Cuba Today: Where are we Headed?

By Ricardo Torres  (Progreso Weekly)

HAVANA TIMES– The country’s economy continues to set the pace for some of the most intense debates currently taking place on the Island. Since 2016, economic growth has slowed significantly: The GDP increased 2.7 percent per year from 2010-2015, and since has slowed to a 1.5 percent increase from 2016 and 2018. In 2019, it is not expected to exceed 1 percent. The Economic Commission for Latin America and the Caribbean (ECLAC) estimates the increase at 0.5 percent.

The immediate causes can be attributed to the economic collapse of Venezuela, the new sanctions imposed by the United States, the economic break with Brazil, and low prices for some export products. But we must add to these the little success achieved by the ‘updated’ economy. 

The first half of 2019 began with the worst shortage of basic goods since the end of the most acute stage of the crisis of the early 1990s. Even the government itself warned that the situation could get worse in the following months. The low availability of fuel has affected public transport in several provinces.

Slow growth is not new in the Cuban landscape. The truth is that Cuba does not grow what it owes in the best of times, and now does it with greater inequality. The short periods of bonanza have been, as a rule, associated with external support of doubtful sustainability. One of the latent problems is the chronic shortage of foreign exchange, which results in default cycles of international commitments. This means that the Island systematically transfers to its foreign partners the consequences of its limited economic success.

Cuba is not financed in the international markets like other similar countries, partly because of the U.S. sanctions, but also because of its peculiar economic system. Although the Island has managed to obtain disproportionate attention from countries such as Venezuela, China, Russia and the European Union, this has more to do with geopolitics or strategic positioning than with its economic dimension. The problem with this is that these arrangements are almost always vulnerable to the political cycle, and unsustainable over time. A very good example is the low profile of Chinese investment on the Island amid excellent commercial and political ties.

The truth is that Cuba’s response has always been below expectations. Although foreign debt was recognized as a priority since 2010 as part of a broader strategy to return to foreign markets, a similar episode has been repeated less than seven years later. Few question the interest of the Cuban authorities to fulfill their obligations, the doubts fall on their strategy to achieve a viable project.

According to the authorities themselves, since 2010 only the simplest changes contained in the Guidelines were finalized.  The restructuring of employment is perhaps the most important transformation. The government reduced its workforce starting in 2010. During this period, 1.2 million workers ceased to be public employees. At the same time, the working-age population increased by about 300,000 people. The 1.2 million then found employment in the non-state sector, or the informal trade, or emigrated. It is a common narrative to hear about growing inequality, economic crime, or new jobs such as the smuggling of products or imports.

In spite of the ‘demographic crisis’ that is constantly cited, the truth is that Cuba has the largest working-age population it has ever had in its history. The problem lies in the use of this workforce. The proportion of people of working age with formal employment has been systematically reduced since 2011, from 76 to 64 percent. There are multiple explanatory factors, but a very important one is investment. Although investment volumes have grown, they remain very depressed.

At the same time, little has been done to improve the allocation of the scarce existing resources from the rigid central planning system to the price and exchange rate distortion. The real estate boom shows that once rules and incentives are put in order, significant amounts of resources are mobilized. The banking system is lagging behind in channeling temporarily free resources to expanding sectors. It would be necessary to look for the causes by which the individuals keep enormous amounts of money out of the domestic banks, and the lack of support these offer to the emergence and expansion of small businesses, just to mention one example.

The government is committed to foreign investment, but leaves behind the use of internal resources. Foreign capital, without a strategic approach within the development model, will only produce an even greater currency mismatch in the future. Changes in state enterprises have been minimal, and have not resulted in a framework that allows them to be managed commercially, or brought fresh resources.

Restructuring of the economy done timidly, such as we have taking place, has already been tested in other countries with similar models (central planning systems such as the USSR of perestroika). The prospects are not promising, and Cuba is proof of it. Productivity has not increased and dangerous macroeconomic imbalances accumulate. Public debt has grown in the shadow of cheap loans from state banks to the State, in part to cover the enormous inefficiency of the state business apparatus. And to the chronic shortage of products, one must add the visible deterioration of the price of the convertible peso in the informal market.

Faced with this situation, the latest economic policy decisions are, at the very least, late and of little impact. The successful transfer of factors to viable sectors requires at least three conditions.

