Understanding developments in Cuba

RATB educational, 22 May 2011

1990s: Special Period

GDP collapses 35%. US blockade intensified

Critical scarcities in most sectors, industries closed, infrastructure ground down

Employment protected - enterprise loses subsidised, salaries maintained

Fiscal deficit reaches 30% of GDP. Real salaries & pensions fall 70%

The correlation between salaries and productivity lost - low salaries & low productivity

2009 unemployment rate was 1.7%

20% of the state sector workforce surplus to requirements: Can be productively employed in other sectors

Cuba: unemployment & real GDP growth

1994-2000 GDP growth average 4%

2001-2006 GDP growth average 6.3%

Defending socialist development

Surviving the ‘Special Period’ from 1991

Maintained welfare provision, state planning, predominance of state ownership and internationalist solidarity

Economic reforms introduced - small concessions to market forces reversed as conditions improve

Organic farming, crop rotation techniques, urban agriculture, bicycle transport, car-pooling, solar-energy, and eco-tourism

Investments in healthcare, education, biotechnology - socioeconomic benefits domestically (offsetting inequalities) and in international trade

Medical and educational internationalism

Cuba’s welfare priorities

1990s share of Cuba’s GDP spent on social programs increased 34%

1990-2003: Cuban doctors increased by 76%, Dentists 46% Nurses 16% Maternity homes 86% Day-care centres for older people 107% Homes for people with disabilities 47%

Infant mortality: 1989 = 11.1/1,000 falls to 1999 = 6.4 (2010 = 4.5)

Education exp rose from 8.5% of GDP in 1990 to 11.7% in 1999 and 12.8% by 2007 (20% of government spending)

1992-1996: 1.5% GNP invested in scientific poles (biotech & pharma industries). Produces 80% of domestically consumed medicines

Social spending in Cuba & Latin America

Social spending in Cuba & Latin America

Cuba’s internationalism

Medical internationalism 100,000 doctors abroad in five decades

2010: 30,000 health care professionals in Venezuela (295,000 lives)

Serving in 75 countries. 24% Cuban physicians outside Cuba

Medical brigades in 27 countries, training locals to replace them (2008)

ELAM 2,000 graduates from 28 countries (2005), including from US

Operacion Milagro 1.5m people from 35 countries (2009)

International School of Sports 2005 - 1,300 students from 72 countries

Cuba literacy campaigns Yo Si Puedo in 28 countries 3,600,000 people from 23 countries made literate (2008)

Recovery & Rectification from 2005

2005 GNP reaches pre-crisis levels. Structural rectification initiated. Measures to improve efficiency, raise salaries and productivity

Recentralisation of finances & de-dollarisation Raising of salaries and pensions Energy efficiency campaign Enterprise Perfection System Distribution of idle land in usufruct (rent-free loan) Reduction in imports Tightening of regulatory and auditing controlsChanges in the employment structure

Aim to raise productivity (precondition to raise salaries and standard of living), reduce imports, rationalise production, obtain capital for infrastructural investments

Restore macroeconomic efficiency and fiscal balances

Recovery & Rectification from 2005

Fidel: ‘the dream of everyone being able to live on their salary or on their adequate pension’ (2005)

Marx: ‘the individual producer receives back from society – after deductions have been made – exactly what he gives to it’ (1875)

Raul: ‘Wages…have thus ceased to play a role in ensuring the socialist principle that each should contribute according to their capacity and receive according to their work’ (2007)

2007: initiated a nationwide debate. Key complaint was dual currency, low salaries and high prices:

‘any increase in wages or decrease in prices, to be real, can only stem from greater and more efficient production and services offered, which will increase the country’s incomes… To have more, we have to begin by producing more, with a sense of rationality and efficiency.’ (2007)

2007-8 global crisis & natural disasters

Global food and fuel price raises: import prices of oil, milk and chicken increase 200-300%

80% of Cuban ‘ration’ imported (50% of agricultural land idle following contraction of sugar industry)

Global financial/economic crisis disrupts access to external financing, income from tourism, export earnings (Nickel prices fall 75%), increase in oil prices

2008 hurricanes cost $10bn damage (20% GDP) – revenue needed for emergency imports and reparations (1998-2008 = $20.5bn)

Nov 2008-Jul 2010 Severe drought affects food production, leading to price rises

World price fluctuations

Cuban Development:

