CUBA: Government Confident in Economic Take-off

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Sep 15 1999 (IPS) - The Cuban government believes the economic surge that began with increased tourism and a strong sugar harvest will continue, despite the fact this is the ninth year of one of the island nation’s worst economic crises.

Though the situation is still very difficult for Cuba’s more than 11 million residents, especially when comparing income with the prices of basic products, official predictions say better times are ahead.

“We are in conditions to stabilise the growth rate between four and six percent over the next two to three years,” stated José Luis Rodríguez, minister of economy and planning.

He added that Cuba will continue searching for ways to renegotiate its foreign debt of 11.2 billion dollars, but it does not have far to go before it begins dialogue with the Paris Club (or the ‘Group of 10’ wealthy governments that lends money to the International Monetary Fund).

During an official five-day visit to Sweden last week, Rodríguez assured that economic growth would accelerate in the next two or three years as long as the island continues to attract foreign tourists and export sugar.

According to Ibrahim Ferradaz, tourism minister, the sustained growth of the tourism sector over recent years has consolidated the official goal to bring in seven million tourists in 2010.

According to the Visit Florida agency, Cuba is displacing this southern U.S. state as the tourist destination for Canadians, Germans, Brazilians and the British because of its attractive location and services and its low prices.

The agency said that, in Canadian tourism alone, a 90 percent increase in travel to Cuba was reported in the first half of this year, while Canadian travel to Florida fell 11 percent.

Sugar production, the island’s second most important source of income after tourism, increased this year to 4.2 million tonnes. But the sugar industry continues to face problems including inefficiency, climatic variations and falling sugar prices.

The Cuban government maintains a policy to attract foreign capital for key sectors of the economy, like energy and mining. There are currently 370 projects underway on the island, 42 of which were initiated this year, and only one that is completely foreign-funded.

Rodríguez declared that to trigger an increase in this year’s gross domestic product (GDP), the decisive factors will be greater foreign investment – especially in mining and petroleum – and the island’s nickel production.

Following a slight 1.2 percent increase in the GDP last year, official Cuban sources affirmed that the GDP grew 6.1 percent in the first half of this year compared to the same period in 1998.

Local experts, however, believe the officially reported growth rate is too optimistic and are more conservative in their analyses of the economy’s behaviour and its impact on the population.

They estimate that a family of four, in which two are economically active, would require at least double the current average family income in order to cover its nutritional needs.

The average salary is 217 pesos per month. In 1994, the dollar was worth 140 Cuban pesos, but today the exchange rate is just 22 pesos per dollar. The Cuban population receives all health and education services free, and housing rents are low.

Food shortages earlier this decade sparked price increases, leading the government to set up a parallel market based on dollars, and increase interest rates and tariffs as part of its finance reform.

Manuel Millares, minister of finance and pricing, said Friday in his report to parliament that his office would continue supporting the official strategy to fight excessive cash flow in order to stabilise prices.

In August 1999 there were approximately 100 million more Cuban pesos in circulation than the year before. The total Auguast circulation reported was 9.5 billion pesos, of which 5.3 billion were in bank accounts, stated Millares.

This year’s government budget expects income of 13 billion pesos and a deficit of some 700 million – in addition to the 559.7 million peso deficit with which it ended 1998.

Millares acknowledged that the country has had to “tighten its belt” in order to handle the government decision to raise salaries of employees in several economic sectors, including health and education.