THE BRILLIANT FUTURE OF A POST CASTRO CUBA'S ECONOMY: BASIC THOUGHTS

MANUEL CEREIJO

MIAMI, JULY 2001

PREAMBLE

After more than forty years, Fidel Castro's socialist experiment has exposed Cuba to the economic turmoil and decay that are the hallmarks of a command economy: stagnation, heavy debt burdens inefficient industries, declining standards of living, officially unrecognized inflationary pressures and shortages of basic goods.

Cuba's successful transition from communism to democratic capitalism will require major economic, social and legal restructuring. The development of a market economy that dramatically increases the standard of living of the Cuban people will involve a variety of economic and political challenges. Entrenched bureaucracies, the lack of simple, uniform foreign investment and commercial codes, and divisive property ownership disputes are some of the challenges which Castro's democratic successors will confront.

Insights derived from the experience of reform initiatives in Eastern Europe can greatly enhance the effectiveness of the reconstruction programs in Cuba. However, successful economic reform efforts in Cuba must be tailored to the particular cultural and political needs of the Island and must benefit from a general consensus on fundamental economic principles and policy objectives.

The avoidance of protracted debate on these issues during the initial stage of Cuba's democratic transition will enhance dramatically the ability of Castro's successors to reestablish traditional trade ties and generate capital inflows into Cuba which are crucial for implementing emergency relief and macro economic reform programs.

I. THE CHALLENGE

Cuba's successful transition from communism to a democratic capitalism will require a major effort in all aspects of society -economic, social, spiritual and civic. Also, they must be intimate related in order to achieve a just system.

Every country has its own history, idiosincracies, traditions, present conditions under which the change takes place, that makes each change unique. That is why the Nicaraguan transition can not be taken as an example, as can not either any of the East European transitions.

It is a fact that the new government that will replace the present one in Cuba will be in a great pressure from the citizens to achieve a fast and large economic recuperation, that will permit the citizens to enjoy the benefits that democracy and free enterprise brings when properly in place. Needless to say that the pressure will be equally great in the political aspects.

It is also a fact that the people now in Cuba, from where the majority of the members of the new government will be, can not plan for the future due to the lack of freedom, information, and opportunity.

One of the conditions unique to the transition that will take place in Cuba is the fact of the large exile group, located mainly in one geographical area, with a political, social and economic power, or access to it, like no other one, and in the most powerful economic and technological society of the world.

The new government of Cuba, in order to raise the necessary capital for its economic reconstruction, should not search for funds from the typical banking sources, such as the AID, World Bank, etc. It has been proven that the consequences of this are to create inflation without control, a large, inefficient government and bureaucracy, and a large national debt.

The new government should search for private investment mainly. However, for private investment to take place, the country must have certain conditions. Some of them can not be achieved until the transition has taken place. These are conditions such as a stable government, faith in the future, privatization laws implemented, etc.

In the new Cuba after Castro, we will have to create a new economy, where human inventiveness makes physical resources obsolete. We should return to the age-old wisdom of our culture. The laws of microcosm are new and contrary to ordinary experience. However, the microcosm will dominate the Cuban reality, subduing all economic and political organizations to its logic.

The new technologies of the microcosm-artificial intelligence, silicon compilation, and parallel processing -all favor entrepreneurs and small companies. Here is where it will be based the growth and recuperation of the post Castro Cuban economy.

The mobility and ascendancy of mind among all forms of capital not only deeply undermines the power of the state, therefore reducing public functions to a minimum, but makes easier for a starting new country, like Cuba will be, to restructure its economy at a minimum cost.

We live in an epoch where desert-bound Israel can use computerized farming to supply 80% of the cut flowers in some European markets and compete in selling avocados in Florida. As well as tiny islands like Singapore and Hong-Kong can far out-produce Argentina or Indonesia, so Cuba will do.

This is not a world in which the gain of one nation can only come at the expense of another. Cuba will have not only a technological renaissance but also a moral renewal. Capitalism is reaching a new creative pinnacle. This will be our new challenge in Cuba.

