Grim Cuban Economic News 

Grim news over Cuba’s economy was delivered in July 8 speeches to the country’s legislature (the National Assembly of People’s Power) by Cuba’s President, Raúl Castro, and by Cuba’s Minister of Economy and Planning, Marino Murillo. Naturally the Cuban people are worried. Here is a summary of those developments.

President Castro’s Report[1]

“In December 2015 I [projected that we would experience] financial constraints as a result of declining export revenue . . . [due to] falling prices for our traditional items as well as damages [to our] relations of mutually beneficial cooperation with various countries, particularly with Venezuela, which is being subjected to an economic war to weaken popular support for its revolution.”

“In the first half [of 2016] GDP grew by only one percent, half of what we had projected. This is the result of worsening external financial restrictions, driven by the decline of export earnings, coupled with the constraints faced by some of our major trading partners, due to falling oil prices.”

“There also has been a contraction in fuel supplies that had been promised by Venezuela, despite the firm will of President Nicolas Maduro and his government to fulfill that commitment. Obviously this has caused additional stress on the functioning of the Cuban economy.”

“Nevertheless, Cuba has managed to maintain compliance with the commitments made in the process of restructuring of debts to our foreign creditors. However, I must admit that there have been some delays in current payments to suppliers and I thank our partners for their confidence and understanding of this situation and reaffirm the commitment of the Government to meet the outstanding maturities and to continue restoring the international credibility of the Cuban economy.”

“Nor can we ignore the harmful effects of the US blockade and the US ban on Cuba’s use of the US dollar in its international transactions.”

“In these adverse circumstances the Council of Ministers adopted a set of measures to address the situation and ensure the main activities that ensure the vitality of the economy, minimizing the effects on the population.”

“As expected, in order to sow discouragement and uncertainty among citizens, there have been speculations and predictions of an imminent collapse of our economy with the return to the acute phase of the special period. These dire warnings have been overcome thanks to the resilience of the Cuban people and their unlimited confidence in Fidel and the Party. We do not deny damages that may occur, even higher than at present, but we are prepared and better able then to reverse them.”

“Faced with these difficulties and threats, there is no room for improvisations and much less for defeatism. In the short-term, we face the situation with great energy, fairness, rationality and political sensitivity; and we continue to strengthen coordination between the Party and the Government with much optimism and confidence in the present and the future of the Revolution.”

“We must reduce expenses of all kinds that are not essential, to foster a culture of saving and efficient use of available resources, concentrating investment in activities that generate revenue from exports, substitute imports and support strengthening of infrastructure, ensuring sustainability of electricity generation and better use of energy carriers. These programs will ensure the development of the nation, in short, non-stop.”

“At the same time, the social services that the revolution has obtained for our people and measures to gradually improve their quality are preserved. In the midst of these difficulties were made several measures aimed at increasing the purchasing power of the Cuban peso, including the decrease in prices of a set of products and articles of broad demand for our population.”

“Similarly, despite the prolonged drought plaguing us, we begin to see the fruits of other actions to ensure better collection and distribution of agricultural products, confirming greater presence of these markets and a slight but progressive reduction of selling prices. These measures have been welcomed by the population as relief to Cuban families.”

“In addition, these measures have guaranteed the internal financial balance through appropriate levels of supply in the retail market, while progress is being made in the implementation of pay systems linked to productive results, all of which has enabled us to avoid inflationary pressures.”

“This morning the National Assembly of People’s Power agreed to support in its spirit and letter the update of the Guidelines for Economic Policy and Social Party and the Revolution for the period 2016-2021 that were adopted by the Seventh Congress of the Communist Party of Cuba. This will entail the legislative development and adoption of legal standards required to continue improving the legal and institutional basis in the interests of economic changes in the country.”

“We reaffirm that we will continue updating our economic model at our sovereignly determined pace, forging consensus and unity of Cubans in the construction of socialism.”

“The rate of change will continue to be conditioned by our ability to do things right, which has not always been so. This requires ensuring the preparation of policy documents, training and mastery of content, conducting monitoring and implementation and timely rectification to any deviations.”

“As clear evidence of our strength and experience, we have had favorable results in implementing the plan of prevention and confrontation of mosquito-borne diseases.

“The complex circumstances of the national economy will not weaken in the least, the solidarity and commitment of Cuba to the Bolivarian Revolution and Chavista with President Maduro and his government and the Civic Union Military brother Venezuelan people. We will continue lending to Venezuela, to the best of our ability, collaboration agreed to help sustain the achievements in social services that benefit the population. True friends are known in difficult times and Cubans will never forget the support of Venezuelans when we faced serious difficulties.”

