A New Call For Possible Dialogue In Order To Overcome The Crisis

Masked police agent controls line to buy food in Havana (File photo)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, July 8, 2020 — The virulence of the economic crisis that is battering Cuba, as a consequence of containment measures for the Covid-19 pandemic, is becoming more serious and profound than expected. Spaces for dialogue are opening up because of the surge in outbreaks, which create uncertainty about the future.

The data and information trickle in drop-by-drop for the authorities to confirm. And if it’s true that no data exist on the economic situation, some that are known, like the statistics on travelers, are frightening. In May, only 993 visitors arrived, which represents a decrease of 99.7% compared to the same month last year. Tourism has disappeared from the Island, and possibilities for recovery are scarce.

Certainly it won’t happen in 2020. The authorities will go back to their sales pitch to explain the failure, but they won’t have far to go. The forecast for economic development in Cuba has to be revised downward and thus assumes that the economy can collapse, given the great importance of the State in all economic activity.

There is nothing now that allows anyone to have any real confidence in the future of the economy. Our estimate of the drop in the economy’s GDP was initially situated around -6.2% when CEPAL* showed only -3.8%. The data and information that come from the Island require caution and point to a particularly important decline, probably in the neighborhood of -10%, almost three points lower than the initial estimate. This puts Cuba among the countries that could be the most affected by the crisis in Latin America, although it won’t be the only one.

The fact that we’ve revised our initial prediction downward shows the lack of confidence and credibility in the authorities to surmount the present crisis. It’s difficult for any country to try to confront such a situation on its own, so this whole experience is going to be harder and more complex than was believed.

In reality, there isn’t any analyst who thinks that a true recovery of the Cuban economy will happen in the last two quarters of the year, so 2020 will be remembered as a time when the Cuban economy came close to collapse, because of the intensity and unexpected origin of the crisis.

The updated forecast contemplates a complex international scenario for tourism, with risk factors of difficult control from the Cuban perspective, which will have a potential negative effect on recovery. This downward trend of tourism will coincide with lower remittances, a low level of foreign investment and fewer exports of minerals and tobacco.

As a consequence, hard currency will be scarce, and that will put the brakes on imports. In addition, on the internal front, the agricultural sector won’t be capable of producing sufficient food for the whole population. The authorities know this, and the building industry isn’t going to bail out the economy because the State’s budget has committed resources to current expenses, which will have limited impact in terms of growth.

In sum, these factors, together with inattention to the self-employed, abandoned to chance by the Government, depend on the political goodwill of the leaders and their ability to promote measures that really serve to bring the economy out of the hole it’s in. Perhaps if, instead of making individual decisions based on communist orthodoxy, all sectors of the economy, State and private, came to the table for a dialogue, the Regime leaders would realize the enormous importance and the social support they would have; for example, if they approved a special fund to help the economy recover.

Decisions of this type could serve to establish the basis of an economy centered on a common goal, incorporating an integral plan of reforms and support for the private entrepreneurial fabric. At the same time, resources could be generated for the social protection of the least-favored groups because of the crisis.

The authorities of the Cuban Regime still haven’t accepted that they have a long and difficult process of recovery ahead of them, a great challenge in the coming months, which will demand far-reaching measures that, alone, might not give them the results they need. The moment for dialogue and consensus has arrived.

Unilateral Communist decision-making must end. If they want to light the way to the first fruits of recovery, they have to participate in all the plans for aid proposals, and they must have the funds and tools available to transform the economy. Díaz-Canel’s government must understand that the survival of the Cuban economy depends on being able to confront the task of economic reconstruction by collaborating with all State and non-State economic agents, and by promoting  a climate of political and social dialogue on new foundations, which will help Cuba return, as soon as possible, to a sense of sustainability and fiscal consolidation.

The challenge in the next few months is to support a progressive return to growth and consolidate the first fruits of the recovery. Without dialogue, it will be impossible.

*The United National Economic Commission for Latin America and the Caribbean

Translated by Regina Anavy


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