II. TECHNOLOGY IN A NEW CUBA

Before 1959, Cuba was an overdeveloped country. That is, it had a flourishing economy, but, it was an under-industrialized country. Cuba's main sources of income at that time were agriculture, tourism, animal husbandry, and mining.

The dependency of Cuba's economy in the sugar market was, and will not be in the future, good, in order to have a solid, stable economy. In the post-Castro Cuba, we need to establish a solid, stable economy, based on a sound industrial development.

To enhance the economic growth of Cuba, the following objectives should be followed: (a) improving existing industries; (b) attracting new industries; (c) creating new industries; (d) making Cuba an international service, manufacturing, information headquarters, and export center, for Latin America, the Caribbean, and the United States.

In order to accomplish the main four objectives, three strategic development plans should be created. We will briefly describe them here.

The first one should be to motivate regional development, which means not only a decentralization of the national government, but also means new jobs for the residences of the different provinces and also a tax revenue from industries and the resulting trade generated by these industries.

One important element is to create "critical masses" at different points of the Island, that is, grouping of new and/or existing facilities with interest in technical innovation.

The second one is the creation of industrial parks, where at least one main industry should be established. Adjacent to this main industry, many smaller industries, suppliers of the main ones , should also be established. By doing this,the main industries will operate under the concept of "zero inventory" which reduces cost and improve productivity. It also assures the market for the smaller industries, promoting growth and productivity.

The third one is the creation of incubation centers, where entrepreneurs with new ideas or products will be provided with technical assistance, as well as legal, marketing, accounting, etc., until the product is in such stage of development that the companies can survive by themselves.

We are now, fortunately for Cuba, in the new technology era. Technology will be the driving force of Cuba's economy. Thanks to the magic of technology, the new Cuba will be able to expand the supply of available resources as well as to create new materials to replace those resources hard to get.

Technology, properly applied, will allow us to do things in Cuba cheaper, faster, and better. To increase the supply of a physical resource, we will have to improve our ability to find, obtain, distribute, and store it, and improve the efficiency with which we use it. This is technology in action.

Also, most important for the new Cuba will be the rate at which we will process information. Information is useful only to the extent that it can be efficiently distributed. Engineers, entrepreneurs, business people, and the labor force in the new Cuba will have to be able to make use of new developments and technologies as fast as possible.

III. INTERNATIONAL COMPETITIVENESS

In the economic development of the new free enterprise Cuba it will be critical to identify the exact meaning of "international competitiveness" because most probably all technical and commercial activities will be international in nature and, most important, elements of the national policies will have to be developed on the basis of international competitiveness.

In the pre-Castro years, the world was simple, and the meaning of international competitiveness was clear. A firm was owned by Cubans, and its products were manufactured in Cuba. To the extent possible, several of those products were sold abroad, and if the firm did so successfully, it was internationally competitive.

Of course, we have pictured an oversimplified situation. In certain cases the raw materials came from abroad, and in others they came as semifinished goods to be assembled in Cuba. The technology used in manufacturing resided in the minds of the Cuban employees. In other cases, employees or consulting firms were brought from abroad for that purpose. This was technology transfer in an incipient stage.

The post-Castro world will be far more complex, and we will have to consider each factor contributing to the system by which products will be designed, manufactured and sold in international markets. There will be a need to analyze three separate issues:

• Who owns the enterprise?
• Where are the products manufactured?
• Who is generating the technology?

That is, in the post-Castro Cuba, there will be three important elements in order to be internationally competitive: ownership, production, and technology.

A leading position in one area does not necessarily dictate the choice of the other. The location of manufacturing and assembly facilities will be determined by regional development in Cuba, based on economic considerations. Technology will be generated where there will be an adequate concentration of technical resources. Ownership will be based on financial resources.

The new government of Cuba will have to take into consideration three objectives in order to achieve a decent level of international competitiveness:

Businesses, of the kind that we are contemplating for Cuba, must operate in a hypercompetitive environment, because the business climate is fierce internationally. There is a gap between the industrial enterprise and its potential markets. This gap results from issues such as: public acceptance; technological obsolescence; channels of distribution; development of an after market; overseas manufacturing; and the process of moving to new markets.

