Cuba faced worst economic crisis in '09

Posted on Friday, 01.01.10

Cuba faced worst economic crisis in '09

Deepening economic troubles, rising crime and corruption, and a
burgeoning blogger movement vexed Cuba in 2009.
BY JUAN O. TAMAYO
jtamayo@elnuevoherald.com

Raúl Castro was right, when he predicted on Jan. 1 that 2009 would be a
tough year for Cuba.

Havana faced its worst economic crisis in 20 years, myriad scarcities,
freezing foreigners' deposits in its banks -- with promised reforms
stalled and its political cohesion put in doubt by one of the
revolution's worst-ever leadership purges.

Crime and corruption increased, according to official reports. Bloggers
as well as black Cubans fired increasingly daring darts at the
government, but Castro gave no ground on human rights.

Brother Fidel Castro, meanwhile, often appeared to veto deep reforms
intended to help Cuba survive, and ended the year apparently far
healthier than he was at the beginning.

At the root of Cuba's crisis is its centralized, unproductive
communist-styled economy, $10 billion in damages caused by three
hurricanes in 2008 and a global recession that shriveled virtually all
the sources of Cuba's income.

The price of main export nickel plunged by half, income from tourism
sank by 10 percent and foreign credits dropped by a reported $1 billion
-- a devastating blow to an island long accustomed to financing its
operations by taking out loans to pay old debts.

Throughout the year, the government railed against admitted economic
mismanagement and exhorted Cubans to tighten their belts and work
harder. And while Castro initially promised ``structural'' reforms to
improve the economy, his actual steps were more tentative. ``Raúl has
done more to diagnose the problems than to solve them,'' said Phil
Peters, a Cuba expert with the Lexington Institute think tank in
suburban Washington.

FREEZE ON DEPOSITS

With his coffers empty, Castro set out to cut government spending and
imports, step up production and reduce labor inefficiencies. In the most
telling sign of Cuba's crisis, he also reportedly froze at least $600
million in foreign businesses' deposits in Cuban banks.

``It's one thing to fail to pay a loan, but to seize money in Cuban
banks, that tops it all and shows the chaos in the country,'' said
dissident Havana economist Oscar Espinosa Chepe.

On an island that spends some $1.4 billion buying 60 to 80 percent of
its food abroad, Castro slashed imports by 37.4 percent -- U.S. imports
alone dropped by about 27 percent. An order to cut electricity
consumption by 12 percent led to the closing of thousands of factories
and workplaces.

To increase productivity, the government raised the retirement age by
five years, allowed workers to hold more than one job and raised some
salaries, including those of the island's 545,000 teachers.

It also slashed the massive subsidies that augment Cubans' meager
salaries -- $17 to $20 a month -- by removing several items from ration
cards and cutting back the quantities for others. Hundreds of free
cafeterias at state enterprises were closed, as were some state boarding
schools in rural areas.

As the year passed, the government's forecasts of economic growth kept
shrinking, starting at 6 percent, hitting 1.7 percent by late summer and
1.4 percent by year's end, though several independent analysts projected
minus growth.

BLAME THE EMBARGO

Cuba continued to blame the U.S. embargo for many of its travails,
issuing a report in the fall that estimated the sanctions' total damages
since 1962 at $236 billion.

But Castro was brutally honest when it came to Cuba's most critical
domestic problem -- a moribund agricultural sector. Half the arable land
is fallow, and the state sector controls 75 percent of the land yet
accounts for only 40 percent of production.

``The land is here! The Cubans are here! Let's see if we can work, if we
can produce!'' he declared in one speech.

In his government's most ambitious effort to revive agriculture, by
August it had reportedly loaned 1.7 million acres of fallow land to
82,000 private farmers. It also shifted Acopio, the inefficient
Agriculture Ministry agency that gathers and distributes harvests, to
the Commerce Ministry.

Castro also closed some farmers' markets, where supply and demand set
prices, hoping to force more products to state-run markets that have
lower government-set prices but fewer products.

Havana residents reported seeing more vegetables by year's end. But
major problems clearly remained.

Some new farmers were inexperienced city dwellers, and the bureaucracy
retained control of supplies like seeds, fertilizers and gasoline, as
well as the vehicles that take the harvests to market.

