The Ghost of The Special Period Threatens Cuba in 2019, Warns Report

The worsening of the economy is seen not only in the “shortages in the hard currency stores,” but also in the lack of subsidized basic necessity products like bread and eggs. (14ymedio)

14ymedio biggerEFE (via 14ymedio), Miami, March 5, 2019 — The economic crisis Cuba is experiencing will worsen in the next few months and, if it doesn’t open itself to a market system, the country could fall into a new “Special Period,” the grave depression into which the island was sunk in the 90s, according to predictions from The Havana Consulting Group, headquartered in Miami.

In fact, the worsening of the Cuban economy is now seen not only in the “shortages in the hard currency stores,” but also in the lack of subsidized basic necessity products like bread and eggs, emphasized Emilio Morales, president of this firm that provides insight into the Cuban market and its consumers.

The report to which Efe had access warns that Cuba “urgently needs” to open itself to the market economy, “liberate once and for all the productive forces, and allow Cuban citizens to invest in their own country,” otherwise, the “reappearance of the ghost of the ’Special Period’” will become a reality.

At the time of the ’Special Period’ the grave crisis that gripped Cuba was due to the withdrawal of the subsidies that it used to receive from the defunct Soviet Union; today the “financial support that the island has [recently] been receiving from Venezuela is practically insignificant,” given the total collapse of the South American country.

Only by “avoiding the habitual dependence on third parties” and undertaking “profound transformations of its economy” will Cuba be able to get out of the crisis by itself, detailed The Havana Consulting Group’s report.

In that context, Morales noted that the Venezuelan subsidy, for some twenty years, “has helped the battered Cuban economy survive,” with the subsidized shipments of billions of dollars in barrels of oil in exchange for primarily medical services.

This commercial exchange between the two countries managed to reach $8.5 billion in 2012 and today barely reaches $2 billion, which is a decrease of 74%.

Added to this reality is the “failure of the economic reforms undertaken by Raúl Castro” approximately a decade ago and the “decrease in exports of nickel and sugar,” to the point where sugar production in 2018 was some 16.3% less than in 1905, which has now forced the country to buy sugar from France.

To these difficulties must be added another negative factor such as the “limits imposed to hinder the development and expansion of the private sector,” whose entrepreneurs took $2.39 billion out of the country in 2017.

And the nonexistence of free enterprise, the “non-recognition of private property, the prevalence of the monopoly established 60 years ago, and the lack of opportunities to invest and market goods and services that Cubans have,” undermine any attempt to revitalize the economy in medium and long term, says the report.

Another “chronic problem” is the deficit of the Cuban economy, despite the opening of the Mariel Special Development Zone (ZEDM) and its failure to attract capital, which barely reaches the 14.2% of the goal proposed when it was created six years ago.

To this devastating outlook must be added the “stagnation that the Cuban tourism industry has had in general,” with the decrease of the principal tourism markets: Canada, the United States, Germany, England, France, Spain, and Italy, it points out.

Air travel between Cuba and the US in 2018 declined some 18.3% compared with the previous year, a “declining tendency begun in the last trimester of 2017.”

In terms of the economic impact, this decline in toursim translated into an estimated loss of $1.283 billion.

Conversely, the low growth rate of the Gross Domestic Product (GDP) “hides a permanent recession,” with a fall to 1.4% in the last five years, according to official figures.

For that reason, “if the Cuban economy has not collapsed, it has been thanks to the Cuban exile,” 90% of which is settled in the United States and annually provides around $7 billion to the Cuban economy, between cash remittances and merchandise.

Additionally, Cuban Americans leave millions of dollars in the tourism sector of the island, since more than 50% of them who travel to the island stay in hotels with their relatives* living in the Caribbean country.

Close to 2.2 million Cubans live in the United States, some 90% of them in the state of Florida.

In 2017, cash remittances coming to the island represented 50.8% of the total annual income of the island’s population, The Havana Consulting Group pointed out.

Translated by: Sheilagh Carey


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