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Another Indictment of the Cuban Economy

Cuba Siglo 21 has published a new dossier by economist Emilio Morales that provides a statistical x-ray of the collapse of the regime’s system on the island. [1]

“The Cuban economy is in a critical phase due to the drastic fall of more than 50% of its main sources of income: export of medical services, remittances and tourism. This financial collapse has accelerated the countdown of the governance regime.”

“The export of medical services, the country’s main source of income, has suffered a 78.12% dropsince its peak in 2013, when it reached 10.42 billion dollars.”
“Remittances, the second largest source of income, have also declined significantly. In 2023, remittances totaled $1,972.56 million, a drop of 3.31% compared to 2022 and 46.93% compared to 2019, before the pandemic. Morales attributes the decline to mass emigration that began after the crackdown on protests on July 11, 2021, which ‘has not only reduced remittances but has also resulted in a significant flight of human capital.’”
“Tourism, one of Cuba’s most promising industries, has failed to recover post-pandemic. Morales recalls that in 2023 Cuba received 2,436,979 tourists, a figure comparable to that of 2009, well below the expected levels. The economist points out that ‘the situation is aggravated by the decrease in Cuban tourists living abroad, a key segment for the Cuban tourism economy.’”
“The regime’s commitment to attracting Russian tourists has not compensated for the loss of European tourism, affected by the Cuban government’s support for Russia in the war against Ukraine. The arrival of tourists from the five main European issuers (Italy, France, Germany, Spain and England) has decreased by 67.45% in the last five years.”
“The Cuban regime has proven incapable of implementing effective mechanisms to transform the economy and overcome the current multi-systemic crisis. The fall of the three main sources of income by more than 50% reflects the total dysfunctionality of the governance regime.”

“Even the regime’s allied governments are not willing to carry out a large-scale economic rescue. The governance models of Russia, China or Vietnam have not been adopted, and the power elite in Cuba continues to resist any change.”

“Mass emigration has decapitalized the country financially and in terms of human resources, and the metamorphosis of Castroism into a mafia state, with GAESA as the center of true power, has led to the destruction of industries and the loss of political capital.”

“The Cuban Communist Party (PCC) has no retraining pool, with many members who no longer believe in the party or its ideology.”

“The economic crisis has had devastating effects on all sectors of society.There is an alarming shortage of teachers, health personnel , workers in the sugar industry, tourism and the energy system. Even the justice system is affected, with the Supreme Court of Justice operating at only 69% of its capacity.”

“With the celebration of the 71st anniversary of the attack on the Moncada barracks, Cuba finds itself in a deep humanitarian crisis, with 89% of the population living in poverty and 1.79 million citizens having left the country in recent years.”

Morales concludes, “the Cuban system has collapsed. The Cuban state is dysfunctional and bankrupt. The Cuban government is mediocre and lacks leadership. The Cuban power elite is impervious to criticism. Without some kind of radical transformation to prevent or postpone it, the final collapse, by one route or another, is inevitable.”[2]

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[1] 71 years after July 26: ‘The Cuban Economy has collapsed,’ Diario de Cuba (July 25, 2024). Cuba Siglo 21 is “a nongovernmental think tank based in Madrid, Spain that serves the forces that promote change in Cuba towards an open, democratic and prosperous society supported by the rule of law and a free market. ” (About Cuba Siglo 21.)

[2] See also ‘Distortion’ of employment in Cuba: army of inspectors, thousands less farmers, teachers and doctors, Diario de Cuba (July 25, 2024); The regime is forced to stop falsifying data on Cuba’s demographic crisis, Diario de Cuba (July 24, 2024); Industrial devastation in Cuba is worse than the agricultural catastrophe, Diario de Cuba (July 23, 2024).

Cuba’s Current Economic and Political Crises

Introduction[1]

At least by early December 2023, it was evident that Cuba was experiencing a horrible economic crisis. One commentator put it this way: “Cuba is going through the worst crisis it has experienced in decades, with widespread shortages of food and medicines, rolling blackouts and a sky-high 400% annual inflation rate. The calls on the communist leadership to open up the economy to the market are getting loud, even from close political allies.”

t also was a Cuban political crisis on how to respond to this economic crisis. As John Kavulich, the president of the U.S.-Cuba Trade and Economic Council based in New York City, said in early December, Cuban “bureaucrats have become more reluctant to take risks since there is uncertainty about who is really in charge.” They are “either frightened or untrusting, and certainly not risk-takers.”

