Cuban government set for broad reorganization

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.

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