14ymedio, Miriam Celaya, Havana, 28 December 2016 — On December 27th, at the Havana Convention Center, the Eighth Session of the Eighth Legislature of the Cuban Parliament opened, with a balance sheet on the socio-economic results of the year ending and the proposed draft of the National Budget Law for 2017.
This time, there is no good news or triumphant speeches. 2016 ended with a 0.9% drop in Gross Domestic Product (GDP), according to the report presented by Ricardo Cabrisas, Minister of the Economy and Vice-President of the Council of State, and there are no reasonable grounds to date to believe that the forecast of a 2% growth of the GDP for 2017 will be realized. In fact, that was the modest growth prediction for the second half of this year, which finally failed.
Even more somber, Cubans will start the New Year with overdue payments to suppliers. “It has not been possible to relieve the transitory situation we are experiencing in the current payments to suppliers …”, indicated the general-president, Raúl Castro, in presenting the central report, although he announced, without going into details, “a number of measures that will alleviate the described scenario”.
“It has not been possible to relieve the transitory situation we are experiencing in the current payments to suppliers …” indicated the general-president
As for the 2017 budget plan, he cautioned: “I must warn that financial tensions and challenges will persist that could even increase in certain circumstances.” The current difficulties related to the economic downturn in 2016 will affect next year, the president stated, unless three “permanent and decisive” objectives are met: guaranteeing exports and working immediately to create the conditions to increase them in successive years; identifying the possibilities in the national production and substituting any level of imports; and reducing possible non-essential expenses, among which he indicated trips abroad by the cadres and leaders at different levels.
“We will have a definitive solution to these traditional deficits if we produce more goods and services, both internally and externally, and reduce expenses as much as possible,” said Cabrisas. But the proposed solutions revolve around the usual jingle of the last decades which is never fulfilled, such as the one that proposes the substitution of imports based on the development of national productions “with a well-designed program” encompassing the entire national industry, including the military, or a “greater requirement of the efficient use of carriers to avoid purloining and theft,” in addition to increased controls in this area.
The Cuban president said that he attaches “great importance to the need to boost foreign investment in Cuba” as an essential road for the country’s economic development. However, he made it clear that there are forces opposing this solution, which are blocking this inflow: “I recognize that we are not satisfied in this area and that excessive delays in the negotiation process have been frequent. We need to overcome, once and for all, the obsolete mentality of prejudices against foreign investment and, to resolutely make strides in this direction, we must shed false fears towards foreign capital.”
The report by the Minister of the Economy detailed an opaque and unpromising scenario for now and for the future, because of “the persistence of existing financial constraints due to the non-fulfillment of export earnings, the difficulties faced by some of our main partners due to the fall in oil prices, and by the commercial and financial blockade, strengthened by large fines to international banks that transact business with our country.”
While figures on investments and imports are expressed in dollars, the State’s income and budget -including so-called subsidies and other social benefits -are expressed in CUP
In general, the budget plans for 2017 are similar to those of 2016, except for lower fuel imports, which should stimulate the growth of electric power generation from better utilization of the national capabilities.
One confusing aspect is that, while figures on investments and imports are expressed in dollars, the State’s income and budget – including so-called subsidies and other social benefits – are expressed in Cuban pesos (CUP, that is the “national currency”). This creates a distortion that masks the actual amount of profits and expenses.
For instance, it is stated that the State proposes to invest $1,750,200,000 in food for the population ($82,000 more than in 2016), although total imports in physical terms are similar to 2016. However, we do not know the total amount of foreign exchange revenues generated mainly from tourism, a sector that is controlled by the generalship.
The official reports remain mysteriously silent on this subject. Something similar happens with the issue of monetary duality, an insoluble distortion pending a solution and not mentioned among the great problems that hinder foreign investment in Cuba.
Another problem of the domestic economy during 2016 was the positive reaction of agricultural production, but the industry was unable to respond to production, thus affecting the high level of imports to meet the demand of the population. This is a situation that the Government will try to reverse in the 2017 plans through an “accelerated medium-term program to recover this industry and enable it to respond to both domestic consumption and visitors.”