“In commemorating the Day of National Rebellion [on July 29] we will do so with the conviction that the Cuban revolutionary people will again face difficulties without the slightest hint of defeatism and full confidence in the Revolution.”

Economy and Planning Minister’s Comments[2]

In his July 8 speech to the Cuban legislature, Marino Murillo, a member of the Politburo, Vice President of the Council of Ministers and Minister of Economy and Planning, essentially repeated the main points of President Castro’s report.

Conclusion [3]

The 1% increase in Cuban GDP for the first half of 2016 stands in contrast to the 4.7% increase for the first half of 2015. According to Reuters, Venezuelan shipments of crude oil and refined products to the island nation decreased around 20% for this period.

As a result of these economic problems and challenges, Cuba is concentrating on reducing expenses, promoting conservation and efficient use of available resources; concentrating investments on activities that generate exports and replace imports; strengthening infrastructure; assuring the sustainability of electrical generation; and facilitating better use of energy resources. The plan is to reduce total electricity consumption by 6% while not cutting residential use and key revenue-generating sectors such as tourism and nickel production.

More than 450,000 U.S. citizens or residents were among the 3.5 million tourists to visit the island last year, when the total number of visitors rose 17% from 2014, and the number of U.S. visitors for the first half of 2016 was up 26% to 304,000 out of a total of 2.1 million visitors to the island. Those numbers are likely to rise further when commercial flights from the U.S. begin later this year.[1]

Cuba’s future exemption from electricity restrictions for privately-owned businesses that cater to tourists could be seen as a Faustian bargain. Cuba desperately needs the hard currencies that tourists bring and spend on the island. On the other hand, the increasing numbers of U.S. visitors are tending to spend their money on Cuban bed-and-breakfasts, taxis, meals in privately-owned restaurants and other services that will increase demands for electricity and nurture Cuba’s nascent urban middle class and increase pressures for political and economic change.

Signs of these changes already can be seen. Public offices and state-run companies have cut work hours and are limiting the use of air-conditioning. Cinemas have cut the number of film screenings, and petrol stations are running out of fuel more frequently than in the past few years.

According to a New York Times journalist, many Cubans now fear “a return to the days when they used oil lamps to light their living rooms and walked or bicycled miles to work because there was no gasoline.” Regina Coyula, a blogger who worked for several years for Cuban state security, voiced one aspect of that fear: “We all know that it’s Venezuelan oil that keeps the lights on. People are convinced that if Maduro [the President of Venezuela] falls, there will be blackouts here.”

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[1] Castro, Faced with the difficulty, there is no room for improvisation or defeatism, Cuba Debate (July 8, 2016)(English translation of text of Castro speech), http://www.cubadebate.cu/opinion/2016/07/08/raul-castro-la-velocidad-de-los-cambios-seguira-estando-condicionad a-por-nuestra-capacidad-de-hacer-las-cosas-bien/#.V4Tyf5MrLj0;There is no room for improvisation or defeatism, Granma (July 8, 2016)(report about Castro’s speech), http://www.granma.cu/cuba/2016-07-08/el-pueblo-revolucionariocubano-nuevamente-se-crecera; Reuters, Castro Admits Cubans Face Hard Times as Economy Slows Sharply, N.Y. Times (July 9, 2016), http://www.nytimes.com/reuters/2016/07/09/world/americas/09reuters-cuba-economy.html?_r=0; Assoc. Press, Raul Castro Says Venezuela’s Crisis Hurting Island Economy, N.Y. Times (July 9, 2016), http://www.nytimes.com/aponline/2016/07/08/world/americas/ap-cb-cuba-parliament.html.

[2] Murillo, Cause the least possible services to the population, Granma (July 9, 2016); Marino Murillo: Come adjustments in the economy, without affecting basic services to the population (+ Video), Cubadebate (July 8, 2016) (the English translation of his speech in the Cuban press is impossible for this blogger to follow and understand); Reuters, Cuban Economy Minister Details Dire Economic Measures, N.Y. Times (July 9, 2016), http://www.nytimes.com/reuters/2016/07/09/world/americas/09reuters-cuba-economy-austerity.html.

[3] Burnett, Amid Grim Economic Forecasts, Cubans Fear a Return to Darker Times, N.Y. Times (July 12, 2016), http://www.nytimes.com/2016/07/13/world/americas/cuba-economy-venezuela-power-cuts.html?ref=world; Althaus, Growing Flow of Americans Remakes Cuba, W.S.J. (July 12, 2016), http://www.wsj.com/articles/growing-flow-of-americans-remakes-cuba-1468365712.