .1001 1. Limestone and Marble .1001 2. Clay .1005 3. Gypsum .1013 4. Barite .1014 5. Magnesite .1015 6. Silica Sand .1017 7. Asbestos .1017 8. Talc .1018 9. Portland Cement .1018 III. Fuel Deposits ....................... 1020 1. Petroleum .1020 2. Asphalt .1025 3. Peat and Lignite .1030 xxiii PAGE CHIAPTER 50. A BAG MILL FOR CUBA? ...................... 1031 1. The Problem Analysed ...................... 1031 2. Best Way to Start a Plant ...................... 1033 3. Recommendations ...................... 1036 APPENDICES I. Purposes of the Mission . 1039 II. Appendix on the National Income . 1042 III. Bibliography of Sugar By-product Research . 1048 IV. Equivalents of Weights and Measures . ........................................... 1051 CHARTS PAGE I. Pattern of Agricultural and Industrial Development ..................... after 16 II. Some Opportunities for Cuban Indfistrial Development . . 28 III. Trend of Real Income Per Capita in Cuba .41 IV. Percent of Agricultural Workers Who Worked the Number of Months Shown, 1945 .50 V. High, Low, and Average Rainfall in Oriente .110 VI. Relation between Total Volume of Cane Ground, and Portion Carried on Public Service Rairoads .245 VII. Cuban Exports, Imports and National Income, 190349 .725 VIII. Cuban-U. S. Trade, 19151949 .764 IX. Percentage Distribution of Cuban Imports by Geographic Area, 1915-1949 . .765 X. Production of Sugar Compared with World Production. . 797 MAPS AFTER PAGE 1. Railroads 242 2. Recommended Network of Highways .270 3. Section of East Oriente Province .332 4. Location of Principai Metallic Mineral Resources .982 5. Location of Non-metallic and Fuel Resources ..... ........................................ 1002 6. Travels of the Mission ............................................................ 1040 xxiv BOOK I Chapter 1. GENERAL COMMENT AND DIAGNOSIS 2. OUTLINE OF MAJOR RECOMMENDATIONS CHAPTER 1 General Comment and Diagnosis L A PROBLEM AND OPPORTUNITY Ample Resources Cuba today faces both a problem and an opportunity. Her problem is to reduce her dependence on sugar, not by producing less sugar but by developing additional enterprises. Her opportunity is that her present prosperity offers her the means to do so by further diversifying her economy. Ample, unused human and material resources are available in Cuba with which her people might increase the nation's output, broaden its economic base and create a better standard of living for the population as a whole. Also, at the present time, Cuba has a financial potential of her own, which-if it can be effectively tapped-is adequate for her development. In addition, as long as present sugar prosperity continues, further large financial resources should be at her disposal for this purpose. Why Action is Important In the opinion of the Mission,' it is important for Cuba to take immediate advantage of this opportunity. This is because the growth of the Cuban econ- omy has not matched the needs of the existing population, still less those of coming generations. Though accurate statistics are not available, it seems that -even in prosperous times like the present-there is serious permanent as well as great seasonal under-employment. Moreover, there is no evidence that in recent years Cuba has become less vulnerable to a serious fall in world-sugar prices than in the past; in fact there are some indications to the contrary. A return, therefore, to more normal world conditions might well confront Cuba with a critical unemployment problem. Finally, it is impossible to predict how long Cuba's prosperity will last; and it is uncertain if or when an opportunity like the present will occur again. It has been, perhaps, the fate of Cuba to have often failed to act when sugar prosperity would have financed action and to have sought to act only in periods when depression provided a motive but sugar did not provide the means. It is therefore of the utmost urgency that Cuba should take the fullest ad- vantage of this period of prosperity. Objects of the Mission are given in detail in Appendix 1. 3 4 REPORT ON CUBA No Single Remedy This will not be easy, not only because of problems inherent in the Cuban economy but also because the present opportunity is not unrestricted. While international uncertainties make sugar profitable, they may also make it diffi- cult to obtain the supplies and equipment which Cuba may need for maximum development. Despite the difficulties, however, the Mission believes that it is within the power of the Cuban people to make substantial economic progress, provided there is energetic, resolute and united action by the Government, by private groups, by individuals and by the nation as a whole. The solution of Cuba's problems depends on simultaneous action by many people. It does not lie in any single plan. It cannot be found in quick or easy remedies. Cuba can increase the diversification of her economy only by concerted effort in many spheres, by diligent improvement of her institutions and by new attitudes in many people. For this reason, the Mission does not offer an over-all economic scheme. Instead, it offers what it has called a "Strategy for Development" which is reflected in a large number of suggestions and recom- mendations in various fields-administrative, technical, financial-and in the fundamental matter of human relations. Since the accomplishment of these recommendations will be a slow process, the Mission believes that they should be tackled without delay, while the opportunity of prosperous times remains available. II. RESOURCES FOR DEVELOPMENT2 Soil and Climate Since Cuba's chief need is to di,versify her economy, she is peculiarly for- tunate in having great and unused resources at her disposal. She enjoys a most favorable geographical position, within a few miles of the great American market and on important trade routes. She has an excel- lent climate and, for a tropical country, remarkable freedom from disease. Cuba's soil is exceptionally fertile and level. There is a surplus of good land. Rainfall is usually adequate and there is no frost. Further mechaniza- tion of the major crops is feasible. It is possible for Cuba, therefore, greatly to increase and diversify her agricultural production once certain impediments have been removed.3 She has a variety of mineral resources which have not yet been fully de- veloped.4 2 Note: For clarity, this ontline has been kept as brief as possible. But the footnotes refer the reader, to chapters where the various statements are diseussed in greater detail. a Chapter 5. 'Chapters 8 and 49. GENERAL COMMENT AND DIAGNOSIS 5 Human Resources Cuban workers are resourceful and quick to learn manual skills. There- fore, since Cuba is close to supplementary sources of raw materials, there are possibilities for the development of industries particularly those related to agriculture.5 Cuba's people are intelligent, able and quick to absorb modern knowl- edge; her business men are shrewd and capable, her doctors and surgeons among the best in the world, her architects bold and imaginative. In other fields, many Cubans are already alert to modern methods and technology and there is no insurmountable obstacle to training as many more as may be required or, in the meanwhile, to obtaining technical advice from abroad.6 Financial Potential As already noted, Cuba has a substantial financial potential. Unless there is a serious fall in world sugar prices, she will have the benefit of further financial resources for development in the future, provided taxes are effec- g tively collected, governments are responsible and private capital investment is made attractive.7 Gold and dollar holdings of institutions and individuals are higher than in any other country of Latin America. The peso has been at par with the dollar for the last ten years and foreign trade is unhampered by exchange or direct trade restrictions.8 Qualifications This fortunate position, however, must be qualified to some extent. For instance, Cuba has no coal and-so far-no liquid fuel of any consequence has been located, though there are still unexplored possibilities.9 Without a domestic fuel supply, heavy industry is impractical. The limited; domestic market, too, restricts the possibilities of some other industries. In some areas supplies of water are inadequate or uncertain. But irriga- tion and water-conservation measures could help to remedy this.10 Cuba's forests have been seriously depleted" and there is evidence that her soil is not as fertile as it was.12 But with time and effort these liabilities can be corrected. 5 Chapter 6 and Chart II. 6 Chapter 6. X Chapters 24, 26, 39 and 40. s Chapters 26 and 40. a Chapters 8 and 49. 10 Chapter 5. " Chapter 46. " Chapter 5. 6 REPORT ON CUBA Her roads and utilities need extensive rehabilitation and expansion and her railroads are sorely in need of renewal.'8 Cuba is subject to hurricanes but modern hurricane-warning methods help to reduce loss of life and property. Education and Training Only about half of the children of school age in Cuba are in school and there is a high rate of illiteracy.'4 As a general rule, too, technical training is inadequate for modern needs."8 Labor-management relations in Cuba are generally unsatisfactory and, together with the inadequacies of the educational system, diminish the effec- tiveness of Cuba's human resources.16 Financial Problems A substantial government floating debt-part of which has been out- standing for twenty years-gives an element of uncertainty to the financial picture.'7 The present unsatisfactory position of the pension and retirement funds"8 does the same thing and, at the same time, enhances the feeling of insecurity of many Cuban workers, which arises from the unstable and static nature of the economy. This, in turn, complicates the problem of labor-man- agement relations. Though great improvements were made in 1950, the administration of public finances has for many years left much to be desired. Tax evasion has been widespread and the use of public funds has not always been in the best interests of the nation. For instance, the record revenues of 1943-48 do not seem to have been spent as constructively as they might have been. m. PRESENT POSITION AND PROBLEMS Living on the Past Cuba has achieved an income level which is among the highest in Latin America. In the past decade per capita real income has risen 30%o.19 In the postwar years, sugar sales have reached values not attained since 1920. Domestic industrial and commercial activity has been high-except for a period of readjustment during 1948 and 1949-and there have been large imports of agricultural and industrial machinery and of various types of consumer goods. s8 Chapters 10, 11, 12 and 14. 1' Chapter 18. 1f Chapter 6. 10 Chapteis 16 and 17. "I Chapter 38. Is Chapter 22. ID Chapter 3. GENERAL COMMENT AND DIAGNOSIS 7 But the present per capita income of about $300 is only slightly above that of the early 1920's. It is largely the result of the sugar boom which brought back into full use equipment installed in the first quarter of the century. Direct quota restrictions, tariffs and currency difficulties make a further expansion of the sugar industry unlikely. Cuba's present standard of living, therefore, depends mainly on an industry which stopped growing many years ago.20 Some activities, such as the textile industry, have expanded. But, in rela- tion to the need for employment of the present and future population, the growth of new enterprises has been disappointingly slow.21 In recent years, little foreign capital has come to Cuba while much of the savings of Cubans has gone abroad, been hoarded or used for real estate construction and for speculation.22 Dominance of Sugar Sugar is not only Cuba's principal source of livelihood. It dominates the economy-and the outlook of the people-in various ways. Sugar plays an even greater part in the exports of Cuba today than it did in the past. The economy, in fact, is more at the mercy of fluctuations in world sugar prices than ever before. This causes constant feelings of insecurity which, in turn, diminish business confidence and tend to restrict initiative. When sugar prices are good, no other activity in Cuba is so rewarding. But when they are bad-since the economy hinges on sugar-most other ac- tivities suffer at the same time. To many Cuban investors, therefore, other forms of investment seem less attractive than sugar in good times and almost as risky in bad.23 Hence a "vicious circle": only greater diversification can reduce Cuba's dependence on sugar but the dominance of sugar discourages diversification. Some Consequences This inability to escape risk while sugar is dominant has many profound consequences. For instance, it makes potential investors anxious to keep a large part of their assets in liquid form.24 It promotes a desire for a quick, if precarious, profit rather than for smaller but steadier gains. Above all, it encourages a static tendency among all groups to concentrate on the distribution of existing wealth and employment rather than to cieate new wealth and more work, since neither can be increased without investment and exposure to the underlying risk of sugar.25 a Chaptere 3 and 40. 21 Chapters 5, 6, 7 and Book X. 2' Chapters 24, 25 and 40. 21 Chapter 25. 21 Chapter 25. sa Chapter 3. 8 REPORT ON CUBA Dangers of Static Economy Hence an economy which-in relation to Cuba's need for development- is virtually static. Despite Cuba's present prosperity, the underlying situation is unsound. For when this prosperity ceases, through a change in world conditions, Cuba must not only face increasing competition from other sugar-producing areas, for which she is not prepared, but she must also rely on other articles of export which she does not now produce. Problem of Competition Other sugar producers are not standing still and, to meet their competi- tion, Cuba may have to reduce production costs by such means as more intensive cultivation and further mechanization. Greater mechanization must inevitably displace some labor and, unless this can be absorbed in alternative activities, the present serious unemploy- ment problem will grow immensely more severe. Its magnitude is indicated by the large margin of under-employment even under present boom condi- tions. Moreover, the natural annual increase of an estimated 25,000 persons available for employment demands consideration. Though-as far as can be ascertained-this is not serious in relation to Cuba's development poten- tialities, it is not a problem which can be safely ignored so long as new sources of employment remain matters for conjecture. Dangers Obscured Periods of depression in the past have made many Cubans acutely aware of the danger of such complete dependence on sugar. But, for the nation as a whole, the prosperity of the past ten years has tended to obscure the fact that changed world conditions, increased labor costs in Cuba and prog- ress in other sugar-producing countries have reduced her capacity to compete in more limited markets. Prosperity, too, has helped to conceal the relative stagnation of the Cuban economy and the need to adopt a more dynamic approach. But the fact is that, to a large extent, Cuba is living in-and on-the past and that her present prosperity rests on foundations which can be dangerously weakened by events beyond her control. IV. OBSTACLES TO NEW GROWTH Significant Attitudes The relatively static character of the Cuban economy is evidently not due to a lack of physical and hurnan resources or-in recent years-of financial potential. It does not appear to be entirely due to the dominance of sugar, GENERAL COMMENT AND DIAGNOSIS 9 although this is a preponderant factor. Its causes must be sought also among prevailing attitudes of the Cuban people and the conduct of their institutions; for resources in themselves are not enough and even the golden capacity for sugar production has its disadvantages. A progressive outlook and effec- tively organized human effort are needed and, without them, an advancing economy cannot develop. It was apparent to the Mission that unconstructive attitudes, which appear to be common in Cuba, are among the chief obstacles to economic progress. It should be emphasized that these attitudes are largely the result of the unstable and static nature of the economy itself. For just as a people's out- look may affect their economy, so the nature of their economy influences their outlook. However understandable and explainable these points of view may be, their practical effect on the economy cannot be ignored. Not Peculiar to Cuba We fully realize that such problems are not peculiar to Cuba. As an international group, the Mission knows that they are present, in some degree, in every nation. It is their extent rather than their existence which is significant. The practical question is: do they exist in such degree that they are a danger to the economy? Insufficient Confidence in Cuba It is axiomatic that confidence in a country's future is an essential ingredi- ent of its economic progress. One of the principal barriers to Cuban develop- ment seems to be a lack of confidence in Cuba among Cubans, arising, no doubt, in large part from the insecurity of their sugar economy. Lack of such confidence may account for the fact that Cubans prefer to invest in ventures which promise rapid and spectacular returns, rather than in more constructive but longer-term projects, and are averse to tying up liquid funds for any length of time.26 Without such investment, economic growth is retarded. Many business men seek high profits on a small turnover because they fear that the future may bring rapid contractions in the market. This attitude -though easy to understand-has kept prices high and restricted the market which, in turn, has limited investment possibilities, income and employment.21 Consequences This fear that the future of any investment will rise and fall with the price of sugar is one reason why so much of the savings of Cubans is either hoarded 26 Chapter 25. 2' Chapters 3 and 6. 10 REPORT ON CUBA or invested abroad, instead of being invested in diversified activities at home. Yet, without such domestic investment, the basis for the fear will remain. Reluctance to invest in Cuba also discourages the research and technical initiative needed for a more diversified economy. It is notable that even the sugar industry in prosperous times spends negligible sums on research to meet future competition and to develop other uses for sugar.2 - In the face of the uncertainties which prompt the merchant or investor to snatch a quick profit while he can, organized labor also tries, understandably enough, to extract the maximum advantage of the moment. Lacking confidence in the development of new jobs through new enterprises in Cuba, employees strongly resist mechanization and cost-reducing methods. "Featherbedding" is encouraged and the discharge of employees for legiti- mate cause is made difficult or impossible.29 Such attitudes not only prevent a higher level of productivity-the only sound basis for higher wages over any substantial period of time-but also discourage the establishment of new busi- nesses and the expansion of old ones. Thus they retard the development of new jobs, which could increase confidence and remove the basis of uncertainty. These attitudes also introduce a further danger into the Cuban economy. For higher wages, coupled with opposition to methods for increasing produc- tivity, endanger the competitive position of the basic sugar industry itself.30 Lack of Confidence in Others Informed Cubans, in every walk of life, make no secret of their belief that one of Cuba's weaknesses is a prevailing lack of integrity in public administra- tion and personal conduct. Such views were freely volunteered to the Mission. Whatever the truth may be, this attitude toward the integrity of others is a fact which must be considered. Apparently great numbers of Cubans believe, rightly or wrongly, that for many years the misuse of public funds has been extensive and that public administration still leaves much to be desired. It is equally apparent that many also lack confidence in the integrity of leaders in private business enterprises and labor organizations. The effects of such a lack of faith, whether or not well founded, may be observed in the reluctance of investors to assume the position of minority stockholders, in dissidence within labor unions and in the difficulties encoun- tered by those who have sought to develop agricultural cooperatives and other community efforts. If the Cuban economy is to be developed and diversified, increased capital investment in Cuba, orderly operations of labor organizations and more co- operative activities are essential. These ends will not be possible unless there is 21 Chapters 7, 9 and 43. 29 Chapters 6 and 16. a} Chaptera 16, 17, 40 and 43. GENERAL CO:MMENT AND DIAGNOSIS 11l more widespread confidence in the integrity of those who lead such enterprises. The establishment and maintenance of such confidence must be a product and an objective of any sound recommendations for Cuba's development. Attitudes toward the Law A further point of view, which seems to have checked individual initiative, is a prevalent doubt as to the impartiality and predictability of the law and its administration. Such doubts produce a basic uncertainty in business affairs, which makes men reluctant to act. The origins of these doubts can be traced to several causes. Laws are unfortunately sometimes confused and circumvented by govern- ment decree.31 Tax collections indicate that, up to recently, the tax law could be evaded with impunity.Y2 Collections in 1950, however, serve as proof that this avenue of disrespect can be blocked to the advantage of the nation as a whole. A further cause has been the fact that past governments have failed at times to pay their debts to corporations and private citizens and the present govern- ment has inherited a large "floating debt" composed of such obligations.33 Law enforcement is impaired-and doubt of the impartiality of its admin- istration is fostered-by the personal difficulties of underpaid civil servants and by a tendency to regard the law as an opponent to be avoided rather than as an essential safeguard of human rights. Decrees Promote Uncertainty Of all these factors, laws by decree probably contribute most to diminish confidence in the existence of non-political and impartial law among business men and potential investors-domestic and foreign. The basic unpredictability of decree laws raises vast areas of doubt in plans for investment. There can be little doubt that lack of confidence in the predictability and impartial protection of the law deters Cuban and foreign capital from seeking investment among the opportunities offered by the island. Lack of Continuity and Consistency Another deterrent to progress may be found in actions of governments which reflect a lack of continuity and consistency of purpose and policy. In many parts of Cuba the Mission noticed unfinished and abandoned proj. ects such as roads and public buildings.34 Recent tendencies of governments al Chapter 16. at Chapters 36 and 38. 3 Chapter 38. a Chapter 21. 12 REPORT ON CUBA to support extreme demands of labor have largely nullified the attractions of tax abatement and customs exemption designed to promote new enterprises.35 These examples illustrate such lack of continuity and consistency. Causes vary. An administration may be reluctant to complete the work of its predecessor, lest rivals receive the credit. A project may have been so ill- conceived, however, that a succeeding administration is justified in abandon- ing it. Or it may be that the project was started without any assurance that the funds to complete it would be available. Decrees or decisions are often dictated by some temporary consideration and reversed-without regard to continuity or consistency of purpose-when the situation passes. Other Obstacles Though, in the opinion of the Mission, the attitudes outlined above are among the chief obstacles to healthy growth, many others, of course, constitute contributing factors. For example, there is still a serious lack of specialized credit for non-sugar agriculture and smaller industrial enterprises. But it is hoped that the recently created Agricultural and Industrial Credit Bank will lead to great improvements in this field.-6 There are also marked defects in the internal distribution system. In the sale of most crops, other than sugar, competitive markets are often almost wholly absent and commercial exploitation can flourish unchecked by market restraints. Local retailers, too, retain a striking monopoly of the distribution of many consumer goods, though this position is gradually being improved by the introduction of chain stores, new public markets and the growth of the commercial practice of seeking a greater volume of sales at a lower profit per unit. Part Played by Government It is not uncommon to find people who readily blame Cuba's difficulties entirely on poor administration and lack of fiscal responsibility of successive Cuban governments, which have failed to use record revenues in constructive ways. But the Mission believes that this is too facile an explanation. It is more probable that many of the root causes lie in the attitudes described, which governments have reflected. The causes from which these attitudes spring can be attacked; and it is toward those causes that this Mission has directed much of its comment in the ensuing books of the Report. = Chapter 6 and 36. sc Chapter 29. GENERAL COMMENT AND DIAGNOSIS 13 V. THE CHOICE BEFORE CUBA The Alternatives Though Cuba's economy is vulnerable to more normal world conditions, present international tensions-with resulting prosperity for Cuba-offer her a chance to improve her capacity to thrive even when these tensions pass. The Missior is confident that Cuba can take advantage of this opportunity -but it is up to Cubans to determine whether she will. There is no safe compromise between those who are content to let matters drift and those who are alert to Cuba's vulnerability anrd will work to reduce it. The choice before the people of Cuba is clear-cut. They may take advantage of their present opportunity to start to substitute a growing, dynamic and diver- sified economy for their present static one, with its single crop dependence. This may be a long and arduous task. It will involve great effort and some sacrifice of tradition and comfort. But it can diminish present risks and in- stabilities and it can prepare the economy to meet a reduced demand and price for sugar and increasing competition in its production. The Seriousness This choice is plain; and the Mission believes that failure to choose the dynamic alternative can bring to Cuba consequences of the utmost seriousness. War prosperity has created new standards of living for many of Cuba's people. If her economy cannot maintain these-at least in some reasonable degree-in less prosperous times, it will be subject to great political strains. If leaders have neglected to prepare Cuba for this, they will be held to blame by the people. And, if that should happen, control may well pass into subversive but specious hands-as it has done in other countries whose lead- ers have ignored the trends of the times. CIAPTER 2 Outline of Major Recommendations I. BASIS FOR RECOMMENDATIONS A Guide and Summary It is the dual purpose of this chapter to furnish a guide to and a summary of the more important recommendations which will appear in the subsequent Books of the Report. As a guide, it should exhibit to the reader the process by which our think- ing has carried us from general concepts, through suggestions for actions of a broad or administrative nature, to proposals to accomplish specific objectives. As a summary, it should provide the reader with a brief introduction to the things we think Cubans should do to win a higher standard of living from the great resources at their disposal and to overcome, in time, the very sub- stantial problems they face. It should furnish in condensed form the answers, as we see them, to the questions which are posed by the broad analyses of chapter 1 and give balance and perspective to the conclusions we have drawn. The core of our advice lies in our proposal that Cubans should face their future and seek to mold it by finding not a plan but a strategy for development (Chapter 42). H. STRATEGY FOR DEVELOPMENT Two Components The Mission believes that Cubans need to seek out and grow to accept a long-term strategy for development if the Cuban Government and people are to make headway in solving the country's pressing social and economic prob- lems. This concept is discussed in Chapter 42. Such a strategy should be based on two components: 1. A set of standards or criteria against which judgments may be tested and decisions made in economic matters, so that development opportuni- ties and specific projects-both public and private-may be individually guided toward sound, appropriate and constructive ends. 2. A course of action, the objective of which is to remove certain key obstacles that now retard greater productivity, so that there will arise in Cuba the most favorable environment for development. These two aspects of a strategy are closely interrelated. Indeed, even the best criteria for selecting new activities, for technical improvements and for specific projects are not likely to contribute to effective action if they do not 14 OUTLINE OF MAJOR RECOMMENDATIONS 15 go hand in hand with a course of action which will result in the reforms and changes in attitude needed to create an environment favorable to development. III. STANDARDS FOR ACTION Objectives of Development The direction which Cuban development should take is a matter of judg- ment to be decided before suitable standards or criteria may be evolved. The Mission believes that Cuba can make the greatest and most lasting progress if its development moves toward the following objectives: 1. To make Cuba less dependent on sugar by promoting additional activi- ties-not by curtailing sugar production. 2. To expand existing-and to create new-industries producing sugar by-products or using sugar as a raw material. This objective deserves a first priority because progress in these directions will make the sugar sector itself more stable. 3. Vigorously to promote non-sugar exports in order to reduce the em- phasis of the country's exports on one product. This will help both to raise total income and employment and also to stabilize it. Among the most promising possibilities for achieving this aim are the promotion of mineral exports and of the export of a variety of crude and pro- cessed foodstuffs. 4. To make further progress in producing in Cuba, for domestic con- sumption, a wide range of foodstuffs, raw materials and consumer goods now imported. Specific Development Opportunities The choice of the specific crops and of industrial and agricultural activi- ties most suitable for development depends on many factors, technical and economic, which cannot be summarized here. They are analyzed in great detail throughout the Report. In general terms, since Cuba at present has no domestic fuel supply, cer- tain types of industrial development-such as steel production-which are de- pendent on cheap local fuel, are clearly not for Cuba. Major Cuban develop- ment must be related to her basic resources-soil and climate-and to her mineral deposits, although industries processing imported raw materia,ls may also play a useful role. Pattern of Development This is illustrated in outline in Chart I-"Pattern of Agricultural and Industrial Development". 16 REPORT ON CUBA It will be noticed on the chart that Agriculture divides into two main branches-food and chemurgy. Chemurgy is concerned with the upgrading and industrial utilization of farm-grown raw materials, with the discovery and development of new crops, with profitable uses of agricultural residues and with the preservation-or reduction to chemically-stable form-of agricultural produce of all kinds. Many of the processes, of course, are well-known. But, in recent years, the concept of chemurgy has served to focus and to inspire a great deal of special- ized research. This has a peculiar significance for Cuba since her greatest physical assets are her soil and climate. Choosing Priorities General priorities for Cuban development have already been indicated in the objectives stated earlier. But it is also necessary to discover which specific proposals deserve priority of consideration and action. Of these, some are specially urgent because failure to act would lead to economic retrogression. Standards to guide such choices must be evolved, if sound decisions are to be taken. The Mission has subjected all its proposals for expanding existing activities or starting new ones to the test of the following twelve questions. It suggests that those who may be concerned with carrying out the pro- posals in this Report might also accept and make use of these-or similar- criteria as a standard to guide their decisions in their over-all strategy for development: Twelve Criteria 1. Is it feasible? 2. Will it be productive so that men can have more of what they need? 3. Will it use resources and manpower available in Cuba? 4. Will it provide jobs in the off-season for sugar production? 5. Will it help diversify Cuba's exports? 6. Will it help to widen the internal market and make it more competi- tive ? 7. Will it contribute to a broader regional distribution of work? 8. Will it take advantage of an opportunity peculiar to Cuba? 2. Will it open up new natural resources or conserve and improve old ones? 10. Will it improve the human capacities and skills of Cubans? 11. Will it encourage Cuban production? 12. Will it raise the standard of living of Cubans? REFERENCE BASIC RESOURCES CHART I NUMBER SUBJECT NUMBER SUBJECT Pattern of Agricultural ON CHART REFERENCE ON CEART REFERENCE (D HUMAN RESOURCES I B.ok V 21 Chops. 7, 43 @© SOIL © CLIMATE and 2 cE,p. 5 22. B.ooEX 3 Ckop. 5 23 Chp. 6, 7, 12, 43, 4N, Appndi. III ® MINERAL RESOURCES Industrial Development 4 CUpo. 8, 49 24 ChpS. 7, 43, App-odio IIl 5 Chp. 12 25 Chopo. 6, 7, 43, App d.,11 III 6 Chop,. 3 ood 6 26 Chop. 5, 44 @ IL 7 Ckps. 6, 9, Book X 27 Chp,. 5, 9, 44 e Chpa. 10, 11, 14 28 Chp. 45 INITIATIVE 7 Chp. 6, 15 29 Chop, 7, 43 6 III 16 Chap. 6, 16, 17 30 Chop, 6. 7. 43_ 11 Book VII 31 App..4Id 111 O COMMUNICAT .'S 12 Book VII 32 Chp. 45 TRANSPO 11 ChoI 6, Book X 33 Chp. 9, BO.k X 15 Chp. 46 34 Ch5 9, Book X TECHNOLOGY 16 Chp. 47 36 Chp. B. 13. 49 17 Chops. , 49 37 Chop,, B, 499 Ls Ch-p. 5, 44, 45 38 Chy. I 49 _ 19 Chp. 2, Bork X 39 Chp,. B, 49 2; Chp. 44 40 Chp,. B, 49 I MANAGEMN .. TAO CAPTA (OLhICYAN AGRICULTURE FORESTRY FISHING M . ' ' A,. ' I ,w'1 '-- I~~~~. ~' 14ON~~~~~~~~~~~~~~*~ ~~~~~~~~sE~~ ~~~~~~~~IIUT I'O- - - PRWA I PGSOD |\ IEUG PRODUCTION ., A - PGTH N,~~~~~~~ -, NI, | F ~~~O OD _ CLO - SHELTE U TER LIV INGS TO P60 CRP S.A , I,I67SSILcsp OUTLINE OF MAJOR RECOMMENDATIONS 17 For Selection and Rejection On the basis of these objectives and the direction in which they indicate Cuba should move, these criteria-discussed further in Chapter 42-have guided the Mission in suggesting a course of action which would create a more favorable environment for development. The application of these criteria has also assisted the Mission in weeding out from among specific recommendations, which others have suggested, cer- tain proposals which do not meet these practical tests. Steel mills, hydro-electric power schemes, a tunnel under Habana harbor, an extension of the Malecon-such things find no place in a course of action for Cuba's development when subjected to these standards for action. IV. A COURSE OF ACTION TO FOSTER DEVELOPMENT 1. Applied Research Why it is Urgent The development of Cuban agriculture and industry largely depends on applied research to find the products, production methods and processes most suitable to Cuban conditions and problems. Since research takes time to produce results, it is imperative to initiate a program of applied agri- cultural and industrial research without delay. The Mission, therefore, recommends the immediate establishment of a Fundaci6n Cubana para la Investigaci6n Tecnologica. Special consideration has been given to the best ways of establishing such an organization as well as to the most suitable, methods of financing and operating it. In framing the detailed proposals set out in Chapter 9, the Mission has been fortunate in being able to draw on the experience of those who have taken a leading part in establishing research facilities in other Latin American countries. It is essential that private groups should actively support the creation of the Fundaci6n and that the Agricultural and Industrial Credit Bank should make full use of the Fundaci6n's facilities. It should also coordinate its own research activities with those of the Fundaci6n (Chapter 29). i In the Mission's recommendations on industry, agriculture, mining and the sugar industry, private groups and the government are urged substan- tially to increase their expenditures on research. It is also suggested that they should do everything possible to make up- to-date technical information available to Cuban farmers and industrialists. The Mission also recommends that the policy of the Cubanization of labor should be relaxed to facilitate the admission of foreign technologists, at least until more Cubans can be trained and gain experience. Coincidentally, 18 REPORT ON CUBA steps should be taken to make more and better trained Cuban technologists available (Chapter 6). The object of these proposals is to promote technical initiative which, at present, is at a low level. 2. Education Improvements Essenttial An examination of the educational system in Cuba convinced the Mission that unless and until drastic improvements are effected, the Cuban people cannot hope effectively to develop their country. This problem is discussed in Chapter 18. The Mission's chief recommenda- tions are that the Government should create a nonpolitical National Board of Education to administer the educational system and to relieve it of political pressures and patronage; and that the Government should revive the local Boards of Education, which did so much for public education when they were in operation. The objects of this latter proposal are to decentralize adminis- tration and to stimulate local interest and control. As temporary measures, the Mission recommends the establishment of a Civic Committee for Educational Development, representative of the nation as a whole, to suggest improvements in the educational system in the light of modern requirements. The Mission also suggests that independent foreign educational experts should be invited to examine the policies, curricula, facilities and methods of the Universities of Habana and Oriente and to make recommendations for their improvement (Chapter 6). The Mission believes that the training pro- vided by these Universities is inadequate for modern requirements. They produce too many men of letters for whom employment is scarce and too few with the technical qualifications needed for agricultural and industrial de- velopment. 3. Labor-management Relations Obstacle to Development Among the most serious obstacles to Cuba's development is the present unsatisfactory state of labor-management relations. In no other field is it more necessary for all concerned-government, management, and labor-to adopt a more cooperative and realistic attitude. These problems are discussed in Chapter 16. This will be a slow process and the problem may only be fully solved when the urgent reforms of the Cuban educational system have been carried out and have had time to produce results. In the meanwhile, the Mission believes that much can be done to improve labor-management relations if Labor Courts are established to settle disputes OUTLINE OF MAJOR RECOMMENDATIONS 19 on an impartial, judicial-rather than on a political-basis and if the admin- istration of labor legislation is improved. Other major recommendations for government action in this field are the adoption of a system of dismissal wages similar to that used in other Latin American countries; reforms to make dismissal procedure under exist- ing law simpler, faster, and less subject to political pressure; codification and simplification of labor and social laws and regulations; and reversal of the Government's policy of fixing almost all types of wages in Cuba and the substitution for it of more free collective bargaining. The Mission also suggests the establishment of a small technical com- mittee to study and report on principles of wage determination appropriate to Cuba. Need for New Attitudes The Mission urges both management and labor to reconsider old attitudes and to adopt a more positive policy towards increasing production and initiat- ing new ventures. It also suggests that management should pay more attention to good personnel relations as an essential part of modern management, and that employers should form associations of their own and a general confederation of employers. Labor is urged to review union policies on seniority, "make work" and mechanization; to consider special wage incentives to encourage employers to offer new "dead season" employment; to recognize the desirability of strong employers' organizations; and to take all possible steps to increase educa- tional opportunities, especially on economic and social topics. The Mission further recommends the establishment of a Cuban Institute of Labor-Management Relations, composed of representatives of the govern- ment, employers and organized labor. Since the port labor conditions pose specially grave problems, a tempo- rary committee to study them is suggested (Chapter 17). Putting Retirement Funds on Sound Basis In the Mission's view, the present deficiencies in the structure and admin- istration of Cuba's extensive system of pension and retirement funds do much to aggravate the unsatisfactory labor-management relations. Until Cuban workers can be assured of the pensions and benefits to which they are en- titled, a more constructive attitude on the part of labor is unlikely. d Mission therefore offers detailed proposals for the rescue and over- haufY the government and non-government social security funds (Chapters 22 and 38). It urges immediate action in this field because the present 20 REPORT ON CUBA favorable economic conditions offer Cuba a unique chance to put the pension funds on a proper basis. It believes that such action would do much to ease labor-management problems. 4. Government Policies and Development Three Areas Since the policies and attitudes of government have a profound effect on development, the Mission offersboth general and specific recommenda- tions concerning them. In general, it urges the Cuban Government and nation to pursue a policy of dynamic development in all fields, in contrast to present policies which too often are designed to restrict or control in order to preserve the status quo. It may be helpful to distinguish three areas of government policy: 1. General policies, such as monetary and fiscal policy, commercial policy, wage policy, and price and production control policies. 2. Government action to maintain and expand the physical plant needed by the Cuban people, such as highways, waterworks, etc. 3. Action by the Government to improve the human resources of the nation through education, health measures, the dissemination of tech- nical information, etc. Such policies can only be carried out effectively if the level of government administration is improved, if competent technical advice is brought to bear within the government, and if the government's functions are allocated efficiently between various administrative units. The Mission's Report contains many recommendations for these aspects of government action which need not be summarized here. The following major recommendations, however, should be emphasized: Fiscal and Monetary Policy In the Mission's view, the broad objectives of Cuban fiscal and monetary policy should be: to enable the Government and private interests to command the real and financial resources needed for development and, at the same time, to preserve the existing exchange rate of the Cuban peso without ex- change control and also to keep the internal price level relatively stable. Since the action in this sphere must be flexible, so that it can be adapted to changing economic circumstances, the Mission has suggested a coordinated program of fiscal, monetary, commercial, and wage policy measures appro- priate to three different courses which world political and economic 5 1 67o1 ments may take and which Cuba may confront in the next few years 39). OUTLINE OF MAJOR RECOMMENDATIONS 21 General Recommendations In the field of fiscal policy, the Mission's general recommendations are that the Government should: 1: Use a good part of surplus tax revenues accruing during prosperous times to provide private industry with capital funds through the Agri- cultural and Industrial Credit Bank. 2. Pursue much more aggressively a policy of encouraging private ini- tiative through tax abatements and customs exemptions. 3. Carry out high priority projects and research activities that promise to do most to encourage private initiative. During the next few years, however, the first priority should be given to the liquidation of the Government's short-term obligations to the workers' pension funds, and to repaying or refunding the floating debt. Consequently, moderate internal borrowing for capital purposes may be appropriate unless the present rise in the price level grows more severe (Chapters 36, 38, and 39) . In general, the Mission advises against new government bond issues during periods of high sugar prosperity. It believes that more effective tax collection, improved budgetary methods, better handling of public funds and more efficient expenditure of government revenues, as well as the restriction of nondevelopment outlays, could make adequate financial resources avail- able for constructive use by the Government. Action by National Bank s In the monetary sphere, particular stress is laid on the need for flexibility and on the extent to which the National Bank must make its policies effective by means of the new Agricultural and Industrial Credit Bank (Chapters 27 and 29). The National Bank is urged to continue its present efforts to encour- age the commercial banks to grant a greater volume of medium and longer- term loans on the basis of the sizeable savings deposits available to them (Chapter 28). A number of suggestions are made for further action by the National Bank, by the commercial banks and by various savings institutions to strengthen the government bond market (Chapter 33). Ca,pital and Credit The Government is strongly urged to supply the Agricultural and Indus- trial Credit Bank with additional capital funds, as far as possible out of tax revenues. Suggestions are offered for the Agricultural and Industrial Credit Bank to make credit and capital available on a sound basis to those sectors of the economy which at present are not receiving adequate credit. Particular stress laid on coordinating the Bank's lending activities with a revitalized a~~a-1 extension service and with action designed to encourage the growdh of farmers' cooperatives (Chapter 29). 22 REPORT ON CUBA It is also suggested that the Agricultural and Industrial Credit Bank should assume an important role in efforts to develop a more active capital market in Cuba. The Bank can win public confidence by selecting competent technical personnel, by avoiding operations reflecting political pressures, and above all by showing that it is investing in business ventures which are successful because of good management and improved technical methods. Having gained such confidence, it should be able to issue its own obligations, as well as participation certificates in the enterprises which it has helped to finance. It is essential, of course, that the private commercial banks and other invest- ment institutions be associated with these efforts to develop a market for industrial securities (Chapter 30). Changes in Environment The Mission is under no illusion that these actions by the Agricultural and Industrial Credit Bank can in themselves overcome the difficulties of attracting Cuban capital into new business ventures. This will depend on many changes in the environment for economic developmejpt stressed through- out the Report and particularly on improvements in labor-management rela- tions, public administration, and the handling of public funds. Among the most important specific causes hampering private investment are the mort- gage moratoria. Consequently, the Mission urgently recommends the appoint- ment of a commission to examine possible modification of this legislation (Chapter 32). Control Policies In its investigations in various fields, the Mission found many examples of government measures designed to control the price and output of various commodities. Many of these controls are the result of historical accident or of the political influence of specific pressure groups. Their cumulative effect in certain instances has been extremely harmful to further diversification and development. Outstanding examples are price control policies imposed on coffee, corn, and meat and on other cost-of-living items. The price ceitings have not been adjusted to the rising over-all price trend both in Cuba and in outside markets so that in some cases, inadequate prices have caused production to decline (Chapters 5, 6 and Book X). Since it is important to diversify Cuban agriculture, the Mission recom- mends a reappraisal of these price controls with the object of removing them as rapidly as possible. A similar re-examination is urgent in t% ase of marketing and production stabilization schemes affecting tobacco anwcoffee. The Mission urges that the appropriateness of these schemes and their relation OUTLINE OF MAJOR RECOMMENDATIONS 23 to an increase in production and employment should be examined objectively (Chapters 5, 6, and 39). Commercial Policy The diversification and expansion of Cuba's exports is an essential part of efforts to expand and stabilize the economy. In this sphere the main rec- ommendations are as follows: 1. Cuba should exert every effort to maintain-and if possible to increase. -her basic sugar quota in the United States, as long as the latter maintains the quota system. 2. Cuba should attempt to preserve and enlarge her European markets by promoting an increase of imports from Europe. In order to do so, she should try to secure the reduction or abandonment of some of the preferential import duties granted to the United States. 3. Cuba should take an active interest in all efforts to renew the inter- national sugar agreement. 4. If it should not be possible for Cuba substantially to increase her imports from Europe, it might be appropriate for her to conclude temporary bilateral agreements for sugar exports to European coun- tries-or groups of countries-rather than to allow a sharp shrinkage in her exports on the termination of ECA grants. She may also need to conclude such agreements to foster or preserve markets for a number of her secondary export products (Chapter 40). 5. Government Reforms Improving the Civil Service Reform is urgent in virtually all spheres of Cuban administration. The Mission recommends the prompt passage of a law to provide for an "administrative career" in the government; the adoption of the principles of promotion by merit, of security of tenure, of salaries commensurate with responsibility, and of a full working day. It also proposes establishment of a "merit system" in government agencies, to which admission should be by competitive examination and members of which should receive higher salaries. To prepare present employees for these examinations in-service train- ing programs are advocated (Chapter 20). Need for More Information It is clear that in all the fields where government action is important it is impossible to make wise decisions or frame sound policies without the necessary facts. Since these are often lacking in Cuba, many decisions have been made on the basis of opinion only. There have not been enough facts 24 REPORT ON CUBA to counteract the pressure of groups concerned only to gain some sectional advantage or to solve some temporary problem. In consequence, the long- term effects on the nation as a whole have often been disregarded. The Mission offers a number of suggestions to alleviate this difficulty. These include the establishment of an economic unit in the Ministry of Finance to study and advise on all important fiscal matters (Chapter 34). Wider functions and larger funds are recommended for the National Eco- nomic Council; and means to provide the Government with more-and more complete-statistics. are suggested (Chapter 23). The Government is urged to seek the advice of the National Bank in formulating its economic policies (Chapter 34). Without full knowledge of the essential factors involved-technical and economic-it is possible for the best-intentioned policies to result in losses to the Cuban taxpayers and to the economy as a whole. A practical example of this-in connection with alcohol-gasoline blends-is analyzed in Chapter 15 and a Technical Fuels Advisory Committee is recommended. Need for Fiscal Responsibility With reference to all aspects of the financial policy of the Government, the Mission emphasizes the need for a much greater sense of fiscal respon- sibility and for further improvement in the handling of public funds. The Mission believes that this is essential to strengthen the faith of Cubans and foreigners alike in the continued stability of the Cuban peso and to en- courage businessmen and investors to initiate the new activities that Cuba so urgently needs. Better Tax Enforcement One of the most important-and most obvious-of the Mission's recom- mendations is that tax enforcement and collection should be further improved and strengthened. This recommendation needs neither emphasis nor justifi- cation because the beneficial effects of better tax collection in 1950 were readily apparent. Nor is it necessary for the Mission to make specific pro- posals, because these have already been made in a report prepared by Price, Waterhouse & Co., in the summer of 1950 at the request of the Cuban Government. The Mission endorses these proposals which are briefly described in Chapter 36. Budgetary and Tax Reforms In Chapter 35 improved budgetary methods are suggested with special emphasis on means to assure more constructive use of revenues; to unify the budget and to bring all government revenues and expenditures under a measure of budgetary control. OUTLINE OF MAJOR RECOMMENDATIONS 25 As for tax reform, the Mission recommends revisions in sugar taxation, the abolition of nuisance taxes and the consolidation of the personal income and business profits taxes. It further suggests that both the economic effects and administrative costs of existing taxes should be carefully reviewed, with the object of revising and codifying them (Chapter 36). Public Works Administration It seems probable that in the past a significant proportion of the public funds spent on public works has been wasted. This was partly the result of faulty administration, since improved by the Comisi6n de Fomento. For still greater improvement the Mission recommends some modification of the Comisi6n de Fomento and urges that its functions and those of the Ministry of Public Works should be clearly defined and separated (Chapter 21). It also suggests that a Highway Advisory Committee should be established not only to advise the Comisi6n but also to ensure that the interests of the different provinces and road construction are fairly represented (Chapter 11). V. ACTIONS TO INCREASE AGRICULTURAL AND INDUSTRIAL PRODUCTION 1. The Sugar Industry Keener Competition Likely Sugar cultivation in Cuba is extensive rather than intensive and it is probable that keener competition will have to be faced in the future from countries which grow sugar more intensively and efficiently and with lower labor costs (although not necessarily lower wage levels). For this reason, the Mission urges the Cuban sugar industry substantially to increase its expenditures on research, particularly in the fields of improved cane varieties, fertilization and irrigation, by-product development and bagasse storage. It recommends that the Government do everything possible to encourage the further mechanization of cane cultivation and harvesting, greater yields per acre, higher mill-yields and greater effciency in the industry. It is also recommended that -sugar wages should be allowed to have downward as well as upward flexibility, if they are to continue to be tied to sugar prices. These and other recommendations are discussed in Chapters 7 and 43. 