Economic Factors Complicate Easing Lockdown Restrictions in Cuba

The first of Cuba’s three-phase recovery plan to return to the “new normal”, began on June 18th.

By IPS Cuba

Insufficient food production is one of the Cuban economy’s biggest weaknesses.  Photo: Jorge Luis Banos/IPS

HAVANA TIMES – In addition to epidemiological indicators, Cuba’s recovery post-COVID-19 will be determined by factors linked to its sluggish economy: a global crisis and limited access to foreign currency and fuel.

Highly dependent on foreign trade, Cuba’s economy will be negatively impacted by the reduced activity of many of its main trading partners, a drop in demand for tourism services and the suspension of global value chains.

On June 18th, the first phase of relaxing lockdown restrictions was announced across the country, excluding the provinces of Havana and Matanzas.

“Cuba is a country with a very open economy, closely connected to foreign trade and its international relationships, thus we have to face this difficult situation caused by COVID-19,” the minister of Foreign Trade and Investment, Rodrigo Malmierca, said on TV show Mesa Redonda.

He pointed out that this was in addition “to the already difficult situation caused by the US’ economic, commercial and financial blockade against our country,” which he said “has gotten a lot worse and been further reinforced during this COVID-19 crisis.”

The Caribbean island’s recovery is closely linked to the economy’s own shortcomings: foreign debt, insufficient food production and billion-dollar imports to cover this deficit, as well as a high dependence on imported raw materials.

Tourism’s decline

The tourism industry is also getting back into gear during this first recovery phase, but only for the domestic market, as flights in and out of the country are still restricted, meaning that revenue in convertible currency won’t be available until after July.

Even when the international tourism sector comes back into action, the number of tourists may well be a lot lower, both because of a fear of traveling that could exist in source markets, and because of reduced capacity at hotels, as well as other restrictions.

According to the minister of tourism, Juan Carlos Garcia, the second phase of recovery will mean that international tourism will begin again at hotels on Cayo Largo del Sur, Cayo Coco, Cayo Guillermo, Cayo Cruz and Cayo Santa Maria.

Up until now, it has emerged that hotels won’t be able to open at 100% capacity: some will be at 50%, and others at 60% to encourage physical distancing, especially at dining and leisure facilities.

Some segments of the market believe that holidaymakers only being able to move around on the cays where they have their accommodation, might negatively affect travelers’ decisions to book a holiday, as they are generally interested in visiting other destinations, including Havana and Varadero, where they won’t be allowed to travel.

In the third phase of recovery, when the entire country opens up again to tourism and tour operators and agencies, and tours are allowed again, these will be limited to a maximum number of customers.

Transport sector

Examples from the transport sector also highlight non-health-related factors that weigh heavily in their operation.

The minister of Transport, Eduardo Rodriguez, announced in a broadcast of Mesa Redonda on June 17th, that the second phase of recovery plan is still the same and will open up provincial, state and private, urban, intermunicipal and rural transport, depending on regional priorities and access to fuel.

He also pointed out that urban transport offered by bus companies will be reinforced, “depending on demand and the priorities of provincial Defense Councils and in line with fuel availability.”

Although it isn’t only a matter of access to fuel, which has been in shortage since September 2019.

Rodriguez stressed that when transport services run again as normal, in the third phase of recovery, “reestablishing domestic flights will depend on the availability of planes,” just like it did before the pandemic and standstill.

Foreign investment plans in Cuba

In order to drive revenue, authorities have said that they will boost exports and foreign investment, with incentives and more flexibility.

The minister of Foreign Trade and Investment revealed some new measures that might help contribute towards this:

– Make the most of regional potential in order to diversify goods and services for export.

– Create a regional map with exportable headings in three categories: consolidated, under development and promotion.

– Create terms for private sector exports.

– Make restrictions on the activities of a company with foreign capital more flexible, so that they can carry out their main objective, as well as provide other services.

– Continue to make it easier for Cubans living abroad to invest in Cuba.

– Enable small companies created with foreign investment to undertake projects that resolve local needs.

3 thoughts on “Economic Factors Complicate Easing Lockdown Restrictions in Cuba

  • Dace Berg hits the nail right on the head. In pursuing the Stalinist interpretation of Marx/Engels/Lenin, the Castro regime (note for those who disparage that description, Raul Castro remains in charge), is all about total control. The people are but a “mass”. Stalin’s ghost still stalks Cuba.

  • Unfortunately the government does not listen to reason because it will decrease its control of the populace. They did not pick up on the fact that fully controlled communism does not work, ie. USSR, but partially controlled can make an economy flourish without handouts, ie Viet Nam. To them the control is all important, never mind the people!

  • The Minister of Foreign Trade and Investment makes some interesting pronouncements with words not exactly convincing of real substantial concrete change. Wording such as “ …with incentives and more flexibility.”; “Make the most of …; “Create a regional map…”; “ Create terms …”; “Continue to make…”.

    What does all this primarily verbal usage mean? To use one example, “more flexibility”, I presume refers to flexibility where necessary but not necessarily meaningful flexibility to make much of an economic difference? It seems government optics is crucial for propaganda delivery.

    If there was some serious concrete economic decision making in play, whether for the foreign market or the domestic one, why not begin allowing Cuban farmers, entrepreneurs, foreign business owners, rental home owners the opportunity to operate in a free market economy whereby demand for the product or service is paramount and foremost, and the risk taker is unencumbered by political bureaucracy and is allowed to freely meet this demand, plus is allowed to keep all financial gain, minus municipal, provincial and state taxes where they apply.

    Begin laying the foundation for the free market economy to operate with substantial concrete steps so that the ordinary Cuban on the street can distill the Minister of Foreign Trade and Investment’s incentives and spur change.

    Let the free market dictate and create, not “more flexibility”, that is, more of the same.

    When risk takers know they will be uninhibited by government in their risk taking endeavors and are encouraged to pursue profit, potential risk takers will be motivated to participate fully in the economy and contribute meaningfully. Successful economic activity at the micro level, foreign or otherwise, quickly multiplies into the broader macro economy which by extension then begets a successful transition for all Cuba.

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