Cuba candid about economic challenges and mistakes

Cuba candid about economic challenges and mistakes

HAVANA, Jan. 10th. DIFFICULTIES were centre stage at a plenary session of the central committee of Cuba’s Communist Party and the National Assembly of People’s Power in the last month of 2023.Addressing the plenary session, Cuban President Miguel Diaz-Canel noted: “We have discussed efforts that have not yielded solutions, measures that did not prosper, and goals that were not fulfilled…. The scenario is that of a war economy.”

“We would be surrendering beforehand if we see this war as an insuperable calamity. We must see it…as the opportunity to grow and to overcome our own selves, while the adversary is nakedly evil before the world… we are called to act together for a common objective: save the homeland, the revolution, socialism, and overcome.”

Dismal numbers

Speaking to the National Assembly were Alejandro Gil Fernandez, minister of the economy and planning, Prime Minister Manuel Marrero Cruz, and Diaz-Canel.

Gil Fernandez regards the US economic, commercial, and financial blockade of Cuba as the principal obstacle Cuba faces in restoring its economy.

He indicated that numbers for 2023 will show that Cuba’s GDP fell almost 2 per cent. Exports were $770 million below predictions. Food production was less than in 2022. Tourism income increased by $400m in 2023 but represented only 69 per cent of the yield of 2019.

Overall production was down, due mainly to state enterprises held back by shortages of supplies and fuels. Currency shortages and loss of workers due to migration hampered the healthcare and education sectors.

There were a few bright spots to report. Electricity generation was up 32 per cent in 2023. Cuba’s 30 per cent inflation rate for 2023 was lower than the 77.3 per cent rate in 2021. State business entities showed “gradual recuperation.” They employ 1.3 million workers while accounting for 92 per cent of goods and services produced in Cuba and 75 per cent of exported products.

He attributed price inflation to international price hikes, the government’s release of money to finance its budget deficit, fewer goods being produced, and an agriculture sector burdened by labour shortages, high costs and low yields.

“What isn’t being produced cannot be imported,” Gil Fernandez lamented. His message is that importing goods is almost impossible with “the effect of high prices on the international market.” But, paradoxically, “a lack of production resources” forces Cuba to import over 70 per cent of the food that is being consumed.

He proposed measures for increasing food production, including:

Creation of a financial mechanism for bolstering production based on farmers using Cuban currency derived from agricultural sales to buy supplies they need.

Build a farm labour force through moonlighting, employing students, and having young people do agricultural work as part of their military service.

Use food produced in Cuba, not imported food, to fill the “normal family food basket.”

Prime Minister Manuel Marrero Cruz critiqued the government’s lack of control over production and distribution, which he said “adversely affects production by state entities and lets currency exchanges on the illegal market determine the pricing of products from the non-state sector.”

Subsidising private profits

He reported that social inequalities are growing and that the tendency exists while state subsidies continue to nourish less distressed sectors of the economy. Equally worrisome: “The former state monopoly in production is now consolidating in the private sector.”

He was referring to the recent appearance of 9,000 or so mostly private small and medium-sized businesses and to independent farmers and co-operatives that took over land from the state under long-term usage arrangements. They now control 80 per cent of Cuba’s agricultural land.

Marrero Cruz called for “stimulation of government-operated small-and-medium-size business entities.”

Both private businesses and the farming sector sell products at highly inflated prices, with those prices being set by black market operatives. The prime minister condemned the state subsidies such entities receive in the form of low prices assigned to the fuel, water, transportation, and electricity they buy from the state. Similarly, the government pays high prices to farmers for food that, under the rationing system, is sold inexpensively to the population.

Henceforth, according to Marrero Cruz, the government will be subsidising people, not products.

The government, he indicated, will increase sales taxes on final products such as water, gas, electricity, and transport and reduce import tariffs by 50 per cent on the “intermediate products” used in food production and manufacturing.

More tourist dollars will be harvested. Municipal assemblies will present budgets and in the case of deficits will generate more income and reduce administrative expenses.

For the prime minister, “food production needs to be prioritised and by all sectors. Many countries are saying to us: ‘We’ll put up the money, you provide the land and then pay back the money with production.’”

He pointed out that, despite the non-availability of imported fertiliser and pesticides, “there are many instances of countries producing food; an agricultural country must produce its food.”

Marrero Cruz sees “speculative prices… and intermediaries earning a lot more than producers” and non-state entities now controlling imports rather than the government, the result being “abusive and speculative pricing.”

He called for paying for imports with income from exports: “[W]e prefer importing supplies and products essential to the economy and paying for them by offering other countries certain products and/or services.”

In response to inflation, the government, collaborating with the Central Bank of Cuba, will change the official exchange rate for the peso. According to Marrero Cruz, the government will be restricting prices for goods and services with a system of “maximum prices.”

War economy

Diaz-Canel, addressing the National Assembly on December 22, focused on what he called Cuba’s “war economy.” Referring to the US blockade, he described a political scenario of “maximum asphyxia, designed and applied against a small country by the most powerful empire in history.”

He also attributed economic problems to “the crisis in international economic relations and our own errors.”

Diaz-Canel spoke of government errors as “part of the complexity of making decisions in a context of extreme tension…[and of] commitment to preserving social conquests.” He mentioned mistakes, particularly in the “design and implementation of currency unification” and in “approving new economic actors without performance norms having been established.”

The effectiveness of new measures will “depend on generating more wealth, more work incentives, and more distribution of resources.” The president promised there would be no “neoliberal package… no crusade against small businesses, no elimination of the basic food allocation.”

He highlighted: “food production, localities taking care of more of their needs, the revival of tourism, the rescue of the sugar industry, state control of currency and the exchange market, redesign of the financial system, guarantees for self-financing, and managing currency to serve those whose production generates income.”

Diaz-Canel took note of Cubans’ high regard for healthcare workers and teachers, promising that “they will be the first to benefit from additional pay, which the prime minister announced in his intervention.”

Response strategies

The information and opinions provided by Cuban leaders clarified some difficult realities: the adverse effects of diminished tourism, inflation, and emigration; social inequalities based on varying access to resources; production stymied by shortages of resources; inadequate food production; lack of buying power for most Cubans, and for importing necessary goods; and the near impossibility of securing foreign investment.

Cuba is fashioning responses. They include further decentralisation of political and economic administration; cutbacks on the expenditure of central government funds; reduced subsidies for the purchase of water, fuel, transport, and electricity by business entities; adjustment of import tariffs to favour the availability of resources for production; capturing more tourist dollars; protecting state-operated production entities; fixing prices; and producing more food.

These will be palliative remedies, however, unless basic causes are dealt with. A prime goal of US policy has been to deprive Cuba of money, and that has come to pass.

There, the great need now is for Cuba to be removed from the US list of terrorist-sponsoring nations. That designation causes most international financial institutions to refuse to handle dollars on Cuba’s behalf.

The US use of economic sanctions everywhere rests on planet-wide dollar dependency. That emerged out of the Bretton Woods Conference of 1944 and has coincided since with the unrelenting US assertion of worldwide power. That’s the basis for a global constituency on Cuba’s behalf.

How it will be set in motion is the big question.