Rufo Lopez-Fresquet [Speech]

I'd like to welcome you to a talk sponsored by the Division of Inter-American Affairs, the Graduate School, the Latin American Center, and the Department of Economics and Political Science. It took a lot of sponsorship to put on, and I think I speak for everyone involved when I say we're very pleased and very proud to have with us this evening Dr. Rufo Lopez-Fresquit. Dr. Lopez-Fresquit has a doctorate from in political science and economics from the University of Ivana. He has been active both as a professional economist and as a political activist. He took a prominent role in underground activity against the Batista in Cuba. In governments before Batista, the Democratic governments before Batista, he represented

Cuba at international economic conferences of various types. After Fidel Castro came to power, Dr. Lopez-Fresquit became Minister of Finance and in that capacity he organized a complete overhaul of the Cuban tax system. He was the last, I think, of the bourgeois ministers to leave the cabinet. He left unamicable terms for reasons of health, ostensibly at least, and since a written of his experiences in a book called My 14 Month with Castro, I think, Fuy Miniso de Kidel, after teaching in Puerto Rico for some time, Dr. Lopez-Fresquit is now Professor

of Economics at Elbet, Covel College, University of the Pacific. His topic tonight is the economic transformation of Cuba. Thank you very much, Professor Martin. It's a privilege to be here tonight. I used to deliver this type of talks, just starting right away, reading from my notes. But my wife has advised me that it's better to say some of the cuff remarks before delivering

this speech, so I'm going to do that. Well I don't want you just to get a wrong impression of how expensive I am. The reason why they have to have three responses is because this is the end of the academic years and they are running short of funds. We are going to talk about Cuba, and it is in order to say that actually we are going to talk about Castroism that is a very special type of political organization without a system.

Castro is a very fascinating personality, a trembling, intelligent, hard-working, very disorganized. He is a born guerrilla fighter, he is still fighting the guerrilla war in Cuba. There is a new book by a Polish Marxist, political scientist that is called guerrillas in power, and I think it's a very good title, that's what we have in Cuba. The 12 years in government, Castro doesn't have a place of office, he doesn't have enough. I don't think he even has a desk, he's running the government going from one end to the other, just as a guerrilla fighter.

He doesn't have a place to live. One day he doesn't eat, and some other day he eats for a battalion. He's a charismatic personality, after 12 years in power, the impression is that he still commands the backing of the majority of the Cubans, with or not for sure, because there is no freedom of expression in Cuba. I think he's sincere, he's wrong, but he's sincere. I don't agree with those by Ronald Hilton from Stanford University who says that he said just an old-time Latin American Caldillo, for one reason mainly, he's honest. All those Latin American carriages, the Caudillos were just thieves and murderers that killed

when people opposed them from stealing everything from the government. That is not the case with Castro. He's honest in monetary matters. You will see that he's not honest in other matters of a political life. He has a tremendous location for power that is the reason of the special characteristic of the system. It's very difficult to label the system. We can talk about socialism in Cuba, or the ultimate effort to establish a really communist society, but it's very difficult to find a straightforward label for what is just taking form in Cuba.

He has a very key mind. He grasped the meanings of every new subject that he has to face. But maybe because of that, he's very superficial, and after reading one article in the Spanish translation of the read and digest, he thinks he knows all about astrology or fertilizers of what not. But if somebody will ask me just to pinpoint what really strikes me in Castro personality, I will say that he's an actor. He's a magnificent actor. When I accompany him to the States in April of 1959, a very high officer, a very high officer of the Central Intelligence Agency, had a talk with Castro.

His name was General Cable. They put the director of the Central Intelligence Agency. He was in New York, in the start to the hotel. His suite was by the side of my suite. And after the interview that lasted about three hours, General Cable came into my office and my suite, I said, may I have a drink? I really feel euphoric. This man is not a communist, on the contrary, he is the strongest anti-communist fighter I ever met. I think that time is getting shot for him. I think he's facing a crisis. His familial phrase of the credibility gap is not one of the monopolies of the United States.

