In-Depth Portrait Of Cuba Today.

A newly released edition of an ECLAC study provides information on one of Latin America’s most interpreted, but least studied, economies: Cuba. The Cuban Economy, Structural Reforms and Economic Performance in the 1990s, prepared by ECLAC, with support from the Swedish International Development Agency and published in both Spanish and English, comes with a CD-Rom packed with additional statistics covering all major aspects of economic life.

“The main objective was to present the government of Cuba and the international community with an independent analysis of its economic development and the trends and obstacles to the structural and institutional adjustments made in response to contemporary events,” write the authors. “Special attention was given to the repercussions of the breakup of Cuba’s ties with the countries of Eastern Europe and the former Union of Soviet Socialist Republics, the progress of the stabilization program and the nature and scope of the reform process.”

Significant progress toward structural reforms has been made in Cuba in the past two years. By 2001, there were 405 mixed enterprises and contracts functioning involving more than US$5 billion. Foreign investment is concentrated primarily in oil, energy and nickel, while the diversification of foreign trade has continued, with America (39%) and Asia (14%) taking large bites out of what was once virtually a European monopoly on Cuban exports (which dropped from 89% in 1989 to 46% in 2001).

There has also been progress toward correcting huge imbalances in fiscal accounts, although economic recovery came with deterioration in external sector accounts. Prices have stabilized in recent years, and there has been some improvement in labour productivity, although it remains well below international standards. Agriculture has seen a significant expansion in private activity, with 147,000 private farmers and 76% of land now cultivated by the non-State sector.

The study provides a general overview of the problems facing Cuba’s economy at the start of the 21st century and goes on to explore events leading up to the 1989 crisis and the government’s response to it. A third section focuses on individual sectors, particularly agriculture and livestock, with a special section on the sugar industry, manufacturing and energy. Tourism, a mainstay of the Cuban economy, is also examined in depth by the team of researchers, which was headed up by David Ibarra and Jorge Máttar, and actively supported by ECLAC’s Executive Secretary, José Antonio Ocampo. A Cuban team, under the leadership of Enrique Martínez, Deputy Minister, assisted the ECLAC effort, provided access to much-needed documentation and figures.

The study finds that introducing the necessary economic reforms is a particularly complex task in Cuba. Unlike its counterparts in the ex-socialist countries of Europe, the need for sweeping changes arose due to external changes (the fall in 1989 of the socialist countries that heavily supported its economy) rather than the demands from social movements inside Cuba. Thus, introducing structural changes, particularly conditions more favourable to private enterprise, is no easy task.

The study examines policy options for change within the Cuban economy, outlining costs and benefits. Instead of making the welfare state lose ground and repeating, on a different scale, the long European history of social achievements dating back to the Industrial Revolution in England, Cuba’s new development phase could be based on the advantages stemming from an equitable distribution of income as has successfully occurred in many countries – under different circumstances – following industrialization, the study observes.

Contrary to general opinion, comprehensive changes cannot be achieved overnight. Poland, for example, had access to substantial foreign funds (some US$5.5 billion over a three-year period) to help its structural reforms along, and nonetheless experienced serious social upheaval. This was helped along, however, by widespread support for the changes. In Cuba, however, this financial and moral support does not exist.

The authors warn that “It will be important from the outset to devise counterweights to limit the social polarization that tends to occur with the functioning of the free market and the diffusion of private economic rights. There is no theoretical basis that sets the exact limits of the boundaries between efficiency and equity, so solutions will have to be pragmatic and reached through political consensus. That is why it is difficult to strike a stable balance between economic freedom and social justice.”

They note that the current transformation of production and institutional structures is taking place in singularly unfavourable conditions, particularly the lack of foreign financing and the US trade embargo. Nonetheless, Cuba is gaining ground in terms of vital foreign sales, which grew at 10% from 1993 to 1998. Still, much remains to be done. The country needs to change regulations, economic organization and management mechanisms to develop more stable sources of foreign financing.

In this sense, advances in the banking system are encouraging. The new Banco Central de Cuba has become the regulatory and supervisory authority for financial institutions, with responsibilities similar to central banks elsewhere in the world. It issues currency, acts as a lender of last resort, looks out for monetary stability and regulates the financial system. The Banco Nacional de Cuba is focusing on foreign-debt management and operations to support foreign economic relations, while the Banco de Crédito y Comercio now offers universal banking throughout the country, and the Banco Popular de Ahorro (People’s Savings Bank) provides services to the productive sector.

These changes signal the advent of a new phase, characterized by more business autonomy, the proliferation of economic agents, and decentralized decision-making, thus opening the way to the creation of capital markets and other financial instruments.

Other issues explored by the study include:

Macroeconomics and social development, particularly recent history, the foreign sector, social welfare, fiscal reform, adjustment of public accounts, monetary policy and reforms, foreign economic relations, the labour market, social development and social policy dilemmas;

Sectoral topics, particularly agriculture and the sugar industry, land ownership, reforms to manufacturing, crisis and restructuring of the food, energy, steel, medical, tourism and construction industries, the environment and environmental problems.

To view book CLICK below:

http://cepal.un.org.mx/resumenes/febrero2002/cuba.html

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