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HavanaJournal.com: Cuba Politics

Centralization and China helping Cuba recover from post-USSR days

Posted February 14, 2005 by publisher in Cuba Politics.
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By Anthony Boadle | Reuters

Cuba’s communist state is rising from the ashes of its post-Soviet economic crash with greater control over its economy and help from China and Venezuela, President Fidel Castro said on Saturday.
“The state is rising again like the phoenix,” Castro said in an almost six-hour speech to economists into the early hours.

For two years Cuba has been steadily centralizing control again over state companies by scaling back the autonomy allowed during the deep crisis that followed the collapse of the Soviet Union.

It has also introduced foreign exchange controls, eliminated the U.S. dollar as legal tender, increased regulation of foreign companies and curbed private enterprise in a return to a classic command economy that is 90 percent state-owned.

The centralization of state company operations will save Cuba between $500 million and $1 billion, Castro said.


“We had to establish the most rigorous exchange controls,” Castro said, complaining that previously 3,000 managers had authority to buy and sell, or run up hard currency debt.


Since the beginning of the year, all foreign exchange and its Cuban equivalent, the convertible peso, must be turned into a single account controlled by the Central Bank, which enhanced its grip on the purse strings of the cash-strapped state’s finances.


CHINA THE NEW ENGINE


Cuba will double its production of nickel and cobalt over the next four years thanks to Chinese investment and the increase in output by its joint venture with Canada’s Sherritt International, the Cuban leader said.


Nickel, the Caribbean island’s top export, will earn Cuba at least $800 million in gross revenues, or $500 million in net terms, Castro said. Cuba has the world’s third largest nickel reserves and its industry is producing at capacity of around 75,000 tons a year from three processing plants.


China’s state-owned Minmetals Corp. signed an agreement in November to invest $500 million in a joint-venture that aims to produce 68,000 tons of ferro-nickel per year. Castro called China the “new engine” of economic growth.


Cuba’s tourism industry, the island’s top foreign currency earner that brought in $2 billion last year, has cut its costs to 60 to 80 U.S. cents on the dollar of gross income.


Hotel managers complain authorities have ordered them to squeeze costs so much that quality of service has suffered.


Castro thanked Venezuela’s leftist President Hugo Chavez, his closest foreign ally, for generous assistance in shipping vital supplies of Venezuelan oil, officially 53,000 barrels a day, on preferential terms.


The number of Cuban doctors, dentists and teachers sent to Venezuela in part-payment for the oil will increase from 20,000 at present to 30,000 by the end of the year, he said.


SOVIET SUN VANISHED


Castro said “the sun vanished from the horizon” when the Soviet Union collapsed. The demise of the Soviet bloc deprived Cuba of billions of dollars in subsidies, mainly through cheap oil supplies in return for overpriced sugar.

The Cuban economy shrank by 40 percent between 1990-1993 and has not fully recovered to pre-crisis output. Castro reluctantly legalized the dollar, opened up Cuba to foreign investment and tourism, and allowed private entrepreneurs in food, transport and other services the state could not cater for.

Castro expressed his abhorrence for private business in his speech to 1,400 economists at an anti-globalization conference,

He attacked private jitney cabs who ply the streets of Havana in 1950-era American cars, accusing them of charging exorbitant fares while enjoying free medical care and low rents.

“We privatized as little as possible,” Castro said, as he claimed victory for the survival of Cuban socialism.

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