14ymedio, Mario Penton, Miami, 4 August 2017 – “It doesn’t matter when, all we get are feathers,” complains the father of a family, disgusted on finding no kind of meat other than chicken in the Hard Currency Collection Stores (TRD), the state chain that sells only in Cuban Convertible Pesos (CUC). Since the beginning of the Venezuelan crisis, Cubans have been bitter about the shortages in retail markets, a problem that will grow in the coming months, according to economist Omar Everleny Perez.
The country cut 1.5 billion dollars in imports in the first half of the year, which will directly affect the population,” said Perez, in conversation with 14ymedio.
The abrupt cut in imports stems from the decision to use 2.306 billion dollars to make payments on external debt, renegotiated with the Paris Club and other creditors, adds the former director of the Center for Studies of the Cuban Economy.
“They renegotiated a debt that they had not paid since 1986. Creditors waived up to 90% in some cases, but they had to pay that remaining 10% and could only do so by cutting imports,” he explains.
According to Perez, a contributor to the magazine Temas, the national economy is beginning to show signs of macroeconomic recovery but it is not enough.
“From the macro point of view, it seems that there will be a change in the trend line, but 1% growth does not tell you anything. The country needs to grow from 5 to 7% — and not just for one year — so that people feel it,” he adds.
“With this rate of growth, seeing an improvement in living conditions would take at least 30 years. How do you say that to a 50-year-old?” Pérez quips.
Cuba announced that at the end of this semester the economy had grown by 1.1%, after a GDP fall of 0.9% in 2016. Pérez attributes this positive result to tourism, which grew by 23%, and the sugar cane industry, which produced about 1.8 million tons of sugar.
“Tourism is changing lives in many parts of Cuba. For example, in the municipality of Trinidad, the revenues of the non-state sector surpassed those of state enterprises for the first time. In this municipality the private sector generated 56.9% of the total collected,” he says.
The Havana Consulting Group has just published very interesting data on the increasing contribution of remittances to the functioning of the national economy. The Miami-based consulting firm says remittances grew 2.7% in 2016 to $3.444 billion, surpassing net revenue from tourism that year, according to official sources.
The difference is even greater when compared to net tourism receipts, which will not exceed $1.3 billion after deducting the costs of imports needed to cater for tourists, especially food, as Cuba produces nothing.
Pérez Villanueva is worried about the strong impact that the eventual fall of Nicolás Maduro’s government in Venezuela would have on the Cuban economy.
“Venezuela continues to be Cuba’s number one trading partner, despite its crisis. For the past two years, the problems of that country have been growing, but no measures have been taken to counteract the end of that trade relationship,” he says.
Perez believes that Havana should be thinking of sending its highly skilled labor to other countries with oil reserves like Angola or Algeria. “It will never be the same as with Venezuela and those countries could not absorb the number of doctors [that Venezuela has been paying for], but at least it would cushion the blow,” he says.
Cuba could take advantage of currently low oil prices to buy fuel from other allied nations, such as Russia or Algeria, but the lack of credit is a chronic problem, according to the Minister of Economy and Planning, Ricardo Cabrisas, who acknowledged in the Report on Behavior of the Economy and Planning 2017 that the Island’s ability to obtain loans is affected by the amount of debts due.
However, according to Pérez, Cuba is trying to strengthen new mechanisms to generate electricity from renewable sources, but “it needs time and money.” There is also an attempt to revive national oil production, which is declining due to the depletion of the wells.
“If the supply of Venezuelan oil is stopped, it would not be as it was in the USSR. We receive from Venezuela half the fuel we need, and in the time of the former Soviet Union we received virtually all of it,” he added.
“The country should bet heavily on foreign investment,” says Pérez Villanueva, who was ousted after a series of lectures in which he displayed his critical opinion on the economy’s progress on the island.
“The guidelines say that foreign investment is not a complement to domestic investment but rather a part of the national investment, but in practice the level of appropriations is not noticeable,” he adds.
Despite continuing to publish the portfolio of foreign investment opportunities, the investment flagship project, the Mariel Special Development Zone, continues to be bogged down with small investments.
For Pérez, the country has to immediately expand trade on its own, something that seems very distant, especially after the freeze in the granting of new licenses for self-employment announced last Tuesday.
“There is a mass of workers who could leave the guardianship of the State and pay taxes in activities related to what they studied [at the universities]. This would prevent engineers graduating in Computer Science from leaving for Canada or quitting to drive a taxi “.
However, Perez believes that the state does not want healthy competition to exist because the great socialist state enterprise remains its model. “In Cuba, ideology continues to set the tone, not the economy.”