26 REPORT ON CUBA 2. Non-sugar Agriculture New Crops and Varieties In order to improve and diversify agriculture it will be necessary to make existing agricultural knowledge better known and also to develop new crops and varieties, suited to Cuban conditions, by agricultural research. To achieve these objectives the Mission recommends that the Ministry of Agriculture should not only expand the Agricultural Inspectors Service and improve' the Provincial Agricultural Schools, but should also improve the government agricultural experimental stations (Chapter 5). The Mission also urges the Government actively to encourage agri- cultural and other research by private enterprise by allowing tax deductions for sums spent on research (Chapter 9). Mechanization and Custom Farming It is suggested that the Agricultural and Industrial Credit Bank can perform a service to agriculture by encouraging mechanization and custom- farming and by helping to expand crop storage facilities. The Mission recommends self-liquidating community irrigation coop- eratives. It also suggests that the problem of increasing the number of owner-operated farms should be studied, but with caution against hastily improvised land distribution schemes (Chapter 5). In general, the Mission believes that the Government can promote diver- sification by revising those price controls which discourage the growth of non-sugar crops; and by restricting sugar wage rates to work directly connected with sugar, thus encouraging the centrales to grow other crops (Chapter 5). 3. Agricultural Potential Scope for Expansion The Mission believes that special consideration should be given to the increase of rice production; to the development of high-yield corn; and to the expansion of the livestock and dairies industries, of vegetable oil production and of tropical fruit growing (Chapters 44 and 45). In developing agriculture, including the sugar industry, attention is particularly directed to chemurgic activities which-as previously indicated -include the upgrading and industrial utilization of farm-grown raw materials, the discovery and development of new crops, the use of agri- cultural residues, and the preservation of agricultural produce of all kinds. Though such developments are promising, in many cases a good deal of applied research will be needed before specific activities can be started. OUTLINE OF MAJOR RECOMMENDATIONS 27 Products which are derived chiefly from sugar cane naturally offer the greatest challenge and opportunity to Cuban applied research and develop- ment. As an indication of the possibilities, the Mission has prepared a partial bibliography of recent studies in this field (Appendix III). 4. . Minerals and Forests A Ministry of Mines Since two of Cuba's most important-and most neglected-resources are her minerals and her forests, the Mission believes that these deserve special attention. It therefore recommends the immediate establishment of a Ministry of Mines, Water and Forests to be responsible for the develop- ment not only of minerals and forests but also of irrigation and of the water resources of Cuba (Chapter 8). Among the specific actions suggested are: 1. Expeditious completion of the topographic mapping of Cuba (Chapter 8). 2. Study, planning and administration of all government-financed irrigation projects by the proposed Ministry (Chapter 5). 3. A revision of the Cuban Mining Law (Chapter 8). 4. Appointment of a Technical Commission, advisory to the proposed new Ministry, to improve and enforce the conservation of forests, fish and wild game (Chapter 6). Further suggestions are offered in Chapters 5, 6, and 8 and a detailed analysis of the problems and possibilities of forestry is given in Chapter 46. 5. Industry Specific Opportunities Books III and X contain a great number of suggestions either for new activities or for improving and expanding existing ones. These cannot be summarized here. B3ut 32 opportunities for Cuban industrial development are analyzed graphically in Chart II. This chart shows the raw materials required and the markets to be supplied. It also indicates the justification for such developments and the chief problems that stand in their way. To examine the first example on the chart, it will be noticed that the manufacture of jute and kenaf bags in Cuba is suggested. As the chart shows, a bag mill in Cuba could use an imported raw material-jute-and also Cuban-grown kenaf. Bags would find a ready market not only in Cuba 28 REPORT ON CUBA CHART II Some Opportunities for Cuban Industrial Development MAIN MAIN ~CHIEF JUSTIFICATION PRINCIPAL PROBLEMS RETARDING DEVELOPMENT SOURCES MARKETS X OFARAW TO BE I _ _ 0 x _ _ RECOMMENDED FOR 4 X 0. a O o' ) ( U 1 Z - -0 c ,.-B CUBAN MANUFACTURE j I Z = = X _= NEW OR EXPANDED H ~~~~~~~ ~ ~~I. R,.~ a' - E. E - E E- ') .M BAGSC-UTE & EENAF X X _ _ _ __X XX_ X | - BOTTLES x IX x lx i I II IX I I CRACKE X_ x x _ _ XI_ I _ X ESSEDTL OIS X TB X X X I X X X X X X CHEMICAS ROM MOLASSES X I X||Xi I I x CHCLUE TEX X | Ixl Ixl 1 _ x x I CIGAMSR&JELLES X | | | x | X|I| | XI I x I X | = x | X X | CMKEAT BYPOUT | x| | x Ix||X| x x _ I CRACKER S x I x lx I Ix x x FSSENTAL OILS x [x IxIT x _ I I SHEET E A RDUCS ( gt | | X X | | x _ _|X |||X FHERTIIZE x| x | |||X| _ | x x FROZEN FOODS X X X x IXX X x Xe x GETLUE YAN||X X| i[x x lx I |X TEXTILES (added types) I x x x x x x X x WAXFROM SUARCANE X x x x x X X WIRE PRODUCTS x x | x x x I I Xx YEALT (ctefe)x| x | 1x I _II I : but also in other countries and five important reasons are given to justify their production.* But there are two main difficulties to be overcome: some technical problems in connection with kenaf production remain to be solved and it has to be determined whether wage-rates and port-costs might make the venture uneconomic. Because, potentially, a bag mill has great importance for Cuba, this proposal is discussed in detail in Chapter 50. But similar opportunities are also examined elsewhere in the Report. OUTLINE OF MAJOR RECOMMENDATIONS 29 Tourism Development of tourism in Cuba largely depends on making some of the most attractive parts of the island more accessible. Tourism, therefore, is closely connected with plans for improving highways and roads. For a number of reasons the Mission is not optimistic about the possibility of any rapid development in tourism. But it suggests the appointment of a small committee to develop a long-range tourist policy (Chapter 41). 6. Aids to Production Railroads, Roads and Water Supplies Railroads, roads and water supplies are essential aids to production. Action to improve the railroad and highway system of Cuba is con- sidered so urgent that the Mission's recommendations are summarized in the following section of this chapter which suggests five projects for first priority. The same applies to the problem of providing the City of Santiago with an adequate water supply. Public Power, Telephone and Telegraphs There is room for improvement in these aids to production but there are no technical obstacles, unless the international situation makes it im- possible to get.new equipment. Broadly speaking, in the case of public power and telephones, improve- ment will depend on whether additional capital can be found, despite the present attitudes of labor and of the government; and on whether the public will be prepared to pay more for better service. Equipment of the government telegraph system is antiquated and it is understood that rates are kept low as a matter of policy. But private telegraph systems and the telephones are available to those who are willing to pay for more rapid communications. The Mission recommends that rates for power, telephones and telegraphs should be reviewed and, if necessary, revised to make these services profitable and attractive to capital (Chapters 12 and 14). VI. FIVE SPECIFIC PROJECTS Among the specific projects in Cuba that urgently need to be undertaken, the Mission believes that the following five are the most essential, most imme- diately feasible and most likely to benefit Cuba as a whole: 1. Railroads Reorganization and rehabilitation of Cuba's public service railroads is so urgent, in the opinion of the Mission, that its recommendations (reprinted in 30 REPORT ON CUBA Chapter 10) were delivered to the Government of Cuba, in December 1950, in advance of the rest of the Report. Reasons for urgency are: a. Any breakdown in the railroads would imperil the entire economy. A part of Cuba's railroad system has deteriorated to a dangerous degree. b. In the event of war, a heavy load is likely to be thrown on to the rail- roads owing to a shortage of gasoline. c. In the light of world shortages, new equipment may become increas- ingly difficult to obtain. d. Old-fashioned and worn-out equipment increases costs of operation. Freight rates on sugar may be an important problem if Cuban sugar producers have to face keener competition in the future. 2. Roads Cuba's roads are vital assets which have been allowed to deteriorate rapidly. The longer they remain unrepaired the more expensive it will be to restore them. Prompt action, therefore, will save the Cuban people money. This need not seriously be affected by the international situation because the necessary materials and a good deal of machinery are available in Cuba (Chapter 11). As mentioned earlier, the Mission recommends the establishment of a Highway Advisory Committee to advise the Comisi6n de Fomento and to plan the efficient maintenance and expansion of Cuba's highway system. For the latter the Mission offers detailed suggestions (Chapter 11). As one of its first duties, it suggests that the proposed Highway Advisory Committee should plan an arterial highway network to facilitate the develop- ment of urgently needed farm-to-market roads. A suggested network, with estimates and priorities, is discussed in Chapter 11. The Mission also proposes that the National Transportation Commission should be revived in order effectively to regulate highway transportation. It would be one of the duties of this Commission constantly to review trans- portation policy and offer constructive suggestions (Chapter 11). 3. Pension Funds As mentioned previously, the Mission believes that it is urgent to rescue and overhaul government and non-government pension funds for the follow- ing reasons: a. Until the Cuban workers can be assured of the pensions and benefits to which they are entitled, a more constructive attitude on the part of OUTLINE OF MAJOR RECOMMENDATIONS 31 organized labor is unlikely. Without this, industrial progress and the confidence of investors are impossible. b. Until workers who are entitled to retire can do so with confidence, industry cannot become fully efficient and is reluctant to expand. c. The present market for sugar offers Cuba a unique chance to put the pension funds on a proper basis. This subject is discussed further in Chapters 22 and 38. 4. Research The Mission believes that it is imperative to establish a Fundaci6n Cubana para la Investigaci6n Tecnologica-already proposed-as soon as possible for the following reasons: Cuba urgently needs the results of research applied to Cuban conditions and problems. But, since research takes time to'produce results, it is impor- tant to initiate a program of applied agricultural and industrial research with- out delay. While international conditions need not seriously restrict such a program they do afford another reason for prompt action: in the event of war the best foreign technical personnel will not be available to Cuba. The Mission's detailed proposals are given in Chapter 9. 5. City of Santiago Water Supply The Mission recommends a re-examination of the problem of providing more water forthe City of Santiago. This will require topographic and geographic mapping of the area con- cerned, gauging of stream-flow and obtaining annual rainfall data. This is urgent for three reasons: a. The city narrowly escaped disaster in the summer of 1950 and luck cannot be counted on to save it again. b. The necessary surveys and plans will take time and not a moment should be lost in starting them. c. Pipes, water-purification equipment and steel for concrete reinforce- ment are becoming hard to obtain. The immediate establishment of a water-purification system for the City is also recommended. These recommendations are discussed in Chapter 13. 32 REPORT ON CUBA VII. CONCLUSION The Mission has not sought to cover in detail all aspects of the Cuban economy or to provide an exact blueprint of how it should develop. It has sought rather to assemble some of the more outstanding facts in Cuba's eco- nomic life and to draw from them the perspective of broad conclusions, protected by our impartiality, but sound only within the limits of our knowl- edge and experience. On these conclusions we have based our recommendations and sugges- tions, trying to fit them to what we found and to form them to meet a wide range of situations from matters of the most general scope to actions of a detailed nature. This Book presents a summary of our broad conclusions and a guide to our principal recommendations. In the succeeding nine Books we have presented facts and suggestions about many aspects of Cuban life in con- siderable detail. BOOK II The Cuban Economy Chapter 3. THE ECONOMY 4. RESOURCES FOR DEVELOPMENT CHAPTER 3 The Economy I. MAIN FEATURES 1. The National Income Some Recent Estimates How successful have Cubans been in making a living? The best general measure is in estimates of national income per capita. Even though gaps in the basic statistical data make all such estimates for Cuba less reliable than could be wished, it is nevertheless instructive to study them. National income estimates for several recent years are shown below. These are based on the work of the Department of Economic Research of the National Bank of Cuba. Details, an indication of the methods used, and an explanation of certain supplementary estimates and adjustments which we have made for present purposes will be found in Appendix II. Table 1 presents, by economic sectors, the estimated Cuban national income for the years 1945-1949. The substantial role of sugar in the economy is immediately apparent. We shall return later to this and to other points on which the table is instructive. TABLE 1 CUBAN NATIONAL INCOME BY ECONOMIC SECTORS, 1945-1949 (In Million Pesos, and as Percentages of Total Income) 1945 1946 1947 1948 1949 Million Million Million Million Million Economic Sector Pesos' % Pesos % Pesos % Pesos % Pesos % Agriculture: Sugar .......... 169 15 236 18 391 22 363 20 332 20 Non-sugar .... 192 16 193 14 190 10 202 11 186 11 TOTAL .. ... 361 31 429 32 581 32 565 31 518 . 31 Industry and Commerce: Sugar .......... 104 9 145 11 265 15 239 13 175 11 Non-sugar ...... 453 39 489 36 641 35 643 36 627 37 TOTAL ..... 557 48 634 47 907 50 882 49 802 48 Government a 100 9 127 10 146 8 179 10 159 10 Urban real estate 60 5 70 5 77 4 77 4 78 5 Finance .......... 34 3 47 3 47 3 54 3 49 3 Other b .......... 44 4 47 3 58 3 60 3 51 3 National income, including in- come of non- residents c .. ..... 1,156 100 1,354 100 1,815 100 1,817 100 1,657 100 Sugar sector . .... 273 24 381 28 657 37 602 33 507 31 a Government salaries only. b Professional income, income of domestic servants, and investment income received from abroad. e At factor cost. SOIURCE: See Appendix on National Income. 35 36 REPORT ON CUBA For the present we are especially interested in the total national income, ihcluding non-resident income, which for the peak year 1948 is estimated at 1,817 million pesos and for 1949 at 1,657 million pesos. The corresponding income level for 1950 was undoubtedly above 1949 but below 1948.1 TABLE 2 CUsBAN NATIONAL INCOME By DISTRIBUTIVE SHARES, 1945-1949 (In Million Pesos, and as Percentages of Total Income) 1945 1946 1947 1948 1949 Distributive Million Million Million Million Million Shares Pesos % Pesos % Pesos % Pesos % Pesos % Compensation of employees: Private .. ........ 515 - 634 - 827 - 841 - 817 Government .... 100 - 127 - 146 - 178 - 159 - Domestic servants 18 - 19 - 22 - 23 - 22 TOTAL ...... 633 55 780 58 995 55 1,042 57 998 60 Non-corporate business and rental income: Farm ........... 198 - 211 - 291 - 282 - 257 - Business .......... 76 - 63 - 111 - 93 - 79 - Rental ............ 101 - 116 - 138 - 135 - 133 - TOTAL ... .. 375 32 390 29 540 30 510 28 469 28 Corporate income: Resident .. ... 57 - 67 - 122 - 121 - 71 - Nonresident .... 31 - 42 - 75 - 53 - 41 - TOTAL .. 88 8 109 8 197 11 174 10 112 7 Professional income ........... 25 - 27 - 35 - 36 - 28 - Net interest ....... 34 - 47 - 47 - 54 - 49 - Investment in- come from abroad 1........... I - 1 - 1 - 1 - 1 - TOTAL ... .. 60 5 75 5 83 4 91 5 78 5 National income including in- come of non- residents a 1,156 100 1,354 100 1,815 100 1,817 100 1,657 100 Less: Nonresident income .......... -31 3 -42 3 -75 4 -53 3 -41 2 National Income of Cuban resi- dents only a ... 1,125 - 1,312 - 1,740 - 1,764 - 1,616 a At factor cost. SOURCE: See Appendix on National Income. See Apoendix on National Income. THE ECONOMY 37 Income by Distributive Shares In Table 2 the national income is shown by distributive shares. The next to last line shows an estimate of that portion of the Cuban national income which goes to non-residents. The proportion is 2% to 4%. Subtracting this, we arrive at an estimate of national income received by Cuban residents. shown in the last line. Per Capita Income On a per capita basis, the average income of Cuban residents has been approximately as follows, in current pesos and in 1939 pesos (see technical details in Appendix on National Income): TABLE 3 CUBAN PER CAPITA INCOME IN SELECTED YEARS (Pesos) At Current At 1939 Prices Prices 1939 .103 103 1945 .228 114 1946 .261 129 1947 .341 145 1948 .341 134 1949 .307 137 1950 .322 131 SOURCE: See Appendix on National Income. Comparisons This recent average per capita income of more than three hundred pesos (equivalent to the same number of United States dollars) is undoubtedly higher than that of any other tropical country and among the highest in all Latin America. In comparison with the more highly developed countries of Western Europe and North America, it is, of course, low. Further comparisons are suggested by the data brought together in Tables 4 and 5. It should be remembered, however, that all such comparisons are at best rough approximations because of defects in the basic data, differ- ences in definitions and methods of estimation, and difficulties introduced by the conversionf of local currency incomes into dollars. Also, income measured in money is not a fully reliable index of relative economic well-being. For example, in some countries-Cuba among them- the climate makes certain expenses, such as house heating, practically unneces- sary, while in other countries these same items add substantially to both income and expenditure. Work done in the household in some countries, especially in rural areas, is done commercially in other countries and in urban 38 REPORT ON CUBA areas. Thus, the flow of money income and expenditure in the latter areas is -likely to be higher than in the former by a larger proportion than the real difference in amount of goods and services. With all their shortcomings, however, these income figuTes are the best comparative index we have. A Record Year Cuba's national income per capita depends very much on the market for sugar, and 1947 was a record sugar year. In 1947, as Table 4 shows, Cuba's income per capita was not only near the top in Latin America but ahead of Italy and Spain. Comparative estimates are also available for 1939. In that year the demand for Cuban sugar was better than it had been a few years earlier at the bottom of the depression, but the great stimulus to be provided by World War II had not yet appeared. In 1939, as Table 6 shows, Cuba stood lower in comparison with other countries.2 Nevertheless, even then Cuba had one of the highest average income levels in the tropics and also in Latin America. TABLE 4 SOME ESTIMATES OF PER CAPITA INCOME IN SELECTED COuNTRIEs, 1947 (Dollars) Haiti ... .................... 25 Italy. ....................... 242 Ecuador (1948/49)a ...... ..... 64 Puerto Rico (1945/6)a .. ........ .. 269 Dominican Republic (1946) ... ... 86 Uruguay. ......... .............. 316 El Salvador b .................. .. 87 Chile ..... .................. 330 Peru ... .................... 105 Cuba c ....................... 341 Jamaica. ...................... 123 Argentina . ....................... 349 Brazil . ....................... 125 Netherlands (1949) ...................... 502 Guatemala b ....................... 128 Denmark .................. .... 731 Colombia ......... .............. 169 Switzerland ...... .................. 870 Mexico ....... ................ . 90 New Zealand ........................ 911 Surinam ....... ................ 192 United States ....................... 1,472 Spain ................. ...... 222 a Fiscal year. b Gross product. c Of Cuban residents only. SoURcEs: Public Finance and Economic Development in Guatemala, by John H. Adler, Eugene R. Schlesinger, and Ernest C. Olson, Chapter II, Table 6, (to be published by Banco de Guatemala). AlsO: A Development Program for Colombia, I.B.R.D. Mission, p. 25; Financial Statistics, International Monetary Fund. 2 In comparing the 1947 and 1939 estimates it should be remembered that dollar prices and incomes expressed in dollars were considerably higher in 1947. The U. S. consumer price index in 1947 was 160 when converted to a 1939 base, and the wholesale price index was 197. THE ECONOMY 39 TABLE 5 PER CAPITA INCOME IN CUBA, OTHER CARIBBEAN SUGAR-PRODUCING COUNTRIES AND CERTAIN SOUTHERN STATES OF THE UNITED STATES, 1947 (Dollars) Dominican Republic a . ..... . ......... ... ..... ...... 86 Jamaica 123 Puerto Rico b .290 Cuba .341 Mississippi ..... v ...... .......................... ......... . I. 676 Louisiana .864 Florida .............................. ..................................... ...... ... 1,103 NOTE: Although the income concepts used in arriving at the per capita income of the various areas are not entirely consistent, the results assembled here are useful for illustrative purposes. a 1946. b Fiscal year 1947-1948. SouncEs: Sminican Republic, Jamaica and Puerto Rico - Statistical Office of the United Nations Nss-osal Income Statistics 1938-48; U. N. Statisr:col Yearbook, 1948; and Puerto Rico Industrial Development Company, privately supplied. State Income Payments -U.S. Department of Commerce Survey of Current Business, August, 1950, p. 20. TABLE 6 SOME ESTIMATES OF PER CAPITA INCOME IN SELECTED COUNTRIES, 1939 (Dollars) Ecuador ........... ............ 44 Cuba. ..... .......... ....... 98 a El Salvador .. ..................... 45 Italy. ...................... 140 Brazil ..... .................. 46 Chile . ..................... 174 Guatemala ......... .............. 48 Argentina ................. ..... 218 Haiti. .. ....... ...... ....... 50 Denmark . ...................... 338 Dominican Republic ................... 51 Netherlands ...................... 338 Uruguay ........... ............ 56 New Zealand ...................... 396 Mexico ........... ............ 61 Switzerland ...................... 445 Peru ........... ............ 72 United States ...................... 554 Colombia . ...................... 76 a This figure, from the source indicated, is slightly lower than that shown in Table 3, but not by enougb to affect the conclusions drawn in the text. SotRacX: Point Four: Cooperative Program for Aid in the Development of Economically Underdeveloped Areas. U.S. Department of State, Publication 3719, January, 1950, pp. 113-4. The figures are from a report by the National Advisory Council on International Monetary and Financial Problems, December 18, 1947. Living Levels Of course, any figure for average per capita income is rather fictitious, especially where-as in Cuba-there is a very wide gap between the incomes of a relatively few high-income receivers at the top and the mass of low- income receivers. Truer international comparisons could be made by setting against each other, not general averages, but the living levels of specific social groups such as town dwellers, country dwellers, industrial wage workers, agricultural wage workers, business men, professional people, etc. The data, unfortunately, are not available. The general'impression of members of the Mission, from observations in travels all over Cuba, is that living levels of the farmers, agricultural laborers, 40 REPORT ON CUBA industrial workers, storekeepers, and others, are higher all along the line than for corresponding groups in other tropical countries and in nearly all other Latin American countries. This does not mean that there is no dire poverty in Cuba, but simply that in comparative terms Cubans are better off, on the average, than the people of these other areas. The income and living levels of the wealthiest portion of the population also appear to be notably high in comparison with these other countries. Limited Middle-Income Group With respect to the size of the middle-income group, it appeared to mem- bers of the Mission from observations in a number of other countries that Cuba probably occupies an intermediate position. It seems to have more people at the middle-income level than other tropical countries and more than most other countries of Latin America, but decidedly few& than the countries where modern industry is most highly developed. In comparison with the more highly developed countries of Western Europe and North America, there is a relatively small true middle class in the social as well as the economic sense. Certainly the lack of a large middle group is a serious economic, social and political weakness for Cuba. Development of National Income Some important historical facts about the development of Cuba's national income are shown graphically in Chart III. Again, we must caution that the basic data are crude. The maker of the estimates has had to resort to a good many informed guesses and approximations in reaching this result.3 We believe, however, that the major point brought out by the chart is sound and is supported by other evidence. The major point is that Cuba's total national income, after allowing for changes in prices, showed a strong upward trend from 1903 through 1924. But, starting in 1925, Cuba experienced a slump which was disastrously intensified by the world depression of the 1930's and from which recovery to the 1924 level was made only two decades later under the stimulus of the Second World War. Meanwhile, population was growing, though at a declining rate after 1925, largely because of less immigration. In conse- quence, real income per capita in Cuba remained below the pre-1925 level for nearly twenty years. No New Growth? Even now there is no clear evidence of a new growth trend. It is at least arguable that the recovery from the low of the early 1930's and the rapid upward trend during the years of the Second World War reflect mostly a See Julian Alienee y U-roa, Caracteristicas FPndameenales de la Economia Cdbana, Banco Na cion al de Cuba, Hahana, 1950, pp. 52-54. A suomnary of the methods used is given - the appendir on National Income in this Report. As explained there, the U.S. price data used to deflate the Cuban income sernes pro. doce misleading results for the two war periods, a.d therefore figures for these years are omitted on the ehart. CHART III Trend of Real Income Per Capita in Cuba, 1903-1948 PESOS AT 1926 PRICES INCOME INCOME PER CAPITA PER CAPITA 300 100 200 200 0 10~~~~~~~~~~~~~~ 1903 1910 1920 1930 1940 1948 SOURCE: Julian Alienes y Urosa, Caracteristicas Fundamentales de la Economla Cubana, Banco Nacional de Cuba, 1950, p. 52. Regarding gaps in graph, see footnote 3. 42 REPORT ON CUBA improvements in the external market for sugar, which enabled Cuba to benefit more from the equipment an,d skills which she already possessed, rather than from new fundamental developments in her productive capacity. If that is true, the picture is a disturbing one. The income growth trend from 1903 through 1924-the period when Cuba's modern sugar industry was under construction-was somewhat greater than the growth trend of population. But in the last quarter century, national income, while extremely unstable, has experienced hardly as much over-all growth as the growth of population, even though the latter has slowed down somewhat since 1925. This would seem to be the picture of an economy which has lost its pre-1925 "dynamic" and has not yet found a new dynamic. Volume of Consumer Goods Purchases As a check on the rather startling observation that real income per capita in Cuba remained below the 1924 level for more than a decade and a half, until the second World War brought greatly renewed activity in sugar, Dr. Alienes, in the study already cited, has compiled information on trends in the volume of purchases of certain consumer goods. The results are shown in Table 7. For each commodity, purchases in 1925 are taken as 100, and in no case was the 100 level again attained prior to the Second World War. TABLE 7 RELATIVE PER CAPITA CONSUMPTION OF CERTAIN COMMODITIES IN CUBA, 1925 - 1949 (1925=100) Wheat Flour Cigarettea Beer kutomobiles 1925 ................ 100 100 100 100 1929 ............... 88 90 91 86 1933 ............... 79 82 84 77 1937 ............... 71 75 78 62 1941 ................ 64 70 74 62 1945. ... .......... 114 93 144 7a 1949 ...............- 67 107 169 227 a Low figure explainable by wartime supply shortages. SouncE: Alienes, op. cit., pp. 54-5, for 1923.41 figures. For subsequent years, data supplied by Dr. Alienes. 2. Structure of Production How Cubans Make Their Living It is now pertinent to ask how Cubans make their living; and this will lay the basis for an analysis of certain dangers and weaknesses in the present structure of the Cuban economy for which remedies need to be sought. Of the total population of approximately 5,300,000 in Cuba in 1950, we estimate that about 1,700,000 are economically active-that is, gainfully employed or seeking employment.4 The occupational distribution as of 1950 a The official population estimate for January 1, 1950, supplied by the General Statistical Office of the Ministry of Finance, is 5,308,255. The last census, taken in 1943, showed a total population of 4.778,583, of which 32% were reported "with occupation." We have applied this same percentage to the 1950 popula- tion figure in order to ares-e at the estimate given above. THE ECONOMY 43 is unknown, but it is probably the same in major respects as that reported by the census of 1943 and shown in the table below. TABLE 8 OCCUPATIONAL DISTRIBUTION, 1943 I. Agriculture (including cattle raising and fishing) ...... ... .. . 41.5% II. Manufacturing and mechanical industries ....... ......... 12.3 Construction .. ............................................. 1.7 Mining ........... ............. ..................... 0.4 14.4 III. Commerce . ............................................... 9.6 Domestic and personal service ....... . ................. .... 4.9 Government .......................................... .... 4.0 Transport and communications ................. ............. 2.2 Professional services ............................................... 2.1 Recreation and similar services ................ ......... ...... 0.3 Banking and finance .................... .......................... 0.2 Miscellaneous services ............................................... 0.2 23.5 II &III. Industrial and commercial, not classified .. ................ 20.6 SOURCE: Censo de 1943, p. 783 .. ....... ... 100.0% Agriculture-An Intermediate Position The division of the population between agricultural and other "primary" pursuits on the one hand and the various industrial and service occupations on the other is one of the best indices of the extent to which a country's production structure has moved toward the pattern which characterizes the more highly developed economies of the modern world. Cuba, with 41.5% of its population engaged in agriculture, holds an inter- mediate position in this respect, just as it does in its per capita income level. In Mexico and Brazil, for example, 65% and 67%, respectively, of the gainfully occupied were engaged in agriculture in 1940, and in all but a few other countries of the tropical regions and of Latin America the percentage would be considerably higher than in Cuba.5 Comparison with Other Countries In the more highly developed countries, however, the percentage in agriculture falls considerably lower-for example: France (1936) 36%; Denmark (1940), 27%; United States (1948), 13%. It is interesting, how- ever, that Cuba is less exclusively agricultural than such countries as Japan, which had 48% of its occupied population in agriculture in 1948; Spain, with 51% in 1940; Portugal, with 49% in 1940; and Italy, with 48% in 1936.6 Of those Cubans occupied in agriculture, the largest group, of course, produces sugar cane. I Yearbook of Food and Agricultural Statistics, Food and Agriculture Organization of the United Nations, 1949, p. 26. 1 All figures from FAO Yearbook cited above. 44 REPORT ON CUBA Subsistence and Family Farms Exceptional Cuban agriculturists are not subsistence farmers, except for a small minor- ity. This is another very significant way in which Cuba differs from most of the so-called "underdeveloped" countries. Sugar cane growing and other leading lines of agricultural production, as carried on in Cuba, characteristically employ wage labor on a permanent or temporary basis. The family farm unit is the exception rather than the rule. Non-agricultural Occupations Of the persons occupied in manufacturing and industrial pursuits, the largest groups were engaged, according to the census of 1943, in the proces- sing of sugar, tobacco, other food products, and in the making of textiles and footwear.7 Of those Cubans who make their living by commerce, over 90% (134,000 in 1943 out of 147,000) were engaged in some form of retail trade, and the rest in wholesale operations. Commerce and Services The item "industrial and commercial, not classified" in the census report is so large (20.6%) as to render the whole distribution rather unreliable, except as a measure of agricultural vs. non-agricultural occupations. Probably a large part of this unclassified group should really be added to "commerce". Observation suggests that the total of small storekeepers and merchants in Cuba must be quite large. Also included in this unclassified group are no doubt many artisans in small family-type workshops and a "floating" or "fringe" population, inter- mittently employed or self-employed, with no steady occupations. Note that domestic and personal service occupies a large group-4.9% of the economically active population in 1943, or 83,000 people if the same percentage is applied to the larger 1950 total. Government, at 4.0%o, would be employing 68,000 in 1950. This figure is too low, however. The 1949 budget of the Cuban Government provided for 110,855 regular positions and 78,765 "obreros del Estado," workers intermittently employed on public works and maintenance.8 Sources of Income If we look at the production structure of Cuba from the point of view of the principal sources of income, the picture is, of course, much the same as from the point of view of occupational distribution. I Censo de 1943, p. 1042. Preliminary Report on Pension and Retirement Funds of Government Employees, National Ecooomie Couneil, Table 7. THE ECONOMY 45 Table 1, presented earlier, shows that agriculture accounts for nearly a third of national income and industry and commerce together for nearly half. Government, urban real estate, finance, professional income, income of domestic servants, and income from investments abroad make up the balance. Sugar Growing and Other Agriculture Note that sugar growing provided slightly less than half of total agricul- tural income in 1945. But a rising demand led to more than a doubling of the peso income from sugar within a few years. Other farm income stayed about the same. Recently, therefore, sugar has been providing nearly two- thirds of farm income. Table 9, based on the Agricultural Census of 1946 (which assembled data for the operations of the preceding year), shows the income from sugar cane and other farm crops in 1945. This gives a good idea of the structure of Cuba's agricultural production, but, for reasons just explained, understates the more recent role of sugar. Sugar and Other Industry and Commerce Sugar also accounts for a substantial portion of the income generated in the industrial and commercial sector of the Cuban economy-chiefly through milling and marketing operations. Based on the estimates in Table 1, the percentage has ranged in recent years from 19% (in 1945) to 30% (in 1947). It is evident in this sector, as in agriculture, that improvement in the sugar market raises the relative impoitance of sugar income. But industry and commerce, unlike agriculture, experiences a distinct stimulus in its non-sugar sector when sugar is prosperous. In other words, sugar prosperity spreads into prosperity for makers of shoes and textiles, for transport workers, and for producers, importers, and tradesmen generally. A similar effect on agricultural production for the home market is probably offset by the tendency to concentrate on cane rather than other crops when the market for cane is good. Sugar in the Total Income Adding together the agricultural income from cane-growing and the industrial and commercial income from milling and marketing of sugar, we find that the "sugar sector" of the Cuban economy in recent years has con- tributed directly from 24% (1945) to 37% (1947) of the national income. Exports Finally, one extremely important point about the structure of Cuban pro- duction and of the Cuban economy in general must be noted and emphasized. This is the key role of exports in Cuba's economic life. "Export is the great independent variable of the Cuban economy."9 9 Alienes, op. cit., p. 246. 46 REPORT ON CUBA Exports represent directly more than a third of the value of Cuba's total production of goods and services.10 Indirectly, changes in the quantity and price of Cuba's exports have a very important influence on the non-export sectors of the economy. A rise or fall of export income quickly generates a secondary rise or fall of production, employment, and income in Cuban enterprises geared to the home market. It strongly affects the financial pros- pects of the government and the outlook of the banks. TABLE 9 SOURCES OF FARM INCOME, 1945 :Amount Percentage of (in million total farm Source of Income pesos) income Sugar cane. ... ............ 153.5 46.2 Livestock and livestock products ......... .. . ...... 68.2 20.6 Tobacco .................... ' 40.8 12.3 Cereal grains, peas and beans... . 21.3 6.4 Cacao, henequen, peanuts, etc ...................... ... ... .. . 15.4 4.6 Potatoes, yucca, etc ....................... ............... 14.5 4.4 Coffee .............. ...... 10.5 3.2 Fruits ........ ..... ........................ 4.1 1.2 Commercial vegetables ........... . ................... 2.0 .6 Forestry products ...................................... 1.6 .5 Total farm income ........... ... 331.9 100.0 SoURcK: 1946 Agricultural Census. Influence of Foreign Factors To some extent Cubans can influence the amount and value of their export sales by productive skill and efficiency, by initiative in developing new pro- ducts or improving old ones, by quality control, by marketing efforts, and the like. But it is a fact that tariff and quota policies, booms and depressions, wars and war preparations, shifts in consumer preferences, technological changes, and other factors in the outside world exert a major influence on Cuban economic conditions through the effect on exports. These matters are further discussed in Chapter 40. 3. Sources of Insecurity A Fluctuating Economy It is now appropriate to give attention to certain very important charac- teristics of the Cuban economy which have made its performance highly fluctuating and irregular. There are important seasonal sources of instability in the Cuban economy; other instabilities arise from the impact of booms and depressions and wars 11 See Chapter 40. THE ECONOMY 47 in the rest of the world; and still other instabilities and needs for adjustment arise out of "structural" changes affecting Cuba's external markets and its internal conditions of production. We shall examine these sources of insecurity in order, and then point to two sets of consequences with major significance for Cuban development policy which flow from them: 1. A high level of insecurity, with human reactions to insecurity that complicate the economic, social and political problems of Cuba. 2. A chronic under-utilization of potentially productive resources, which is both a problem and an opportunity. Seasonal Instability If Cuba extended seven hundred miles from north to south instead of seven hundred miles in an east-west direction, or if it had high plateaus with temperature and rainfall markedly different from the lower areas, the seasonal rhythm of its economy would be much less pronounced. As it is, the whole country oscillates simultaneously with the two major seasons- the wet and the dry. The wet season runs in general from May through November, and the dry from December through April. Sugar cane grows with relatively little attention in the fields during the wet season. It is cut, hauled to the mills, and ground, beginning about the first of the year. This season of intense activity, called the zajra, lasts for a length of time determined by the market conditions and the size of the crop to be ground. In the past, as a rule of thumb, it has been estimated that the Cuban sugar mills would grind about 50,000 long Spanish tons per working day. This means that the zafra would last about 60 working days in a 3,000,000- ton season and about 120 working days in a season of 6,000,000 tons. Lately, however, technical and mechanical improvements, including increasing mech- anization of cane-hauling from the fields, have increased the average daily output and shortened the zafra period. Thus, the zafra of 1948, during which 5,940,000 long Spanish tons of sugar were ground, the largest year's production in Cuban history, lasted 104 working days-spread over a total of 120 days-or nearly four months.1 The Dead Season Following the zafra comes a letdown in activity which, except for some replanting and maintenance, lasts until preparations start for the next zafra. For this period Cubans have an expressive term: tiempo muerto, or "dead season." " Hugo vivo, El Empleo y la Poblacion Activa de Cuba, Publicaciones de la Asociacion Nacional de industriales de Cuba, Habana, 1940, pp. 20-25. 48 REPORT ON CUBA Not only the sugar industry but also the whole Cuban economy fluctuates to this rhythm, though naturally to a lesser extent. Traffic on the railways and exports through the ports move seasonally with sugar. As is pointed out in the industrial section of this Report, manufacturers for domestic con- sumption find their best market during the zafra season. Their response is to hire additional people and use more raw materials at that time and to cut down on their activities in the dead season. The following, from a description of the Cuban economy written some years ago, is still substan- tially true today: The Zafra "With the sugar crop, activity commences over the island. Families begin to purchase meat and rice to build up the terrific energy which must be expended in the field. Clothing and shoes are bought. Travel- ling salesmen for firms having warehouses full of imported food and clothing crowd the second-class hotels in the rural towns of the island. Lights appear about the countryside as the families once more have enough money to purchase kerosene . . . During a normal season everything quickly assumes an air of prosperity. "But after two to five months of steady employment the atmos- phere begins to change . . . The cane families begin to reduce their expenditures because they can see the dead season ahead . . . Store- keepers reduce the stocks on their shelves and the travelling salesmen retire to Habana. Gradually the prosperity of the zafra passes away and the kerosene lights in the bohios begin to flicker out. Meat, rice with lard, and beans which have been the foundations of the zafra diet now come fewer times each week. The cane cutter looks about him for substitute foods, turning to plantains, sweet potatoes, malanga, and yucca."'12 Intensification by Other Crops The other agricultural crops of Cuba, unfortunately, intensify rather than counterbalance this sugar rhythm. Analysis of pay rolls for agricultural workers producing tobacco shows that two-thirds of the annual amount is paid out during the six months from September through February, while in the other six months only one-third of the yearly amount is paid. Thus, several months of the high seasonal demand for tobacco labor coincide with the similar demand in sugar. For the coffee planters, the rainy season is also a dead season; the coffee trees need little or no attention until the berries are ripe for the harvest in October or November. However, the harvest time is slightly different from that of sugar, which is a favorable factor in seasonality. A whole series of other harvests begins towards the end of the year and extends into the following spring, largely overlapping the sugar harvest: 's Problems of the New Csba, Report of the Commission on Foreign Affais, Foreign Policy Association. New York, 1935, pp. 73-74. THE ECONOMY 49 potatoes, yuccas, malangas, and fruits and vegetables for exportation, such as tomatoes and lima beans.13 Even the tourist trade intensifies seasonal fluctuations. Some 60%o of the tourists who come to Cuba arrive during the first four months of the year- that is, the zafra season-and oiily 40% in the other eight months.14 Waste of Manpower Some extremely revealing data on the waste of manpower which results from these seasonal fluctuations emerged from the special agricultural census of 1946. That well-conducted census showed, as of 1945, a total of 829,668 agricultural workers on all the farms and plantations of Cuba, for all crops. They were divided as follows: TABLE 10 AGRICULTURAL WORKERS, 1945 Permanent workers: Unpaid (proprietors, members of family) ....... .... 331,724 Paid .................... ........ .............. 53,693 Total permanent workers ............ ..... ... ... ... .. 385,417 Temporary workers: Unpaid (proprietors, members of family).,.... 20,561 Paid ...................... ....... 423,690 Total temporary workers ............... ..... .... 444,251 Total agricultural workers, permanent and temporary ............................... 829,668 S.u.cE: Preliminary release and typewritten summary of the National Agricultural Census of 1946. Duration of Employment The average duration of employment for the temporary workers in 1945 was 4.1 months (123 days) in the case of.the 423,690 paid workers, and 4.5 months in the case of the 20,561 unpaid workers. Speaking now only of the former-the' 423,690 paid, temporary workers, constituting about one- half of the gainfully occupied in agriculture and about one-fourth of the total occupied population of Cuba-the extent to which their labor power was apparently unused during the year is shown in Chart IV. This Chart records that 100% of the workers in question worked for one month, but only 52% for four months, and only 6% for as much as nine months. Concealed Unemployment No doubt there is some small offset against that portion of the chart labelled "not working" because of nonagricultural jobs which some of these temporary workers may find in towns and cities during the dead season. For reasons already indicated, however, it does not seem probable that this could be a very substantial offset, and our direct inquiries in the field con- firmed this impression. Alienes, op. cit., p. 135; Lowry Nelson, Rural Cuba, University of Minnesota Press, 1950, Chapter 3. "Alenes, op cit., pp. 139-40, based on data for 1939. CHART IV Percent of Agricultural Workers Who Worked the Number of Months Shown, 1945 PERCENT OF PERCENT OF WORKERS WORKERS 100 100 80 \\.80 \ ~~~~NOT WORKING 60 60 40 40 WORKING 20 20 0 0 0 1 2 3 4 5 6 7 8 9 10 11 12 NUMBER OF MONTHS WORKED SOURCE: Agrictultural Census of 1946. THE ECONOMY 51 Furthermore, it must be remembered that the other half of the agri- cultural labor force-including the proprietors and members of families, reported by the agricultural census as "permanent" workers-must actually experience a considerable amount of "concealed unemployment." This must happen even when they are not formally unemployed and even though their activities are no doubt spread more widely over the year than those of the temporary workers. We have no information on seasonal underemployment of manpower in the industrial and commercial and service sectors of the Cuban economy, though every indication suggests that it is very considerable. Because these facts seemed so startling and so important to Cuba, we made it a point to gather the personal inmpressions of well-informed people throughout the island. The interviews confirmed, on the whole, the economic and statistical analysis. 4. Instability from Trade Cycles and Wars "The Dance of the MiUions" A number of episodes have made Cubans aware of the great extent to which their good and bad fortune depends upon events in the outside world over which they have little or no control. One was the "dance of the millions" which followed the lifting of United States wartime controls of sugar after the end of World War I. With high demand and with competing beet sugar areas in Europe still disrupted by the effects of the war, sugar prices soared in Cuba. From 5.5 cents per pound paid by the United States Sugar Equalization Board for the 1918 crop, Cuban sugar rose to 9 cents in February, 1920, to 18 cents in April, and to a high of 22.5 cents on May 19, 1920. "A mania possessed all who held or even had heard of sugar." The decline began, at first slowly, but with gathering momentum, which became most rapid in August and September of 1920. By the end of September sugar was 8 cents and in mid-December it reached 3.75 cents.'5 The Downward Movement Chart VII in Chapter 40 shows the sharp rise and subsequent sharp fall in the value of Cuban exports. Subsequent to the price collapse, Cuban production continued nevertheless to increase for several years, for events proved that it took longer for competing areas to rebuild their production than had been anticipated. In 1925, however, as the chart shows, a general downward movement began in the fortunes of Cuban sugar and hence of the whole Cuban economy. c "s Leland H. Jenks, Our Cuban Colony: A Study in Sugar, Vanguard Press, New York, 1928, Chapter IL 52 REPORT ON CUBA Effects of Depression and Wars A second unforgettable experience was the effect of the world depression of the 1930's, coupled as it was with protective import duties and quotas in the United States for the benefit of domestic producers of sugar. We have already noted the disastrous effects on Cuban income. (See Chart III.) A third episode was the lift to Cuban prosperity provided by the Second World War. The effects of high wartime demand for sugar both as a food and as a raw material for alcohol and other products, and of the destruction or disruption of communications with sugar-producing areas in Europe and the Far East, are clearly visible in Chart III and other data already referred to. The most recent demonstration of all occurred in 1950; the shrinkage in the market for Cuba's sugar-wliich had been universally anticipated as a consequence of the post-war recovery of other areas-was prevented or post- poned by the effects of the Korean crisis, as already mentioned. Cuba's Dependence on Outside World Thus, experience has thoroughly impressed on Cubans of practically all walks of life that good and bad times in Cuba are the result of good or bad times in the world outside, and specifically of the vicissitudes of the sugar market. The experience has also been that war means prosperity for sugar and hence for Cuba. In view of Cuba's concentration upon sugar, this encourages the impres- sion-though we are convinced that it is untrue, at least in the long term- that nothing Cuba can do at home is nearly so important to her economy as a variation of a cent or two in the price of sugar. Assuming exports of three million tons, a one-cent variation up or down in the average price received for its sugar can make a difference of 60 million dollars in Cuba's receipts. A willingness on the part of the United States and other countries to accept an additional million tons could mean, at recently prevailing prices, a 100 million dollars of extra receipts. Variations such as these, originating in forces outside Cuba's control, can stimulate or depress Cuba's whole economy. 5. Structural Changes Causing Instability Adjustments Needed In addition to the seasonal instabilities in the Cuban economy and the instabilities induced by trade cycles and wars, there are certain long-term "structural" changes at work, some of them hinted at already. These wVill have to be matched by constructive adjustments if Cuba is to employ its population productively and to maintain or improve living standards. THE ECONOMY 53 First, there have been important structural changes in the international market for sugar which have had the effect of stopping the growth of Cuba's sugar industry since 1925. The chart already referred to has shown this, and the reasons for the cessation of growth will be dealt with further in other connections. The most important reasons are market limitations imposed in the form of import quota restrictions in the United States and other consuming coun- tries for the benefit of domestic producers. By these the protected producers have obtained the right to force consumers in their own countries to purchase their production at higher prices than it would be necessary to pay for sugar from Cuba. "The Rules Changed" This phenomenon is part of the world-wide trend toward breakdown of the international division of labor by nationalistic regulation of trade. It forces readjustments on countries like Cuba which have vigorously played the game on the basis of the old rules and-after building a highly special- ized production-structure, based on the international division of labor-find the rules changed. Cuba, with probably the best resources in the world for the large-scale cultivation and grinding of cane, could produce indefinitely larger quantities of sugar at reasonable cost if the world were willing to take it. But, unless protracted war emergencies change the outlook, or unless great changes occur in the protectionist policies of the leading consuming countries, Cuba cannot count on regularly producing and selling abroad even as much sugar as she has been selling in the last few years. Even if there should be a considerable expansion in the market for Cuban sugar (and a fortiori if there is not), Cuba gravely needs to develop new and diversified lines of production to supplement her present reliance on sugar. Such diversification, of course, has been taking place to some extent. But, as various chapters of this Report reveal, the process has not been nearly rapid and vigorous enough to meet the situation. An Internal Change An internal structural change which intensifies the conclusions just stated is the mechanization which is now taking place in various aspects of Cuban agriculture. The hauling of sugar cane in motor trucks instead of ox carts raises the productivity of the workers employed; and only by such improve- ments can high wages and low costs of production be made compatible. For this reason, the high wages of agricultural labor in Cuba, achieved by organiza- tion and social legislation, are likely to hasten this process of mechanization. The saving of manpower by mechanization, providing the economy as a whole is elastic and progressive, results in putting the saved manpower to work 54 REPORT ON CUBA at producing other goods, and this increases the total national production to the benefit of all. In a stagnant economy, however, where new lines of pro- duction are developing only slowly-if at all-the result may be an accumu- lating problem of chronic unemployment, with all the attendant evils - economic, social and political-that this implies. That is the danger-indeed, it appears to be a present actuality-which confronts Cuba. Population Growth At the same time, Cuba's population is growing, not at an alarming rate, but rapidly enough so that each decade brings an appreciable increase in the number of consumers and in the labor force. The actual rate of increase between the last two censuses (1931-1943) was at the rate of 1.6% annually. This is not an excessively high rate of increase as compared with rates in underdeveloped countries generally and in view of Cuba's unused land. Also, the rate of increase has been falling. It was very much higher during the rapid expansion of the sugar industry in the first quarter of the Twentieth Century, when many immigrants were coming to Cuba.'6 The present rate of growth is unknown. Current trends cannot be assessed from birth rates and death rates because such data are not collected in Cuba with sufficient completeness or reliability. Supposing, however, that the cur- rent growth rate is still 1.6%, it is necessary for total production to increase by at least that amount per year, on the average, if living levels are to be maintained or increased and if productive employment is to be found for the additional numbers in the labor force. 