Cuba 2016: A Year of Decisions and Uncertainty

by Pilar Montes

Minister of the Economy and Planning, Marino Murillo, is the point man of the Cuban economoy.

HAVANA TIMES — To hope for the best and prepare for the worst seems to be the maxim followed by those who manage Cuba’s economy when offering an overview of the situation.

In his overview of 2015, Vice-President Marino Murillo, known as “tsar of the Cuban economy,” announced before the parliamentary session that ended on December 29 that the country’s GDP had grown by 4% over the year, in contrast to a 1.2 % growth the previous year.

Locals were unable to celebrate as they looked to 2016, however, as the government estimates that GDP growth will be around 2% over the coming 12 months.

Citizen hopes of seeing a “prosperous and sustainable” socialism arrive at their dinner tables and daily lives in general continue to be frustrated and many have stopped waiting altogether. The substantial rise in emigration reflects this.

Statistics unavailable in the local press reveal that, by international standards, 7 out of 10 Cubans live in poverty.

Neighbors. Photo: Juan Suarez

Though the issue was not addressed during the concluding session of the Cuban legislature on Tuesday, economist friends of mine (who asked to remain anonymous) explained to me that the country’s difficulties will worsen in the short term, owing to the almost certain withdrawal of Venezuelan support, particularly in terms of the supply of oil and its derivatives.

These sources believe that this will be the main cause of the drop in GDP in 2016. The situation will also affect the functioning of the Cienfuegos refinery, which processes Venezuelan crude, but these economists feel that other suppliers, to be paid through credit, will be found, thanks to Cuba’s new relationship with the Paris Club.

We can expect new power cuts in 2016, my economist friends believe, but not as critical as those experienced in the 90s, when the island had frequent blackouts of up to 12 or more hours. They also point out that public transportation, already deficient, could be affected.

With respect to the Cuban medical doctors and other professionals currently working in Venezuela, these sources feel it is too soon to tell what will happen, as they do not believe the Venezuelan opposition will make a drastic decision that could turn the population against them.

Cuban doctors in Venezuela. Photo: Caridad

They also foresee colder relations with Argentina and the withdrawal of some companies, such as Brazil’s Odebrecht, implicated in the Petrobras scandal, which had invested in Cuba’s Mariel Special Development Zone.

Debt Relief

The answer to a serious problem has been postponed to give Cuba’s debt-saddled economy some breathing space. The renegotiation of the foreign debt was approved by the main creditors of the Paris Club in December.

Cuba was granted an 18-year term to pay its debt, but, to secure US $6.5 billion in credit to finance the economy in 2016, “we need to pay more than US $5 billion in debt.”

According to the math, this breathing space comes at a price: making the country more efficient in terms of production (a process for which the island does have reserves) while attracting more foreign capital to its investments portfolio.

As for the thaw in Cuba – US relations, if US capital continues to be kept out of Cuba by the embargo, it will not be able to attract other investors.

Wages and Housing

It could be said that the most pressing issues Cubans face are low wages and housing needs. The average worker earns around 500 Cubans pesos (25 usd) a month. That is to say, if these workers are to have food on their tables, they must refrain from buying any clothes and be rather stingy in terms of daily public transportation.

Photo:. Jorge Luis Baños / IPS Cuba

Referring to wages at the parliamentary session, Murillo promised that “the average monthly incomes of State companies will increase to 700 pesos (35 usd) and that 35% of revenues (tax revenues? profits?) will be destined to worker salaries.”

However, the income required to cover a person’s basic needs has been estimated at twice the figure mentioned by Murillo.

Doctors were granted a wage increase in 2014 and are today earning an average of 1,200 pesos (around US $ 60) a month.

Agricultural cooperatives and farmers granted permission to use certain lands continue to secure the highest incomes to date, as do workers at State companies authorized to pay wages on the basis of employee productivity.

According to the parliamentary announcement made Tuesday, the government foresees the building of 27,480 houses in 2016, only 12,480 of which will be built by the State, a tiny figure when compared to the nearly two million homes that have been declared to be in regular or poor condition.

It was also said that the sale of building materials including cement would notably increase during the year. Several members of parliament warned of illegal activities in the sector, where workers at warehouses prioritize sales to re-sellers and not the population in need.

Clear Decisions Urgently Needed

Economists predict that important decisions in key areas will be made in 2016. These include the elimination of the two-currency system, which encourages capital flight domestically, and determining which economic activities will remain under State control and which will be put in the hands of cooperatives and the private sector.

On the one hand, the government must plan these monetary measures, which would involve a devaluation of the peso, with a view to compensating for the loss in purchasing power that would hit wage earners, and pensioners the hardest.

Talk of seriously ending the the two currency system began in 2012, but…

The second decision is already taking shape through the establishment of service and food industry cooperatives, where no embezzlements are yet reported (as all members ensure this does not take place).

Meanwhile, we will have to wait and see whether joint ventures with foreign capital (or fully owned by foreign firms) have a place in the services and food industries to come.

For several years now, the government has been promising to take steps forward with respect to the creation of wholesale markets, but nothing has yet come about. Members of parliament pointed out that the lack of wholesale markets leads to considerably higher supply prices that private businesses have to pay and encourages black market sales of products stolen from the State sector.

The 7th Congress of the Cuban Communist Party, to be held in the first half of 2016, promises to be an opportunity to announce changes and decisions and to become a pivotal moment for a socialist country such as this one. Around 10% of the Cuban population belongs to the Party.

That said, most of the economists approached did not dare make any predictions in terms of leadership changes or economic reforms. In the meantime, experts and government officials are becoming increasingly aware that time is running out.

