CUBA-ECONOMY: Crisis Persists Despite Growth Forecasts

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Apr 6 1997 (IPS) - Cuba’s economy will grow in 1997 for the fourth consecutive year but not enough to counteract the effects of the worst economic crisis since Fidel Castro came to power in 1959, according to economic analsusts.

In its 1997 economic planning forecast, the Economic and Planning Ministry predicted a five cent increase in gross national product (GNP) to follow the 7.8 per cent growth of 1996 and the 2.5 per cent in 1995. In January, Cuba’s Center for Economic Studies published independent estimates by a group of economists who predict various growth scenarios ranging from 5 to 7 per cent.

Today, most Cuban analysts agree that the current economic revival will extend to the most areas of productivity, but that this growth will not be sufficient to put an end to the crisis unleashed in 1990.

The GNP fell 34.3 per cent in the first three years of this decade and very few sectors have recovered 1989 production levels. Some will require several more years to do so.

Carlos Lage, Cuba’s vice-president, declareed last week that “there is no doubt that an internal recovery dynamic is in process, but he also admitted that the economic situation is “difficult.” Earlier this month, official sources admitted that this years sugar harvest would be delayed because of adverse weather and the late arrival of 350 million dollars of overseas financing.

Lage pointed to delayed credit lines as one of the effects of the Helms-Burton Act by which the United States aims to tighten its economic blockade of Cuba and stop the influx of foreign investment.

Cuba’s sugar industry – which has sufficient capacity to produce between eight and 10 million tons – registered a production decline from 8.4 million tons in 1990 to 3.3 million in 1995. Sugar’s current recovery is attributable to the injection of foreign capital in both agricultural and industrial endeavor. The recovery began last year when Cuba produced 4.5 million tons of sugar, a 33.6 per cent increase over 1995.

This year, authorities hope to exceed last year’s total although delays in harvesting will have impact on both efficiency and next year’s harvest. March is the month when sugar is the most concentrated in raw cane and, the styart of April with rain and intense heat, usually heralds diminished agricultural yields.

Experts believe that Cuba will not be able to continue its dependence on sugar as the island’s chief export. At the moment, tourism seems to be the most attractive method of attracting foreign capital.

Last year, Cuba hosted a million foreign tourists who spent 1.3 billion dollars on the island. Meanwhile, according to official statistics, income from the sugar industry was around 880 million. Tourism Ministry sources say that 219,390 visitors arrived on Cuba’s shores in the first two months of this year. This number represents an increase of seven percent over 1996.

But functionaries from the tourist industry believe that a seven percent growth rate is insufficient to meet expectations since the official prediction of 1.2 million tourists requires a sustained increase of 10 percent per month.

With the help of Canadian and Australian investment, nickel has been among the Cuban economy’s best performing sectors. In 1996, nickel production reached a record level of 55,800 tons, 12,900 more than in 1995. Havana cigars – considered to be Cuba’s most exclusive export – should boost their presence in the international market from 71.6 million units in 1996 to 100 million this year.

A report presented to Parliament by the Economy and Planning Ministry noted significant growth in sugar, tobacco, nickel, tourism, food stuffs, citric fruits, seafood, and petroleum production.

Economy Minister Jose Luis Rodriguez recently said that development plans for 1997 have not been halted in spite of “financial tensions and State treasury liquidity problems.

Rodriguez noted that “the overseas financial situation has become Cuba’s foremost obstacle to sustained economic recovery. At the end of 1995, Cuba’s external debt amounted to 10.5 billion dollars.

By the middle of 1996, this debt had increased to 11 billion, and according to experts, reached 12 billion in the first few months of this year. Last year, Cuba’s trade balance registered a deficit of 1.7 billion pesos (equal to dollars at the official exchange rate).

On the foreign investment front, growth continued but without fulfilling the prediction of 300 new entrepreneurial associations between the Cuban State and foreign capital.

According to the Ministry of Foreign Investment and Economic Collaboration, 260 economic associations involving foreign capital now function on the island, 42 of them created after the signing of the Helms-Burton Act in March 1996. Nevertheless, capital invested by foreign companies has not been sufficient to substitute for other sources of financing.

Unfortunately, additional financing is becoming increasingly difficult due to the size of Cuba’s debt and pressures exerted by Helms-Burton.

Added to tensions in foreign affairs, Cuba must bring about structural transformation of State-owned industry which is currently characterized by cumbersome size, excessive fuel consumption, technological backwardness, and economic inefficiency.

The government also confronts the challenge of ushering in economic reform that breaks with production models imported from Europe’s antiquated socialist camp, without renouncing what the Cuban government considers to be unbreachable principles of socialism. Earlier this month, Lage admitted that the possibility of establishing small and medium-sized private businesses in Cuba is still far off, and will depend on the prior recovery of State-held industry. In turn, industrial recovery relies on the implementation of widespread efficiency measures.

According to authorities, State-held property will continue to predominate on Cuba’s economic stage, although peasants will continue to be invested with rights of usufruct to the land they farm, at the same time Cuba fosters enhanced cooperative production simultaneous with increased self-employment.

In 1997, the Cuban government proposes to give the green light to the opening of free zones ,and to the approval of a banking law that guarantees bank reform in the areas of real estate holding and business activity.

Vice President Lage cautions that economic planning should result in improvement overseas accounts, raised levels of economic efficiency and stabilization of economic relations among island-based business based on national currency.

The “dollarization” of Cuba’s economy in recent years has brought about serious depreciation of the Cuban peso since dollars are now used for much of the business conducted on the island.

Experts from Cuba’s Center for Economic Studies say that if Cuba is to achieve predicted growth this year, the nation must halt exchange rate deterioration at the same time it produces 100 million cigars and 64,000 tons of nickel. Likewise, sugar must maintain an international price of 12 cents per pound; citrus export must grow 20 percent; and the sale of seafood will have to exceed 200 million dollars, 35 million more than last year.

Economic analysts caution that if increased imports remain the basis of recovery, Cuba’s economy could cycle into a vicious circle that would make it difficult to overcome the persistent economic crisis.