6. Chronic and Recurring Unemployment One of the most lamentable of the many lacks of economic and social information in Cuba is the complete absence of any current data on employ- ment and unemployment and their trends. Information gathered by the 1943 census supports the view that a grave problem of unemployment-probably chronic as well as seasonal and cyclical-exists in Cuba. But the report shows such a large proportion of "unknowns" that it offers no reliable means of estimating the exact size of the problem. Of the total labor force of 1,521,000, those who were reported as employed numbered 856,000 (56%), unemployed 321,000 (21%), and "unknown" 344,000 (23%).17 The census enumeration was made in the dead season and, therefore, reflects unemployment from seasonal as well as other causes. The year 1943 was one of moderate prosperity. 10 See the discussion of Cuba's population history and trends in Alienes, op. cit., Chapter 2. 17 Censo de 1943, p. 1056. THE ECONOMY 55 Cuban Views on Unemployment In order to check and to supplement the results of our analysis of the seasonal, cyclical and structural instabilities of the Cuban economy- especially as they relate to employment-members of the Mission gathered the impressions of various well-informed persons throughout the island who were in a position to have first-hand information. The following summaries are presented as a brief but typical sample of the responses obtained in these interviews: A civic leader in a provincial capital: "Rural unemployment is very serious even at the height of the zafra. In the city, however, unemployment is probably not very severe at 'present." A small-town banker: "Subsidiary industries to absorb some of the unemployment in this area are badly needed." The mayor of a small town in an important sugar-producing district: "There is a hard core of several hundred sugar workers in the rural part of the municipality outside the town who do not find work even at the height of the zafra. There is no way to make a well-informed estimate of the degree of unemployment in relation to the total working population." A provincial wholesale merchant who supplies and gives credit to store- keepers, who, in turn, supply and give credit to workers: "The seasonal nature of the sugar industry is clearly reflected in commercial life. During the zafra there are daily wage payments in the centrales and sales to storekeepers of the centrales are triple in that season. "Perhaps half of the people are out of work during seven months of the year. The grinding stops around May 15th, and most of those employed in the industrial activities of the mill wait until about November until they are employed again, and even then not all are taken on. They just have to shift the best they can during the seven months. "In the agricultural side of the operation, mechanization has taken much employment away. In some cases an operation with tractors is completed in ten days by ten workers when it took one hundred men three months to do it before. "During the zafra many people come here from the next province. They work in the tobacco plantations there during the dead season and go on to the bean harvest in Oriente after the sugar crop is brought in. Formerly many Haitians came in as cane cutters, but their number has decreased, as they now often do not find work on arrival." 56 REPORT ON CUBA The manager of agricultural operations for a large sugar central: There are perhaps 1,800 field workers on the farms that supply cane to the mill, of whom perhaps half come into this district just for the harvest. The company's own agricultural operations em- ploy 600 workers during the zafra and 300 in the dead season. Those employed in the dead season are on odd-job time. The extra labor for the zafra comes from all over. Few Haitians come in these days. "There is no doubt that increases in wage rates have made mech- anization profitable and helped to stimulate it greatly. Also, higher wages in the mills have tended to keep employment down during the dead season. "Trucks with three and four trailers have made the ox&art obso- lete for hauling cane, and loading of trucks has been very largely mechanized. Most of the plowing is now done by tractors. Dis- placed labor has usually been absorbed, however. For example, ox cart drivers have been trained to run trucks." The proprietor of a retail general store (bodeguero) who supplies and gives credit to workers on neighboring centrales: "In spite of wage increases in recent years, the position of the wage earners is very bad. I am in a position to have a better insight into their problems than most people, since they come to me for credit to buy their supplies in the dead season. "Mechanization has hit the men very hard by cutting short their working time; they have no other jobs to go to. Before 1939 the zafra lasted only about 31/2 months, but in the other eight months the men found work for about two-thirds of their time. In the recent prosperous years, on the other hand, the zafra has lasted from four to five months, but in the remaining months the men find work for perhaps only a third of the time. The reason is that much of the plowing and maintenance is now done with the aid of machines. "Perhaps one-fifth of the rural people do not have steady work even in the zafra." The secretary of a local union of sugar workers: "Even at the height of the zafra there are at least 200 men without steady work against 600 employed in the mill. Among the field workers in the vicinity there are up to 400 unemployed even during the zaJra as against 1,500 who find employment." A national official of the sugar workers' union: "At the height of the zafra there are some 500,000 workers em- ployed in the sugar industry. Of these, perhaps 100,000 work only 4 months and another 100,000 are employed the year round. The rest probably average from six to eight months of work a year. THE ECONOMY 57 "Replanting of sugar cane in the dead season and maintenance of the fields keeps a substantial number of workers busy at various periods, and there is some alternative employment for sugar workers in the dead season, although not as much as there should be. "The union is very much concerned with ways of finding off- season employment, although they feel that there is not very much they can do to promote it, since they are not investors. There are great variations in the attitude of employers concerning the devel- opment of supplemental activities and the use of sugar by- products." An official of the Cuban Confederation of Labor: "Speaking of all the wage earners of the country, we can assume about one million men. Perhaps about 300,000 will have work the whole year round, 500,000 for three or four months, and the rest four to six months. There are probably 200,000 to 300,000 unem- ployed even during prosperous times in the zafra season, but large- scale public works could reduce this to 100,000. II. REACTIONS TO INSTABILITY AND STAGNATION 1. Feelings of Insecurity Effects on Behavior Since 1924-25, the Cuban economy has been both unstable and undynamic. It has been barely holding its own in long-term trends of real income per capita. It has been characterized by large amounts of unemployment, under- employment, and general insecurity for independent producers and commer- cial people as well as for wage earners. Modern psychology has found that feelings of insecurity may affect human behavior-whether in individuals or groups-in a powerful way. They often lead to attitudes and actions which are not reasonable or rational and which may even intensify the basic causes of the difficulty and thus set up a vicious circle. It is not surprising, then, to find in Cuba two tendencies quite unfavor- able to economic progress. Though they are by no means absent in other countries, in Cuba they seem to have become greatly exaggerated. One may be called the gambling spirit in economics. The other is the tendency to freeze or rigidify economic relationships and to preserve or create work which is technically unnecessary because-in the short run- it augments a particular business or employment. Barriers to Progress However understandable these reactions may be, in the light of Cuba's past and present economic position, they are major barriers to future advance. 58 REPORT ON CUBA At best they retard-and, at worst, they could defeat-the adoption of many measures for economic progress which are necessary if productivity and hence living levels are to be increased in Cuba. 2. The Gambling Spirit in Economics Initiative Reduced The gambling spirit in economics distorts the spirit of enterprise. It is one of the reasons for the relative scarcity of capital and business initiative interested in the development of new industries. For the large owner of capital, what may be won in the fluctuating and unpredictable international sugar market-almost comparable to a lottery-can quickly outshadow all the pos- sible profits of a new, constructive venture, which would necessarily take much time, toil and trouble. For example, late in 1950 under the impact of world rearmament, market- ing contracts were made for all of Cuba's exportable supply of blackstrap molasses from the coming 1951 sugar harvest at 20Q a gallon, as compared with 50 a gallon one year earlier.18 This meant many millions of extra dollars distributed through the mills and cane farms of Cuba. Under these circumstances it takes a foresighted manager to devote himself with enthusiasm to laborious development of alternative crops and products. For the small man-in an economy where opportunities for business growth and job advancement seem to be few-a lottery ticket or one of the many gambling games that flourish all over Cuba may seem a more attractive use for money than saving. Besides providing excitement, it seems to offer a better hope of getting ahead than the prosaic process of steady saving, planning and hard work. A Cuban View A Cuban of unusual wisdom and experience told the Mission that, in his judgment, the gambling spirit that pervades all layers of society can be compared to a cancer gnawing at the vitals of Cuban life. It chokes off, he said, the disposition to build solidly by persistent effort and to save and plan ahead. He believes that a campaign of public education to explain the consequences of gambling is badly needed. Instead, the Government conducts a lottery each Saturday from which it derives considerable revenue. Every day of every week thousands of street vendors from one end of the island to the other importune the passerby to purchase a chance on some allegedly lucky number. s Jo.rnal of Commerce, New York, Nov. 8, 1950. THE ECONOMY 59 A Sociologist's View The following comment by a sociologist is pertinent:111 "Whether or not they plan in advance for other expenditures, there is no doubt that many people on small incomes regularly devote a specified portion of their earnings to lottery tickets. It is useless to argue with them that the same amount placed in a savings account would in time provide a competence for old age or for a possible emergency. The remote chance of winning as much as $100,000 with an investment of 205 has too strong a pull on the imagination. "The net result of the lottery is probably the further degradation of the poor. More than that, it is the most potent enemy of any program designed to promote thrift among the population. It encour- ages a sort of chronic boom psychosis or speculative mania, where everyone lives in a bubble which, for most investors, bursts every Saturday evening. For the limited few, of course, it brings various degrees of fortune. "But win or lose, on Monday hopes rise anew and build up to feverish anticipation as the week advances toward another Saturday that will bring an answer to their hopes. The most that can be said for the lottery is that, besides rewarding a few, it constitutes an experi- ence-continuum for the many that brings a modicum of excitement to lives that otherwise are drab." 3. Preserving Status Quo and Make-work Practices Freezing Relationships The second of the two tendencies which impede economic advance is the disposition to freeze or rigidify economic relationships and to create unneces- sary work for the sake of preserving business and jobs. This stifles technical improvements and cost reductions which are essential in order to increase production and raise standards of living. In an unstable and insecure economy where the processes of long-term growth seem to be on dead-center, it is perfectly natural for everyone to seek to hold fast to what he has. It is natural, too, for everyone to think of improving his position by somehow getting a bigger slice of the pie rather than by enlarging the pie. Such reactions are common among all economic groups, not just one or a few. Following are some of the many examples that permeate the CUban economy: The Tarafa Law Certain railroad interests obtained passage in 1923 of the Tarafa Law, still on the statute books, which prohibited-among other things-the estab. lishment in the future of new private ports such as those used by a number 1D Nelson. op. cu. 60 REPORT ON CUBA of sugar centrales. It also limited the use of existing private ports to the same kind of operations they performed during the fiscal year 1922-23. Under this law, for example, it was held that the Cuba Cane Company, which had been using its sub-port at Palo Alto for the shipment of molasses from certain of its mills, could not also export sugar through this sub-port, but must ship it by railway to a more distant point.20 Make-work Practices At the end of World War II, Cuban port workers secured the promulgation of decrees which made it compulsory to continue a wartime practice of storage at ports before shipment (thus making more work in handling) and which required that sugar shipments be routed through the traditional ports in use before the war. Port workers, too, successfully opposed the Sea Train, and have been able to require many other make-work practices, detailed in other sections of this Report. Difficulty of Dismissal Workers in general are protected in their job tenure by practices which make it nearly impossible, under present methods of administration, to dis- miss a worker after he has been employed for six months. Several Cuban lawyers confirmed the literal truth of the saying: "In Cuba it is usually easier, quicker and cheaper to divorce a wife than to fire a worker." Under prevailing conditions of chronic and seasonal unemploy- ment, it may also be easier to find a new wife than to find a new job. Trade unions generally demand rigid application of seniority rules and invent many practices to require extra labor. This problem is dealt with at some length in Chapter 16. Investors Play Safe Most investors play safe by hoarding money, by transferring their funds abroad, by demanding a rate of return sufficient to repay their capital in a few years, and by refusing-for the most part-to go into unaccustomed types of enterprise. These problems also are dealt with in greater detail in the chapter which discusses the availability of capital. Few Rewards for Efficiency The sugar and other industries have their stabilization institutes, laws and agreements which, to a great extent, preserve the status quo in the in- dustry, in a manner which severely limits the advantages which any particular producer can gain by efficient operation. 29 See Problems of the New Cuba, op. cit. pp. 435-39 and p. 301 for a history and discussion of the Tarafa Law. THE ECONOMY 61 For example, in the sugar industry each mill and each colono has a quota right to a certain share in total production, regardless of efficiencies or costs. The point here is not that such regulations are unnecessary, but that they inevitably involve a bias in favor of the status quo and preserve existing rights as against possible innovations. 4. Case of the Match Industry Prospect of Mechanization Recently, the match industry has offered a peculiarly illuminating example of some of the rigidities and pressures which m'ay block economic and tech- nical advance, under the conditions of insecurity and relative economic stagnation in Cuba today. Briefly, early in 1950 the Cuban match induistry, which used techniques that had hardly changed in forty years, was confronted with the establish- ment of a new Cuban company prepared to install modern, highly automatic machinery. The established manufacturers and the organized workers imme- diately asked the Ministry of Labor and the President of the Republic to prevent the installation of this machinery, alleging that the new company would create a monopoly and that workers in existing factories would be out of jobs. The Government thereupon referred the problem for study and recom- mendation to the National Economic Council, which made a detailed report accompanied by majority and minority recommendations of its Technical Commission. The facts, as developed in the National Economic Council's study, are so instructive that they are summarized below: Facts of the Case In 1950 there were 18 match factories in Cuba, the smallest employing 10 workers and the largest 160. The oldest was established in 1880, another in 1895, and several in the period between 1900 and the First World War. Three others date from the late twenties and early thirties. Then the industry was practically stationary until 1946. The old routine-with some partial mechanization, but mostly using hand labor, either in the factory or on contract at the worker's home-continued nearly unchanged. High profits in the industry, stimulated by increased population and the prosperity brought by the Second World War, attracted several new firms in 1946 and subsequent years. These firms introduced some new techniques. The old firms, with one exception, did not modify their methods. A Price War Then began a price war, but not one which was permitted to benefit consumers. The price of matches to the consumer has stayed at the same 62 REPORT ON CUBA level during more than forty years. The match factories sell to middlemen at a discount from the fixed price charged to retailers. This middleman's discount was 12% in 1944, 14% in 1945, 16% in the latter part of 1948, 26% in 1949, and 30% to 40% in the summer of 1950. By this time some of the smaller, high-cost firms were already in danger of being forced out * and were cutting wages below the level set by the National Minimum Wage Commission. Most of the factories were operating only part of each week and producing at considerably less than half capacity. This was the situation in the industry when it became known that a Cuban businessman, not hitherto connected with match production, was about to install new machines purchased in Sweden, France and the United States *to produce matches by a highly mechanized process at much lower cost. Protests by Manufacturers and Workers The established manufacturers thereupon represented to the Government that the new company was an affiliate of the Swedish Match Trust; that it would be able to produce with only thirty to fifty workers all the matches consumed in Cuba; that the new machinery was controlled by the Trust and could be used only by the new firm; and that the result would be a monopoly of match production in Cuba. The organized workers joined the employers in urging the Government to prevent installation of the new machinery, emphasizing particularly the threat to the livelihood of an estimated 4,000 Cuban workers and their families. When the new machinery arrived at the port of Habana on the sixth of April, 1950, it could not be removed from the docks because of the opposition of the local Maritime Federation, acting in support of the National Federa- tion of Workers in the Chemical Industry. Findings of the Council Investigation by the National Economic Council established the following: The new company was wholly owned by a small number of Cubans and was not under the control of any other interest. The machinery which it had purchased was regularly listed in the catalogues of the foreign manufac- turers, and there were no restrictions to prevent the purchase of similar machines by others in Cuba. The capacity of the new plant would be from 13,000 to 15,000 gross of boxed matches per month, somewhat less than 20% of the current Cuban output of 60,000 to 70,000 gross. Promise by New Company The new company formally promised that it would not produce more than 2Q% of national consumption. It also stressed that it proposed to devote a considerable part of its production to creating an export market for matches THE ECONOMY 63 -practically no Cuban matches are exported at present-and hoped to com- pete with existing European sales of matches in the markets of the United States, Puerto Rico, Venezuela, Peru, Bolivia, Haiti, Panama, and El Salvador. Further Facts Other facts which emerged were: In the summer of 1950 the total number of workers employed in the existing match industry-including administrative and office personnel-was 1,704 and not 4,000, as originally claimed by the protesting groups. Of these, 259 or 15%o worked at machines, 805 did hand work in the factories, 476 worked by hand at home, and 164 were miscellaneous workers. About 65 % of the workers were women. A table-prepared by the National Economic Council-compared the match industry with 11 other industry groups in Cuba. It showed that the match industry had the lowest capital investment per employee (1,882 pesos) and that its average monthly wage payments to workers (50.49 pesos) were the lowest of all the industries. The earnings of the workers were especially low because of irregular employment, often only two or three days a week. Total capital invested, according to the answers of the manufac- turers to the questionnaire of the National Economic Council, was 3,206,391 pesos. Problem of Profits Profits, according to these manufacturers, were zero in 1949. The Techni- cal Commission of the Council indicated some skepticism regarding profits estimates supplied by the industry, but was unable to check them because of lack of the necessary technical personnel or funds to hire outside accountants. It did call attention to earlier incomplete reports to the Register of Industries of the Ministry of Agriculture in which six reporting match factories, employ- ing somewhat less than a third of the workers, stated their profits in 1948 as 220,815 pesos. In 1945, before the price-war had developed, nine reporting firms in the industry declared profits of 521,127 pesos. This would suggest an annual rate of return on capital above 30%o even if their investment in 1945 were reckoned at 1,600,000 pesos, which is half the industry total of 3,200,000 pesos reported five years later for 18 firms (including several new factories established only in 1946 and after}. Proposed Solutions Of solutions suggested to the National Economic Council, the only one which certain of the established manufacturers would contemplate was the banning of the new factory. Others considered Government regulation of the match industry indispensable, with or without the new factory. Others would 64 REPORT ON CUBA accept only a regulation of the industry by the manufacturers themselves. Attempts, however, by some within the industry to get agreement on a quota for each factory were unsuccessful. The workers' representatives said that they were eager for Cuban or foreign capitalists to start new industries and thus to help to meet the grave problem of unemployment, but that this new machinery would not have such a result. They favored regulation of an industry whenever necessary to guarantee the employment and wage levels of workers and to avoid "compe- tencia desleal." This is a term roughly equivalent to "unfair competition," and is often used in Cuba, as in other countries, to mean any effective com- petition. Both employers and workers maintained that there was no possibility of increasing the domestic demand for matches-the new company had proposed an advertising campaign-nor of developing export markets. Two Conflicting Opinions The Technical Commission of the National Economic Council found itself divided between two irreconcilable opinions. One group held to the principle that all the existing factories must be maintained, including the least efficient, by regulating the industry and by permanently subsidizing workers who might be displaced by new machinery and not absorbed into new occupations. The other group supported the principle of free competition, including the elimination by competition of inefficient factories. In order to mitigate the effects of the unemployment which might thus be produced, this group favored subsidies of long duration for elderly displaced workers, with a limited com- pensation for others displaced. Majority Recommendation The second view prevailed by a majority of six to five. The Technical Commission therefore recommended that no legal or economic reasons existed to prevent the installation of the new machinery; that a subsidy fund should be established, financed from a tax on matches and lighters; and that workers who had been employed in the match industry for not less than five years and who would be displaced by the effects of new machinery should have the right to compensation. For workers sixty years of age or older, the majority recommended that compensation should be 75% of their 1950 rate of earnings for life; for workers between fifty and sixty, it should be 75% of their 1950 rate of earnings for twelve months; and for aU other displaced workers compensa- tion should be a single sum equivalent to their earnings in the first six months of 1950. THE ECONOMY 65 The Minority Opinion The minority views of the Technical Commission are interesting because they reflect an approach to these problems which is very influential in Cuban thinking. It is mainly concerned to avoid rather than to facilitate any readjust- ments. The minority agreed that the machinery should be admitted to Cuba and installed in the new factory. But it proposed that, at the same time, production quotas should be established for all existing factories and for the new one. In order to benefit from the quota assigned to it, each factory should be required to maintain in employment the same number of workers which had been on the payroll on April 1, 1950. The new factory would have to employ an "adequate number." A factory which did not need as many workers as before could dismiss some if it continued to pay them their avera'ge earnings of the first part of 1950 as long as they were unemployed. The minority also suggested that small factories-which the investigation had shown to be particularly inefficient-should be given the special protection of a minimum quota; and that a fixed minimum selling price should be established for the industry. Finally, the Minority recommended that a Mechanization Subsidy Fund should be established to assist the firms to continue the prescribed payment to workers who had been dismissed; and that any new factories should pay to this Fund a contribution equal to the total of the wages of displaced workers. 5. The Economic Problem in Cuba The "Master" Circle This chapter has shown that Cuba enjoys a level of income and a standard of living among the highest in Latin America and probably the highest of any tropical country. However, the productive basis of this was mainly established before 1925, in the upbuilding of the agricultural and industrial phases of sugar-producing. Since then, the Cuban economy has made rela- tively little progress. Cuban incomes have fluctuated with the world market for sugar-affected strongly by trade cycles, tariffs and quotas, and wars- but have shown little, if any, over-all tendency to advance. Instead of dynamic development, there appears to have been stagnation. At the same time, the Cuban economy suffers from a high degree of instability. Every year there is a long "dead season" when most of the sugar workers are unemployed and the most extensive capital equipment in the country stands idle. This seasonal instability permeates the whole economy. 66 REPORT ON CUBA Also, instabilities from booms and depressions and political crises in the outside world quickly raise or lower Cuban economic fortunes. And new problems raised by long-term trends both inside and outside Cuba-such as protectionism in sugar-consuming countries, mechanization and population growth in Cuba-are insistently demanding adjustments that require more diversification, flexibility, and dynamism than the Cuban economy has shown in recent years. All this means both chronic and recurring unemployment and a high level of economic insecurity which affects all groups in Cuba. One consequence is to encourage a gambling spirit in economics, in contrast to a more solid spirit of constructive enterprise. Another is to intensify the natural "defensive" impulses of economic groups against new methods of production which appear to offer competition or to threaten opportunities for jobs or profits. A stagnant and unstable economy with a high level of insecurity creates resistance to improvements in productive efficiency. And yet improvements in productive efficiency are the key to creating a more progressive, more stable economy. This is one of the many vicious circles which have to broken in order that Cuba may increase and diversify her production, have more and steady employment and go on to the attainment of progressively higher standards of living. It is, in fact, the "master" circle of all the vicious circles that needs to be attacked. With only a little exaggeration this can be called the economic problem in Cuba. This will be discussed further in Chapter 42. CHAPTER 4 Resources for Development GENERAL CONCLUSIONS Five Factors Does Cuba have the resources necessary to achieve a real advance in production and standards of living? Which of her resources can be used more effectively? What resources are lacking or inadequately mobilized, and what can be done to remedy this? Many of the specialized chapters in this Report discuss the answers to these questions in detail. Our purpose here is to make a rapid preliminary survey of Cuba's present and potention position, under five headings: 1. Natural Resources 2. Labor 3. Capital 4. Management, Business Initiative, Technology 5. Institutional and Governmental FrameworA. The last two may be described as the "organizing factors," the function of which is to bring together natural resources, capital and labor in the process of production and to maintain conditions conducive to production and economic progress. What Limits Cuba's Prospects To state in advance certain general conclusions: Many of Cuba's basic resources are far from being fully utilized. This is true of natural resources, of labor, of installed capital and of potentially- available capital. This means that Cuba's economic advance is not at present restricted by lack of available resources and that Cuba has great opportunities for eco- nomic development. It is chiefly deficiencies in the "organizing factors" mentioned above which limit Cuba's prospects today. It is improvements in this field which can have the greatest effect on Cuba's economic progress. If-but only if-something can be done to remedy these deficiencies, Cuba is probably in a better position than most countries of Latin America to make economic progress. 67 68 REPORT ON CUBA 1. Natural Resources Population Density With an area of 114,524 square kilometers and a population of approxi- mately 5.3 million, Cuba has a population density of 45 per square kilometer. There are many countries with a lower man-land ratio than Cuba, among them nearly all of the other Latin American countries; for example, Argen- tina, 5.8 persons per square kilometer, Chile, 7.4, Mexico, 11.9. On the other hand, Cuba is not to be classed among those under-developed countries where land is a very scarce resource and pressure of population on the land consti- tutes a grave social and economic problem. Cuba's population density is much less than that of Puerto Rico (241.6 per square kilometer), or Java (390), or Haiti (127.9), or Jamaica (116.2).21 Few countries too have so much good level land per person as Cuba; Mexico actually has pressure on her good land. Little more than half of Cuba's total land area is in farms. Of the total area in farms it is estimated that nearly 60% is tillable, but that considerably less than one-half of this is actually under cultivation.22 A Great Advantage Two general characteristics of Cuba's land and climate, which offer great economic advantages to Cuba, should be pointed out. First, a high proportion of the land is flat and fertile. Second, most of the crops best adapted to Cuba lend themselves rather well to labor-saving by mechanization and other improved processes. This is true, for example, of sugar cane, tobacco, corn, rice and such proposed crops as kenaf. Com- pared, therefore, with tropical countries which depend mainly on coffee and cocoa, Cuba is in a much more favorable position to develop high produc- tivity per man in agriculture; and this is the fundamental basis for higher income and living levels. This assumes, of course, an economy flexible and dynamic enough so that new lines of production are developed to make use of the labor saved by mechanization. There are in Cuba none of the laboriously-terraced hillsides and other evidences of crowding of the land seen in densely populated areas of the Orient. On the contrary, the observer is impressed with the extensive rather than intensive use of land and with the amount of land even in the more heavily settled provinces which apparently could be brought into use rather easily. 21 All density figures except that for Cuba wbich has been calculated on the basis of the 1950 populaton estimate, are from the United Nations Statistical Yearbook, 1948. m P. G. Minne.an, The Agricalt-re of C.ba, Foreign Agricultural Bulletin No. 2, U. S. Dept. of Agricul. ture, Washington, D. C., December, 1942, pp. 15.16. For more detailed analysis of land use based on the 1946 Agricultural Census, see Chapter 5. RESOURCES FOR DEVELOPMENT 69 F'avorable Location Cuba's location is also an economic factor of no mean importance.23 It is closer than any other Latin American republic to the northeastern United States-that is, to the largest market in the world and also the world's most important source of capital. History and traditional ties of friendship rein- force this geographic factor. This is shown most concretely by the fact that Cuban goods enter the United States under preferential tariff rates-averag- ing about 20% less than the rates applied on goods of other countries- and United States goods entering Cuba receive similar tariff preference. Cuba's location, her good natural harbors, and the fact that water trans- port is much cheaper than land transport for moving bulk cargoes also place it-economically speaking-quite close to Western Europe. Her posi- tion on the trade routes north and south between the rest of Latin America, the United States and Canada suggests possibilities for developing entrepot trade, such as processing imported raw materials and foodstuffs from coun- tries farther south and exporting the product to North America or Europe. Nearness to the United States helps Cuba in other ways. In normal times she has easy access to the goods and equipment she needs and to cheap fuel. Advantages Under-utilized It would seem that these locational advantages have not been fully utilized up to now, except in the growth of the sugar industry. Also, certain internal problems-notably those considered elsewhere in a discussion of port labor -threaten partly to cancel these locational advantages. Finally, as is shown in detail in a later chapter, Cuba's mineral resources appear to offer considerable promise for development and deserve much more attention than they have received hitherto. 2. Labor Statistics The number of persons economically active in Cuba-estimated at 32% of the total population on the basis of the last census-was about 1,700,000 in 1950. We have already discussed occupational distribution in connection with Cuba's general economic structure. The proportion of the Cuban population within the productive ages, 14 to 64 inclusive, is 62.4% according to the census of 1943. This is about the same as in other Latin American countries, but is somewhat less than the corresponding figure for industrially advanced countries such as the United States and Western Europe, where relatively fewer children are born but more survive to maturity. 2" On th.s and other aspects of Cuba's geography see Geogrofi. de Caba, by Lens Marrero, La Habana, 1950. 70 REPORT ON CUBA By comparison with such countries, therefore, Cuba, like other countries of her economic and social type, suffers some small degree of handicap in attaining high per capita levels of living, because her working population has to support more dependents.24 Unused Labor Supply There is a large unused labor supply in Cuba. In the first place, as previously mentioned, all the indications suggest a considerable chronic un- employment which persists even in the busy season of the best years, though there is no way to estimate its exact amount. Second, any type of production which could arrange its maximum labor requirements in the dead season from May to November, especially if it could be located in or near the sugar centrales, would be able to draw upon a tremendous supply of seasonally unemployed labor. Third, women constituted only 10.3% of the gainfully empl6yed in Cuba in 1943. This is considerably less than the percentage in some other Latin American countries and in countries where industrial development and diver- sification have reached high levels.25 There is no reason to suppose that Cuban women would not work as willingly and as effectively as women in other countries if given the oppor- tunity for remunerative employment. No Shortage for Expansion Fourth, most enterprises in Cuba-from the Government itself to the small shops-are probably over-staffed. Current practices in job tenure and the play of human factors such as family ties, friendship, sympathy, and political rewards conspire to this end. Fifth, and finally, mechanization and other labor-saving devices could undoubtedly be adopted much more rapidly in Cuba if anything like a labor shortage appeared. As we have seen, mechanization is already being hastened by the "artificial" raising of wage levels through economic and political bargaining power. These five points make it clear that labor is one of Cuba's under-utilized resources and that a very great agricultural and industrial expansion could take place on the basis of the present working force without encountering any general scarcity of labor. An important advantage from this fact is that new production is possible without reducing exports. 2' See Alhenes, op. cit., pp. 30-31. 25 Some percentages calculated from data in the Unted Nations St.tac. Yearbook. 1948, are: Brtl, 1940, 16%; Chile, 1940, 24%; Peru, 1940. 35%; U. S. A., 1940, 24%; United Kmugdom. 1931, 30%. RESOURCES FOR DEVELOPMENT 71 Quality of Labor Observations by members of the Mission and testimony from employers lead us to conclude'that the quality of Cuban labor is good. Allowing for such factors as climate, health and education, the average Cuban worker is willing to work and able to learn-qualities which are necessary for high levels of production per worker, and, hence, for high standards of living. Unlike such countries as Mexico, the Central American Republics and some South American countries with large Indi#i populations, Cuba has very little purely subsistence agriculture. Rural Cubans of all social levels and races, even in comparatively remote areas, are accustomed to the idea of producing for a market or working for wages. Repair and maintenance work at the ubiquitous sugar mills and, lately, the increasing use of automobiles and tractors, have established some degree of familiarity with machinery throughout the island and have led to a fairly widespread development of mechanical skills. Shortage of Craftsmen Members of the Mission, however, did hear some complaints about a shortage of good craftsmen, especially outside Habana Province. A civic leader regarded this as one of the most serious aspects of the labor situation. He said that the Cubanization law had driven back to Spain many excellent technicians and craftsmen; and that apprenticeship has been made so costly by wage requirements that it no longer pays to train new people. A merchant also remarked on the lack of good craftsmen and the loss of incentive to learn skills, which has been caused by trade union insistence on the same wage for everyone. Obstacles to Improvement From a survey of the educational situation in Cuba (see Chapter 18), it seems obvious that the levels of skill in the Cuban labor force could be considerably improved by a wider and more adequate system of primary education as well as by increased opportunities for vocational preparation. Furthermore, we have the impression that-with notable exceptions- management in Cuba is devoting too little attention to personnel development and training programs. Programs of training for supervisory personnel, in particular, might be expected to pay good dividends.26 The Government could also encourage on-the-job training by allowing the cost of such programs to be charged against earnings in computing tax payments. But the most serious obstacles to raising Cuban productivity and living levels, by using her labor resources more effectively, are the present state of 2s In one case of exceptionally good management-labor relations a significant role seems to have been played by a broad educational program open to all employees-and also by active efforts to Improve the sklls-including the leadership skills-of supervisors. 72 REPORT ON CUBA labor-management relations and the administration of labor law, discussed in Chapter 16. 3. Capital "Heavily Capitalized" "Cuba almost certainly is more heavily capitalized in relation to popu- lation than any other Latin American country, and a fortiori, than any other tropical country.27 This is one of the principal reasons for the relatively high productivity of the Cuban worker and for the relatively high per capita income noted earlier. The largest share of the industrial and agricultural capital is devoted to sugar production, with public utilities and transportation next. A high proportion of this capital represents foreign investment. Approximately 50% of the capital in sugar is foreign owned, a higher percentage in utilities and transport, and there is considerable foreign participation in banking and insurance. Most of the foreign capital is American, with some British, Canadian, Spanish, French and Dutch ownership. In the 161 sugar centrales, in the excellent central highway, in the extensive system of public and private railroads, in the harbor installations, in the cities and their utilities, Cuba has the basis of exceptionally fine equipment for modern economic activity and for further development. This is true even though some of these capital assets-notably roads and railroads (see Chapters 10 and 11)-have suffered seriously from under-maintenance. Installed Capital Under-utilized Cuba's resources of installed capital-like her natural resources and labor resources-are under-utilized. It is an obvious waste for the sugar centrales -with their power plants and other equipment, communications and trans- portation systems and technical personnel-to be idle, except for making repairs and improvements, during almost two-thirds of the year. Similarly, the railroads, ports, and other capital installations are under-utilized most of the time because their activity fluctuates according to the sugar rhythm. Improvement in the average yearly utilization of these capital resources could increase substantially the productivity of capital and labor in Cuba. But whether such improvement is feasible depends, of course, upon finding new types of production with a seasonal rhythm different from that of sugar. Financial Resources Of "fluid" capital-or, rather, the money funds and potential savings which could be drawn upon to create new capital in agriculture, industry and the basic utilities-Cuba also has substantial resources which are not at present being utilized to the full. 27 Henry C. Wall.ch, Monet-ry Prubl-ss of nn Export Economy: Cnbnn Experience 1914-1947, Harvard Economic Studies, Volume 88, Harvard University Press, 1950. RESOURCES FOR DEVELOPMENT 73 Other chapters deal in detail with capital formation in Cuba, the capital market, savings going into investment at home or flowing abroad, domestic and foreign financial resources of banks and individuals, and the financial position of the Government. The general conclusion is that Cuba's economic development is not at present being retarded by a general shortage of savings potentially convert- ible into capital, nor is there immediate prospect for such a shortage. The Basic Problem The problem is to get Cuban money-instead of resting idle or going abroad or going into a narrow range of investments at home-to back a greater amount and variety of constructive new enterprises in Cuba. This problem is analyzed in Chapter 25. We estimate that in 1949 Cubans saved about 219 million pesos (about 12% of gross national products). Of this total they invested some 142 million in Cuban industry, agriculture, and construction. Of the rest, over 40 million went abroad. Another large part went to increase the idle balances of the public. (See Chapter 24.) The Banking System The Cuban banking system is in a strong financial position, both with respect to its domestic and international operations. The recent establishment of the National Bank and the good reputation which it has already acquired, together with the still more recent establish- ment of the Agricultural and Industrial Credit Bank, have further improved domestic financial facilities. Government Finance The Government's financial position was rather unsatisfactory until 1950, and even now a sizeable floating debt-largely the result of long-continued financial mismanagement-remains to be funded. During 1950 there was a great improvement in tax administration and in the handling of public funds. The Government was able to place an internal loan without undue difficulty. The funded public debt amounted to less than 150,000,000 pesos as of September 30, 1950, of which 72,000,000 was external and 77,000,000 internal. The amount required to service the external and internal funded debt is less than 5%o of annual Government revenues. Ninety percent of the external public debt is held by Cubans, and the amount required to service it consti- tutes less than 1% of the annual value of Cuban exports in the last few years. Foreign Exchange Cuba has enjoyed ample foreign exchange reserves and a remunerative dollar market for her main crop in the last few years. 74 REPORT ON CUBA Foreign Capital Foreign corporations which have invested in Cuba took out 53 million pesos of earnings in 1948. Their reinvestments and new foreign investments in Cuba amounted to approximately 34 million pesos. Cuba has exceptionally close relations with the capital market of the United States, through extensive business and personal relationships. This is a resource which should help future development if Cuba can establish the proper conditions to attract new investment capital. 4. Business Initiative, Management, Technology Functions Defined In economic development, business initiative-whether in a man or organ- ization-is necessary to bring together into a productive combination natural resources, capital, labor and management. The man or group with business initiative, called in technical language the "entrepreneur," has a new idea for producing some product or service, has organizing ability, and is willing to take a risk on something new in the hope of profit. In an economy largely built on private enterprise, business initiative or enterprise is the mainspring of progress. The function of management is to plan and administer day-to-day opera- tions. Technology-the knowledge and practices used in getting a job done -is largely the responsibility of management. As we have already noted, improvement of these and of the other organ- izing factors-represented by the institutional and governmental framework -is likely to have the most beneficial and permanent effects in Cuba. A Preference for Commercial Activities There are certain obstacles in Cuba, however, to stimulating economic initiative, which were indicated to the Mission by well-informed Cubans. These are ably expressed in the words of Mr. Wallich: "Cuban businessmen have shown themselves capable of taking advan- tage of their opportunities. Nevertheless, the habits of Cuban entre- preneurs still show the traces of a colonial past and, to that extent, do not greatly aid the development of a more progressive economy. "For centuries, large-scale economic activities except sugar have been commercial, not industrial. Today this predilection for comerrial enterprise, which is characte r ar arl e pansh-born gr_ er imui ocomriloeaintooeneLnxbor troubles, an v the belief in its quic er and sa er returns. "The Cuban investor shows the traditiona pre erence for real estate over the anonymous and intangible participation in a corporation, an attitude justified to some extent even today by the inadequate protec- tion that the law extends to minority stockholders. RESOURCES FOR DEVELOPMENT 75 "The industrialist, conscious of the limitations of his market and accustomed to seeing high profit rates-even if only occasionally-in the speculative sugar industry, often clings to a low-turnover-high- profit philosophy of production, even for reasonably stable lines, which, in turn, keeps prices high and further restricts the market. "Other impediments to business expansion manifest themselves in the reluctance of family enterprises to admit outsiders, in the unwilling- ness of some foreign corporations to plow back their local profits, and in the all-pervasive 'sugar mentality.' "28 Supply of Managers Inadequate In supply and quality, Cuban managerial personnel probably compare favorably with those of other tropical and Latin American countries. But, in both respects, they are inadequate to achieve the higher productivity and higher living levels to which Cuba can legitimately aspire. Educational improvements are the most important means of augmenting the supply of good managers, men with initiative, and technicians. The more Cubans who receive a sound primary and secondary education, the greater the likelihood that sufficient numbers will develop both the spark of initiative and also the talent for capable management which are needed to make the Cuban economy progressive and to keep it productive. In our view, more courses on business administration-not centered exclusively on accountancy, as seems to be the present tendency, but empha- sizing personnel and financial management, marketing, etc.-at the Univer- sities of Habana and of Oriente and other institutions would be a very con- structive step in the interest of the Cuban economy. Improvements in the facilities for vocational and technical education relating to agriculture, .industry, economics, finance, and public administration would be of the highest value in making the organization and use of Cuba's resources more effective. We have already suggested that Cuban businesses should give more atten- tion to on-the-job training programs and that these should be designed not merely to improve labor skills but also the skills of foremen and supervisors and other managerial personnel. Value of Imported Talent Cuba also has exceptional opportunities to benefit from talent which comes from abroad, usually in connection with foreign investments. This applies to enterprise, management, and technical knowledge. Not only the actual operations of this imported talent, but also-and even more important -the demonstrations and training which it provides are extremely valuable to Cuba. In our judgment they do much more to increase Cuban oppor- tunities than they do to compete with Cubans. 28 Wallich, op. czt., Chapter 1. 76 REPORT ON CUBA Strictly from the point of view of Cuba's own best interests, therefore, we believe that Cuba should be very cautious about allowing any measures of a nationalistic sort to impede this import of business and technical talent; and that the laws governing foreign business and technical personnel should be reviewed from this point of view (see Chapters 6 and 9). Technology Not Appreciated A mission of technical experts sent by the United States Government during the War to help to increase Cuban production "was impressed with the need for greater and more organized effort directed toward solving the technical problems which face the several industries." The mission found "a lack of appreciation of what trained engineering services can accomplish, and a lack of understanding of the value of technical research in pointing the way for improvements in processing, new processes, industrial expansion and greater profits." It also observed that industry in Cuba, particularly the sugar industry, suffers "from a lack of properly trained engineers and, paradoxically, from a lack of opportunities for engineers to accomplish all they are capable of. The failure of Cuban industrialists and industrial managers to appreciate and encourage engineers has resulted in stagnation in many plants." A Pittance for Research It appears that the great Cuban sugar industry-with gross sales of well over $500,000,000 a year in recent years and a future clouded with uncer- tainty-has been spending not much more than $50,000 a year on research which might lead to increased efficiency and to the development of new by-products.29 This is about .01% of the industry's gross sales and means that it is lagging far behind in one of the most significant trends of the times: the vigorous pursuit of new methods and products through industrial research. As an example of this trend, a recent survey by the National Association of Manufacturers in the United States indicated that of the nearly 1,000 member companies replying to its questionnaire three-quarters were invest- ing continuously in research and that their annual investment in research amounted to an average of 1.6% of gross sales.30 A study by the National Industrial Conference Board has reported that the median percentage of gross sales spent on research by American industry falls between 1.5% and 2%.31 The need for research is discussed more fully in Chapter 9. 