It is produced in some other countries too. And he has been producing Cuba. I think that many, many people in Cuba are falling to this credibility gap. And I'm beginning to wonder for how long they have to take Castro. This is about the conclusion we are going to get today that Castro is facing a crisis. The outcome is unpredictable. I have some ideas about it and I will let you know later. With this words I will get into the notes where I have tried to summarize in the shortest

possible way, a history of the economic policies of Castroism, the different stages that can be very definitely established in those two years, the main reasons for the failures and the accumulation of effect of these failures in the situation that we are facing today. Economic statistics from Cuba are unavailable or unreliable. But we need only to listen to Castro to learn that Cuba is now facing the most difficult

crisis in the history of the revolution. We will rely mainly on the speeches delivered by Castro last July 26th and January 2nd to document this paper. So stated in his speech last July 26, quote, our enemies say we have economic problems and our enemies are right. They say there is public discontent and our enemies are right. They say the people are irritated and our enemies are right. The maximal leader also tells us that they, quote, do not yet have a solution to their problems.

On quote, why have Cuban socialism come to such a chaotic economic situation? In the first place, all along the elasticate, the economy has been neglected and in many instances it has been sacrificed to political goals. And in the second place, Cuban socialism has not been institutionalized. It has remained a government of one man with all these shortcomings that are inherent in such an state of affairs. So is the head of the political power of the country being the Secretary General of the only political party. He is the head of the defense power, the armed power being the chief of the staff of the Cuban army.

He is the head of the political, of the administration power being the prime minister. So in just one person, all the main powers of a community are centralized. More accurately, we should talk about the economic problems of castroism. The Cuban people had a good chance in 1959 to solve the structural problems of the country within the framework of a mixed economy. A land reform act was enacted in May of 1959 and it's a wide popular support. The conflict with the American landowners could have been settled satisfactorily. State center on the cash versus bone compensation question for the land is propied by the government. And I have good reasons to believe that the financing could have been arranged to make

the payments promptly and in cash. Most of the Cuban owners were willing to accept the payment in bones. The land in funds of the development bank were increased. The exchange controls established by the central bank to adjust the balance of payments serve as incentives to create to increase domestic production. The tax reform of July 1959 was a complete overhaul of the previous antiquated tax structure and the installation of new production centers by private enterprise. Several measures for a more equitable distribution of income were established. They were accepted without much protest by those who were to foot the bill.

By October of 1959, every economic indicator except private home building reached the highest levels in the history of Cuba. On the restrictions from Castro, the bones to finance the land's appropriation were never issued. With his acquaintances, the agrarian reform law was not implemented. Land was occupied, cattle and equipment were taken by the militia without any legal formalities. The land taking was not given to individual farmers. The cooperative organized in the beginning were transformed soon into a state farm. The law was drastically altered to fit a socialistic model. The laws that favor free enterprise were all repealed by the end of 1960

and by that time, all the entrepreneurial class, most of the managerial talent and a great part of the technician, had less left Cuba. This exile of these people that comprise the know-how of the country is going to be, as you may see, in the course of this talk, one of the main causes of the failures that have occurred constantly in the economic activities. On account of all this, at the end of 1960, the economy began the downturn, the downward turn. During 1961 to 1963, the socialization of the economy proceeded at food speed

and the country was incorporated into the socialistic world. Early in this period, blue prints were drawn for a rapid industrialization. Grash programs were organized to train personnel. Foreign technicians were imported. Credits were obtained from the socialistic countries, but production continued falling. Escalcities developed. And in 1962, almost 10 years ago, consumption began to be curtailed by rationing controls. Many and various were the reasons for the continuous failure. At the beginning of this period, the economy was allowed to run wild. Administrative positions were taken by political activists, and a great deal of damage was done to the production facilities.

As an illustration of this, when all the production facilities of the islands were concentrated in one government organization, the man appointed to head this organization was the former janitor of one of the drug industry factories. The lack of technicians was fell everywhere, both in the central planning offices and in most of the economic installations. The foreigners had a lot of problems on the standard peculiarities of the soil, of the American made equipment and of the Cuban people. This was the time where an outstanding diplomat from Czechoslovakia said that Cuba were trying to establish a chacha-chacha socialism. By the end of this period, Castro was called to Moscow.

This happened in January of 1964. At that point, the industrialization drive was abandoned. A rainforests upon basic agricultural production mainly sugar became the new economic policy, and Cuba was integrated into the international division of labor of the socialist world. Now, let us see what can be expected of an economy dependent on sugar production. The last sugar mill was built in Cuba in 1925. The population was then 3 million. It was already seen in 1927 that the sugar production, with 161 mills at the time, was in no position to provide employment to all who were willing to work. The first efforts toward industrialization were attempted at that time.