First, the system must detect activities and sectors that don’t function. In that sense, a deep monetary-exchange reform is essential. Secondly, mechanisms have to be created to make it possible for mobile factors (labor and a part of capital) to move towards new sectors. This process is not free from friction, since it takes time and resources to liquidate unviable companies and create new jobs. Along these lines, the limitations imposed on the expansion of the non-state sector act as retardants. The self-employed sector has already fulfilled that function for the public sector, although unfortunately only in areas with little prospects for improvement.

Finally, the restructuring needs investment resources to make possible the emergence of new sectors. These resources must be procured not only in foreign investment or external credit, but in domestic savings. A part would come from a lighter public sector, and from the productivity gains of companies run by independent government boards. In any case, a modern financial sector is part of the solution.

That is a possible path for Cuba which would allow the country’s endogenous capabilities to be used more fully, making it less dependent on the stormy global geopolitics. But it would only come through a paradigm shift. Recent measures taken do not point in that direction.

Where do we go from here? Not very far.
Ricardo Torres is a professor of economics at the University of Havana.

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32 thoughts on “Cuba Today: Where are we Headed?

  • I think it was American embargoes and sanctions that kept Cubas progress suppressed.

  • Venezuela Together with Cuba is about to Have there Gates opened To Freedom. The Word Has Come Down To The World.

  • Joel is another of those losers who admires Cuba from afar. Like all such admirers of castrismo, he doesn’t have to live under its heel.

    He is just another US or Canadian Lefty, who, like a broken record, continues to keep blaming all of Cuba’s woes on an “embargo” which ceased to have any economic impact on the island nation a long time ago!!

  • Where does the Cuban state acquire its arms — the only thing that prevents castrismo from dying a long-awaited and overdue natural death? Who finances Cuba’s arms purchases?

  • Carlyle I have spoken with Tourist : Canadian Farmers: On the streets of Cuba, They had come off the Resort & did a day trip into Cuba Country side, A Canadian Farmer,s & Canadian Expression, They Just Shake there Head when asking Why with this Land & there Climate are these People Hungry. The old Generation Canadian Farmers that have known the Hard Life of years ago, They talked explanning of how Many Canadians Farmers are now & have for some time Operating a Second winter Farm in Mexico as there Back up crop of Wheat Flour or Wheat Seeding Crop. Canadian The University Of Guelph is a open World School of Food, Students & Professor,s sharing & Creating From all Nations anything Food Grown & Raised Live Stock. It has Been Canadian,s Nature to Provide a Helping Hand Up for the Cuban Nation & it has Not Been utilized to its Potential Many now believe. Canadians Today are More inclined To Provide that Hand Up Then A Hand Out To Nations that are in Need & only Expect those Nations become More & in time Complete & Self Sufficient, Providing all there People the possibility,s to become Independent & Proud of there Creations. The Canadian way to influence Equal & Fair Quality of Life with a Future that the people have Created with the influences of Many other Nations Working Together without Discrimination. To just think how much Canada Has been influenced by & Created together with other Nations has been Endless. Tomatoes: as I read on a jar of Tomato Sauce 100% of our Profits are Donated To Charity in Canada & Throughout the World. One Mans Name, Creating a Better World. In My small way this is exactly what I intended for Cuba, I was Shot Down. Where are You Headed Cuba.

  • Socialism is not the same as Cuba has. Cuba has a very corrupt government that steals from foreign countries and investors. The little people in Cuba paying a very heavy price in human suffering. You can have a free trade zone where factories pay $2. U.S per hour per worker with 70 percent going to the workforce and 30 percent to the government . Using oxen reduces food production, the same resources put into milk production is so much better. China is no long term friend. Many diseases in Cuba are much worse than the government numbers. The U. S trade rules are silly but Mexico and Canada will still trade but Cuba has very little to trade.

  • Only problem Robert is that Cuba can’t grow sufficient tomatoes, so how could they grow cannabis ?

  • McDuff You Sure Have an Honest Way with your Words To Guild So many of us through the Smoke & Mirrors of Cuba,s Other World. Joel: Selling Cannabis to the Canadian Market if it would Truly Benefit the People of Cuba I would be all for it, But as the Sugar Cane crop & the People that have Broken there Backs for so Many Years, The Reality most of us readers will Never see is how many Cuban,s are the Forgotten People. Yes with the Right means of Travel, Not in a Car with AC on & the windows up You Can Smell the Cannabis Crop from the Back roads. March is the month of Bob M, By the way This is Tabo to talk about & Some may burn Cannabis as insect Control or the Manufacture of Rope, No One Talks.

