CUBA-ECONOMY: Year of Crises Ends

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Dec 31 1996 (IPS) - Cuba rang down the curtain on 1996 Tuesday – a year fraught with political crises and economic upheaval.

While the Gross Domestic Product (GDP) grew 7.8 percent, a big boost toward helping the country out the harsh economic crisis that has gripped it since the start of the decade, the average Cuban still scrambled to put a solid meal on the table.

“Figures can’t be eaten” grumbled one Cuban busy trying to scrape a few dollars together to buy oil, powdered milk and other products that can only be bought with hard currency.

On the political front, Cuba’s problems began with the shooting down in February of two U.S. civilian airplanes piloted by Cuban exiles. Then came the signing into law of the Helms-Burton legislation tightening the U.S. embargo against Cuba, a rise in oil prices, hurricane Lili and another diplomatic row between Havana and Madrid, which almost gave rise to an assault on the Spanish Embassy here by aspiring emigrants.

That incident made it clear that there is still a significant sector of Cubans who dream of going abroad, in spite of the economic reforms implemented over the past few years by the government.

The reforms included the legalisation of the dollar and the opening of government exchange bureaus, the broadening of areas in which self-employment is allowed, the opening of free agricultural markets, a clean-up of the financial system, business, labour and bank reforms, and an opening to foreign capital.

Fernando Gonzalez, 50, who gave up his post in a state enterprise to sell food on his own in the capital, owes close to 800 pesos in taxes (on par with the dollar at the official rate). “I’m on the verge of going under,” he told IPS.

Sources at the national tax office say 19 percent of the slightly more than 167,000 Cubans registered as self-employed workers owed back taxes.

The scarcity of money and the high prices of basic products are the toughest problems facing the the majority of the country’s 11 million inhabitants.

But authorities contend that 1996 confirmed that the economic crisis has hit bottom, and the economy is on its way up. Minister of Economy and Planning Jose Luis Rodriguez said in late December that “the factors fuelling a dynamic of internal development will be consolidated” in the coming year.

The GDP growth of 7.8 percent was higher than the official forecast of five percent, and much better than the 2.5 percent growth of 1995. But the 1996 increase represented a mere one quarter of the growth seen in 1989, before the economy began its downward spiral of 34.3 percent in three years.

The “special period”, the official name given to the crisis, continued to have enormous effects on Cuba’s economic structure this year, while the economy continued to suffer the aggravating effects of the U.S. blockade with estimated losses of 60 billion dollars in 34 years.

The foreign financial deficit, the spectre of the effects of the Helms-Burton act, foreign debt and domestic shortages loomed across the national economy like the four horsemen of the apocalypse.

After the first six months in which GDP grew 9.6 percent, the economy slowed down with the rise in oil and food prices and the drop in the price of nickel. According to official sources, the increase in international fuel prices meant the Cuban government shelled out 108 million dollars more than was foreseen, and 118 million more in food products.

Local analysts say GDP growth was based on increased tourism and sugar production, which enjoyed growth of 32.8 and 33.6 percent, respectively.

According to unofficial estimates, the sugar cane harvest produced an estimated 1.2 billion dollars, and the recreation industry closed the year with 1.3 billion in income and the arrival of 960,000 visitors. A report presented to parliament by the Ministry of Economy and Planning said that over 20 percent growth was registered in nickel, tobacco, vegetables, fish and oil refining this year.

In spite of the Helms-Burton act, which aims to hinder the flow of foreign capital to Cuba, joint ventures with foreign investors increased from 212 to 260.

Rodriguez said that “the external financial situation has become the chief obstacle for a sustained recovery of the Cuban efconomy,” with exchange rates deteriorating 21.3 percent.

With a foreign debt totalling more than 11 billion dollars, Cuba will set out on 1997 in search of fresh credit allowing it to pull itself out of the crisis, a solution that looks suspiciously like a problem. Academic sources calculate the external financial deficit at around 500 million dollars at the close of 1996, a phenomenon acknowledged by authorities.

The average Cuban has dreams of a better year ahead, but authorities recognise that 1997 will be tough and complex, without any real major improvements in the daily life of the population.