Cuba’s Raul Cas­tro faces deep eco­nomic prob­lems in 2017

Kuwait Times - - BUSINESS -

Alex Romero was de­lighted when Pres­i­dent Barack Obama came to Ha­vana in March bear­ing the prom­ise of a bright new fu­ture. Like so many other Cubans, the 42-year-old state photography shop em­ployee thrilled at the pres­i­dent’s vi­sion of re­stored ties be­tween the US and Cuba. Fam­i­lies would re­unite. A flood of Amer­i­can busi­ness would lift the stag­nant cen­trally planned econ­omy, fu­el­ing its slow path to­ward re­form. Even as Obama spoke, an 80 per­cent surge in US vis­i­tors was drench­ing state-run and pri­vate busi­nesses with hun­dreds of mil­lions of des­per­ately needed dol­lars.

Nine months later, the world seen from Ha­vana looks very dif­fer­ent.

Pres­i­dent Raul Cas­tro faces what could be his tough­est year since he took power in 2006. 2017 brings a pos­si­ble eco­nomic re­ces­sion and a US pres­i­dent-elect who has promised to undo Obama’s nor­mal­iza­tion un­less the Cuban gov­ern­ment makes new con­ces­sions on civil rights. Re­sis­tance to pres­sure from Washington is a found­ing prin­ci­ple for the Cuban com­mu­nist sys­tem, mak­ing do­mes­tic con­ces­sions in ex­change for con­tin­ued de­tente a vir­tual im­pos­si­bil­ity.

“Peo­ple ex­pected that af­ter Obama came there would be changes in the re­la­tion­ship be­tween the US and Cuba but that we could keep the best of what we have, the ben­e­fits for the peo­ple,” Romero said. “Trump’s not go­ing to be able to get what he wants, an­other type of Cuba. If the world’s num­ber one power takes us on, 2017 is go­ing to be re­ally bad for us.”

Twin chal­lenges

Cas­tro must man­age these twin eco­nomic and diplo­matic chal- lenges dur­ing a year of tran­si­tion. The 85-year-old gen­eral has promised to hand over the of­fice in early 2018 to a suc­ces­sor, widely ex­pected to be Miguel Diaz-Canel, a 56year-old of­fi­cial with nei­ther the Cas­tro name nor rev­o­lu­tion­ary cre­den­tials. The change will oc­cur with­out Cas­tro’s older brother Fidel, the rev­o­lu­tion­ary leader whose largely un­seen pres­ence en­dowed the sys­tem he cre­ated with his­tor­i­cal weight and cred­i­bil­ity in the eyes of many Cubans be­fore he died last month at 90.

“Even if those two events hadn’t taken place - Trump’s vic­tory and Fidel’s death - 2017 was go­ing to be a very dif­fi­cult year for Cuba,” said Cuban econ­o­mist Omar Ever­leny Perez, a vis­it­ing pro­fes­sor at Keio Univer­sity in Tokyo. Cuba pub­lishes few cred­i­ble eco­nomic sta­tis­tics, but ex­perts ex­pect the coun­try to end this year with gross do­mes­tic prod­uct growth of 1 per­cent or less. It main­tained a rate close to 3 per­cent from 2011-2015.

One bright spot is tourism, boom­ing since Obama and Cas­tro’s Dec. 17, 2014, de­tente an­nounce­ment set off a surge in over­all vis­i­tor num­bers, up more than 15 per­cent in 2015 and again this year.

“I’ve never seen as many tourists as I have this year,” said Ma­galys Pupo, a street-cor­ner pas­try ven­dor in Old Ha­vana. “They’re ev­ery­where and they’re the in­come that we need in this coun­try.”

The slow­ness of macroe­co­nomic growth de­spite a surge of in­ter­est in for­eign in­vest­ment and the great­est tourism boom in decades at­tests to both long-term mis­man­age­ment of the Cuban econ­omy and the depth of the cri­sis in other sec­tors, par­tic­u­larly aid from Venezue­lan in the form of deeply sub­si­dized oil.

An­a­lysts be­lieve that as Venezuela’s Cuba-in­spired so­cial­ist econ­omy has dis­in­te­grated, ex­ports to Cuba has dropped from 115,000 bar­rels daily in 2008 to 90,000 in re­cent years to 40,000 a day over the last few months. Venezuela was the prime des­ti­na­tion along­side Brazil for Cuban doc­tors and other pro­fes­sion­als whose salaries go di­rectly to the Cuban gov­ern­ment, pro­vid­ing an­other vi­tal source of hard cur­rency be­lieved to be slack­en­ing in re­cent years. Nickel, an­other of Cuba’s main ex­ports, has seen a sharp price drop this year.

The rev­enue drop may be cre­at­ing a vi­cious cy­cle for Cuba’s staterun in­dus­tries. Ex­perts say cut­backs in im­ported in­dus­trial in­puts this year will lead to lower pro­duc­tiv­ity in Cuba’s few do­mes­tic in­dus­tries in 2017 and make zero growth or re­ces­sion highly likely.

“Raul Cas­tro’s gov­ern­ment has a year left and it should be plan­ning what needs to be done,” said Pavel Vi­dal, a Cuban econ­o­mist at the Univer­si­dad Jave­ri­ana in Cali, Colom­bia. “Above all, it will be man­ag­ing a cri­sis.” The gov­ern­ment cut back sum­mer work­ing hours and gas ra­tions for state-owned ve­hi­cles and has so far avoided any sus­tained power out­ages. But a crack­down on black-mar­ket gaso­line sales to taxi driv­ers led them to in­crease prices, caus­ing driv­ers to raise their prices, squeez­ing many Cubans al­ready strug­gling to get by on state salaries of about $30 a month. — AP

HA­VANA: In this March 20, 2016 file photo, tourists ride in a clas­sic Amer­i­can car past a bal­cony dec­o­rated with Cuban and US flags in Ha­vana. Slow growth dur­ing a surge of in­ter­est in for­eign in­vest­ment and the great­est tourism boom in decades at­tests to both long-term sys­temic mis­man­age­ment and the depth of the cri­sis in other sec­tors, par­tic­u­larly aid from Venezue­lan in the form of deeply sub­si­dized oil. —AP

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