``This is a Gordian Knot that can't be undone little by little. Cuba
needs major changes, and Raúl is only picking at the problems,'' said
Jorge Sanguinetty, a Miami economist who follows Cuba closely.

THE POSITIVE

It wasn't all bad news.

On the international front, Cuba enjoyed its best standing since the
late 1970s, with solid allies around Latin America and much improved
relations with Spain, Russia, Iran, Algeria, Angola, China and even
Australia. Castro made a string of trips abroad and heads of state
streamed to Havana to sign trade and other deals.

Venezuelan President Hugo Chávez kept up his massive subsidies to Havana
-- their size unknown, but estimated in the billions -- and the
Organization of American States voted to welcome back Cuba as a member,
an invitation the Castros declined.

President Barack Obama made friendly gestures, such as lifting most
restrictions on Cuban-American travel and remittances to the island. The
U.S. opened immigration and postal service talks. By year's end,
however, bilateral relations remained strained.

Castro also appeared to face political problems at home, canceling a
Communist Party summit he had set to approve a new model of socialism
for Cuba.

Castro replaced his entire economic cabinet, a dozen top party
officials, 30 ambassadors and the heads of the Central Bank and
Communist Youth Union. Most importantly, he fired Carlos Lage and Felipe
Perez Roque, once presumed heirs to the reins of power.

Fidel Castro also remained a power to contend with at age 83, by most
accounts blocking some of his brother's proposals for major changes
while receiving a steady flow of visits by foreign heads of state. He
also wrote more than 100 columns, called ``Reflections,'' over the year.

``This was a man who was thought to be literally on his last legs, and
in many ways he emerged during the year in a stronger position,'' said
Daniel Erickson, author of The Cuba Wars: Fidel Castro, the United
States, and the Next Revolution.

Many Cubans accepted the pain with resignation.

``What can we do? We have suffered for many years, and now there's some
more suffering. We have no option but to bear it and survive somehow,''
said a Havana journalist who asked to remain anonymous out of fear of
government reprisals.

But others voiced complaints in increasingly novel ways, with critical
bloggers winning international attention and black dissidents
complaining of racism -- a move that drew a first-ever show of support
from a group of 60 well-known African-American activists.

``The young generations see the frustrations on the island continuing to
increase, and it's not just the economy but the politics, the lack of
hope and future that they see for themselves,'' said Andy Gomez,
assistant provost at the University of Miami and senior fellow at UM's
Institute for Cuban and Cuban-American Studies.

PROTESTERS

Near year's end, the government sent supporters to the streets to bully
the protesting wives and mothers of jailed dissidents as well as blogger
Reynaldo Escobar. His wife Yoani Sánchez, who writes the popular
Generación Y blog, reported that security agents had beaten her and
another cyber-writer.

The number of Cubans leaving illegally reportedly dropped to the lowest
level since 2002, perhaps because the U.S. economic crisis meant fewer
jobs or less money to pay for smugglers, maybe because people were
waiting for Raúl Castro to make changes.

Nevertheless, a steady stream of boxers, baseball and even basketball
players continued to defect, and the Spanish embassy in Havana
reportedly received 20,000 applications for citizenship in the first
month of a law allowing those with Spanish grandparents to become Spaniards.

By the end of the year, as the rest of Latin America appeared to be
emerging from the global crisis, there was widespread talk in Cuba of
more belt-tightening coming in 2010.

One idea: The state would scrap the ration card, now good for 10 days of
food a month, and issue food coupons to only the most needy. All 24,700
free workplace cafeterias will close.

Another: Cuba's detested two-currency system would go. Employee-run
cooperatives would take over government-run retail stores like clothing,
butcher and car repair shops -- all nationalized in the 1960s.

But none of that would be sufficient to straighten out an economy
burdened by 50 years of Soviet-style socialism, Espinosa Chepe said by
telephone from Havana.

``This has been a year of total frustration,'' the dissident economist
said. ``What should have been done this year was not done. There are no
credits, and no reforms. So the problems have been accumulating, and
will continue to accumulate.''

Cuba's Minister of the Economy and Planning seemed to agree. Granma
reported in July that Marino Murillo had predicted that 2010 ``will be
equally difficult.''

Cuba faced worst economic crisis in '09 - Americas - MiamiHerald.com (1
January 2010)
http://www.miamiherald.com/news/americas/v-fullstory/story/1405416.html