Irma blows away hopes in Cuba
RECESSION LIKELY TO LINGER
Cuba’s cash-strapped economy has suffered this year from a decline in aid from chief ally Venezuela, lower exports and a brake on market reforms. And then came Hurricane Irma.
It ravaged infrastructure, collapsing the power grid and damaging crops after it hit land last Friday. It battered beach resorts popular with foreign tourists and knocked out the airport they use.
The cost of rebuilding and lost revenue from tourism and agriculture, which had helped offset some of the economy’s weaknesses, are heavy blows as the nation strives to pay overseas creditors and suppliers.
“The probability the economy stays in recession are now much greater,” said former Cuban central bank economist Pavel Vidal, of chances for a second straight full-year contraction in 2017. “With the impact on installations in the keys and on infrastructure, tourism will lose dynamism.”
A tourism boom over the past few years has helped sustain the economy.
Cuba is still labouring under a 57-year US trade embargo.
Official data shows hotels and restaurants account for just 4.4% of the $90 billion-a-year economy (R1.1 trillion), but are a vital earner of hard currency. A 23% rise in visitors 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 going to Cuba. And the Cuban government said last month it would not hand out new licences for much of the private sector until it had “perfected” its functioning. Then Irma arrived, grazing along the coast from east to west. The keys, home to a quarter of the four- and five-star hotels, are littered with debris, according to state media.
President Raul Castro vowed on Monday tourism infrastructure would be fixed before the start of the high season at year-end. Eric Peyre, a representative at French hotel company Accor SA, said 90% of what the hotel needs would be in place by mid-December.
But hotels in the keys face revenue loss for the months tour package operators sent clients elsewhere. Damage in the agricultural sector will weigh on state finances and tighten food supply.
Forty percent of sugar mills were damaged in the industry that is one of Cuba’s most important in terms of employment and export earnings.
About 300 000 hectares of sugarcane – an area roughly twice the size of Houston – were affected to different degrees. –