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    The Cuban Economy is Still a Matter of Improvisation

    The Cuban Economy is Still a Matter of Improvisation
    December 2, 2014
    Dariela Aquique*

    HAVANA TIMES — In its efforts to “refashion” economic and political
    concepts and practices on the basis of the Party’s Economic Guidelines,
    the Cuban State has declared that these weren’t valid at other points in
    history because of the impact the globalized world, characterized by a
    structural crisis of the capitalist system, had on the island at
    different junctures. As though not fully satisfied with this argument,
    it adds that such changes are possible today because they can be
    implemented as part of process of social interaction that is different
    from the one that has existed for more than fifty years.

    As we might have expected, the deficiencies and mistakes that have
    characterized Cuba’s State economy – and their impact on society – are
    pushed to the background.

    All of us know, however, that the Cuban economy has congenital
    structural deformities that have long made it impossible for the country
    to avoid its subordination to other economies (which have historically
    sustained the country’s productive system in terms of capital and

    Today, the Cuban government shows unequivocal signs of being desperate
    to remain in power in the final stretch of the race – even if that means
    taking up a “new economic model” that implements unprecedented measures
    and legislations, including the development of the business portfolio
    (valued at US $ 8.7 billion) recently presented at Havana’s
    International Fair, a portfolio that includes a list of 246 projects,
    from poultry industry initiatives, to the production of vaccines or
    bottles or to the development of wind farms.

    Anything seems to come in handy in its attempts to remain afloat,
    something that involves more pathos than the strategies of an old and
    exhausted prostitute desperately trying to reinvent the Kama Sutra.

    Chronologically speaking, these economic disasters began in 1959, when,
    a short year after the revolution, the Cuban State began to nationalize
    the country’s industries, banking institutions and service providers and
    set out to structure a State economy disconnected from the US market.

    From 1961 to 1972, the planning and centralization of material and
    human resources, which took the Soviet Union as a template, was the eye
    of the economic hurricane. This stage can be considered the initial,
    utopian phase of the revolution, a time in which efforts at prosperous
    industrialization, agriculture and import substitution were made without
    any consideration to the lack of financial resources for such
    large-scale projects.

    During this time, the economy was a field for experimentation. The
    notorious 1970 sugarcane harvest, when the nation’s main goal became the
    production of ten million tons of sugar, an epic mission propped up by
    impassioned speeches and slogans, was conceived in this context.
    Economic initiatives began to be subordinated to a political leadership
    that prioritized ideology and downplayed the importance of the
    commercial factors needed to successfully implement these.

    The process that made the concept of social property and arbitrary
    decisions of this nature an absolute led to the stagnation of small
    businesses and of course prompted the first great crisis, which revealed
    the State’s limited capacity in terms of developing a coherent economic
    development agenda.

    In the 1980s, when Cuba became a member of the Council for Mutual
    Economic Assistance (COMECON), the hardships of the 1970s seemed
    forgotten, and it could even be said that, until 1986, Cuba appeared to
    have an efficient economic environment. The relative abundance of
    material resources gave the impression, at the level of everyday
    experience, that, generally speaking, the basic needs of the population
    were covered.

    Though it is true there was the semblance of daily harmony, the
    country’s economy was not sustainable. The technological backwardness of
    many of the country’s regions, the inadequate salaries, the
    vulnerability of the countryside (to mention only a few realities) were
    yielding productive statistics that were sorry indeed.

    From 1986 to 1990, a stage known as the Rectification of Errors and
    Negative Tendencies, the leadership called for the development of a
    sustainable socialist model, aware that the pillars that held up this
    system in East Europe, their benefactors, were already very weak. To
    make matters even worse, European State socialism collapsed in 1989 with
    the tearing down of the Berlin Wall, and the Soviet Union broke up two
    years later.

    From 1991 to 2000, the notorious Special Period crisis, the collapse of
    the socialist bloc had profound and immediate consequences for Cuban
    society, which received 63% of its food, 86% of its raw materials, 98%
    of its fuel, 86% of its equipment and 70% of its manufactured products
    from this bloc.

    Suddenly alone and in the inconvenient position of having to confront
    international isolation and the need to reinsert its economy into a
    unipolar world, Cuba was forced to come up with new strategies to
    survive without the aid of its former mentor. To alleviate the economic
    crisis (which became more pronounced in 1993 and 1994), the government
    introduced a number of market reforms: the opening of the tourism
    sector, the legalization of the US dollar, the authorization of
    self-employment, the broadening of the joint-venture sector and a law
    authorizing foreign investment.

