Privatization in Cuba
Privatization in Cuba
Replacing Fidel Castro who has ruled the island for decades won’t be easy. Implementing changes that are opposite to what the citizens have come to know and practice for years would not happen in a year or two, or even in my years of administering the nation. I understand that the people clamor for change, but how much change they are willing to undergo remains to be seen. Nevertheless, it is important that I start the process of democratization based on capitalism to obtain the much-needed capitalization to uplift the country’s impoverished citizens.
First on my agenda is to select a competent set of advisors and cabinet members who would aid me in planning and executing economic policies that are different from Castro’s socialist ideals. These people should be sent to the United States and China with the specific purpose of learning their economic models. I believe these two nations would not hesitate to help a country in transition; a country that needs the help of its neighbors and friends to succeed. Among the first changes that my administration will be implementing is the privatization of certain industries.
In many developed and developing countries, privatization plays a great role in making the economy vibrant and alive. I want the same for Cuba. Castro’s administration did the opposite and took control of all industries. The nationalization, in the long run, did not prove as effective as thought it would be. It proved to be inefficient, and did not improve the lot of the people. Without the private individuals or corporations’ contributions and ideas, the nationalized industries are bound to stagnate. Perhaps the embargo contributed a lot to our economic stagnation. However, dwelling on that would not be productive.
I will continue with my privatization plan for I believe it could increase efficiency of business enterprises. I also understand that private ownership is the most important factor for a company’s success. Socialist ideas do not promote the enthusiasm that is needed to make a venture successful. Faced with the prospect of not actually owning what you work hard for could dampen creativity and innovation. Through privatization, entrepreneurs will be welcome additions to the economy. An added factor for considering privatization is the prospect of lowering government expenses in maintenance and employee salaries.
Although privatization is adopted in many countries, it has to be enforced in a careful manner, following models that are already proven successful. It is my goal to establish an efficient economy that is founded on efficient privatization models that will improve the financial condition of the state. In the planning stage, it is important to involve the cabinet members with their various expertises, representatives from private corporations, international business experts, representatives from communities and other governments.
I will be soliciting ideas from these people for I believe that many heads are better than one. The state will undertake total or partial privatization for industries like sugar, transportation, food, tobacco, beverages, etc. In terms of providing utility services, the state will follow other alternatives like subcontracting and partial sale of ownership. Before the nationalization in Castro’s regime, corporations were privately owned. In cases like this, a re-privatization will occur. Assets that were seized by the state without due compensation will be given back to their owners.
This could take the form of natural restoration of property or ownership in an enterprise; government securities; cash; or co-ownership. However, limited focus will be given on this model because the government won’t get financial returns for this. Privatization through the issuance of vouchers at very low prices, or for free, to the poorest communities and individuals will truly return the nation’s assets to the people. This will bolster confidence in the new government and provide the poor with assets of their own. This should be limited, however.
The vouchers should only comprise a very minor shareholding in companies. In most cases, the government will follow the usual method of handing ownership from the state to private individuals: the sale of state-owned businesses, issuance of vouchers, and promoting employee shareholding. In the sale of state-owned business, two processes could take place. First is an initial public offering where the government will sell stakes in the companies through the issuance of shares for a certain price. Those who can buy will include private citizens, corporations or international investors.
Just like Ecuador’s ongoing privatization of Ecopetrol, its state-owned oil company, the government is selling stakes in tranches to its citizens, and later in foreign markets. Ecuador has followed Brazil’s opening of its oil sector in the 1990s, which ushered in foreign investors in the country. By doing this same method, the Cuban state will hopefully realize billions of dollars from the sale proceeds that could be used to fund investments and social programs. In this way too, the state will only gradually lose control of important industries.
There is however, a distinct disadvantage to this scheme. If no major group of investors will hold majority of the shares, that is, the stocks are too diluted, the problem of management could arise, just like in the case of the voucher privatization. With this in mind, I’m considering the sale to be mixed with another method. While minority stakes in the company could be sold in the market, it is necessary to sell the bulk of a company’s assets to direct buyers to ensure leadership positions. This direct sale could be done by inviting bidders to participate in an auction process.
Each company will have to submit proposals and will be prequalified based on what’s in the proposal. A final list of qualified bidders will be asked to participate on the final bidding day. Added to the sale of the companies’ shares are to let employees and managers have the first option to buy stocks. By doing this, resistance from those working in the companies could be lessened because their status will be elevated to shareholders instead of being merely paid employees. Cuba has started in 2007 oil exploration and drilling activities in the Gulf of Mexico.
The country’s proven reserves are fairy substantial. With this in mind, privatization of the oil industry will be limited to the extent that it will become attractive for investors, while leaving a substantial portion of the revenues for the state. As for the sugar industry, the state will take the same posture. Demand for bio-fuels is now increasing, with only the United States and Brazil to supply the world market. While Castro was against the utilization of sugar cane to produce bio-energy, I am for it.
Cuba should capitalize on its vast sugar industry by expanding its production to include bio-fuels. Castro fears this would promote hunger, I disagree. Through the cooperation of the private companies and the government, the expansion of this industry would ensure jobs for the workers all throughout the year, while labors unions will ensure that employee rights and welfare won’t be disregarded. Works Cited Begovic, Boris, and Mijatovic, Bosko, and Zivkovic, Bosko. The New Model of Privatization in Serbia. Center for Liberal Democratic Studies.
Belgrade 2000. 5 December 2007 <http://www. clds. org. yu/pdf-e/e-privatisation. pdf> Hardoy, Ana, and Schusterman, Ricardo. New Models for the Privatization of Water and Sanitation for the Urban Poor. 4 December 2007. International Institute for Environment and Development. 5 December 2007 http://eau. sagepub. com/cgi/reprint/12/2/63. pdf> Ramamurti, Ravi. A Multilevel Model of Privatization in Emerging Economies. 1 July 2000. Academy of Management Review. 5 December 2007 http://www. accessmylibrary. com/coms2/summary_0286-638726_ITM