  • So Joel Cook, if you so admire the totalitarian repressive state of Cuba, would you recommend its practices or enjoy being governed by them yourself?
    To suggest that the Castro regime has “preserved” Cuba is to ignore that for sixty years -with the exception of the UNESCO sites, it has been visibly crumbling – infrastructure, housing, economy -the lot!
    If you had claimed Joel Cook that the regime has placed Cuba in a nineteenth century time warp based upon 19th century philosophy then you would have been more accurate in your assessment.
    Incidentally, what is that “highly educated populace” being permitted to openly discuss without fear of imprisonment and why are university professors currently being purged for failure to comply with communist thought?
    I share your relief that Cuba is not a US governed country, but not your admiration of a political system that denies the Cuban people the basic freedoms and is demonstrably incompetent.
    If you wish to vent your spleen about Trump, than use a US blog, for then you will have a potential audience of 63 million Americans who elected him.

  • I believe Cuba has the right idea in a lot of instances, The Revolution, has preserved and promoted Cuba and the culture, The U.S has bullied so many places and the blockade has caused all the economic woes, the rest of the world could learn many things from Cuba and Cubans, if the blockade was lifted, normal trade could happen, investments, access to all the things that are needed, for a successful and prosperous economy, Cuba has overcome many difficulties, years of economic terrorism, all they wanted was, healthcare and access to education, the U.S laid claim to over 90% of Cuba before the revolution, they had a low literacy rate, now, Cuba has a highly educated populace, I am glad Cuba is Cuba and not another U.S territory, Viva La Revolucion, I think they should start growing cannabis, they have the perfect climate and am sure that with Cuban know how, that they could maximize output without a large overhead, export it to Canada, turn it into Oil, Shatter, whatever, Canada would buy it and I am sure the medical uses for it can further be elaborated on by Cuban Doctors and Chemist, The U.S is a Bully, Trump is a Ignorant Bully and the rest of the world see the U.S the way it truly is, A JOKe!

  • Well AVK or McTuff, I spend the majority of my time at home in Cuba with my Cuban wife and direct family along with over sixty relatives. I might have to bow to your knowledge of travelling Cuba if you can describe both the Roncali Lighthouse at the western tip of the Guanahacabibes peninsula and the location of the concrete statue of Christopher Colon at Baracoa. I am well accustomed to climbing the iron steps onto the converted taxi particulars – which apparently you regard as “tourist travel.” I visit local shops daily, just in case they have something reasonably edible available and wait patiently along with other members of our community at the panderia. As indicated I observe the excess prices charged by TRD shops for “luxury items” like pressure cookers, food mixers, shoes and children’s clothing. Is that not “economic rape” by the GAESA subsidiaries?
    But, out of interest, you state that “the black market that originates out of Miami engages in an economic rape of the Cuban people”. Where are those goods sold and by whom?
    In all the years that I have lived in Cuba, I have yet to be offered such goods. Yes, I like Cubans buy daily needs from the mercado negra – the Cuban economy is as you possibly know, dependent upon it – how else could we eat?
    It is possible that you view the Castro regime with favour – as indicated by your describing KVA’s comments as “absurd”. I with my prolonged experience of living in Cuba coupled with European experience of communism in practice, detest totalitarianism.
    I note you say that the state undercharges for human necessities – but cannot verify that with my own experience. That may be a comment about the set prices at which food producers in Cuba are compelled to comply with, but certainly doesn’t apply to the shops. Right?

  • KVA is right i have seen it too.

    The Castro dictatorship/communist party are criminals with kangaroo courts.
    They deserve freedom to choose other political choices.

  • MacDuff, you have mastered the art of the assumption. Kudos. My average eight stays per year were quite extended. But that really is beside the point is it not? I am very much aware of how the Cuban people live as I have family in Cuba. They are average working class Cubans. Further, as I have indicated, I assume unlike you, I have extensively traveled to Cuba. Not tourist travel . I live among the Cuban people, shop with them , eat with them, experience their woes with them. And what he stated was absurd, not unlike your points. Anyone who has visited Cuba knows that yes the state overcharges for luxury items. Under charges for human necessities, … yet the black market that originates out of Miami engages in an economic rape of the Cuban people. The Cuban or Yuma purchasing the $1000 CUC TV in the market is not your average Cuban. You know that! Luxury items are priced excessive, … but that makes since for a country that is simply importing that item for the elites or the Yuma. Right?