The most vivid criticism of this situation came from Roberto Alvarez-Quinones, a Cuban journalist, economist and historian who after working in Cuba for Granma and Cuban television stations has been doing that work in Los Angeles, California. He said, “Never in the history of the entire West has there been such an overwhelming economic and social crisis that it has affected practically 99% of the total population of a country, without having been caused by a natural catastrophe or a war, but by the Government of the nation.”

Cuban Government’s Response[2]

At a December 20-22, 2023, meeting of Cuba’s National Assembly, the Minister of the economy and planning, Alejandro Gil Fernandez, reported that for 2023 Cuba’s GDP fell almost 2%; exports were $770 million below predictions; food production was less than that for 2022; tourism, although more than the prior year, had a yield only 69% of the 2019 figures; overall production was down; there were shortages of supplies and fuels; and health care and education sectors where harmed by loss of workers to emigration.

Fernandez attributed Cuba’s inflation to international price hikes, the government’s release of money to finance its budget deficit, fewer goods being produced, the agricultural sector being burdened by labor shortages, high costs and low yields and Cuba being forced to import over 70% of the food that [was] being consumed.

Prime Minister Manuel Marrero Cruz said the government’s lack of control over production and distribution “adversely affects production by state entities and lets currency exchanges on the illegal market determine the pricing of products from the non-state sector.”

President Diaz-Canel, of course, criticized the U.S. embargo (blockade), but admitted that the Cuban government had made some errors in the “design and implementation of currency unification,” “approving new economic actors without performance norms having been established” and “the complexity of making decisions in a context of extreme tension [and of] commitment to preserving social conquests.”

All of these “difficult realities” were summarized by W.T. Whitney, Jr. (an U.S. political journalist focusing on Latin America) as “the adverse effects of diminished tourism, inflation, and emigration; social inequalities based on varying access to resources; production stymied by shortages of resources; inadequate food production; lack of buying-power for most Cubans, and for importing necessary goods; and the near impossibility of securing foreign investment.”

To meet these problems, Whitney said, Cuba was preparing these responses: “further decentralization of political and economic administration; cutbacks on the expenditure of central government funds; reduced subsidies for the purchase of water, fuel, transport, and electricity by business entities; adjustment of import tariffs to favor the availability of resources for production; capturing more tourist dollars; protecting state-operated production entities; fixing prices; and producing more food.”

Moreover, Whitney said, the U.S. needs to cancel its embargo (blockade) of Cuba and remove Cuba from the U.S. list of countries that are sponsors of international terrorism.

Criticism of Cuban Government Responses[3]

Javier Perex Capdevila, Doctor of Economic Sciences and Professor at the University of Guantanamo, said the Government measures are based on cutting subsidies, but “there are no measures to get out of economic stagnation and . . . to reduce inflation, accompanied by a fiscal deficit that entails generating more liquid money which does not stimulate the economy, but rather inflation. The measures that have been announced in a confusing and ambiguous manner are supposed to achieve macroeconomic stabilization, but that is not a real solution . . and there is no guarantee that they will work.”

In addition. Capdevila noted that increases in long-distance transportation rates will adversely affect many people who have to use such transportation to reach competent medical personnel. He said, “You cannot save a country if you do not save the people.”

Pedro Monreal, a Cuban economist, criticized the purported justification for increasing black market prices for currencies by saying the government had not designed that market. Monreal said this was “a fig leaf to cover up the poor design of the ‘organization that made this informal market necessary.’” The Cuban State did something worse in 2020 when “it designed a defective official exchange market with an overvalued [peso].” Monreal also “predicted more inflation” this year with a government deficit of 18.5% of gross domestic product.

Cuban economist Emilio Morales commented on the continued emigration of Cubans in 2023 while there was a 3.3% decrease in remittances to those on the island due to the need for those now in other countries to pay for their outbound transportation and expenses of living in other countries on their “march for family freedom.” Morales concluded that this result shows “the systemic crisis demands radical reforms and the entrenchment of the mafia regime in its totalitarian model blocks any possibility of survival. History teaches that bayonets cannot sustain a regime for long, indefinitely without fundamental reforms.”

The most recent news about Cuba’s laws affecting private enterprises was the January 16^thannouncement of new income tax regulations. Now “private sector employees will have to pay a 20% income tax on earnings above 30,000 Cuban pesos, about $109 per month. That’s a 15% tax rate increase from the previous scale set up in 2021, which imposed a 5% income tax for earnings over 9,510 Cuban pesos. Business owners must automatically deduct the tax payments monthly, the decree says.”