9 See Chapter 43, where attention is also called to the significant achievements of research in a field directly competitive with Coba-sugar beet production. r National Association of Manufacturers, Trends zn Industrzal Research and Patent Practices, Janoary 1948, p. 3. al The Conference Board Business Record. March, 1947, p. 64. RESOURCES FOR DEVELOPMENT 77 No less important than research to develop new techniques, is constant effort to spread the knowledge of the best techniques already known. It should not be forgotten that in Cuba the economic contribution of the small enterprisers and managers, including -farmers and rural businessmen, is extremely important. For this reason we attach great importance (see Chap- ters 5 and 6) to the benefits to be derived from improved agricultural extension work and from adult education generally, as well as from primary, secondary and technical education. All these forms of education are neces- sary to spread the understanding of modern scientific ideas-and their applications in agriculture and industry-among the Cuban people. 5. The Institutional and Governmental Framework Important Functions The productivity of an economy is greatly affected by the institutional framework, including the framework of law and administration provided by government, within which economic activities go forward. Basic utilities like public order, general education, specialized education, a road network, the "rules of the game"-within which individual transac- tions and group-bargaining take place-collection and distribution of impor- tant types of economic information, and representation of Cuba's interests abroad-all these are important economic functions for which Cubans look primarily to their government. Other functions-such as the operation of a banking and credit system, the details of labor-management relations, and research and development in agriculture and industry-in Cuba today are partly the responsibility of government and partly of private and semipublic institutions, such as banks, trade unions, associations of mill owners and of cane growers and so on. The actual day-to-day operations of producing and marketing goods and services are for the most part handled by private enterprise in Cuba, though with a strong admixture of government regulation, or government-assisted self-regulation, as in the very extensive controls over sugar production and marketing exercised by the Sugar Stabilization Institute. The Role of Governmrent In the opinion of the Mission, these "organizing factors" are of the utmost importance to Cuba's economic future. For this reason, many specific recommendations in this connection are offered in this Report. Two general suggestions, however, will be made here concerning the role of government and the policy it should adopt toward the Cuban economy: 78 REPORT ON CUBA 1. Clear Lines Essential We suggest that it is important for the Government to draw as clear a line as possible between those economic matters which it proposes to control or regulate and those which it proposes to leave to private business manage- ment. The Government should be most reluctant to intervene in matters of the second category, except where an extraordinary national interest is involved. For it is important to take as many uncertainties as possible out of the plans of business. It should permit private business to make either profits or losses in accordance with the skill, foresight and luck of the management. Profits are the necessary incentive to good business judgment and efficiency, while losses are needed to weed out the inefficient. Measures to encourage an active, expanding economy, with vigorous com- petition, are the best means to ensure that exorbitant profits will not long persist but will be passed along to other sectors of the economy, including consumers and wage earners. With such measures, too, new and better employment opportunities will grow and absorb workers displaced by the failure of inefficient firms. 2. Increased Productivity The Government should recognize-and emphasize from now on-that better standards of living for the Cuban people mainly depend on increasing production and on a higher productivity per worker. Social legislation and wage-regulations adopted since the revolution of 1933 have done much for the Cuban worker. But further gains, if they are to be substantial and permanent, must come not so much from further re- distribution of the national income as from further increases in its total amount; in other words, from an increase in national productivity. The Government can- do much to encourage and assist the necessary increase in productive efficiency. For example, such measures as the estab- lishment of the National Bank and the new Agricultural and Industrial Credit Bank and the recent improvements in financial administration are very help- ful in this connection. Any improvements that can be introduced in pablic education, public administration, road-building, agricultural extension serv- ices, and many other fields of governmental responsibility will help to increase the national capacity to produce. Such measures are in keeping with a policy of economic development and in the best interests of the Cuban people as a whole. All the recommendations and technical suggestions offered throughout this Report are directed towards the objective of greater productivity, for productivity is the key to higher living standards for the Cuban people. BOOK III Production Chapter 5. AGRICULTURE 6. INDUSTRY 7. PROBLEMS OF THE SUGAR INDUSTRY 8. MINERAL RESOURCES 9. APPLIED RESEARCH CHAPTER 5 Agriculture I. INTRODUCTION Room for Development and Improvement Agriculture is the basic industry of Cuba, and certainly the natural one. The land is fertile, the climate favorable and markets are available. Except for localized damage by an occasional hurricane, a general crop failure is practically unknown in Cuba. It is not surprising, then, that development of the nation's natural resources to date has centered largely upon agriculture. This does not mean that the agricultural resources have even approached full development. Predominance of sugar cane has unbalanced production almost to the point of monoculture-not because there is too much cane, but because there is not enough of other crops. In all phases of Cuban agri- culture there is much room for technical improvement. Nor is the available land yet fully utilized. Fundamentally, the growth of Cuba's industry, transport and many other activities must hinge upon still further agricultural development and diversi- fication. Thus, in the words of a recent observer,' "Much depends upon the degree of imagination which the Cuban people can bring to the task of finding and developing new products from their natural resources." II. RESOURCES 1. Climate Temperature Although Cuba lies just south of the Tropic of Cancer, the tempering effects upon the narrow island of the prevailing winds and of the ocean give it a semitropical climate, suitable for most tropical and some temperate crops. Temperature fluctuations are slight; the extreme range is perhaps from a low of 450 F. in January or February to almost 1000 in summer,2 but such conditions are rare. Over a recorded 10-year period the average annual mean temperature was found to be 75.8° F., with average seasonal lows and highs ranging from 67.8° to 85.60 (Table 11). Rainfall Rainfall is normally thought to be sufficient for agricultural needs, al- though seasonal. Average precipitation in Cuba in a 24-year period has been given2 as 54.9 inches per year, distributed by months as shown in Table 12. 1 Nelson, op. cit. 2 Minneman, op. ca. This publication has been drawn upon freely to supplement the basic material in the agricultural portions of the present report, and the reader is referred to it for greater detail if desired. 81 82 REPORT ON CUBA The rainy season usually extends from about the middle of May through October, the heaviest rainfall coming in June and September. Approximately three fourths of the annual total falls in the six summer months of the rainy season. TABLE 11 AVERAGE ANNUAL AND SEASONAL TEMPERATURES OF CUBA Temperatures a High LoW Mean Degrees F. Degrees F. Degrees F. Annual average 80.2 71.4 75.8 Spring . , 82.8 68.2 75.8 Summer 85.6 73.0 79.3 Autumn 85.3 67.8 76.6 Winter 82.4 66.0 74.2 a Based on recordings of a 10-year period. SOURCE: Official recordings. TABLE 12 CUBA: AVERAGE PLAINFALL BY MONTBs Rainfall Month (inches) January . 1.9 February . 1.6 March 2.0 April 2.8 May 6.9 June 8.3 July 5.6 August 5.7 September 7.8 October 7.0 November 3.3 December 2.0 Annual 54.9 SOUcE: P. G. Misccan, The Agr=c.Zt-re of Cab., Foreign Bulletin No. 2, 1942, p. 9. The rainfall is fairly well distributed throughout the island (Table 13) varying from about 35-75 inches from place to place. It tends to be heavier on the north coast than on the south, and still heavier in the interior. The western end of the island usually receives somewhat more than the eastern end. Cuba lies in a hurricane belt, and must be alerted frequently. Those hurricanes which strike the island are occasionally severe, and since they occur from July to October they may damage crops. Fortunately, however, a great many of them pass harmlessly to the north or south of Cuba. TABLE 13 INCHES OF RAINFALL IN CUBA, BY PROVINCES, 1946-49 Tutal Year and Provaice Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. for year 1949 Pinar del Rio. 0.03 0.36 1.03 2.85 5.60 10.23 5.18 5.11 11.12 3.89 3.66 1.28 50.34 Habana 0.07 0.28 1.32 4.01 3.47 10.92 6.07 8.51 7.32 4.29 1.25 1.84 49.35 Matanzas 0.00 0.21 0.93 4.94 5.68 11.19 6.80 7.97 7.97 4.74 1.85 0.65 52.93 Las Villas 0.19 0.09 1.01 3.55 6.79 10.79 6.77 6.45 6.95 4.79 3.69 1.15 52.22 Camaguey 0.26 0.35 1.35 2.39 9.62 10.11 5.80 6.39 6.78 5.22 2.92 1.60 52.79 Oriente 0.15 0.20 2.59 2.01 9.63 4.31 3.93 6.10 5.41 5.39 4.94 1.90 46.56 Average 0.15 0.23 1.52 3.02 7.58 8.85 5.58 6.61 6.85 4.90 3.34 1.45 50.08 1948 Pinar del Rio 3.01 0.16 1.75 3.01 6.80 5.21 6.51 10.53 11.17 7.19 1.65 2.21 59.20 Habana 2.35 0.06 0.39 4.34 6.28 7.74 7.92 7.71 12.02 9.37 0.88 1.73 60.79 Matanzas 2.03 0.01 0.37 3.20 7.74 8.50 9.70 8.16 11.66 10.68 0.90 0.35 63.30 Las Villas 1.94 0.14 0.25 4.79 9.12 8.06 8.87 7.76 19.91 10.05 1.57 0.76 73.22 Camaguey 1.37 0.14 0.40 4.53 12.61 7.16 7.54 7.35 15.45 9.56 1.56 0.44 68.11 Oriente 2.16 0.61 0.52 5.38 7.70 11.29 4.41 4.20 9.66 5.93 2.03 0.90 54.79 Average 1.99 0.24 0.48 4.54 8.93 8.59 7.21 6.90 13.69 8.65 1.54 0.86 63.62 1947 Pinar del Rio 1.03 1.29 2.60 1.91 9.49 12.60 8.22 4.67 8.07 11.57 5.32 1.43 68.20 Habana 0.89 1.14 4.13 3.64 8.45 10.09 6.82 8.22 11.51 9.75 5.16 0.50 70.30 Matanzas 0.58 1.27 2.84 4.13 8.03 10.91 9.60 8.62 11.75 7.87 4.00 1.12 70.72 Las Villas . 1.01 2.75 1.61 3.50 7.44 15.55 8.51 7.23 17.53 6.29 3.53 0.61 75.56 Camaguey 0.85 1.73 2.42 2.43 7.46 12.30 6.93 5.96 12.34 5.13 3.47 0.41 61.43 Oriente 1.37 2.16 1.09 2.72 4.88 5.92 4.07 3.99 8.68 4.55 1.50 1.61 42.54 Average 1.01 1.92 2.12 3.04 7.05 10.88 6.90 6.18 12.03 6.41 3.30 0.95 61.79 1946 Pinar del Rio 0.73 1.44 0.76 1.34 6.03 8.98 3.88 7.40 6.65 7.00 1.22 3.14 48.57 Habana 0.59 1.88 1.55 3.60 6.99 7.85 5.37 6.89 6.98 5.33 2.05 2.72 51.80 Matanzas 0.47 1.36 1.88 2.00 13.41 10.22 7.96 9.34 9.12 4.65 0.97 4.06 65.44 Las Villas 0.94 1.38 1.50 1.75 9.95 9.18 6.01 8.45 8.65 8.50 1.50 4.57 62.38 Camaguey 1.26 0.53 2.54 2.05 10.68 8.03 4.87 6.87 6.47 9.26 1.09 3.15 56.80 Oriente 1.09 0.73 2.18 3.44 7.87 5.59 2.87 3.75 5.59 4.75 4.69 1.82 44.37 Average 0.95 1.06 1.92 2.47 9.42 7.92 4.94 6.70 7.09 6.76 2.24 3.16 54.63 SouRCE. Asoczaczon Nactonal de Hacendados de Cuba. TABLE 14 INCHES OF RAINFALL AT SPECIFIED LOCATIONS BY MONTIIS IN ORIENTE PROVINCE, CUBA, 1949 Total Location Jan. Feb. Mar. Apr. May June Jutly Aug. Sept. Oct. Nov. Dec. for year Altagracia 0.00 0.43 2.63 1.19 6.45 5.75 3.80 7.15 10.50 3.35 6.10 2.30 49.65 Alto Cedro 0.00 0.00 2.65 2.00 9.65 5.55 5.45 5.40 3.00 2.15 4.55 3.20 43.60 Baguanos 0.08 0.33 0.52 1.57 9.01 2.02 2.31 4.19 3.17 2.60 4.89 2.52 33.21 Baltony 0.00 0.10 4.03 3.02 11.81 4.41 4.00 5.67 3.98 7.71 6.16 1.13 52.02 Borjita 0.00 0.27 6.92 2.93 10.70 4.28 6.20 10.05 4.72 6.84 2.91 1.16 56.98 Boston 1.14 0.82 1.11 0.43 12.92 0.66 1.96 3.18 3.18 4.00 9.53 5.22 44.15 Cacocum 0.07 0,00 2.30 3.15 15.16 2.46 6.76 4.74 2.80 2.85 2.92 1.91 45.12 Cape Cruz 0.04 0.27 1.20 1.05 8.09 2.47 5.37 7.23 5.60 4.76 5.81 0.30 42.19 Cupey 0.00 0.00 3.80 0.00 10.75 9.35 7.65 1.65 8.75 2.50 1.65 2.50 48.60 Estrada Palma 0.00 0.00 6.80 3.00 17.06 11.70 7.85 9.29 8.74 5.79 7.76 0.00 77.99 Hatillo 0.00 0.00 3.12 0.30 4.65 2.10 2.20 9.42 6.74 5.23 3.27 0.00 37.03 Isabel "B" 0.00 0.20 3.00 2.52 8.95 5.91 5.06 7.13 6.29 3.03 3.86 1.93 47.88 Isabel "G" 0.00 0.00 3.35 3.27 9.21 3.60 1.98 5.17 6.68 10.69 4.29 0.54 48.78 Jobabo . 0.00 0.00 0.25 4.20 7.30 10.35 3.20 6.15 6.80 2.40 5.15 1.25 47.05 Los Canos 0.00 0.00 0.75 0.52 4.25 1.58 1.26 4.97 3.91 10.82 2.42 1.37 31.85 Manati 0.38 0.09 1.00 1.97 8.84 8.31 4.19 6.35 5.98 1.49 10.03 3.42 52.05 Miranda 0.07 0.00 2.25 2.85 11.50 5.91 5.86 7.89 6.13 5.03 3.60 2.29 53.38 Niguero 0.00 0.09 2.67 3.03 12.62 3.23 4.91 6.17 6.31 7.64 4.82 1.97 53.46 Palma 0.00 0.15 3.42 0.65 9.60 3.24 4.52 10.55 10.11 3.39 3.49 0.75 49.87 Preston 0.76 0.57 2.55 0.91 10.19 1.70 2.44 4.34 3.31 5.31 7.45 5.51 45.04 Rio Canto 0.00 0.00 2.09 6.30 18.18 10.47 4.33 7.20 7.13 8.74 0.00 0.00 64.44 Romalie 0.00 0.00 1.41 2.80 7.90 2.83 1.20 6.75 6.95 9.30 3.89 0.37 43.40 Salvador 0.00 0.00 5.02 2.00 7.95 4.63 6.70 6.38 3.00 3.75 1.50 1.50 42.43 San Antonio 0.00 0.00 0.79 3.33 9.01 2.82 2.12 4.38 6.47 11.62 3.73 0.63 44.90 San German 0.01 0.03 2.03 1.60 10.61 2.73 4.56 5.36 3.32 0.97 6.79 1.17 39.18 Santa Ana 0.00 0.87 4.70 1.86 10.79 3.69 4.25 9.62 5.07 2.82 2.70 0.53 46.90 Santa Cecilia 0.00 0.00 0.78 0.29 2.31 3.52 2.32 4.65 4.06 10.07 2.62 0.76 31.38 Santa Lucia 0.25 0.38 1.04 0.94 7.02 1.67 1.78 3.46 2.73 3.09 12.64 4.28 39.28 Soledad 0.00 0.00 4.05 3.95 5.00 3.38 3.55 6.38 4.79 7.55 6.09 1.37 46.11 Tacajo 0.50 1.23 0.49 1.03 15.50 1.85 3.31 3.61 3.64 4.47 5.61 3.11 44.35 Tanamo 1.38 0.56 2.79 0.19 9.03 1.40 1.08 2.12 2.53 7.18 9.89 6.78 44.93 Union 0.00 0.06 3.20 1.60 6.04 4.13 3.71 8.47 6.78 5.32 1.79 1.07 42.17 Average 0.15 0.20 2.59 2.01 9.63 4.31 3.93 6.10 5.41 5.39 4.94 1.90 46.56 SOURCE: A4eczaczin Nacional de Hacendados de Cuba. AGRICULTURE 85 2. Land SOILS3 Wide Variations The island of Cuba exhibits wide variations in soil types, with friable clays and sandy clays predominating. Comparatively speaking, the soils appear to be fairly fertile, although in the absence of much-needed analytical studies adequate support for such a generalization is lacking. Under good farm management, yields of suitable crops have shown satisfactory volume. Experi- ments, however, in artificial fertilization demonstrate sizeable increases, and true yields in terms of nutritive value (ofteii influenced by trace elements) have yet to be determined. The Clay Soils In the middle and eastern part of the island the soils are distinguished by their high content of clay, of both the extremely friable and extremely plastic kinds. Within this region are vast areas whose soils have a clay content of more than 75% and in some cases over 90%. It may be noted, for com- parison, that soils of the United States rarely exceed 65% in clay content. One of the most productive soil types found in this region is the Matanzas red clay, the characteristic color of which is caused by its relatively high content of iron oxide. In occurrence it is generally deep, in places exceeding 25 feet, and underlain with limestone rock. This remarkable soil type, despite its very high clay content, may be cultivated soon after heavy rains because it is so permeable that it absorbs and rapidly disperses water. Another soil type of this section of Cuba has quite different characteristics. This is the reddish-brown and yellowish clay which is found primarily in the eastern part of the island. An extremely plastic clay, it is sticky when wet, and upon drying shrinks, cracks, and becomes very hard. In general, this soil is similar to the Matanzas red clay only in that it is a deep clay soil with underlying limestone rock. Other Soils Between these extremes of friable and non-friable soils are found others of black and gray colors which have intermediate physical characteristics. Some have large proportions of organic matter, while others contain salts in appreciable quantities. Because of poor drainage, caused by impermeable clay subsoils, some of them are difficult to work during the rainy season. a For addiional technical description of Cuban sO-'s, the reader is referred to the following publications from which are taken some of the data condensed here: Bennett, Hugh H., and Alhson, Robert V., The Soils of Cuba, Tropical Plant Research Foundation, Washlngton, D. C., 1928. Minneman, op. czt. 86 REPORT ON CUBA Of the many types of sandy soil, the most important are those of the savannas in central Cuba. The sandy soils of western Cuba and of the Isle of Pines contain a high proportion of quartz sand and relatively little clay. Usually the sandy soils are well drained but are deficient in humus and lime, and are lower in soil fertility than are the clay soils. In the swamp regions of the low coastal areas and small islands the soils are generally water-soaked clays, and frequently contain large areas of peat, muck, and marl. The mountainous regions, particularly in eastern and western Cuba, contain soils which tend to be very thin and of a stony nature. Often these soils are unsuited for cultivation except in the alluvial accumulations of the narrow valleys. LAND UTILIZATION Areas Under Cultivation Cuba contains a total land area of 11,452,400 hectares, of which a 1945 analysis indicated 79.3% or 9,077,100 hectares included in farms distributed as shown in Table 15. The proportion of land in farms varied from a high of 95%o of the total land area in Las Villas Province to a low of 70.9% in Oriente. Of this total farm area, 1,970,404 hectares or 21.7% was under cultivation in 1945. Matanzas Province reported the greatest proportion of cultivated land-32%-while in Pinar del Rio the figure was only 15.2%. Total pasture land, including both natural and seeded pastures, accounted for 3,897,217 hectares or 42.9% of the farm area. This figure may be higher than warranted, however, because of the practice of listing as "pasture" any land which was idle or fallow. All of the provinces reported a high percentage of pastures, varying from 48% in Camaguey to 34.5% in Habana. The three eastern provinces of Cuba, Las Villas, Camaguey and Oriente contain over three fourths of the grazing land. Wooded farm land represents 1,265,698 hectares or 13.9% of the total area. This area includes all farm woodland without any consideration of age, size or condition of timber stands. In the Habana Province the timber area appears to account for nearly one-quarter of the farm area, but 85.4% of its wooded area is on the Isle of Pines. Unproductive and Idle Land Maribu (Dichrostachys nutans) has now covered 268,152 hectares or 3% of the farm area of Cuba. This plant is causing much trouble in the pasture lands of certain areas, where it grows into dense thickets which shade out the grass. The plant is reported throughout all the provinces, but Pinar del Rio and Las Villas are more heavily infested. Cuban farmers are hoping for an economical method by which this pest can be brought under control. AGRICULTURE 87 TABLE 15 CUBAN LAND IN FARMS, BY PROVINCES, 1945 Land n Farms Total Average land Culti- Other Number size of Province area Total vated Pasture Woods Marbi uses a Idle b of farms farms per- per. per- per- per. per. hec- hectares hectares cent cent cent cent cent cent number tares Pinar del Rio 1,350,000 968,853 15.2 44.5 20.3 4.8 14.9 0.3 23,030 42.1 Habana 822,100 659,225 23.5 34.5 22.8 1.6 17.3 0.3 14,272 46.2 Matanzas 844,400 654,314 32.0 46.5 5.7 1.7 13.6 0.5 12,486 52.4 Las Villas 2,141,100 2,033,191 20.4 43.9 10.4 4.1 20.7 0.5 40,182 50.6 Camaguey 2,634,600 2,164,875 16.3 48.1 11.0 3.2 21.2 0.2 18,541 116.8 Oriente 3,660,200 2,596,628 26.6 38.5 16.7 1.8 16.3 0.1 51,447 50.5 TOTAL 11,452.400 9,077,086 21.7 42.9 13.9 3.0 18.2 0.3 159,958 56.7 a Includes roads, buildings, and unproductive land. b Farms not cultivated. SOURCE: Cuban Agricultural Census, 1946. Of the total land in farms, 18.2% or 1,650,405 hectares represent roads, ditches, buildings and unproductive land. While much of this is considered wasteland, the Mission believes that a large proportion could become pro. ductive if put to its best economic use. Land which the census classified as idle accounted for 25,210 hectares or 0.3% of the farm area. This represents land which was not being used for agricultural purposes at the time the census was taken and which had been idle for the previous year. It is estimated that, of the total land in farms in Cuba, nearly 60% is tillable. At the present time slightly over one third of this is under cultivation. SIZE OF FARMS Cuba, by official records, contained 159,958 farms in 1945, with an average individual farm area of 56.7 hectares (Table 16). The number of farms varied from 51,447 in Oriente Province to 12,486 in Matanzas. Average size per farm ranged from 116.8 hectares in Camaguey to 42.1 hectares in Pinar del Rio. Habana Province reported 14,272 farms with an average area of 46.2 hectares, but if the Isle of Pines is excluded this average drops to 29.7 hectares since the average size of farm found on the Isle of Pines is 767.4 hectares. Of the total number of farms, over one third were smaller than 10 hectares in size and approximately 70% had less than 25 hectares. About 45% had from 10 to 49.9 hectares. Only about 1.5% of the farms were of 500 hectares or more. 88 REPORT ON CUBA Of the total farm area, on the other hand, 47% was included in farms of 500 hectares or more. About 24%o of the farm land was in farms of 100 to 499.9 hectares, 18% in farms of 25 to 99.9 hectares, and 11% in farms less than 25 hectares. TABLE 16 CUBAN FARMS BY SIZE GROUPS, 1945 Number of Percentage Total area Percentage Size Group farms of farms farms of area hectares number percent 1,000 hectares percent 0.4 and less 1,148 0.7 0.3 a 0.5- 0.9 1,877 1.2 1.4 a 1.0- 4.9 29,170 18.2 84.4 0.9 5.0- 9.9 30,305 19.0 210.7 2.3 10.0- 24.9 48,778 30.5 725.1 8.0 25.0- 49.9 23,901 15.0 789.7 8.7 50.0- 74.9 8,157 5.1 488.6 5.4 75.0- 99.9 3,853 2.4 329.7 3.6 100.0- 499.9 10,433 6.5 2,193.6 24.1 500.0- 999.9 1,442 0.9 992.5 10.9 1000.0-4999.0 780 0.5 1,443.5 16.0 5000.0 and over 114 a 1,817.6 20.1 TOTAL 159,958 100.0 9,077.1 100.0 a Less than 0.1 percent. Souacz: Compiled from Cuban Agricultural Census, 1946. FARM CROP SPECIALIZATION One-crop Tendency The agriculture of Cuba is characterized by the great extent to which individual farms are dedicated to one crop. This is seen not only in the case of sugar growers, but equally in such examples as the tobacco farms, cattle ranches and coffee plantations. The principal crop-sugar cane-was grown on 26.6%7 of all the farms in 1945; but, as shown in Table 17, for only 18.2% of the total number of farms was it the major source of income. Cane production utilized about 56% of the cultivated farm acreage, which was distributed throughout the island but somewhat concentrated in the central and eastern regions. Tobacco Tobacco, the second most important crop, was reported grown on 21.5% of the farms but served as the primary source of income on 14.2%. Only 3.4% of the cultivated farm area is planted in tobacco. AGRICULTURE 89 4~~~~~~~~~~~~~~~~~~~~~~~ Cattle 4 The large cattle ranches are more heavily concentrated in the eastern re-ion, especially in Camaguey and Oriente Provinces. Although approxi- mately 75% of the farms possessed some cattle in 1945, only 18% realized the major shares of their farm income from livestock and livestock products. The high percentage of farms reporting cattle is understandable, since oxen serve as the work animals on most of the small farms. TABLE 17 CUBAN FARMS CLASSIFIED ACCORDING TO PRINCIPAL SOURCE OF INCOME, 1945 Proportion of Proportion Principal source income from Number of of total of farm income Total income principal crop farms farms Sugar cane $153,345,413 86.6% 29,121 18.2% Livestock and livestock products 68.220,720 82.0 28,836 18.0 Tobacco 40,755,323 75.9 22,750 14.2 Cereal and legume crops 21,272,941 63.8 26,828 16.8 Vegetables 16,486,010 61.4 16,969 10.6 Coffee 10,472,608 75.6 9.331 5.8 Fruit (tree) 4,137,084 70.6 4,758 3.0 Forest products 1,608,372 79.3 857 0.6 Other crops a 15,386,771 73.9 11,394 7.1 No income 9,114 5.7 Total $331,885,242 - % 159,958 100.0% a Includes cocoa, henequen, peanuts, melons, pineapples, bananas and plantains. SOIRCE: Compiled from Cuban Agricultural Census, 1946. Cereals and Legumes Farms reporting cereals and legume crops as the principal source of income represented 16.8%o of the farms. Corn production is widely dis- tributed throughout Cuba, as much of the crop is produced on small plots for home consumption; Oriente Province produces about 75% of the com- mercial corn crop. Rice was grown on 18.4% of the farms in 1945, but it accounted for only about 3% of the cultivated area. Moreover, the areas cultivated aver- aged only about five acres per farm. There are relatively few Cuban farms that produce rice as the principal cash crop. Almost 50% of the rice pro- duction is in the southern parts of Matanzas and Las Villas Provinces, although Habana, Pinar del Rio, and Oriente also contain important pro- ductive regions. 4 This subject is discussed in detail in Chapter 45, Livestock Mcat and Dairy Products. 90 REPORT ON CUBA Vegetables Vegetables are grown on a commercial basis chiefly in central and western Cuba, especially in Las Villas, Habana, Pinar del Rio, and certain areas of Matanzas Province. Of the total farms of Cuba, 10.6% reported that they derived their principal source of income from vegetables. The most important of these crops are tomatoes, lima beans, eggplant, okra, cucumbers, sweet potatoes, yams, malanga and onions. Some cabbage, lettuce and potatoes also are produced. Coffee Coffee is grown almost entirely in the mountainous regions of Oriente Province, although some is produced in the southern part of Las Villas near Cienfuegos and a little in Pinar del Rio Province. Coffee is grown on 11.4%o of Cuban farms but is the principal cash crop for only 5.8% and accounts for only 4.5,% of the cultivated farm area. FARM OWNERSHIP AND OPERATION Degree of Concentration According to the 1946 census, about 30% of the total number of farms representing 32%o of the farm area are owner-operated (see Table 18), while about 6%o of the farms, representing one fourth of the farm area, are run by hired farm administrators. Over half the farmers rent their farms, on either a cash-rent or share-crop basis, but less than 40% of the farm area is accounted for by this group. Finally, some 9% of the farms and about 3%7 of the farm area are held by squatters who, without legal title to the land, have taken possession of it irrespective of owne,ship. The degree of concentration of land ownership is most clearly revealed by the fact that farms of less than 25 hectares constitute 70% of all farm units but occupy only 11% of the total area, while the 894 farm units with holdings of more than 1,000 hectares occupy 36% of the entire farm land. Average Size The average sizes of farms handled by various types of farm operators is as follows: administrators. 316 hoctares; owners, 60.6 hectares; renters, 58.9 hectares; sub-renters, 30.8 hectares; sharecroppers, 16.7; squatters, 17.8 hectares; and other types of farm operators, 35.9 hectares. The average size of farm for all types of operators is 56.7 hectares. Ownier-operated farms cultivate only 16.2% of their acreage, with 50.1% in pasture. The farms operated by administrators contain 43.7% pasture land and cultivate only 14.9% of the farm acreage. Sharecroppers, renters, and sub-renters, on the other hand, cultivate a high proportion of their farm acreages (40.7%, 28.3%, and 36.8%, respectively), and this group contains AGRICULTURE 91 TABLE 18 TYPES OF FARM OPERATORS IN CUBA, 1945 Farms Total Area Type of Operator Number Percent Hectares Percent Owners 48,792 30.5 2,958,694.5 32.4, Administrators 7,342 5.8 2.320,444.7 25.6 Renters 46,048 28.8 2,713,929.7 30.0 Sub-renters 6,987 4.4 215,215.5 2.4 Sharecroppers 33,064 20.7 552,078.9 6.1 Squatters 13,718 8.6 244,588.8 2.7 Other 2,007 1.2 72,134.2 0.8 Total 159,958 100.0 9,077,086.3 100.0 SouucE: Compiled from Cuban Agricultural Census, 1946. the smallest farm woodland acreages. Farms operated by squatters contain 31.22% woodland, while 21.1% of their acreage is under cultivation. The type of ownership is far from uniform throughout the island. In the tobacco growing areas of the province of Pinar del Rio, more than half the farm units are operated by sharecroppers. In Oriente Province more than a fifth of farms are run by squatters. Large owner-operators and managers predominate in the cattle areas of Camaguey, while cash tenancy is most common in Habana, Matanzas and Las Villas Provinces. TRENDS IN LAND TENURE Concentration of Ownership Even a cursory examination of the census information indicates that concentration of land ownership is great and that tenancy, while less prevalent than in many other areas of Latin America, is high by comparison with Western Europe and parts of the United States. The problem of the best use and distribution of land has occupied Cuban attention for many years. The relatively low percentage of owner-operators -less than one-third of all farm units-is the result of a long and complex historical process, in which Nelson5 distinguishes four clear phases follow- ing the breakup of the haciendas comuneras6 in the Eighteenth Century. (1) The expansion of sugar production through multiplication of the number of small mills, 1790-1870. (2) The rise of the large landed sugar estate, 1870-1895. (3) The large landholding system in full flower, 1900-1925, transform- ing Cuba into an agricultural wage economy under industrial management. GNelson, op. cit. 6A form of communS property. 92 REPORT ON CUBA (4) The stagnation of the sugar industry and restriction of the large estates from 1933 to thedpresent time. Prior to the rise of the big sugar estates, there was a system of land tenure in which the farms were largely owner-operated, and the farmer could sell his cane on a competitive basis to the mill that offered the highest price. 'With the advent of the bigger and more efficient sugar mills, the surround- ing land was collected into large parcels. Ownership came to rest in the hands of relatively few companies and individuals, many of them foreign. Increasingly, farm owner-operators sold or otherwise lost title to the land and "became tied by a triple bond to the mill: they were dependent upon it for land to rent, for the milling of the cane and for credit."7 The great sugar depression (1925-1941) halted and reversed the growth of sugar estates. This, in part, was a result of various government measures, of which the Sugar Stabilization Law and certain provisions of the 1940 Constitution are perhaps of most significance. The Colonos Under one provision of the Sugar Stabilization Law, a colono cannot be evicted from rented land so long as he continues to produce his quota of cane. Today, consequently, the Cuban tenant colono enjoys many rights of land tenure normally associated only with actual ownership, but without most of the obligations that usually go with it. Nevertheless, the system does not seem to inspire any greater care or long-term improvement of the land than do other forms of tenancy. Recent studies indicate that in Cuba, as in other parts of the world, real ownership leads to more efficient farm practice and to a higher standard of living than is achieved by any other type of land operation. The Big Estates As for the fate of the big sugar estate itself, the Constitution of 1940 contains provisions which-if fully implemented-would prescribe the maxi- mum amount of land that each person or entity can have. It also calls for measures tending to limit foreign ownership of land, and favors its restoration to Cubans. At the time when the Sugar Stabilization Law was enacted and the Con- stitution approved, the Cuban sugar industry was still in the throes of a long depression. Popular emphasis was placed upon stopping the further con- centration of land-ownership, stabilizing the position of the various groups of sugar producers, and limiting the ownership of land by foreign corporations. The question of whether the various land-distribution schlemes were econom- ically desirable did not receive sufficient factual study. I See footnote No. 3. AGRICULTURE 93 Importance of Economic Aspects While these economic aspects are not necessarily the decisive element in arriving at an intelligent land policy for Cuba, they deserve heavy emphasis if the country is to develop and diversify. They seem to call for much greater recognition of the following facts: (1) Only with optimum-scale units of production can the advantages of of modern farming techniques be gained to the fullest extent. The optimum size of farm varies from medium to large (seldom very small) depending upon the crops selected. (2) Actually, excessive land partition raises as many problems as does excessive concentration, because it may lead to a drop in national production. If simple subdivision of the land were the solution, Haiti would presumably be the leading Caribbean cduntry in per capita income at this time. (3) Any change in the Cuban land ownership pattern must fail in its objective unless accompanied by improvement in the educational level and technical competence of farmers, the marketing and credit facili- ties available to them, and the degree of cooperative action possible among, them. Further Study Needed In view of these considerations, the Mission does not propose specific land- distribution measures at this time. In fact, it urges caution and an adequate objective, factual study before such measures are contemplated. While it is clear that an increase in the number of owner-operated farms is desirable, it would indeed be short-sighted not to learn from the serious mistakes already made in some other countries and even at home.8 There is also a continuing need to study methods for putting into use idle lands which are now held unproductively in some of the sugar and cattle regions of the island. In this it should be kept in mind that Cuba's loss through idle land is measured by the potentials of the land and is not related to nationality of ownership. The Mission believes that the new Agricultural and Industrial Credit Bank, in collaboration with the National Bank, can for the first time examine these problems objectively. Problem of Squatters The Cuban Government is at present considering a proposal under which it would buy land now occupied by squatters-when the legal owners are 8 Aluch can be learned from the mistakes and lack of follow-through to be seen in the Cuban Govern. nnent's land distribution project at "Ventab de Casanova" in Oriente Province. 94 REPORT ON CUBA willing to sell-and would grant full title to those squatters who prove their agricultural competence over a five-year period. The Mission believes that, with the addition of three provisions, this pro- posal has merit as a first step in solving the potentially serious problem of squatters throughout the island. First, in order to free the program from undue political pressure, it is suggested that its supervision be placed under the Agricultural and Industrial Credit Bank. Second, it is felt that the squatters should in no case be given the land as an outright gift, but should pay a moderate annual sum toward its purchase, over a period of years, at some predetermined price. Third, the squatters should be assisted to learn more efficient practices. I1. PROBLEMS 1. Diversification Need Acute The Republic has long been awake to the need for a more balanced agri- cultural production. Periodically the problem is accentuated by an unexpected turn of events in sugar, wartime shortages of other products, hindrance to specific development programs, and the rest of the maladies to which a nation is inevitably subject when its eggs are all-or mainly-in one basket. The word diversification, if not the act, has been popular in Cuba for three decades. While some progress has been achieved, the situation is still acute. Indeed, there have been recent periods of sugar prosperity in which Cuban agricul- tural diversification actually appeared to regress, as happened during World War II-despite general shortages which should have encouraged its progress. It will be valuable, therefore, to examine the reasons why neither the normal economic pressures, nor even peremptory legislative orders, have succeeded in bringing about crop diversification with the speed desired. Ten Impediments The Mission observes ten major factors in the Cuban scene the influence of which is contrary to the avowed goal of a more balanced agricultural production: (1) History Cuba grew rich as the sugar plantation for the world-at least until altered world conditions revealed that this could not last forever. And again, in its 1939-1948 recovery, by increasing per capita real income no less than one-third, sugar showed spectacularly what it could do. Through such processes, attitudes of mind, as well as acres of sugar cane, became rooted in Cuba. Changes will take a long time. AGRICULTURE 95 (2) Capital For historical reasons the large landowners today, and those with sufficient capital to apply more modern agricultural techniques, are for the most part already engaged in sugar production. Cultivation of other crops is thus left to those with the most difficult capital problems. (3) Technology For historical reasons also, the agricultural knowledge and tech- nology most readily available in Cuba today are those dealing with cane cultivation and sugar production. And the work of Cuban Governments to disseminate practical technical information on the growing of other cropswhas been, at best, a token effort. (4) Ease It is almost easier to grow sugar in Cuba than not to. Land suitable for its cultivation is abundant. Once planted, it continues to yield gratifying harvests for years. Compared with most other crops it requires little work-at least under the Cuban extensive-cultivation practices. (5) Credit Broadly speaking, up to the present time satisfactory agricultural credit in Cuba is available only for sugar and, to a lesser extent, tobacco. (6) Roads Lack of farm-to-market roads definitely hinders the development of most crops; but not sugar, which has-among other facilities- its own private railroad network connected with the public rail system and the ports. (7) Marketing Cuban marketing facilities-including warehouses, specialized freight and shipping facilities, purchasing intermediaries and both domestic and foreign bulk marketing mechanisms-have been built up for sugar and little else. Sugar growers are fairly well protected in disposing of their product, while growers of many other crops face a more disorganized market and abuses by unregulated intermediaries against whom they are powerless. (8) Price Uncertainties Sugar prices vary, to be sure, but large-scale international pur- chases and agreements exert a stabilizing influence. In most other Cuban crops there is a much greater gamble on prices, even from day to day, except where regulation holds them at a permanent low. 96 REPORT ON CUBA (9) Governmental Controls Since the bulk of Cuban sugar is sold abroad, the government affords every possible assistance in getting the best possible price for it consistent with harmonious international relationships. For manv other agricultural products government action is in the opposite direc- tion, with the purpose of holding down the cost of living. Ceiling prices and other controls indirectly favor unscrupulous intermediaries, who are thus given the weapons to beat down the farmer's price. Similarly, the low ceiling prices remove all incentive for better quality in non-sugar products, which in turn lowers their market acceptance in favor of foreign sources. (10) Freight Rates Discriminatory freight rates have favored sugar, at least until recently. Effect of Government Policy Experience elsewhere demonstrates that crop diversification can take place at a reasonable rate despite a few of these factors, but not against the com- bined opposition of all ten of them. Inconsistent government policy, apparently often designed solely to appease labor, plays an important part in thwarting the government's own efforts toward diversification. For example, Law 9 of 1942 obliged sugar centrales to plant subsidiary crops such as corn, beans and other basic foods (known, ironically, as frutas menores). Had the scheme worked, it would have put the cultivation of at least a part of the non-sugar crops in the hands of those best equipped financially to do so. But, by other legislation, these same centrales were required to pay sugar wage-rates for any supplementary activity in which they engaged. While such wages might be supported by sugar in its unique position, they made the growing of many other crops a losing proposition. Improvement Possible Admittedly, a number of the factors impeding diversification are more-or- less inherent conditions which time alone can modify. Yet, of those listed above, no less than six of the ten (Nos. 3, 5, 6, 7, 9 and 10) are well within the power of the Cuban authorities to change. A hopeful beginning has been made, in fact, in three of these through the recent creation of the Agricultural and Industrial Credit Bank, the construction of a few warehouses for beans, and adjustment of some freight rates. AGRICULTURE 97 2. Mechanization Progress It is interesting to note the degree of agricultural mechanization which has taken place in Cuba within the short time since the publication of Minne- man's study in 1942.9 The data of Table 19 show clearly the rapid rise in farm implement imports in the last few years, and to these figures must be added a small but growing domestic production of plows and certain other tools. The totals are small but encouraging, although the reversal of the import growth since 1947 perhaps indicates an unwarranted sensitivity to the sugar price trend. A more significant index of mechanization is not the purchase of equip- ment but its actual use. Cuban fuel distributors report a considerable increase in sales of tractor and diesel fuel for agricultural purposes in recent years, but point out that the year-by-year increase is diminishing. Tractor fuel increases are greater than those of diesel fuel. Disinterested estimates of the extent of agricultural mechanization on the island are not readily available. However, major implement and fuel dealers are in general agreement that the level of farm mechanization and motoriza- tion at present is from 7% to 10% of what it could be. TABLE 19 CUBAN IMPORTATION OF FARM IMPLEMENTS AND TRUCKS value of agricultural Number of Number of Year machinery a tractors trucks Av. 1935-39 $ 107,736 65 2,051 1940 64,761 n.a. n.a. 1941 192,440 n.a. n.a. 1942 160,393 n.a. n.a. 1943 111,194 n.a. n.a. 1944 153,753 n.a. n.a. 1945 238,073 197 909 1946 427,430 643 4,461 1947 1,602,376 2.267 9.365 1948 1,648,079 2,145 6,513 1949 1,903,449 1,705 3,190 a Cuban customs classification No. 216-A. n.a.-not available. SOUnRC: Co.ercro Externor, Ministerio de Hacienda. Mechanization in Sugar Industry Workers' opposition to modern mechanized farming is, of course, strongest in the sugar industry, where farm labor is so predominantly on a wage basis 9 Minneman, op. cit. 98 REPORT ON CUBA and most fully organized. Yet here is found also more ready capital and a somewhat greater appreciation of the advantages of advanced agricultural technology. Consequently, it is the sugar industry that accounts for the largest part of the local progress to date in this field. In this connection it is observed that what has been accomplished is not so much a mechanization of planting and cultivating operations as it is a motorization of the harvest. Tractors are beginning to haul the cane carts in place of oxen; and the cane carts themselves are being replaced by rugged multiple-axle trucks which transfer the cane from field to mill in detachable cradle-type bodies. Problems Workers' opposition to machinery, already mentioned, exists in agriculture as it does in industry, but is perhaps not as adamant. Hand operations in crop planting, cultivation and harvest are strenuous work. Without doubt the worker is torn between the natural desire to make his job easier and the fear of losing it altogether. Furthermore, some of the agricultural workers are self-employed farmers, whose use of modern machinery may be governed mainly by his ability to acquire it; in such cases the general lack of agri- cultural credit is the greatest hurdle. Technical Difficulties Certain phases of Cuban agricultural mechanization await other technical developments. The varieties of rice now grown in the Republic have a serious tendency to lodge, making ordinary machine-harvesting extremely difficult. Thus, the problem in this case is, first of all, one of finding or breeding well- adapted varieties of rice which do not offer this objectionable feature. Sugar growers are only lukewarm towards the several Australian and U.S. mechanical cane harvesters, maintaining (apart from the trouble of worker opposition) that they cut the cane too far above the ground and there- fore lose the portion having the best sugar-content. According to independent technical authorities, however, this objection is not valid, as some machines cut within two inches of ground level. Even so, to date none of the machines can do quite as good a job as the hand cane-cutters do. There is still room for technical improvement. Prices Farmers throughout Cuba complain of the high and erratic prices charged by dealers for tractors, seeders, harvesters, chick incubators and similar equip- ment. The popular tendency is to lay the blame upon the various government charges and duties connected with importation. Spot-check investigations by the Mission give some support to the com- plaints of high-and occasionally exorbitant-prices, but indicate an entirely different explanation of them. AGRICULTURE 99 Government charges on imported agricultural implements are somewhat complex, it is true: in addition to customs duty (4%) they involve various taxes, consular fees, and even a tax on the total tax. All together, however, they amount to about 18%o of the U. S. f.o.b. prices, and do not appear to be designed either to exclude or to encourage the use of such machinery. The Cuban distributor of a well-known complete line of farm equipment reports Cuban delivered prices on tractors and implements (including duties and taxes) averaging about 35% above U. S. prices, with repair parts 40% higher. A few sample prices obtained by the Mission from various sources, compared with U. S. prices prevailing at the time, are shown in Table 20 below. U. S. and Cuban Prices of Selected Farm Equipment TABLE 20 U S. Cuba Percentage Item price a price b spread Ford Tractor $1,290 $1,750 35.6% Manure Spreader 300 498 66.0 Milking Machine 76 . 134 76.3 Hammer Mill 119 249 109.0 Chick Brooder A 30 54 46.6 Chick Brooder B 65 119 83.0 Chick Incubator 89 119 c 33.7 a Price f.o.b. U. S. factory, retail. b Price delivered to farmer In Cuba, including duties and taxes. c This identical item was sold by a competitor for $279, a spread of 214% over the t. S. price. Publication of Prices Desirable Inquiries made of various farmers as to the prices actually paid by them for identical items revealed a wide range of Cuban retail mark-up, especially when purchases were made through small dealers in outlying districts. There is no doubt that many farmers are being overcharged, either through exorbi- tant dealer credit or simply through high cash prices which the buyer is led to believe attributable to actions of the government. On the other hand, the larger reputable distributors and dealers-and some small ones-have advertised fixed prices not unreasonably higher than corresponding U. S. prices; and at least two large companies are offering time-payment plans at conservative interest rates. Widespread publication of their prices and terms will unquestionably have an effect upon the less scrupu- lous dealers. The new Agricultural and Industrial Credit Bank, in extending credit to farmers for the purchase of equipment, will be able to exercise additional control over this situation by approval of individual transactions. 100 REPORT ON CUBA Maintenance Cuban purchasers of agricultural machinery complain of the lack of service and maintenance facilities. The complaint is not unfounded, but the remedy will come only after the island has enough farm equipment in use to justify the existence of specialized repair shops. At the same time, it is believed that the smaller local dealers can do much to improve the post-sale service to their customers, and that they will be rewarded by increased sales volume. The farmers, for their part, can reduce repairs and prolong the useful life of their tractors and equipment by improved care and housing of their machinery. Too many Cuban farms lack even simple machine sheds. Much agricultural machinery is left standing in the open where sun, wind, rain and dust inevitably cause rapid deterioration. Custom Farming It is difficult for the operator of a very small farm to justify the purchase of much machinery for his sole use. In the Cuban rice districts, even larger farms cannot easily carry the heavy equipment needed to level the land, build levees and dig irrigation ditches. Grading. reclamation and soil conservation practices often call for machines costing $20,000 or more. The problem suggests a broad opportunity for what is known elsewhere as custom farming. For example, an enterprising farmer whose farm is too small to keep him fully occupied might-with the aid of Agricultural Bank credit-purchase a tractor together with certain implements. In addition to doing his own work he might then use his equipment to plow, cultivate or harvest for his'neighbors, at standard rates per acre or in exchange for similar work on his land by owners of other types of machines. This practice is very common in the United States, and is of genuine economic benefit to the entire farming community. Disadvantages of Communal Equipment In various countries, including Cuba, there have been proposals or attempts to provide community-owned machinery, or else government-owned equipment to be rented out. Experience has shown this to have a serious disadvantage in that the equipment is operated by too many different people, none of them its owner. No single person has the incentive to take real responsibility for its care and maintenance, and the machinery is soon beyond repair. Much greater success has been achieved when the owner of the imple- ments has operated them himself, on a hired basis. Opportunity for Cuba Custom farming can also be a complete business in itself. The custom worker need not have a farm of his own, but can devote his full time and a larger investment to such work for surrounding farmers. This type of enter- AGRICULTURE 101 prise might prove exceedingly valuable to Cuban agriculture, and on a suffi- ciently large scale could even solve such special needs as those of the rice growers mentioned above. From the abuses that have been observed in the sale of agricultural imple- ments in Cuba, it may be inferred that custom farming on the island may require some regulation of rates charged for the service. Farmers relying upon custom work can reduce their own capital investment in equipment. But this advantage may be lost if an unscrupulous c'ustom worker, possessing the only harvester in the neighborhood at a critical time, elects to charge extortionate rates. Rate Regulation Problems Regulation of rates, however, cannot be considered only from the point of view of benefit to the farmer. To set them too low will accomplish nothing at all, for then no custom work will be offered and the advantage of mechaniza- tion of the small farms will never be realized. The rates must be profitable to the custom worker, and give him a satisfactory return for his time and machinery investment. It seems probable that the Agricultural and Industrial Credit Bank can play an important part here, financing custom farming enter- prises under loan contracts containing reasonable restrictions on rates to be charged for the services. Effect of New Developm ents Farm land operators should be constantly alert to new developments in agricultural machinery, and an active Ministry of Agriculture should help to keep them informed of such things by suitable publications. The fact that a certain crop has once been shown to be unprofitable in a given region does not make this true forever. A new method of cultivation, harvesting or processing sometimes reverses the situation. This is happening today in kenaf. For various reasons, peanuts (see Chapter 44) have proved unattractive to Cuban farmers. It is therefore worth noting that the U. S. Department of Agriculture has developed an experimental two-man combine harvester which digs peanuts, cleans them, removes the vines and stems and returns these parts to the land, and bags the peanuts, all in one operation. Drawn by a two-plow tractor (such as the Ford, Ferguson or other popular makes commonly used in Cuba), in field tests this machine has harvested and bagged peanuts at the rate of one acre per hour. 3. Erosion and Depletion Problem Ignored To date virtually no attention has been paid to the progressive destruction of Cuban soil. Not only is there no serious national program for soil conserva- 102 REPORT ON CUBA tion, but farmers are not acquainted with the elementary procedures for reducing erosion and no effort has been made to inform them. Erosion There is, of course, an occasional expression of alarm when the floods of an exceptionally heavy rain have cut new gullies and eroded the surfaces of fields; but in the several destructive rainstorms which occurred during the field work of the present study, the Mission observed far more local concern over the muddied cane crops than for the surface erosion of which the mud was glaring proof. Many other evidences of erosion are present, although perhaps not so easily seen by the farmer. Coffee trees are not terraced. Hillside fields of tobacco, corn and bananas are too often laid out with the rows cultivated uphill and down instead of horizontally contoured-a sure way of causing the top soil to wash away. Seen from the air after a rain, at the mouths of streams and rivers the sea shows broad discolorations of silt-in reality soil carried off the fertile fields and slopes only the day before. Effect of Forest Removal Removal of the island's forests has accentuated the erosion problem in all its aspects. It has also lowered the available fresh water supply. Originally the forest vegetation retained a large part of each rainfall; it allowed the water to seep down the slopes gradually, feeding the springs and inland water-table. Denuded of their forests, these same areas now allow most of each rainfall to run off at once, in a fluid film of water that carries with it the top layer of soil. Gathering strength in the valleys, the run-off cuts gullies in farmlands. Farther down, th4e streams mobilize into rivers overnight, carrying away bridges and destroying roads and fields on their way to the sea. The topsoil goes along for the whole ride. Measures for Improvement Dramatic or not, this whole process was el}acted no less than twice during the period of the Mission's investigations. The only place to stop it is at the source, by reforestation and farming methods that check the movement of the original film of water and absorb it into the ground. Contour plowing, terracing, conversion of gullies to grassed waterways, and strip cropping are practices which are well-known elsewhere, and should be promoted in Cuba. Relatively steep slopes (over 12% grade) should not be cultivated, but can be used for permanent pasture if not wooded. Small ponds with simple earthen dams can be made on each farm having a suitable watershed (a few acres will do) and will not only check erosion below but also provide a water supply for cattle and other uses. AGRICULTURE 103 The Mission believes that a vigorous program of this kind, carried out by the farmers and the Cuban Government with the technical aid of soil conservation specialists from abroad, could reduce the present dangers rapidly. Depletion of Soil Elements It is only recently that a few Cuban agriculturalists have recognized that the generosity of the island's soil is not inexhaustible. The remarkable thing is that the land has maintained such fertility for so long a time without help. Some areas are said to hase been cultivated in sugar for 400 years, with very little fallowing. Yet with some crops depletion may take place slowly, so that it is almost imperceptible from one year to the next. In any case it may escape notice in the absence of well-kept records of crop yields. And finally, a record of sustained yields in terms of weight alone may be misleading, for soil depletion can reduce the nutritive value of some crops without reducing their weight or volume. Empirical evidence of depletion is available in the response of certain Cuban soils to fertilizers, discussed more fully on succeeding pages of this chapter. Some sugar growers have found that in recent years they have had to replant their cane more often than formerly was necessary. Need for Analyses Depletion can be shown best by comparison of chemical analyses of the soil made at prolonged intervals, to show changes in the essential soil elements and trace materials. Unfortunately Cuba has made no significant number of such analyses in years past, so that there is nothing with which to compare today's analytical data. In the late 1920's, Bennett and Allison10 made an exhaustive survey of Cuban soil types. The study was concerned mainly with soil classification rather than with chemical analysis, although a few typical specimens were analyzed. However, the many soil samples which were obtained from various parts of the Republic were preserved at the experiment station at Santiago de las Vegas. Plan to Re-sample The experiment station now plans to analyze these old samples by the latest chemical methods. The plan also calls for resampling the soils at the original locations and analyzing these in the same manner. Thus, when the project is completed, Cuba will have some quantitative indication of the soil changes which have occurred in the past 20 to 25 years. The Mission hopes that the analyses will be as complete as possible, despite the age of the original 10 Bennett and Allson, op. do 104 REPORT ON CUBA samples, and that expertly-made spectrographic records will be preserved for trace-element studies both now and in the future. Some Examples of- Analysis Single analyses at a given time can indicate deficiencies, part of which may be due to depletion even if this cannot be established positively. A summary of partial analyses of several hundred soil samples classified as poor, medium and good according to sugar cane yields, were supplied to the Mission through courtesy of a Cuban seed company and are presented below. Addi- tional analyses of 254 soils at two Camaguey centrales are given in Table 21. SUMMARY OF ANALYSES OF A GROUP OF CUBAN SOILS CLASSIFIED BY SUGAR CANE YIELDS PER ACREa Soil fertility a Phosphorus Potassium judged by sugar Nitrogen (P205) (CoO) eane yields (Ibo./acre) (Ibs/acre) (lbs./acre) Poor 2-6 50-60 70-80 Medium 20-30 100-125 150-175 Good 40-50 150-175 175-200 a The data may be considered indicative, but not entirely valid, smnce other factors influenocig yields were not reported. Inspection of Table 22 indicates that most of the samples are fairly well supplied with nitrogen, although a few show deficiencies. Potash deficiencies are variable, while most are low in phosphorus. The acidity is regarded as generally satisfactory. It is clear even from these few tests that Cuban soils cannot be considered free of major deficiencies, that depletion has probably taken its toil, and that scientifically guided soil rebuilding is needed in at least some areas. 