Cuba's economy and the US blockade


By Rodolfo Casals

The Cuban economy has developed special and exceptional characteristics since late 1989.

The new conditions that emerged as a result of the collapse of socialism in Eastern Europe and the subsequent disappearance of the Soviet Union, further aggravated by the effects of the 30-year old US blockade, have brought about the need to adapt the economy to deal with the challenges posed by these changes.

However, as the country's leadership has repeatedly stressed, the answer does not lie in adopting capitalist formulas, but rather in applying socialist formulas to survive in a capitalist world.

At the 9th Havana Trade Fair, held last November, President Fidel Castro stated that Cuba is opening up its economy to as wide an extent as possible, studying all types of proposals, prepared to listen to all possible ideas and participate seriously and honestly in any that are both feasible and mutually beneficial.

This opening, he emphasised, does not imply change in the country's political orientation, much less a shift to capitalism, as is the case in Eastern Europe, where state property is rapidly being passed over to the private sector.

Adapting and transforming the economy has become a top priority in Cuba, where a historical dependence on foreign trade has had wide repercussions on any plans for development.

According to foreign trade minister Ricardo Cabrisas, in 1989 Cuba opened its economy by 51.5%.

The changes that have taken place in the international arena mean that the country is faced, for the second time in 30 years, with the challenge of abruptly reorienting its foreign trade, rapidly searching out new sources of financing and capital as well as new markets for importing and exporting.

Before the triumph of the Revolution on January 1, 1959, 70% of Cuba's foreign trade was carried out with the United States, on the basis of preferential tariffs. Three decades later, trade with the socialist nations had grown from 1.5% in 1959 to 83%, of which 70% was conducted with the former Soviet Union.

The illegal US blockade created and continues to create serious material difficulties: the loss of billions of dollars in trade, lack of access to equipment and parts with the specifications upon which Cuban technology is based, higher freight costs due to longer distances travelled to deliver exports, etc. Moreover, the impact of the eclipse of socialism in Europe has been a sudden decline of over 50% in imports, as a result of the failure of those countries to agreements. This has obviously had negative repercussions on the population's standard of living.

As the president of the National Bank, Héctor Rodríguez Llompart, has pointed out, these events marked the end of fair trade relations, as well as the suspension of credit and favourable financing for the acquisition of industrial equipment which, while lacking in the latest technological advances, had nonetheless allowed the bases to be laid for the country's development.

The demise of the Council for Mutual Economic Assistance and the rupture of the system of economic relations with those countries resulted in practice in a double blockade. The highly negative effects of this situation on the Cuban economy necessitated severe economic and social adjustment measures. As a result, the country has entered into what is known as the special period, the duration of which is still impossible to predict.

The measures implemented include rigorous energy conservation due to the substantial drop in oil supplies; factory closings due to shortages of raw materials; restrictions on social programs; and cuts in consumer goods and services. At the same time, however, everything possible is being done to ensure that the high levels achieved in such areas as health, education and social security are maintained, and that no-one is left without sufficient income.

The government's current strategy is based on three main priorities: the development of a wide-reaching food program to meet the basic needs of the population; the development of tourism; and advances in the pharmaceutical and biotechnology industries, as a means of attracting freely convertible currency.

Despite the difficulties and material shortages facing the country, the last few months have witnessed a slight economic recovery in a number of different areas. This is true, for example, in the agricultural sector, where production of garden and root vegetables during the first quarter of this year was 10% greater than during the same period in 1991, using less fuel.

Nevertheless, these increases do not compensate for the limitation currently being faced.

To complement the investments being made by the Cuban government, foreign participation is being sought through a variety of mechanisms such as joint ventures and cooperative production.

Carlos Lage, member of the Council of State and of the Political Bureau of the Communist Party, defines this process as a socialist opening to the capitalist world. In other words, the basic principles of the political, economic and social project chosen by the country are maintained, at the same time as trade is reoriented, the market is diversified, and the necessary injections of capital and technology are made via associations that are fundamentally geared toward the export sector. This investment path began with tourism, with European and Latin American partners. But it has already spread to other branches of the economy due to the attractiveness of the Cuban market, which provides tax benefits and facilities for repatriating capital.

Fluid communication exists between the socialists firms and the foreign companies interested in consolidating established businesses or in finding out about the conditions and opportunities to do so. According to Chamber of Commerce figures, 60 business delegations have been received by that institution since January of last year, not counting those attended to by other Cuban economic agencies.

The threat of a tighter and wider-ranging US blockade implied by the possible passage of the Torricelli bill, makes discretion concerning these business deals important. The policy of restricting information is aimed at protecting Cuba's new partners from US pressures to abandon their projects or businesses because of threatened economic reprisals.

Nevertheless, it is known that by the end of last year more than 60 such business associations were functioning, more than 100 were under consideration, and some 250 foreign companies had opened offices in Havana. During the Fourth Party Congress in October 1991, President Fidel Castro said that propositions were pouring in despite the anti-Cuban campaigns and US pressures.

Lage has said that only the associations that are in the country's interests will be accepted. The best offers that a country in need of fresh capital — but that is not in crisis as certain governments and Western news agencies claim — can make to foreign business people is fair treatment and guarantees on investment. The only condition is that this investment not affect national heritage and not undermine the island's sovereignty. Independence and the chosen socialist orientation will be preserved; they are not under discussion.
[From Granma, slightly abridged.]

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