Cuban bureaucracy resists cleanup drive

By Marc Frank

HAVANA (Reuters): Communist Cuba's legendary leader Fidel Castro finds himself tangling with more than "Yankees" these days, as thousands of his own economic managers resist a drive to improve bookkeeping and reduce theft.

Castro launched the campaign in 1995, warning that corruption played a big role in the demise of the former Soviet Union and posed a potential threat to Cuban socialism.

Six years later, many bureaucrats are still having trouble getting their figures straight and keeping their fingers out of the pot.

"Of the 300 audits we conducted last year, 46 percent were satisfactory or acceptable. The rest, or 54 percent, were deficient or bad," Lina Pedraza, director of the government's National Auditing Office, told Cuba's official media recently.

Her office examines the accounts of Cuba's most important companies, most of them in the emerging dollar-driven economy and tourism sector. A similar number of audits in 1999 found only a third of the firms had their books in order, and that was an improvement over 25 percent the previous year.

Castro believes corruption must be contained if his socialist revolution is to survive. He called a three-day meeting of the island's top political and economic officials in 1995 to discuss the universal ailment and how to fight it.

Citing an upsurge of corruption that he said was linked to Cuba's opening to the capitalist world, Castro called for improved accounting and a crackdown on white-collar criminals. "Socialist morality must be preserved. ... We can't let the idea get around that we can be bribed," he said.

But four years later, in June 1999, Communist Party daily Granma published a report on the party's investigations into popular complaints against individual bureaucrats.

Of 1,159 complaints investigated, it said, 77 percent had merit, of which 686 involved "diversion or misuse of state resources, lack of economic controls and irregularities and lax administration."

In front of a state-run dollars-only hardware store in Havana on a recent day, half a dozen young men insisted they could offer anything one wanted to purchase for half the price. "It's the same merchandise, our friend runs the warehouse," said one of the black marketers, ushering his latest client to a nearby apartment to see stolen five-gallon drums of paint.

Similar stories are told by just about everyone in Cuba. Repeated official denunciations of black market activity also attest to the widespread nature of the phenomenon.

The government views instituting good accounting procedures as key to improving efficiency by controlling the hemorrhage of state resources into private hands and onto the street.

"With the state accounting system in chaos it's impossible to trace who's responsible for missing resources," said a Cuban economist who did not want his name used.

The National Auditing Office has reported that around 10 percent of the audits that uncover bad accounting practices result in prosecutions. Many more do not because evidence of embezzlement, diversion of resources and other corrupt practices cannot be pinned on any individual.

Castro and other officials say proudly the highest reaches of Cuba's hierarchy are free of corruption. To be sure, there have been no high-level scandals even remotely resembling those that have shaken other Latin American governments recently.

"If we are talking about corruption in government, we can say there is none," Vice President Carlos Lage said two years ago. "If we are talking about 'Could there be someone in a position of responsibility at the middle level or base who ... has a lifestyle superior to the austerity and modesty we demand,' certainly, and we take action when we find out about it."

Lage, who chairs the National Control Commission formed in 1996 to fight white-collar crime, said state managers would be warned, then fired, if their books were not in order. He spoke in the wake of an anti-corruption dragnet that left dozens of state managers without jobs and an unknown number behind bars.

Diplomats and foreign businessmen confirm they encounter little corruption in their dealings with top Cuban officials. At the same time, they view the state-run economy as riddled with pilferers.

"There's no list of officials to pay off like in some countries," said one foreign businessman.

A Western diplomat said: "When Castro claims Cuba is the least corrupt country in Latin America he's telling the truth. He's managed to control the situation at the top."

But the diplomat said corrupt practices were fairly common throughout the middle and lower levels of the bureaucracy, though he considered the sums involved "petty" compared with other countries.

He used the example of the tourism hotel construction boom underway, in which companies from his country are participating. "As much as 20 percent of the materials disappear," he said.

Indeed, mini building booms have erupted near developing tourism resorts as local residents improve and expand their dwellings with cement, paint, tiles, bathroom fixtures -- you name it -- that appear like magic on the local black market.

As Cuba has struggled to survive in the wake of European communism's collapse -- forced in the process to reshape and open up its Soviet-style economy to the international marketplace -- the need for proper control has become glaring.

A three-year-old government priority plan to transform Cuba's 3,000 most important companies into more efficient and agile firms has bogged down. Only 64 state firms scheduled to "perfect" their businesses have come up with the accounting practices required to begin the process.

Castro, during the 1995 meeting that launched his fight against white-collar crime, stressed the need to revive the accounting profession, which all but disappeared after his 1959 revolution because it was viewed as a capitalist practice.

"It is decisive to convert auditing into a dignified, well- paid job with a high moral standing and not the universal discredit of the past," he said. Since then the official media has taken to praising accountants, and Havana University has tripled the number of students studying the profession.

The government introduced an ethics code for officials and managers in 1997, passed new laws against white-collar crimes and established special courts to deal with "economic crimes."

Attorney General Juan Escalona, testifying before a parliamentary committee last December, reported his office began the prosecutions of 5,800 white-collar criminal cases in 2000.

He said the cases resulted from audits and other investigations conducted at 668 priority economic entities and asked for more funds to expand his task force, state media reported.

"After the revolution accounting fell into disrepute. It was looked at as a capitalist tool used by corrupt pre-revolutionary governments and their supporters," the Cuban economist said.

"Making matters worse, with the Soviets it was all barter and only material accounts were kept," he said. "The government thought there was no need for financial accounting and you can see the mess it's got into. That's all changed now, but it appears old habits die hard."