Cuba 2005: The “Alice in Wonderland” Economy (Part 1)
Posted: 03 March 2006 06:05 AM   [ Ignore ]
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The Canadian Foundation for the Americas (FOCAL)

FocalpointJanuary/February 2006, Volume 5, Number 1

Cuba 2005: The “Alice in Wonderland” Economy

Jorge Pérez-López

In his year-end report to the National Assembly of People’s Power, Minister of Economics and Planning José Luis Rodríguez delivered astonishing news: the Cuban economy grew in 2005 by 11.8%, probably one of the highest economic growth rates in the world. If this statistic presented a true picture of economic activity growth and of improvement in the material well being of Cubans compared to the previous year, it would indeed be a remarkable accomplishment for the Cuban nation. There is strong evidence that, to a large extent, it is a gross manipulation designed to obfuscate the truth and to advance domestic and international political objectives.

A Reality Check on Economic Performance

The purported stellar economic growth performance in 2005 is all the more startling in light of statistics provided by Rodríguez in his own report or available from other sources:

• Oil and gas production declined by 3.7% compared with 2004.

• Nickel output was unchanged compared to 2004, although higher world market prices for nickel improved the export performance of the sector.

• Rodríguez made no reference in his report to sugar production, an unthinkable omission a few years ago, but not entirely unexpected since President Fidel Castro already proclaimed in March 2005 the demise of the sugar era in Cuba. Reliable sources have reported that the 2004-2005 sugar crop amounted to 1.3 million tons, the lowest production level in a century (1.23 million tons were produced in 1906). Since domestic consumption is approximately 700,000 tons, barely 600,000 tons would have been available for export in 2005.

• During the first half of the year, the island was affected by a severe drought that reduced production of milk, grains, vegetables, and viandas, resulting in production losses estimated at 1,350 million pesos. Cuba was also hit during the year by three hurricanes (Dennis in July; Rita in September; and Wilma in October) that wreaked havoc with agricultural production and damaged or destroyed thousands of housing units, electricity distribution lines, tourism facilities, and schools and hospitals. The losses to the economy associated with the three hurricanes have been estimated at 2,311 million pesos, for a total of 3,661 million pesos in losses in 2005 associated with adverse weather conditions.

• The only reported agricultural production increases were for eggs and pork, and among processed foods, for yogurt and pasta. Minister Rodríguez stated that food consumption was not adversely affected by the sagging agricultural sector because food imports increased significantly (by 43.2%).

• Non-sugar manufacturing output rose by 3.2%, with 12 of the 20 branches of industry showing increases in output; growth leaders within the manufacturing sector were non-ferrous metallurgy (19% increase, boosted by a 15-fold increase in the production of pressure cookers, a priority of President Castro), beverages and tobacco (6.4%), and fuels (6.1%). Although there are no official statistics on electricity generation, the wave of blackouts that affected cities and rural areas suggests that the electricity generation sector did not perform well and adversely affected other areas of the economy.

• Through September 2005, merchandise imports were three times the level of exports, resulting in a huge merchandise trade deficit. According to Vice Minister of Trade Antonio Carricarte, goods exports in 2005 were adversely affected by lower world market prices for nickel and decreases in the quantity of sugar exports.

Gains in Services Sectors and Help from Good Friends

In contrast with the decidedly poor performance of the goods-producing sector of the economy, Minister Rodríguez reported that 2005 was a banner year for the services-producing sector:

• The transportation sector grew by 7.7%, boosted by gains in rail transportation, road cargo transportation and warehousing, and passenger road transportation.

• The construction sector also expanded, particularly housing construction.

• The communications and informatics sector expanded by 8%.

• The number of tourists grew by 12% to 2.3 million, and income generated by tourism by 10.7%.

Note, however, that expansion in the value of output of none of these sectors reached or exceeded the reported overall growth rate of 11.8%.

Critical for Cuba’s economic growth in 2005 were the trade and aid relations forged with Venezuela and China. Venezuela, the island’s largest trading partner, sold Cuba an average of 98,000 barrels per day of oil—valued at a reported US$1.1 billion—pursuant to a long-term energy cooperation agreement, expanded in April 2005 through a bilateral agreement negotiated as part of the Bolivarian Alternative for the Americas (ALBA), Chávez’s response to the Free Trade Area of the Americas. China stepped up economic relations with Cuba, providing lines of credit to the island to purchase Chinese goods and making important investments in the island.

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Posted: 10 July 2007 07:16 PM   [ Ignore ]   [ # 1 ]
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