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Posted October 05, 2004 by publisher in Business In Cuba

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By Marc Frank | Reuters

An energy crisis, hurricanes, increased controls on state businesses and a tighter U.S. embargo are taking a toll on the Cuban economy after a strong first semester, foreign and domestic experts said on Monday.

The Caribbean island closed more than 100 factories this month in an effort to cope with a lack of generating capacity that has caused daily blackouts of up to 12 hours.

“Steel, cement, paper, juice and other plants totaling 118 in all will be shut at least for October,” Vice President Carlos Lage announced last week.

Cuba has escaped the brunt of high oil prices as it uses local fuel to generate power and receives 53,000 barrels of petroleum products a day from Venezuela with generous financing.

Cuban authorities have said nothing this year on the economy’s overall performance, after reporting 2.6 percent growth last year.

Recovery from a 1990s economic crisis has faltered in recent years. Growth averaged 2.5 percent during the 2001-2003 period, compared with more than 6 percent in 1999/2000.

The U.N. Economic Commission on Latin America and the Caribbean estimated in August that Cuba’s gross domestic product was up 4.5 percent through June, but forecast a 3 percent increase for the year as economic activity traditionally slows during the second semester.

Foreign and local analysts said they doubted growth would top 2 percent because the energy crisis has hit even as re-centralization of the state sector, which accounts for 90 percent of the economy, impacts business.

KEY HARD CURRENCY EARNERS SPARED

Communist authorities, as part of a drive against mid-level corruption, have been taking back decision-making power that had gone from ministries to state companies in recent years

“There had already been a noticeable decline in business activity by mid-year as managers balked at making decisions or waited for authorization from above. The energy crunch just makes matters worse,” a foreign banker said. “

The measures largely spared the country’s main hard currency earners, tourism, nickel and sugar, but will impact domestic production and consumption.
“The steel, mechanical, food processing and light industries are the sectors most effected,” said a Cuban economist, who asked his name not be used.

“Nickel plants are operating normally, the sugar harvest will not begin until January and October is a very slow month for tourism when many hotels, for example the entire Cayo Largo resort, are closed anyway,” he said.

Tourism, up 10 percent through August, has suffered since from an extremely active hurricane season and the bad publicity it has brought. High oil prices are also forcing tourists to reconsider travel plans and increasing the price of airline tickets, industry sources said.

“The hurricanes and energy problems have largely spared us, but people see the mess storms are causing in the area and go elsewhere,” a ministry source said.

There has also been a decline in Americans and Cuban- Americans visiting since Washington tightened travel restrictions in June.

“American arrivals are down 25 percent,” Tourism Minister Manuel Marrero said in September. Some 70,000 U.S. citizens and 120,000 of Cuban origin, visited in 2003.

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