Cuba’s Economy Heading Towards the Perfect Storm

Summary of a report by Cuban economist Emilio Morales

By Vicente Morin Aguado

Emilio Morales

HAVANA TIMES – In true Spartan style, Emilio Morales*, president and CEO of The Havana Consulting Group, claims that Cuba is experiencing “one of the most serious crises in its history”, while he also predicts that Diaz-Canel’s “second presidential year will be a lot worse”.

With the title “Diaz-Canel’s first year as president: returning to the brink of the Special Period”, Morales presented his lecture at the recently concluded 29th annual Association for the Study of the Cuban Economy (ASCE) conference, causing the unusual murmur of approval in the conference room, which normally remains silent.

The report begins by defining factors that endorse the foretold crisis:

– Drop in exports.

– Growing deficit of capital investments.

– Socialist state-run enterprise, corrupt and inefficient.

– Continuous failure to make foreign debt repayments. As well as debt payments to regular suppliers.

– Drop in the total number of tourists entering the country, confirmed by recent figures.

– The worst sugar harvest in these past sixty years, with total production falling short of that in 1905.

– A dual-currency system that is still in practice after a quarter of a century, when it was declared to be a “provisional” or “temporary” measure at the time of its implementation.

– The limited private sector remains afloat, attacked by high taxes along with significant restrictions on its development.

– Productive Forces, dominated by Socialist state-run companies, continue to be prisoners of state centralization.

In the face of not being able to refute the above arguments, the Cuban professor gets straight to the point:

The government “hasn’t been unable to untie the Gordian knots in its economy”: Getting rid of Cuba’s distorted dual-currency. Resolving the lack of productiveness of its Socialist enterprises. Reducing growing chaos and corruption in the sector.

The president of The Havana Consulting Group, an institution which is a leader when it comes to economic analysis in our country, quotes revealing data.

Created back in 2009 by former president and no.1 in power still, Raul Castro, Cuba’s National Audit Office and its reports clearly indicate that the results from an inspection carried out in November/December last year show that 51% of state-run companies have negative earnings, the deficit being the same as corruption, the equivalent of some 2 billion pesos in the so-called “total currency”, a euphemism that sums up the hard-to-explain dual-currency system, of not just two exchange rates in practice, but up to six different ones.

Which we call “the lid of the bottle” in fine Cuban, which is to say, the extreme of so many evils, when we study the official statistics for service exports, comprised mostly of health professionals.

Here, a summary from the report:

“Cuban (government) statistics relating to service exports aren’t transparent. In 2017, the ONEI (National Office of Information and Statistics) reported that service exports had been valued at 11.379 billion USD. This figure clearly doesn’t respond to just medical service exports.”

“In order for Cuban medical personnel abroad to bring in 11 billion USD per year in revenue, nurses, X-ray technicians, lab workers and other paramedics would have to be earning the same as doctors, an average of US $220,000 per year. They wouldn’t even be earning this kind of money in the United States, much less in the third-world countries they are based in.” 

Considering the significant decrease in internationalist business, with a complete shutdown in Brazil and being cut in half in Venezuela, the recent statistic of US $6.4 billion generated by Cuban medical personnel abroad is still questionable.

Emilio Morales suggests a more profound analysis. There are several thousands deserters, hundreds of documents have been published about this revenue, it isn’t hard to calculate some reliable figures. Experts believe that Cuba receives some 4500 USD per month, while other health bring in 3500. According to the economist, the total doesn’t exceed 2.4 billion USD.

Health professionals working abroad. Number, monthly salary, months, total. In US dollars.

The conclusion is obvious: either the figures are lying (not at all surprising), or simply hide other sources of potentially suspicious income. Venezuelan aid for its political stepfather, and the main guarantor of its personal security (another form of professional services) of the team in charge, under Nicolas Maduros leadership?

The reality is that a significant figure joins the Cuban economy’s negative numbers.