To help companies meet the challenge of a hypercompetitive environment, and specially within the Caribbean and against the Pacific competition, Cuba will have to provide incentives for the building of indigeneous companies. Indigeneous company growth is very beneficial and a necessary long term economic strategy.

The concept that a single company can develop and control all the science and technology embedded in an advanced product or system, and can then clearly separate the technical base in another country from a complex manufacturing location in Cuba, is not practical. Any advanced product or system integrates many components into its assembly. The value added by the producer of the final product can only be a fraction of the total value.For example, a large electronic system will bring together materials, components, and subassemblies that will be produced in other countries.

The establishement of an effective and competitive manufacturing process that implements the development of complex technology products will have to be done in close cooperation with the technical organization. In fact,for very complex products only after the first manufacturing plant is successfully underway in the country where the R&D organization is established, should the plant be established in Cuba. The dollar value of industry shipments, however, will be only a partial reflection of the central role of the new technologies in Cuba. Education, health care, safety, work activity, environment, recreation, entertainment, life style, and aspirations of our people will be enhanced by this new technology.

Cuba's success in this field, and in the industrial field in general, will lie in the careful selection, and purchase, of foreign technology, mainly from the United States, the speed and extent of its adoption, and the ability to refine purchased technology. If Cuba wants a phenomenal industrial growth, it will have to follow the U.S. example: little direct government involvement, and allow the entrepreneurial firms to accelerate the pace at which new technologies can be translated into commercial innovations.

However, a well developed venture capital market will be needed and a key factor for this will be the mobility of entrepreneurs leaving established firms to form new ones and experts being recruited away from firms by competitors. Also, Cuba will need the following: general economic policies and their effect in investment decisions; financial capital cost/supply; supply of skilled labor; access to R&D sources; the transfer of technologies to other economies and sectors. Industrial production, and specifically high tech firms, generally compete in rapidly expanding markets and so will be the case in Cuba. The ability to quickly respond to new opportunities will be essential. International differences in the availability of financial capital will be crucial also in determining relative competitiveness in specific areas.

The application of new technologies in a production system requires substantial capital. High capital cost could preclude endeavors which have high risks but potentially great returns for Cuba. A large industrial development requires also a high demand of skilled personnel. The availability of large numbers of well trained scientific and technical personnel will be an essential factor to the future competitive strength of Cuba's industrial production.

IV. STIMULANTS

A variety of social and economic factors will be needed in Cuba to stimulate private economic development. These factors include a focus on capital formation, a careful restructure of institutional relationship, supportive government programs (at the minimum possible level), a reassessment of intellectual property, and very new approaches to innovation. Of course, a new and growing pool of capital dedicated to the entrepreneurial process must be created. A second stimulation concerns the commercialization of technology. The ability to transform technical developments into profitable business opportunities should be a prime concern in Cuba.

A third stimulant is the proactive role of the national, provincial and local governments. Mainly to facilitate - red carpet treatment- with the minimum possible obstacles, the development or establishment of private industrial initiatives. Also, improving the quality, at all levels, of public education. Tax incentives programs will be also of primary importance and should be carefully prepared.

A fourth stimulant is to promote the interaction between private firms and universities. There must be a complete reaseessment of policies and approaches to intellectual property due to hypercompetition.

A fifth stimulant is the removal of barriers to innovation throughout the establishment of an environment favorable to private ownership of production means and intrapreneurial as well entrepreneurial activities.

One of Cuba's strongest assets which will help attract investors to the country will be the Island's inherent quality of life. In general, investors will look for both affordable housing and a variety of leisure activities. These two factors should be of prime concern since the very beginning of the new government. Cuba will have to compete with the rest of the Caribbean, and, therefore, the importance of these factors in the industrial development of the country.

Cuba will offer enough year-round leisure activities to satisfy almost any person. However, these activities should be redeveloped and well publicized in other countries. Also, Cuba's geographical location provides weather that is not only ideal for outdoor recreational activities, but also for year-round type of testing required by many industrial companies.