4. Fertilization Use of Fertilizers It is only within the last decade that a few Cuban farmers have begun to appreciate the benefits to be obtained through fertilization of sugar cane and other crops. True, small applications have been made here and there since earlier times, but the present steady increase in fertilizer consumption is of recent origin (see Tables 227 and 228). The latest available analysis of Cuban fertilization practice is that of the 1946 Agricultural Census, shown in Table 23. Reporting for the year 1945, it was found that only 12% of the farms used fertilizers, and that the treated land (145,000 hectares) represented 7.4% of the nation's cultivated acreage. Of these farms, more than three-fourths were in Pinar del Rio, although only a AGRICULTURE 105 TABLE 21 ANALYSES OF SOILS SAMPLED AT Two CAAMAGUEY SUGAR CENTRALES Phosphorus Potassium Nitrogen (P205) (K20) Number of Sodl type pH (lbs./acre) (lbs./acre) (lbs./acre) analyses CENTRAL CUNAGUA Pina Sandy Loam 7.0 21 57 130 7 Matanzas Clay 7.3 22 60 195 46 Francisco Clay 7.3 26 63 217 27 Angelina Clay 8.0 12 40 100 1 Jaronu Clay, P-Free Phase 6.9 20 81 108 15 Esmeralda Clay 7.0 44 66 157 7 Jaronu Clay, B-T-A Variety 7.1 45 60 161 8 CENTRAL JARONU Perdigon Phase Matanzas 7.2 35 65 114 46 Hardpan P. Navajas Clay 7.6 50 56 130 1 Jaronu Clay 7.2 40 67 119 19 Esmeralda Clay 7.0 44 66 157 1 Hardpan P. Jaronu Clay 7.4 35 73 124 28 Blanquizal Macagual 8.0 25 28 100 1 Camaguey Clay 7.1 30 67 177 11 Santa Clara Clay 7.2 53 66 190 3 Palmarita Clay 7.3 25 166 177 3 Chaparra Clay 7.3 57 83 127 6 High Lime Phase Chaparra 7.5 32 60 202 10 Alto Cedro Clay 7.4 36 75 180 3 Blanquizal-Jucaral 5.4 96 50 220 1 Jucaro Clay 7.3 22 66 213 9 Sabanas P. Matanzas Clay 7.1 34 58 100 1 a third of the fertilized land was in this Province. It is interesting to note from the table that the number of farmers applying fertilizers to their soils decreased almost regularly by provinces from west to east, with only Cama- guey slightly out of line in this progression. Crops Favored For the whole island, sugar cane accounted for some 60% of the fertilized area. and tobacco about 19%. Of the other crops treated, fruits, potatoes and rice were the leading ones. In Pinar del Rio, tobacco was the principal crop fertilized, but some was applied to sugar cane, rice, vegetables and pineapple. Habana Province used its fertilizer largely on potatoes and plantains, although on the Isle of Pines (where 42% of the cultivated acreage was fertilized) citrus fruits and vege- tables were the main treated crops. Sugar cane accounted for the largest use of fertilizer in the remainder of the island, together with some rise in Las Villas and potatoes and pineapples in Camaguey. Oriente Province used very little fertilizer at all. 106 REPORT ON CUBA TABLE 22 CUBAN FARMS REPORTING UsE OF FERTILIZERS, BY PROVINCES, 1945 Number of % of Total Area % of Province's % of Farms using % of Total fertilizing fertlhzed farm area fettilized Province fertilizer farms farms (hectares) fertilized area Pinar del Rio 14,537 63.1 75.9 48,700 33.2 33.6 Habana 2,265 15.9 11.8 16,000 10.4 11.1 Matanzas 790 6.3 4.1 24,000 11.4 16.5 Las Villas 342 0.9 1.8 7,700 1.9 5.3 Camaguey 1,173 6.3 6.1 48,200 13.6 33.3 Oriente 63 0.1 0.3 300 a 0.2 Total 19,170 12.0 100.0 144,900 7.4 100.0 a Less than 0.1 percent. SouRcE: Cuban Agricultural Census. 1946. Fertilizing Experiments In the main, fertilizer application in Cuba is still on a guesswork basis. Not even the large foreign or Cuban growers have taken the trouble to analyze their soils for specific deficiencies as a guide to the kinds of fertilizer needed. The national favorite is a 10-10-5 formula,1" but many others are used and seldom is there any scientific basis for the selection of any of them. Some empirical tests are made, nevertheless; for the demonstration tech- nique has proven the most convincing method for promoting fertilizer sales. In a typical case, a dealer persuaded a Guines Valley sugar central to allow him to operate a demonstration plot on its land, with the understanding that his sales to the central would depend upon the results. Last year, as a conse- quence, this central applied fertilizer to its cane fields for the first time in 100 years of operation. Yield Data Comparative yield data on some fairly complete fertilization experiments in Cuba are appended in Tables 23-A and 23-B. In the first of these, various combinations of nitrogen, phosphorus and potash were applied to test plots of POJ 2725 sugar cane in Perdigon Phase Matanzas clay soil, at the rate of 100 pounds of each fertilizer component per acre; in an adjacent control plot no fertilizer was applied. The resulting cane yields clearly demonstrate two significant facts: (a) fertilization helped this particular soil in all cases, for the yield of every test plot was higher than that of the control plot; and (b) the benefit depends not only upon fertilization in general, but much more upon what fertilizer is employed. This last depends upon the particular soil in each instance, and also upon the crop to be raised in it. 1' Nitrogen.phosphorus-potassium fertilizers, elsewhere referred to as NPK-mi.tures. AGRICULTURE 107 The experiments of Table 23-B show the effects of various NPK-formula fertilizers on the yields of plant cane and first ratoon cane, each of the two groups in a different soil area of high-limestone Chaparra clay. Compared with the test plots, increases as high as 120%o in cane yield are noted. Need for Soil Tests The data show striking proof of the absolute need for soil tests and con- sideration of other factors before selecting fertilizers. For example, in one case the 4-4-16 mixture increased cane yields nearly 22%, while under different conditions this same fertilizer actually showed a lowered crop. TABLE 23-A EFFECT OF VARIOuS FERTILIZER ELEMENTS UPON SUGAR CANE CROP YIELD AT COLONIA SAN RAMONa Application: Fertilizer applied before planting, at the rate of 100 lbs. of each component used per acre. Nitrogen (N) as sodium nitrate; phosphorus (P) as double-super- phosphate; potassium (K) as potassium sulphate. Test plot Fertilizer applied Cane crop yield No. (as above) (arrobas per cab.) Control none 86,832 1 N 97,200 a 2 N, P, K 95,580 3 N, P 92,016 4 N, K 97,848 5 P, K 88,776 Experimental Conditions: Soil: Perdigon Phase Mvatanzas Clay Location: Colonia San Ramon Plot area: One-fourth acre Variety: POJ 2725 Planted: June 10, 1930 Harvested: February 29, 1932 Rainfall: 65.46 inches a Tests cond-cted by Federico Pory. Ing.Agron Habana In presenting these data to illustrate the foregoing points, the Mission wishes to point out that the relative yields from different fertilizers shown are not necessarily applicable to any soils other than those of the test plots themselves. Tables 23-A and 23-B cannot be used as general guides for sugar cane fertilization. It is perfectly clear, however, that the proper use of fertilizers in Cuban agriculture is economically advantageous. 108 REPORT ON CUBA TABLE 23-B EFFECT OF VARIOuS NPK FERTILIZER FORMULAS UPON SUGAR CANE AND YIELDS, COLONIA CAONAO, CENTRAL JARONUa Fertilizer Cane crop, Sucrose Test Plot formula (arrobas per content No. N-P-K cab.) (%) Purity Area A -Plant Cane: 1.4.... .... ... 4-16- 4 143,208 14.18 - 2. .... ..... .. 8-12- 4 151,632 13.16 - 3............. ... .. 4-12- 8 144,404 14.45 - 4.... ..... .. 12- 8- 4 112,104 12.71 - 5.. ......... 8- 8- 8 142,236 14.09 - 6..... ... . 4-12- 8 130,896 14.89 - 7. ......... 16- 4- 4 111,376 14.65 - 8..... ..... . 12- 4- 8 109,188 14.47 - 9. .......... 8- 4-12 104,328 13.91 - 10 ............ .. 4- 4-16 95,256 15.33 - Control .none 98,172 15.21 - Area B - First Ratoon Cane: 11 ...... .... 4-16- 4 93,960 15.68 86.62 12 ............ 8-12- 4 109,188 15.50 86.11 13 .4-12- 8 96,558 15.70 81.77 14 . 12- 8- 4 95,256 15.04 85.45 15 .......... 8- 8- 8 94,284 13.06 82.65 16 ..... . 4- 8-12 81,324 15.77 88.64 17 ... .. . 16- 4- 4 75,492 15.73 85.48 18 ....... 12- 4- 8 75,816 15.45 86.79 19 ............ 8- 4-12 73,872 15.58 86.07 20 .... 4- 4-16 69,336 15.78 86.22 Control .none 49,572 14.28 88.14 a SOIL: High-Limnestone Phase of Chlaparra Clay. Tests conducted by Federico Poey, Ing.Agron., Habana. 5. Irrigation RainfaU in Relation to Irrigation Rainfall in Cuba-as stated earlier-has generally been considered ade- quate, if somewhat heavily seasonal. Yet this view is slowly changing, even as regards sugar cane and other time-honored crops. At the same time there has been a fairly recent expansion of certain crops, such as rice, which require considerable amounts of water. Cuban sugar growers today are of the opinion that their crop requires from 65 to 70 inches of water, well-distributed throughout the growing season, if best land yields are to be realized. Some feel that even more is needed. With these figures in mind, it will be of value to re-examine certain aspects of the rain distribution. AGRICULTURE 109 For the past 20 years, the average annual rainfall in Cuba has been 54.46 inches. Moreover, during this period it has varied from 41.9 to 72.2 inches. Between the Provinces still greater variations are observed; 32 inches were reported in Oriente Province in 1933, while as much as 77.5 inches fell in Matanzas Province in 1936. When specific locations are considered, similar variations occur in both amount and distribution of rainfall. Prolonged drought periods are sometimes experienced. For Oriente Province during 1949 the average rainfall was 46.56 inches, with a variation from 31.38 to 77.99 inches according to the location within the Province (Table 14). The variations in seasonal rainfall with Oriente can be seen more readily in the accompanying chart, which shows the high, low and average precipitation by months during 1949. Some areas within Oriente did not receive any rain during three or four months of the year. From the estimates furnished, then, it would appear that Cuban rainfall conditions are far from perfect for the crops grown, and that perhaps even the annual total is insufficient in a large part of the island. In any event, it is well-known that, even in regions of relatively high total rainfall, supple- mentary irrigation during drought periods can increase crop yields. Cuban Irrigation Practices In 1945 there were 147,789 acres of Cuban land under irrigation, repre- senting 3% of the total cultivated area and only 4% of the total farms (Table 26). Approximately 60% of the irrigated acreage was planted with sugar cane and tobacco. Irrigation is rather highly localized in the Provinces. Almost 90% of the irrigated land in Habana Province-according to the Agricultural Census- was in the municipalities of Guines, San Nicolas, Melena del Sur, Guira TABLE 24 DISTRIBUTION OF IRRIGATED LAND IN CUBA, 1945 Number of farms % of Area of total reporting total irigated cultivated Province irrigation farms (acres) area Pinar del Rio 3,367 14.6 32,694.0 9.0 Habana 2,203 15.4 56,486.1 14.8 Matanzas 96 0.8 5,637.6 1.1 Las Villas 195 0.5 9,003.1 0.9 Camaguey 373 2.0 34,115.6 4.0 Oriente 200 0.4 9,852.6 0.6 Cuba - total 6,434 4.0 147,789.0 3.0 SOURCE: Cuban Agricultural Census, 1946. CHART V High, Low, and Average Rainfall Recorded in Oriente Province, Cuba, 1949 RAINFALL IN INCHES RAINFALL IN INCHES 20 20 F~~~~~ \0 o o JAN FEB3 MAR APR MAY JUN JUL AUG SEP OCT NOV DEC SouRCs: Data ot Asociacion Nacional de Hacendados de Cuba. AGRICULTURE 111 del Melena, Alquiza and San Antonio de los Banos; Guines alone, in fact, had 43% of it. In Pinar del Rio, three municipalities-San Juan y Martinez, Pinar del Rio and Consolacion del Sur-accounted for 85%. Ciego de Avila and Moron had 98% of the irrigated acreage of Camaguey Province. The situation in the remaining Provinces was similar. Size of Irrigated Farms As shown in Table 25-A, the Agricultural Census found that over 75% of the irrigated farms were smaller than 25 hectares in land area. About 38% of their number had from one to nine hectares, 37%o from 10 to 24 hectares, and 18%o from 25 to 99 hectares. Only 6% of the farms were of 100 hectares or more; however, these accounted for over half the irrigated area. TABLE 25-A LAND AREA IRRIGATED IN CUBA BY SIZE OF FARMS, 1945 Total Farms Proportion Proportion number reporting of irrigated Area area Size of Farms farmns irrigation farms irrigated irrigated (hectares) (no.) (no.) (percent) (hectares) (percent) 0.4 and less 1,148 7 0.1 1.8 a 0.5-0.9 1,877 34 0.5 21.0 a 1.0-4.9 29,170 1,020 15.9 1,841.1 3.1 5.0-9.9 30,305 1,401 21.8 3,671.5 6.1 10.0-24.9 48,778 2,410 37.4 9,909.7 16.6 25.0-49.9 23,901 837 13.0 6,949.5 11.6 50.0-74.9 8,157 240 3.7 4,050.3 6.8 75.0-99.9 3,853 101 1.6 2,558.0 4.3 100.0-499.9 10,433 296 4.6 17,105.1 28.6 500.0-999.9 1,442 48 .7 4,998.9 8.3 1000.0-4999.9 780 36 .6 6,850.2 11.5 5000 and over 114 4 .1 1,852.3 3.1 Total 159,958 6,434 100.0 59,809.4 100.0 a Less than 0.1 percent SOURac: Cuban Agricultural Census, 1946. Irrigated Area by Types of Farm Operators Of the total farms reporting irrigation, almost 50% were operated by sharecroppers. About 25% of the irrigated farms were operated by renters, 19% by owners, and 4%o by administrators (Table 25-B). In terms of area, the renters accounted for about 45% and sharecroppers 18%. About 17% of the land under irrigation was operated by owners and 19%o by admini- strators. There are no figures to show the extent to which Cuban irrigation systems are modern or of a more primitive character. However, such things as pumping systems are beyond the means of the smaller Cuban farmer, and 112 REPORT ON CUBA governments have done little in this field. Thus some indication of the charac- ter of irrigation systems may be had from the fact that about three-fourths of the irrigated farms are operated by renters and sharecroppers. Irrigated Area by Crops Sugar cane, tobacco, rice and potatoes account for the major proportion of the irrigated land acreage in Cuba. Irrigation was reported to be used to some extent on practically all crops in 1945, with the exception of coffee, but in many cases the acreage was insignificant. Approximately 43% of the irrigated acreage was planted in sugar cane, 18%o in tobacco, 10%o in rice, 1O0o in potatoes, 4% in oranges, 3% in bananas and plantain, 2.5% in tomatoes, 2%o in sweet potatoes, and the remaining 7.5% in various other crops. TABLE 25-B LAND AREA IRRIGATED IN CUBA BY TYPES OF FARM OPERATORS, 1945 Farms Proportion Proportion reporting of imgated Area of irrigated irrigation farms irrigated area Type of Operator (no.) (percent) (acres) (percent) Owners 1,247 19.4 25,729.8 17.4 Administrators 281 4.4 28,511.1 19.3 Renters 1,471 22.8 56,590.1 38.3 Sub renters 185 2.9 9,108.6 6.2 Sharecroppers 3,182 49.4 27,386.3 18.5 Squatters 42 0.7 221.4 0.1 Other 26 0.4 241.7 0.2 Total 6,434 100.0 147,789.0 100.0 SOURCE: Cuban Agricultural Census. 1946. Costs of Irrigation Actually, average Cuban costs for irrigation are unobtainable. Too many of the farmers keep no records of such things. It is probable that some do not know whether they are gaining or losing money by it. As for the large centrales, which can at least produce figures for the amounts paid for equipment, power consumption, etc., accounting practices in cane production are often not much better. When improvements are made, too many variables may be introduced simultaneously. Thus frequently the centrales are unable to measure the economic benefit of a certain improve- ment against its cost. One grower, for example, introduced irrigation and fertilization at the same time. He raised his cane production from 40,000 to 85,000 arrobas per caballeria, but has no way of knowing whether the gain was caused by irriga- tion, fertilization or both. Another centrale wrote off the entire cost of irri- AGRICULTURE 113 gation equipment against the first crop gains, rather than amortize it over its reasonable life as a cost of obtaining specific gains. Some Estimates Nevertheless, a few growers do attempt to estimate irrigation costs. Random figures obtained by the Mission range from $23.48 to $35.79 as the cost of applying one inch of water to a caballeria of land. Such estimates depend upon the type of equipment and power requirements, and include management costs as well as depreciation and maintenance on pumps, wells, ditches, pipelines and other facilities. By making some assumptions based upon actual crop returns reported to the Mission, an idea of the potential gains from irrigation of sugar cane can be obtained. A breakdown of the costs of producing cane without irrigation is given in Table 26, which shows a profit of $36.36 per acre. If we assume (from growers' reports) that cane production could be doubled by applying 20 inches of water at a cost of $21.40 per acre, holding other costs constant, an additional return of $50.80 per acre would be realized. With irrigation at this level of cost, (this is perhaps near the maximum return that could be expected under favorable conditions) cane production would have to be increased about one-third to break even on irrigation. TABLE 26 CALCULATED COSTS OF PRODUCTION OF IRRIGATED AND NON-IRRIGATED SUGAR CANE With irrigation With irrigation Without Production Production irrigation a increased 100% b increased 50% c Cane acreage 2 cabs. 2 cabs. 2 cabs. Cane production . 100,000 arrobas 200,000 arrobas 150,000 arrobas Received for cane after cutting and hauling $4,800.00 $9,600.00 $7,200.00 Costs: Rent of land 200.00 200.00 200.00 Cultivation 1,500.00 1,500.00 1,500.00 Fertilizer 500.00 500.00 1,000.00 Irrigation - 1,419.32 1,419.32 Miscellaneous 200.00 200.00 400.00 Total costs . $2,400.00 $3,819.32 $4,519.32 Total profit . 2,400.00 5,780.68 2,680.68 Profit per caballeria 1,200.00 2,890.34 1,340.34 Profit per acre - 36.36 87.16 40.42 Profit due to irrigation - 50.80 4.06 aActual profit per acre obtained by one cooono. b Assumption of 100% icrease in production, based on actual production figures; production cost assumed to be same as above. c Assumption of 50% increase in production, doubling fertilizer and miscellaneous costs. 114 REPORT ON CUBA For another calculation - also shown in Table 26 - let us assume less optimistically that irrigation raises cane production by only 50%o, and that to obtain these results the fertilizer and miscellaneous costs must be doubled. This shows an additional profit of $4.06 due to irrigation. Under these circumstances a 45% production increase is necessary before irrigation becomes profitable, while a doubled cane crop would return a total profit of $77.08 per acre. Benefits of Irrigation In most areas irrigation has not been used for a sufficient length of time to determine its effects upon the life of cane stands. In areas where irrigation has been practiced for several years, accurate records have not been kept, so that the necessary comparison cannot be made. In discussing this question with many cane growers, the Mission found a general opinion that irrigation would increase cane production and maintain this increased production longer than non-irrigated cane. On'e cane grower stated that his present stand of irrigated cane was 15 years old and that pro- duction was holding up very well. Another producer was of the opinion that cane production could be maintained at a high level with irrigation from 6 to 8 years, and that this time could be increased to 10 or 15 years with one reforming of the stand. However, it seems probable that the greatest benefit to be derived from the irrigation of cane lies not in prolonging the average productive life of cane stands, but in maintaining field production at a much higher level than possible without irrigation. These are questions to which the answers today are little more than guesses; and they will remain so until the results of enough carefully controlled experi- ments are at hand to establish the true facts quantitatively. It should be the task of an agricultural experiment station to make coopera- tive arrangements with growers in at least one broad test area, to obtain complete and continuous year-by-year data of the necessary type. By this procedure, carried out over a period of years and supplemented with test plot data at the experiment station itself, it will be possible to determine the economic criteria for irrigation of cane and such other Cuban crops as may be studied. Public Irrigation Projects Meanwhile the Mission calls attention once more to the studies reported in April, 1941, by the Technical Commission of the U. S. Department of Agriculture. This report listed five specific irrigation projects suitable for consideration by the Cuban Government, and presented them in considerable detail with outlines of complete costs. In addition, the Commission recom- mended thorough study of eight other potential irrigation projects. AGRICULTURE 115 It is the feeling of the Mission that it would be pointless to discuss other newer public irrigation schemes until at least some of the 13 projects already offered by this special Technical Commission have been adequately studied by the Government. Private Cooperative Irrigation Systems Without recourse to governmental projects, it appears feasible for agri- cultural producers in numerous local areas to set up self-liquidating irrigation projects through the formation of private cooperative organizations. Such projects can be capitalized by member stock participation, and with additional long-term financing, possibly through the Agricultural and Industrial Credit Bank. Cooperatives of this kind can be-and are-operated successfully on a businesslike basis. Water is purchased by the users at fixed rates, with measurement by individual water meters. The water may come from wells, reservoirs, or both. 6. Crop Storage Facilities Inadequate Except in the case of sugar, the warehousing and storage facilities of the island are quite inadequate for Cuba's crops. The danger of weevil damage, for example, has traditionally forced bean growers to sell their crops soon after harvest, at a time of depressed prices. In order to alleviate this trouble, in 1945 the Cuban Government built six cold storage warehouses in important producing areas, with a total net capacity of 312,000 cubic feet. Accessible to road or rail transportation, these plants are also equipped to perform such services as cleaning and grading certain crops. Cost of these warehouses was approximately $1,500,000. Crops are stored for farmers at 10 centavos per month per 100 pounds, and at 16 centavos for persons other than the actual growers. About 22,000 tons of beans, potatoes, corn and other products were stored in these plants during the first years of operation. While this is a step in the right direction, the situation is still acute. More warehouses are needed, as well as privately owned storage facilities for certain crops on the farms themselves. It is understood that the new Agricultural and Industrial Credit Bank, which has taken over the operation of the present warehouses, is planning to interest itself in these problems. Technical Deficiencies From a technical standpoint, the operation of the existing warehouses is not all that could be desired. Inspections by the Mission showed some of the rooms being cooled-by evaporation of water-under dangerously high 116 REPORT ON CUBA humidity conditions. In one such warehouse the Mission could find no member of the personnel in charge who understood the significance of the indicating instruments, operative control being centered in Habana. 7. Farmers' Cooperatives Discussion of the need for cooperative agricultural credit and marketing associations and some problems and suggestions in this connection will be found in Chapter 29 on Agricultural and Industrial Credit. 8. Agricultural Education, Research and Extension Service NEED Why? It is clear that Cuba's agricultural progress-like that of any country- depends upon: (a) The quality and quantity of agricultural technology available within the nation. (b) The extent to which the practical aspects of this technology reach the man with the plow. The Mission emphasizes both these factors, because they are of equal importance. What is not generally appreciated is that successful modern farming probably requires a broader general understanding of varied technical matters than any other ordinary occupation. The once popular idea that "anybody can farm" simply is not true. A country's productive land is limited. Each farmer is entrusted with a piece of it. Since the continued economic welfare of a nation-particularly an agricultural one-depends largely upon the productivity of its land, every individual farmer is an agent whose practices govern the well-being and prosperity of a larger number of citizens. This is not a piece of abstract philosophy, but an everyday truth which should be self-evident. But a good farmer is a busy man. He has time to apply the technology- his main job-but not to develop it. There must be another group, then, whose task is to acquire the technology in minute detail, to discover the best ways to conserve and employ the land for high productivity, and to pass this information on to the farmer in such a form that he can use it. EXISTING MECHANISMS With this concept in mind, the Mission has examined the principal Cuban agencies available to perform this function: The University of Habana and the Ministry of Agriculture. And because neither of these agencies plant and harvest the nation's crops, special attention has been given to the extent to which they communicate their knowledge to those who do. AGRICULTURE 117 The agricultural portions of the University of Habana are its School of Agronomic Engineering and Sugar and the University Farm. In the Ministry of Agriculture, the units most concerned with agricultural development are: (1) Six Provincial Agricultural Schools, one in each province. (2) The main Agricultural Experiment Station at Santiago de las Vegas, Habana Province. (3) The Sugar Cane Experiment Station at Jovellanos, Matanzas Province. (4) The Coffee Experiment Station at Palma Soriano, Oriente Province. (5) The Agricultural Inspectors Service. UNIVERSITY OF HABANA Departments of Instruction The School of Agronomic Engineering and Sugar of the University of Habana concerns itself only with college-level agricultural education; there is no appreciable research or extension service. The eight departments of instruction are: Agricultural Chemistry (with emphasis on sugar chemistry); Agronomy; Entomology and Pathology; Animal Industry; Agricultural Economics; Agricultural Engineering; Agri- cultural Hydraulics; and Biology, Sugar and Food Processing. The curriculum covers either three, four or five years, depending upon whether the student wants a degree of "Expert in Sugar Chemistry", "Chemical and Sugar Engi- neer", or the highest title of "Agronomic Engineer". With a faculty of 18 staff members, student enrollment varies from 500 to 700. The majority of the students come from the cities and are chiefly interested in employment in agricultural industries. Although the school does not keep such records, its authorities estimate that not more than 10% of the graduates enter farming pursuits, and the number may be much lower. Equipment and Staff The buildings for agricultural instruction are six in number, and are located on the University campus itself. Grounds and buildings are in good order and the equipment is modern, clean and ample for university instruc- tion. The laboratories and offices are equal to those of many similar insti- tutions elsewhere, and are unusually clean and orderly. The University Farm is located on about 130 acres of good Matanzas Clay land, some 20 miles east of Habana. It is used solely for teaching and student demonstration work, and appears to be excellent for the purpose except for its distance from the classrooms. A certain number of hours of attendance at this farm is required, at least of candidates for the degree of Agronomic Engineer. 118 REPORT ON CUBA The farm maintains two specialists and a number of assistants who do the actual work of cultivation. For purposes of demonstration numerous crops are grown. Attention to high yields is shown by this year's corn crop, which reached 60 bushels per acre against a national average estimated at 16.2.12 On the whole, the agricultural training of the University appears to be fairly good. The School of Agronomic Engineering and Sugar seems to be singularly free from the political agitation and other maladies which pervade the University in general. The competence and enthusiasm of the instructional staff are reflected in the attitude of the students interviewed by the Mission. Morale and continuity of purpose appear to be good. Too Much Emphasis on Sugar On the debit side, there is entirely too much emphasis upon sugar, and especially sugar chemistry, rather than on its cultivation. In this respect the University contributes very little toward national agricultural diversification. The few graduates who actually enter agriculture as a profession are likely to grow more sugar because it is one of the few things they have been taught. It is unfortunate that neither the School of Agronomic Engineering and Sugar nor the University Farm conducts any appreciable research. It is felt that a University should be a fountainhead of new knowledge, and not merely a mechanism for passing the same information down from generation to generation. Without research, of course, it is not surprising that the University has no extension service. On the other hand, these things cost money. Agricultural instruction requires extra funds for supplies and equipment. Yet, considering the impor- tance of agriculture in Cuba, the University allocates a surprisingly small amount to it. The combined budget for the School and Farm-about $100,000-is less than 4% of the University budget. The Law School receives as much or more, and Medicine's budget is nearly five times as great. THE PROVINCIAL AGRICULTURAL SCHOOLS Qualifications for Admission The Ministry of Agriculture operates a small agricultural school in each of the six provinces. The purpose of these institutions is to provide both practical and theoretical training in actual farming. According to information supplied to the Mission, candidates for entrance must: (a) be the son of a Cuban farmer; (b) have completed five grades of primary school; and (c) pass an entrance examination. However, government officials have the right to send a certain number of students on their own nomination. 12 See "Corn"-Chapter 44. AGRICULTURE 119 Tuit*n is free, in addition to which the students are given room, meals and clothing. Upon completion of the three-year course, a diploma of "Master Farmer" is awarded. Some of the buildings are new, while others are in need of repairs. Equip- ment is not very plentiful, but generally good. Each school has sufficient land for livestock and crops, and these are of fairly good grade. The school direc- tors complain of lack of money for operation. Enrollment Enrollment in the individual schools varies, but probably seldom exceeds 100. The one in Pinar del Rio had 40 boys between 14 and 18 years of age in 1949. It is estimated that only a small percentage return to farms; the staff of the Matanzas school reported that the better students go on to the University of Habana, preferably to become sugar chemists or to enter business firms. Students become accustomed to better living while in the schools, and often object to a return to Cuban farm life. Some, nevertheless, do return with the intention of introducing improvements on the old family farm. In spite of shortcomings, these Provincial Agricultural Schools (together with the agricultural departments of the industrial trade schools described in Chapter 18) offer the best real agricultural training seen by the Mission in Cuba. Probably their biggest drawback is that there are not enough of them. While an occasional destitute and worthy student might be granted free tuition and expenses, it is believed that these schools would do better if they made at least a token charge. Certainly, at least, it appears unnecessary to make all students complete wards of the State for three years. Neither is it clear why entrance should be confined to sons of farmers. SANTIAGO DE LAS VEGAS EXPERIMENT STATION Poor State of Repair The main Agricultural Experiment Station of the Ministry of Agriculture is situated about 20 miles sAouth of Habana, at Santiago de las Vegas. It includes 280 acres of land, of which about 200 are under cultivation. The buildings consist of one large main structure housing the offices, laboratories and library, and a number of smaller buildings for cattle, hogs, chickens, experimental and maintenance shops, and similar purposes. Although neat in appearance and attractively landscaped, the buildings are in a poor state of repair: for example, the roof of the main building leaks in many places, so that during rains the desks and records must be moved about to avoid damage. In contrast to this, equipment is rather well maintained. The library consists of approximately 5,000 volumes, to which are added about 200 annually. Some of the files of scientific journals are complete and 120 REPORT ON CUBA up-to-date, while others are not. From many observations over a tpv-month period, it appears that the library is seldom used. The Staff The personnel of the Station includes the director, about 20 technical employees and 37 laborers. Most of the technical people are employed on a part-time basis. Qualifications of the staff for the work are good, and a number of members are outstanding. Yet the morale of the staff was exceed- ingly low at the time of the Mission's studies. Programs Interrupted Many valuable research programs have been well-planned on paper at the Experiment Station; but on most of them little or no work is being done. This-according to the staff-is a traditional procedure. Programs are laid out, approved, and perhaps even started; they are then halted by lack of funds or a change of officials in the Ministry of Agriculture. The process is constantly repeated with new programs, so that the files are filled with uncompleted work. It is reported that no government officer will continue a project of his predecessor, and that a change of administration is considered reason enough for abandoning any research project no matter what its merit. The Kenaf Project One significant program under way at the present time is the development of kenaf fiber for Cuba. The work includes plant breeding and cultivation studies as well as research in harvesting and processing methods, and is being conducted jointly by Cuban technologists and specialists loaned by the U. S. Office of Foreign Agricultural Relations. Excellent progress is being made (see Chapter 44). Not even this program has been allowed to move smoothly, however. Despite the high priority placed upon it by the Cuban Government, the Government ceased paying the salaries of the Cuban workers and provided no funds for supplies during a period of about tMo months in 1950. Although funds were eventually made available, some work was lost and much damage was done to the morale of the technical staff. The investigators, once enthusi- astic, are now wondering how soon the next period of discontinuity will come. Research cannot flourish in this atmosphere. Hybrid Corn An earnest 15-year attempt to develop a hybrid corn at the Experiment Station was constantly thwarted by such interruptions. Its completion was finally made possible this year, but only by its transfer to private support. A Cuban organization, in association with an established U. S. seed corn AGRICULTURE 121 company, is now financing the work on Experiment Station land. As a result of this change, it is expected that hybrid seed will be available for sale in 1951. Continuity Essential The processes of nature are slow. Many of the most important agricul- tural experiments require a time longer than the incumbency of a single government administration. With the record of discontinuity in past years at the Experiment Station, it is not surprising that the institution has produced little of public benefit. It is essential that the annual funds for its work be provided on a more stable basis, perhaps as a fixed sum or guaranteed percentage of the budget of the Ministry of Agriculture. It is also essential that approval of the scientific program be removed from the hands of politicians and allowed to rest with competent technical authority. SUGAR AND COFFEE EXPERIMENT STATIONS Funds Inadequate Two specialized branch experiment stations exist. Very little more can be said of them. The Sugar Cane Experiment Station at Jovellanos, Matanzas, has been in operation nearly four years, and has not yet received any of the funds for which special sugar taxes have been levied since 1941. Most of its 1,260 acres are used for ordinary sugar cane production, the crop being sold by the Station's director to a nearby mill to pay the bare running expenses. Build- ings consist of a corrugated sheet-metal garage and a small uncompleted green- house. Work in progress is practically limited to fly-breeding (to fight cane borers) which is privately supported by the sugar cane growers of Matanzas Province. The Coffee Experiment Station at Palma Soriano, Oriente, is not much better. It may be sufficient to say that it is badly located for the growing of coffee-a fact which in itself precludes effective service to the industry. Its staff of two technicians and two laborers are conducting some work on plant propagation, but wise coffee growers seem to have little confidence in the seedlings which the Station offers. AGRICULTURAL INSPECTORS' SERVICE Little Coordination with Education - A framework exists for communication of information between the Min istry of Agriculture and the farmer, in the form of an Agricultural Inspectors' Service. Under a chief inspector in the Ministry, each of the six Provinces has a provincial inspector, a local headquarters, and a number of regional inspectors. In all, there are 219 agricultural inspectors distributed about the island. 122 REPORT ON CUBA These men act as agents of the Ministry in the distribution of free seed, literature and agricultural information. They promote the various projects of the Ministry and attempt to answer farmers' questions. Insofar as the Mission could determine, however, there is no formal coordination between their work and that of the experiment stations or agricultural education centers of either the Ministry or the University of Habana. Local inspectors are paid $103 per month, and usually spend only half their time at this work. Many operate farms of their own, or hold other part-time employment. Those who were interviewed by the Mission appeared to be fairly well-trained, and to be conscious of the social importance of their task; they were aware of the handicaps under which they were working, yet determined to make a good job of it if at all possible. Handicaps to Extension Work In common with other agricultural services in Cuba, the Inspectors' Service suffers from lack of funds. Also the available funds are inequitably distributed. The headquarters in Pinar del Rio seem adequate for present uses, while those at Palma Soriano do not. Some of the inspectors are furnished trans- portation and a small operating budget for expenses; others have neither, and cannot easily visit the farms in their districts. In some cases the farmers must hunt out the local inspector in the nearest town when they have questions. Another handicap is, of course, the lack of new information to distribute. The Ministry of Agriculture publishes very little material of practical interest to the farmer. The Mission feels that this could be remedied easily, as an enormous amount of usable agricultural information is published elsewhere and in many cases needs only adaptation and translation. Suitable cooperative arrangements with the U. S. Department of Agriculture should provide a fruit- ful source of such material. Attitude of Farmers Inspectors find that their attentions are only moderately well received by the farmers. They point out that Cuban farmers are not inclined toward cooperative effort, are characteristically suspicious even of each other, and are particularly wary of government agencies. This situation is not improved by the unfortunate choice of the term "inspector". The word, in fact, reflects a mistaken concept of the Inspectors' Service apparently held by some high officials of the Government. This is that the main flow of information should be inward to the Ministry (gather- ing statistics, etc.) rather than as an outward dissemination of knowledge helpful to the farmer. The Mission feels that removal of some of the above-mentioned handicaps will immensely increase the value of this Service to the country's agricul- tural production. AGRICULTURE 123 PRIVATE EFFORTS Some Useful Work A very few of the more enterprising sugar centrales engage in some form of agricultural development. One, for example, is growing test plots of several of the newer varieties of cane, trying fertilizers, testing mechanical planting equipment, and fatten- ing steers for market under controlled experimental conditions. Another is attempting to develop a livestock feed from maribu. This central and a number of others maintain purebred cattle and engage in cross- breeding experiments. In some cases the results are good, while in others accurate records of the crosses have not been kept. (See Chapter 45.) Central Soledad An outstanding effort is that of Central Soledad, near Cienfuegos in Las Villas.Province. In addition to much development work of its own, this central and its foreign owners contribute the major support to an experiment station and plant collection operated on its property under the guidance of Harvard University. When needed, the central also supplies pasture land and livestock for grazing tests. The Harvard station has some 2,000 species of plants, and last year sent out 3,700 shipments of cuttings, seed and plants to various areas-about half of them in Cuba and the balance to other countries. It maintains plant exchange with many other stations in the world. Of the 120 best known varieties of sugar cane, the Harvard Garden possesses 100 and has the re- mainder on order. It grows seedlings for reforestation, forage crops, and a large number of commercial-type plants. Experimental work has included hybrid corn develop- ment and resistant legume pastures, both still in progress. Without question, the cooperative work of Central Soledad and the Harvard Garden is the best of its kind in all Cuba, and both its technical and manage- ment personnel and its financial supporters are to be commended. 5-C CLUBS An important contribution is being made by one of the large mail-order and retail sales organizations, in its moral and financial support of the 5-C Clubs sponsored by the Ministry of Agriculture. Similar to the 4-H Clubs of the United States, these clubs are designed to stimulate the interest of the rural youth in improved agricultural practices. Prizes are offered for the best pigs, chickens, eggs and crops produced under competitive conditions, and help is given in a number of ways. 124 REPORT ON CUBA IV. RECOMMENDATIONS Some of the Mission's recommendations concerning agriculture will be found in the separate discussions of livestock and individual crops in Book X. Additional suggestions on various topics have been incorporated in appro- priate portions of the text of the present section, while still others are to be found in Chapter 29 dealing with Agricultural and Industrial Credit. Below, in summary form, are listed some of the Mission's principal recommendations affecting broad agricultural development. The Mission recommends that: Agricultural Training 1. The Ministry of Agriculture should invite appropriate members of the staffs of the Universities of Habana and Oriente to serve on a continuing advisory committee for improvement of the Provincial Agricultural Schools. 2. The University of Habana should enlarge the budget for its agricultural instruction, and increase the emphasis upon diversified crops. Experiment Stations 3. The Ministry of Agriculture should revise the administrative structure of and budget provisions for the government agricultural experiment stations, and, in particular, should take the following immediate steps: (a) Guarantee continuity of adequate funds for research, irrespective of political changes. (b) Place the selection of research projects in the technical hands of the administration and staff of these stations, and protect this personnel against political changes by means of Civil Service tenure. (c) Abandon the present coffee experiment station at Palma Soriano, and establish a new one in a location suitable for coffee-growing. (d) Publish, in individual leaflets, the results of experiments conducted by all of the experiment stations. Dissemination of In formation 4. The Ministry of Agriculture should expand the Agricultural Inspec- tors' Service and intensify its work, in accordance with a planned program of personnel training. Special attention should be given to the following points: (a) For psychological reasons the name of this service should be changed to Agricultural Development and Information Service (or similar), and the inspectors should be known instead as Provincial Agrono- mists or Development Agents (or similar). AGRICULTURE 125 (b) Increased funds should be allocated to this Service, not only for expansion of its field staff, but also for translating, adapting, writing and publishing practical agricultural information for distribution, as well as for the use of motion pictures, radio and other educational aids. (c) The field agents of the Service should stress soil conservation prac- tices. To train its agents in this subject, it is suggested that the Ministry of Agriculture seek the cooperation of foreign technicians. (d) Active cooperation should be established between the Agricultural Development and Information Service and: (1) the Agricultural Experiment Stations; (2) the technical services of the Agricultural and Industrial Credit Bank; (3) the Universities of Habana and Oriente; (4) such privately-supported agricultural experimentation as may be willing to cooperate; and (5) the proposed (Chapter 8) new Ministry of Mines, Water and Forests. Land Tenure 5. The Government should frame and carry out with caution a policy designed to increase the number of owner-operated farms. A start should be made by taking the following steps: (a) The Agricultural and Industrial Credit Bank, collaborating with the National Bank, should begin a most careful and comprehensive study of problems of land distribution, with special attention to idle lands and to the mistakes caused by precipitate action in Cuba and some other countries. (b) The Cuban Government should consider seriously the existing pro- posal for the purchase and title-transfer of land now held by squatters, with three modifications: (1) the program should be handled by the Agricultural and Industrial Credit Bank for efficiency and to minimize political influence; (2) transfer of title should not be by outright gift, but by sale to the squatter at a moderate price with long-term mortgage credit; and (3) the squatters should be assisted to learn more efficient practices. Mechanization 6. The Agricultural and Industrial Credit Bank, in financing pur- chases of farm equipment, should make two additions to its policies: (a) Transactions in the purchase of equipment through its loans should be individually approved in order to protect the borrower from excessive profiteering by dealers. (b) Credit should be extended to enterprises to perform custom-farming, with reasonable regulation of rates to be charged for such farm service, through terms of the loan agreements. 126 REPORT ON CUBA Irrigation 7. The Agricultural and Industrial Credit Bank should be prepared to finance self-liquidating community irrigation cooperatives, as described in Chapter 30. 8. Concerning public irrigation projects, the Cuban Government should take the following steps: (a) Place the study, planning and administration of government-financed irrigation projects (as distinguished from community cooperatives) under the proposed new Ministry of Mines, Water and Forests. (b) Place the execution of such government-financed irrigation projects under the Comisi6n de Fomento. (c) Charge the Ministry of Mines, Water and Forests with complete study of the 13 specific projects proposed by the 1941 U. S. Technical Commission, before any new proposals are considered. (d) Encourage the Agricultural Experiment Stations to assemble, con- tinuously, such data on Cuban irrigation and crop yields as may be obtainable from farms and centrales, and to make related experimental studies and demonstrations. Diversification (Some of the foregoing recommendations are designed to serve not only their indicated primary purposes, but also to contribute toward crop diversification. Additional recommendations for this latter purpose follow.) 9. To encourage agricultural diversification the Cuban Government should: (a) Review and minimize inconsistent government price controls which work against the growing of non-sugar crops. (b) Restrict the application of sugar wage legislation to work involving sugar, thus allowing the centrales to engage in other agriculture economically. (c) Consider the effects of short secondary farm-to-warehouse roads upon diversification, in planning its general road building program. (d) Review discriminatory freight rates. 