This recent announcement is in addition to the tax burden on Cuban private businesses: 35% tax on profits, a 10% tax on sales or services provided, a 5% payroll tax, a one percent revenue tax to support local governments and contributions to social security equal to 14% of workers’ salaries. Owners of the [private businesses] also have to pay up to 20% taxes on dividends.

Such private businesses “cannot hire more than 100 employees, they cannot be involved in economic activities handled by the state, such as telecommunications, and must import products and supplies through state companies working as intermediaries. According to the new regulations published this week, they can also be hit with price controls at any time ‘when circumstances advise it to achieve more favorable prices for the population.’”

At about the same time as this announcement of new taxes on private enterprises, the Cuban government announced a new “’ethics code’ for government officials and members of the Communist Party and similar organizations that mandate them to ‘be faithful to socialism,’ fight against the ‘genocidal’ U.S. embargo and ‘be loyal to the Cuban Communist Party, the Revolution… and to the Revolution´s Commander in Chief, Fidel Castro.”

Conclusion[4]

This blog consistently has advocated for U.S. repeal of the embargo (blockade) of Cuba and the U.S. designation of Cuba as a state sponsor of terrorism. However, all of the blame for Cuba’s current crises cannot be attributed to these U.S. measures. Indeed, the U.S. now is the sixth largest exporter to Cuba.

Moreover, now the U.S. is preoccupied with the Israel-Hamas and the Russia-Ukraine wars, problems with Iran, North Korea, China, Yemen and the Red Sea and the problems created by large number of immigrants at our southwestern border. As a result, the U.S. does not have the time and resources to devote to Cuba’s problems and U.S. policies regarding same.

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[1] Analysis of Cuba’s Current Economic Crisis, dwkcommentaries.com (Dec. 5, 2023); Almost All Cubans Suffer Worst Economic Crisis in the History of the Western Hemisphere, dwkcommentaries.com (Dec. 11, 2023);

[2] Whitney, A revolution in trouble: Cuba’s government, People’s World (Jan 8, 2024).

[3] ‘You can’t save a country if you don’t save the people.’ a Cuban economics doctor explodes in response to the package, Diario de Cuba (Jan. 13, 2024); Another rise in the price of the dollar and the euro on the Cuban black market, Diario de Cuba (Jan. 15, 2024); Emigration grows, but remittances to Cuba sink, Diario de Cuba (Jan. 16, 2024);Through resolutions, the Castro regime intends to stop the astronomical fiscal deficit that it approved, Diario de Cuba (Jan. 17, 2024); Reyes, The economic package opens a political crisis in the Government of Cuba, Diario de Cuba (Jan. 17, 2024); Torres, As the economy craters, the Cuban government hits private-sector workers with tax hike, Miami Herald (Jan. 18, 2024).

[4] E.g., posts listed in sections “Cuba: State Sponsor of Terrorism?” and “U.S. Embargo of Cuba” in List of Posts to dwkcommentaries—Topical: CUBA [as of 5/4/20]; Cuba Still on U.S. List of State Sponsors of Terrorism, dwkcommentaries.com (Dec. 2, 2023);U.S. Senators and Representatives Demand Ending of U.S. Designation of Cuba as State Sponsor of Terrorism, dwkcommentaries.com (Jan. 12, 2024); COMMENT: Another Congressman Calls for Ending Cuba as a State Sponsor of Terrorism, dwkcommentaries.com (Jan.13, 2024); U.S. Increasing Exports to Cuba, dwkcommentaries.com (Jan. 12, 2024).

Another Defining Challenge of the 21st Century

Ross Douthat, a New York Times columnist, asserts that at least one of the defining challenges of the current century is “the birth dearth, the population bust, the old age of the world.”[1]

This assertion is based, he says, upon “various forces, the Covid crisis especially, [that] have pushed birthrates lower faster, bringing the old-age era forward rapidly.” Additional support for this thesis, he says, is China’s recent announcement that “its population declined for the first time since the Great Leap Forward, over 60 years ago.” And “variations on that shadow lie over most rich and many middle-income nations now—threatening general sclerosis, and a zero-sum struggle between a swollen retired generation, and the over-burdened young.”

