Cuba: A momentary darkness?

s has been widely reported, Cuba hasentered a new period of austerity. On July 8, President Castro told theCuban National Assembly that Cuban economic growth had slowed to 1 per cent inthe first half of 2016 compared with 4.7 per cent over the same period in 2015.Thecountry must, he said, rapidly cut its spending and energy use in order toaddress a lack of liquidity as a result of lower than projected income fromexports of services and goods, and reduced oil imports from Venezuela.

In doing so he acknowledged “rumours andforecasts of an imminent collapse of our economy” but sought to reassure Cubansthat there was no danger of a return to the severe austerity of the 1990s followingthe collapse of the former Socialist bloc.

“We don’t deny some challenges mayarise, even bigger than the ones we are now facing, but we are ready and in abetter condition than back then,” he observed.

Subsequent statements made clear thatwhat is planned involves reducing energy consumption by 6 per cent and fuelconsumption by 28 per cent; importing less, in part by strictly controllingimport credits; seeing state investment decline by 17 per cent through to theend of the year; and more generally reducing loans and liquidity across thestate sector. In contrast, export andforeign currency earnings from key sectors such as tourism and nickel werespared, but others that do not contribute to export earnings or importsubstitution are to experience cuts. Socialspending is to be protected.

Observant readers of the media may havesubsequently seen that the delivery of this has largely been entrusted to Cuba’sregionally and internationally known, and hugely experienced Vice President,Ricardo Cabrisas, who additionally becomes the Minister of Economy and Planning.The decision effectively divides political responsibility for overall economic managementand planning from the less than satisfactory delivery of the updated ‘lineamientos’(the national guidelines), with the intention bringing rigour into the deliveryof both processes.

In all of this the official media hastried to allay fears about this latest economic setback, which comes at a time ofnational frustration about the speed of economic growth and the absence formany, of material benefit and personal opportunity, despite continuing economicreforms.

Shortly after the announcement, the Cubanwebsite Cubadebate sought to reassure Cubans as to why the country is now in abetter place to address austerity than it was during the ‘Special Period inPeacetime’ that began in 1989 and ran to the late 1990s.

In an article, Randy Alonso Falcon, the Directorof the Council of State’s Office of Information, who is also Director of the publicationand of Cuban television’s principal discussion programme, Mesa Redonda, set outa number of reasons why the Cuban economy of today is better able to withstandan economic shock.

He noted that Cuba had a morediversified group of trade partners, despite Venezuela’s ‘significant weight’;that it had managed to renegotiate its debts with the Paris Club and othercreditors in terms that allow access to new financing; foreign investment wasunderway and was recognised as an essential component in the country’s futuredevelopment; and tourism had become the second largest source of foreignexchange after the export of professional services and biotechnologicalproducts. Mr Alonso also emphasised that the country was able to continuefunding investments in strategic sectors such as tourism, nickel, constructionand renewable energy, and suggested that the fact that 29 per cent of all Cubanworkers were in self-employment provided a form of protection against largescale (state) unemployment.

While there was no doubt that thecountry would experience difficulties in the coming months, he wrote, there wasno need for panic or to allow ‘opportunists, exploiters, speculators and manipulatorsto prevail.’ ‘A momentary darkness,’ he said, should not divert the view awayfrom the light of the future.

Recounting this is not intended to arguefor or against the accuracy of Mr Alonso’s analysis, but to demonstrate whyCuba’s collegiate leadership believe they will be able to turn the economy aroundin a relatively short time.

This is important as the timing and successfuldelivery of recovery will have a considerable bearing on popular Cubanperception of the country’s present and future leadership, as planned changestake place.

President Castro has made clear that he willstand down as President in 2018, and gradually hand over the management of thecountry to the next generation.

As one committed Cuban academic recentlynoted at an external roundtable meeting, the ability of the country’shistorical leadership to be able to retire with respect and without criticism havingdemonstrated that the model they have fostered is both socially andeconomically viable long into the future, is important. It will, he said,enable the next generation of leaders to have the moral authority to deliver difficultdecisions and take forward the process of change.

Judging from his now intensiveinternational travel, and regular domestic media exposure, the role ofoverseeing the country’s future along with other younger ministers, will likelyfall to Miguel Diaz Canel, the country’s First Vice President.

Less certain, however, is how in thecoming years power will be exercised, as it is unclear whether in future theleadership of the Cuban Communist Party and of government will continue tocoincide; matters that may become clearer when promised changes to theconstitution and a new electoral law are revealed.

The list of economic challenges facing Cuba’spresent and future leadership is challenging

Beyond present concerns and making theeconomic reform process work, it includes the prospect of the collapse of theVenezuelan economy to which Cuba is symbiotically linked; the absence, so far, ofany significant long term financial gains from the policy of détente with theUS; logistical problems holding back a greater economic role for non-stateco-operatives and the self-employed; the better implementation of taxation;improved management at all levels; tensions over the role of the media and theinternet; and, as the national assembly recently observed, growing incomeinequality.

How long the new period of austerity willlast is unclear. Barring change of the kind seen previously in Vietnam, it maywell result in new uncertainties in a country with an economy in a slowtransition, and where generational change and new thinking about its managementis now overdue.

David Jessop is a consultant to theCaribbean Council and can be contacted at david.jessop@caribbean-council.org

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