ECONOMY-CUBA: Gov’t Reopens Office for Buying People’s Valuables

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Dec 18 2002 (IPS) - The reopening of a government office in Cuba that buys gold, silver, gems and jewelry from the public is another indication that the economy of this socialist island nation is once again hitting bottom, and facing difficulties reminiscent of the worst moments of the crisis of the 1990s.

The ”house of gold” was first opened in the early 1990s to shore up the weakened state coffers, in a country where the economy remains basically state-run.

”They used to pay with checks with which you could buy clothes and other goods, but now they pay you with ‘convertible pesos’, a currency that is basically the same as the dollar in Cuba, but has no value anywhere else,” said Ramón Suárez, a bank employee.

During the crisis of the 1990s, which followed the collapse of the east European socialist bloc and the break-up of the Soviet Union, many people sold off their family valuables to make it through the hard times.

But observers say the Dec 10 reopening of the ”house of gold” might not bring the hoped-for results, because in the past few years, ownership of such valuables has become largely exclusive to the highest-income sectors, which would not likely be interested in relinquishing them.

According to economists consulted by IPS, the reopening of the ”house of gold” will merely be the first of a series of measures that the government plans to adopt to confront difficulties that threaten to trigger a new depression in the Cuban economy.

The government’s most pressing problem is the shortage of dollars. In the past few weeks, the socialist government of Fidel Castro has had to do a balancing act to meet its international obligations, said government officials.

”There has been a general gathering in of hard currency. We cannot spend a thing on publicity or on anything that requires freely convertible currency,” a public relations employee of a state-run record company told IPS.

Sources with the government have reported that on several occasions in the past few months, Havana has just barely been able to make the payments for foodstuffs purchased from U.S. companies, which in accordance with the rules imposed by Washington must be paid for strictly in cash.

The shipments, which began to be imported by Cuba after Hurricane Michelle caused huge material damages and losses here in November 2001, will amount to 175 million dollars by the end of the year, said Pedro Alvarez, director of the state-run Alimport company.

The country is also having trouble paying for the 53,000 barrels a day of oil it imports from Venezuela at market price, as part of a broader cooperation agreement between the two countries.

Fuel supplies to state enterprises and the mass transit system are increasingly restricted. In Havana, a city of 2.2 million, the already inadequate bus service is functioning far below capacity.

”The dearth of official information available on the behaviour of the economy is the confirmation of the existence of a complex internal and external situation,” states a specialised report on the economy to which IPS had access.

According to the new study, the government’s silence on the performance of Gross Domestic Product (GDP) during the first half of this year could hide the fact that the economy was stagnant or even shrunk.

This year’s economic performance could be the worst seen since GDP contracted by 34.8 percent between 1990 and 1993, at the height of the crisis.

After several years of timid recovery, Cuba’s 11.2 million people are once again beginning to feel the effects of the crisis more intensely, due to a steady rise in the prices of goods that are sold only in dollars, and the drop in the value of their wages, paid in pesos, against the dollar.

The peso currently stands at 27 to the dollar, and the average monthly salary in Cuba amounts to 270 pesos – which can easily be spent in a single visit to the free farmers’ markets.

Although utility rates are low, rent is cheap, and education and health care are free, a family in Havana needs seven times the average monthly salary to cover its needs, reported a study carried out in 2000.

But the situation has become even more complicated since then. The cost in pesos of items like garlic, onion, beans and pork has risen 24 percent on average with respect to last year’s prices.

”My money stretches less and less every day,” said Mariela Pérez, a secretary in a foreign firm who considers herself privileged. ”I have a fixed income in dollars, something that virtually no one in this country has, and even I am having a hard time,” she said.

With few exceptions, Cubans do not have incomes in dollars. But according to official sources, 60 percent of Cubans have at least occasional access to dollars, although that includes people who receive only infrequent, tiny amounts of the U.S. currency.

The dollars mainly come in as remittances sent by family members living abroad, especially in the United States, and through services provided by self-employed Cubans to foreign tourists and foreign nationals living in this Caribbean island nation.

But the two main sources of dollars – remittances and tourism – have not yet recovered from the impact of the Sep 11, 2001 terrorist attacks on New York and Washington.

Tourist season, which usually runs from November to March, has not even officially begun this year. The most optimistic forecasts indicate that this season will bring no more visitors than last year.

Emigrant remittances, which range between 800 million and one billion dollars a year and have become the Cuban economy’s chief source of revenues, will run to no more than 800 million dollars this year.

Nevertheless, the ”dollarisation” of the Cuban economy has continued apace. More than 70 percent of transactions between companies in Cuba and among the population are carried out in that currency.

Experts say the money supply in pesos will expand this year.

The specialised study to which IPS had access states that the fact that inflation has not reached the levels seen at the peak of the crisis in the 1990s is due to the high degree of ”dollarisation” of the economy in the past few years.

”There is a lot of money in the street, but most people barely scrape by on tiny incomes. That makes you think that there is a greater concentration of income in less hands,” retired economist Alfonso Rodríguez commented to IPS.

ECONOMY-CUBA: Gov’t Reopens Office for Buying People’s Valuables

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Dec 18 2002 (IPS) - The reopening of a government office in Cuba that buys gold, silver, gems and jewelry from the public is another indication that the economy of this socialist island nation is once again hitting bottom, and facing difficulties reminiscent of the worst moments of the crisis of the 1990s.
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