Cuba’s Government Analyzes and Responds to Economic Woes
“Our joy is immense … We don’t deceive ourselves thinking that everything ahead will be easy, when perhaps everything is going to be more difficult.” That was Fidel Castro, hours after the victory of Cuba’s Revolution.
Difficulties were center stage 65 years later, at a plenary session of the Central Committee of Cuba’s Communist Party on December 15 and 16 and at the National Assembly of People’s Power, meeting on December 20-22.
The views of Cuban leaders on problems now enveloping Cuba shed light on the realities of a nation under siege and a revolution in trouble. The information is pertinent to the solidarity efforts of Cuba’s friends abroad.
Addressing the Central Committee’s plenary session, Cuban President Miguel Díaz-Canel noted that, “We have discussed efforts that have not yielded solutions, measures that did not prosper, and goals that were not fulfilled …The scenario is that of a war economy … [We] are all here to reverse the present situation … with consensus as to decisions and with collective work, with passion and energy.”
Díaz-Canel called for “creative resistance” and “confidence in victory,” while insisting that dissatisfaction “is a motor that moves revolutionary energies. It provokes embarrassment that ends up activating people’s full participation, without which socialism is impossible.”
“We would be surrendering beforehand, if we see this war as an insuperable calamity. We must see it … as the opportunity to grow and to overcome our own selves, while the adversary is nakedly evil before the world … On the eve of the 65th anniversary of the Cuban Revolution … we are called to act together for a common objective: Save the homeland, the Revolution, socialism, and overcome.”
The Assembly meets
Speaking to the National Assembly were: Alejandro Gil Fernández, minister of the economy and planning; Prime Minister Manuel Marrero Cruz; and President Miguel Díaz-Canel.
Gil Fernández regards the U.S. economic, commercial and financial blockade of Cuba as the principal obstacle Cuba faces in restoring its economy.
He indicated that in 2023 Cuba’s GDP will have fallen almost two percent. Exports were $770,000 million below predictions. Food production was less than that of 2022. Tourism income increased by $400 million in 2023 but represented only 69% of the yield in 2019. Overall production was down due mainly to state enterprises held back by shortages of supplies and fuels. Currency shortages and loss of workers to migration hampered the healthcare and education sectors.
Electricity generation was up 32% in 2023, according to Gil Fernández. Cuba’s 30% inflation rate for 2023 was lower than the 77.3% rate in 2021. State business entities showed “gradual recuperation.” They employ 1.3 million workers while accounting for 92% of goods and services produced in Cuba and 75% of exported products.
He attributed price inflation to international price hikes, the government’s release of money to finance its budget deficit, fewer goods being produced, and an agriculture sector burdened by labor shortage, high costs, and low yields.
“What isn’t being produced cannot be imported,” Gil Fernández lamented. His message is that importing goods is almost impossible what with “the effect of high prices on the international market.” But, paradoxically, “a lack of production resources” forces Cuba to import over 70% of the food that is being consumed.
He proposed measures for increasing food production, including:
+ Creation of a financial mechanism for bolstering production based on farmers using Cuban currency derived from agricultural sales to buy supplies they need.
+ Build a farm labor force through moonlighting, employing students, and having young people do agricultural work as part of their military service.
+ Use food produced in Cuba, not imported food, to fill the “normal family food basket.”
Prime Minister Manuel Marrero Cruz critiqued the government’s lack of control over production and distribution which “adversely affects production by state entities and lets currency exchanges on the illegal market determine the pricing of products from the non-state sector.”
He reported that social inequalities are growing, and that the tendency exists while state subsidies continue to nourish less distressed sectors of the economy. Equally worrisome: “The former state monopoly in production is now consolidating in the private sector.”
He was referring to the recent appearance of 9000 or so mostly private small-and-medium-sized businesses and to independent farmers and cooperatives that took over land from the state under long-term usage arrangements. They now control 80% of Cuba’s agricultural land.
Marrero Cruz called for “stimulation of government-operated small-and-medium-size business entities.”
Both private businesses and the farming sector sell products at highly inflated prices with prices being set by black market operatives. The prime minister condemned the state subsidies such entities receive in the form of low prices assigned to the fuel, water, transportation and electricity they buy from the state. Similarly, the government pays high prices to farmers for food that, under the rationing system, is sold inexpensively to the population.
