Irma bat­ters al­ready strug­gling Cuban econ­omy

Jerusalem Post - - BUSINESS & FINANCE - • By MARC FRANK and SARAH MARSH (Alexan­dre Menegh­ini/Reuters)

HA­VANA (Reuters) – Cuba’s cash-strapped econ­omy has suf­fered this year from a de­cline in aid from its chief ally, Venezuela, lower ex­ports and a brake on mar­ket re­forms. And then came Hur­ri­cane Irma.

The strong­est storm to strike Cuba in more than 80 years rav­aged in­fra­struc­ture through­out the coun­try, col­laps­ing the power grid and dam­ag­ing crops af­ter it slammed ashore two weeks ago. In the keys along the north­ern coast, it bat­tered beach re­sorts pop­u­lar with for­eign tourists and knocked out the air­port they use.

The cost of re­build­ing as well as the lost rev­enues from tourism and agri­cul­ture, sec­tors that had helped off­set some of the econ­omy’s weak­nesses, are heavy blows as the Com­mu­nist na­tion strives to pay over­seas cred­i­tors and sup­pli­ers.

“The prob­a­bil­ity that the econ­omy stays in re­ces­sion are now much greater,” for­mer Cuban cen­tral-bank econ­o­mist Pavel Vi­dal, now a pro­fes­sor at Univer­si­dad Jave­ri­ana Cali in Colom­bia, said of chances for a sec­ond straight full-year con­trac­tion in 2017. “With the im­pact on in­stal­la­tions in the keys and on the coun­try’s gen­eral in­fra­struc­ture, tourism will lose dy­namism.”

A tourism boom in Cuba over the past few years sparked by warm­ing re­la­tions with the West has helped sus­tain the econ­omy. Cuba is still la­bor­ing un­der a 57-year US trade em­bargo and suf­fer­ing from a steep de­cline in sub­si­dized oil from its cri­sis-stricken So­cial­ist ally Venezuela.

Of­fi­cial data, which gives heavy weight­ing to Cuba’s uni­ver­sal free health care and ed­u­ca­tion, shows ho­tels and restau­rants ac­count for just 4.4% of the roughly $90 bil­lion-a-year econ­omy, but they are a vi­tal earner of hard cur­rency.

A 23% rise in for­eign visi­tors to Cuba helped the econ­omy re­turn to growth in the first half of 2017, the govern­ment said, af­ter it tipped into re­ces­sion in 2016.

The out­look has dark­ened in the sec­ond half of the year.

First US Pres­i­dent Don­ald Trump said he was tight­en­ing re­stric­tions on Amer­i­cans trav­el­ing to Cuba. Then the Cuban govern­ment said last month it would not hand out new li­censes for much of the pri­vate sec­tor un­til it had “per­fected” its func­tion­ing.

Then Irma ar­rived, graz­ing along the is­land’s coast from east to west. Pack­ing sus­tained winds of more than 157 miles (253 km.) per hour

The keys, whose pris­tine beaches are home to about a quar­ter of Cuba’s four- and fives­tar ho­tels, are now lit­tered with felled trees and lamp posts, an­i­mal corpses and shred­ded fur­ni­ture, ac­cord­ing to state-run me­dia.

Irma de­stroyed much of the area’s sin­gle-run­way air­port, which re­ceives more than 485,000 pas­sen­gers a year.

The re­gion’s big­gest beach re­sort, Va­radero, was left mostly in­tact.

Pres­i­dent Raul Cas­tro vowed last Mon­day that tourism in­fra­struc­ture would be fixed be­fore the start of the win­ter high sea­son at year-end.

Eric Peyre, a rep­re­sen­ta­tive at French ho­tel com­pany Ac­cor SA, which runs the Cuba-owned Pull­man ho­tel in Cayo Coco, said dam­age would be cov­ered by in­sur­ance, and he ex­pects 90% of what the ho­tel needs would be in place by mid-De­cem­ber.

“As long as you have the main kitchen and the main restau­rant and rooms [ready], you can nor­mally wel­come guests,” Peyre told Reuters. “The ten­nis court and things like that, that can come af­ter.”

Still, ho­tels in the keys face rev­enue loss for the months that tour-pack­age op­er­a­tors sent their clients else­where, and it could prove tricky to re­build the area’s rep­u­ta­tion.

HUR­RI­CANE AF­TER THE DROUGHT

Dam­age in the agri­cul­tural sec­tor will both weigh on state fi­nances as well as tighten food sup­ply in the short term. Fuller reser­voirs due to Irma’s tor­ren­tial rains could in the long run prove ad­van­ta­geous af­ter a se­vere drought.

Some 300,000 hectares (740,000 acres) of sug­ar­cane – an area roughly twice the size of Hous­ton – were af­fected to dif­fer­ent de­grees, the state sugar mo­nop­oly said.

Forty per­cent of mills were dam­aged in the in­dus­try that re­mains one of Cuba’s most im­por­tant in terms of em­ploy­ment and ex­port earn­ings.

‘With the im­pact on in­stal­la­tions in the keys and on the coun­try’s gen­eral in­fra­struc­ture, tourism will lose dy­namism’

Even though Cuba had rushed to har­vest what it could be­fore Irma hit, other crops, such as pla­tano and rice, had also re­port­edly been af­fected, said Laura Melo, the Cuba rep­re­sen­ta­tive for the United Na­tions World Food Pro­gram.

“Some of these ar­eas were al­ready se­ri­ously af­fected by drought, so this is an ac­cu­mu­la­tion of shocks to Cuba’s ca­pac­ity to pro­duce food, both in terms of in­come and avail­abil­ity of food,” she said.

Look­ing ahead, Cuba will need to re­pair tens of thou­sands of houses as well as roads, bridges, public build­ings and the power grid. Irma also dam­aged a ther­mo­elec­tric plant that pro­vides a fifth of the coun­try’s elec­tric­ity.

“If this year, the bud­get deficit was es­ti­mated at around 12%, that will un­doubt­edly have in­creased with these enor­mous losses,” Cuban econ­o­mist Omar Ever­leny said.

DAM­AGED POOL chairs are seen on the grounds of a ho­tel a day af­ter the pas­sage of Hur­ri­cane Irma in Va­radero, Cuba, last Sun­day. The strong­est storm to strike Cuba in more than 80 years rav­aged in­fra­struc­ture through­out the coun­try, col­laps­ing the power grid and dam­ag­ing crops.

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