There are now fewer mills, 152, and the population has increased to over 8 million. During the harvest of 1951-1952, the sugar mills were allowed by the government to grind all the available cane. Production has been restricted each year since the end of the war, well-walled the second on the commitment by Cuba to the international sugar agreement. But in that year, production rose to 7.3 million tons. This was done in 120 days, and 400,000 workers were employed. In 1969-70, most of the country's resources were mobilized for the harvest to the detriment of many other areas of industrial and agricultural production. During 10 months, instead of the previous four, the full-time services of 500,000 laborers and 1 million volunteers work in part time were used.

The production reached a million 0.500,000 tons of sugar. Between these two great sufferers, there is a mere difference of 1,200,000 tons, or approximately at last year world prices of $100,000,000. There is no way to find out the total value of the opportunity cost that were wasted to grind the 8.5 million tons. Ban from Quattasro said, last July 26, the cost must have been very high. I quote, we were incapable of waging the simultaneous battle of producing the sufferer and maintaining normal levels of productions in other areas of the economy. The sufferer of the 10 million left the rest of the economy in this array, and besides, the 10 million were not produced.

In his January 1st speech this year, Quattasro said that to meet her economic needs, Cuba will have to produce at least 7 million tons this year. Actually, as we see the figures today, at the end of the sufferer period, we can predict that the sufferer will not be over 6 million tons. The plan for sugar production developed during the last 6 years has not materialized. This trailer has taken place in the most important economic activity of the island, one for which Cuba has been favorably endowed by nature. Cain grows as a weed during the rainy season on the summer, and when it's caught in the winter for granted, it's in the cold and dry period, so the water content is reduced and accordingly the sugar content is higher. How about this impressive economic situation?

Most of the consumer goods are rationed. There are meager ratios in meat, pork, chicken, milk, shoes, all clothing, soap and toothpaste, and these ratios are seldom met. Even cigars, cigarettes, sugar in the sugar land of the world is rationed. Home building is below Norman House in depreciation. The promise of a hundred thousand new dwelling units per year by 1970 has, like all the such promises, not been kept. It is true that some of its shortcomings come from the diversion of part of the production to foreign markets. However, the acute deficit in the balance of payment has not been released. The debt to Russia and her satellites is ever increasing.

Right now, Russia is helping Cuba with almost twice the amount of money that the United States is spending in 8 and grants to the whole of Latin America. The accelerated problems of vocational education and technical training have not come up to expectation. From the mouths of Castro, we all know that there are important management positions in the hands of people who is less than a 6th grade education. The same act items that were spotted 12 years ago, today, at similar levels, accounts for the biggest majority of the sports. And sugar is still maintained 80 to 85 of the total value of the sports. How then are we to explain the full employment of the labor force, the scarcity of labor hands that exist in Cuba, that exist in Cuba to date?

What has happened to the structural unemployment that prevailed in the country up to 1959? With a population of 6.5 million, there was a permanent unemployment of 686,000 workers in Cuba. The economy provided employment only for 1 million and 114,000 people. Now, and we follow the data in Castro's speech last July 26, there is a labor force all employed of 2,630,000 workers. It seems from these figures that the economy has increased and has generated 816,000 jobs. That will mean an increase of 45% over the level of 1959.

The increase of employment in health, education and welfare services amounts to 193,000 and to 150,000, the increase that has taken place in the armed forces. Cuba today has a professional armed forces of about 200,000 men. And in terms of fighting power and professionalism, Cuban army is considered the second strongest army in the hemisphere, a head of the Brazilian and Canadian army. But if we are all together, these figures, we find that we have 483,000 workers missing. With no new installations of an increase, they have to be working in the same old factories.

Let's all elaborate a little bit on this point. Most of the production facilities have been deteriorating since 1961. Maintenance has been neglected or has been impaired by the United States embargo. The large inventories of spare parts on hand when the private properties were confiscated are long gone. They were gone at the end of 1960. A common practice during the last 10 years has been to cannibalize the marginal intelligence to repair the more efficient ones. In case you are not familiar with the term, that means just to close the installation that are less efficient in order to provide the spare parts for the installations that remain in production. That has been the fate of nine sugar mills.

