A Momentary Darkness

David Jessop | Cuba: A Momentary Darkness
Published:Sunday | August 7, 2016 | 12:00 AM
AP

As has been widely reported, Cuba has entered a new period of austerity.

On July 8, President Castro told the Cuban National Assembly that Cuban
economic growth had slowed to 1 per cent in the first half of 2016
compared with 4.7 per cent over the same period in 2015.

The country must, he said, rapidly cut its spending and energy use in
order to address a lack of liquidity as a result of lower-than-projected
income from exports of services and goods, and reduced oil imports from
Venezuela.

In doing so, he acknowledged "rumours and forecasts of an imminent
collapse of our economy" but sought to reassure Cubans that there was no
danger of a return to the severe austerity of the 1990s following the
collapse of the former Socialist bloc.

"We don't deny some challenges may arise, even bigger than the ones we
are now facing, but we are ready and in a better condition than back
then," he observed.

Subsequent statements made clear that what is planned involves reducing
energy consumption by six per cent and fuel consumption by 28 per cent;
importing less, in part by strictly controlling import credits; seeing
state investment decline by 17 per cent through to the end of the year;
and more generally, reducing loans and liquidity across the state sector.

In contrast, export and foreign currency earnings from key sectors such
as tourism and nickel were spared, but others that do not contribute to
export earnings or import substitution are to experience cuts. Social
spending is to be protected.

Observant readers of the media may have subsequently seen that the
delivery of this has largely been entrusted to Cuba's regionally and
internationally known, and hugely experienced vice-president Ricardo
Cabrisas who additionally becomes the minister of economy and planning.

The decision effectively divides political responsibility for overall
economic management and planning from the less than satisfactory
delivery of the updated 'lineamientos' (the national guidelines), with
the intention of bringing rigour into the delivery of both processes.

In all of this, the official media have tried to allay fears about this
latest economic setback, which comes at a time of national frustration
about the speed of economic growth and the absence for many of material
benefit and personal opportunity despite continuing economic reforms.

REASSURANCE

Shortly after the announcement, the Cuban website Cubadebate sought to
reassure Cubans as to why the country is now in a better place to
address austerity than it was during the 'Special Period in Peace Time'
that began in 1989 and ran to the late 1990s.

In an article, Randy Alonso Falcon, the director of the Council of
State's Office of Information, who is also director of the publication
and of Cuban television's principal discussion programme Mesa Redonda,
set out a number of reasons why the Cuban economy of today is better
able to withstand an economic shock.

He noted that Cuba had a more diversified group of trade partners,
despite Venezuela's 'significant weight'; that it had managed to
renegotiate its debts with the Paris Club and other creditors in terms
that allow access to new financing; foreign investment was under way and
was recognised as an essential component in the country's future
development; and tourism had become the second largest source of foreign
exchange after the export of professional services and biotechnological
products.

Alonso also emphasised that the country was able to continue funding
investments in strategic sectors such as tourism, nickel, construction
and renewable energy, and suggested that the fact that 29 per cent of
all Cuban workers were in self-employment provided a form of protection
against large-scale (state) unemployment.

While there was no doubt that the country would experience difficulties
in the coming months, he wrote, there was no need for panic or to allow
"opportunists, exploiters, speculators, and manipulators to prevail".

"A momentary darkness," he said, should not divert the view away from
the light of the future.

Recounting this is not intended to argue for or against the accuracy of
Alonso's analysis, but to demonstrate why Cuba's collegiate leadership
believe they will be able to turn the economy around in a relatively
short time.

This is important as the timing and successful delivery of recovery will
have a considerable bearing on popular Cuban perception of the country's
present and future leadership, as planned changes take place.

STAND DOWN

President Castro has made clear that he will stand down as president in
2018 and gradually hand over the management of the country to the next
generation.

As one committed Cuban academic recently noted at an external roundtable
meeting, the ability of the country's historical leadership to be able
to retire with respect and without criticism having demonstrated that
the model they have fostered is both socially and economically viable
long into the future, is important. It will, he said, enable the next
generation of leaders to have the moral authority to deliver difficult
decisions and take forward the process of change.

Judging from his now intensive international travel, and regular
domestic media exposure, the role of overseeing the country's future
along with other younger ministers, is likely to fall to Miguel Diaz
Canel, the country's First Vice President.

Less certain, however, is how in the coming years, power will be
exercised as it is unclear whether in the future, the leadership of the
Cuban Communist Party and of government will continue to coincide,
matters that may become clearer when promised changes to the
constitution and a new electoral law are revealed.

The list of economic challenges facing Cuba's present and future
leadership is challenging.

Beyond present concerns and making the economic reform process work, it
includes the prospect of the collapse of the Venezuelan economy to which
Cuba is symbiotically linked; the absence, so far, of any significant
long-term financial gains from the policy of detente with the US;
logistical problems holding back a greater economic role for non-state
cooperatives and the self-employed; the better implementation of
taxation; improved management at all levels; tensions over the role of
the media and the Internet; and, as the national assembly recently
observed, growing income inequality.

How long the new period of austerity will last is unclear. Barring
change of the kind seen previously in Vietnam, it may well result in new
uncertainties in a country with an economy in a slow transition, and
where generational change and new thinking about its management is now
overdue.

- David Jessop is a consultant to the Caribbean Council.
david.jessop@caribbean-council.org

Source: David Jessop | Cuba: A momentary darkness | Business | Jamaica
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