Henceforth, according to Marrero Cruz, the government will be subsidizing people, not products. According to one report, “The Ministry of Work and Social Security will be charged with undertaking a survey of ‘vulnerable’ social sectors.” “Nobody will be abandoned,”Marrero Cruz insisted.
The government, he indicated, will increase sales taxes on final products such as water, gas, electricity, transport and reduce import tariffs by 50% on the “intermediate products” used in food production and manufacturing. More tourist dollars will be harvested. Municipal assemblies will present budgets and in the case of deficits will generate more income and reduce administrative expenses.
For the prime minister, “food production needs to be prioritized and by all sectors. Many countries are saying to us: ‘We’ll put up the money, you provide the land and then pay back the money with production.’”
He pointed out that, despite the non-availability of imported fertilizer and pesticides, “there are many instances of countries producing food; an agricultural country must produce its food.”
Marrero Cruz sees “speculative prices … and intermediaries earning a lot more than producers” and non-state entities now controlling imports rather than the government, the result being “abusive and speculative pricing.” He called for paying for imports with income from exports: “[W]e prefer importing supplies and products essential to the economy and paying for them by offering other countries certain products and/or services.”
Responding to inflation, the government, collaborating with the Central Bank of Cuba, will change the official exchange rate for the peso. According to Marrero Cruz, the government will be restricting prices for goods and services with a system of “maximum prices.”
President Miguel Díaz-Canel, addressing the National Assembly on December 22, focused on Cuba’s “war economy … [It’s] a political scenario of maximum asphyxia, designed and applied against a small country by the most powerful empire in history.” He also attributed economic problems to “the crisis in international economic relations and our own errors.”
Economic war takes the form of economic blockade aimed at “reduced supplies of goods used by the population, inflated prices, and low purchasing power for most Cubans.” “Together with constant acts of subversion and disinformation against Cuba, the goal is to break the country, provoke social decomposition, and make for ungovernability.”
Díaz-Canel spoke of errors as “part of the complexity of making decisions in a context of extreme tension … [and of] commitment to preserving social conquests.” He mentioned mistakes, particularly in the “design and implementation of currency unification” and in “approving new economic actors without performance norms having been established.”
The effectiveness of new measures will “depend on generating more wealth, more work incentives, and more distribution of resources.” The president promised there will be no “neoliberal package … no crusade against small businesses, no elimination of the basic food allocation.”
The president highlighted: “food production, localities taking care of more of their needs, the revival of tourism, rescue of the sugar industry, state control of currency and the exchange market, redesign of the financial system, and guarantees for self-financing, and managing currency so as to serve those whose production generates income.”
Díaz-Canel took note of Cubans’ high regard for healthcare workers and teachers, promising that “they will be the first to benefit from additional pay, which the prime minister announced in his intervention.”
Testifying earlier before the Economics Commission of the National Assembly, Díaz-Canel emphasized “taking advantage of the facilities of the municipalities and articulating strategies of local development.” Recalling that the “[f]oundation of government is the municipal assembly of people’s power,” he insisted on “mapping out actors in the municipalities and integrating them with state and private businesses.”
In the end
The information and opinions provided by Cuban leaders and reviewed here clarify difficult realities, among them: 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.
Cuba is fashioning responses. They are: decentralization of political and economic administration; cut backs on 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.
These will be palliative remedies unless basic causes are dealt with. A prime goal of U.S. policy has been to deprive Cuba of money, and that has come to pass. Revolutionary Cuba’s very survival depends on U.S. citizen activists forcing their government to shed its blockade of Cuba. There, the great need now is for Cuba to be removed from the U.S. list of terrorist-sponsoring nations. That designation causes most international financial institutions to refuse handle dollars on Cuba’s behalf.
There is a larger context. The U.S. use of economic sanctions everywhere rests on planet-wide dollar dependency. That emerged out of the Bretton Woods Conference of 1944 and has coincided since with unrelenting U.S. assertion of worldwide power. That’s the basis for a global constituency on Cuba’s behalf. How it will be set in motion is the big question.
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