  • Berta, you are clearly confused between the meaning of socialism and social programs.
    Socialism is a political and economic theory of social organization which advocates that the means of production, distribution and exchange should be owned or regulated by the community as a whole.
    Social programs are introduced both by private organizations and by the different levels of government, municipal, provincial or national. Such programs are not socialist. Examples abound of social programs introduced by those described for the benefit of specific groups or for populations as a whole.
    Socialists and communists, like to claim all the social programs and particularly education
    and health programs as socialist and is just is not correct. Examples:
    Scotland introduced schools into every parish in the country by law in 1697 – and education was free for all. That was almost 200 years prior to Marx and Engels promoting their communist and socialist theories.
    Canada has never had a socialist or communist government, but has both educational and health programs which are superior to those of Cuba.
    So forget the idea that social programs are a consequence of socialism, that is bunkum!

  • Obviously AVK collects frequent flyer points. Perhaps instead of his obviously average of 8 brief stays per year, when he gets feted as the rich relation, he should go and stay in Cuba for a continuous six months, wait at the panderia, buy his other foods on the street, take the taxi-particular converted trucks as transport, and comprehend that Cimex as a subsidiary company of GAESA is the import/export agency of Cuba. It is the GAESA subsidiaries that control every retail shop in Cuba – they charge over 1000 CUC for a 40″ TV that can be purchased retail for $399 of those “weak Canadian dollars” in Canada. It is the expatriates and those who have relations in Cuba that provide over four and a half billion dollars in reparation to Cubans annually.
    Maybe in suggesting that KVA “got played” AVK is reflecting upon his own experience?

  • I have been married to my Cuban wife for 10 years. I have traveled to Cuba upwards of 100 times in the past 12 years. What KVA states it utterly absurd! By an measure, the quality of life of the average Cuban far exceeds that of the majority of other island nations as well as all of latin america. I have many Cuban friends that are satisfied, dis satisfied and outright critical of the Cuban government, no different from the criticism I see in my home country of the USA. The Cuban people, notwithstanding their personal opinions, are very much aware of what external factors impact their social and economic life in Cuba. They understand the politics of embargo and the black market that originates in Miami and elsewhere (Canada) that brings goods into their country for the purpose of obtaining 400% profit or more from the Cuban people, and that these black market capitalists have no desire to see an end to the embargo as it would end their business ventures. Thus, folks like perpetuate a lie that perpetuates the status quo. You should be ashamed of yourself KVA. I can only assume that you married some opportunist from Havana that fed you that “Cuba is so f-up line” to fleece you of your weak Canadian dollar and get her ticket out of Cuba as she likely had nothing to offer Cuba. You got played Yuma, yet it appears since you don’t realize it, you deserved it.

  • Ernesto, before attempting to use the term “socialism” try defining it first comrade. Clearly you understand that a form of socialism exists in all economies (e.g., the USA has public hospitals, public works, public educational institutions, national parks, social safety-nets for those that suffer economic setback (that is not capitalist ideology comrade!)) … I could go on … for example, corporate welfare. Imagine a society absent the above (excluding corporate welfare), … a frightening place. As a pseudo-economist I assume you are, … I am deeply confused you do not take into account external ideological and political pressures placed upon nations (such as Cuba) to undermine its economy in an attempt to harm the people in an attempt to force political change via social pain.

  • I am married to a cuban citizen for 4 years now & travelled to Cuba 15 times now. The cuban people are slaves to the Communist Castro family regime! I’ve witnessed it all as a Canadian. It’s so very sad. I have helped my cuban wife & her family that remains in Cuba under this dirty dictatorship that has destroyed cuban families & taken innocent lives of men, woman & children. There is no freedom, no human rights at all. There is no real laws. The Castro family & the communist regime are cowards! The country belongs to the Cuban people! Regardless, the end is near, the Castro family & regime will be destroyed & all the innocent people who sacrificed their lives & died when the revolution took place, will rise again & have ever lasting peace & freedom to celebrate a new life!!! That is a truth. I know this for a fact!!!