That's why, as I said before, we had 162 sugar mills in 1959 and there are only 151 these years. A common practice, but no, the skilled workers, when a factory is closed, are not laid off. They are transferred to the units that are kept in production. As a consequence, there is a glut of a skilled labor in many factories so that the low of available proportions got down productivity. They have simply too many people working the same machines, the same equipment. In other instances, when the equipment cannot be replaced or repaired, the plan uses less capital resources, but the labor force is not reduced proportionately. The finishing returns is the logical result of this type of system, but the main reason for the low productivity is the lack of material incentives.

With only 60 pesos, a person can buy all that is allowed to him in the ration card. Any money in excess of 60 pesos to put it briefly is a complication. So, the average Cuban is working half-heartedly or not at all. As the recognized absentees, ascentees of 20% of the working population indicates according to Castro. The question of moral incentive to work versus material incentives lies at the core of the present economic difficulties. The dilemma was raised by Che Guevara as a matter of political philosophy back in 1962. And incidentally, at the time, Castro did not state his position in the matter.

But material incentives have been out for a long time now. Castro has been looking for a, I quote, new man who will work only for the good of society, unquote. But calling 1971 the year of productivity, Castro was still saying in January 1st this year that a crusade will be launched to improve productivity. The quality of labor work and to quote eradicate pregnancy, parasitism, and other strange vices of the revolution, unquote. A few weeks later, the Minister of Labor acknowledged that there is widespread passive resistance by the workers. Admitting that, Castro has added, I quote, that the apathy to work exists only among the old generation, unquote. But the facts coming out of the Isle of Pines, renamed the island of Jews, does not substantiate that exclusion.

This Isle of Pines experiment that I refer here was a very interesting communal experiment that has been going on for four years. The Isle of Pines is an island in the southern part of the western part of Cuba, where the population of about 10,000 used to live. The government took the 10,000 out of the Isle of Pines and transferred them to the main line, main land. And instead of them, they took the out about 25,000 to 30,000 youngsters of those ages that were going to live in a typical communist assistance that is without no monetary incentive, no money as a mean of exchange with everybody getting as much as they need and everybody given to the experiment or what they could give.

In the beginning, this was a fantastic publicity about this, and this experiment got the imagination of all the professors and writers and youngsters that went to Cuba. But I'm talking about four years ago. Now nobody talks about the experiment, and the fact is that this general malice of apathy has spread there. It seems that the youngsters who have realized that they can get as much as they want, as much as they need, but very little in the quantitative form. No matter what the effort they give to the production, that's been given less and less efforts to the production, and the experiment is coming to pieces. Moreover, in the same speech of January 1st, Castro admits that 400,000 children have dropped out of school and are not working.

This represents about 25% of the total school enrollment. But even if Castro is convinced that the system of moral incentive is intensifying the economic difficulties, what can he do about it? But if material incentives were reinstated, everything would have to be done differently. In the first place, the economy at its precedence stage cannot produce the quantity of goods needed to comply with material incentives for the working population, and to satisfy the needs of those now in welfare. The social service will have to be reduced. The drive for the equalization of income will have to be reversed, and above all, many people will have to be put out of work.

That is, Castro has succeeded in creating an egalitarian society in Cuba. There is not, generally speaking, a new class in Cuba, as there is a new class in Russia, and of course, more evidently, a new class in Yugoslavia. It has been achieved in egalitarian society, but at a very low level. If we continue with this speculation of how to change things, we will have to see that the defense spending will have to be cortale also. Cuba does not have the economic resources to keep that army of 200,000 people.

In order to have an illustration of what 200,000 people in the army means in Cuba, as a way of illustration will mean that this will be the equivalent of half an army of five millions in the United States. And this in terms of population, not of economic facilities. And finally, in order to reverse this whole system, all the marginal workers, all that God of skill workers, in most of the factory, will have to be laid off. Presenting, again, was the problem of structural unemployment.

It's obvious that Castro is not going to reverse this trend. In spite of all the candidate explanation and admission of mistakes that he has made in the two major speeches in the last 12 months, the speech in July 26 last year and the speech in January the 2nd this year, the aftermath has not plot economic changes. All what we have seen as a consequence of those two important speeches has been two important political measures. One has been a complete change in the composition of the of the cabinet members, increasing the amount of military men within the cabinet. And what it is more important, the recent establishment of various stiff criminal sanctions against absenteeism, against lack of productivity, against feather bedding and all those vices of the revolution that Castro spoke of.