10. The Agricultural and Industrial Credit Bank should expand crop- storage facilities to improve further the marketing position of non-sugar agricultural products. CHAPTER 6 Industry I. THE ROLE OF INDUSTRY IN CUBA Up-grading Resources Two Responsibilities The purpose of industry is not to provide employment; it is to convert raw materials into desirable finished products. Employment is a useful by- product. In the broadest sense, Cuba's biggest known asset is her soil. She is an agricultural nation, not by mere circumstances of history as with some coun- tries, but by natural endowment. For her future, this gift carries with it two responsibilities. First, she must protect and nourish the endowment-the soil itself, not only the people on it. Second, she must make the best use of it by orienting her development, industrially as well as agriculturally, toward a wider dependence upon this most basic of natural resources. Sugar a Raw Material That sugar production is Cuba's biggest industry should not obscure the fact that sugar itself is a raw material. Today more than half the sugar which Cuba sells to the United States is consumed by other industries. If Cuba can spare some labor for the purpose, then, what more logical than that she begin by adding more domestic industries which utilize sugar? But these secondary products are seldom made of sugar alone. They are things like bakery goods, cereal products, canned and frozen foods, preserved fruits, jams, jellies and candies. Largely, they require more agricultural crops, eggs and livestock. At the moment Cuba imports many of these things. Not for industrialization, to be sure; but merely to provide enough ordinary good food for her people. Something must be amiss when one of the richest agri- cultural countries cannot feed herself. What Holds Industry Back? Some maintain that diversification of Cuban agriculture is held back by lack of industries to absorb the products of the soil. This cannot be true, for a domestic market for such products already exists and is being supplied from abroad. We are forced to conclude, on the contrary, that potential Cuban industries are held back by lack of domestic sources of these raw materials. Mineral Resources On another front, there are the nation's mineral resources still to be developed. These have been underestimated by so many who, seeking only 127 128 REPORT ON CUBA precious metals, leave greater wealth untouched. As a matter of fact, there is more money to be made from clay than from gold. Clay is more useful. Population The remaining major resource is the population. Many people are needed to produce sugar, which certainly should remain the chief crop so long as demand justifies it. Others are needed to produce the diverse supplementary crops and raw materials which the island can logically and economically yield, both for food and for industrial processing. The balance of the people -more or less-will be those available for industrial activity and public service, and these should be put to the most productive use possible. Primary Objective We must emphasize that we do not mean that Cuban industries should be limited to those using Cuban raw materials, but only that the processing of Cuban raw materials to make them more valuable should be a primary objec- tive, rather than industrialization for its own sake. The best utilization of labor also may be considered as development of a natural resource; and often it is good business to import special materials which will make possible the most efficient and productive application of their talents. Opportunity for Industry The Mission's whole approach to this question is that industry's proper role in Cuba is to provide the most advantageous development of her resources. Thus, if there are unused human resources-a seasonal labor force, for example -they should be regarded as an opportunity for industry, and not as public charges to be disposed of in some way. To consider industry mainly as a means of giving everybody employment is, we believe, approaching the question from the wrong direction; that way leads to deliberate inefficiency, from which no one ever profits in the end. II. CUBAN INDUSTRY TODAY 1. Production Magnitude In the sense that sugar is the main product of the Republic, Cuban indus- trial production approaches in magnitude that of agriculture; for sugar must be not only grown, but processed. Even so, most actual refining of Cuban sugar is done by her foreign customers. Industrial production in non-sugar lines, and in the secondary processing of sugar to finished products, is much smaller. Estimates of the portion of INDUSTRY 129 the national income contributed by this sector range from 10% to 15%, or an aggregate value of around $225,000,000.1 Location While the 161 sugar mills in operation are rather uniformly distributed about the island, there is a pronounced concentration of other industries in the Habana area. A recent tally by the Ministerio de Hacienda showed 8,330 industrial establishments in the Province of Habana, with a combined operat- ing capital declared at $177,400,000. This undoubtedly exceeds the total for the rest of the provinces. Pending publication of an Industrial Directory now in preparation, it may be conjectured that there are in the neighborhood of 12,000 to 13,000 indus- trial plants of all sizes in Cuba, and that their total declared operating capital may be roughly in the neighborhood of $300,000,000. Manufactured Products Leading Cuban manufactures, in addition to sugar, include cigars and cigarettes, rayon fiber, textiles, clothing, shoes, beer, rum, alcohol, fertilizer, soft drinks, certain canned foods, cement, soap, tires and tubes, matches, and a number of others. Among the smaller factories there is a considerable variety of products. The national output of selected commodities in recent years will be found in Table 27. More detailed discussions of these and other Cuban industries have been incorporated in Book X of this Report, and need not be treated here. 2. Seasonal Industrial Activity Permeates Economy 'The widespread seasonal unemployment following the annual sugar harvest is one of the outstanding features of Cuban national life. Cuba has constantly sought the establishment of new industries and agricultural pursuits of a com- plementary seasonal nature to aid in leveling the curve of productive activity. While the problem is frequently regarded as one of employing the unoccu- pied sugar workers themselves, this is actually only a part of the story. During the sugar harvest all domestic business and commerce is catalyzed by the ready flow of wages. Cuban workers spend their money when they get it. But Cuban manufacturers like to get their money as quickly as possible after they have finished making their products. Therefore the shoe manufac- turer does not go on making shoes at an even tempo throughout the year, storing them for the season of heavy sales. Instead, he tries to produce shoes about as fast as they are selling, and calls in his reserve supply of standby I Because Cuban statistics do not distinguish between manufactunog and commerce, this is at best an approinnation. TABLE 27 ESTIMATED OUTPUT OF SELECTED CUBAN PRODUCTS iN RECENT YEARS Products Unit 1946 1947 1948 1949 Sugar Products: Sugar Short tons 4,480,000 6,450,000 6,675,000 5,764,000 Blackstrap molasses Gallons 233,650,000 339,205,000 340,800,000 300,000,000 Alcohol Liters 192,377,000 143,196,000 89,629,000 145,415,000 Foods and Beverages: Beer Liters 81,365,000 84,384,000 99,608,000 96,514,000 Candy (exports) Value n.a. ($4,096,392) ($14,774) ($2,530) Carbonated beverages Cases 17,000,000 20,000,000 21,000,000 19,000,000 Coffee Bags (132.276 lb.) 382,000 589,000 551,000 463,000 Milk, canned Cases 684,000 747,000 694,000 1,000,000 Milk, powdered Pounds 107,000 118,000 113,000 200,000 Peanut oil Pounds 12,000,000 11,000,000 6,500,000 4,000,000 Textiles: Cotton textiles Yards 48,000,000 57,900,000 38,868,000 27,611,000 b Rayon textiles Yards (n.a.) 1,600,000 2,000,000 796,000 Rayon staple fiber Pounds c c c 1,768,000 Rayon filament yarn Pounds c c c 2,022,000 Rayon tire cord Pounds c c c 3,780,000 Tobacco Products: Leaf tobacco Pounds 84,683,000 78,200,000 58,000,000 55,000,000 Cigars Thousands 513,000 590,000 620,000 514,000 Cigarettes Millions 7,059 7,327 7,691 7,808 Miscellaneous: Cement Barrels (376 lb.) 1,414,000 1,626,000 1,676,000 1,837,000 Paint Gallons n.a. 1,139,000 1,233,000 1,271,000 Paper Short tons 23,500 25,000 25,000 24,000 Cardboard Short tons n.a. 3,000 3,000 5,000 Salt Metric tons 65,000 60,000 61,000 66,000 Tires Units 53,000 66,000 59,000 53,000 Inner tubes Units 45,000 42,000 34,000 34,000 Rubber footwear Pairs I 3,740,000 2,560,000 3,056,000 Leather footwear Pairs 9,500,000 10,000,000 8,000,000 5,850,000 Matches Millions 10,491 12,433 12,017 9,331 Soap Pounds n.a. 80,000.000 91,000,000 100,000,000 a Not available. b Incomplete. c Production started September 1948. SouncE: From various sources. It should be noted that some of the foregoing figures are advance esti. mates and do not necessarily correspond with tables referring to individual products. INDUSTRY 131 workers just shortly before the harvest. The same thing happens in the making of numerous other domestic consumer goods. Thus there is seasonal unem- ployment in a great many industries and activities which have no direct connection with sugar, and their busy times are in the same season. Problems of Labor and Credit In a relatively free labor market some of the unemployed sugar workers would offer to work for less during the dead season, rather than remain idle. Manufacturers of other products might then take advantage of lower labor costs by increasing their activities at this time and building up warehouse stocks for later sale. Present attitudes of labor preclude this solution, as will be seen in this chapter and in Chapter 16. The Cuban manufacturer of seasonally-sold goods must, of course, main- tain a plant which is fully occupied only part of the year. Amortization of idle plant capacity thus increases his cost of production. If he could obtain off-season labor at reduced rates (to offset interest charges on unsold product in the warehouse), he would still have a problem of credit. For the average Cuban manufacturer, to carry such stocks of unsold finished goods would call for more investment in inventories than he could manage. Until progress is made in the problems of labor and credit-not just one or the other, but both together-the situation will undoubtedly continue. Under present circumstances a new domestic consumer-goods industry, if introduced to help smooth the seasonal production curve, would probably soon find itself operating most heavily in the busy harvest season with the others. 3. Inducements to Industry Previous Attempts During the past few administrations, and especially in the last six years, the Cuban Government has issued a number of decrees designed to encourage industrial expansion-or equally, to prevent its contraction. Although there were various earlier measures, the most important legisla- tion of this kind has been based upon a law of 1942 which authorizes the President to suspend-wholly or in part-any national provincial or municipal taxes which in any way hinder development of production and supply.2 A 1944 decree undertook to suspend certain customs duties on new industries, but was revoked and superseded by Decree No. 1831 of July, 1945. This offered duty-free importation, for three years, of equipment and machinery required for the establishment of new industries or the execution 2 In the opinion of some persons, such measures as ta!ff protection, quantitative restrictions on specsfic Imports, and pricefirimg should be included in the list of legislative inducements for industrial development. The Mission feels that this is at least debatable, and points to various instances cited in this report so which such measures have worked to the actual detriment rather than benefit of industries. 132 REPORT ON CUBA of public works and public services. Exemptions were applicable only if the imported articles were of types not made in Cuba-a customary provision in all such decrees. In 1943 the industries already favored by Decree 1831 were exempted from these duties for three more years. The privilege, too was broadened to include equipment needed for expansion of the same industrial plants, estab- lishment of branch factories in the same line, recovery of by-products, or even the establishment (by these same companies) of supplementary industrial plants manufacturing products which were not new to Cuba. Also included was duty exemption on equipment imported to effect any spectacular-but not gradual-improvement in the quality of the product, provided that its introduction would not cause any considerable displacement of workers. Simultaneously a separate decree granted a five-year period of customs duty exemption on equipment and parts for new assembly plants in general, and rather pointedly mentioned "vehicles" in a wishful attempt to attract the automobile industry. Preservation of "War Industries" Decree No. 4089 of 1946 was promulgated not so much to attract new industries to Cuba as to keep alive some of those which sprang up under abnormal war conditions. It would seem to apply, however, to quite a few industries which may have come into being through the normal process of evolution, war or no war. For the purposes of this decree, "war industries" are defined as those which started production after September 1, 1939, and have engaged in manu- facturing goods which were not being produced in the country prior to that date. Upon making proper application, and commencing as of the date of its acceptance, such industries were granted a three-year exemption from customs duties on imported raw materials, from specific taxes on domestic raw materials, and from the taxes on capital, stock, and the exportation of money for purchase of materials abroad. Present Inducements The principal piece of Cuban legislation now in force for the attraction of new industries is Decree No. 2144 of August 14, 1945, which was drafted in collaboration with leading industrialists of Cuba who were contemplating further investments at the time. New industries are re-defined as those whose products were not being made in Cuba on the date of this decree. Each such industry desiring the special privileges conferred by the law must make application in the prescribed form and must furnish to the Government details of the enterprise, its inten- tions, lists of equipment and materials required and their sources, labor force needed, and similar information. The application must receive the favorable INDUSTRY 133 recommendation of the Minister of Agriculture, and also that of the Minister of Finance whose resolution is required for its final acceptance. Special Concessions Issuance of this resolution marks the date of reference for application of the special concessions and privileges, of which some begin on that date and others when production begins or a maximum of eighteen months later. These include: (a) Three years' exemption from: all customs duties and charges on machinery, equipment, and construction materials which must be imported; taxes on the exportation of money for buying such items; and taxes on the transfer of real estate and property. (b) Six years' exemption from the regular taxes on loan interest, capital, stocks, and excess profits. (c) Ten years' exemption from: customs duties and charges on imported raw materials; taxes on the exportation of money for the purchase of these raw materials; and specific taxes on domestic raw materials purchased. (d) Ten years' exemption from the general profits tax, in proportion to the percentage (by value) of the industry's total raw materials which are of Cuban origin, and provided that this amounts to at least 33.33% . (e) Authorization to deduct as depreciation and for the purposes of the payment of the general profits tax, an annual 20% of the total value of fixed assets, during the five years following the first two years of operation. To prevent unfair advantage, once a new industry has qualified under this decree, other enterprises of the same kind starting later can obtain the same privileges during the unexpired portion of the time already granted to the first enterprise. In other words, all such exemptions in a given type of industry will terminate on the same date, although they may have begun at different times. Results to Date These efforts have met with some success. Under Decree 2144 concessions have been granted to 36 new industrial concerns to date.3 The most important new enterprise in the list is Cuba's large and modern rayon plant; among the others are factories making various food products, chemicals, fertilizer, insecticides, sandpaper, jute sacks,4 and wire products. 3 Four of these have since been annulled for one reason or another. A few others are not really separate industries but are essential components of the same enterprise, incorporated separately for legal reasons. a This company does no spinsng or wearig of jute. Its sacks are made only by cutting and sewing imported burlap. 134 REPORT ON CUBA A significant additional one, soon to be constructed, is a mill for the produc- tion of wheat flour, breakfast cereals, and animal feed. One of the major purposes of the Cuban Government in legislation of this kind is expressed in the preamble to Decree 2144, which states that the nation's agriculture is now limited by the lack of national industries able to use as raw material the products of the Cuban soil. Similar statements appear in the earlier decrees. Failure to Use Cuban Materials In this respect, unfortunately, the legislation has been a notable failure up to the present. Despite the attractive tax concessions, the forces which tend to discourage development in this direction have shown themselves to be stronger. Only a few of the new industries mentioned are using any appreciable quantity of Cuban materials; these few are not the bigger ones, nor are they all agricultural. The more important enterprises in rayon, chemicals, fertilizers, and wheat milling, as well as many of the smaller ones, are primarily dependent upon imported raw materials. There is room to believe that this result may have been realistically anticipated, for the longest period of duty exemption offered by Decree 2144 is that on foreign raw materials. New industries attracted by these decrees have not always met wholehearted welcome. Influential importers and handlers have not been overjoyed by the prospect of domestic manufacture, and in certain cases have successfully opposed it. One of the most important enterprises mentioned above- unquestionably a new industry for Cuba-fought unexplained Government delays and red tape for two years and was finally qualified under Decree 2144 only by the personal intervention of the President. Conflicting Pressures In analyzing the over-all effect of these legislative inducements to new industry, they must be considered in contrast with other existing forces in Cuba. Industries already established are beset with labor troubles, almost insurmountable resistance to modernization, and similar problems. Growth and improvement of an existing Cuban industry may be blocked by its present members, who are sometimes even supported by the Government in their opposition to anyone else entering the same field with a new and better factory. Quota restrictions and other legislation seem to support a belief that the ultimate desirable size of a Cuban industry is that which will exactly supply the present domestic market, with the result that the creation of surplus production at lower costs for exportation is made extremely difficult. INDUSTRY 135 In short, it is not easy to see how further investment in many present Cuban industries could be made less attractive. Meanwhile, broad tax conces- sions are made available to any industry which is entirely new to the country. New Industries for Old Inevitably, the effect of this combination of circumstances is to encourage a switch of Cuban non-sugar industrial production from whatever exists now to whatever does not exist. Not only can new investors be expected to go into entirely new lines, but already there is evidence of this change-over on the part of present operators. If present conditions continue, still more of the older industries may be left behind to die, while the advent of new ones will give a false impression of growth. There is no net gain to the economy and it is significant that, in the midst of a small flurry of new industries during the past few years, Cuban total industrial production appears to have decreased. 4. The Handwriting on the Wall A Disappointing Picture Annual economic reviews for recent years present a disappointing picture of Cuban industrial development. It is evident that the Government's efforts to build industry have been unable to offset opposing internal forces. Apart from this, of course, domestic industrial output is still governed by sugar prospects and the level of economic activity in the major industrial countries. No Inspiration to Development The policy of the Cuban Government, during 1948, 1949 and 1950, of - holding wages at no less than the highest level reached, despite falling con- sumer demand, is having the effect upon industry that would be expected. While domestic industrial output decreased in 1949, tiere was no significant drop in industrial employment. This can only mean lowered worker-produc- tivity-which certainly is no inspiration to development. Indicative Trends The 1949 decline was indicative. While production of a few things such as alcohol, cement, soap and canned milk increased, there was a 27% drop in shoe output, 30% in leather, 38% in vegetable oils, 10% in tires, 83% in exportable candy (whose production was 162 times as great in 1940), 17% in cigars, 22% in matches, and appreciable decrease in the output of beer, soft drinks, paper, canned foods in general (except milk) and various manufactured articles. In the textile industry three mills closed-two of which represented about 60% of the country's rayon flat goods output. 136 REPORT ON CUBA Workers Demand Lower Productivity The Mission found 1950 trends a natural continuation of these processes, although in the final months the Korean war caused some recovery in textiles and certain other lines. With labor still making wage demands, it is believed that in many cases they have reached the limit that employers will tolerate. Workers are now pressing for lower productivity, as well as for shorter hours, increased benefits, etc. A few new industries (e.g., the flour mill) are being established. But many existing industries are refusing to expand, or in a few cases are expanding reluctantly; at least one major company refuses to install equipment already on hand. A few are attempting to sell out. Several foreign companies have already withdrawn; a few others, attracted by the special tax concessions, have investigated the Cuban possibilities and decided not to enter. An attempt to analyze the causes of this situation, and to suggest a few remedies, appears in the succeeding pages. MI. FACTORS INFLUENCING INDUSTRIAL DEVELOPMENT 1. Capital and Credit Little Desire to Invest in Industry Cuban capital would appear to be plentiful, but there is very little desire to invest it in domestic industrial activity at present. Whatever may be the moral issues involved, the plain fact is that the investment atmosphere has become so unpleasant that foreigners do not care to bring industrial capital in, and the Cubans themselves prefer to send theirs outside or to put it into real estate. There is a growing tendency to shy away from new enterprises which use much labor, while in the existing industries there is trouble with labor in introducing labor-saving capital machinery. Outside of the sugar industry there is very little bank credit available for industrial development and expansion. Commercial banks tend to confine their ordinary industrial operations to the short-term financing of raw material purchases, and are seldom interested in participating in the acquisition of new production machinery. This, if done at all, must be handled out of the avail- able cash of the industries or of their owners. Replacement of Equipment It appears that maintenance and replacement of capital equipment are not properly considered in Cuban industrial accounting. Much industrial machinery is allowed to deteriorate while funds which should be set aside for its replacement are taken out of the enterprise. Many Cuban capitalists, therefore, with a desire for large quick profits, are probably deluding them- selves that they are getting them. As a general characteristic (to which, of INDUSTRY 137 course, there are numerous exceptions) the returns from a given Cuban industrial enterprise are not reinvested in the same enterprise when expansion is indicated, but are put into another which is then handled in the same manner. Credit for Raw Materials Meanwhile, the industries themselves often find it necessary to extend credit either to their customers or to their suppliers of raw materials, or both. Slaughter houses must finance the retail butchers who buy from them. Creameries provide cream separators to the numerous small dairymen who supply their plant. Perhaps it is safe to say that most Cuban industries dependent upon agricultural crops must advance crop loans or otherwise finance the farmers, unless they operate their own plantations. The same practice is necessary in a few non-agricultural industries also. The system does not work too well. Neither party is satisfied. Fruit and vegetable canneries, in order to assure themselves of a crop, advance to the farmers seed, fertilizer and cash. They complain that the farmer accepts these things, raises his crop, and then often sells it to a com- petitor. Fish canneries assert that they finance some of the fishermen, who then take their catch from wharf to wharf until they get the best, price. The farmers and fishermen defend their actions with the claim that the canneries, after financing them, want to pay too low a price for the goods. Probably both are right. Lack of Confidence-an Example Mutual lack of confidence-rooted in a long history of bitter experience- appears to be the cause. A case which illustrates this is that of a recent tomato venture. A large new canritery undertook to fill an order which required considerable quan- tities of vine-ripened tomatoes for the pack. Since Cuban farmers were accustomed to picking their tomatoes green, the foreign investors in this concern went to some expense to help them adjust to the new conditions. In addition to advancing loans, seed and fertilizer, the cannery brought to Cuba an outstanding tomato expert to advise and assist each farmer until harvest time. But when the tomatoes reached the green stage at which they had been picked in the past, the farmers were afraid to let them ripen. Green, they could be sold anywhere; ripe, only the new cannery would buy them and perhaps they would not! To be sure, the cannery had pro'mised, and had paid for seed, fertilizer and technical help, but who could tell? A delegation of the farmers called upon the cannery and laid down an ultimatum: it was time to pick tomatoes and they were going to pick them 138 REPORT ON CUBA green; if the cannery wanted them it could buy them. Thus the venture ended, and the cannery is no longer in this business. In cases such as the above, the Cuban lender can do little to enforce the terms of his bargain. Nothing is really mortgaged, for confidence in mort- gages has been destroyed. This and other aspects of the credit situation have caused great hopes to be expressed for the success of the government-spon- sored Agricultural and Industrial Credit Bank, described and discussed in Chapter 29. 2. Labor Effects on Industry No discussion of industry can neglect the efects of labor conditions upon the industrial investor or employer, who must be guided by practical opera- tional flexibility and costs. A broader discussion of the entire Cuban labor problem is presented in Chapters 16 and 17, which include discussion of its history, economic significance, viewpoints of both worker and employer, and recommendations.5 By all evidence, the Cuban worker can be one of the nation's greatest resources. He learns routines and procedures quickly and retains them. He is ingenious and acquires mechanical skills easily. As an individual, he can be cooperative, understanding and enthusiastic. He is capable of high pro- ductivity. The Cuban has an unusually developed sense of respect for the dignity and self-esteem of those around him, and naturally expects the same in return. Perhaps such training may react a little bit to his own disadvantage at times, because it weakens his determination fully to exercise such supervisory respon- sibilities as may be thrust upon him, and tempts him to take the easy way out of an unpleasant or embarrassing situation. If so, it may have contributed to the poor discipline and low worker-productivity which unfor. tunately prevails. Pendulum Swung too far There is no doubt that Cuban labor has been badly exploited in decades past, and that an eventual swing of the pendulum was to be expected. How- ever, what started as a movement for the recognition of the fair rights of labor during the years just preceding the Cuban Constitution of 1940, has since developed into a pyramid of excesses which threatens to liquidate many of the country's productive assets. Organized labor's lack of responsibility was illustrated by the costly nation- wide general strike, called on October 27 of 1950 by the Cuban Confederation I The reader who is interested in the complete background of this subject is referred to the well. documented treatment of the evolution of the Cuban labor movement, its causes, constitutional provisions, legislation and decrees up to 1947, appearing in the M.A. Thesis of Barbara Ann Walker, submitted to the University of California in July, 1947. INDUSTRY 139 of Workers, for no other announced purpose but to protest the formation of a similar Confederation of Employers. Present Attitude The Constitution of 1940 commits Cuba to the resolution that labor is the inalienable right of the individual, that the nation must assure employ- ment to all, and that every worker must be guaranteed acceptable economic conditions. When the Constitution was drawn an attempt was made to estab- lish labor as "the inalienable right and duty of the individual", but as a matter of record the word "duty" was voted down.6 Other portions of the Constitution and much of the subsequent legislation appear to give support to this principle. Where there is any doubt about it, such support has been given by the courts. Summary of Principal Labor Laws The actual wording of a good deal-though not all-of the labor legisla- tion is reasonable, even if it is somewhat arbitrarily administered. The following are some of its most important provisions and characteristics: 1. Minimum wages are established from time to time, and a portion of the wage is protected against attachment. 2. Equivalent wages must always be paid for similar work. 3. Wage claims against employers have priority over all other claims. 4. No deductions can be made from wages except those specifically authorized by law. 5. Wages must be paid in legal tender. (Payment in merchandise, or in credit slips good only at a company store, are thus excluded.) 6. Social security provisions include retirement pay, death pensions, and insurance against accident, disability, old age, etc. 7. The maximum working day is of eight hours. 8. The maximum working week is of 44 hours, for which the worker is to receive 48 hours' pay. 9. Workers and apprentices must be over 14 years of age. 10. Workers are guaranteed one month of paid vacation every year, as well as pay for certain national holidays. 11. While a worker is on his paid vacation the employer must hire another to fill the vacancy. (The aggregate effect of this and several other provisions plus legal sick-leave is that, out of a possible 313 working days, the employer must pay the worker for 63 days on which no work is done. This has been too much for some businesses.) e Walker, op. cit. 140 REPORT ON CUBA 12. Married and unmarried women must be accorded equal treatment and working conditions. 13. Women workers must be excused six weeks before and after child- birth, are paid for this period out of a maternity insurance fund, and must be reemployed. 14. Workers have the right to form unions and to strike. Members of "university" and "non-university" professions are required by law to form associations, and these are charged with establishing the require- ments and qualifications for practice of such professions. 15. In general, the right to work is limited to native-born Cubans. On the other hand, distinction as to race or color is prohibited. 16. The worker cannot be discharged without just cause. (Actually it is difficult or expensive to discharge an employee for any reason.) 17. Employers may not move their factories to new locations without Government permission. Thus, an employer cannot move his opera- tions to take advantage of the more satisfactory or lower cost labor force elsewhere. If he is allowed to move, he must pay at least the same wages in the new location. 18. Numerous laws and decrees have grtinted arbitrary blanket wage in- creases, not only with respect to minimum wages, but as percentage increases of all wages. Other decrees have similarly affected wages in specific industries. 19. Some wage decrees have tied wages to a cost-of-living index or a commodity price. (As in other countries, experience has already demonstrated in Cuba that these are enforced when wage adjustments are upward, but nullified when the indicated adjustment would be downward.) 20. Wage rates are sometimes decreed for specific types of piece work. 21. Government and judicial policy has been established to the effect that if a company is economically unable to pay the legally required wage, it should not be in business. Labor Contracts The law defines the form of contracts between labor and employer and the provisions which must be included; and renders them void if they violate any of the established rights of labor. If the business changes hands, labor contracts remain in force and all original provisions are binding upon the new owner. They can be terminated by the total and final liquidation of the industry or working center, but only if such liquidation is previously author- ized by the Secretary of Labor. They can also be terminated by force majeure, provided that the existence of such force is declared by the Secretary of Labor. INDUSTRY 141 Although the form of such contracts is disproportionately weighted in favor of labor, employers accept this condition with resignation. They com- plain, however, that the Government holds them rigidly to all provisions with severe penalties for the slightest infraction, while labor may violate, renounce, or completely ignore any of its contracts at any time without penalty or inter- ference from the Government. As a protection to themselves, most employers regard a Cuban labor contract as valueless. Apprenticeship For the most part, apprenticeship contracts involve the same provisions as do regular labor contracts. However: (1) an apprenticeship agreement can be terminated in the first six months by free will of either party; (2) in view of the age limits (14-21) of the apprentice, the employer is bound to certain reasonable additional responsibilities for his health, teaching, moral conduct and general care; and (3) an apprentice becomes a regular employee automatically (and his contract becomes a labor contract) when (a) he reaches the age of 21 and has been with the employer at least two years, or (b) he has completed three years of apprenticeship, or (c) if his wages are paid in any way other than by a fixed periodic sum (if piece rates are paid, for example). Apprentices are subject to minimum wage provisions, and cannot be paid less than the minimum rate established for apprentices in the zone and particular classification of industry. Although there is considerable variation, in some cases these rates are as high as those of regular workers. Apprentices Avoided Machine shops, railroad maintenance shops and the like complain that they have to pay an apprentice-machinist just as much as they do a fully- trained man. They point out that there is a gamble in taking apprentices, since they may not turn out well in every case, yet cannot be discharged after the first six months. Under the circumstances they prefer to avoid apprentices and confine themselves to hiring men away from other shops or from the sugar mills. The latter, particularly, as Cuba's largest industry, provide fairly broad opportunities for a man to acquire some experience in shop work, and in the last analysis probably constitute the country's principal source of such workers. But this is a slow and uncertain process at best, and cannot supply the number of trained men required for any real industrial expansion. Graduates of the country's practical trade schools should be able to help fill this gap, but are strongly discouraged from doing so by the sindicatos' reluctance to admit them to practice on other than an ordinary apprentice- ship basis. 142 REPORT ON CUBA Wage Rates In a decade or less, Cuban wage rates for most workers have risen about four-fold. The present range for ordinary and semi-skilled labor in various industries is roughly from $3.00 to $7.00 per day, with numerous exceptions and special rates in certain lines. Tire builders in Habana receive $7.50; one classification of crane opera- tors gets $8.40; Manzanilla machinists, with or without experience, are paid $13.00. In the sugar mills, samplers draw $4.67; weighers, $7.15 to $7.69; helpers, $5.85 to $6.04; general mechanics, $10.71; gas welders, $11.12; foundrymen, $15.57; shop foremen, $12.97; a chief electrician-among the highest paid-receives $23.36. These are basic wage rates, to which must be added a number of social security taxes and other special charges which vary with the industry. In all but the sugar wages given above there must also be added 9.09% to give the worker the legally required 48 hours' pay for 44 hours of work. The sugar wages as listed above already include this. Example of Labor Costs The following breakdown is a typical calculation of labor costs (the example is the cost of placing an automobile aboard ship): Regular Time Overtime Basic wages $13.80 $27.60 9.09% adjustment (48-44) 1.25 2.51 Vacation pay 1.37 2.74 5% retirement fund 0.82 1.64 1/2% labor maternity 0.08 0.16 7% labor insurance 1.15 2.30 Total. . $18.47 $36.95 Some Employers Desperate It is perfectly natural, of course, for labor to continue to press for even higher wages especially in a period of rising prices. Under pressure of collective bargaining we would expect these efforts to succeed gradually, as long as the demands were within the economic ability of the employer to pay and still retain an incentive to stay in business. That they have reached this limit in some cases is attested by the fact that government intervention for the settling of wage disputes-originally intended as a protection to labor-is now practiced increasingly at the specific request of the employer.7 Considering the Government's recognized pro-labor attitude and its fre- quent decrees raising wages without regard to actual costs of production, In many lines, wage increases up to 40% have been granted fairly recently. Notweithstanding this, demands are being made ior further increases in these and other industries. The current custom is to ask for 40%. although at least one group io the lienequen industry is demanding a three-fold increase. Settlements actually range from 10% up to a full 40% granted in October, 1950, by a coffee roasting plant. INDUSTRY 143 productivity trends and market conditions, this action of employers in volun- tarily opening their books to government interventors may be viewed as a final desperate appeal to reason. Piece Rates Piece-rate payment for labor, where it has been introduced, appears to operate very successfully in Cuba, except in the ports, where excessively high rates are combined with work-stretching measures to make costs prohibitive. In industry the rates used have been fair as a rule, and the workers have made considerably more money this way than under a daily wage basis. At the same time the employer has benefited through increased production, and has had no difficulty in justifying the higher payments to his workers. Cases in which the voluntary daily production per man has doubled upon introduc- tion of piece rates are not uncommon. In some industries, such as soap and tires, the workers have had "norms" established for each job, set by agreement with the employer and supposedly representing a normal day's production for the worker. In such cases any production beyond the norm is paid on piece rates or as overtime. Since the norms are remarkably generous to the worker (often little more than half of what he can really do), he can earn quite handsome pay if he is willing to do a full day's work. Unfortunately, since this gain is achieved through the worker's own conscientious efforts and not through organized demands, some labor leaders may have felt that such practices undermine their own prestige. In several instances they have caused these incentive methods to be dropped, with consequent lowering of the take-home pay of the workers. Resistance to Modernization Cuban industrial development has been greatly retarded by labor's resist- ance to new machinery, modern methods, or virtually anything that will increase the efficiency of production. There is hardly an industry in Cuba that has not been affected by this, and to some it has been positively disastrous. Cuban cigar makers have successfully opposed the introduction of machin- ery which would replace the laborious hand rolling. As a result, with rising wages, the costs of production have increased to the point where the once- famous Cuban cigars have virtually disappeared from many of their old export markets. Some important textile mills have actually been forced out of business, and others have been saved only through Government interven- tion. Some sugar mills are unable to take full advantage of new mechanical developments for loading, unloading and handling sugar-bags. There is not much uniformity in the types of new development that are resisted; the policy seems to be to retain the status quo, whatever it may be. Thus, labor accepts machines and modern methods which were already in use 144 REPORT ON CUBA in a given place before they began their excessive demands, but anything additional is automatically blocked. One factory will be found using the very machinery that the workers in another similar factory refuse to allow. Productivity Frozen When improved methods or machinery are introduced into a factory with permission of the workers, it is generally under the stipulation that the same nusiber of workers be employed as were used under the older, inefficient method. The workers also commonly see to it that the new equipment turns out no more products than the old. As an illustration, a Cuban tire factory possesses several tire-building machines, one of which is of a new design and allows the operator to turn out twice as many tires as the older machines without the expenditure of any more time or effort on the part of the worker. In practice, however, it is found that the new machine is making exactly the same number of tires as the older ones do. Noodle-twister Sabotaged Other examples are numerous. Candy-wrapping machines in Habana are operating at the lowest possible speed. In one cordage mill the equipment turns out 60% of its rated capacity of product. A large soap company bought a mechanical feeder designed to serve two machines at once, then was forced to install one such feeder on each separate machine instead so that two attendants would be required. Cuban noodles are sold in little twists that are coiled by hand. One manu- facturer bought a modern unit which not only made the noodles but delivered them already twisted. His workers protested, and the machine was repeatedly sabotaged until he agreed to operate it with the twisting mechanism removed. Policies Harm Labor Another industry furnishes an excellent example of how these policies hurt labor itself. In recent years there has been an enormous increase in the Cuban consumption of crackers. The domestic cracker industry-established for 70 years-should therefore show a boom in sales and production; instead it is diminishing, to the consternation of its workers. Cuban crackers, manufactured in antiquated bakeries, cannot compete with imported crackers, which increased in volume 14.5%o in 1946, 95.2% in 1947, 320.6% in 1948, 376.4% in 1949, and 459% in the early months of 1950. Thus resistance to modernization-through the fear of the workers that it might displace some of them-may eventually displace all of them. Right Way to Make Crackers An attempt to solve this difficulty by tariff adjustments would defeat itself by raising the price of crackers and thus reducing their consumption; and a INDUSTRY 145 subsidy would only pass the burden back to the Cuban people in another way. Obviously, the right way to make crackers is the best way, and no amount of legislation can alter this simple fact. The figures show clearly that if this Cuban industry had been permitted to lower its unit production costs enough to satisfy this greatly enlarged home market, it would be employing more workers today with efficient equipment than it is able to do at present with its old methods. Featherbedding Where a new machine is to be introduced, workers are not satisfied with the mere retention of employees who might otherwise be displaced, and their transfer to other useful work in the factory. They have generally insisted that the displaced workers be retained in the same department, even if there is nothing for them to do there but to watch the machine and draw their pay. If there is other work that they might do, the sindicatos have required that the employer hire additional laborers for it. It has been judged that gantry cranes at Matanzas and Habana do work which would otherwise require four winch operators; therefore in each case four men are paid, although only one operates the crane. This sort of thing, together with the difficulty of discharging a worker for any reason, has brought about the "featherbedding" of a great number of workers throughout Cuban industry. One railroad estimates that 40% of its payroll is for work not performed. Before the Government came to the assistance of a textile mill to prevent it closing its plant, it had nearly a thousand extra employees. Port Labor Costs It is in the seaports that labor's attitudes interfere most seriously with nati6nal development. The cost of loading and unloading merchandise at Cuba's seacoast frontiers is sometimes so great that businesses find it impos. sible to operate, while others do so only by charging high prices to the consumer. Unreasonable port costs which must be added to the final prices of some export products effectively bar the export of these items from Cuba. It has been suggested that certain types of processing-in.transit (such as manufacturing Honduras hardwoods into furniture for shipment to the United States and elsewhere) would offer a partial solution to Cuba's seasonal labor problem. But the necessary double passage of the materials through Cuban ports makes it most doubtful whether such plans would be feasible under present circumstances. The pay of these port workers is based upon the particular commodity being loaded or unloaded and instances are reported of individual workers receiving $40 to $50 per day for handling sugar, and $64 a day for loading cordage. 146 REPORT ON CUBA Effects on Costs The plea that a worker does not get this much every day is no defense,' for the situation must be judged by its net results: It costs more than $3.00 per thousand board feet to transfer lumber from a boat to a flat car alongside. Stevedores now charge $18.47 to load an automobile aboard ship in Habana on regular time, and $36.95 on overtime -the same job costs $2.00 in Miami, Florida, with no increase for overtime or holidays.9 Phosphate rock-according to importers-is loaded in the United States for $0.35 per ton and carried to Cuba for another $2.50; but upon arrival it costs $2.82 per ton just to unload it from the boat to the dock. At the time of the Mission's study there was a small shipment of adver- tising safety matches abandoned on one of the piers, as the $134.70 demanded by the stevedores and longshoremen for handling this consignment made it uneconomical to claim it. One company attempted to unload bulk cement by the usual method of pumping, and was forced to hire 38 men at double pay because that number would have been required if the cement had been unloaded by hand in sacks. Another company making installations for the milling of wheat flour has felt it necessary to abandon plans for unloading its bulk wheat by the cus- tomary pneumatic method, and will use a gantry crane instead because the "featherbedding" for this type of equipment involves only four men in contrast to the preceding example. Laws to Stretch Work Not only are the rates of payment high, but the laws governing port labor contain a myriad of detailed provisions for dividing and stretching the work as far as possible. A few selected items from the regulations of the port of Habana illus- trate this: 1. For each gang or hatchway of a boat, six men shall be employed as a minimum in the work of the hold alone. 2. In work done on a piece-work basis eight men shall be employed in each gang for the hold. 3. A sling of sacks cannot contain more than seven sacks of rice. 4. Once the hatches have been opened, the stevedores shall be under- stood to have earned a half-day's pay; and if the hatches are opened by the crew of the vessel, the stevedores shall be understood to have earned a half-day's pay as soon as the first sling-load is lifted. 8 Although undoubtedly true. There are more port workers than necessary at present. 9 Fr ths reason, these workers strongly oppose the idea of a Cuba.Florsda auto ferry fot toutist travel. INDUSTRY 147 5. On colliers and vessels carrying chemicals or paving block in bulk, there shall be employed at each hatch not less than three buckets, with two men to each bucket, and a hooker at each hatch. In case the buckets have a capacity greater than one-half ton but not more than one ton, three men per bucket shall be employed, with one hooker to each hatch. 6. Regarding the handling of cargo and packages in hand trucks, etc: " . . . jerked beef, small, 2 bales, 1 man; bales of jerked beef, the weight of which is from 200 to 225 pounds, 1 bale, 1 man; bales of jute of 300 kilos or more, 1 bale, 2 men; bales of hops, up to 150 kilos, 1 bale, 1 man; bales of large size, exceeding 200 kilos, 1 bale, 2 men; bales of dried leather and skins, the weight of which is not greater than 200 kilos, 1 bale, 1 man; . . . kegs of wine, rolled, 1 keg, 2 men; hogsheads of olives, vermouth, and crockery, rolled, 1 hogs- head, 2 men; . . . etc., etc." 7. For crates of fruits or vegetables, three men shall be employed in each gang for either loading or unloading the lighter, provided the latter's capacity is not greater than 250 tons. Exception is made of pine- apples, for which one more man shall be employed in each gang. If the lighter has a capacity of more than 250 tons, four or five men, re- spectively, shall be employed, according to whether it is a question of fruit, vegetables or pineapples. Compulsory Shipment by Boat Laws have been passed requiring the local shipment of certain goods by boat, and even specifying the ports from which they must be shipped, in order to guarantee that the port labor will get the work of loading. Raw sugar being shipped to a refinery would normally be loaded in bulk; but in Cuba it must be sacked, so that the port workers can carry each sack to the ship's hatch, open it and pour the contents into the hold. A lumber company located near one seaport receives logs by truck or rail from other parts of the island; but if the port workers' sindicato decides that a given shipment could have been moved by boat instead, the company is obliged either to engage p,rt laborers to unload it or, in any case, to pay the established port labor rate. The Habana Seamen's Union has recently asked the Government for a decree to prevent the movement of sand into Habana by truck directly to the user, and to require that all sand from the interior be deposited at seaports for water shipment. Difficulty of Discharging Workers Most employers and independent observers believe that much of labor's entire attitude is based on its virtual immunity from discharge. Employers 148 REPORT ON CUBA in Cuba are not adverse to giving the worker ample protection in his job. They would be willing to pay discharged employees a fairly heavy indemnity or severance-pay, perhaps based on length of service as is done in many other countries. But to be forced to retain a disloyal, useless, or even dis- honest employee is too extreme. The fact that, for all practical purposes, an employee in Cuba cannot be discharged has a ruinous psychological effect upon him. It destroys his initiative and incentive, and makes him feel irresponsible. Effect on Supervisors Worst of all, this extends to employees in the supervisory positions. Many Cuban employers have learned that a good percentage of the labor trouble can be averted through the maintenance of good human relations with their employees. But this function falls largely to the supervisors, and, if-occasionally-some of these are poorly chosen, much tr6uble can result. Since many of the supervisors themselves are harmed psychologically by the protective aspects of the law, a Cuban company can develop a good set of supervisors only by a process of weeding and replacement more exten- sive than would have to be practised elsewhere. Yet this is impractical, for Cuban management finds that it cannot remove the worthless or dangerous supervisors by either discharge or transfer, unless by extra-legal methods. Theory and Practice From an examination of the law itself, it would appear that an employer has ample recourse to dismissal in cases of unsatisfactory workers. The law (specifically, Article 61 of Decree No. 798, April 13, 1938) clearly de- fines 14 permissible causes for discharge of a worker by his employer, including such things as unjustified absence from work, fraud or abuse of confidence, ineptitude, negligence, habitual drunkenness, insubordination, continued voluntary slowdown, crimes against the enterprise, etc. In practice, however, employers maintain that the situation is quite different. The many factories and enterprises visited by the Mission reported a remarkable uniformity of experience. e One employer stated that he had made 60 appearances before the labor courts without a single favorable decision. In a period of six years, another company was said to have filed 200 applications for permission to discharge workers for cause and did not succeed once. It is difficult to describe the extent of this alleged one-sided interpretation of the law and its practical effect on business without the use of concrete examples. A few actual cases, reliably reported to the Mission as by no INDUSTRY 149 means unusual, will illustrate a situation which may tax the credulity of the reader: Case of Disgruntled Hosiery Worker Case 1: In 1938, a textile worker in Company A became disgruntled and insubordinate. Upon being warned by the employer, he showed his defiance by seizing a pair of shears and deliberately cutting up the hosiery that was being manufactured. He was given formal notice of discharge in accordance with the law. During the ensuing days, while the case was awaiting process by the labor court, he came to the factory regularly and outraged the female employees by depraved exhibitions. The employer had these acts duly wit- nessed and photographed. With the amount of evidence available, the labor court supported the employer. The man was discharged, and shortly afterward found other regular employment. Four years later, he appealed the case, but the original decision was upheld. Thereafter, at intervals, the worker pressed the series of succes- sive higher appeals provided by the law, but without altering the earlier decision. During this time the plant changed ownership. Eight years after the event, the final tribunal decreed that the worker (who had been profitably employed elsewhere all this time) had been punished enough. It ordered the new factory owner to reinstate him and to pay him full- time back wages amounting to $16,000 (actually more money than he would have earned had he not been discharged). The desperate employer laid the case before the President of the Republic, who adjusted the matter by cancel- ling the cash payment but ordering the worker reinstated anyway. Pay for Prison Time Case 2: Several workers in Company B entered the factory at night and committed acts of vandalism and sabotage on the production machinery. They were caught, tried, convicted and sentenced to a penal institution. At the same time, of course, they were discharged by their employer and the dis- charge was upheld by the labor court. Two years later, these workers - now freed - appealed the decision of the labor court and won. The employer was forced to reinstate the men in their original jobs and to pay them full wages for the elapsed time, including the time spent in prison. Asleep on the Job Case 3: A worker in Company C developed a reputation for defiance and "soldiering", and was warned repeatedly. One day he was found sleeping on the job. Numerous witnesses were available, and to provide incontro- vertible evidence, photographs were made. 150 REPORT ON CUBA The usual discharge proceedings were instigated. The worker did not deny his identity in the photographs. The labor court ruled, however, that while the evidence showed the man to have been reclining, it did not prove beyond all possible doubt that he had been asleep. Therefore, since it was considered that the full charge against him had not been proved, the case was dismissed and the employer was ordered to retain the worker. The Man Who Stabbed His Wife Case 4: An employee of Company D was subject to fits of such uncontrolled rage that he was considered an actual menace to other people. In one of these rages he once stabbed his wife, although not fatally. His removal from the plant was considered urgent by his wife, by other workers in the factory, including his own sister, and, of course, by the management. Unfortunately, he did not want to leave and had not yet committed any specific act on the premises which would satisfy the labor court as valid reason for dismissal. Seeking a solution, the management finally discovered that he always yearned to drive a taxicab. At a cost of $600, a second-hand taxi was bought and presented to him in exchange for his letter of voluntary resignation. Photographed with the Loot Case 5: A maker of textile fabrics discovered that a certain employee had been systematically stealing quantities of cloth for several months. Knowing the difficulties of discharging a worker, the employer set up a rather elaborate watch on the man in order to catch him in the act and to secure the required evidence. It was found that his method was to take the cloth to the washroom, wrap it around his body under his clothing, and walk out of the plant gate with it at closing time. When the thief's pattern of operations and timing had been fully estab- lished by repeated secret observations, the stage was set to trap him. On a day when he was known to be carrying stolen cloth, he was met at the plant gate by a delegation of police, labor and management representatives, photog- raphers and other witnesses. He was searched and his loot removed in front of cameras to insure his conviction for theft which would be necessary in order to discharge him legally. He pleaded guilty, claiming that it was his first offence, and there seemed to be little doubt of the outcome. But the court, taking into account the fact that his conviction would give the employer grounds for his discharge, ignored his admission of guilt and dismissed the case. INDUSTRY 151 Case of Nonplussed Employer Case 6: The law requires that the employer must begin discharge proceed- ings by notifying the employee of his dismissal in writing. The courts have required that the employer present this notification, countersigned by the employee, as evidence that the employer has complied with the regulations. Factory Manager E, who claims that his case is not unusual, tried to follow this procedure but found the worker unwilling to acknowledge receipt of the notification. After 15 days of such attempts the nonplussed manager consulted the labor office for assistance. But there he was told that they could not consider his request for help because he had not yet shown that he had notified the employee properly. The employee is still on the payroll. Case of Imaginary Accountant Case 7: Prior to 1932 a woman had been employed by a Cuban company as Chief Accountant. In 1932 she was elected a Director and Treasurer of the company. Under this company's Articles of Association, the Treasurer is a Director and elected by the stockholders, and the Treasurer's duties include responsibility for the company's books. In 1945, for sufficient reason, she was dismissed. But this was done without the elaborate administrative procedure provided for workers because, under the law, the woman's position was not that of a worker but of an officer of the company and a "responsible representative" of the owner. The matter was protested and in 1950, after a long series of appeals, the final Court of Constitutional and Social Guarantees upheld an original ruling of the Minister of Labor made in 1946. This was to the effect that, while the company could not legally be required to reinstate the woman as a Director and Treasurer, she was nominally in charge of the company's books, and therefore must be restored to the position of Chief Accountant which she had held prior to 1932. As Chief Accountant she would be classified as a worker and, therefore, subject to this social legislation. Yet in this case the office was a purely imaginary one at the time as there was no. Chief Accountant included on the payrtll. Nevertheless the company was ordered to reinstate the employee. Dishonest Filling Station Worker Case 8: A petroleum company discovered that one of its filling-station employees had been systematically stealing and short-changing customers over a long period of time. The total amounted to thousands of pesos. When a company inspector privately confronted him with the evidence, the employee admitted the practice but pointed out that he could not be dis- charged for it because there were no witnesses and he would refuse to confess it in court. 