Cuban Economy Minister’s Cautiously Optimistic Forecast

By El Toque

HAVANA TIMES – Forecasts for economic recovery in Cuba are no more than 2%, after the GDP dropped 10.9% last year and the previous, more optimistic, forecast of 6% growth. Almost 24 months of cumulative crisis, made worse by the combined effects of US sanctions and the COVID-19 pandemic, 2021 hasn’t been a better year: it’s been reported that the country will bring in 500 million USD less in revenue than it did in 2020.

“An 11% drop will be hard to recover from in the short-term,” Deputy Prime Minister and Minister of Economy and Planning, Alejandro Gil, warned at a press conference. He talked about these and other numbers during an update about the Cuban economy when we entered the last trimester of the year.

1. “There is no limit for small and medium-sized enterprises”

Gil says that they have received concerns over the number of small and medium-sized enterprises that will be authorized. “We don’t have a limit for small and medium-sized enterprises.” Nor is there a time limit and we aren’t planning on stopping granting authorization once we reach a certain number of small and medium-sized businesses,” he said.

Small and medium-sized businesses in the private sector have created approximately 3000 jobs, he reported. Between January and September 2021, the Cuban economy has generated a total of 200,000 jobs,” (the rest in the State sector), Gil noted.

2. “Covering basic needs”

“The country has been able to satisfy the population’s basic needs,” the minister says. “In order to reduce the impact of blackouts on the population, we have paralyzed or slowed down economic activities, such as cement and steel production.”

“Repairing and making the national electricity grid sustainable is expensive: we are spending between 60-66,000 tons of diesel every month to support electricity generation. At today’s prices, this is never below 50-55 million USD; and we have to use other resources for electricity generation.”

3. “A more dynamic economy”

Gil announced that the Economic Plan for 2022 has still not been written up; it will be presented to the National Assembly of People’s Power in December. “This year, we are entering the second phase of the National Plan for Economic and Social Development”, after the first phase, between 2019-2021, whose objectives he said have only been partially met.

The second phase will last until 2026 and the minister says that we are going to be “in better condition”: with “a more inclusive, more dynamic economy, […] with a more diverse productive sector and greater participation from state-led and private businesses.”

4. “The economy won’t get better overnight”

The minister announces entering “a gradual phase of economic recovery. The economy won’t get better overnight, lines won’t end suddenly, nor will shortages…” We can’t create false expectations, he added.

Gil reminded the population that in 2020, the Cuban economy lost approximately 2.4 billion USD of revenue, compared to 2019, “which was essentially linked to a stricter US blockade and the impact of the COVID-19 pandemic.”

This year, a deficit of 500 million USD has been reported in 2020. As we know, the economy shrunk by 10.9% last year. “It’s a steep drop” which “is felt in Cubans’ everyday lives,” the minister said. “An 11% drop will be hard to recover from in the short-term,” he warned.

5. “Shortages are the reason for inflation”

Far from the paradigm of fixing prices or increasing wages, Gil said that today, the focus is centered “on how to increase products on sale to fight inflation.” He called on “social responsibility and ethics”, which he described as “calling on every economic player to understand and help the country to overcome this situation. Not to take advantage of the situation in an almost criminal way […] There are people who want to get rich and become millionaires by reselling.”

The monthly demand of pork “is 17,000 tons and we don’t even have 2000 or 3000.” He said that the new measures for agriculture published last April have had some impact on food availability. “We had 120,000 tons of products via Cuba’s State purchasing entity (ACOPIO). In August, this went up to 135,000; in September, 131,000. [It’s] still way below demand, but it is beginning to recover.”

“We will slowly recover levels of activity that have been lost in the past two years, as well as supply levels of certain products that have been in shortage since mid-2019,” he promised.

6. Unanswered questions “for the time being”

The minister explained that he couldn’t give “an exact number” for the official estimate of inflation because they are “rebuilding the database.” Given the fact that the Cuban peso suffered a devaluation on January 1, 2021, “the comparison includes inflation of prices as well as the currency’s devaluation.” Within a sampling of goods and services, comparing “a 2021 price with one from 2020, […] there are elements that make it difficult for us to calculate this technically. It’s steep though, there’s no doubt about that.”