Another problem of the domestic economy during 2016 was the positive reaction of agricultural production, but the industry was unable to respond to production
The transportation sector is another old and pressing problem, although it is officially acknowledged that “it is strategic for any of the branches of social and economic development of the country”, therefore, its boost is projected for 2017.
In this sense, the State proposes 3% growth compared to 2016, guaranteeing the essential services of national bus companies, transportation for workers and for school children, as well as taxi and cooperative services, in addition for guaranteeing necessary fuel “for buses manufactured in 2017”.
An interesting note was the Minister of the Economy’s reference to maintaining “the current production capacity of bicycles and spare parts” as well as the importation of tires. In the present circumstances, the mere mention of producing bicycles casts over the Cuban population the lugubrious and counterproductive memory of the hardest years of the Special Period.
Other figures for the 2017 plans were the program of 9,700 homes and the start and development of an additional 4,890, similar indicators to those in 2016, which were not met. This program will prioritize the homes affected by Hurricane Matthew in Guantánamo and “those affected by previous hurricanes in Pinar del Río and Santiago de Cuba”.
But the most serious problem is that the solution to our economic ills, foreign investment, remains extremely low at just 6.5% of the plan. In other words, the provisions of Guideline 78, which gives an essential role to this investment, are not fulfilled. Cabrisas stated: “These projects need to be energized,” starting with making a list of investment projects for development that will guarantee the economic development plan until 2030, “concentrating the efforts in strategic and prioritized sectors.”
Thus, 2017 investment takes into consideration supporting priority tourism programs in Havana, Varadero, the Northern Keys, Holguín and in the infrastructures of the Special Development Zone of Mariel (ZEDM) or fuel storage, among others. Measures have also been developed to increase salary systems in the development of tourism and ZEDM sectors.
2017 investment takes into consideration supporting priority tourism programs and in the infrastructures of the Special Development Zone of Mariel (ZEDM) or fuel storage
An increase in the income levels of the population and the absorption capacity of the State is projected in the plans. Productivity will grow by 6.6% and the average wage by 3.5%. To accomplish this, it is essential to avoid payments without productive results, the consistence between the indicators, and taking into account added value, in order to avoid monetary imbalance.
The preliminary draft of the 2017 budget foresees revenue growth of 1.525 million pesos, mainly from taxes on profits, an investment of the state enterprise sector with 6.330 million pesos in increase in expenses with respect to 2016, and an 11. 454 million fiscal deficit, 12% of the GDP.
The report of the Finance and Prices Minister, Lina Peraza, did not offer much detail, other than that of the Minister of the Economy. It seems that the “solution” for the Cuban economy has been reduced to a simple list of elementary considerations, such as deepening the country’s financial obligations, assessing the impact on credit levels, guaranteeing exports and substituting imports, making progress on foreign investment projects, increasing controls in the use and pilfering by energy carriers and stopping the decreasing trends in production, among others. These are about the same solutions as in previous years.
“The plan we are presenting to this Assembly is tense, (…) but we believe we can meet it,” Cabrisas said. “The above calls for willpower, decision, organization, discipline and attention prioritized to all these matters” especially by those responsible for enforcing them.
Apparently, the Cuban economy’s “solution” is reduced to the same solutions as in previous years.
It has been a redundant day to announce the dark clouds that hang over an unborn 2017, a somber gloomy Parliament on a somber Island. No one expected an economic miracle, but perhaps the most candid were trying to picture see some sign of change. For the time being, everything indicates that Cuba is on its leaderless way, tottering towards some enigmatic horizon.
Curiously, the greatest novelties now are what’s missing: this is the first session of Parliament without the shadow of a Fidel Castro -not sufficiently alive or completely dead -vigilant and omniscient; there was no Council of Ministers prior to the sessions, so that the last one, held on July 25 of this year, was referred to; the full plenum of the Communist Party of Cuba (PCC) was not held, and the former Minister of the Economy, Mr. Marino Murillo, who accompanied the “Raúl reforms” for a long time, was not seen at the sessions.
What these signals might mean would be material for another analysis.
Translated by Norma Whiting