Austerity bites as Cuba fails to revamp

Austerity bites as Cuba fails to revamp
By Marc Frank in Havana
Published: June 3 2009 00:57 | Last updated: June 3 2009 00:57

Cubans are in no mood to party today as Raul Castro, the president,
turns 78. They are suffering the toughest austerity measures since the
post-Soviet crisis of the 1990s, despite diplomatic achievements that
have left the US isolated in its tough policy towards the Communist nation.

Darkened stores and offices in Havana, Cuba
Sweltering in Havana: darkened stores and offices are going without air
conditioning into the early afternoon as the government tries to reduce
power consumption
It has been just over a year since Mr Castro took over from his ailing
brother Fidel with a pledge to improve people's lives and remake one of
the most statist economies in the world. But now the population is being
called on to sacrifice by a government many view as old and bureaucratic.

Cubans this week jostled one another in ever longer lines waiting for
buses, sweated to meet mandated reductions in power consumption and
grumbled over a 50 per cent reduction in lunch portions served at work
place cafeterias.

At the same time, the region's foreign ministers battled the US over
Cuba's status in the Organisation of American States at a meeting in
Honduras which began on Tuesday. The austerity measures that took effect
on Monday have stirred up memories of the dark days after the Soviets
fell, called the Special Period, when 18-hour blackouts and food
shortages traumatised the population.

Cubans are once more confronting darkened stores and offices that are
going without air conditioning into the early afternoon. The government
has threatened to black out entire provinces if they do not reduce power
consumption.

"With a combination of global and domestic factors driving a new round
of economic and material deprivation, it's hard to imagine a birthday
celebration will be on the Cuban president's mind," said Julia Sweig,
senior fellow at the Washington-based Council on Foreign Relations and
author of the forthcoming book, Cuba: What Everyone Needs to Know.

"The diplomatic environment for Cuba is arguably the best in memory, but
Raul Castro surely understands that it will be hard to leverage a
favourable external environment domestically if life is about to get
even harder than it already is," Ms Sweig said.

The austerity measures followed warnings by the government that it could
not meet rising electricity demand because of a cash crunch that has
forced it to restructure debt and put off payments to foreign
businesses. The import-dependent country purchases more than half its
fuel and food requirements abroad and Venezuela, its main ally and
economic partner, is struggling with a 50 per cent decline in oil
revenues so far this year.

The Caribbean and Latin America have seen export earnings, remittances
and tourism revenues drop significantly and credit dry up as the
international financial crisis and economic downturn spreads to the
developing world.

The United Nation's Economic Commission on Latin America forecasts
foreign investment will decline by as much as 45 per cent and trade by
11 per cent in the region this year, undermining years of steady growth.

The Cuban government reduced its growth forecast from 6 per cent to 2.5
per cent last week and said the fall in nickel and tourism revenues
alone could exceed $1bn in 2009 because of the crisis and US sanctions.

But there is a growing feeling among Cubans that Raul Castro's failure
to revamp the state-dominated economy as he promised upon taking office
is at least partially to blame for renewed hard times.

"These people are just plain stupid. A few weeks ago they put new
restrictions on private taxis and this week they cut the buses. I do not
understand them anymore," a frustrated women waiting for a bus in Havana
said, asking that her name not be used.

Rafael Hernandez, editor of the often critical Temas Magazine, said that
Raul Castro faced not only the international financial crisis, but "an
inefficient domestic economic model due to its extreme centralisation
and waste, where a dysfunctional bureaucracy resistant to change has
prospered".

The state-run media have increasingly taken the bureaucracy to task for
a range of shortcomings, including its failure to implement wage reform
and move crops from the fields to consumers.

Bert Hoffmann, Cuba analyst at the German Institute of Global Area
Studies in Hamburg, said that Raul Castro recognised that "only a policy
of change – controlled, gradual as it may be – can hope to regain public
support." But believes he has run into fierce resistance that to date
means, "not even the modest reform agenda initially spelled out has
proved politically viable."

FT.com / Americas / Society - Austerity bites as Cuba fails to revamp (3
June 2009)

http://www.ft.com/cms/s/0/a1148faa-4fcc-11de-a692-00144feabdc0.html