Cuba’s Economy Heading Towards the Perfect Storm

Summary of a report by Cuban economist Emilio Morales

By Vicente Morin Aguado

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.

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?

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.”
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*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