Inspiration to the Bolivarian Alliance for the

Americas

Helen Yaffe, 10 April 2011

h.yaffe@ucl.ac.uk

Fall in nickel prices and fluctuations in oil prices Jan 2007 – April 2010

Navigating the crisis

2008 Fiscal deficit = 6.9% of GDPDeficit in balance of foreign trade in goods and services = $1.7 billion

2008 Cuban banks freeze accounts of foreign suppliers and investors. Debt repayments not met. Liquidity crisis

US blockade punishes trade with Cuba. Costs $236 billion by 2010

2009 imports reduced by 37% on previous year (ISI) – but not compensated by domestic production due to drought & other factors

2009 positive balance in foreign trade – 2/3 of frozen bank accounts paid off and some foreign debt repayments renewed

2010 Cuba exports increase 21%. Trade deficit reduced by 7% on 2009

Cuba buffered by the Bolivarian Alliance for the Americas (2004)

Changes to the employment structure

The 1 million surplus workers to transfer to agriculture, construction or industry, cooperatives or self-employment

State institutions must provide these alternatives. Cuban trade unions delay restructuring to protect workers

Self-employment: 1980s max. 50,000

1993 law: 170,000 workers in 2005 falls to 144,000 in 2009

Cuban workforce 5.2 million. 15.4% work in the non-state sector – mostly agricultural cooperatives. 2.7% are self-employed

200,000 new licenses issued since October 2010 = less than 7% self-employed - non strategic or marginal occupations

Increase state tax receipts and decreases salary costs

Self-employment in the Cuban workforce

Evolution of self-employed work, 1994-2009 (thousands of workers)

Guidelines for updating the economic model

G1: socialist planning will continue to be the principal means to direct the national economy

G3: In the new forms of non-state management, the concentration of ownership shall not be permitted

Short-term aim: Eliminate the BoP deficits, increase NY, ISI, improve economic efficiency, work motivation and income distribution and improve productive forces

Long term aim: ‘food and energy self-sufficiency, an efficient use of human potential, a higher level of competitiveness in traditional production areas, and the development of new forms of the production of goods and services of higher added value’

Conclusion

Cannot be understood from purely ideological or political perspective

Pragmatic measures: challenge of building socialism in underdeveloped, trade-dependent island, blockaded and attacked

Create the infrastructure in which all Cubans can contribute towards

socialist developmentNo one will be abandonedNot an ideological preference for ‘liberalisation’Not a rupture with the socialist revolution and Fidel Castro

Progress monitored and policies updated and adapted over 5 years

Progress with patience and resolution to improve the efficiency of the system; maintaining the principles of socialism, while adapting, with creativity and innovation to the challenging context of the global capitalist crisis

Cuban imports & exports by destination, 2008

Source: Economic Intelligence Unit, 2009.

Cuba & ALBA

Bolivarian Alliance for the Americas: Antigua and Barbuda, Bolivia, Dominica, Ecuador, Honduras (coup June 2009), Nicaragua, St Vincent & the Grenadines. Pop. 70 million & GDP $440bn

Promotes non-market based exchanges between neighbouring countriesReciprocal cooperation and focus on endogenous development to overcome structural inequalities Barrier to US & European capital – protects radical governments, example of the benefits of trade relations based on South-South cooperation and welfare-based development

‘Of course the ALBA is largely inspired by the good things of the Cuban model; like trade between peoples based on solidarity, not for profit, cooperation for development…’

President Correa 2009

ALBA benefits to Cuba

0

20

40

60

80

100

1989 2006

International trade regional distribution (%)

AméricaLatina

Europa

Asia

AméricaNorte

Africa yOceanía

Alternative to complete insertion into capitalist world economy

Export strategy consistent with Cuba’s socialist principles, reaps the benefits of the Revolution’s welfare-based development strategy, and not obstructed by the US blockade

Provides capital for infrastructural investment projects (PDVSA & CUPET)

Political support against US blockade

Locates Cuba as a central axis of pan-Latin American integration

Distribution of Cuba’s international trade 1989 & 2006Distribution of Cuba’s international trade 1989 & 2006Source: Angela Ferriol Muruaga, INIE, Cuba, 2008Source: Angela Ferriol Muruaga, INIE, Cuba, 2008