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Posted August 12, 2003 by publisher in Business In Cuba

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MIAMI: Cuba’s economy is in disastrous shape and relies almost entirely on cash transactions, raising the risk the country could become a humanitarian emergency, bankers and economists said Thursday.

“It’s pretty much a cash economy,” said Dennis Flannery, vice-president of the Inter-American Development Bank.

Asked whether communist Cuba risked running out of cash, he told journalists “it could, and then it would become a humanitarian case like African countries.”

Flannery made the comments on the sidelines of a conference on the Cuban economy that opened in Miami Thursday.

He told participants that Cuba’s foreign debt has reached a record high and that rating agencies classified the Caribbean island’s economy as one of the riskiest in the world, on a par with those of Iraq and Angola.

Citing US State Department figures, Flannery said Cuba’s foreign debt amounted to $12.2 billion in addition to about 20 billion dollars owed Russia and $6.3 billion in expropriation claims from US citizens.

This translates into per capita debt of 3,000 dollars, as compared with 1,500 for Brazil—Latin America’s largest economy—and 150 for Haiti, whose economy is comparable in size with that of Cuba, said Flannery.

“Cuba is experiencing its worst crisis in decades,” said Beatriz Casals, president of the Association for the Study of the Cuban Economy, which organized the conference.

She cited serious housing shortages, high unemployment, falling wages and reports that almost 20 per cent of Cubans are undernourished.

Adolfo Franco, assistant administrator of the US Agency for International Development (USAID), pointed out that the Cuban economy was further weakened by its worst sugar cane harvest in seven decades.

The speakers concurred that significant economic change was only possible if Cuba adopted wide-ranging democratic reforms—something unlikely to happen while Castro still rules the island.

They also said development credits would only be forthcoming once Cuba settles its foreign debt, but Flannery said creditors would likely be willing to deeply discount Cuba’s debt.

“There is no doubt that once Cuba gets around to addressing its debt there would be a lot of forgiveness,” he said.

Economists participating in the meeting raised questions about the debt owed Russia, saying the former Soviet Union at the time effectively gave the money to Cuba in payment for sending troops to Ethiopia and Angola.

“It is entirely possible that part of the debt could be deemed illegitimate,” Flannery said.

Once the debt issue is solved Cuba would need to negotiate a program with the IMF which would be “the cornerstone of their restoration of international credit-worthiness,” he said.

Franco, meanwhile, said that USAID was devising, at the request of Bush, a plan to help ensure “a rapid, smooth transition in Cuba.”

In order to do this, the agency is compiling data both from inside and outside the country in a bid to get reliable data on Cuba’s most immediate needs, he said.

  1. Follow up post #1 added on February 14, 2004 by Frieda May

    To Whomb it may concern,
      I understand why Cuba’ economy is failing,  howver I am curious to know what you think the best plan of action for Cuba to take in order to solve their ecinomic problems.
      Thank you for your time:  Frieda May

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