Another one of these elements “is that official records don’t always measure real prices.” Inflation of one product might “be planned; but it can be distorted because people are buying this product in real life for three or four times the price” in stores. “In today’s situation, the illicit market accounts for an important part of consumption. We can’t just assume that most people are buying the products at official prices.” 

In terms of tourism, he said that “this year, we won’t reach 2.2 million visitors. We are getting ready for this peak season. We are rescheduling so that we can beat 2 million visitors in 2022. We don’t have an exact target in mind this year, but we don’t have a limit.” 

7. “Living a decent life in Cuba”

The minister said that economic reforms targeting the private sector aren’t focused on containing the drain of the workforce, especially of young people. “We aren’t making small and medium-sized enterprises or CNA [non-agricultural cooperatives] a migration issue. We believe that young Cubans should and can have a life plan by working at a state-run company, at a hospital, at a school, in communal and public services. […] We are working so that every job position receives worthy remuneration and people can live a decent and dignified life in Cuba, regardless of the sector they are working in.”

“We believe that this is an inclusive country where young people have a project that fits in with their life expectancy […] Everything we are doing in terms of diversifying production and including this workforce of young people is so that people can live a respectable life in Cuba and are happy living in our country.”

He announced that “out of the 200,000 new jobs created between January-September this year, 35% will be occupied by young people under the age of 35 and 36% are women,” both in the private and public sectors.

“Our state-led companies have to be efficient, and they have to be a place where people enjoy working, and not where they don’t get this renumeration they long for.” He said that wages could go up to 10,000 pesos and that 4,192 pesos is currently the average salary in the public sector, and that limited purchasing power is due to inflation, which is temporary.

8. “We don’t believe we will reach 6% growth”

“We hope that the economy will recover in the second semester of 2021. In the second trimester of 2021, the economy grew 7.5%. It’s practically 0% growth compared to the same period in 2020. But in the first trimester of 2021, we shrunk by 14%.” compared to the first trimester in 2020.

“We don’t believe we will reach 6% growth, which is the target in this year’s Economic Plan. We would have to grow more than 14% in the second semester of 2021. Bearing in mind the fact that key economic activities will only resume in the third trimester, we won’t be able to meet these targets for growth. We are trying to reach 2% growth [we’re still in the negative], which is the figure that ECLAC has forecast for us too. To do this, we would still have to grow quite a bit in the second semester compared to the same period last year, but we are moving in this direction.”

In terms of the 2022 Budget, it still hasn’t been written up. “This is why I can’t give you a target for growth next year. […] But we aren’t working just for targets. We aren’t working to make a GDP: we are working to satisfy more and more of our people’s needs and demands.”

Read more for Cuba here on Havana Times.


7 thoughts on “Cuban Economy Minister’s Cautiously Optimistic Forecast

  • November 1, 2021 at 8:17 pm
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    Economia Comunista= Porqueria

  • October 23, 2021 at 10:46 am
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    Nick: debating the embargo turns out to be an exercise in futility. The result is a majority assigning blame to the US and sitting back contently as if they had made some real difference to Cuba.

    Instead, we should determine the actual cause of Cuba’s economic problems and attempt to eliminate that cause. While the policies of the Cuban government are the #1 cause, admittedly the embargo has some effect. Again, too many sit back accepting the illogical belief that the US is going to unilaterally end the embargo if enough post on the internet that they should. They cannot accept that is realistically never going to happen because they are so convinced “that is the right thing to do”. But this is real life and not a fairy tale.

    The embargo can be ended by both the US and Cuba working together making compromises. It certainly is not that far from practical reach. The US showed motivation during the Obama administration. Cuba has always maintained the position they will make no compromises as they have done nothing wrong. As guaranteed when one side refuses to compromise, no progress is made at resolving the dispute.

    The embargo, commonly referred to as Helms Burton is a US law. The Cuban Liberty and Democratic Solidarity Act of 1996, Pub.L. 104–114, 110 Stat. 785, 22 U.S.C. §§ 6021–6091. The majority of those calling for the end of the embargo have never bothered to read the law itself. It contains events that must have happened before termination. Most of these events have happened. The few remaining are within reach given willingness by both sides. Cuba’s unwillingness to negotiate puts the US congress in the position of needing to politically surrender to Cuba simply because they refuse to negotiate.

