Cuban Government Happy Talk About the Economy is Not Convincing
By Mario Pentón Martinez
Translating Cuba - 14ymedio
January 3, 2018

An old woman shows her Cuban ration card that every year covers fewer and fewer products s
ubsidized by the Government. (EFE)

Several Cuban economists consulted by 14ymedio consider the growth of 1.6% in the Gross Domestic Product (GDP) announced on Thursday by Cuban Economy Minister Ricardo Cabrisas before the National Assembly, meeting in Havana, unlikely.

Cabrisas offered a series of growth figures including numbers for construction (+ 2.8%), tourism (+ 4.4%), transport (+ 3%) and agriculture (+ 3%). The results of 2017 mark a recovery with respect to the previous year when the Venezuelan crisis led Havana to acknowledge that the economy contracted by 0.9%.

Surprisingly, the Cuban Government data are even better than those of the United Nations Economic Commission for Latin America and the Caribbean (+ 0.5%), considered by several experts as too optimistic.

“The Gross Domestic Product is not just a number, it is basically an indicator that should be reflected in the economy of individual families and should mean something about the value of what is in their pockets for daily life,” independent economist Karina Gálvez says from Pinar del Río.

Gálvez, who belongs to the Coexistence Studies Center, assures that on the Island “there is no growth that is perceptible to the people.”

“If any Cuban is asked what this growth has meant for their pockets, they will answer ‘nothing’,” the expert points out.

According to Emilio Morales, director of the Havana Consulting Group, “the performance of the Cuban economy in 2017 was bad.” Morales bases his analysis on the disastrous passage of Hurricane Irma in September, the economic crisis in Venezuela, Cuba’s main ally and benefactor, as well as the freezing of relations with the United States.

Commercial Exchanges Between Cuba and Venezuela
According to official data, the economic losses related to Hurricane Irma amount to 13.585 billion dollars. In the agricultural area there is great damage in the production of bananas and a shortage of basic products, such as eggs, is palpable, which has forced the authorities to establish contingency plans to increase production.

Morales, who is based in Miami, also points out “the decrease in exports, the low prices of nickel and sugar [in international markets] and the lack of liquidity” as some of the main problems of the Island to which he adds “the lack of payments to the usual suppliers of goods and low productivity.”

“The abandonment by the Venezuelan oil company PDVSA of 49% of the shares of the mixed company that controlled the Cienfuegos Refinery and the departure of the Brazilian company Odebrecht from the project in the sugar industry has been serious,” says the expert, who believes that the step taken by Caracas is a sample of the difficulties that the relationship between both countries is going through.

Commercial exchange between Cuba and Venezuela has reached historical lows. According to official figures, the last year (2016) it fell to 2.224 billion dollars, after exceeding 8.5 billion in 2012.

“The Venezuelan crisis has generated great uncertainty in the energy sector of the Cuban economy,” explains Morales, who believes that the Russian rapprochement is due only to a geopolitical interest and that Moscow is not willing to subsidize the Cuban economy in the way that the Soviet Union did.

Domestic fuel production has also lost steam and has been reduced to 2.8 million tons this year.

Nor is the sugar industry, another mainstay of the supposed economic recovery, living through good times. The damages from Hurricane Irma alone are calculated as losses of more than 4 billion dollars. To this must be added that this year the production plan foresaw 133,000 fewer tons than last year, already very deficient and resulting in a number comparable to that of the early years of the twentieth century.

“The recent exit of Odebrecht from the sugar industry generates a great unknown with regard to its recovery and the future of this industry in the country,” explains Morales, who believes that finding new partners is made increasingly difficult by the “financial burden and the history of defaults” on the part of the Cuban government when it comes to making promised payments to partners and lenders.

According to the economist Omar Everleny Pérez, who lives on the island, the growth figures reported by Cuba are “surprising.”

“In the first semester it grew 1%, according to official figures. I do not know what activities in the second semester could make that jump because the material production was stagnant,” says Pérez.

The export of services, the principal source of foreign currency for Cuba, thanks to the thousands of doctors, athletes and professionals working abroad, has also fallen in recent years. In 2014, the latest figure reported by the Government was 11.898 billion dollars but some experts believe that it has fallen by more than one billion dollars due to the Venezuelan crisis and the difficulties in the Mais Médicos program in Brazil, where thousands of doctors have escaped from the control of Havana, which keeps two-thirds of their salaries.

“In order to reach an adequate growth rate and start on the path of development, we need an annual growth of more than 4%, which we are still very distant from,” Pérez points out.

The economist Elías Amor, based in Spain, considers the reported GDP growth rate “false.” According to him, “the regime says that it has been achieved by tourism but this sector barely represents 6% of GDP and has no effect of pulling up the whole economy.”

“As of November, Cuba had received 4,257,754 international visitors, which reflects a growth of 19.7% over the same period in 2016,” Amor explains.

However, the growth in the number of tourists is not accompanied by greater profitability in the benefits left by visitors.

“The problem of tourism in Cuba is the low level of income received per traveler. With only $655 profit per tourist, the sector earns about half what it does in other countries in the region, and therefore appears in comparative terms as a market positioned as the lowest of all Caribbean countries,” explains Amor.

Simply growing the number of travelers without taking into account the average income per tourist is not a profitable strategy for the future, according to the economist, who points out “the high cost of investments made by the State,” such as the importing of food and other supplies, which are required to support the tourist industry.