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ECONOMY-CUBA: Keeping the Wolf from the Door
By Patricia Grogg
HAVANA (IPS) - The global recession
poses new economic threats to Cuba, hitting
its principal exports and reducing its
chances of obtaining external financing,
although officials seem confident that the
situation will remain within manageable
limits.
Experts consulted by IPS predicted that
starting this month or next, the number of
tourists visiting this Caribbean island
nation will begin to diminish. The leisure
industry is an important source of hard
currency in Cuba and brought in more than
2.5 billion dollars last year. Remittances
from abroad are also expected to shrink.
They pointed out that the global crisis has
also restricted credit available from
international lenders, or driven up its
cost, and that Cuba is not exempt from this
effect, which is already causing a decline
in imports of raw materials for its
industries.
The fall in the price of nickel, Cuba's main
export product, meant that last year the
country's income from the metal was 250
million dollars less than expected. And
sales of Cuba’s exclusive cigars dropped by
three percent due to the recession, the
decline in tourism and the intensification
of anti-smoking campaigns.
Officials are tight-lipped about the
subject, but it has been reported that the
administration of President Raúl Castro is
taking measures to mitigate the impact,
including a six percent cut in the 2009
budgets for expenditure and subsidies of
most Cuban institutions, that had already
been approved.
Inevitably, the cuts will affect the
resources available for social programmes
and development. However, some analysts say
the nature of the centralised, state-run
Cuban economy will give the government
manoeuvring room and allow it to use
resources intelligently, by contrast with
economies where funds are widely dispersed.
"The fact that Cuba has a different kind of
economic structure gives it the opportunity
to use its limited resources with more
precision. This is very important at a time
of crisis when no one knows what is going to
happen," said Ariel Terrero, a leading
commentator on economic issues for state
television, in an interview on the website "Kaos
en la Red".
So far, the Economic Commission for Latin
America and the Caribbean (ECLAC) has not
included Cuba among the countries of the
region predicted to suffer negative growth
this year because of the crisis.
According to ECLAC executive secretary
Alicia Bárcena, the most affected countries
will be Mexico, where GDP is projected to
shrink by two percent, Brazil, with a
decrease of one percent, and Costa Rica and
Paraguay, with a fall of 0.5 percent each.
At a recent international meeting in Bogotá,
Colombia, Bárcena added that the GDP of
Panama, Peru, Cuba and Bolivia were expected
to grow at a rate of three percent or more
in 2009, while Ecuador and Chile would have
zero growth.
The ECLAC official said the crisis could
provide an opportunity to rethink the role
of the state, which could take an active
part in protecting the most vulnerable
sectors of society and in promoting
productive forces that are more
knowledge-based.
In recent weeks, authorities in Cuba have
reiterated their warnings about the critical
situation of the global economy, and urged
people to prepare themselves to face the
consequences. But they said the impact will
not be as bad as the 1990s, when the
country's main foreign partners, the Soviet
Union and the East European socialist bloc,
collapsed.
First Vice President José Ramón Machado told
activists in the governing Cuban Communist
Party (PCC) in the eastern province of
Granma that bolstering farm production is
essential to overcoming the crisis, in order
to replace imports and raise exports.
One of the island's economic Achilles' heels
is the high cost of food imports. In 2008
the country spent some 2.5 billion dollars
on food purchases abroad, 907 million
dollars more than in 2007. The difference
was basically due to soaring food prices on
the international market.
In late December, President Castro described
a scenario of uncertainty and austerity for
the year ahead due to the global financial
crisis and the destruction wrought by three
hurricanes in 2008, which caused nearly 10
billion dollars in losses, according to
official estimates.
Given the broader international context,
researchers predict that in the short term
the lifting of restrictions on remittances
and travel to Cuba by Cuban-Americans is
likely to have, at best, a moderately
positive effect on the economy.
On Monday, U.S. President Barack Obama
lifted all restrictions on Cuban-Americans
to visit their homeland and send money to
family members.
The elimination of travel restrictions for
U.S. citizens would have a greater effect,
but tourism sector officials are unwilling
to comment on that possibility, at least in
public. With a hotel capacity of over 46,000
rooms, Cuba hosted 2.35 million tourists in
2008.
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