The Cuban Economy is Still a Matter of Improvisation

The Cuban Economy is Still a Matter of Improvisation
December 2, 2014
Dariela Aquique*

HAVANA TIMES — In its efforts to "refashion" economic and political
concepts and practices on the basis of the Party's Economic Guidelines,
the Cuban State has declared that these weren't valid at other points in
history because of the impact the globalized world, characterized by a
structural crisis of the capitalist system, had on the island at
different junctures. As though not fully satisfied with this argument,
it adds that such changes are possible today because they can be
implemented as part of process of social interaction that is different
from the one that has existed for more than fifty years.

As we might have expected, the deficiencies and mistakes that have
characterized Cuba's State economy – and their impact on society – are
pushed to the background.

All of us know, however, that the Cuban economy has congenital
structural deformities that have long made it impossible for the country
to avoid its subordination to other economies (which have historically
sustained the country's productive system in terms of capital and
technology).

Today, the Cuban government shows unequivocal signs of being desperate
to remain in power in the final stretch of the race – even if that means
taking up a "new economic model" that implements unprecedented measures
and legislations, including the development of the business portfolio
(valued at US $ 8.7 billion) recently presented at Havana's
International Fair, a portfolio that includes a list of 246 projects,
from poultry industry initiatives, to the production of vaccines or
bottles or to the development of wind farms.

Anything seems to come in handy in its attempts to remain afloat,
something that involves more pathos than the strategies of an old and
exhausted prostitute desperately trying to reinvent the Kama Sutra.

Chronologically speaking, these economic disasters began in 1959, when,
a short year after the revolution, the Cuban State began to nationalize
the country's industries, banking institutions and service providers and
set out to structure a State economy disconnected from the US market.

From 1961 to 1972, the planning and centralization of material and
human resources, which took the Soviet Union as a template, was the eye
of the economic hurricane. This stage can be considered the initial,
utopian phase of the revolution, a time in which efforts at prosperous
industrialization, agriculture and import substitution were made without
any consideration to the lack of financial resources for such
large-scale projects.

During this time, the economy was a field for experimentation. The
notorious 1970 sugarcane harvest, when the nation's main goal became the
production of ten million tons of sugar, an epic mission propped up by
impassioned speeches and slogans, was conceived in this context.
Economic initiatives began to be subordinated to a political leadership
that prioritized ideology and downplayed the importance of the
commercial factors needed to successfully implement these.

The process that made the concept of social property and arbitrary
decisions of this nature an absolute led to the stagnation of small
businesses and of course prompted the first great crisis, which revealed
the State's limited capacity in terms of developing a coherent economic
development agenda.

In the 1980s, when Cuba became a member of the Council for Mutual
Economic Assistance (COMECON), the hardships of the 1970s seemed
forgotten, and it could even be said that, until 1986, Cuba appeared to
have an efficient economic environment. The relative abundance of
material resources gave the impression, at the level of everyday
experience, that, generally speaking, the basic needs of the population
were covered.

Though it is true there was the semblance of daily harmony, the
country's economy was not sustainable. The technological backwardness of
many of the country's regions, the inadequate salaries, the
vulnerability of the countryside (to mention only a few realities) were
yielding productive statistics that were sorry indeed.

From 1986 to 1990, a stage known as the Rectification of Errors and
Negative Tendencies, the leadership called for the development of a
sustainable socialist model, aware that the pillars that held up this
system in East Europe, their benefactors, were already very weak. To
make matters even worse, European State socialism collapsed in 1989 with
the tearing down of the Berlin Wall, and the Soviet Union broke up two
years later.

From 1991 to 2000, the notorious Special Period crisis, the collapse of
the socialist bloc had profound and immediate consequences for Cuban
society, which received 63% of its food, 86% of its raw materials, 98%
of its fuel, 86% of its equipment and 70% of its manufactured products
from this bloc.

Suddenly alone and in the inconvenient position of having to confront
international isolation and the need to reinsert its economy into a
unipolar world, Cuba was forced to come up with new strategies to
survive without the aid of its former mentor. To alleviate the economic
crisis (which became more pronounced in 1993 and 1994), the government
introduced a number of market reforms: the opening of the tourism
sector, the legalization of the US dollar, the authorization of
self-employment, the broadening of the joint-venture sector and a law
authorizing foreign investment.