  • “It’s a great place to visit.” and the people “Make do with what they have.” So speaks the typical tourist, unaware of the reality of life for those people who have no alternative but to “Make do with what they have.”
    So what do they have? Perhaps it is easier to describe what they don’t have! They don’t have choice of government. They don’t have freedom of speech. They don’t have freedom of movement. They don’t have access to a free media. They don’t have choice of employment.
    The tourists from the free capitalist countries assume all those as normality and they have the resources to eat, sleep, drink and lie around on manicured beaches for a couple of weeks at a time – and although they may spend a few hours with a guide looking around Habana Vieja, or taking a tour bus along the Malecon to the plush areas of Mirimar and Siboney, they never experience La Lisa and Marianoa where the bulk of the Havanese live, and they certainly don’t visit areas like those west of Pinar del Rio.
    Those “helpful and friendly” people are hopeful for a few financial crumbs off the rich tourists tables. They live in penury threatened with imprisonment if they criticize the communist regime which has never been elected in an open vote, they get their rations, they wait with patience outside the panderia to get a couple of 200 gm loaves. They certainly don’t have much. That is the Cuban reality!
    But, “Cuba is a great place to visit.”

  • This state of Parasite will continue until Raul and the useless bunch that surround him have moved on! For over 60 years “EL Pueblo” has lived through fear… economic shortages… separation from family members… Death on the High Seas trying to find a better life… going to bed with empty stomachs… thinking that perhaps “Tomorrow” things will change… maybe the Tomorrow after 60 years???

  • Cuba is not able to stand on its own; has never been. CORRECTION…It has never been since AFTER 1959 when the Castro brothers destroyed the Island. Cuba was the envy of ALL of the Latin Nations… ALL!
    We had Tourism, Coffee,Cigars, world renouned Music. Cuba had Television before a lot of American cities (we had a television set in our home since early 1958!)

  • David Perrin, IF you say that Cuba is a great place to visit is because there you can have Sex with women or men you can’t even dream on outside the Island or because you can eat foods you can’t afford in your Country. What you do when you visit Cuba is to take advantage of Cubans desperation and that is despicable. All the money spent in Cuba goes to the Dictatorship, not to the Cuban People.

  • That’s not even “Socialism” it’s SLAVERY.

  • Insanity; to the same over and over and expect different results. 60 years making the same mistakes. Cuba is nothing but a Parasite, living off the former USSR’s money and latter of Venezuela’s. How can be possible, to control Venezuela’s Oil, but instead of taking advantage and develop Cuba what they did was to Ruin Venezuela! Venezuela used to be an Immigration Country, but nor almost 5 million have fled, creating what is probably the WORST humanitarian crisis ever seen! All because they followed the Cuban Model, which is: SLAVERY! Old fashioned slavery, now available not only for African Slaves, but for everyone. Stop trying to justify the unjustifiable, because if they don’t want to follow the American Way because of its Ideology, they could have followed the CHINESE WAY!. Plain and Simple! Why don’t they do it? Why they insist in doing the same, over and over and over, knowing that is WRONG? That’s the question that needs to be asked to Cuban rulers.

  • This writer has done a fantastic job trying to put “lipstick on a pig”. He has artfully avoided directly criticizing the real problem in Cuba…the Castro dictatorship. The growth numbers he opens with are total B.S. by the way.

  • Cuba is a great place to visit the people are so helpful and friendly .even if they don’t have much they . Make do with what they have. It’s a great place to visit.

  • Wayne, it is communism. How did you get the idea that the Castro regime practices any form of democratic socialism? Democracy is anathema to communists. Yes, in an endeavor to fool the innocent or ill-informed politicians in the free world (it succeeded obviously with Frederica Mogherina of the EU) that Cuban practices and policies have changed, Raul Castro removed the words communist and communism from the Constitution, but that same Constitution commences by emphasizing that Cuba is a one-party state with the Communist Party of Cuba being that sole party.
    Forget the idea that Cuba has changed!

  • Which country will be pulling their chestnuts out of the fire next? I am inclined to believe that Europe will be the next dupe just because they hate America so much. Cuba has already lived off the Soviet Union and Venezuela.Cuba is not able to stand on its own; has never been.

  • Es una vergüenza que los dictadores gobernantes tengan al pueblo oprimido pero también la gente de cuba tiene la culpa por permitir tanto abuso

  • It’s NOT true Democratic Socialism

  • Its only one thing to blame a out Cubas economy. And that is socialism!

  • Those growth numbers are issued by a closed communist dictatorship Ricardo.
    They are almost assuredly inflated numbers.
    Yes they’re fake, Cuba is in recession and it’s in deep trouble.

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