China and Cuba: a Lot of Noise, Little Action

Díaz-Canel with his wife Liz Cuesta boarding the plane from Ankara to Beijing. (Cuba Presidency)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, 27 November 2022 — Back in Havana, the state press has started a propaganda campaign aimed at exalting the results of a trip, which leave much to be desired. The first to speak has been exactly the one who should be silent, taking into account that little or nothing has been achieved by his department on this trip. We refer to Alejandro Gil, Cuban Minister of Economy, who described relations with China as “a new starting point, a relaunch of our country’s relations with the Asian giant.” So he wishes.

It is true that “twelve legal instruments” were signed as Granma says, but there is a long stretch from the saying to the fact. The minister even dared to quantify at 100 million dollars the Chinese donations to Cuba (practically nothing) and the reopening of new state funding, but in reality, like most of the trip, Chinese support is aimed at old projects that are either underway or have not even started, like the Floating Dam project, which since 2019 and even before has not been completed.

The lesson that Díaz-Canel and his entourage have learned from this trip is that the Chinese have not given money for banalities or to sustain an inefficient political system, as the USSR or Venezuela did, but have provided funding for concrete projects to be developed by the Cuban communist state. And this is the source of the main problem.

The communist regime inherited from Fidel Castro has more than shown its inability to develop investments in infrastructure, in fixed capital, in projects of mid-life cycle, in energy, housing and real estate developments (except hotels). At the same time, it has an extraordinary voracity for spending on current projects, which is consumed in the annual budgets.

The data are eloquent. The share of the investment aggregate in the GDP of the economy, about 10%, is less than half of that recorded in Latin American countries. The low investment in Cuba is the result of a political choice that has conditioned the state’s intervention in the economy, which has resulted in the deficient general state that it presents.

The Chinese money is a double-edged sword, because it requires discipline, efficiency and effectiveness from the Cuban communist state — attributes that it lacks — in order to undertake projects of a certain magnitude with the guarantees provided. So the money will be there, in front of the eyes of Díaz-Canel and company, but its execution will be problematic if things do not change, and by a lot.

It’s like the Algerian power plant. Who is going to build it, with what technology and at what cost of time and money? The Chinese have put their cards on the table, and although they have granted money — this is undeniable — they have sent a message to the Cuban communists that the waste, adventure and the little campaigns to organise trouble in other countries are over. China is not Venezuela, nor does it want to be.

In that sense, one has the impression that the “legal instruments” that Granma talks about are designed, precisely, to adjust the accounts to Cuban partners, and that China plans to give money as the projects progress.

The question is, is the Cuban communist state ready to undertake all those investments and make it through? There are doubts.

In the Cuban economy there is everything. From planned and never-executed investments to investments with an advanced degree of execution, but which are pending some administrative work. And others that, when executed over very long periods, end up being allocated to different purposes than those for which they were planned. The Chinese know this situation and don’t believe in that model. Its economy advances along a different path in which the expected profitability of the projects is the determinant of investment, while the political criteria have gone to a better life.

So in the end, the only thing that will benefit the Havana regime is the donation of the 100 million dollars that Minister Gil talks about. For the moment he is the only one who has mentioned that figure, and the debt negotiations with China are reaching out-of-control dimensions, as this country becomes the second buyer and supplier of Cuba’s foreign trade.

The Chinese, who were sympathetic to the economic situation of the Island, want to collect or at least secure the payment, and there doesn’t seem to be good news there either. And for this they demand adequate plans for the ordering and restructuring of the debt, because otherwise, the credits associated with China’s investment projects in Cuba will be paralysed.

It’s the same as Díaz-Canel’s idea of attracting Chinese companies to invest directly in Cuba and that it not be all state aid. No matter how much political convergence exists between the two countries, these Chinese companies respond to management boards oriented by the perspective of profit, and they will not be willing to invest in ruinous businesses in Cuba. There are no data to justify it, but the low Chinese direct investment in Cuba since the adoption of Law 118 is amazing.

Translated by Regina Anavy


COLLABORATE WITH OUR WORKThe 14ymedio team is committed to practicing serious journalism that reflects Cuba’s reality in all its depth. Thank you for joining us on this long journey. We invite you to continue supporting us by becoming a member of 14ymedio now. Together we can continue transforming journalism in Cuba.