The Economic Scenario Behind the Protests in Cuba

The Economic Scenario Behind the Protests in Cuba

HAVANA, Aug. 4th (IPS) There is no doubt that one of the triggers for the social unrest displayed on July 11th in Cuba points to media and promotional campaigns aimed at causing a social outburst with the support of external financing.

But that argument results insufficient to explain the origin and national scope of the protests: the shortages and economic hardships of the country must be added.

Obviously, we must also consider the impact of the intensified US embargo, the additional restrictions imposed from that country on family remittances and the negative effects on the economy of the Covid-19 pandemic.

It is not enough to fight these demonstrations with violence or even with conviction. Structural modifications of the economy and results are needed in the short term.

For example, it would be necessary to redirect investments in tourism and real estate businesses for another time and direct those existing resources to the rehabilitation of the most impoverished neighbourhoods or municipalities in terms of housing quality, and in public infrastructure and services such as water and sewage and roads.

In addition, imports from the private sector should be allowed even if they have commercial objectives since they will offer the population more goods and services. There is no need to fear competition since it is impossible for a private individual to sell less expensively than the state, which has the possibility of wholesale purchases.

The Economic Scenario Behind the Protests in Cuba
The author, Omar Everleny Perez Villanueva. Photo: IPS

Small measures adopted in the last two weeks, such as the elimination of customs duties on Cuban and foreign travellers’ baggage for the unlimited importation of medicines, food and cleaning products, of which the country has a deficit, show that these options could have been taken since 2020. There are many more and the State knows it.

The government should think more about how to open the economy, create more markets, like countries such as China and Vietnam, where the economy has played a different role due to the contribution of the private sector.

But how did the Cuban economy get to July 11th?

Cuba arrives at the second half of 2021 with a carryover of economic decline. In the last 5 semesters including the current one, the causes are well known and real, but objectively the economic crisis that we have been going through continues.

In the Cuban economy at present there are serious objective hardships. Even if what was achieved in 1989 is taken as a reference, there are indicators of great impact on the population, where the situation is even worse than 32 years ago, but it does not make much sense to compare it with 1989, when Cuba’s economic relations had other conditions.

In the food sector, there are areas that have worsened compared to 2016. That is, five years ago, such as the decrease in the production of bread, pork meat, rice, among others and in construction materials for housing, with less production of cement, concrete blocks and steel, and thus in a group of impact indicators on the population’s standard of living, which is impossible to analyze all of them.

If 2020 is compared with 2013, there is either a decline or there is stagnation, but if 2020 is compared with five years ago, the decrease in essential products for the well-being of the population is evident. In a forecast for the end of 2021, it can be concluded that it will be as difficult as 2020. Cuban authorities have already declared an economic decline in the first half of 2021 of two percent.

For example, pork production went from 144,100 tons in 2016 to 93,400 in 2020, that of rice from 181,100 tons in 2016 to 111,300 in 2020, and that of bread also fell to 10 percent in 2020 compared to 2016.

Vital products to improve the critical condition of housing, such as cement and concrete blocks decreased in 2020 compared to 2016 in both lines by 32 percent, and in rebar they decreased in the same period by 50 percent.

Housing is one of the main social problems in Cuba, a country of 11.2 million inhabitants with around 3.8 million units, of which 39 percent are in a fair and poor technical condition. The housing deficit amounts to 929,695 units. In the country there are 854 apartment buildings in critical condition, of them, 696 in Havana, with about 849,753 people affected.

It does not mean that the State neglected this task, but the magnitude of the figures shows that it is necessary to invest more to mitigate the situation of the people who live in the worst conditions.

In the case of international tourism, there are serious effects related to the pandemic that is afflicting the world, including Cuba. It has been almost nil or extremely low. Since 2020 only 6 percent of tourists arriving in the country were received compared to 2019, and by at the end of June 2021 it was 14 percent of what was received in 2020.

Little could be obtained from another important sector for Cuba, the production of raw sugar, since the results achieved in the last 2020-2021 harvest are only comparable with what was obtained at the beginning of the 20th century, that is, below one million tons.

The Economic Scenario Behind the Protests in Cuba
A saleswoman sells food products in a privately run agricultural market in Havana. Photo: Jorge Luis Baños/IPS.

The results of the monetary reforms and other measures since last January are far from the objectives that were proposed.

More progress was made in the financial sphere ahead of the productive one. Small and medium private companies should have been approved at the same time that the 15 provisions that were applied to state companies. New urban cooperatives, especially construction, should have been approved, only to mention some of the deficiencies.

In April, a package of 63 measures was adopted to boost food production and the result is still not seen in the markets. There may be exceptions in some territories, but in the capital, with 2.1 million inhabitants, what has been present currently is shortages.

The purchasing power of workers and the population, in general, has deteriorated in the last seven months due to inflation, which may exceed three digits at the end of 2021, especially in the informal and agricultural markets in general.

The shortages of many products in the stores in CUP (regular Cuban pesos) made a part of the population emigrate to stores selling in US dollars (called freely convertible currency stores or MLC). But the few establishments of this type existing in the territories and the generalized shortage, among other factors, led to long lines in front of commercial establishments, in which a whole working day is used to obtain a couple of products.

The situation proved fertile ground for the existence of “coleros” (people who live from the sale of positions in the lines) and resellers who increase prices several times in their sale among the citizens.

The astronomical figure of 65 to 70 CUP for one dollar at which it is traded, shows this deterioration in income. [The official rate is 24 x 1 but the government sells no dollars.] A matter now more complex due to the official regulation of not accepting cash in USD to be deposited in the accounts for MLC cards needed to buy in the dollar stores. It is known that the hand of the US blockade was present to make that decision.

Then the low agricultural production, price caps on certain agricultural products that led to a large part of the regulated private markets closing or selling few products, fostered great anger in the population.

Additionally, July and August are the hottest months in Cuba, therefore electricity consumption always increases in these months. The maintenance of the thermoelectrical plants should have been carried out in the first months of the year, to avoid subsequent breakdowns. As happened, when a drop in electricity production for maintenance occurred in summer and demand could not be met, the result has been prolonged blackouts in almost the whole country.

Hence, the regime of in-house protection due to Covid of people like young Cubans added to the severe power cuts and evidently led to an increase in social discontent.

The country was also going through a crisis in the distribution of medicines due to the lack of raw materials to produce antibiotics and antidepressants, and meds for high blood pressure, coronary deficiencies, among dozens of other drugs.

The efforts of the Ministry of Health due to the limited availability of currency, to prioritize resources to face the Covid-19 pandemic, including the manufacture of national vaccines for the immunization of the population, are understood.

In conclusion, the Cuban government should overcome the existing political-ideological obstacles and put aside the old mentality that for the model to be socialist, most of the companies must be state-owned with over-centralization of decisions, additionally minimizing the role of the market in resource allocation.

There are other experiences in the socialist development model that requires further study, such as the Vietnamese. But the people need to see results from the economic strategy announced as soon as possible.