Truth about Cuba's economy lies in middle
Saturday 3rd September 2005 by Paolo Spadoni . February, Fidel Castro proudly stated that Cuba is recovering from the ashes of its post-Soviet economic recession and "rising again like the phoenix." Conversely, U.S. Interests Section Chief James Cason recently said that the island is facing severe economic problems and that Castro's government "is on its last legs."

What is the truth about the current status of Cuba's economy?

The economic situation in Cuba is not as bad as U.S. officials would have us believe. The country's economy grew 3 percent in 2004, mainly thanks to a substantial increase in revenues from tourism and nickel exports, rose by approximately 6 percent in the first half of 2005, and is expected to end the year with a 5 percent growth.

Apart from an aging Fidel Castro, who just turned 79, there is little reason to assume that the present government in Havana is on the verge of collapse, especially after its recent and extremely beneficial agreements with Venezuela and China.

Since October 2000, Cuba has been paying for vital imports of cut-rate Venezuelan oil (supply has now reached 80,000 to 90,000 barrels of crude per day) with medical and educational services. Between 2001 and 2004, according to official figures, the Castro government received almost $130 million in revenues from various treatments to little more than 7,500 Venezuelan patients in Cuba's hospitals and medical centers (around $17,000, on average, for each patient treated). And these revenues do not include services provided by some 20,000 Cuban doctors stationed in Venezuela and those offered by teachers and sports trainers. Last December, Cuba and its South American ally signed new agreements aimed to promote investment as well as technical and educational cooperation between the two countries.

During the 1990s, China had been the only foreign country that granted a considerable amount of financing to Cuba at highly concessional terms. Between 1990 and 2004, the Asian giant provided soft credit and donations of more than $160 million, mostly in the areas of education, tourism and agriculture. In the past few months, China has announced new credits and aid to Havana and major investments in Cuba's nickel and oil sectors. The Chinese capital involved in new projects on the island could represent more than one-fourth of the total amount of foreign direct investment ($6 billion) committed by overseas firms over the past 15 years.

But Cuba's economy is not even as good as Havana's authorities proclaimed. Leaving aside the frequent blackouts that have plagued the entire island in recent months, the reality is that the latest progress at the macroeconomic level has not yet translated into tangible benefits for the Cuban population. While the Castro government is trying to address some major deficiencies of its economic system, three chronic problems remain unresolved in Cuba: the availability of food and other basic products, the construction of new houses and the reparation of existing ones, and the very precarious condition of the public transportation sector.

The majority of Cubans have great difficulty in acquiring food and other items they need because of the limited purchasing power of their salary in regular pesos and insufficient domestic production. As several goods must be purchased in state-run stores that accept only the convertible peso or CUC, a local currency worth 24 regular pesos, most prices remain prohibitive for the average Cuban. This holds true even after the recent 7 percent revaluation of the regular peso against the CUC and substantial increases of salaries and pensions for many Cuban citizens.

Between 2000 and 2004, the number of new houses built annually by the Cuban government dropped about 65 percent. Last year's number was the lowest since 1990, even lower than the annual average of new homes completed between 1991 and 1993, during the worst time of the economic recession in Cuba. Regarding public transportation, the total number of passengers transported each year by bus and taxi plummeted by about 80 percent between 1990 and 1998, with a small improvement since then. In 2003, however, the volume of passengers was the same as in 1963, when the Cuban population stood at just 7.4 million, almost 4 million less than its current size.

In short, the truth about the current economic situation in Cuba lies somewhere in the middle between the overly optimistic assessment coming from Havana and the nearly catastrophic one made by Washington.

Cuba's economy is neither a phoenix rising from the ashes nor a system on its last legs. It looks like a bird with strong legs that keeps walking but has not learned how to fly, at least not yet.

Paolo Spadoni is a Ph.D. candidate in the Department of Political Science at the University of Florida. He wrote this commentary for the Orlando Sentinel.



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