V. INDUSTRIAL POLICY

In contrast to a narrowly focused industrial policy for Cuba, we advocate a wide array of decentralized initiatives that will boost the visibility of innovation in the Cuban economy. The government should stay away of centralizes industrial policies and move toward the different but interrelated elements of the innovation process. Innovation starts with creativity but should result in productivity growth - the cornestone for improvement in the standard of living and quality of life. Productivity-low cost-is the key element in the future industrial growth of Cuba. In the new Cuba there must be flexibility in adapting to change, in acquiring new knowledge, in accommodating technology, and in adjusting to new management processes. Management and labor will have to team up on the same side by crafting goals in which both have equal stakes.

Improvements in a person's standard of living can not be gained by simple negotiating redivisions of a shrinking pie. They will have to be earned by enlarging the size of the pie, or, in other words, throughout productivity growth. The growth in strong competition overseas has made it apparent that Cuba success in foreign markets will be hard to win.

If success is achieved, and we are sure it will be, it will have to be in those areas in which Cuba could have the greatest comparative advantage in relation to the rest of the world. That is, Cuba will have to move into those areas of specialization in which it can do best. Of course the government should not dictate what to produce or not, but private firms will have to find the best products, and the best production methods, to compete effectively in the market. Some products or services are clear cut cases, such as those related to microprocessors, microelectronics, fiber optics, telecommunications, paper, textile, sugar, etc. In general, for the typical industrial products, Cuba should concentrate in those areas where the size and weight of the product is small compared to its cost.

VI. OVERALL OUTLOOK

Based on the declining production, deterioration of existing industries, and obsolete technologies used in Cuba, a new industrial environment must be developed that will (1) renew existing industries,(2) attract new industries, and(3) stimulate the creation of new companies. The new industrial environment should focus on new industries that employ new methods, new processes, new technologies, new equipment.

To understand the new technologies, the significant factor is that they are computer based, and can account for as much as 70% increase in manufacturing productivity. With extended applications of the computer, the use of new process technologies has become a critical element in adding new efficiency to the manufacturing process. These new technologies can lead to lower costs, increased productivity, increased responsiveness to new markets, increased flexibility in manufacturing, and improved product quality. The problem in Cuba will be one of availability of technology.

The technologies presently available are far ahead of the ability of the typical small and medium size companies -in any country- to implement. The problem will be also of introducing new people - the Cuban people-to new systems. The management of the small and medium size companies in the new Cuba should be knowledgeable about advanced manufacturing technologies, their advantages, and their capabilities.

The new technologies, in all fields, are complex and will require a high degree of engineering expertise to implement effectively. Direct "hand holding" assistance to companies will be necessary through a lengthy process of learning about and implementing new production technologies. Each company, each field, will need a unique solution to bring its production process to peak efficiency. The type of information and assistance that will be needed in Cuba, however, will be homogeneous and generic since the new technology is computer based.

Whenever the computer is applied, increased structure, discipline, and standardization result for that industry or field. We will need to provide an integrated approach to technology in Cuba. One that will permit a fast and orderly growth of industries. There will be a number of crucial aspects in a company's decision to locate, stay, and/or expand in a particular province or city in Cuba. One might describe these as the province's internal environmental conditions as they relate to the company's perception of the potential benefits or drawbacks within the given province.

These conditions include the adequacy of the province's educational system, the availability of an appropriately trained and plentiful labor force, local financial and business climate, and access to capital resources.

VII. CAPITAL RESOURCES

One of the key factors in the economic and industrial development of Cuba will be the availability of capital resources. There must be venture capital available in Cuba - large pools of risk money for new ventures- if a solid industrial development is to be accomplished. One of the reasons which is good about having venture funds in Cuba is that they can help incipient companies establish relations with bankers and other key players in the financial community.

An important effort, therefore, should be made to make Cuba attractive for venture capital funds. A major portion, if not all, of the venture capital funds will have to come from out of the country.

However, there is no doubt that there will be a sufficient and adequate amount of capital available from out of the country for industrial firms wishing to start in Cuba, mainly from financial institutions in the United States, Japan, and Europe.

