Cuba Banks on Exporting Services

Cuba Banks on Exporting Services
September 2, 2014
By Eileen Sosin (Progreso Weekly)

HAVANA TIMES — In the past 25 years, the profile of Cuban exports has
gone from a strong specialization in goods (nickel, sugar, citrus fruit)
to a marked increase in services, especially tourism and health related
services.

In 2012, services accounted for 12.6 billion CUC (just over 13 billion
USD); today, it represents approximately two-thirds of the country's
foreign sales.

This year, the projected revenue provided by the export of assistance
services exceeds 8.2 billion CUCs, or 64 percent of all export sales, as
reported in March by Marino Murillo, vice president of the Council of
Ministers.

A new group of 200 doctors left in August for Ecuador. The More Doctors
program in Brazil is in its first year and involves 11,000 Cuban doctors.

The signing of the Integral Agreement of Cooperation with Venezuela
(2000) launched this line of paid services, which between 2004-2005
replaced tourism as Cuba's main source of revenue. More than 50,000
professionals work abroad at present and a considerable share of them
are doctors.

However, several experts point out that, since the late 2000s, the model
of growth based on the provision of hiring out personnel begins to show
signs of exhaustion.

Although this phenomenon does not rule out the export of services as a
valid strategy, it does imply reappraising the manner in which it has
been developed so far.

Wide variety of services

There is a consensus about the educational level of the Cuban labor
force. To many, professional services are the country's basic asset,
beyond its natural resources and geographic location. And that
competitive advantage has been key towards the advancement of this field.

Taking into account the wide stock of professionals in Cuba, the
Integral Strategy of Exportation of Services (EIES), approved by the
government in 2011, points to four potential groups: health, tourism,
information electronics, and telecommunications. The category "Others"
includes sports, charters, education and insurance.

The document also identifies experiences and demand in industrial, farm
and environmental projects, the control of vectors, epidemiology,
disaster response and civil defense, and urban and suburban agriculture.

Although the possibilities are diverse and the foreign sales involve
more than 135 countries, the results show a high concentration on health
services, specifically in the Venezuelan market. This situation,
sustained over a long period, introduces a high-risk system factor, says
Ricardo Torres, professor and researcher at the Center of Studies of the
Cuban Economy (CEEC).

"Perhaps at some point there was not enough foresight to aggressively
seek new markets, to explore other ways to contribute, to see how we
could link together more health sectors to incorporate equipment and
medicine," Torres says.

The EIES proposes to sell packages of integral solutions that could
include goods, thus giving a greater added value to the sales. While
some action has been taken in that regard, especially with
biotechnological products, we are still taking timid steps. South
Africa, Angola, Namibia and Algeria are emerging as relevant markets and
talks are ongoing with Qatar and Saudi Arabia.

Meanwhile, the Brazilian program More Medics employs more than 11,000
Cuban doctors. The Ecuadoran government has asked for 1,000 doctors.

Because of the place that services occupy in the formation of the GNP
and exports, it is often said that Cuba has "a service economy." Though
not altogether wrong, that statement omits the fact that the growth of
this sector appears more pronounced because of the abrupt reduction in
other sectors, such as industry and agriculture.

Torres stresses that the change in the structure of national exports is
related not only to the significant increase in the services themselves
but also to the slowdown in the sale of goods.

"In many cases, there have been outright losses," he says. "The example
of the sugar industry is a paradigm. If one part is restricted, the
other occupies a greater space, even if it grows very little."

Another weak side of this pattern of growth is the limited connection it
makes with the domestic economy, because the predominant modality has
been to send professionals abroad.

"When you talk of development, one hopes that the dynamic sectors will
couple with the others," he says. "That's why they're called 'engines.'
They advance and pull the others along. When it comes to Cuba's
professional-service exports, this has been very poor, so far."

In turn, tourism does show a greater impact in terms of infrastructure,
jobs and stimulus to national products. However, tourism has remained on
a plateau for years.

To catalyze the development of tourism, plans are under way for the
construction of marinas, golf courses and associated facilities, with
which Cuba can attract visitors with higher purchasing power.

The EIES is trying to promote the means of supply so the client may come
to the island to receive a service and gain access to other services,
thus multiplying the total revenues.

Lázaro Peña, director of the Research Center for International Economy,
believes it can be said that the strategies implemented in Cuba's key
sectors (sugar, tourism, biotechnology and specialized services) have
prioritized the quest for foreign currency.

"But it would seem that all of them have pushed back — or at least have
not sufficiently grasped — another objective that's also essential to
the economic activity of any country: the balanced fostering of domestic
savings and investment," he wrote. (1)

Haste and pause

"The job is hard, because there is no structured health system; you have
to create everything from the start," says pediatrician María Antonia
Campos, who worked in Venezuela for four years. She would go back if
asked, but not everyone feels the way she does.

Sending professionals to other countries takes a physical toll, due to
the need for a specific number of professionals to remain in Cuba and
because of the human exhaustion caused by extended and/or repeated
missions abroad. We're talking about people who often leave their
families and their lifetime projects behind.

"There is a real barrier, which Cuba may already be encountering,"
Torres says. "We have to make a greater effort to bring patients to Cuba
and foster health tourism on the island. It has a more important effect
on growth and development, because it allows more spillovers to the rest
of the economy."

This opinion coincides with a statement made two years ago by Antonio
Luis Carricarte, vice minister of Foreign Trade and Investment (MINCEX).

"An exportation of that type does not necessarily mean sending Cubans to
other countries," he said. "It can be done on the island, taking care of
foreigners who need different treatments."

On the other hand, several domestic issues hold back the potential drive
of the service sector. On an international level, countries that are
strong in the exportation of services — generally, First World countries
— enjoy a very advanced technological structure, especially in terms of
information technology and telecommunications. Connectivity and online
work become basic conditions.

Torres, the CEEC researcher, points to Cuba's limited participation in
the global circuits of commerce, investment and finances. Also, related
services such as Customs, transportation, financial, legal and technical
services are not at the right level for worldwide requirements.

"Another factor that impacts our model strongly is the philosophy behind
the productive activity in Cuba," he says. "Unfortunately, what
predominates is a top-to-bottom vertical vision of the economic
processes, in bureaucratic and administrative terms. And that extends to
exports."

Therefore, a more proactive relation vis-à-vis the market remains an
unfinished task.

"There are many fields whose services we could export," says Osvaldo
López, chief of the Exploration Department of the Petroleum Research
Center (CEINPET). "However, the promotion and the marketing are not what
they should be."

"We have certain disciplines where we are competent on a global level
but we don't have a service-exportation facility, an entity devoted
entirely to that end."

Recently, Vivian Herrera, director of Exports for the MINCEX, graded the
EIES' progress as "discreet." In this case, a functional institutional
and regulatory structure could be part of the answer.

"There must be a radical change in the regulatory framework that
establishes incentives, penalties, and compensations for production,
specifically for exporters," Torres says. "There will be no economic
future for Cuba if the country doesn't become a successful exporter."
—–

Reference:

(1) "The model of global accumulation and external insertion:
Experiences for Cuba," by Lázaro Peña Castellanos. "About the
International Economy," Vol. 2, by various authors. Published by the
Demographic Studies Center. University of Havana, 2012.

Source: Cuba Banks on Exporting Services - Havana Times.org -
http://www.havanatimes.org/?p=105910