Conclusions point straight at politics. The only difference is that there is no cover-up in discourse, semantics are used like Aristotelian logic:

“There is no doubt that stubbornness, pride and stupidity have been and continue to be stronger than good judgement and common sense among Cuba’s 80+ year old elite, which no longer has the resources to reinvent themselves.  Right now, they are paying the cost for their irreverent response to Obama’s administration’s rapprochement offer.”

“The clumsy strategy they’ve employed to deal with US reforms and relations, as well as the Venezuelan crisis that is only getting more and more serious, as well as the waiver on Title III of the Helms-Burton Act being lifted, have all placed the country on the brink of the abyss again. The perfect storm is inevitably around the corner.”

Did Cuba or does Cuba have a solution?

Photo: Jorge Luis Borges L.

The following reflection remains on a table:

“Having worked in an intelligent manner and with audacity, the Cuban government would well be on its way to building a Vietnamese or Chinese-style economy today.”

Let’s say that the proposal doesn’t aim to change the political status quo in the country, another core issue that the Cuban people have to resolve.

Emilio Morales continues to tell us:

“Diaz-Canel and his advisors only have one way out: facilitating a solution to the Venezuela issue and implementing real structural reforms in the economy. Right now, this could be the only way for the country to not fall into the eye of the perfect storm.”
——-

*EMILIO MORALES: headed the department of planning and commercial strategy of the largest state corporation in Cuba, CIMEX. He was a consultant of other national companies related to sugar, tobacco, medical services, hotels and telephones. He advised his country’s government on bilateral projects with Argentina, Canada, Mexico and South Africa and has written about 100 articles addressing key aspects of the Cuban economy. Author of the books “Cuba: a silent transition to capitalism” and “Marketing without advertising: brand preference and consumer choice in Cuba”. He is the president & CEO of The Havana Consulting Group, a firm recognized by the academic and business world in statistics and research on the economy of Cuba.

Vicente Morin Aguado: Mardeleva287@gmail.com



24 thoughts on “Cuba’s Economy Heading Towards the Perfect Storm

  • In short, the Castro dictatorship is circling the drain. There is very little hope that the Russians or the Chinese will come to Cuba’s rescue. The Cuban economy is evermore dependent on remittances from Cuban expatriates. This dependance upon other people’s money, unlike agricultural or manufacturing exports, leaves Cuba less and less in control of their own destiny. Then again, how long have we been counting down Cuban demise?

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  • The End Of The World. Con Tierra y agua Marie we muere de hambre. Lo Demas es lo Demas. Aprieten el }:?)(????)

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  • Este régimen está especializado en la supervivencia, nada debe asombrarnos, pero tampoco podemos cansarnos de repetir la verdad, evitar la derrota. El hombre, recuerdo a Hemingway, no fue hecho para la derrota.

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  • Thank you HT for this report upon ASCE. It tells us much of what we already know, but laid out in specific terms and detail by a particularly well qualified observer.
    China in particular, and Russia to a lesser extent remain the only hope for exterior support.
    Emilio Morales puts his finger on the heart of the Cuban problem when he points out that if the Cuban regime had acted in an intelligent fashion, Cuba could have been well on its way to having a Chinese or Vietnamese style economy.
    The simple reason why that did not occur, is that the Castros pursued strictly Stalinist policies deliberately obstructing through policies and actions any meaningful form of private enterprise. They insisted on adhering to the concept of creating a malleable mass and suffocating individual initiatives. For sixty years Cuba has been governed by a bunch of economic incompetents who refused to even consider change, let alone the adoption of capitalism.
    As for Obama’s overture played at the Alicia Alonso Theatre on March 21st, 2016 – that was dismissed only one week later supposedly by Fidel Castro who by then was a very sick man in several respects and whose name was obviously only used as a cover for Raul Castro. As Emilio Morales points out, Cuba is now paying the price for slamming the door shut on Obama’s rapprochement offer.
    Diaz-Canel – even if willing, is unable to implement real structural reforms as suggested by Morales, for he is still only a pawn for Raul Castro who remains in control and as Diaz-Canel himself pointed out, will continue to take key decisions. Teaching that particular old dog new tricks is not possible.