Internal cash flow will have significant advantages as a source of funds for innovative activities. Industry structure, corporate sales tax policies, sales volume, profit margins, and investor demand for a return on investment will strongly influence the generation of internal cash flow in Cuba. External funds will be raised through stock issues, bond sales, and borrowing.

VIII. THE ENTREPRENEURIAL PROCESS

The technological and industrial development in Cuba will be based in four critical factors:

Entrepreneurial talent results from the drive, tenacity, dedication and hard work of special types of individuals, people who make things happen. The Cuban exile community, and the Cubans who have remained in the Island, both have demonstrated to have all these talents.

However, the new government will need to stimulate entrepreneurship . Events that trigger entrepreneurial activities are such as recognition of an opportunity, and Cuba will have plenty of these, an urge to try a new venture, or simply a desire to push an innovative idea. Talent without idea is like seed without water. The second critical component concerns the ability to generate ideas that have real potential within a reasonable time. Here is where the incubation centers, which will be explained in detail later in the report, will be of primary importance. Every dynamic process need to be fueled. The fuel for the entrepreneurial process is capital. Capital is the life blood of emerging and expanding enterprises. Cuba will be in great need of it.

Given talent, technology, and capital, one other element is indispensable to make the industrial process succesful: know how. It is the ability to leverage business or scientific knowledge in linking talent, technology, and capital for the proper industrial growth. The know how or expertise will involve management, finance, marketing, accounting, production and manufacturing, engineering, legal, and scientific assistance. Successful industrial development in Cuba will require a synergy among talent, technology, capital, and know how.

IX. HIGH TECHNOLOGY INDUSTRIES

What is high-technology? There are many definitions to what constitutes a high tech industry. Perhaps, the best way to define what makes an industry high tech is to note its chief feature -the advanced educational level of its employees, and a rapid rate of technological development. High technology is different from "high science" or pure science in that it is technology developed for commercial application. The proper development of a solid high tech industry will be of primary importance for Cuba because they will provide a significant contribution to the overall output growth, productivity increases, and trade performances. It is in this restructuring process that computers will have a major role to play.

High tech industries are best envisioned as tool makers. Computers, robots, wordprocessors, communications equipment and other products boost the productivity of all type workers. The question will be not a choice between old and new; it will be whether new technology will be able to revitalize Cuba's basic industries, from manufacturing to services, to create competitive vitality.

High tech equipment reduces costs to the point that proximity to the market becomes a greater competitive advantage than cost of labor. Cuba has a privilege geographical position to world markets. Productivity gain throughout automation is not a zero sum game. The end result is increased wealth and higher living standards for everyone, although it may be slow in coming to Cuba. We have abundance of labor, excellent climate, and proximity to markets, all of these make Cuba an outstanding place for industrial growth. It does not have to be all related to microelectronics and sophisticated equipment. This concept is also applicable to Cuba's traditional industries.

The outlook is not good for Europe, where the high tech industry is weak and the employment systems rigid. Even in Japan, the traditional lifelong employment system is under severe pressure. The outlook is great for Cuba, but we will have to know how to use our resources and opportunities. High technology may hold the greatest promise to develop Cuba's economy. In Cuba, economy growth will be topic number one. How to achieve it will be topic number two.

What ultimately happen in terms of economic development will depend not only on technology but on factors like international competition, labor force, and rates of economic growth of the world markets that lie beyond Cuba's direct control. The strength of Cuba and the well being of its citizens will be determined to a substantial degree by its technological development and its level of economic organization.

There are twelve emerging technologies in this new era of microcosm revolution. They are: advanced materials, super computers, advanced semiconductors devices, digital imaging technology, high density data storage, high performance computers, opto-electronics, artificial intelligence, flexible computer integrated manufacturing, sensor technology, bio- technology, medical devices.

The many changes in world wide political structures have led to a vision of a new world order. We can expect increasing economic competition among nations, and this competition will be increasingly important. These changes only serve to emphasize the invariance of the central fact that the maintenance of a strong technology based will be essential to strengthen the competitive position of Cuba.