Mechanisms, practices and conceptions that thwarted the free development
of Cuba's productive forces (both objectively and subjectively) were,
however, still in place. As a result of this, these measures allowed for
only a timid recovery and brought complications of a social nature, such
as prostitution, high levels of corruption and the spread of the black
market.

In addition, the sugar industry, which had been one of the pillars of
the Cuban economy since colonial times, also suffered from bad decisions
that displaced this industry as the island's economic mainstay. The
government announced its intentions of carrying out "sweeping changes"
in this declining sector. Almost half of all sugar refineries were shut
down and more than 100,000 workers were laid off.

By the mid-1990s, tourism had overtaken sugar as the country's main
source of hard currency revenues. In the year 2000, it generated some US
$ 1.9 billion in gross income. The government's hopes that this sector
would continue to grow, however, did not come to be owing to world
recession in 2001 and the negative impact that September 11 had on
tourism in the region.

To keep the economy afloat, foreign investment was actively sought. A
new legal framework, established in 1995, allowed foreign investors to
be majority shareholders in joint ventures created with the Cuban
government. In practice, this was almost never the case. A great many of
these investments are actually loans or management, supply or services
contracts that aren't normally considered investments of capital in
western economies.

This period was also marked by the third largest mass exodus that
country had experienced after the Camarioca and Mariel exoduses, the
rafters crisis (to say nothing of the many people who left the country
legally, a phenomenon which depleted the country's workforce and had a
noxious effect on its economy).

Cuba would find its best political and ideological ally (and one with
plenty of material resources) in 2000, after Hugo Chavez became the
president of Venezuela – a kind of new patron that would begin to supply
the island with 100 thousand barrels of oil a day and would keep its
ruined economy afloat.

The Cuban State, however, was well aware that this near-providential
alliance could change at some point if the Right regained power in
Venezuela. There was also the risk that, following Chavez' health crisis
and ultimate demise, Chavismo would not survive. Preventive measures had
to be taken in the event that happened. A profound revision of
everything done to date was needed, hence the unavoidability of the
"updating" of Cuba's economic model. These changes had to be aimed at
domestic and foreign policy alike.

A new concept, the export of services, would make its appearance as a
source of hard currency revenues, secured through the signing of
individual agreements with countries for the sending of medical doctors,
nurses and other professionals abroad. According to certain official
figures, by 2009, the main source of Cuba's hard currency had ceased
being tourism and had been replaced by the export of services to other
countries, under agreements in the areas of health, education and other
sectors (in that order).

In 2011, we heard talk in terms of the "elimination of needless free
services and subsidies" and "payroll cutbacks at workplaces." We also
saw the opening of spaces for non-State properties and the establishment
of economic models such as cooperatives, land lease, the self-employed,
joint-ventures and international partnership contracts.

I saw this film back in the 90s, and the economic results were modest at
best, such that these "changes" arouse a number of suspicions. Current
statistics, which are quite discouraging, confirm these suspicions.
During 2013, Cuba's GDP grew by a mere 2.7%, below the 3 % reported in
2012 and well below the planned 3.6%.

A few days ago, Cuba's Foreign Trade Minister Rodrigo Malmierca showed
up at Havana's International Fair and delivered a far from strategic
speech before investors and diplomats. Offering a limited business
portfolio to businesspeople, telling them that "this is what I want to
offer you, not what would be convenient for you to take", is anything
but prudent.

When it comes to the country's economic wellbeing and stability, we
continue to lay all our bets on the circumstances, allies or utopias at
hand. We continue to follow the trial-and-error method, to capitalize on
people's enthusiasm and make badly-conceived plans. The Cuban economy
continues to be a matter of improvisation.
—–
(*) This article is a revised and shortened version of the paper I
presented at the 24th Conference of the Association for the Study of the
Cuban Economy (ASCE).

Source: The Cuban Economy is Still a Matter of Improvisation - Havana
Times.org - <http://www.havanatimes.org/?p=107700>