CU Perfecting Industry
Oct 2001

South Florida Sun-Sentinel - HAVANA BUREAU - HAVANA - "Socialism, besides justice, is efficiency and quality," so reads the sign hanging in the peach-painted lobby of the state-owned Hotel Plaza in Old Havana. Many Cuban economists and business managers would be the first to agree that "efficiency" and "quality" are not words commonly associated with the island's industries. However, they are hoping to change that by adopting a series of new reforms borrowed, in part, from American business management manuals. So far, more than 10 percent of Cuba's 3,600 state enterprises, from agricultural cooperatives and hotels to a rubber factory and architecture firm, have embarked on the process called perfeccionamiento empresarial -- literally meaning perfecting industry. They are the newest buzzwords for Cuban business managers living in a globalized economy where Soviet subsidies and guaranteed trading partners are things of the past. Hotel Plaza manager Emilio Vega Padron uses English words like "empowerment" and "benchmarking" to explain the recent reforms at the century-old Hotel Plaza. His desk is crowded with books by Harvard business school professors and American management gurus. "We've diagnosed our situation. There is a war in the industry and we have to be able to survive," Vega Padron said of his push for efficiency and competition, including dollar bonuses for productive employees and a renewed emphasis on customer service. After the fall of the Soviet Union, Cuban industries found themselves not only lacking the subsidies that once kept them afloat but also without their biggest trading partner. This has forced state-run industries to work "in a market, not in a ministry," said Philip Peters, who has written about the Cuban economy for the Virginia-based Lexington Institute. "This is the end of the Soviet state planning process," Peters said. "That model is dead. And in a way, that may be the biggest thing happening around here. Š You have whole companies where nobody knows how to make a sale. Now that's changing. Companies have to sink or swim. They have to make money." Enterprises are allowed to enter the "perfecting" processes after passing a lengthy audit and submitting a 16-point self-evaluation. Once approved, managers, who once needed ministry consent for everything from hiring new employees to budgeting, are given unprecedented freedom. "People ask: `How is it possible you use the principles of a market economy being a socialist [country]?'" said Vice Minister of the Economy Julio Vazquez Roque. "The fundamental difference between a market economy and a socialist economy is the final use of the profits. In capitalism the profits go to the owners. In socialism they go to the state." Critics have argued that the perfecting process is moving too slowly and too few businesses are meeting auditing requirements. They say it is only the latest in a string of economic reforms that have had little impact on the island. At the EMPAI architecture firm in Matanzas, two hours east of Havana, employees said they have transformed the way they do business. They have slashed the number of mid-level managers and workers' bonuses are now tied to the company's production. For every 10 percent increase in company profits workers can add 20 pesos ($1) to their average 384-peso ($19) monthly salary.  Dolores Alemañy Vega, the firm's sub director and an employee since 1977, said the government once guaranteed the firm's projects. Since foreign trade was decentralized, the EMPAI must now compete with Spanish, English and Canadian firms for business. "We are more aware of the economy," she said. "I have to provide quality on a worldwide market."