    Mechanisms, practices and conceptions that thwarted the free development
    of Cuba’s productive forces (both objectively and subjectively) were,
    however, still in place. As a result of this, these measures allowed for
    only a timid recovery and brought complications of a social nature, such
    as prostitution, high levels of corruption and the spread of the black

    In addition, the sugar industry, which had been one of the pillars of
    the Cuban economy since colonial times, also suffered from bad decisions
    that displaced this industry as the island’s economic mainstay. The
    government announced its intentions of carrying out “sweeping changes”
    in this declining sector. Almost half of all sugar refineries were shut
    down and more than 100,000 workers were laid off.

    By the mid-1990s, tourism had overtaken sugar as the country’s main
    source of hard currency revenues. In the year 2000, it generated some US
    $ 1.9 billion in gross income. The government’s hopes that this sector
    would continue to grow, however, did not come to be owing to world
    recession in 2001 and the negative impact that September 11 had on
    tourism in the region.

    To keep the economy afloat, foreign investment was actively sought. A
    new legal framework, established in 1995, allowed foreign investors to
    be majority shareholders in joint ventures created with the Cuban
    government. In practice, this was almost never the case. A great many of
    these investments are actually loans or management, supply or services
    contracts that aren’t normally considered investments of capital in
    western economies.

    This period was also marked by the third largest mass exodus that
    country had experienced after the Camarioca and Mariel exoduses, the
    rafters crisis (to say nothing of the many people who left the country
    legally, a phenomenon which depleted the country’s workforce and had a
    noxious effect on its economy).

    Cuba would find its best political and ideological ally (and one with
    plenty of material resources) in 2000, after Hugo Chavez became the
    president of Venezuela – a kind of new patron that would begin to supply
    the island with 100 thousand barrels of oil a day and would keep its
    ruined economy afloat.

    The Cuban State, however, was well aware that this near-providential
    alliance could change at some point if the Right regained power in
    Venezuela. There was also the risk that, following Chavez’ health crisis
    and ultimate demise, Chavismo would not survive. Preventive measures had
    to be taken in the event that happened. A profound revision of
    everything done to date was needed, hence the unavoidability of the
    “updating” of Cuba’s economic model. These changes had to be aimed at
    domestic and foreign policy alike.

    A new concept, the export of services, would make its appearance as a
    source of hard currency revenues, secured through the signing of
    individual agreements with countries for the sending of medical doctors,
    nurses and other professionals abroad. According to certain official
    figures, by 2009, the main source of Cuba’s hard currency had ceased
    being tourism and had been replaced by the export of services to other
    countries, under agreements in the areas of health, education and other
    sectors (in that order).

    In 2011, we heard talk in terms of the “elimination of needless free
    services and subsidies” and “payroll cutbacks at workplaces.” We also
    saw the opening of spaces for non-State properties and the establishment
    of economic models such as cooperatives, land lease, the self-employed,
    joint-ventures and international partnership contracts.

    I saw this film back in the 90s, and the economic results were modest at
    best, such that these “changes” arouse a number of suspicions. Current
    statistics, which are quite discouraging, confirm these suspicions.
    During 2013, Cuba’s GDP grew by a mere 2.7%, below the 3 % reported in
    2012 and well below the planned 3.6%.

    A few days ago, Cuba’s Foreign Trade Minister Rodrigo Malmierca showed
    up at Havana’s International Fair and delivered a far from strategic
    speech before investors and diplomats. Offering a limited business
    portfolio to businesspeople, telling them that “this is what I want to
    offer you, not what would be convenient for you to take”, is anything
    but prudent.

    When it comes to the country’s economic wellbeing and stability, we
    continue to lay all our bets on the circumstances, allies or utopias at
    hand. We continue to follow the trial-and-error method, to capitalize on
    people’s enthusiasm and make badly-conceived plans. The Cuban economy
    continues to be a matter of improvisation.
    (*) This article is a revised and shortened version of the paper I
    presented at the 24th Conference of the Association for the Study of the
    Cuban Economy (ASCE).

    Source: The Cuban Economy is Still a Matter of Improvisation – Havana –