Exclusive: Cuban government set for broad reorganization

Reuters News
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Posted: Sep 30, 2011 2:50 PM
Exclusive: Cuban government set for broad reorganization

By Marc Frank

HAVANA (Reuters) - Cuba plans to close some ministries, create new ones and eliminate some of their business activities by year end in reforms spearheaded by President Raul Castro to modernize the communist island's economy, government sources said.

On Thursday the government announced that the sugar ministry would be closed and turned into a holding company. But the measure is just the beginning of a broader reorganization adopted at a Council of Ministers meeting last Saturday, the government insiders said.

The shake-up includes the elimination of the Basic Industry Ministry, with some of its wide-ranging duties going to new ministries of Energy and Mining, a person with knowledge of the meeting said.

"I'm not sure what will happen with some other ministries, like the Steel and Metallurgy Ministry, but what is certain is that enterprises such as steel and aluminum companies are being peeled off and turned into independent state businesses," he said.

"If a ministry is left with no state function it will be closed," he added.

The changes are aimed, in part, at achieving greater efficiency and profitability by reducing the government's role in state enterprise clusters called Unions of Companies.

In Cuba's Soviet-style command economy, most state companies are managed by government ministers, who historically have appointed executives, reviewed all plans, set salaries and prices, controlled imports and exports, managed partnerships with foreign firms and conducted endless inspections.

Castro's push to preserve Cuban socialism through reform will move many of those responsibilities to the companies by making them independent of the ministries and giving them greater autonomy to manage funds and take business decisions.

The reform package would move more than 20 percent of the state's 5 million workers to an expanding "non-state" sector in retail and farming, decentralize some revenue collection, eliminate subsidies in favor of targeted welfare and lift some restrictions on buying and selling personal property.

The reforms, to be adopted over five years, would make central planning more flexible, and the government would move from running the economy to regulating it, mainly through "taxation."

OIL AND MINING

"By 2012 we will become two ministries, one for energy and another for mining. The pharmaceutical division will be spun off and Unions of Companies become independent," said a mid-level employee at the Basic Industry Ministry.

She said ministry personnel were called to an emergency meeting on Monday and told of the changes.

The Energy Ministry will oversee the country's oil and gas industries, from exploration and refining to imports and exports, along with the power grid.

The change comes at a critical time as Cuba is expected to begin the first full-scale exploration of its part of the Gulf of Mexico later this year.

The Mining Ministry will regulate the country's nickel industry along with lesser mining activities.

The Basic Industry Ministry employee said several vice ministers were moved out of the ministry to run the newly independent holding companies, which one local economist said was not necessarily welcome news.

"They are part of an old administrative culture that must be broken for the economy to advance," he said.

The head of a joint venture that deals extensively with the Food Processing Ministry, where a number of businesses have already been spun off, said so far it was business as usual.

"It is still 'wait until I ask the ministry'," he said, like others asking that his name not be used. "There can be no autonomy if there are no autonomous finances, and the holding companies still have to go to the government for everything."

But another local economist said it was too early to pass judgment on the measures.

"So far they are simply restructuring, getting rid of a layer of bureaucracy at the ministerial level. Now they have to change the regulatory environment state companies operate in. A new law for state companies is being prepared," he said.

(Editing by Jeff Franks and Anthony Boadle)