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    • You say:

      “For sixty years Cuba has been governed by a bunch of economic incompetents who refused to even consider change, let alone the adoption of capitalism.”

      The same can be said of its northern neighbor, … For over sixty years the U.S.A. has been governed by a bunch of ideological incompetents -influenced by a smaller group of grossly ideological incompetents located in Miami- who refused to even consider change, let alone working with a socialist state (not unlike its cooperation with Vietnam/China).

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      • I note with interest Berta your reference to Vietnam and China, both of which unlike Cuba, have lifted themselves out of the morass of 19th century Marxism/Leninism thinking by adopting capitalism. (China has more billionaires than the US).
        Is it despite the endeavors “by a bunch of ideological incompetents” that the US has the largest economy in the world – whereas Cuba has what?
        You appear to consider that the US ought to consider working with the Stalinist communist totalitarian regime in Cuba. Why should they unless the conditions of the US Cuban Democracy Act are met?
        But I also note with respect that although you make a comparison with the US, you do not deny that “For over sixty years Cuba has been governed by a bunch of economic incompetents”.

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    • You are so right about this. Cuba has had many chances to make things better for the Cuban people, but instead has been dishonest and corrupt. Russia dumped a lot of money and resources into Cuba because of its location. Several foreign companies have been robbed by the Cuban government. When I was there I seen girls as young as 15 available with the Cooperation of government officials. These same officials would tell the directors of the foreign companies that they would go to jail if they exposed the government corruption and wanted the money back invested in Cuba.

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  • The End of The World. No Just The Start of The New World For Cuban Children. We understand there is More Need Today for Food & Money Missionary,s to Help Cuban Children Create There Future, There Dreams of No Corruption,Controls or Interference,s. A Future of there Positive Thinking is there First Step for them to Make there Right Chooses for There Future Life,s. So Lets all Stop the Negative B.S. The Honesty Hurts, So What. Great Reporting Thank you

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  • President Obama’s ‘rapprochement’, as it is being called here, was not conditional on any specific Cuban changes or actions. It is inaccurate to suggest that it was.
    The current incumbent of The White House seems to have a personal vendetta against President Obama and has ripped up various of Obama’s advancements toward the USA becoming a more modern and rational country (Healthcare, Iran, Climate Change etc). Trump’s disturbing policies which affect the whole world are seemingly based on his deep down hatred and jealousy of his predecessor.
    Trump’s reversal of President Obama’s reform of U.S. policy toward Cuba could just have easily occurred no matter what Cuba’s reaction to the Obama move. This suggestion that this apparently crazed, spoilt brat, current president of the USA would have ever done anything different or anything based on reality or rationality has no wheels at all as far I can see.

    Emilio Morales is absolutely correct that serious reforms are needed big style in Cuba.
    Cuba’s economy is in trouble but it is unlikely that any help would ever come from the current U.S. regime.
    As suggested, China seems a far likelier bet.

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    • Nick, you are so out of touch with Cuba’s reality since the Barbudos got control of power, your opinion confirms it.
      The Castro mantra is omnipotent. No attempt no matter if by an acting or former president, Pope, or Illuminati figure would have swayed the inflexible rigidity of their policies.
      To suggest that Obama’s milquetoast overtures could change that is not only naive but baseless. Only a liberal with his/hers/it rose tinted lenses could conceive that distorted notion.
      Now that the last of the pachyderms is on his last stages, only a resolute, strong unwavering front is the only answer to salvage what little salvageable there is. Stop hating Trump it’s blinding your common sense.

