At a diplomatic cocktail party in Havana, one of Cuba's hot young economists shocks his foreign listeners by boldly claiming that two-thirds of the island's economy has been ``privatized.''
But almost at the same time, Cuban officials sharply deny that they are selling off the nation's centrally owned-planned-and-run economy.
``Privatization is a dirty word to them,'' said John Kavulich, head of the U.S.-Cuba Trade and Economic Council.
What gives? Has Cuba agreed to sell its public enterprises to foreign investors, the same privatization program that many other Latin American governments have adopted to get rid of money-losing state firms and boost their economies?
The answer is yes, with the same mixed bag of results as elsewhere in the hemisphere: more production, more corruption and a growing gap between rich and poor. But Cuba has privatized with such stubborn reluctance that the answer might as well be no.
Allowing foreign capital into economically strapped Cuba is ``the solution most convenient in this place, in this condition, in this moment, but not like a general policy, not like privatization,'' vice president and economic czar Carlos Lage has said.
Critics of President Fidel Castro agree. Privatization to them means more than just selling to private owners. It means a dramatic policy change, to push the government out of the economy and let the forces of supply and demand drive the market.
``In Latin America, privatization comes accompanied by major structural adjustments. The public sector is reduced. The state closes agencies, fires part of the labor force and liberalizes import duties. Those firms that cannot compete go broke,'' said Carmelo Mesa-Lago, a University of Pittsburgh economist who specializes in Cuba.
``Compared to what it was before, of course Cuba has changed,'' he added. ``But if you're asking about privatization, you have to ask if the government has really carried out a real privatization.''
Cuba sold 49 percent of the telephone company to the Mexican Grupo Domos in 1994. About 25 percent of its tourism industry and 30 percent of its nickel-mining industry are now co-owned with foreign investors.
``It's not a lot -- phones, nickel and tourism -- but that is privatization in almost anyone's book,'' said Kavulich, whose New York-based group tracks Cuban economic and business developments.
Less clearly ``privatized'' -- and the reason behind the stunning claim by the young economist at the Havana cocktail party -- are the more than 2,640 agricultural cooperatives the government created in 1993. Cooperative members were given control of state-owned farms totaling more than 7.4 million acres, largely involved in sugar cane, cattle and milk production.
These Basic Units of Cooperative Production are ``private'' in the sense that they are owned by their members -- usually the same people who were salaried employees of the state farm -- and can own equipment, take out production loans and distribute profits.
But that's about it.
Whether or not such cooperatives amount to privatization, it's clear that the other forms of privatization have brought Cuba the same benefits and headaches that the sales of public enterprises have brought other Latin American nations.
Domos' takeover of the Cuban telephone service, though now in financial trouble, unquestionably improved Cuba's calamitous telephone service. International calls soared from 400 to 60,000 per day, and Cuba got its first telephone directory in 20 years.
Cuba's tourism could not have soared to a $1 billion-a-year industry in just five years without the help of foreign capital and know-how, and nickel mining would not have brought $100 million in 1995 exports without the investments of Canada's Sherritt International.
And the drawbacks?
Corruption easily blossoms whenever rich foreign capitalists move into a country where a top official of the Foreign Investment Ministry might earn the equivalent of $15 a month.
And some privatized enterprises have ordered layoffs in the name of efficiency -- especially hotels, which have trimmed some bloated staffs by up to two-thirds. Cuban officials talk of ``downsizing,'' in English.
Yet the impact of such cuts remains small because newly built hotels in fact create new jobs. Total employment in the foreign-investment sector amounts to only 60,000 in a nation of 11 million, according to government reports.
But even if it walks like privatization and talks like privatization, critics argue that such a word cannot be used in one of the most centrally controlled economies in the world -- one that allows only foreigners and not locals to buy stakes in public firms; and one that forbids people from owning small enterprises and hiring outside workers.
``The government deals with foreigners on enterprises that affect foreigners,'' said dissident Havana economist Marta Beatriz Roque. ``We don't feel privatization on the streets here.
``The only real private activity here is family restaurants,'' she added in a telephone interview. ``The rest is nonsense -- a man whose `business' is picking lice off a kid's head.''
The ``piñata'' -- the papier-mache figures children smash at birthday parties to disgorge candy inside -- is the nickname given in Nicaragua to the Sandinista Front's seizure of public properties for its own members after the party was defeated in the 1990 election.
Cuba's situation is different.
Cuban ministries that once ran production units -- the Ministry of Science ran pharmaceutical factories and the Ministry of Tourism ran hotels, for example -- have spun off some enterprises into ``private'' corporations in an attempt to negotiate deals with foreign investors.
Those ``private'' firms in turn have issued shares. While the government is the real owner of those shares, it has given or assigned them to trusted managers and Communist Party members in the companies.
The Soviet Union and many Eastern European countries carried out a similar version of this type of ``privatization'' in the mid-1980s, hoping to generate increased efficiency and profits.
A Soviet factory that manufactured heating elements for nuclear submarines spun off a corporation that made electrical home heaters. The manager of the parent firm was one of the ``owners'' of the other.
A Polish Ministry of Heavy Industry factory that made light airplanes was chopped up into half a dozen enterprises that did everything from manufacturing metal furniture to designing industrial equipment.
The corporations indeed increased production. But when communism collapsed and chaos ensued, what had once been public property suddenly became very private property owned by managers and Communist Party members.
In many cases, especially in Poland, managers then quickly transferred most of the parent enterprises' assets to the new corporations, in effect looting them and giving themselves a jump-start on the new capitalist economy.
``The Cuban managers have no possibility of seizing these companies right now,'' said Rodolfo Carrandi, Miami representative for the Association of Independent Cuban Economists.
``But if the situation changes and Castro goes, anything could happen. People are already calling this the `Cuban Piñata.' ''
Copyright © 1996 The Miami Herald