By Eileen Sosin (Progreso Weekly)
HAVANA TIMES — In the past 25 years, the profile of Cuban exports has gone from a strong specialization in goods (nickel, sugar, citrus fruit) to a marked increase in services, especially tourism and health related services.
In 2012, services accounted for 12.6 billion CUC (just over 13 billion USD); today, it represents approximately two-thirds of the country’s foreign sales.
This year, the projected revenue provided by the export of assistance services exceeds 8.2 billion CUCs, or 64 percent of all export sales, as reported in March by Marino Murillo, vice president of the Council of Ministers.
A new group of 200 doctors left in August for Ecuador. The More Doctors program in Brazil is in its first year and involves 11,000 Cuban doctors.
The signing of the Integral Agreement of Cooperation with Venezuela (2000) launched this line of paid services, which between 2004-2005 replaced tourism as Cuba’s main source of revenue. More than 50,000 professionals work abroad at present and a considerable share of them are doctors.
However, several experts point out that, since the late 2000s, the model of growth based on the provision of hiring out personnel begins to show signs of exhaustion.
Although this phenomenon does not rule out the export of services as a valid strategy, it does imply reappraising the manner in which it has been developed so far.
Wide variety of services
There is a consensus about the educational level of the Cuban labor force. To many, professional services are the country’s basic asset, beyond its natural resources and geographic location. And that competitive advantage has been key towards the advancement of this field.
Taking into account the wide stock of professionals in Cuba, the Integral Strategy of Exportation of Services (EIES), approved by the government in 2011, points to four potential groups: health, tourism, information electronics, and telecommunications. The category “Others” includes sports, charters, education and insurance.
The document also identifies experiences and demand in industrial, farm and environmental projects, the control of vectors, epidemiology, disaster response and civil defense, and urban and suburban agriculture.
Although the possibilities are diverse and the foreign sales involve more than 135 countries, the results show a high concentration on health services, specifically in the Venezuelan market. This situation, sustained over a long period, introduces a high-risk system factor, says Ricardo Torres, professor and researcher at the Center of Studies of the Cuban Economy (CEEC).
“Perhaps at some point there was not enough foresight to aggressively seek new markets, to explore other ways to contribute, to see how we could link together more health sectors to incorporate equipment and medicine,” Torres says.
The EIES proposes to sell packages of integral solutions that could include goods, thus giving a greater added value to the sales. While some action has been taken in that regard, especially with biotechnological products, we are still taking timid steps. South Africa, Angola, Namibia and Algeria are emerging as relevant markets and talks are ongoing with Qatar and Saudi Arabia.
Meanwhile, the Brazilian program More Medics employs more than 11,000 Cuban doctors. The Ecuadoran government has asked for 1,000 doctors.
Because of the place that services occupy in the formation of the GNP and exports, it is often said that Cuba has “a service economy.” Though not altogether wrong, that statement omits the fact that the growth of this sector appears more pronounced because of the abrupt reduction in other sectors, such as industry and agriculture.
Torres stresses that the change in the structure of national exports is related not only to the significant increase in the services themselves but also to the slowdown in the sale of goods.
“In many cases, there have been outright losses,” he says. “The example of the sugar industry is a paradigm. If one part is restricted, the other occupies a greater space, even if it grows very little.”
Another weak side of this pattern of growth is the limited connection it makes with the domestic economy, because the predominant modality has been to send professionals abroad.
“When you talk of development, one hopes that the dynamic sectors will couple with the others,” he says. “That’s why they’re called ‘engines.’ They advance and pull the others along. When it comes to Cuba’s professional-service exports, this has been very poor, so far.”
In turn, tourism does show a greater impact in terms of infrastructure, jobs and stimulus to national products. However, tourism has remained on a plateau for years.
To catalyze the development of tourism, plans are under way for the construction of marinas, golf courses and associated facilities, with which Cuba can attract visitors with higher purchasing power.
The EIES is trying to promote the means of supply so the client may come to the island to receive a service and gain access to other services, thus multiplying the total revenues.
Lázaro Peña, director of the Research Center for International Economy, believes it can be said that the strategies implemented in Cuba’s key sectors (sugar, tourism, biotechnology and specialized services) have prioritized the quest for foreign currency.
“But it would seem that all of them have pushed back — or at least have not sufficiently grasped — another objective that’s also essential to the economic activity of any country: the balanced fostering of domestic savings and investment,” he wrote. (1)
Haste and pause
“The job is hard, because there is no structured health system; you have to create everything from the start,” says pediatrician María Antonia Campos, who worked in Venezuela for four years. She would go back if asked, but not everyone feels the way she does.
Sending professionals to other countries takes a physical toll, due to the need for a specific number of professionals to remain in Cuba and because of the human exhaustion caused by extended and/or repeated missions abroad. We’re talking about people who often leave their families and their lifetime projects behind.
“There is a real barrier, which Cuba may already be encountering,” Torres says. “We have to make a greater effort to bring patients to Cuba and foster health tourism on the island. It has a more important effect on growth and development, because it allows more spillovers to the rest of the economy.”
This opinion coincides with a statement made two years ago by Antonio Luis Carricarte, vice minister of Foreign Trade and Investment (MINCEX).
“An exportation of that type does not necessarily mean sending Cubans to other countries,” he said. “It can be done on the island, taking care of foreigners who need different treatments.”
On the other hand, several domestic issues hold back the potential drive of the service sector. On an international level, countries that are strong in the exportation of services — generally, First World countries — enjoy a very advanced technological structure, especially in terms of information technology and telecommunications. Connectivity and online work become basic conditions.
Torres, the CEEC researcher, points to Cuba’s limited participation in the global circuits of commerce, investment and finances. Also, related services such as Customs, transportation, financial, legal and technical services are not at the right level for worldwide requirements.
“Another factor that impacts our model strongly is the philosophy behind the productive activity in Cuba,” he says. “Unfortunately, what predominates is a top-to-bottom vertical vision of the economic processes, in bureaucratic and administrative terms. And that extends to exports.”
Therefore, a more proactive relation vis-à-vis the market remains an unfinished task.
“There are many fields whose services we could export,” says Osvaldo López, chief of the Exploration Department of the Petroleum Research Center (CEINPET). “However, the promotion and the marketing are not what they should be.”
“We have certain disciplines where we are competent on a global level but we don’t have a service-exportation facility, an entity devoted entirely to that end.”
Recently, Vivian Herrera, director of Exports for the MINCEX, graded the EIES’ progress as “discreet.” In this case, a functional institutional and regulatory structure could be part of the answer.
“There must be a radical change in the regulatory framework that establishes incentives, penalties, and compensations for production, specifically for exporters,” Torres says. “There will be no economic future for Cuba if the country doesn’t become a successful exporter.”
(1) “The model of global accumulation and external insertion: Experiences for Cuba,” by Lázaro Peña Castellanos. “About the International Economy,” Vol. 2, by various authors. Published by the Demographic Studies Center. University of Havana, 2012.