Will this measure surface, will this increase in terror tactics, be the necessary correction with the economic problems. This time will tell, my personal opinion is that they are creating the basis for a political crisis in Cuba. It seems to me as a conclusion of this tanorama that general inefficiency is beating Major Castro. Thank you.

Following the speech, Dr Lopez Fresquette answered many questions among them, this question, what was Che Guevara's role in post revolutionary Cuba, this answer? Well, I will give you the facts and you'll derive your own conclusions. When the rebels arrived in Japan and formed government, Guevara was not appointed as the member of the cabinet. Guevara was not appointed as head of the army, Guevara was not appointed as head of any province army unit, Guevara was appointed as head of a secondary military installation in Havana. This was at the beginning of January of 1959, at the end of March, only after three months in that position, he was taken out of that position, care of the Cavania fortress, and he went in a pericles around the world, especially the third countries, Asia, Africa,

and even to Russia, and from March of 1959 to the end of his life, he was never given command of any air force in Cuba, never again, he had command of any military unit in Cuba. Then, at the end of 1959, he was appointed president of the central bank, at the time when the position of the central bank was practically near, because we have very little international monetary reserves. And that is the position he had until he went to the in-rate, that is the institute of national agrarian reform, in charge of the department, the department of industrialization.

Later on, that department became a minister, a minister of industrialization, and he seemed at that time that he was responsible for the industrialization drive that I was talking about in my talk. At the end of 1964, the ministry practically disappeared, and at least Guevara was no longer the minister of industry. And those were the positions he occupied in Cuba all the time, these are the facts. So, this may show to you his relevance within the Cuban government when the revolution took power. I may add, and this now is my interpretation, these are not facts.

I was a witness many, many, many times of the type of relationship that existed between Castro and Guevara. Guevara was very humble. I would say even Susivian to Castro. I never thought Guevara was standing up to Castro in any confrontation. Guevara, whom I talked several times, because he became president of the central bank at the time, I was still minister of treasurer, and in a way, the central bank was not dependent, but was connected with the treasurer, and I have to do basis with him many, many times. I think he was definitely a very idealistic man. I mean, he believed in what he was preaching, and he was on selfish, I mean, he was willing to make any sacrifices for what he believed.

He was a straightforward, I was willing to an opportunity when he told the representatives of the next leg corporation not to go ahead with the installation of a new factor in Cuba, because he was going to confiscate that installation anyway. But at the same time, that I say all these things that were true, they are nice things, but were true, I would say that he was extremely conceited. He thought that he knew more about everything that anybody else, especially economics, and I couldn't figure it out how a man that graduated or was going to graduate from the medical school in Argentina in 1953, and then traveled by motorcycle to Guatemala in 1954, and then become engaged with Castro in the expedition to Cuba in 1954. In 1956, how could a man with that background could become a professional economist in 1959? It was something that I could not reconcile.

I don't know if you are familiar with the joke, this is a joke, this is not a historical anecdote, that circulate at the time, that Che Guevara was appointed president of the Central Bank. The story goes that Castro explained to a group of his followers that he had got to dismiss the president of the Central Bank and he needed an economist, and who was an economist among you, and Che Guevara that was at the end of the room raised his hand. Che Guevara says, Rufo, make the decree, make Che Guevara president of the Central Bank, so I did make the decree and appoint Che Guevara president of the Central Bank. After the beating was over, Castro went over Che Guevara and said, Che, I didn't know that you were an economist, and Che Guevara said, what did you say, Castro, an economist? Oh, I thought you were looking for a economist. In Spanish, the play of words is even more logical.

