Joaquín P. Pujol
In 2008, I presented a paper at ASCE´s annual meeting titled “Economic Challenges facing the Cuban Authorities.” On that occasion I identified twelve economic policy areas where the Cuban authorities were facing their most pressing challenges, indicated some actions that they had either announced or taken, and sought to evaluate thelikelihood that these actions would likely have a significant impact on these challenges. The twelve areas related to the need to: 1. raise the low productivity of the workers and of the economy at large; 2. increase domestic food production so as to be able to feed the population without undue dependence on imports; 3. provide adequate housing to the population; 4. take care of an aging populationand reverse the emigration of young people; 5. provide adequate transportation; 6. reduce dependence on foreign oil; 7. repair and replace a deteriorated infrastructure (factories, roads, railroads, sewerage systems, etc); 8. eliminate the economic distortions brought about by the multiple currency system, the artificial and arbitrary exchange rate, and the indiscriminate subsidies arising fromthe operation of the “libreta de racionamiento”; 9. restore the quality of medical services and education; 10. reduce the balance of payments deficit and improve the credit worthiness of the Cuban economy in international markets; 11. liberalize the labor market, including by allowing widespread development of self employment activities (“actividades por cuenta propia”) and the establishment ofsmall and medium sized private enterprises; and 12. establish a clearly defined legal framework that is consistently applied by the authorities, and well known and respected by the population. One year later, the economic situation has further deteriorated due to the failure to make significant reforms in most areas, the destruction resulting from the hurricanes that ravaged the island in 2008, andthe impact of the global financial and economic crisis on the Cuban economy. The latter has not only worsened the terms of trade facing Cuba because of the rise in the prices of food imports and the decline in the price of nickel exports, but has further reduced the limited access that Cuba had to international credits. In mid-2009, the government lowered the official growth projections of Cuba’snational product for 2009 from 6% to 2.5%, although some economists in the island think that there will be no positive growth all in 2009 and that the economy could even shrink somewhat. The Economy and Planning Ministry forecast was drawn up within two months of President Raúl Castro’s replacement—in March 2009—of Cuba’s entire economic leadership team after a dismal 2008 performance. After half acentury of relying on external subsidies, first from the Soviet Union and then from Venezuela, and on not paying back the credits contracted abroad, the authorities have finally admitted the gravity of the economic panorama facing the Cuban economy. However, as in the past, government officials refuse to take responsibility for the economic performance debacle and instead blame the U.S. embargo,the destruction caused by the hurricanes, and the impact of the
Cuba in Transition • ASCE 2009 international depression for the dismal economic conditions. The extent of the economic crisis has reached the point where some economists argue that the Cuban economy is near bankruptcy. Even government officials realize that it is impossible to sustain an economic scenario where imports areequivalent to four times the value of exports, as was experienced in the first few months of 2009. The lack of international liquidity is affecting all areas of the economy and the discontent of the population in the island is growing to the point of serious political concern. The government has implemented energy savings measures, cut social spending, and adopted other measures in 2009 to cope...