X. FACTORS INVOLVED

It is in this context that we feel it is important to think carefully about some of the basic factors at work in Cuba's economic future. Some of these factors will be: the emergence and growth of new industries based on high technologies, the accelerating absorption of these technologies into mature economic environment, the recognition that new management philosophies will be required for companies to survive in global market places, and the realization that education has to take an strategic importance in Cuba's economy.

Symbiotic relationships mean creative partnerships. Cuba is to be seen neither as an ecosystem to be preserved unchanged nor as a quarry to be exploited for selfish and short range economic reasons, but as a garden to be cultivated for the development of its own potentials in the human adventure. The goal of this relationship is not the maintenance of the status quo, but the emergency of new phenomena and new priorities.

A creative partnership made of high technology and high tourism will have to appear in Cuba. We should develop a high tech/high tourism symbiosis in our country. Visitors may come as tourists, but once they are there if they could see a prospering business community and our quality of life, they could realize that Cuba is not only a tourist destination but an excellent place to do business. The quality of life, the favorable labor pool, our transportation and tax situation all will play major roles in our attractiveness as a site for new or expanding industries.

The literature on industrial development suggests that a set of locational characteristics are most apt to attract industrial activity. First, we have three features of labor supply: wage rates, unionization rates, and area employment availability. The first two are, in general, negatively correlated with industrial jobs and the later is positively correlated, since high wage, labor militance and tight labor markets all discourage industrial job growth. Second, we have a set of two business climate features: presence of specialized business services and presence of first rate facilities and talent. High levels of business services and personal talent and facilities are positively related to industrial dominance in a regional economy.

Third, we have a set of basic infrastructure features: transportation networks, both air and land, and utility rates. Access to superior free ways and airport facilities will contribute positively to industrial jobs, while relatively high utility rates will discourage them.

Finally, there is a set of amenities features which are very attractive to an industrial labor force, particularly the professional/technical personnel and entrepreneurs. These include the availability of a superior cultural environment, reasonable housing prices, a relatively unpolluted atmosphere,a mild climate, good school for children, and post-secondary educational options.

Seven factors seem to be the most important ones in attracting industries to a country. They are:

1. Airport facilities 2. Arts index 3. Freeway density 4. Labor force 5. Major universities 6. Pollution index 7. Seaport facilities

Cuba will have to develop and excel in all of them. However, there are also three main strategic planning areas that will be essential for the proper economic reconstruction of Cuba, which are: incubation centers; industrial parks; regional economic development; and honest and productive public sectors.

XI. NEW MANUFACTURING POLICIES

The entire Cuban manufacturing industries -all sectors- have not kept pace with the twin challenges of vigorous foreign competition and rapid technological change. Manufacturing in Cuba will have to be embarked on a wide ranging re-examination of the fundamental premises that will be underlying its organization and modes of production.

We will have to learn from the experiences of successful foreign competitors to adopt new structures, new ways of relating to customers, employers, suppliers, and the community; and new ways of doing business in this modern world of free trade and free enterprise.

Cuba will be, at least for the first three years after Castro, in a period of profound change in the organization, the conduct, and the dynamics of industrial production. Under a paradigm of change, we can not evaluate the appropriateness of the new policies by examining only how well they did in the pre-Castro era, because the range of allowable questions, the system being addressed, and the responses to particular public policy initiatives will all be different. Instead we must be open to new thinking and to experimentation.

The new manufacturing tendency, and the one that must be adopted in the free Cuba, is called "lean" production. Lean production refers to a constellation of new organizational relationships, both inside and outside the production firm, to a different way of viewing workers, customers, and the environment, and to a different understanding of how technologies change and improve.

Lean production is a way to produce at lower cost, in less time, using less labor, achieving higher quality, with greater variety, and fewer adverse impacts on worker health and the natural environment; all the while accommodating more rapid model change and including the latest in features and performance.

Flexible production, short production runs, high product variety, and frequent product change will all be necessary in Cuba's lean production system. These characteristics will require greater access to information and greater coordination within the production system at all levels.

Indirect costs and overhead loom large in the new era, more than direct labor costs, which will probably represent no more than 10% of total production costs in the manufacturing sector of Cuba. The new manufacturing technology will also benefit Cuba because it tends to be less dependent on the availability of low-cost raw materials than is the actual technology.

