Thursday, February 08, 2018

Strategic Disclosure in an Age of Transparency: Cuba as Model for Emerging State-Based Trade and Production Orders

(Pix © Larry Catá Backer 2017)

It appears to be something of a global trend now, or at least a movement with sufficient repetitions to merit some notice, that governments are becoming more selective in the scope and character of the information they make available and yet increasingly eager to produce transparency in non governmental enterprises and other institutions. In the United States the trend toward governmental selectivity about the information it makes available has been decreasing. Slowly during the Obama a Administration (e.g., here) and then more comprehensively (e.g. here, here, here; here) the U.S. government has not so much reduced openness as it has made its willingness to be open a strategic asset. At the same time, states have become increasingly eager to devolve disclosure requirements on enterprises with respect to a variety of activities (e.g., here, here).  And not just the U.S. (e.g., here; here, here, here, here). One begins to wonder the extent to which these actions are not mere serendipity but suggests something else.

The development of that trend in Cuba merits considerable attention.  This post considers the recent failure of Cuba to disclose data on economic performance in the larger context of the willingness of states to disclose information. Brief comments and Marc Frank's reporting from Cuba follows.

Cuba represents a model for developing states--one in which disclosures might be made strategically (or required for strategic ends, e.g. here), but can be omitted entirely if necessary to paint a narrative picture that advances state policy. In this case, as Cuban economic progress fails to meet expectations, the willingness of the state to disclose its performance decreases.  Yet that is precisely what all states might consider doing.  This trend is exacerbated within economic globalization as states become more important participants in private markets (or as private markets increasingly develop a substantial public element).  It appears to be an age in which old principles are being challenged.  Transparency and disclosure appears to be high on the list of those principles that will be transformed. Not that transparency is rejected, but that its ideal is being transformed.

On the one hand, what is emerging is a greater reluctance on the part of the state to reveal itself to others.  States are increasingly seeking information about itself from the bottom up--but also increasingly unwilling to disclose that information--even when it might have substantial implications got economic activity. On the other hand, states--and the largest enterprises--have become increasingly data driven--they thrive on the ability to harvest and utilize disclosures by others. The move toward this data driven operation, and its converse, the increasing reliance on compliance as governance, seems to be at the center of the movement that will transform transparency regimes.  And also to change its character.  Transparency and the disclosure of information is less valuable as a means of striving towards regimes of perfect information driving markets and efficient allocations of resources.  It is more now a commodity that protects regional, not global alignments of market power, and enhancing the power and control of the consumers of data as against those with the obligation to produce information (e.g., here).

Yet the Cuban case, as in other matters, may be somewhat sui generis.  Cuba does not have a long tradition of transparency.  Its relations with the United States complicate disclosure.  This is so especially where economic and other performance data might be viewed as objects that could be used strategically against Cuban interests by its enemies.  Economic data as a political tool is thus an issue that tends to be sensitive in those states in which such a presumption is strongly held.   And then there is the anomaly of the conflicts around the Affair of the Sonic Weapons Attacks and their repercussions. Economic data that shows a reduced performance might be viewed as a danger where it is felt the the U.S. could use the data to show that its actions against Cuba are having effect.  

And yet that trend, more than almost anything else, may serve to undermine the core foundations of global markets.  But then that is the point.  And the other trend:  In place of a global market built on the foundations of the structures created after 1945 and refined only recently, there will emerge (again) regional trading blocks around the most powerful states, within which information and the power of markets will be protected, and beyond which information, and the barriers of equal treatment in market activity, will be fostered. This possibility, already well evident by 2006, has now become a possible successor ruling ideology around which global economic activity (and the politics that follow) will be structured (Economic Globalization Ascendant and the Crisis of the State: Four Perspective on the Emerging Ideology of the State in the New Global Order, pp. 154-158).

These trends suggest a restructuring of markets through hierarchically arranged state based trade relations and their conflation with state to state routed production chains. Where once there might have been a global approach to production with markets increasingly indifferent to states, the new trade relations that might well emerge--OBOR and America First--offer a distinctive view where production chains and power chains among states begin to conflate.  In that environment information becomes important, not merely for the construction of global markets but to protect the integrity of state-chain based production. Within state-chain production (whether undertaken by public or private enterprises) information may be usefully deployed, and deployed against the advantage of competitor states and their enterprise instrumentalities operating competitive production chains which then may vie for markets for their finished goods within each other's territories. Information thus becomes a critical factor in the definition and protection of the integrity of competitive trading block global production, perhaps to be bartered but not shared within a potentially fractured global production (but less fractured global trading) order. 

Cuban economy ever more opaque as data omitted from 2016 accounts
Marc Frank

HAVANA (Reuters) - Cuba has not provided a detailed breakdown of key economic activity in its annual statistical abstract for the first time this century, leaving would-be investors more in the dark than usual about the Communist-run economy.

The abstract for 2016, published online in June and July by the National Statistics Office, omitted a chapter that usually provides specifics on gross domestic product, exports and money supply as well as data on debt. Those details are sometimes provided a few months later, but last year they failed to materialize. (

It was not clear if the information would be released at a later date. The National Statistics Office did not respond when asked by Reuters about the omission.

The government surprised most analysts in December when it announced Cuba’s economy grew 1.6 percent last year, rebounding from a recession in 2016.

Moody’s and the Economist Intelligence Unit forecast continued recession for 2017, while the U.N. Economic Commission for Latin America and the Caribbean (Cepal) predicted anemic 0.5 percent growth.

“The abnormal delay in the macroeconomic indicators for 2016 casts doubt on the official estimate for GDP growth in 2017,” said Carmelo Mesa-Lago, professor emeritus of economics at Pittsburgh University and author of numerous books on Cuba’s economy.

“How is it possible authorities can release that estimate at the end of December and not release the entire national accounts for 2016 more than one year later?” he said.

Cuba’s foreign currency earnings have fallen by billions of dollars since global prices for oil and other commodities crashed in 2014. Service income, which includes the sale of professional services to several oil producing developing countries such as Venezuela, fell by more than a billion dollars in 2016, on top of a similar reported decline in goods exports, according to Reuters estimates.

The government has announced cuts in electricity and fuel consumption, slashed imports and, according to diplomats and businessmen, has fallen behind on payments to suppliers and joint venture partners.

One foreign businessman in Cuba, who asked not to be named, said investors already active on the island would not be deterred by the lack of detailed information about the state of the economy in 2016 but it could make others wary of coming.

“Any investor will want to have reliable data,” said Bert Hoffman, a Latin America expert at the German Institute of Global and Area Studies. “Statistical data are not a luxury but a valuable and often necessary resource, and its lack a serious drawback for development,” he said.

Three Cuban economists said they suspected the government was burying bad news.

“Whenever things are bad the response from the government is to hide information,” one said, requesting anonymity due to a ban on speaking to foreign journalists without government permission. “In 2016 the release of the chapter (on key economic activity in 2015) was delayed into late November, now it’s already January,” he said.
 Reporting by Marc Frank; Editing by Daniel Flynn and Frances Kerry

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