After Half a Century of Trying, Cuba Cannot Replace Imports

After Half a Century of Trying, Cuba Cannot Replace Imports / 14ymedio,
Mario Penton

14ymedio, Mario Penton, Miami, 30 December 2016 — "This is the last
thing the ship brought," you hear a young man say, to refer to one of
the most recent products imported and sold on the black market in
Havana. Being made abroad is synonymous with quality for many Cubans
despite attempts to boost local production through state enterprise in a
socialist model.

Decades have passed since the first time Cuba's rulers said it was
necessary to replace imports and increase local production to develop
the country, a matter that the executive, presided over by the Castro
brothers, has suspended year after year.

For the economist Omar Everleny Pérez, one of the gurus of the national
economy, this is a fundamentally "ideological" issue.

"If the state would prefer to avoid paying the Vietnamese in dollars and
allocate at least half of those resources to finance domestic
production, it would not be necessary to import rice," Perez says.

However, Raúl Castro – recognizing that Cuba entered a recession this
year, with a 0.9% drop in its gross domestic product – once again hopes
to salvage the economy using the same formula that has failed for decades.

"It will be necessary to fulfill three decisive premises: to guarantee
exports and timely collection of payments, to increase the national
production to replace imports, and to reduce all nonessential expenses,"
said Castro before more than 600 deputies in the National Assembly.

Exhortations to reduce imports began almost at the same time as the
revolutionary government. The phrase can be found over and over in the
speeches of the top leaders, but the figures published by officialdom
show that, over and over, it has remained just words.

"Stimulating development and diversification of exports and taking
advantage of opportunities to replace imports," is reflected in the
document Theses and Resolutions of the First Congress of the Communist
Party in 1975.

In the documents of the Second Congress, celebrated in 1980, the same
recommendations can be read almost verbatim, which remain unmet and are
reformulated at the next Congress in 1986.

"The essential problem of the country's economy in the five-year period
1981-1985 was that, although we had more than acceptable growth, it was
insufficient where we needed it most, that is, in the export of goods
and services and in the replacement of imports," states the conclusive
document of the Third Congress.

Replacing imports is not a Cuban invention. It is a trade policy based
on the premise that a country should try to reduce its dependence on the
outside world through the development of its local industry, and it was
an ideology in vogue in a post-war Latin America that sought to
industrialize third world countries and promoted protectionism.

However, as the Cuban economist Antonio F. Díaz explains in a research
paper at the University of Havana on the measurement of the effect of
replacing imports (2015), it is not simply a matter of dispensing with
imports to develop the local industry.

"It is a complex process," explains Díaz, who states that the
government's progress in replacing imports cannot be effectively
measured because of the absence of official statistics.

"There has been growth in many of the sectors where there is the attempt
to replace imports, but when domestic production increases, often there
is also an increase in the need to import intermediate products
necessary for this production, such that it does not necessarily end up
positively affecting the global figure for imports," he explains.

"Imports are always going to grow, as happens in all countries, but
their replacement [with domestic products] as an economic policy is
effective when economic growth is greater than the growth in imports,"
the expert explains.

Cuba's balance of trade over the last decades has shown a trend of
increasing deficits, which accelerated in 2008 when the balance of trade
was negative 10.57 billion pesos.

In the economic policy guidelines promoted by Raul Castro in 2011 as a
guide to "perfecting socialism," the replacement of imports is mentioned
20 times. The term is revisited in the update of those guidelines for
the period 2016-2021.

The document calls for "promoting an accelerated and effective process
of import replacement, with mechanisms that stimulate and guarantee the
maximum possible use of all the capacities available to the country in
the agricultural and industrial sectors and in services and human
resources."

In 2015, Cuba reported a decrease of more than 1.5 billion dollars in
exports, motivated to a large extent by the deterioration of economic
relations with Venezuela, the island's main trading partner. Official
Cuban statistics reveal that the exchange between both nations decreased
by more than 3.0 billion dollars in 2015.

The reduction of the immense Venezuelan subsidy (valued at its peak in
more than 100,000 barrels of oil a day, part of which Cuba re-exported),
as well as the drop in demand for the export of Cuban services abroad –
in healthcare and other sectors – cannot be made up for through
increases in tourism (3.8 million visitors) and remittances sent to
Cubans on the island from family and friends abroad (more than 3.0
billion dollars).

For now it will be necessary to wait for the postponed plenary session
of the Central Committee of the Party, originally scheduled for December
2016. The Central Committee must approve the Conceptualization of the
Economic and Social Model and an Economic Development Plan to the Year
2030, in which surely the exhortation will be repeated to replace
imports and strengthen local industry.

Source: After Half a Century of Trying, Cuba Cannot Replace Imports /
14ymedio, Mario Penton – Translating Cuba -
http://translatingcuba.com/after-half-a-century-of-trying-cuba-can-not-replace-imports-14ymedio-mario-penton/