ECONOMY-CUBA: Optimism Grows for Economic Growth

By Patricia Grogg Reprint | | Print |

Patricia Grogg

HAVANA, May 28 1999 (IPS) - A turnaround in the Cuban sugar industry and improved performances in other sectors has boosted government hopes that economic growth in 1999 will go beyond the original modest target of 2.5 percent.

The 3.6 million tons of sugar from the current harvest – 400,000 tons more than last year – will be a decisive factor in reaching new growth goals, officials said. Sugar, previously the number one industry in Cuba, has lost out to tourism as the country’s leading revenue earner.

Jose Luis Rodriguez, Minister of Economics and Planning, says that favorable economic indicators during the first quarter of this year showed prospects were good for continued growth in the industrial and agricultural sectors.

On the agricultural side, the potato crop particularly stood out with 420,000 tonnes being harvested this year against 350,000 tonnes in 1998. Industry saw a six percent increase in construction.

Based on overall results of the first quarter, Rodriguez said that Cuba should be able to increase the predicted 2.5 percent increase in gross national product (GNP) by a full percentage point.

Rodriguez admitted, however, that the fall in sugar prices on the world market – from 6 US cents to 4.8 cents per pound – along with a recent rise in oil prices of 10-15 dollars a barrel would brake the country’s chances of substantial growth.

In 1959, “one tonne of sugar bought about eight tonnes of petroleum. But then the Soviet Union disappeared and we began this special period. Now the cost of a tonne of sugar on the world market buys just one tonne of petroleum,” President Fidel Castro complained last week.

Until 1989, special trade relations with the Soviet Union allowed the island nation to make up for price instability and to increase the buying power of its principal economic resource.

“The country will have to spend more than we had planned in order to buy petroleum,” said Rodriguez, which will mean delaying other economic projects.

Some analysts, however, were not as optimistic as the Cuban minister on economic growth and said the months ahead were “full of danger for the Cuban economy.”

These sources said the island’s economy had been weakened by “inefficient, planned agriculture”, by its exhausted industrial sector, and by its “suffocating financial market”.

“At least they’re being fair in recognising that the financial stress is aggravated by the United States’ blockade of Cuba (intensified by the 1996 Helms-Burton Act),” commented a University of Havana researcher who requested anonymity.

Last year Cuba’s sugar production was only 3.2 million tonnes, the lowest in 50 years. To improve future sugar output, Fidel Castro’s government has resorted to international short term loans at high interest rates.

In mid-1998, official sources put Cuba’s foreign debt at 10,400 million dollars, of which more than 6,000 million represented inter-governmental loans, and development and export credits, all backed by Castro’s government.

Current sugar exports are 43 percent of the country’s total overseas sales. Ten years ago, sugar represented 70 percent of Cuban exports.

Improvement plans for the industry include mechanisation of the production process and modernising 91 sugar processing plants by the year 2006. The government also is looking to increase the development of by-products from sugar cane.

“Sugar cane is truly a blessing for all the possibilities it offers. The entire plant can be used – the straw, trunks and fibres. What’s more, sugar cane renews itself every year,” a government official told IPS.

According to the government’s plans for 1999, exports should increase 7.2 percent and imports should fall 5.4 percent. Meanwhile, tourism is expected to grow by 18 percent.