Along those lines, Dr. Lopez Fresquette was also asked if Castro had any real expectations of Che's success in Bolivia, or whether it was just to get rid of him, this was his answer. Well, the whole story about that, I don't think it has been written, and there are many, many interpretations, based probably in fractionary evidence. If you want, I will tell you my interpretation, but it's all the record. I don't want this to go into your history record. Well, anyway, I say that this is just a very amateurish interpretation of history. I am not a... No, well, except of France, an interview where, among other things, he accused Castro of not...

of not being very courageous during the fight in this era. You take all these elements into consideration, then it's permissible to accept the information that I have gotten from Sossas in Cuba, that Castro confronted Guevara when Guevara arrived in Havana and told Guevara to get out of Cuba. Or otherwise, be taken in prison, that in order to save faces, he will help Guevara in whatever efforts Guevara will make in Latin America. And then, again, if we read the Guevara diary in any edition, the editions published outside of Cuba or the editions published in Cuba, we can see in between lines in the editions published in Cuba, and very explicitly in the editions published outside Cuba,

that Castro was accusing... Guevara was accusing Castro of not fulfilling his promises to help him in the effort in Bolivia. So, all together, it looks like Castro was not a complete associate of Guevara in that expedition in Bolivia. They are adding a little bit more. Guevara was a so-called expert in guerrilla welfare, even if he copied Mao's book, he copied, so he had to learn it.

And if your story, the situation in Bolivia, you realize that he makes two big mistakes, that no one that is an expert in guerrilla welfare as you have made. In the first place, he went to a section in Bolivia where he couldn't communicate with the Indians because he didn't speak his language. So, with that lack of communication, how the guerrilla fighters can feel like a fish in the water that Mao talks about. And in the second place, the land reform was already in effect in Bolivia since 1954. So, he could not offer to repessence in Bolivia any tangible thing to get their enthusiasm and their cooperation.

So, if you take that in consideration, you follow the interpretation that said that Che was not organized in a guerrilla operation in Bolivia, that he was organized and they are exempted for the indoctrination and the preparation of guerrillas all over America, with Peruvians, with Argentinians and so forth. And that was the treason, the betrayal of a very attractive girl that became Guevara's lover that put the Bolivian army on the track of Guevara and ultimately let Guevara to his death. And then, what have appeared about that girl is that she was born in Argentina but from German parties, I think, to recollect members of the Communist Party in Germany.

And that, I think, she was a very little girl, she was prepared to do eventually a job of being an spy in some Latin American countries and this girl became the secretary of very prominent people of the government in Bolivia. And was the betrayal of this girl, learning all the information about Che Guevara in a Jeep that was accessible to the inspection of the Bolivian army that was the beginning of the end of Che Guevara. This spy, by the way, was an spy for the Russians. So, if you consider that at the time Castro was playing the hand of the Russians and that he has all those differences with Guevara, well, you make a right two or three very good detective stories with all that information. The final question asked, Dr. Lopez Fresquette, was, by a fellow Cuban, do you think we'll ever get to go back to Cuba? Again, this was his answer.

Do you mean are you a Cuban? Well, I think that you have a very good chance of going back to Cuba. I don't have such a good chance of my death. No, no. In this, I mean this. I'm counting on the time element. He being a gentleman and me being an orman. That's what I meant. I don't think that as Castro is still in power, there is any possibilities of accommodation between Castro and the United States, not because of the United States, but because of Castro. It is well known now that during the Kennedy administration, the American government tried that rapprochement with Castro and is known that during the Johnson administration, the same effort was made.

And they fail because of Castro. And it's very logical. Castro has based all his political image and following on the basis of having the United States as the enemy of the revolution. And the scapegoat to explain all his sailors. So how can we rationalize a Castro that one day will come to the television and tell the Cuban people the United States is no longer the enemy of the revolution. The United States now understand the Cuban revolution. The United States now is going to help us to go ahead. It's very difficult to understand a situation like that without realizing that that will undermine all the basis of the Castro political following.

So I think it's very logical for him not to accept and follow those initiatives of rapprochement with the United States. Of course, he's caught here in this contradictions between the political goals and the economic needs of the country. In terms of the economic needs of the country, it will be very good for Cuba and for Castro to get together with the United States and establish a type of relations that will allow Cuba to sell the sugar in the most profited sugar market of the United States and be able to import the spare parts directly from the United States instead of having to pay Canadian profiteers and Mexican profiteers for paying the second or third half of those spare parts.

So from the economic point of view it will be good for Castro, but how about the politics of it. And one lesson that is very evident to me, all alone in analysis of the Cuban phenomena, is that Castro is 99% a political animal, maybe only 1% an economic animal. And of course you take it that I use this animal way without any derogatory intention.