Douthat then asserts the following “Rules for an Aging World:”

“The rich world will need redistribution back from old to young.” “[R]eform [of] old-age entitlements will become ever more essential and correct — so long as the savings can be used to make it easier for young people to start a family, open a business, own a home. And countries that find a way to make this transfer successfully will end up far ahead of those that just sink into gerontocracy.”
“The big bottlenecks [of the new A.I. technology] aren’t always in invention itself: they’re in testing, infrastructure, deployment, regulatory hurdles.”
“Ground warfare will run up against population limits [as we see today in the Russia-Ukraine war and the tensions over Taiwan].”
A “little extra youth and vitality will go a long way.” For example, “countries that manage to keep or boost their birthrates close to replacement level will have a long-term edge over countries that plunge toward . . .half-replacement-level fertility.” The same “will be true within societies as well.”
A major challenge in this new age will be the international response to the projections that Africa’s population will “reach 2.5 billion by 2050 and [4.0] billion by 2100. . . .The balance between successful assimilation and destabilization and backlash [of the African diaspora] ….will help decide whether the age of demographic decline ends in revitalization or collapse.”

Reactions

Wow!, This is a new and frightening projection of the next 80 years for all of us on planet Earth today! We certainly have seen these challenges in states in the Middle West like Minnesota, Iowa, the Dakotas and Nebraska, and this blog has advocated for increased immigration in these states to counteract aging and declining populations. Nearly everyone in the U.S. today and in the future should join me in a chorus, “I am a proud descendant of immigrants!!”

At the end of the Douthat column are many comments from readers. Here are a few of those comments:

Geoff Burrell of Western Australia said, “Aged 72 I tend to agree that longevity is currently a problem but hasn’t ‘age at dying’ decreased in western countries due to the pandemic, a trend that may continue for many decades as new Covid variants and climate change induced pandemics come along. The article also characterizes elderly people as a ‘burden’ but doesn’t recognize the substantial portion of any population’s wealth they hold, much of it, ironically, used to support younger family members. Immigration is also able to overcome most of the deficits faced by a population with an ageing society, though that requires a good immigration policy to ensure the country gets what it wants.”
Edwin, an American MD in Africa, thanks Douthat “for his recognition of the importance of Africa. Most of Africa’s low- and middle-income countries have 50% or more of their population under the age of 17 years. The education, health and stability of Africa’s children and adolescents is critically important, and will be a major determinant of global security in the 21st Century…” He adds, “Northern Nigeria, where I spend much of my effort, now has a huge number of people living in extreme poverty. Yet the young people in this area of Africa’s most populous nation have much promise. We in the West must prioritize the health, education and security of places like northern Nigeria.”
Nicholas Mellen of Louisville, KY agrees with Edwin. “An aging population? Allow migrants in. They’re young healthy and ambitious. The most productive and successful Americans are usually within the first 3 generations; these migrants will do the same: from Haiti, Honduras, Iran, Sudan, Venezuela, Russia, China, Afghanistan to name a few. You have to be brave, persistent, hopeful and lucky to survive the journey. So there’s how you rejuvenate an aging nation.”
Patrick Bohlen of Orlando, IL, says, “Allowing for more immigration is an obvious top 3 solution that would solve many of the issues brought about by the demographic shift. It will also be unavoidable with climited migration. . . . We don’t need higher birth rates, but we do need sane immigration policies that help address both the demographic and climate crises.”
Anne F of New York, concludes her comment, “We don’t need to be concerned about population decline as it is part of a long-term picture of sustainable human existence. Climate needs to be the focus.”

Surprising news relating to this subject was the recent release of information about the results of the 2021 Gallup World Poll based on detailed interviews with nearly 127,000 adults in 122 countries. “Globally, people’s desire to move reached its highest point in a decade, but interest in moving to the U.S. plunged. When asked where in the world they would want to migrate, 1 in 5 potential migrants — or about 18% — named the U.S. as their desired future residence. The new numbers marked a historic decline that began in 2017, when just 17% — the lowest rate ever recorded — said they’d want to move to the U.S. In previous years, the U.S. has polled between 20% and 24%.”[2]

The managing editor of this World Poll and one of the report’s authors, Julie Ray, attributed the decline in foreigners desire to relocate to the U.S. to anti-immigrant and anti-Muslim policies of the Trump Administration. A Palestinian man, for example, came to the U.S. for graduate study because he thought the U.S. offered “infinite opportunities, but soon he saw a U.S. “workaholicculture,” a lack of fulfillment and evaluating a person’s value by their job status.

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[1] Douthat, Five Rules for an Aging World, N.Y. Times (Jan. 22, 2023).

[2] Abdeleziz, Fewer People Are Interested in Migrating to The U.S. Than Ever Before. Here’s Why, HuffPost (Jan. 26, 2023); Pugliese & Ray, Nearly 900 Million Worldwide Wanted to Migrate in 2021, gallup.com (Jan. 24, 2023).