Raw materials will still matter in certain Cuban industries dealing with material transformation sectors, such as cement, or food processing, or paper industry. But, because of the high value added in production, as well as because of miniaturization and shifts in market demands,the costs and local availability of raw materials will not be essential to success in most of Cuba's manufacturing industries. In Cuba, we will have to adopt the policy of doing a little bit better everyday what one was already doing, as a secret to product and process improvement and profitability. In this view, we will have to think that achievement tomorrow is heavily conditioned on performance today, and not through an unending succession of breakthroughs.

Changes will have to be made in Cuba to bring public policy into congruence with the new manufacturing paradigm. First, maintaining and upgrading transportation, energy, and public health and safety systems remain of paramount importance. Added to this, however, will be a much greater need to invest in the next generation of information infrastructure; not only in telecommunications, but perhaps more important in information storage, retrieval, manipulation, and analysis capabilities to serve Cuba as a whole.

There must be a major investment in information systems. Finally, the new era of economic reconstruction in Cuba will demand leadership for systematic change. The new era will require policy adjustments in so many and such diverse areas that no government official below the level of the President of Cuba will be in a position to direct or to coordinate them all.

Explicit, open, and enthusiastic leadership will be needed to make Cuba the most attractive place in the world in which to produce.

XII. CUBA MANUFACTURING IN A GLOBAL CONTEXT

We Cubans will face a major challenge to our national will and national capacity. We refer to our imperative need to rebuild and create our competitive position in the global market place, as an essential step in achieving a strong, economic reconstruction of Cuba. This will mean noninflationary growth, with high levels of employment and a raising standard of living for a demanding and growing population.

How well and how quickly we meet our challenge will largely determine our ability to meet and realize our domestic social, political, and economic aspirations. Thriving cities, renewed rural areas, new job opportunities and upward mobility, aid to the disadvantaged, security in old age, a healthy environment, superior educational and cultural institutions: all will depend upon the resources provided by a growing, competitive economy.

We will be facing a lot of problems and questions: what's going on? Are we headed in the right direction? We will need a better understanding of the nature of competitiveness in a global economy. The direct responsibility for competitiveness will rest with private business organizations. But the policies and actions of the future government and educational and professional institutions will have a powerful influence on the ability of business to function effectively.

Winning or losing in a world market will depend on a wide range of factors, at many levels in the Cuban society:

• The framework of policies and practices of corporations, government, and educational institutions.
• Management and strategy in large and small companies.
• A skilled and motivated work force.
• Savings and investment levels
• Strong financial institutions
• Trade policies and market access
• Product and process innovation
• Quality and productivity
• Marketing and distribution
• Cooperation between public and private interests
• Leadership and strategy from top to bottom

Cuba must act in a global context. The efficiency and capacity of the country in exporting goods and services will be essential to a proper economic reconstruction. We have to understand this situation, and we will have to deal with it. How do we do this? How does Cuba can develop a coordinated strategy for competitiveness? Where will the leadership come from? The sources of leadership will be many- in government, industry, universities, and other private institutions.

A government command concept will not work, yet only government spans the full scope of the issues. No one sector of Cuba's society will be able to do it alone. The problem is a hard one, specially for a new democracy, because it will require that all parts of the society make sacrifices for long term gains.

Leadership exists only if there are followers. We believe the key to generating leadership and strategy is the army of talented individuals and organizations concerned about the issues and prepared to participate in finding solutions. The task will be to put the system to work. Starting at the top, the President of Cuba must be persuaded that it will be politically and economically necessary for him to step forward and take the following actions:

• State the high priority of, and goals for, worldclass competitive performance
• Identify the benefits of success and the penalties of failure
• Outline the elements of a coordinated strategy for success, and ask for widespread help from the Congress and the private sector
• Emphasize the need for sustained, aggressive, broad scope actions
• Direct his administration to give competitive issues higher priority

The key will also be for all of us to keep explaining and reasserting the need for world class competitive performance and urging leadership and a coordinated strategy. We will be all in it together, and the time is coming soon.

END

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