152 REPORT ON CUBA He intimated that he saw no reason to change his ways, and defied the company to do anything about it. If the company really felt strongly about the matter, he said, he would be willing to resign for a price of $10,000. The manager of the company ordered that the organization must discharge this man for cause, even if it cost $50,000, since failure to do so would set a terrible example to others. In this case the discharge was successfully accom- plished by the payment of an established fee to a firm of lawyers having unsur- passed political connections through family ties. Right to Discharge Essential The Mission feels that the right of an employer to discharge unsatisfactory workers is necessary to the successful conduct of any enterprise. It is also a right without which very few persons can be expected to contribute to the national industrial development through the establishment of new enterprises. From the standpoint of labor itself, it is one of the main guarantees to the good worker that he will be required to do no more than his fair share, and that he can be properly rewarded for outstanding efiort.10 To deprive the employer of this right is to encourage poor work, and thus to jeopardize the very existence of the enterprise upon which the worker depends for his living. Attitude of Workers Among the workers there seems to be a belief that labor will benefit in some way by anything that will give the employer less for his money, regard. less of whether labor itself receives anything more. This is accompanied by a credo that there is only so much work to be done in Cuba, and that this limited supply of work must not be used up too fast or by too few people. The worker's general ignorance of the economic facts-of-life is one reason for the trouble. This condition, first exploited by the Communists, is now exploited by irresponsible labor leaders who feel that their own personal prestige depends upon securing, for their labor groups, apparent gains as spectacular as those obtained earlier by the Communists. Attitude of Government The Government itself realizes that, in order to discredit Communism, it must also show the worker that he can fare better without it. But officials apparently feel that this fact must be demonstrated in haste, by flashy and impressive moves, rather than through the normal forces of human behavior. Moreover, officials recognize that labor is now the most influential group. Thus, rightly or wrongly, for political reasons, the Government supports the labor leaders in many of their most fantastic demands. 10 Another guarantee of proper reward to the worker Is an employer's right to select the best workers for advancement to hbgher postbons. Under e-ssting "seniority" roles, Cuban labor has virtually destroyed its o0n opportunit-es s thls respect also. INDUSTRY 153 In a notable case in point, in 1946 a decree was issued requiring a specific bus company in Habana to reduce the working day to six hours while con- tinuing to pay wages for an eight-hour day. When the Supreme Court declared the decree unconstitutional in September 1950, the Ministry of Labor immedi- ately ordered a conference of labor leaders, government and-company repre- sentatives for the stated purpose of finding a way to circumvent the decision. The President then issued a new decreel' raising the wages by exactly the same amount instead of shortening the hours. Some Things That Would Help It is confidently believed that some of Cuban labor's demands would be tempered with judgment if more of the workers understood the technology of their calling. Graduates of good trade schools should be better equipped to evaluate the benefits which accrue to them through economical production, high efficiency and cooperation. Unfortunately, the few genuine trade schools which are actually func- tioning under government support are found to include in their curriculum an unnecessarily intensive course in the legal rights of labor. These courses are not balanced by instruction in the worker's duties and obligations to employtrs for mutual benefit. It would be equally helpful if labor leaders and other influential workers could have some training in general business principles, so that they could know how far they could reasonably expect to go in in their demands without putting their employers out of business. Present trade school instruction also includes some notions of industrial accounting and mercantile law, but little or nothing on the comparative costs and economics of production. Dilemma of Employees- To be most useful, much of this information should come from the busi- nesses in which the workers are employed. However, this would mean that the employer should give them a few of the honest facts about the finances, profits, losses and problems of the enterprise. The Cuban employer often tends to be secretive about these things, probably because he thinks that labor will ask too much if it knows how much there is, and also because he may be making a lot more profit than he cares to admit. This last possibility is supported by the fact that so many Cuban enter- prises are still doing business after having met labor demands which would be enough to bankrupt similar enterprises elsewhere. - In one sense, the Constitution itself may have set a precedent for the first decree by providing 48 hours' pay for 44 hours of work. It will be noted that the general prnciple of this decree IS not one of gving the worker any more wages but simply of reducing his daily output. Public safety, by avoiding overtired dnrvers, was used as the reason for the first decree but as soon as the six-hour shift became effective some drivers worked two shifte dally. 154 REPORT ON CUBA 3. Nationalism "Cubanization of Labor" On November 8, 1933, President Ramon Grau San Martin issued a decree (No. 2583) the preamble to which is worth quoting: "The specific protection of the native worker is one of the basic orientations of any really nationalistic policy. "Pending legislation based on truly scientific principles-which, in every collectivity and on all historic occasions, must be accom- modated to the result of exact statistical antecedents, difficult to obtain immediately-it is indispensable that there be established among us, in accordance with the revolutionary ideology and in re- sponse to the urgent needs of the present circumstances, the general outline of a rapid Cubanization of labor. "The Government proposes to fix definitively the obligatory pro- portion of native wage-earners in each and every line of business, as soon as this is permitted by the statistical studies which it is making for that purpose."'12 The "50% Law" The decree which follows these words is popularly known as the "50% Law", or the "Law of Cubanization of Labor". It requires all agricultural, industrial, or mercantile enterprises in Cuba to employ at least 50% native Cuban personnel, and to insure that no less than half the total wages and salaries are paid to native Cubans. Excepted from the computations are only the representatives or attorneys. in-fact of the employer, and technical positions when there are no native Cubans academically qualified to fill them. Were this all, it would not seem to impose too great a burden upon development-with perhaps a reservation in the case of the dangerous words "academically qualified". It is certainly not too much to expect at least half the work in Cuba to be done by Cubans. It does not follow logically that the best procedure is to impose this requirement uniformly upon every enterprise regardless of its nature; still the wording of Decree No. 2583 apparently anticipated some eventual adjustments. "Native Cubans" But unfortunately this is not all; nor do the aforementioned provisions adequately portray the spirit of this decree and the later legislation built upon it.13 As will be seen in what follows, the intent is not "at least 50%", Si Although the decree has stood for se-entees years and has brought forth various supplementary decrees, these statistical studses which were apparently already besng made Sn 1933 have not yet emerged. There is no reason to belicve that they ever wsll, in the light of the subsequent legislatson on this matter. 13 Includmig especially Decree No. 2977 of December 6, 1933: Minstry of Labor Ruling of February 20, 1935 Mmistry of Labor Ruling of Mar-h 30, 1935: Msmistry of Labor Resolution No. 311 of July 3, 1936: and Msnistry of Labor Resolutson No. 868 of Aprsl 24, 1945. Each of these Milsisty of Labor actions acknowledges in tutn the error or inadequacy of the preceding one and sets forth new conditions. INDUSTRY 155 but actually a rapid approach to 100% native Cuban personnel. Moreover, it is intended (and clearly stated) that even the naturalized Cuban citizens shall be eliminated from employment as the process unfolds, leaving em- ployed only citizens actually born in Cuba or born abroad of Cuban parents. These alone are "native Cubans", within the definition of the Law. The original decree itself provides that all positions which become vacant, or which may be newly created in the future, must be filled by native Cubans. On the other hand, all reductions in personnel made for reasons of economy or otherwise must be effected by removal of foreign personnel as long as any remain. Purging the Foreigners It might be thought that some of those removed from one enterprise in the course of adjustment to the "50%" requirement-including the natural- ized Cubans-could be employed by other enterprises whose percentage of native Cuban personnel was already more than required. Under the law this is not so, since both the new positions and also those vacated for any reason must be filled by native Cubans. To make doubly sure of this, the original decree also stipulated that any enterprise already having a propor- tion of native Cuban personnel greater than 50%o must thenceforward main- tain that greater percentage as a minimum and increase it in the future. Some of the regulations of the labor law ordered under Decree No. 2977 illustrate the extent of this apparent preoccupation with the purification of a "Cuban race"-or the reservation of all possible employment for what- ever native-born Cubans there were on November 8, 1933, and for their direct descendants. In adjusting their personnel to the percentage requirements, employers are required to discharge: first, unmarried foreigners without descendants; second, foreigners married to foreigners whose descendants are not native; third, naturalized citizens, unmarried and without descendants; fourth, foreigners with Cuban wives or with native descendants; fifth, naturalized citizens who are married or have descendants. An employer may not dis- charge anyone from the second group until all of the first group is exhausted, and so on. What Foreigners May Do Once discharged, under the law a person in any of these five categories is practically unemployable in Cuba, except as a domestic servant in a private home. If he has special training for a job for which no "academic- ally qualified" native Cuban can be found, he may be engaged as a technolo- gist. If he has enough resources of his own he may become an employer. Otherwise, what is left to him is a provision of Decree No. 2977 which allows him to engage in "household industries, defined as those operated by 156 REPORT ON CUBA the workman or employee in his own domicile or establishment, with the cooperation of only his wife and children." Fate of the Non-privileged It is, of course, impossible to determine just how many of these non- privileged persons have been discharged under the labor law in the last seventeen years. Their number must be substantial, for otherwise there would have been no reason for the legislation. Some have been permitted legal employment as specialists or technologists. A very few may have become employers or domestic servants. It is likely that a good percentage have been forced into the so-called household industries, to account in part for the large number of clandestine producers who are claimed to be the constant competition and despair of the larger tax-paying industrial enterprises of the Republic. The remainder, if they have not left Cuba, are illegally employed; the enforcement of the law is far from perfect. Implication of the Law Several supplementary rulings and decrees on "Cubanization of Labor" have been concerned with the definition of a technician who may be employed under the exception provided in the original law. The stated intention is that such exception be allowed-as a safeguard against immediate paralysis of an industry-only until such time as a Cuban can be found or trained to do the specialized work involved. Thus, by implication the law recognizes that the nation has not yet taken steps to train an adequate technical force of its own. Powers of the Ministry An employer who feels that one of his foreign specialists is indispensable must present his case, with elaborate documentation, to the Ministry of Labor. Among other things, he must show that he has advertised in the newspapers for a Cuban to do the work. He must state how much he intends to pay the foreign specialist, and must have a certificate from the government Labor Exchange showing that it has no registered native Cuban with qualifications for the job. The Director General of Labor then releases a note to the press requesting the appearance of any Cubans who consider themselves qualified; if any appear, their adequacy for the job is decided by a committee headed by the Director General of Labor. Ultimately the Ministry of Labor deter- mines whether the position shall be considered "technical" at all, and whether the employer may fill it with the foreign specialist. Employer Must Hire Somebody If his petition is denied, the employer may not withdraw the position itself, but must hire a Cuban to fill it.14 Thus, if an employer is thinking of hiring 14 Mimstry of Labor Resolution No 868. INDUSTRY 157 a foreign specialist to improve his plant, and is not allowed to hire the man he wants, he still must hire somebody even though he is forced to abandon the projected improvement. This does nothing to encourage development. If the employer's petition is granted, on the other hand, it is for.a limited time only (not to exceed one year) and may be cancelled at any time by the Minister of Labor if a qualified Cuban appears and wants the job. The Director General of Labor publishes a list of such jobs every three months, to make sure that no Cuban misses such an opportunity. Also, the employer of a foreign technician is required to train, at his own expense, a Cuban to replace him as early as possible. Ignorance of Authorities Companies operating in Cuba report comparatively little difficulty in qualifying their necessary technicians by one means or another.15 But to retain them long enough has often been a serious problem. Generally speaking, the Cuban labor authorities are not sufficiently appre- ciative of (a) the importance of really competent technology in the success of a productive enterprise; (b) the length of time actually necessary to train a satisfactory replacement;16 or (c) the fact that pure academic studies are 6 no substitute for practical experience. Both the authorities concerned and the individual Cubans who aspire to the positions of the technicians seem impatient to effect the replacements. They appear to believe that a mere superficial understanding of the work is all that is really necessary. Hence, even when the companies manage to secure cooperation of the authorities, the foreign technicians are sometimes made to feel so uncomfortable that they leave prematurely of their own accord. To keep essential technical staff is regarded as one of the most serious problems of industries attempting to produce in Cuba. 4. Industrial Technology What is Meant While some of Cuba's industrial operations are as good as can be found anywhere, a great many suffer from inadequate-or poorly applied- technology. As the term is used here, industrial technology does not necessarily imply complex processes and elaborate machinery. It deals equally with simple Vs Various Cuban and foreign companies, who prefer a simpler procedure, report that the going price for extra-legal certification of a technician through high channels has been fairly stable at S500; but some com- pames have been able to handle it through lower-echelon officials at prices as low as $75 per mau in multiple lots. 16 Some of these specialists are chosen on the basis of 21 years or more of traming and practlcal experience. To date no method has been found to transfer such knowledge and mature judgment to another man in six months. 158 REPORT ON CUBA things, hand processes, and the straightforward logistics of production. Basically, it refers to a systematic way in which things are done. It is just as much concerned with the efficient handling of a machete as it is witl electronic temperature control. It includes the proper choice of raw materials, their efficient movement and processing by whatever means may be used, and also the critical control and inspection methods which must be employed to insure that the final product uniformly meets the desired specifications. Adapting to Local Conditions The best technological methods of production at a certain time and place are those which take proper account of the existing local circumstances. When importing a new industry into Cuba, it may be a mistake to assume that every detail of a method which has achieved excellent success in another country should be copied in the new location. Differences in the scale of operations, in the adaptability and cost of labor, in transport and storage facilities and even in such things as the climate and temperament of the people-to say nothing of variations in consumer- preference-may call for important modifications. A grinding process which works well in a large mill, or a chemical reaction which takes place satisfactorily in a large vat, may not always perform the same way in a small one. Certain manufacturing equipment, designed for continuous operation, may become quite uneconomical if it must be shut down frequently for strikes. Science no Respecter of Politics On the other hand, there are usually definite limits to which modifications can be made. Unfortunately, the fundamental laws of science do not alter themselves out of respect for political boundaries, the opinions of men, or social legislation, however desirable. Modern industrial methods have been developed precisely to achieve higher productivity of the worker, and so to secure a higher standard of living for him and for everybody. Therefore a modification in a process is not justified unless it does this better than the original method under the existing circum- stances. For instance, the fact that "conditions are different in Cuba" does not eliminate the necessity for sanitation in food products or for the removal of damaging impurities from salt. Moreover, while a country may be able to shield unsatisfactory domestic manufacture for a time by a high tariff upon competitive imports, no com- parable measure is possible to protect its own inefficiency when attempting to sell its products on a world market. For, to date, none of man's efforts to repeal the law of supply and demand have been successful. INDUSTRY 159 Technical Control In Cuba a reasonable amount of technical process control is practiced in the extraction and refining of sugar, in the manufacture of alcohol, beverages, tires, certain textile products, and in a number of otlier industries-particu- larly those which are foreign-owned. A good many other industries are operated by rule-of-thumb, and sometimes without sufficient understanding of the processes or the properties of the materials which are being worked. For example, it is found that some of the Cuban makers of solar-evaporation salt are not acquainted with the principles of crystallization or the constituents of sea water. As in other applications of technology, the problem here lies partly in the lack of practical training facilities. Yet it is also true that many of the manufacturers do not fully appreciate the commercial importance of quality and uniformity in their products. More than a few consider the addition of a competent technical staff member as an expensive luxury. Poor Quality Compels Imports One result of this condition is that production costs are often higher than they need be, for remediable technical reasons, quite apart from such things as labor problems. Another is that numerous Cuban industries find it neces- sary to import raw materials even when such materials are nominally made in Cuba. For the best grade of Cuban shoes, the manufacturers must import leather because the quality of Cuban leather will not satisfy. In turn, the Cuban tanners are dissatisfied with the general quality of domestic salt, and those who cannot conveniently procure it from a few more careful local pro- ducers are forced to import it. Other Consequences Still another result of the shortage of good technical personnel in industry is that the enterprises are extremely vulnerable to the advances of unscrupu- lous promoters who pose as "investors" and "experts". This is a very real hazard, for the displacements of the recent war have flooded the less-developed countries with persons attempting to sell "secret new processes". Without technical competence, but armed with impressive scientific language and promises of fantastic quick profits, such persons have already bilked some of Cuba's industries, including even a few of the large sugar centrales. Real technical knowledge is the best defense against such schemes. Potential investors are aware of the scarcity of experienced technologists, and that the Cubanization Law makes it difficult or troublesome to import them. This contributes to the lack of confidence in Cuban industrial projects. Quite rightly, investors fear that the chances of losing their money will be increased by inadequate technical management. 160 REPORT ON CUBA 5. Technical and Specialized Industrial Training University of Habana The principal institution of higher learning in Cuba is the large Univer- sidad de Habana. Apart from one religious university and the embryonic Universidad del Oriente, the country must depend upon this one institution for its domestic supply of industrial technologists. For the current needs of the country there is a very poor distribution of the professional graduates turned out by the University. The medical budget is high; there are far too many lawyers and architects; there are too few chemists and engineers. Even for the all-important sugar industry the em- pliasis is upon the production of routine control chemists and saccharimeter operators. The significance of chemical engineering as the really basic technical study required by the sugar industry seems to have been largely overlooked; Theoretical Approach The University is government-supported, receiving by law a fixed per- centage of the total national budget. Otherwise, it is autonomous and virtually untouchable. In common with many other Latin American universities, its courses tend to be heavily theoretical and decidedly deficient in laboratory work and applied science. Its technical graduates cite actual cases to show that a decade ago it was possible for a student to get a doctorate degree in physical science without even once using an analytical balance. In recent years the laboratory work has improved somewhat. but almost all earnest Cuban students of industrial technology-except those who wish to be routine sugar-mill control chemists-still find it necessary to go abroad for their specialized university education. Atmosphere The problems of the University are not limited to the nature and scope of its instruction. In the past 15 years the institution has hardly ever com- pleted a course without interruptions due to strikes, internal politics, and the like. At one time recently it remained closed for a two-year period. Professors are appointed for life, elect their own rector, and answer to nobody. Even in cases of gross incompetence they cannot be discharged except by action of their own group; and, of course, nobody wants to cast the first stone. There are, to be sure, some excellent and conscientious pro- fessors on the staff; but these complain that it is difficult for them to make much improvement in the situation. The result is claimed to be much slipshod work, spotty student attendance, far too much preoccupation of the students with political matters, and very slow progress toward a better university. INDUSTRY 161 Powers By law the University of Habana holds the reins of a number of things nominally concerned with higher learning, such as the right to practice a profession in Cuba or the technical qualifications of a foreign specialist. A practicing professional man must either hold a degree from the Universidad de Habana or have his outside degree certified and approved by the University -an ironical situation, since Habana's own technical training curriculum and facilities do not meet the minimum standards established by many of the outside institutions and learned technical societies. Moreover, the Univer- sity of Habana shows a certain reluctance to certify or approve degrees granted by foreign institutions, however world-renowned these institutions may be. Hardship for Cubans Such a policy may have been intended to restrict the entrance of foreigners, but, in practice, the principal hardship falls upon the many Cubans who study abroad. During the recent two-year "holiday" of the University of Habana, the number of these, of course, was greatly increased. Most of them paid heavily for their well-intended effort. In what may or may not be a typical case, a Cuban, who returned to his country with a degree in chemistry from a well-known United States university, was obliged to take additional courses at Habana for two years before his degree was approved. As for foreigners, in another case an eminent medical doctor and blood specialist from Spain is reported to have suffered a 10-year delay before the University would allow him to practice. At the time of the field work of the Mission, the University was supporting agitation against a bill in Congress which would permit experienced sugar chemists to continue working in jobs they already held several years ago when new regulations were passed. The University, too, opposes the employment of foreign chartered accountants. "Coercion and Violence" As the Mission completed its field studies in Cuba, the following words appeared in one of Habana's leading newspapers: "The new term at the University of Habana has been inaugurated with its usual ceremony. The commencement of educational activities at the University has been accompanied by a series of disturbances, strike attempts and moves to suspend classes. This is not an excep- tional case, for the citizenry is well accustomed by now to the way things are done at the University, where coercion and even violence interfere with academic studies. 162 REPORT ON CUBA "The old evils of gangsterism are evidently reappearing with the commencement of the new term, while thousands of real students for whom the University is a means of education and not an end in itself, are beginning to suffer the consequences of an academic course which functions without regularity." The term "academic freedom" was never intended to include so much. Lack of Technical Library Facilities The Mission found no technical library, in any part of Cuba, which could be considered as even approaching ordinary needs of industrial operation, technical instruction or research. A few private libraries may exist, but they are not generally available. The library of the experiment station at Santiago de las Vegas can be helpful in agriculture, but many of its technical periodicals are incomplete. Prominent Cuban chemists state that they are unable to find a single complete set of Chemical Abstracts on the island. Specialists in other lines voice similar complaints. Technical training, to be up-to-date and effective, requires constant reference to current technical and trade literature and to standard publications on a multitude of subjects. Neither the teachers nor the students can do without library facilities; nor can the practising engineers, who must keep informed of new developments. A few school textbooks are not enough. Research in the physical sciences and applied technology is not merely difficult but practically impossible without adequate libraries. Such research is all but non-existent in Cuba today; but the numerous proposals for Cuban research organizations and institutions of various kinds are foredoomed to failure unless accompanied by proper facilities for literature reference. Creation of suitable technical libraries, available to the public, is an essential step in the development of any country's technology. Trade Schools and Special Instruction Out of 84 schools established in Cuba for the teaching of practical arts, trades, and similar specialties, 22 are commercial business schools and 16 teach domestic science. Thirteen of the others are normal schools, five are for the training of nurses, one teaches journalism, and six are limited to artistic painting, drawing, sculpture, and landscaping. As will be noted, these account for 63 of the 84. In the field of agriculture there are six small provincial agricultural schools and one school for forestry. The former are described in Chapter 5. The national government operates three special schools in which women are taught such things as dressmaking, commercial cooking, food canning, and beauty parlor operation. Of the remaining schools ostensibly teaching trades and industrial subjects, seven are of a type known as escuelas de artes y oficios and four are called escuelas politecnicas. INDUSTRY 163 "Schools of Arts and Trades" The escuelas de artes y oficios are of historic origin. Some were founded by private endowment, which they still enjoy. They are generally small, have very little equipment or capacity, and their teachers are few and poorly paid. One of these schools, established in the city of Santa Clara in 1882, will serve as illustration. The Mission is informed that it has an income of $3,000 per year from a private endowment, plus $300 per year from the pro- vincial government "if and when it is received" plus the services of four professors paid by the city of Santa Clara and several others paid by separate endowment. The school has a total of 13 professors, whose salaries average about 70 pesos per month. Each year's enrollment in this school starts with about 100 new, pupils (all boys) who enter at around 14 years of age and pay no tuition. Within three months after school starts the freshman enrollment commonly drops to about 70. Diplomas are granted after a three-year course in carpentry, woodcarving, modeling, or architectural drawing. By means of a recent cash grant from the national government, the school has purchased $5,000 worth of carpenters' tools and elementary scientific equipment, and expects to teach basic physics and chemistry in addition to its present curriculum. It is understood that in the coming year the national government will take over the operation of this school, as a simple method of satisfying its commitment to establish a trade school in this Province. Judging by samples of the handiwork of third-year pupils, the graduates are by no means ready to hire out as practicing carpenters, but their training appears to be reasonably good in the artistic aspects of joinery, sculpture, fancy wood-carving, and the exterior design and landscaping of modernistic private dwellings. Polytechnic Schools Four fairly large escuelas politecnicas have been established by the national government for the training of skilled workers in mechanics, wood- working, construction, printing, shoemaking, leather-working, electrical trades, food preserving and similar specific industries. Two of them are actually fulfilling these objectives. An outstanding member of this group is the Escuela Politecnica para Varones de Ceiba del Agua, which has been in operation since 1939. While not the oldest, this school has been taken as a model for the later ones established at Holguin and Matanzas. Its capacity is 1,200 students, who pay no tuition and are supplied with room, board and clothing, as well as such things as motion picture entertainment. The budget is in the neighbor- hood of $1,000,000, all of which is supplied by the national government. 164 REPORT ON CUBA The physical plant at Ceiba del Agua includes a main building, housing the administrative offices and classrooms for theoretical courses, large dormi- tory buildings, and various other structures, including an extensive series of instruction shops, power plant, kitchen and dining hail, motion picture theatre, laundry, etc. Somewhat removed from the main location are special buildings concerned with practical agricultural instruction. The various shops are fairly well equipped for practice in carpentry, cabinet-making, machining, welding, foundry work, sheet-metal work, brick and tile construction, painting, electrical and radio work, canning and pre- serving, printing and engraving, bookbinding, shoemaking and leather work, elementary chemistry, textile work, agriculture, dressmaking and tailoring, beauty-parlor operation, and a few other trades. A Three-year Course A complete course in any chosen specialty is of three years' duration. Students in this school are admitted on the basis of competitive examination and apparently without prejudice to other factors. An incoming student is given an "orientation course" of six weeks, during which he is tested for aptitude in all of the various trade shops and laboratories. He then chooses the field or trade in which he would like to specialize, and if his performance has been satisfactory in this and the particular quota is not already full he is enrolled in this choice. For the remainder of the three-year course he attends morning classes in basic subjects and the theoretical aspects of his chosen trade, and works three hours every afternoon in the appropriate shop. An Unfortunate Policy Inspection of the school and its work gives a very good impression of its effectiveness. One exception to this is a very unfortunate policy for the classification of students. It appears that there is a stronger demand for train- ing in the industrial trades than in agricultural specialties. Therefore, to distribute the students in accordance with the capacity of the shops, students who consistently do poor work in carpentry, plumbing, or other trades are automatically transferred to the courses in agriculture. Thus agriculture- most vital of all to Cuba-receives the poorest students instead of the best. Situation Improved It appears that, until fairly recently, qualifications for teaching positions at this school were rather loose and the faculty included numerous political appointees. However, the situation has been much improved by stiffening the requirements for these posts. At present the rector of the institution is elected by the faculty itself. There appears to be relatively little governmental interference with the day-by-day conduct of the school, in spite of the fact that the Government supports it. INDUSTRY 165 Another Good Example One other good trade school is the Escuela Teenica-Industrial "General lose B. Aleman" at Rancho Boyeros. This institution is older and smaller than the one at Ceiba del Agua, but the training is comparable. Its capacity is from 350 to 400 students, of which between 50 and 100 are the recipients of fellowships awarded by government officials and the rest chosen by com- petitive examination. Like those at Ceiba del Agua, the students here pay no tuition an3 receive food, shelter, clothing and entertainment (as well as education) at government expense. It appears that the teachers are well trained, and the claim that they are not political appointees is borne out by their long tenure and the fact that they are not replaced at the time of changes in government. The Rancho Boyeros school also has an agricultural department. In some contrast to the situation at Ceiba del Agua, school officials here state that many students-the, sons of farmers-choose this field voluntarily. It is also claimed that upon completion of the course these students go back to their fathers' farms to introduce modern methods-a phenomenon of which very little actual evidence is to be seen. Unsatisfactory Schools The schools at Ceiba del Agua and Rancho Boyeros are members of a more extensive series of institutions classified as Escuelas Politecnicas del Grado Medio which are distributed about the island. The two already described, however, are distinguished by the fact that they are doing what they are supposed to do. The visitor receives a rude shock upon inspection of such others of this series as those in Holguin and Matanzas. Each of these magnificent establish- ments, situated along the Carretera Central, bears an enormous sign proclaim. ing it to be an Escuela Politecnica. Actually it is nothing of the kind. The school in Holguin, whose five-year construction job was complete'd in 1944, began classes in September of 1945. It has capacity for 1,200 students and a current enrollment of 830. The school buildings include extensive dormitories, and a large central building containing administrative offices, ordinary classrooms, cafeteria, a small museum of stuffed animals and sea- shells and a large modern auditorium. There are some additional structures, such as a boiler-house, but only a comparatively small building-somewhat foreign to the architectural scheme and possibly added as an afterthought- intended for instructional shops. Unused Shops These shops are not prepared for instruction and, up to the present, have never been used for this purpose; nor would they be large enough if they 166 REPORT ON CUBA were. There are no work benches, vises, or hand tools. The only equipment consists of an assortment of machines, some of which are of unnecessarily expensive types, more suitable for advanced work or large-scale production. (Example: a large, high-production, power-driven pipe-threading machine which the average plumber would not need to use in a lifetime of practice.) Although the published reports of the Ministry of Education state that these shops have been equipped for proper instruction, the machines have stood long enough for spots of rust to appear where the protective coating of grease has been rubbed off, and not a single machine has ever been con- nected to the electric power. The Matanzas Polytechnic The Polytechnic School at Matanzas, put into operation at about the same time, is smaller but similarly designed. When inspected by the Mission this school had about 150 pupils enrolled out of a capacity for 400. Here, again, the shops are too small and have never been used anyWay. As in Holguin, a certain amount of machinery-in many cases poorly selected for the purpose -has been received but never installed. By checking with the stockroom it was found that the school did not have a single carpenter's bench equipped with vise, and possessed hammers and similar hand tools for not more than 24 students. Real Nature of Schools Even more astonishing than the lack of proper equipment in these schools is the nature of the student body. The students are from 6 to about 14 years of age, and are receiving ordinary elementary instruction in such subjects as reading, writing and arithmetic. In other words, these elaborate schools have been converted into nothing more than elementary schools. According to the faculties, the pupils do not enter by means of competitive examination, but by the personal recommendations of politicians. Investiga- tion discloses that some of the students are orphans who are being cared for by the State in this manner, while the rest are the children of various citizens who allegedly have done favors for politicians. These citizens are no doubt very pleased to have their children lodged, fed, clothed, educated and enter- tained entirely at Government expense. Problems The polytechnic schools at Ceiba del Agua and Rancho Boyeros are doing work which, in the Mission's opinion, justifies additional support. Though they are receiving their allotted funds, it is clear that these are not sufficient either for the purchase of necessary instructional materials or for proper maintenance of buildings and equipment, some of which are obviously falling into disrepair. INDUSTRY 167 Under the present program all of the instructional shops are vacant in the morning and the classrooms are unused during the afternoon. It is readily apparent that with additional dormitories, some enlargement of the faculty and certain other adjustments, the student capacity of both of these schools could be doubled. Resistance by Sindicatos One of the most serious problems faced by these-and all other-trade schools in Cuba is the fact that their graduates encounter strong resistance upon trying to enter the trades for which they have prepared themselves. The sindicatos will not admit them to practice except as apprentices-a status no better than that which can be achieved without any training whatsoever. It is claimed that not only do the sindicatos want to restrict the number of men allowed to share the work in a given trade, but also that they fear these trade school graduates, who are better trained in theory (mathematics, etc.) and might constitute a competitive threat to the older workmen. There are rumors of a contemplated change in the operation of the Holguin and Matanzas polytechnic schools, and it is hoped that these are true. To care for orphans may well be a legitimate government obligation. But there is no justification for allowing this to usurp the function of much- needed trade schools. As for the remaining students, it would seem that the present government could demonstrate its integrity by refusing to tolerate this condition any longer. It should remove these pupils at once to other schools where they will receive their elementary education on exactly the same basis as the rest of the children who attend the ordinary public schools of the nation. The excuse that these ordinary public schools may not provide an equiva- lent education is not valid, for if this is true it is also the fault of the Government and should be remedied immediately. 6. Raw Materials Most Materials Imported An outstanding feature of the present Cuban industrial pattern is its heavy dependence upon imported raw materials. This is partly due to an actual lack of certain materials on the island or to a demand too small to justify the necessary production facilities.17 But a study shows that among equally important causes are (a) failure to produce or utilize many potential Cuban raw materials and (b) failure to produce materials of acceptable cost or quality to meet the needs of domestic manufacturers. I' Perhaps a few of the existmng industries may have been poorly chosen or were originally established under the pressure of abnormal wartime conditions as hsa happened almost everywhere. 168 REPORT ON CUBA Opportunities for Development Numerous available Cuban raw materials are not adequately utilized at home, and some are even exported instead, while the finished products made from identical materials are imported. Though seasonal prices may have something to do with it, the fact is that out of 11,000,000 kilos of tomatoes exported annually, an estimated equivalent of 9,000,000 kilos return to Cuba in various forms such as tomato sauce, paste, ketchup, etc. Pancreatic enzymes for the tanning industry are all imported, while the domestic raw material-from cattle slaughter-is thrown into the tankage vats. For that matter, almost none of the by-products of the meat industry are processed in Cuba, although in the United States and some other countries these represent the main sources of profit to the industry. Large quantities of hide scraps from Cuba's tanneries-as well as the other raw materials used-for glue and gelatine-are either exported for processing elsewhere or simply discarded. The practice of shark-fishing has been almost discontinued because the fishermen can sell only the liver (for oil) and skins; yet the growing demand for fish meal should absorb the rest of the shark readily. Only a few small Cuban tanneries use domestic mangrove tannin.18 The rest import other tannins while vast swamps of mangrove stand unexploited. All o1 these examples are opportunities for industrial development. Domestic Quality Often Unsatisfactory Some materials now produced in the Republic are unacceptable to manu- facturers because of their unnecessarily poor quality, or because of the simple failure of producers to supply what is wanted. There need never be a shortage of salt in Cuba. But there is a shortage of good salt now, because very few local producers pay any attention to the ordinary technique of purification Chapter 48. Hence salt is imported. So also is chocolate for candy and bakery goods, because domestic chocolate makers have not yet adapted themselves to the needs of the market (Chapter 44). Cuban textile manufacturers have trouble with domestic starch because there is so little technical control in its preparation. On the other hand, some of the island's natural resources are idle through the failure of manufacturers to use them in the right manner. An attempt to make bottles was a commercial failure, not because good raw materials were unavailable, but because the bottles were poorly made. Field reports of the Is Of the several available types, the best Cuban mangrove bark is estimated to contain at least 30% tannin and gives good results when properly used. A lhttle of this bark is collected by individuals who sell it to nearby tanneries at $2.00 to 33 00 per 100 pounds. Aflter removal of the bark, the wood is made into charcoal. INDUSTRY 169 Mission indicate that good glass sand is to be found in the Province of Pinar del Rio. High Costs of Materials Other major Cuban problems affect the raw material situation. Excessive profit-taking and high labor costs have made some domestic materials more expensive than imported ones. Little vegetable oil of any kind is produced in Cuba now; existing extraction plants have either shut down or are operat- ing on a greatly reduced basis. Meanwhile increasing quantities of vegetable oils continue to be imported for cooking and soap-making. Lack of roads causes coffee growers to pay up to $4.00 per 100 pounds to mule owners who must haul the coffee to the central collecting points. The same lack of roads adds an estimated $10 per thousand board feet to the price of Cuban pine lumber. Despite the scarcity of the country's rema'ining timber, many good logs from agricultural clearings are burned on the spot because there are no roads to take them out. Diversified Agriculture as a Key to Industry The greatest potential source of Cuban industrial raw materials is the soil. This has been all but ignored except in the case of sugar. Unquestion- ably, the growing of sugar is one of the best uses for land in Cuba, and it is clear that there are further opportunities for industrial growth in the making of secondary products from sugar itself, as well as from the much- discussed by-products and wastes. But sugar alone is not good. There are many other industries, dependent upon agricultural products, which could become important in Cuba if only the farmers could be persuaded to cultivate such other crops. Cuban authorities recognize this problem and have tried various measures to solve it from time to time. Perhaps the formation of the Agricultural and Industrial Credit Bank offers the best hope to date, at least for improve- ment of the unfavorable credit situation. Other facets of the problem are more difficult. "Frutas Menores" To persist in calling everything except sugar "frutas menores" has a psychological effect which does not help to encourage diversification. Even more fundamental is that the growing of sugar cane requires so little work, a fact which many Cubans put forward as the chief reason for the independent farmer's concentration on this crop. And overshadowing these arguments is that, in the eyes of past governments, sugar has always represented income while virtually all other products have been regarded as part of the "cost-of-living". 170 REPORT ON CUBA In other words, the tendency has been to protect-and even augment- the cash income of the cane grower and, at the same time, to make sure that the producer of meat, milk, coffee, and general farm crops does not receive more than a necessary minimum for the fruits of his labor. Small wonder that they are called frutas menores. Minerals Under-exploited A second natural source of Cuban industrial raw materials is, of course, her mineral wealth. Present evidence indicates this to be far greater than has been generally supposed (see Chapter 8). A significant reason for underestimating it has been the traditional tendency to look down upon anything in this category except metals-more especially the precious metals. Although Cuban limestone and gypsum are utilized to some extent in cement and the building trades, these as well as barite, kaolin and various special clays offer a diversity of imp6rtant new industrial opportunities which have been overlooked. This Mission is confident that competent technical develop- ment of these deposits will demonstrate the truth of this. 7. Power and Fuel High Cost of Public Power Power generation is in private hands but, for a variety of causes, the price of purchased industrial power is excessive. The average industrial rate is about 3.2 centavos per kilowatt-hour. Moreover, at present the public service installations are not prepared to absorb additional loads. This in itself, however, is not considered an impediment to further indus- trial growth, for under existing rates an increasing number of industries have found it much more economical to install and operate their own power plants (see Chapter 12). It is felt that this procedure is to be recommended to new industries of sufficient size contemplating installations in Cuba, not only because of the lower power cost but also to minimize stoppages due to hurricane damage and possible labor unrest in the power industry. There are a few relatively small hydroelectric power generation units in the Republic. While a number of opportunities exist for small local or private industrial installations of this kind, the information presented in Chapter 12 indicates that Cuba cannot count heavily on this source. Bagasse Problem Most Cuban electric power is generated in thermoelectric plants burning imported fuel oil or coal, or else in diesel-electric units for which fuel is either imported directly or refined in Cuba from imported crude oil. Unless impqrtant deposits of coal or oil are found in Cuba this situation is likely to continue. INDUSTRY 171 A large exception is noted in the case of the sugar mills, which depend almost entirely upon their waste bagasse for fuel. The mills are aware that from 10% to 15% of the total heating value of this bagasse could be recovered as additional power for other uses, if seasonal load and distribu- tion problems could be solved. For technical reasons, the storage of excess bagasse for use in off-peak seasons is not yet practical, but this too offers a possibility for the future. Special Fuels Large-scale experiments in the burning of Cuban asphalt for fuel have not been very successful. The measure was tried during the last war, and would probably be attempted again under similar conditions. But the high ash content and other technical considerations limit the use of such unsatis- factory fuel to times of dire emergency. Cuba has produced a very small quantity of unusual types of petroleum. The volume is not significant and is decreasing; yet there are some indica- tions that more important deposits might be found with proper exploration and drilling (see Chapter 8). Certain domestic industries are not giving adequate attention to special fuels available to them. Unless prepared to use them for by-products, rice mills could burn their hulls for power as is sometimes done elsewhere. Only a few Cuban sawmills burn their wood waste as fuel, and even these are seeking lower rates for purchased power in the hope of discontinuing the practice. As long as the country continues to be short of fuel, the recovery of the heating value of wastes should be encouraged wherever economically possible. Use of Charcoal Undesirable Charcoal is a widely used fuel on the island, particularly in homes but also occasionally in industries. Firewood is also employed in some factories. Both of these practices have eventually proven ruinous to the forests-and hence the soils-of several Latin American countries. The planting of fast- growing eucalyptus and poplar for these purposes has been proposed; but this idea is not without precedent either, and must be viewed with some skepticism. In a well-populated country today, wood fuel cannot be grown as fast as it is used. Any who doubt this assertion need only to study what has occurred in such countries as Mexico, El Salvador, or Argentina, or to make their own calculations. There is no reason to believe that Cuba will be an exception, and she cannot risk the loss of her most vital asset through soil erosion. It is felt that the best ultimate goal for Cuba in this respect would be to limit industrial consumption to the charcoal and the firewood which may be 172 REPORT ON CUBA by-products from other operations.19 Above all, the domestic use of charcoal should be discouraged. 