ECONOMY-CUBA: GDP on the Rise, But Troubles Continue

By Patricia Grogg Reprint | | Print |

Patricia Grogg

HAVANA, Dec 5 2000 (IPS) - The Cuban government has expressed optimism about the country’s economic results at the close of this year, but cautions that the daily shortages faced by the island’s more than 11 million inhabitants are still far from over.

According to official forecasts, Cuba’s gross domestic product (GDP) growth could surpass five percent, despite this year’s high petroleum prices, which meant extra expenditures of more than 500 million dollars.

“Only a country with a planned economy can administer and withstand an impact like that,” commented José Luis Rodríguez, minister of Economy and Planning, who also emphasised that the critical phase is “only partly” over.

Rodríguez affirmed, however, that the Cuban economy demonstrated over recent years that it has consolidated its ability to recover, based on increased efficiency and the reactivation registered in nearly all economic sectors.

The island’s privileged trade relations ended when the European socialist bloc disappeared. That, combined with the ongoing United States embargo and Cuba’s own policy errors, triggered its worst economic crisis in the last half century, and has already lasted a decade.

“There are a number of things that are improving, but it does not mean we are reaching the point of satisfying all needs,” Rodríguez said in an interview with Cuba’s state-run media.

Food shortages top the list of complaints in most households. “I earn 400 pesos and spend 100 in just one trip to the free farmers market,” says María Elena Maza, teacher and assistant director at a primary school. The free farmers markets are based on free market principles.

As part of the emergency programme designed in the first half of the 1990s to confront the economic crisis, the government freed up the circulation of dollars in the country and opened special dollar shops, the income of which began to fill the near-empty fiscal coffers.

These locales provided a solution, beginning during the hardest years of the crisis (1992-1993), to the short supply of food, though its prices, governed by the law of supply and demand, are high for the average Cuban’s wages of 230 pesos monthly (slightly more than 10 dollars in the parallel exchange).

The shrinking average household income has been compensated, in part, by remittances sent by relatives living abroad. The total sum received by Cuban residents through this channel, according to the Economic Commission for Latin America and the Caribbean (ECLAC), is approximately 750 million dollars annually.

“I don’t have a family abroad and my salary is all in pesos. If I want a litre of cooking oil I must first buy foreign currency,” in other words, dollars purchased at an exchange of 22 pesos each, schoolteacher Maza explained.

Cooking oil is included on the government’s list of products sold in limited quantities, but at subsidised prices for all Cuban citizens. Its sporadic availability, however, often means families have to buy it at the higher-priced dollar shops.

Other government measures aimed at reactivating the economy have included opening the country to foreign investment and international tourism, the incorporation of some workers into a dollar-based incentive system and the authorisation of self- employment or work independent of the State.

Emergence from the so-called “special period,” as the authorities refer to the recession, “will not be equal for all people nor for all sectors of the population,” pointed out minister Rodríguez.

The Workers Central of Cuba (CTC) stated in a recent document distributed to its members that the social inequalities created by the economic reforms “have no part in the values” cultivated by the country since the triumph of the Fidel Castro-led revolution in 1959.

Such differences cannot be completely eliminated, “but can be increasingly reduced by employing measures that favour higher incomes,” especially for salaried workers, says the CTC in the text.

The trade union, the only one authorised in Cuba, says it is necessary to put an end to the parallel monetary circulation of pesos and foreign currencies, “re-establishing the sole circulation of our national currency, as soon as the possibilities and necessary conditions exist.”

Rodríguez, meanwhile, denied that the monetary duality is a “permanent measure of the Cuban economy,” but warned that eliminating it first requires the creation of appropriate circumstances, which does not depend only on Cuba.

He acknowledged that, at the end of 1999, 62 percent of the Cuban population held dollars – 18 percent more than in 1995. Though “the majority has (dollars) only in small quantities,” he stressed.

According to independent experts, the dual monetary system and the pricing framework provided solutions when they were first implemented, but today they are complicating the functioning of the economic system, “generating distortions in terms of incentives and equity.”

In this sense, they believe it is “indispensable” to gradually achieve a currency exchange convergence that normalises financial calculations and corrects the deformations in the relative price structure.

In the second edition of its report on the Cuban economy’s structural reforms and its performance in the 1990s, ECLAC comments that, unlike parallel processes in other countries, Cuba tried to equitably distribute the burdens of the crisis, as well as the subsequent benefits.

Even so, the sacrifices made by the population have been monumental, and do not allow one to consider that the process has completely come to a close, emphasises the United Nations regional agency. According to ECLAC, the Cuban economy has grown at an annual average rate of 3.4 percent over the last six years.