Five points: debunking Raúl Castro's economic rhetoric
A commentary on the five economic claims made by the Cuban President on December 29, 2015, at the closing of the National Assembly of Popular Power.
1- Although the effects of the US embargo remain unchanged and the external financial constraints grew more acute in the second half of the year, our Gross Domestic Product (GDP) was up 4% this year.
In fact, the effect of the "blockade" did change, and the financial constraints were not tighter. The "blockade" was relaxed by the measures ordered by the White House since the restoration of diplomatic relations between both countries was announced, while financial constraints were eased due to the renegotiation of foreign debt, especially when the Club de Paris wrote off three-quarters of Cuba's debts.
With reference to the GDP, the Government recognizes that achieving significant development would take growth of 7%. However, from 2011 to 2014 it grew at an average rate of 2.3%, and in the last of these three years, 2014, growth stood at just 1.3%. Then, in July of 2015 Raúl Castro announced that a corner had been turned on the GDP slowdown trend, and estimated that by the end of the year it would be at around 4%, the figure now heralded as an achievement.
To understand how paltry this growth is, one must recall that the drop in the GDP between 1989 and 1993 was 34%. Therefore, the 4% announced (setting aside whether it is accurate) shows no true recovery, as we can see in the following four examples:
a- The sugar industry, according to Economy Minister Marino Murillo was up 16.9% from 2014. But it was still 73,000 tons short of the forecast in the annual plan, making necessary some 30,000 tons of domestic consumption that had been designated for export.
b- Manufacturing grew 9.9%, but the technological obsolescence affecting the industries involved generated considerable product shortages in the network of hard currency stores , making it necessary to import, among other items, thousands of tons of chicken and thousands of cases of beer, with the consequent outlays of additional money.
Agriculture grew, but deficiences meant that it was necessary to buy an additional 50,000 tons of rice and an additional amount of milk to cover the gap. In light of these deficiencies, the figure of 4% says little, and the change has meant little for Cubans' lives.
2- Next year the Gross Domestic Product will continue to grow, but at a slower rate, 2%, as a result of financial constraints associated with falling revenue from traditional export items, due to lower prices on the world market, such as nickel.
Firstly, if arithmetic is independent of ideology, two is half of four. So, if the GDP goes from 4% to 2%, one cannot speak of a slower growth rate in 2016, but rather a drop. Secondly, if in the past several debt write-offs and re-negotiations were achieved, including those with the Club de Paris, which forgave Cuba $8.5 billion of $11.1; and if thanks to relations with the United States family remittances were up, which at the end of 2013 already ranged from 1.4 to 2 billion dollars; and if tourism and medical services continued to generate additional billions of dollars ... the new decline cannot be explained based on alleged financial restrictions without mentioning other causes, like the reduction and/or total loss of hundreds of thousands of barrels of oil that Venezuela had been delivering to Cuba daily.
3- Although the number of visitors rose to 3.5 million, it should not be overlooked that this result was obtained even though Cuba still remains the only country in the world that US citizens are barred from visiting as tourists.
The surge in the number of visitors was not obtained although US citizens are banned from traveling to Cuba, but just the contrary. It was achieved largely thanks to the expansion implemented by President Barack Obama of the 12 categories established by the Treasury Department, as a result of which tens of thousands of Americans and tourists from elsewhere came to the island starting in early in the year. Without them the figure achieved would not have been possible. Similarly, forthcoming growth will be considerably influenced by the imminent arrival of new regular flights, and that of ferries, all of which is thanks to expectations generated by the new relationship between Cuba and the United States.
4- Despite the financial constraints, the commitments undertaken in the different processes for the readjustment of debts have been been met, and the trend towards the gradual recovery of our economy's international credibility has been maintained. The latest evidence of this was the agreement reached on December 12 with the Club de Paris. This agreement facilitates access to financing in the medium and long term, very necessary to implement the investments slated in our development plans.
More than the fulfilment of commitments made, the result has depended on: a- the pragmatism of creditors, who know that, due to the ruinous status of Cuba's finances, it will be impossible to collect on the debts owed them; b- pressure exerted by companies in creditor countries to invest in the island in the new scenario, aware that the new detente with the United States creates opportunities that Americans still cannot exploit; c- expectations of the resumption of diplomatic relations with the United States; d- the Cuban government's persistent propaganda designed to demonstrate the country's "economic recovery."
The Cuban government's logic arises from something else. The failure of its reform efforts and the economic crisis in Venezuela have aggravated the cash crunch, while access to financing in the short and medium term, especially from members of the Club de París, has given it some breathing room, without having to delve into the relationship with the United States.
What has been forgiven are the enormous interests amassed over the years, but the principal is still outstanding. The Club de París forgave Cuba 8.5 billion of its 11 billion dollar debt, but the agreement imposes stiff penalties if the Cuban Government welshes again. Thus, the game recommences, with generosity but with clear rules: Cuba must honor its commitments, which it never has done, which in the medium to long term will be impossible if the structural changes that the economy and society require are not introduced; something that is as necessary as it is impossible to undertake without the corresponding political will. A fear of commitment seems to explain the words of Marino Murillo at the ANPP last December. Failing sustained economic growth in the economy, he said "we must work towards sustainable debt."
5.- It behooves us to maximize our efficiency reserves, concentrate resources on activities that generate revenue through export, and which replace imports; make the investment process more efficient; and boost investments in the productive sector and infrastructures, prioritizing the sustainability of the generation of electricity and augmented efficiency by energy suppliers, " he added.
This is more of the same. We can find such statements in the hundreds of speeches by Cuban officials over the course of more than five decades, all of them empty words. The reserves exist, but they are elsewhere: in the reforms that Cuban society is crying out for.