    US Federal laws are passed by and terminated by a majority vote of the 535 members of Congress. Most of these have devoted a majority of their lives to the process of being elected a congressperson and retaining that position. While Cuba is not a significant political issue to the US, having little upside, there is a major personal political downside to any of the 535 congressmen who would politically surrender to Cuba because of Cuba’s unwillingness to negotiate. Such would be a major impediment to their reelection in the next 4-6 years. No US congressman, much less a majority, will take that risk. That ensures the US will not unilaterally act to end the embargo.

    Some people will scream “NOT FAIR!” but this is the real world, not Disney.

  • October 22, 2021 at 6:43 pm
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    Bob Michaels,
    I don’t wish to to doubt what you say.
    But are you suggesting that this decades long embargo has some effect?
    Or is it completely useless in its objective. Therefore it has no effect at all?
    I know for a fact that U.S. tourism to Cuba had a big drop off once yer man trump tightened the restrictions.
    I would never say that the embargo has caused all of Cuba’s woes because this is clearly not the case. But it does have an impact.
    And it’s a pretty p*ss poor example if the USA’s wishes to cling to any kind of democratic pretensions.

  • October 22, 2021 at 10:43 am
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    Nick: I must take exception to some of your statements.

    You say the US places limits on citizens traveling to Cuba. There are no limits as the 12 OFAC exemptions to the travel ban cover any possible trip. Documentation is no more than checking any one of 12 boxes on a form. Now, finding a ticket to travel from the US to Cuba is currently difficult but only because the Cuban government has a limit of 4 flights per week as a covid mitigation measure.

    You say the US limits citizens sending money to Cuba. Actually, the US only limits sending remittances processed by the Cuban military. The Cuban government does not allow any non military agency such as the Ministry of Finance to process them. This still can be sidestepped by easily sending money through Canada or some other country.

    The US trade embargo is certainly not Cuba’s number one economic problem. Maybe “not the least” but not the prime problem. That is the Cuban government’s insistence on a government controlled economy. I had a pretty good career in economic problem solving. I live in Cuba part time. I see and analyze the root cause of Cuban economic problems. Almost never are they the embargo despite what the Cuban government says. Almost always these problems result from decisions made by the Cuban government.

  • October 21, 2021 at 2:33 pm
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    I would agree with Mr Patterson that things in Cuba will be harsh. Covid is particularly unkind to any country who’s economy is based largely on tourism.
    Where I would disagree is where Mr P typically states that the U.S. embargo is the least of Cuba’s problems. The U.S. policy toward Cuba is designed to be a problem and it most definitely is a problem.
    The restrictions that the USA places on the freedom of it’s citizens to travel to Cuba or send money to Cuba is an abject disgrace.
    Firstly, it is specifically designed to make a harsh life for Cubans even harder.
    Secondly, this is a cynical attempt to win FLA electoral college votes in the USA’s threadbare version of ‘democracy’.
    Thirdly these restrictions on the freedoms of U.S. citizens, which were once held to be ‘self-evident’, would have the great Benjamin Franklin and his old buddies spinning in their well tended graves.

  • October 19, 2021 at 2:43 pm
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    It’s refreshing to hear a Cuban Minister at least begin to tell the truth. His less than rosy forecast belies the reality that the situation in Cuba is going to be harsh for the foreseeable future. If he says it will be tough, you can be sure it will be very, very tough. Very tough. By the way, the comment by Henry Delforn is misleading. While the Trump sanctions continue under the Biden administration, these sanctions are the least of Cuba’s problems at this time.

  • October 19, 2021 at 7:41 am
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    El toque y luego el puñetazo … connect the dots to 6%.

    Despite promises to lift some Trump sanctions, Biden leaves Cuba in deep freeze – 18 October 2021 (https://www.bakersfield.com/ap/news/despite-promises-to-lift-some-trump-sanctions-biden-leaves-cuba-in-deep-freeze/article_d02d3d49-04dc-5e56-abe2-eb68aa4b0577.html)

    Cuba Formally Joins China’s Belt and Road Energy Partnership – 18 October 2021 (https://www.telesurenglish.net/news/Cuba-Formally-Joins-Chinas-Belt-and-Road-Energy-Partnership-20211018-0016.html)

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