The Cuban Economy is Still a Matter of Improvisation

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.
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(*) 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).