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      • JCD, Not sure if you actually read my comment:
        ‘Emilio Morales is absolutely correct that serious reforms are needed big style in Cuba’
        That is the reality. That is my opinion.
        Your reference regarding ‘liberals’ perhaps speaks loudly of your own opinions??
        But either way, you are incorrect to suggest that I have any hatred toward Trump. His blend of right wing conservatism and acquiescence toward the extreme right may not be to my political taste, but I do not hate the man.
        My overriding point is that he is not of a stable enough mental state to be leading the USA.
        Whoever is in power in Cuba would do well not trust or be influenced by this deeply disturbed and unstable individual.
        The suggestion that anyone can form a strong and unwavering front that involves the weak, permanently wavering and mentally ill President of the USA needs to get a reality check.

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        • George Walker Bush said that Cuban Americans could only visit to see their relatives in Cuba once every three years. This was the biggest humanitarian blunder by George Bush Jr, an inhumane blunder by a president who is foreover remembered as the man who America to war against al-Qaeda after 9/11 and more controversially waging a war in Iraq.

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      • JCD, nobody who reads HT contributions on a regular basis would suggest that Nick and I have commonality. But I think you underestimate the stability of the Castro communist regime. The US has presented that “resolute strong unwavering front” for sixty years and achieved what? In Spanish, “nada”.
        Have you examined the history of the US in regard to Cuba? Obviously that includes the Monroe Doctrine, the Paris Accord, the imposed Cuban constitution of 1902, the Platt Amendment, the 1903 Treaty of Relations, the US occupation of Cuba from 1906-1909 with the US Secretary of War appointing himself as Governor of Cuba and again in 1912, the US retaining Guantanamo an integral part of Cuba, as a naval base, and the Helms-Burton Act of 1996.
        If you have JCD, can you justify them and can you comprehend why so many Cubans whilst envying the living standards and freedom of speech and action, detest that history?
        You are absolutely correct in saying that nothing has swayed the rigidity of the Castro policies, but apart from Barack Obama, what other US President has even tried? The ancient non-effective US embargo has failed to achieve anything other than acting as a scapegoat for the incompetence of the Castro regime. One doesn’t need to be a small or large L(l)iberal to understand that – and my lenses are as Nick would confirm are tinted a pale blue.
        Just as Lenin spawned Stalin, Raul Castro spawned Diaz-Canel, currently a mere puppet for your “last of the pachyderms” but pre-ordained and trained in the Castro menage, to pursue the Stalinist version of Marxism/Leninism so beloved by the Castros.
        As for Donald Trump, many who live outside the confines of the US but regard it as a friend and ally, are deeply concerned regarding the irrational behaviour, obvious untruths, narcissism and boasting that pours out of the White House – and I merely adumbrate! Trump doesn’t merit hate – merely distaste and concern.

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  • Mr MacD, you are correct in saying that we do not have communality. But I would say that I agree with a portion of your most recent comment.
    I would also say that adumbrate is a sadly underused word and commend your giving it an airing.

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  • I have the perfect solution all of Cubas problems that will satisfy everyone. Let’s look at the positive things my beloved Cuba has. It has a workforce that is innovative and resilient. Who else could keep cars for 60 years? The workforce is looking for something that with hard work they could improve their own lives and that of their families and that of their fellow countrymen. That has the potential to improve things for everyone and the government. That is no brainer. That is the first positive.
    The second positive the country itself. That is agriculture. The country used to be an exporter of food, not an importer as it is now. It lacks the pesticides in soil because no one could afford them this is a big plus because most of the crops could be organic. So the big thing needed is no government input or interference. And the only thing needed from the government the land. And not necessarily for nothing. How would any group of farmers be able to afford anything to buy any land? The old fashion way, sharecropping. Who would give any poor farmers any credit? People who have done this in their own country and in India. I am talking about Israeli companies. Who have turned their desert land into an agriculture miracle have helped India do the same. It was financed with sharecropping entirely.
    http://www.izito.ca/ nocamels.com/2016/04/india-praises-israeli-water-technologies/
    Israel is partnering with India on ‘ But on youtube lots of examples.
    They would use the Israeli example of a collective farm, which is a communist idea, and each unit is independent, and any money earned is split equally by all the workers, And collectively they make all the decisions themselves. They elect who would be in all positions and is voted for example a yearly basis. I would help initiate the help from the Israelis companies who would enthusiastically look at all of Cuba looking the whole country over and suggesting which would best to grow which crops and the size of each coop. Maybe the collective would negotiate with the government only at the beginning. Maybe they will negotiate that 25% of the crops to be sold to locals may only at the beginning because after there are many of these collective farms going then at some point Cuba becomes an exporter and these negotiations become unnecessary. Everyone is a winner.