8. Water Perennial Crisis In Habana and other principal cities, few of the municipal water supplies are adequate for present needs. Perennial crisis is the rule rather than the exception. So far, when measures have been taken to correct these shortages, at best they have been designed to bring the supply up to the needs of the moment without regard for future growth. Even in Habana, industries fre- quently find it necessary to drill and operate private wells to assure themselves of a continuous supply. In Santiago de Cuba during 1950, leading makers of beer and rum shipped water from other sources to their factories in railroad tank-cars, while some of the smaller manufacturers used tank trucks. The sugar mills obtain their water from private wells or from streams and other sources located on their property. Most of them operate spray ponds or cooling towers for the recycling of condenser water. 9. Transportation Handicap to Development Few things in Cuba have been so actively discussed and so little helped as the transportation system. In its present state, it is a definite handicap to industrial--and other-development. The railroad service, whose improvement is recommended in detail in Chapter 10, has been on the verge of collapse through enormously swollen payrolls, uncollectable accounts and lack of maintenance. Coastwise shipping, to which Cuba would seem to be unusually adapted, has already died of an overdose of social legislation. Hampered by certain government restrictions yet aided by lax adiministration in other directions, trucking (Chapter 11) is the only form of surface freight transportation in Cuba which has shown any signs of development. Even this is limited, however, by the continued failure of the Government to build roads and highways. Need for Roads The need for roads is acute (Chapter 11). There is, of course, a small amount of new construction each year; but the maintenance of existing highways is so poor that in some years the Republic probably starts and finishes the year with the same net total of usable road mileage. That there has been a great deal of misappropriation and maladministration of road- building funds is unquestioned by any Cuban. is For erample, either firewood or charcoal can be produced as a by-product of mangrove tannin-manufacture -or vice ersa. Mangrove, incidentally, grows in useless seacoast swamps and its cutting will not cause erosion of Cuba's agricultural land. INDUSTRY 173 Some sugar mills and a few other industries have been forced to construct feeder roads at their own expense. In a number of instances such roads have been built under agreements between the industry and the government to share the expense, but in the cases encountered in the present study the government has failed to meet these obligations. 10. Taxes Affecting Industry Tax Level Reasonable Though industrial people in Cuba complain of the corrupt handling of tax collections in the past, as well as of the somewhat irrational manner in which many taxes are levied, very few express the feeling that the general tax level is too high. There is, however, a fairly general opinion that more of the burden should be shifted to income and profits taxes instead of those now imposed on sales, transactions, transfers and documents. The Asociacion Nacional de Industriales de Cuba points out that taxes of the latter category are not properly related to ability to pay, since a transaction may often result in R severe loss and still be taxed. General Industrial Taxes Cuban tax structure is treated more fully in Chapter 36. It may be men- tioned here that there is a graduated personal income tax ranging from 1% to 30.5%, and a tax on net profits of business and manufacturing enterprises of which the basic rate is graduated up to 34%. Corporations, banks, sugar mills and mining companies pay a profits tax, the scale of which ranges from about 2% to 8% higher than that for other enterprises. There is an excess profits tax of 157o on profits exceeding 10%o of the declared capital. and an annual tax of 0.3%o on declared capital. Interest on loans, dividends, etc., are taxed at various rates depending upon their nature. There are stamp taxes on documents such as receipts, drafts, bills of exchange, promissory notes, payrolls, vouchers, invoices, bills of lading, travel tickets, insurance policies and most types of contracts; documents of this kind have no legal standing unless the proper stamps have been affixed. There is also a tax on remittances and exportation of capital in general, and one, with a variety of rates, on the transfer of property. Sugar Taxes As the chief breadwinner of Cuba, the sugar industry is taxed heavily in a multitude of ways and for all sorts of purposes. Some of the taxes are assessed for general revenue, but there is a discernable custom of levying another tax on sugar whenever the country wants something and cannot think of any other way to pay for it. A tax of nine cents per bag is levied to maintain the rural civic military schools and to improve Cuban education; another of 1.5# per bag is to pay the 174 REPORT ON CUBA expenses and administration of the Cuban Institute for the Stabilization of Sugar; a variable tax of about 0.5~ is charged for the maintenance of the .4sociacion Nacional de Hacendados, while another 0.5# per bag is for the building and maintenance of a national library; still another of 4.45 (per bag of sugar or per gallon of syrup not intended for export) was levied in 1942 for military and war expenses. The colonos are not forgotten: a tax on sugar cane is levied to pay the expenses and administration of their national association. Sugar consumed in Cuba, especially that which enters into secondary manufactured products, pays a tax of 1.5¢ per pound; a syrup similarly destined pays at the rate of 18¢ per gallon. Special Taxes on Industries Industries other than sugar face a hodgepodge of special taxes, each levied upon a particular industry and usually for some specific purpose which may or may not be related to the industry taxed. These taxes are usually assessed at a fixed rate for each article or unit of production sold. As a rule, t4hey are not so large as to be burdensome. The industries complain about them chiefly because the funds too fre- quently are used for purposes other than those for which they were intended, or perhaps disappear altogether. Coffee producers, for instance, were hopeful when a tax was created to build much-needed secondary roads into the coffee growing areas. With nearly $4,000,000 collected by the government to date, they are naturally beginning to ask why the roads have not been built. In 1936, a tax was levied on lumber to pay for reforestation; the tax has been collected ever since, but the reforestation has been limited to token efforts. The sugar tax to build a National Library has been collected since 1941. The law provides that when the library has been constructed, half of this tax will be used to support the Sugar Cane Experiment Station. The sugar in- dustry is now agitating because nothing has been done about either institution. Unusual Methods Sometimes unusual methods are employed to levy or collect these taxes. Occasionally such methods are the only ones which can provide a satisfactory check on the taxpayer under existing circumstances. An example is the beverage tax, which is collected not on the beverage sold, but on the purchase of the bottle caps required by each factory. Methods of determining certain taxes, while perhaps satisfactory when the decree was passed, have become unrealistic in the light of present con- ditions. For example, crude oil imported for refining in Cuba is assessed a gasoline tax based on the percentage of the material which distills at a temperature of 392 degrees Fahrenheit. But petroleum refining techniques and the relative markets for different petroleum fractions have changed since INDUSTRY 175 the creation of this regulation. The one refinery operating in Cuba has asked that taxes be assessed upon the products actually issuing from the refinery instead-a reasonable request for the flexibility which they need in order to adapt their operations to present-day conditions. (See Chapter 37.) Apart from those mentioned above, each Cuban manufacturer pays a number of general and special taxes to provide funds for social benefits to his workers established by law. Sometimes these are for the benefit of workers other than his own. For example, a tax of 100 on each barrel of cement is collected to provide retirement pensions for architects. And since the Mission left Cuba, it has been reported that Law No. 6 of 1949 is now being enforced. Among other taxes, this law imposes a head tax of five cents on all animals imported or exported-including, it is said, baby chicks-to provide a retirement fund for veterinarians. 11. Government Controls Lack of Clear Purpose Concurrently with the growth of present-day labor legislation, and partly as a necessary corollary, the Cuban Government has undertaken an increasing amount of control over various aspects of industry. Aside from the labor laws, however, and a number of temporary measures introduced to control allocations and prices or to alleviate shortages during the recent war, the Cuban pattern of government control in industry has not reflected much unified purpose. Rather, it has been a patchwork of unrelated laws and decrees, each apparently designed to meet some limited immediate situation or to placate some small group. It is feared that a great many of these decrees have been passed without considering their secondary effects or how they would function under chang- ing conditions. Some have apparently been issued without realization that they were in conflict with others in their ultimate-or even immediate-effect. In Cuba, as in most countries, it has seemed easier to pass laws than to repeal them. Quite a few decrees have been passed to correct situations caused by other existing decrees, when the same effect could have been achieved more easily by abolishing the first ones. Over-control-The Cuban Sugar Shortage One of the most interesting effects of over-control encountered in Cuba was an apparent domestic scarcity of sugar, which developed during the time of the Mission's field studies. This phenomenon caused a severe crisis in several domestic industries dependent upon sugar as a raw material. Two soft-drink bottling plants were forced to suspend operations; candy and pre- serve manufacturers had to reverse their plans for market development and other such industries were seriously threatened. 176 REPORT ON CUBA Although officials seized upon the Korean war as a popular explanation, the underlying cause was that both the supply and price of sugar for domestic consumption had been fixed by government control. This had been done in a manner which-though no doubt desirable from the Cuban household con- sumers' point of view-was unrealistic in the light of world market conditions. Considering the prevailing Cuban wage and level of living in comparison with those of many other parts of the world, it is not entirely clear why it was considered necessary to legislate the price of sugar in Cuba at a level somewhat below that of the free international market. 20-lbs. Confiscated What took place under these conditions could not have been wholly unexpected: some of the holders of domestically-allocated sugar stocks quite naturally (although illegally) attempted to sell them at the best available price. Within the law, Cuban industries consuming sugar could not pay an equivalent price and had difficulty in filling their requirements. There was, in fact, considerable sugar in the warehouses; but many who were not actually selling it abroad were at least holding it in view of the trend of the outside market. With proclamations and police activity the concealed stocks were soon brought to light and forced on to the market. In Habana, a 19-year old Spanish cruise passenger was arrested for carrying 20 pounds of Cuba's principal export commodity to his ship; his sugar, intended for relatives in Spain, was confiscated. The Government, too, suspecting that manufacturers of candy and pre- serves might export domestic sugar at a better price in these forms, issued a decree prohibiting the exportation of such items. Manufacturers Puzzled To none was the situation more puzzling than to these manufacturers. Originally they had been encouraged to set up industries which would not only add to domestic payrolls but would also utilize more of Cuba's main crop. They then found themselves paying a special tax of $1.50 per hundred pounds of sugar used aimed specifically at domestic sugar-consuming in- dustries. Next they were given a subsidy, in the form of an exemption from this tax, to enable them to compete with foreign products and to encourage the sale of their products in other countries. And finally, they were pro- hibited from exporting their products. What is more, all of these decrees were in effect at the same time. General Control of the Sugar Industry Governrment control of the Cuban sugar industry is far too intricate to describe here (see Chapter 43). It begins before the cane is planted and INDUSTRY 177 extends through the harvesting, grinding and processing, until after the sugar is sold. It stems, of course, from the fact that sugar so completely dominates all of Cuban life that whatever happens to it can profoundly affect the whole of the nation's economy. It is perhaps one of the most elaborate patterns of government control ever imposed upon an industry, short of actual nationalization. Wide Distribution of Profits Much of the legislation in this field is aimed at insuring that the ample profits flowing from this industry are distributed in a somewhat equitable manner, not only to the stockholders but all the way down the line to the mill and field workers, colonos, and others who contribute to the operation. Pressure groups on the fringes of the industry have also counted themselves in. To guarantee business for the railroads, sugar operators are told when they may or may not use trucks. For the same reason, and also to assure work for certain groups of port labor at the expense of others, individual mills are told that they must ship through specified ports. Molasses The price and distribution of molasses is rigidly regulated. At times, such as the present, the market rapidly absorbs all of this sugar by-product that is available; at other times there is an excess on hand. The expense of disposal of any surplus molasses is left to the mill owner; but, when it is a profitable commodity, any gain from it must be shared with the original growers of the cane. If an independent Cuban alcohol distiller wants to buy molasses from a nearby sugar mill, he cannot do so without permission from the Sugar Stabili- zation Institute. Ordinarily he can get this permission, within his quota, although he may be ordered to buy it from another mill. In reality he must buy the molasses from the Institute. which in turn buys it from the mill, the prices in both transactions being fixed by the Institute itself. The molasses is not delivered to the Institute but moves directly from the mill to the distiller. Sold in the Plumbing An interesting phenomenon occurs, as a result, because a large proportion of the alcohol distilleries are operated by the sugar mills themselves on their own premises. In these cases the molasses is, of course, piped directly from the extraction process into holding tanks, whence it passes by other pipes to the fermentation vats. From an engineering standpoint this is excellent; but it is not as simple as the plumbing would indicate. Although it never leaves the premises, on its way down the pipe this molasses must be sold to the Institute at one price (for example, 4) per gallon) and immediately bought back by the original 178 REPORT ON CUBA owner at another price (450 per gallon). The difference accrues to the Institute to finance its cost of carrying out the transaction. Thus, it is to be noted that the centrales' cost of production of a by-product is artificially raised.20 A Precedent Fixing the price of molasses may not have produced any seriously harmful effects to date, except the failure to encourage the formation of stable indus- tries of other types to utilize molasses. At the same time, however, the mech- anism of this regulation establishes a precedent for similar moves, affecting other by-products which might at some time be developed into substantial industries. Cane bagasse is now considered to be the property of the mill owner, and is used by him as fuel to operate the mill; yet it is known to be convertible into various industrial products. If any such conversion were undertaken on a scale large enough to interest the control authorities, measures comparable to those now applying to molasses might make the project uneconomic and could even require the mill owner to pay additional tribute for his fuel. Control of Non-sugar Industries In other industries government control-other than the labor legislation affecting all industries-has been far from uniform. It has been less concerned with distribution of the gains among the workers than with maintenance of marginal or unstable centers of production, with restriction of free choice of markets, with roundabout devices for the collection of certain taxes, and with the shielding of Cuban consumers from the unpleasant truth that prices in the world have gone up. Whatever the merits of the controls themselves, they have been only par- tially effective. Enforcement of many of them requires a small army of inspectors, clerks, and officials of various kinds. Few of these are paid enough to be attracted to their positions for reasons of salary alone. The island's factory operators and businessmen, knowing this, seldom hesitate to offer what seems to them a more advantageous deal than compliance with the law. Often the result is not control at all, but simply a higher cost of production through extra cash outlays to officials for their "cooperation". Coffee Control The coffee business has been considerably annoyed and impeded by government control, but this furnishes an excellent illustration of how Cuban producers in certain lines have brought trouble upon themselves. 20 Since the manufacture of alcohol is subsidized by the Government under certam condltions, this in tarn is reflected in the amount of subsidy paid (see Chapter 15). INDUSTRY 179 In 1934, the coffee growers, disturbed by low prices and market fluctua- tions, requested the government to regulate "the fixing of a minimum price and the declaration of a moratorium for the debts guaranteed by either the harvest or the plantations themselves". The government responded by creat- ing a Cuban Institute of Coffee Stabilization empowered to "control pro- duction, cultivation, distribution, consumption, and import and export prices of coffee". The Coffee Institute has successfully controlled import, export and domestic prices, as well as the kinds and amounts of coffee admitted from other coun- tries from time to time. Through these steps and the setting of quotas it has influenced-if not controlled-domestic production, although not always in a manner ultimately beneficial to the country. The other stated objectives of the Institute were perhaps a little ambitious. As distinguished from production, it has accomplished little or nothing in the fields of cultivation and distribution. It is not clear how or why the govern- ment expected the Institute to control the consumption of coffee. Dismay of Growers With the regulation and with changes in world conditions since the estab- lishment of the Coffee Institute, until recently prices have tended to be higher on the domestic market. To remove excess stocks, the Institute has set for the individual growers quotas which must be sold abroad. Government subsidies on exports have also been provided. & Though the request of the coffee growers in 1934 had been for the estab- lishment of a minimum price, the Coffee Institute soon discovered that it could also control the maximum price. To the dismay of the coffee growers, the Cuban domestic price was recently pegged very much lower than the world market, out of deference to the Cuban housewife. The effect was disastrous; before this price was freed in September 1950, many coffee plantations had been destroyed. In rectifying the damage, it must be kept in mind that the most enlightened legislation will not make a newly-planted coffee tree produce in less than four to five years. Meanwhile, coffee price control has already been re-established. Price Control Although Cuba's centralized wartime price-control system is no longer in effect, the Government has maintained price regulations on various items of primary necessity, especially on basic foods. Sugar and coffee have been mentioned earlier. The policy also extends to such things as meat, milk and serves as a bar to development. Unfortunately, in Cuba as elsewhere, this kind of attempt to cheek a few undesirable effects of natural economic laws also sterilizes their good effects, and others. 180 REPORT ON CUBA As one result of a fixed price of 12¢ per pound for beef, the once- promising cattle population has dropped nearly 20%7 since 1941,21 and the control has been at least partially responsible for the closing of two large slaughtering plants. Cattle-raisers find no incentive to raise better grades of beef, because these would fetch the same price anyway. The price officially fixed for the sale of canned milk produced in Cuba allows the retailer a total mark-up of 47o, which is not enough to meet the overhead of an ordinary grocery business. In consequence, the stores naturally encourage their customers to buy imported canned milk, on which the profit is greater. The price of Cuban milk is automatically limited all the way down the line to the dairyman, whose costs are high for technological reasons, and who is thus not encouraged to increase his milk production. One canning plant is able to buy only half the quantity of milk required to keep the factory operating at capacity. Export Controls Some of the Cuban export regulations are designed to assure local con- sumers and manufacturers of a supply of certain domestic raw materials. For example, though a local producer of such raw products as henequen fiber, hides, etc., may arrange to export these materials to a foreign buyer, under Decree No. 3485 he must first obtain a permit and advertize his intention, allowing ten days for Cuban buyers to exercise the right of priority to pur- chase at tb. same price. Controls to Insure Honesty Controls intended to insure the collection of taxes are varied. Many simply require that a stamp, purchased in advance, shall be affixed to the product in a manner plainly visable to the purchaser. In the case of the beverage tax, the manufacturer of bottle caps actually collects the tax and pays it to the government. But this encourages c*ndestine manufacture with harmful effects not so much on the larger manufacturer as on the government itself. It is reported that a number of small shops are making bottle caps which they sell to the bottler at a price slightly higher than the established rate but without the tax added, thus effecting a net saving to the bottler.22 Intervention Another form of control practiced by the Cuban government is that of "intervention" in an individual company-a final resort in irreconcilable labor disputes. Since many Cuban labor disputes appear irreconcilable unless the management gives in, cases of intervention are fairly frequent. 21 See Table 206, Chapter 45. 22 A certain percentage of cape is inevitably spoiled by corros-on or faulty bottling machinery. The bottler mast save these caps for nspection by the government to obtai a tax rebate en them. INDUSTRY 181 Actually, many companies-facing financial ruin through impossible situa- tions created by labor legislation-have sought intervention, and have turned over their plants to government-appointed interventors to accomplish the necessary adjustment which they are powerless to make themselves. Intervention is not always successful, and there are a few cases in which it has resulted in further degeneration so serious that the plants have closed permanently. In other cases, it may be quite costly, as a company may be forced to finance uneconomical situations for many months while the inter- ventor is making his studies. Yet sometimes it is the best way out of a dilemma; for if-as with a certain shoe factory in Oriente-the plant is actually carry- ing 90 more workers that it can afford to pay, the government will eventually be forced to conclude this from its own operation of the plant and to dismiss them. Discriminatory Enforcement A complaint of many Cuban industries concerning government controls, taxes, and social laws is that, in practice, they are applied in a somewhat discriminatory fashion. It is claimed that enforcement agencies deliberately ignore thousands of tiny "clandestine" operators who observe no regulations, pay no taxes, and do as they please. Recognized manufacturers in some lines assert that such competition is ruinous. While this is difficult to verify, it is certainly true that a substantial part of the national output of certain products such as candles, bricks, simple furniture, charcoal, roasted coffee, toasted wheat, cornmeal, preserves and other food products comes from a myriad of very small producers. Despite the protests, however, and without condoning a discriminatory situation, it must be noted that there is very little evidence of any of the larger manufac- turers being forced out of business by this type of competition. It is possible that much of their annoyance is caused by being forced to sell their products competitively at a more reasonable price than they would like to demand. Official Delay 0 Fishermen complain that the net effect of government concern with their business is not a help but a hindrance, and charge officials with non-coopera- tion. For instance, one owner of seven fishing boats in Cienfuegos, who received an offer of a United States outlet for his cherna catch, felt that this would help to develop his enterprise. After waiting nearly three months for a reply to his request for a proper permit, he was denied the permit on the grounds that to export might raise the price of fish in Cuba. Other industries find their business hindered, if not actually blocked, by unreasonable governmental delays. An Oriente salt manufacturer, who could make deliveries to one of his principal local customers in two hours, has to 182 REPORT ON CUBA wait as long as two weeks for the permit which is legally required before he can move the salt off his property. Fear of Too Much Control Where there is a history of control and interference, there is also fear of more control. Some of the larger tanners cannot get enough hides, although a part of the domestic supply is exported. One of them said: "There is no law to prevent us from paying enough to get the hides which are now exported. There is no government price-control on hides and we don't want any. But if we pay enough for the hides we will have to increase the price of leather; and, if we do that, there will be a hue-and-cry in the local market and the government will step in. We don't like the present situation, but it is the better of the two." -Or of Not Enough If there is too much control in some things, there is not enough in others. Protection of the country's live resources is inadequate. The trees, which once might have maintained at least certain parts of the domestic lumber industry on a sustained-yield basis, are almost gone. So are the deer and alligator; skins of these types used in Cuba's well-known leather handicraft industries are now imported. Enforcement of fish and game laws is so lax that any casual stranger can obtain fresh Morro crab out-of-season just by ordering it in a restaurant. The famous Morro crab is on its way out. A vigorously active Bureau of Weights and Measures, backed by laws providing stiff penalties for short weight and misrepresentation in commercial practice, would do more to give the customer his money's worth than a great deal of unrealistic price control. Similarly, a well-enforced Pure Food and Drug law would be of genuine benefit to industrial development, although it might be loudly protested at first by a few unscrupulous producers. 'Cuba needs a greater water supply, 6ut not in its milk. Domestic oleomargarine might yet be saved by eliminating wholesale adulteration. The Cuban canning industry, a natural one for the country, can never really develop until the sanitation, purity and quantity of its products approach those of its competitors. 12. Protective Tariff and Subsidies What Should be Protected? Cuba's sugar industry is great not because of legislation, but in spite of it. The reason is that Cuba is an excellent place to grow sugar. INDUSTRY 183 Cuba is also suited to other activities23 but not to everything. In view of the economic perils of monoculture, and of the constant threat of being cut off from time to time from essential supplies, there are good reasons to encourage the diversification of production for its own sake. But there are limits to diversification beyond which the price is far too great. Cuba's ultimate objective is to obtain for her people the highest possible standard of living-which simply means the greatest general level of goods, services, comforts and personal satisfactions that the average Cuban can enjoy during his lifetime. There are many industries besides sugar-perhaps smaller but no less stable-which can exist in Cuba without the aid of artificial props. Certain others, however uneconomical, may be essential in troubled times, or may offer sufficient personal satisfaction to Cubans that they are willing to support them. All told, these are the only groups of domestic industries which can really contribute to a raised standard of living. Protection from Healthful Competition Adnittedly, the establishment of an entirely new industry in a limited market is sometimes exceptionally difficult; and its "growing-pains" may be somewhat eased by protective measures. Where these are necessary, however, it should be understood they are not granted as a right for all time but only as a push to get the infant industry started. During the period of protection the infant should be made to prepare itself to stand alone when the tariff is removed. One of the most unfortunate effects of tariff protection is that it destroys the competitive incentive to produce high quality merchandise. This is a part of the price which a country must pay for industries which are artifically maintained. The trouble is particularly acute in a country such as Cuba, where the traditions of marketing depend much more on the principles of monopoly, cartels, and scarcity than upon the alternative way of getting customers by offering them more for their money. Problem of Hosiery Industry It must be acknowledged, of course, that many Cuban manufacturers today are unable to make much improvement in the quality of their products or to lower their cost because labor powerfully resists measures which would normally make these things possible. Cuban knitting-mills, for instance, say that they once had adequate tariff on imported competitive products but that the behavior of labor has raised costs until this tariff is no longer protective. As an illustration, in one common 2 Specia, attdntwon is directed to Chart 11 in Chapter 2 and also to the e.tensive examination of Technical Problems and Possibilities mn Book X. a 184 REPORT ON CUBA operation a Cuban worker supervises from 10 to 12 machines, while from 16 to 22 machines of the same type are handled better by a single worker in other countries. When asked what could be done to correct this situation, the knitting-mill operators do not even speak of any possibility of lowered costs. They can only suggest a further increase in the tariff or else a government subsidy to the mills. Tariff Regarded as Bonus By some producers a tariff is regarded simply as a bonus which an in- dustry can obtain if it exerts sufficient pressure upon the government. Although one Cuban textile factory now claims that its unit costs are among the lowest in the world and another states that in a free market it can compete with anything except outright dumping, the textile industry has tariff protection already and is asking for more. Who Is Really Protected? In some instances, previous governments have established substantial tariffs on the importation of certain articles not produced in Cuba, apparently in the hope that this protection would attract investors into those fields of production. After a sufficient number of years, however, when this objective has not been achieved, it would seem wise to remove these tariffs if at all possible. For example, there is no indication that the growing of cotton will be- come popular in Cuba. Nobody, therefore, is protected by the existing tariff on raw cotton unless it be the spinning mills of other countries which now supply the bulk of cotton thread to Cuba's weaving mills. To take another example, why should semolina flour pay a duty of $2.10 per 100 kilos, when it is unlikely that it will ever be a Cuban product? It is preferred for making spaghetti and noodles, but the tariff is so high that Cuban manufacturers are forced to use ordinary wheat flour instead. Interrelation of Industries The various elements of modern industry are interrelated in a very com- plex manner. The product of one industry is the raw material for another; or the market for different products may be complementary. There would be no ink sold if there were no pens. The market for pancreatic enzymes (obtained from the pancreas of slaughtered cattle and used in the making of leather) is dependent upon the number of hides to be tanned. But the number of hides depends upon the number of cattle slaughtered, which also determines the available supply of pancreatic enzymes. INDUSTRY 185 To meddle with the tariff in response to pressure groups is a hazardous practice, and its harm to an intricate industrial balance may easily exceed any benefits. As for revenue, the government, of course, must get money somewhere to meet its running expenses; but the customs-house as a main source is outmoded. Subsidies Like controls, subsidies have taken various forms in Cuba. This pro- cedure of taking money away from one group and giving it-minus adminis- trative expenses-to another has become increasingly popular in recent years, as a means both of avoiding unpleasant realities, and also of making possible activities which have already been made impossible by preceding legislation. When, in 1945, a decree was passed tying wages in the sugar industry to the market price of sugar (see Chapter 43), it may have seemed that at last a rational basis for determining these wages had been established. It still appeared so when the price of sugar rose subsequently. But when the price dropped again in 1948, only the employers continued to see the justice of the arrangement. Over their protests, the drop in sugar price was disregarded and a decree was promptly issued ordering them to pay the same salaries and wages as were paid for the crop of the previous year. To "satisfy" all parties, the government created a subsidy fund to reimburse mill owners and cane planters for the wages which they would have to pay under the new decree in excess of those determined by formula from the price of sugar. The employers were told to go ahead and pay the extra wages and that they would get their money back from this fund.24 Textile Wage Subsidy Another significant case of wage-subsidies occurred in the textile indus- try (Chapter 49). With the change of conditions in this industry some time after the end of the war, one of the largest mills faced the need to reduce swollen payrolls in terms of both wage.rates and number of personnel. After a period of considerable difficulty-in the course of which it was necessary actually to close the plant for several months-the government finally allowed the dismissal of a thousand extra workers and a 30%o wage reduction for the rest. In doing so, however, the government provided a cash subsidy to Lhe workers remaining, sufficient to restore their total pay to the former level. 24 They paid the wages and the cane planters were reimbursed. The mill owners, however, were still trying to get their money back m 1950. Acs.rdmig to press reports, when they applied for it they were told that the Government needed the cooperation of everyone, and that the best form of cooperation that the mill owners could give was to forget the $6,000,000 involved. Later the government adopted the attitude that there was nothing due them. On September 5, 1950, the Government issued Decree No. 2662 transferring the $6,000,000 to a special account in the public treasury, and another decree appropriating $5,000,000 of the $6,000,000 for public works. 186 REPORT ON CUBA At the same time it subsidized the discharged workers also, by giving them 60% of their former wages for 90 days, while they sought other employment. The original 90-day period has been extended so that already the un- employed workers have been receiving this 60% wage continuously for nearly one and one-half years. The wage-cut restoration for the retained workers also continues, and may remain indefinitely. Funds for these sub- sidies are provided by a 6%o wholesale tax on textiles. Subsidy by Tax Deduction Reference has already been made25 to the subsidy, in the form of excused taxes, to encourage the exportation of products made from sugar and to improve their position on the domestic market in competition with similar imported products. There are other examples of this kind. Since labor costs in the Cuban fiber and cordage industry have virtually priced this cordage out of the world market, manufacturers of Cuban rope, twine, and similar products have been given a subsidy of 4 centavos per pound for all such products exported from Cuban territory. The cordage subsidy is payable by deduction from the sales and transfer taxes which the manufacturers would otherwise have to pay. Subsidy by Capital Gift Some attempts have been made to subsidize the development of specific industries by outright gifts of capital equipment. These experiments have not been too successful. At the principal fishing port of Bataban6, the government supplied a fishermen's cooperative organization with boats and nets, and built them a complete cannery. The organization appears to have disintegrated, however; the cannery has never operated, although another cannery built next door by private enterprise is doing a thriving business. Despite this complete failure of capital-subsidy at Bataban6, other Cuban fishing ports feel that they "do not have proper government cooperation" because they have not received similar gifts. An unsuccessful fishermen's cooperative at Caibarian has recently been revived, and has been presented with some nets and 8 rowboats by the government in what is evidently an- other attempt to make a success of this type of venture. The Mission does not feel that much can be expected from capital equip- ment supplied as gifts, when the recipients do not themselves contribute any major investment which would inspire them to protect their own financial initerest in the equipment. 1s In the d,scussion of government controls. INDUSTRY 187 Alcohol Subsidy An important subsidy, discussed in Chapter 15, is that furnished to Cuban alcohol distillers to make possible the blending of absolute alcohol with gasoline as a motor fuel. The amount of this payment is believed to be more than is necessary for the purpose, and is so attractive as to cause the continued installation of new distilleries at a time when the island's alcohol distilling capacity is already greatly overexpanded. 13. Marketing Practices High Price-Low Volume Cuba has inherited a general philosophy of marketing in the ancient tradition of low volume at high prices, in contrast to the reverse pattern which has made possible the rapid growth of production in the more highly industrialized countries of the world. Coupled with this is an apparent confusion of cause and effect. The local manufacturer explains that because of his low volume he is not able to achieve optimum factory size, and that his costs of production are therefore high. He also points out that with a low sales-volume he must make a large profit on each article in order to make a living. Unwilling to be the one to take the first step to expand his market through lowered price, in many cases he watches an increased national demand for his type of product being satisfied by imported merchandise instead. He then calls for tariff protection to raise the price of the competing article instead of lowering his own. Naturally this has a tendency to diminish, if anything, the total market available to him. The Protection Spiral Buyers. report that Cuban manufacturers whose products are adequately protected by tariff often fail to take the best advantage of their protection. Where the tariff is such as to give them the opportunity to undersell the imported article, they view it instead as an opportunity to raise their own prices to the equivalent level for a higher profit. Thus they continue to be pressed by the foreign competition of merchandise which, as often as not, is of a more carefully controlled quality anyway. Occasionally this leads to a mistaken conclusion that the tariff is insufficient, and further demands for help are made upon the government. Competition to Cartels Resisted Resistance to legitimate price competition has resulted in various cartel- type arrangements, as well as in price-fixing by decree or by single-industry "institutes", formed under governmental auspices. Sometimes it also takes more violent forms which increase the difficulty of governmental efforts to hold the rising cost of living in check. 188 REPORT ON CUBA When a well-known mail-order and retail department store organization brought to Cuba its popular policy of supplying the public at low prices and standardized moderate profit margins, it suffered slanderous attacks, broken windows and even a bombing. Variable Mark-up Cuban retail mark-ups are high on the average, but far from consistent. At times, they are fairly reasonable. Rope-soled shoes, with a factory price of $0.51, may retail at $0.80 per pair; a shirt costing $2.00 wholesale may be sold by a retail shop at $3.25. On the other hand, the store immediately next door may price the same shirt at $4.50. Four small clothing stores in the street-level arcade of the same building in Habana offered guayaberas26 of the same brand and quality for four different prices, with a range of nearly $3.00 from the lowest to the highest. ' In the absence, of an actual statistical investigation, the Mission was unable to arrive at an average Cuban mark-up on standard agricultural machinery, for the various arbitrary sales-prices on identical items (includ- ing duties, taxes, freight, etc.) ranged from 20% to more than 200%o over the corresponding U. S. prices for this equipment. A by-product yeast cattle feed prepared at a cost of $45 per ton is sold by the manufacturer for $90, and reaches the ultimate purchaser at $120. Cuban fertilizer is available at around $40 per ton if purchased direct, but the manufacturer finds his farm sales retarded by the avarice of some local dealers who sell it for $80. The domestic market for these two products-if not restricted by such practices-should be enormous. Distribution Cuban manufacturers sometimes distribute a portion of their output through their own retail outlets, or direct to small independent retailers; but many prefer bulk sales to warehouses and brokers as a method of obtain- ing immediate cash payment. These alternatives may partly account for inconsistent consumer-prices, because the number of middlemen-each of whom expects a large profit on his transaction-is variable. The way is also paved for seasonal speculative hoarding, a phenomenon which appears in numerous commodities at intervals. Harmful Practices There appears to be an unusual amount of uncontrolled sharp practice in retailing, especially in foods and certain other lines. Advantage is taken 2 A form of shirt with four pockets and a straight hem, worn outside the trousers in place of a coat in the Cuban hot weather. INDUSTRY 189 of the possible confusion of various units of measure which are nearly-but not quite-equivalent. A storekeeper who advertises cloth at a specified price per yard may actually measure the customer's purchase by the slightly smaller Spanish yard, or vara. Similar gains are made through appropriate use of the Spanish pound (1.014 English pounds). The five different "tons" used in Cuba27- offer possibilities which are not entirely overlooked. Many food retailers have refused to sell staples such as rice and coffee in pre-packaged form. They prefer to handle bulk goods which give them more freedom in weighing. Some coffee wholesalers have succeeded in over- coming this resistance by creating a strong consumer demand for domestic packaged coffee through advertising. But in these cases, the packages are not marked with the weight of contents, and the factories admittedly vary the weight according to the market in order to sell the packages at a fixed price. Therefore, though the retailer is no longer free to manipulate, the consumer still does not know what he is getting for his purchase price. Adulteration Adulteration is another problem, which is touched upon in a number of connections in this Report. Complaints of watered milk are common. The specifications of manufactured articles, the composition of textiles used in clothing, etc., are sometimes subject to misrepresentation. Before the market for Cuban oleomargarine was ruined by some of the manufacturers themselves, the amount of adulteration of the product with water went as high as 80%. Some makers, indeed, called upon chemists for technical help-not to improve the margarine, but to incorporate more water into it. Expansion Impeded The Mission does not wish to moralize. Yet as a plain business matter, it is clear that expansion of Cuban industrial production is impeded by some of these practices. Production in any line cannot be maintained at greater- than-market levels for long; hence market expansion is one primary need if development is to take place. The domestic Cuban market is not unlimited, but it is large enough to absorb greater domestic output if the manufacturers will use the normal incentives of price, quality and service to persuade Cuban consumers to buy their products voluntarily in preference to imports. This is the way the competitors do it. 27 These are the English short and long tons, Spanish short and long tons, and the metric tos; their appros..sate weights are 907 2, 1016.0, 920.0, 1030.4, and 1000 kltograms, respectively. See Table of Equivalents isn Appendix IV. 190 REPORT ON CUBA Background Causes It is easy to point to these problems; but they must be viewed with sympathetic understanding, for their solution in some cases will come slowly. Today's customs, in any country, are rooted in the past. The problems, too, are largely inherited. People have followed their own leaders. Admittedly, Cuba's history has been most unfortunate. During some four hundred initial years of outright colonial exploitation, officials held their position-and possibly were granted them in the first place-with the tacit understanding that they were primarily opportunities for privilege and personal gain rather than public trusts. It has been difficult to erase this concept of public office; it still persists widely. Generations of malpractice have left their scars. Many of the unfortunate practices which have characterized some of Cuba's past governments have so thoroughly permeated the nation's internal commerce and industry that they have almost become accepted by the public as the normal way of doing business. Effect on Development This presents some special problems in industrial development. For example, it has been mentioned that a strong pure-food law, enforced by frequent bona fide factory inspections, would do much toward making certain Cuban food products truly competitive with imports on the basis of quality and consumer acceptance. But Cubans know that too many of the inspectors who now visit factories for other purposes expect to be paid for not making bad reports. The factories pay them, moreover, and so they need not even make the inspections. The government, in turn, finds it unnecessary, in many cases, to pay the inspectors more than token salaries, since their income is augmented privately; consequently, an inspector is under economic pressure to continue the vicious system. In these circumstances, it might be inferred that to saddle the factories with one more set of government inspectors would only increase the costs of production without having any significant effect upon the low standards of manufacture in these cases. Cubans say sadly that this is the entrenched system, and that although they really abhor it, they cannot change it. If this were true, then it would be a waste of time to talk of progress. But, of course, it is not true. The Cuban people can change the system and tear down the barriers to progress at any time they wish to do so. INDUSTRY 191 IV. RECOMMENDATIONS Labor and Labor Management Recommendations of the Mission in connection with Cuba's urgent prob- lems of labor and labor-management relations are given in Chapter 16. These problems are basic; and it is again emphasized here that unless they are tackled in a vigorous and constructive manner, the Mission sees little possibility of any significant industrial developments in Cuba. In connection with other major industrial problems, the Mission recommends that: Basis of Policy 1. The Cuban Government should adopt a selective bi%t consistent policy directed towards encouragement of industrial development on economically- sound lines. The basis of this policy should be: (a) Reasonable minimum of restrictive control. (b) Minimum interference in industry. (c) Minimum of inconsistent taxation. (d) Greater dependence on good technology. (e) Less dependence on the financial devices of tariff and subsidy. Agricultural Diversification 2. Since agricultural diversification helps industry, the Cuban Govern- ment should review and revise all existing policies and legislation-de- scribed in the foregoing and other chapters-which impede agricultural diversification. Need for Foreign Technology 3. The Cuban Government and people should recognize that more and better technology from other countries is essential to Cuban national develop. ment, until sufficient Cubans have been trained to supply it. For this reason, the policy of the Cubanization of Labor should be relaxed in order that experienced foreign technologists may be more readily available to Cuban industries. Technical Education in Cuba 4. In order to make more and better-trained Cuban technologists eventu- ally available for employment in Cuban industry, the Cuban Government should take the following measures: (a) Arrange for an international and objective panel of experts to examine the technical and engineering curricula, physical facilities, budgets and instruction in the Universities of Habana and Oriente 192 REPORT ON CUIBA and other Cuban institutions of higher learning, and to make recom- mendations to improve the training of technical students. (b) Relieve the University of Habana of the monopolistic right to be sole judge of technical competence in various fields. The ability of other educational bodies and of individual Cuban citizens to assist in such judgments should be officially recognized and encouraged. (c) Modify the operation of the polytechnic schools in the following ways, which are of great psychological importance: (i) All students should be charged a small amount for registration and living expenses. In bona fide cases of hardship, these could be offset by work and/or scholarship grants. (ii) Students should be encouraged to assist in the work of main- tenance, kitchen, cafeteria, etc., as a means of earning their tuition. (iii) Students should be taught the basic principles of industrial production costs. (iv) Students should not only be taught the legal rights of the worker. They should also be taught-with equal emphasis- the worker's moral duties towards his country and his employer. (d) Convert the polytechnic schools at Holguin and Matanzas to their advertised purpose and equip them properly for instruction in the trade skills now taught at Ceiba del Agua and Rancho Boyeros. (e) Increase the budgets for the polytechnic schools at Ceiba del Agua and Rancho Boyeros, in order to provide better maintenance and more adequate supplies. The possibility of doubling the capacity of these schools by alternate shifts should be studied. Conservation 5. A Cuban Technical Commission should be appointed to suggest means to tighten and to enforce regulations for the conservation of forests, fish and wild game, in order that these resources, which can support Cuban industries, shall be efficiently protected and conserved. This Commission should advise the proposed new Ministry of Mines, Water and Forests. 6. To conserve resources and to reduce unnecessary imports, every en- couragement should be given to Cuban industries to burn for heat and power any combustible waste products, such as sawdust, wood-scrap, hulls, etc., if no other industrial use for these can be found. Pure Food Legislation 7. The Cuban Government should enact and rigorously enforce suitable laws to ensure tlJe purity and hygienic handling of foodstuffs. In order that INDUSTRY 193 Cuban food products may be acceptable for export to the United States, the United States pure food and drug authorities should be consulted before this law is framed. Weights and Measures 8. The Cuban Government should establish and enforce stronger regu- lation of the weights and measures used in commerce. Advice should be sought from neighboring countries with effective legislation and enforce- ment procedures. CHAPTER 7 Problems of the Sugar Industry This chapter is a brief review of some of the problems of the Cuban sugar industry and contains the Mission's main recommendations. A technical and historical study is given in Chapter 43, Book X, and many problems which concern the sugar industry-labor, mechanization, irrigation and so on-are discussed in other parts of this Report. 1. Part Played in the Economy World's Largest Supplier Cuba is the world's largest producer and exporter of sugar. Production of this commodity is her principal national occupation. Although Cuba produces only about 17%7 of the world's total sugar production, she furnishes more than 50%c of the sugar which enters the "free" international markets. Nothing could be more apparent than the dominant role of the sugar industry in the Cuban economy. More than 50% of the cultivated land is devoted to cane and, when there is a favorable sugar market, two-thirds of the agricultural income is contributed by it. Nearly one-third of the gain- fully employed, or approximately 500,000 workers1 find direct employment in the industry during the height of the zafra.2 Between one-third and one- quarter of the national income arises directly from sugar production. Total investment in the industry is estimated at from three-quarters of a billion to one billion dollars. Servicing of the Sugar Industry Moreover, the servicing of the sugar industry is an important outlet for such domestic activities as the foundries and especially the railroads. Not only do the sugar mills themselves operate a rail mileage almost double that of the entire public railroad system, but as much as 80% of the tonnage and 53%,