30 thoughts on “Cuba 2016: A Year of Decisions and Uncertainty

  • January 7, 2016 at 2:42 pm

    You are taking things out of context in order to present the worst possible interpretation. The full text of the Armageddon letter is here I will quote some parts. “Given the analysis of the situation and the reports which have reached us, [I] consider an attack to be almost imminent — within the next 24 to 72 hours.” “If the imperialists invade Cuba with the aim of occupying it, the dangers of their aggressive policy are so great that after such an invasion the Soviet Union must never allow circumstances in which the imperialists could carry out a nuclear first strike against it.” “The imperialists.. are preparing to invade, while at the same time blocking any possibility of negotiation, even though they understand the gravity of the problem.” “We will maintain our hopes for saving the peace until the last moment, and we are ready to contribute to this in any way we can.” Now does that sound like someone who is advocating a first strike.

    The second quote was to do with the fact that Castro was angry that Krushchev had backed down due to the dangers of the situation. Whereas Castro felt that they should have held their ground.

    The Soviet Union backed down because they blinked first and because they got a half deal regarding Turkey. The US were unaware of some 100 tactical missiles for possible use in repelling an invading force. These were removed three months after the deal due to lack of trust of Castro.

    In 1983 you miss the context again. At the time Reagan had sworn to cut of communism at it source and Alexander Haig had said “Give me the word and I will turn that island into a fucking parking lot”. Why would Castro provoke a preemptive strike just at the point that the Soviet Union was on the way out?

  • January 7, 2016 at 11:14 am

    “Peace-loving rebels”? Many of those executed were convicted TERRORISTS. Check your facts.

  • January 7, 2016 at 11:08 am

    Que? A fast-food worker can’t afford to buy a house? Is that your gripe? So what? Did that fast-food worker have the opportunity to go to school, learn, get a degree and find a better-paying job? If the answer is yes then by their personal choices they now have to rent an apartment instead of buying a home. Worse things can happen. Much worse.

  • January 6, 2016 at 8:48 am

    I will post Nikita Khrushchev’s own words as a rebuttal to your claim that Fidel was advocating a merely defensive strategy:

    “Castro suggested that in order to prevent our nuclear missiles from being destroyed, we should launch a preemptive strike against the United States.”

    During Castro’s visit to the Soviet Union in 1963, he brought the subject up again, but Khrushchev energetically refuted him. In his memoirs, Khrushchev mentioned that he explicitly told Castro “You wanted to start a war with the United States. If the war had begun we would somehow have survived, but Cuba no doubt would have ceased to exist. It would have been crushed into powder. Yet you suggested a nuclear strike!” – Nikita Khrushchev, Khrushchev Remembers: The Glasnost Tapes (Boston: Little, Brown and Company, 1990), p. 177.

    It was Fidel’s eagerness to initiate a nuclear war with the US, not Kennedy’s resolve, which convinced the Soviet leader to make a deal with the Americans and end the confrontation. Fidel was furious, of course.

    There are reports that a unit of Cuban soldiers surrounded and engaged the Russian soldiers guarding one Soviet missile base, taking control of it. Other reports refute that the Cubans took control, but confirm there was a confrontation. In an interview Che Guevara gave a few weeks after the crisis to Sam Russell, a British correspondent for the Daily Worker, Guevara said that if the missiles had been under Cuban control, they would had fired them off. In his biography of Fidel Castro, his one-time friend Norberto Fuentes, wrote how Che had enthusiastically asked Fidel to allow him to the the one to “push the button” which launches the nuclear missiles at the USA. Their violent hatred of the USA knew no bounds, an attitude which still widespread among the Left today, I note.

    Furthermore, Fidel’s ambition to attack the US with nuclear weapons did not end in 1962:

    “In 1989 General Rafael del Pino Díaz, the highest ranking Cuban defector, said that at the time of the Grenada operation in 1983, Castro ordered Cuban MiG 23 pilots to program their computers to attack targets in Florida. Among the selected targets was the Turkey Point nuclear plant, which Castro said had the potential of producing a nuclear disaster larger than Chernobyl. According to Gen. del Pino, Castro’s words were: “I don’t have nuclear bombs, but I can produce a nuclear explosion.” – Ernesto Betancourt, “Is Castro Planning a Preemptive Strike Against the U.S.?” (Washington, D.C., 1996), p. 4.

    Therefore, the historical record shows that what you characterize as a sensible policy of nuclear deterrent, was in fact an insane scheme by Fidel Castro to initiate a pre-emptive nuclear attack on the USA by the Soviet Union.

  • January 6, 2016 at 6:07 am

    If you take the case of Wales, one million people emigrated during Margaret Thatcher’s reign the vast majority caused directly by her economic policies. The vast majority also hated her intensely and didn’t consider her to have an elected mandate. But I wouldn’t consider them political refugees. That would require that their lives were in danger if they stayed or that they suffered gross discrimination for their political views or ethnic origin. Anyone who visits their country of origin on a regular basis can not be placed in this category.

  • January 5, 2016 at 1:21 pm

    If you read the so called Armageddon letter, Fidel only told the Soviets to launch their missiles IF..IF..IF the US invaded Cuba. Now if you believe in the deterrence argument then that is logical enough. You can’t allow another country to invade you and not use your nuclear weapons or you are just handing those weapons over to that country. For deterrence to work the invading country needs to believe that you will use them. If you don’t like that then join CND.

    You must understand that under international law the Soviet Union had every right to place nuclear weapons on Cuba and though it was a positive outcome that a half-agreement was reached to remove them, it would have been better if that had included many issues that remain problematic until this day eg Guantanamo.

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