Poverty in Cuba increases as government slashes social spending, expert says

Posted on Saturday, 02.08.14

Poverty in Cuba increases as government slashes social spending, expert
says
BY JUAN O. TAMAYO
JTAMAYO@ELNUEVOHERALD.COM

The reforms pushed by Cuban ruler Raúl Castro are necessary to fix the
country's economy, but are eroding social services and have not led to
increased productivity, economist Carmelo Mesa-Lago said Saturday.

Social services accounted for 55 percent of the government budget and 37
percent of the Gross Domestic Product (GDP) in 2007-2008, one of the
highest levels in Latin America but one "that could not be sustained,"
Mesa-Lago said.

The latest official figures show social spending – essentially health,
education and welfare – dropped to about 30 percent of GDP, said the
professor emeritus at the University of Pittsburgh, who is considered
the leading expert on the Cuban economy.

"The result of all of this is that there's more poverty," he added,
estimating the poverty rate in the communist-ruled country of 11.2
million people at about 26 percent.

The combination of "zigzagging" reforms and cuts in social spending
"cannot end well," he told a seminar at the Ermita de la Caridad in
Miami organized by the church as part of Catholic Social Week.

Cuban officials have estimated that state payrolls have a surplus of up
to 1.8 million workers, he said. Yet Castro's hopes to expand the
private sector so that it can take in laid-off state workers have not
come through. By the end of 2012, there were only 365,000 workers in the
non-state sector.

The purchasing power of salaries plunged by 73 percent since 1989 – when
the Soviet Union began halting its massive subsidies to the island –
while the prices of food and utilities have been rising, Mesa-Lago said.

Trying to improve incomes, Castro five years ago abolished salary caps,
ordered that salaries be tied to productivity and made it legal to
receive extra payments in hard currency and hold more than one job. Yet
those changes have shown "no results at all," he added.

Cuba's public health system was once the best in Latin America, the
economist said. But cuts in government spending have led to the closure
of hospitals and clinics, reductions in diagnostic tests, shortages of
medicines and long waits for surgeries.

The 1.8 million pensioners get an average of $10 a month, equal to about
3 percent of the GDP. With the country's population growing older as
youths leave and birth rates remain low, "that problem has no solution
in the long run," Mesa-Lago said.

Spending on public education also has been cut, but the impact has not
been too harsh because there are fewer youths to enroll in schools and
the government shut down costly operations, such as university classes
offered at the municipal levels, he said.

Housing is the country's worst problem, the economist added, with a
shortage of about one million dwellings due to lack of maintenance, a
growing population and damaging hurricanes. About 111,400 units were
built in 2006, but only 21,000 last year.

Source: Poverty in Cuba increases as government slashes social spending,
expert says - Breaking News - MiamiHerald.com -
http://www.miamiherald.com/2014/02/08/3921652/poverty-in-cuba-increases-as-government.html