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    • Although have I found much to admire in Israeli agriculture and especially innovation for example in trickle irrigation and marketing, but with little knowledge of production on a larger scale. I consider that the large UK agricultural producers (for example Shropshires and Spearpoint International – formerly Greens of Soham) have more to offer in terms of scale organization of the type that will be required to take those hundreds of thousands of acres of good agricultural land, currently reverting to bush, back into economic production.
      The Castro regime demand that foreign investors contract to pay the regime for labour and accept that the regime in turn will pay a mere pittance to those so employed, is a major block. Any endeavor to reward employees according to their production is denied, being described as “corruption”.
      Methinks that Edwardo Spetter whilst endeavoring to be constructive, has little knowledge of the reality of the Cuban Castro regimes policies and methods. The optimism is however nice to behold.
      Communism has no interest in making: “Everyone is a winner.” It’s concern is retention of total power and control.

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  • I made a mistake it should that the first negotiations with the government would be to sell 75% of the crop locals.

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  • Thanks Edwardo For your Positive Input, I Needed To Read there May be some Hope For Cuba. Forging Forward For Natural Foods the World is Demanding More every day.

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    • In Cuba Robert, few if any are concerned about “Natural ” or organic foods. People just want to be able to find sufficient to eat. Yes, for a few in the prosperous capitalist societies are prepared to pay extra for those so-described foods – which invariably have lower production than normal methods.
      As a famous black American woman athlete drawled following winning the Olympic 100 metres, when asked how she learned to run so fast: “In my family of over a dozen kids, you had to learn to be fast if you were gonna’ eat.”
      In world terms, those who seek the foods you describe, are but a tiny fraction and it is questionable whether they do so as a consequence of skilled marketing or actual knowledge.

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  • How Eduardo Spetter would you persuade the Castro government to allow the price of that proposed 75% of production to be profitable?
    Obviously, as long as the Castro government controls the prices, the economics of production will at best, be marginal.

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  • So much to think about in all these comments. As someone who goes to Cuba on a regular basis, I’m really rooting for the remarkable people there. The inventiveness and ” make it work ” attitude is everywhere. The sense of family is so strong. The children and young people are well educated and generally family oriented. Then, there is the fertile soil and abundant water. All this beauty, and a people with a strong work ethic. I pray to God for this land and it’s fine people, that they will be allowed to prosper and fulfill their dreams. Amen!

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    • Nicely put Carmen. We love Cuba and always look forward to our next trip there which is at least once a year. My prayers and with them.

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    • You have made an accurate assessment Carmen, Cubans of necessity have to be able to make things work, for most are too expensive to make replacement possible. La familia is the essence of their society with Afro-Cuban music being the soul of Cuba (both are free). Yes, there is lots of fertile soil and abundant water – with some 32% of it currently being allowed to revert to bush – in a country where obtaining sufficient food daily for ones children is increasingly difficult and dependent now upon ever-increasing levels of importation from capitalist countries – Spain, Holland, the US etc.
      The only way for Cuba to prosper is to adopt capitalism – as in China and Vietnam – or even better, allow freedom of political parties, freedom of speech, freedom of the media and freedom of movement.

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  • Interesting,Cuba has been on the brink of disaster for the last 60 years, go figure.

    Reply

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