Upon the death of Fidel Castro, the global media praised his legacy of political sovereignty and his role as an internationalist, as well as the notable improvements he made in education and health, although the judgment is usually negative in regards to the economy. In a previous publication I did a social-economic study spanning a half century of Fidel in power (1959-2008), using 87 indicators which demonstrated that economic performance was generally negative, while social welfare indicators reached a peak in 1989, deteriorating afterwards.1 Herein I will evaluate the situation between 1989 and 2016, emphasizing the most recent decade, as well as whether Raul Castro’s reforms in the last decade have managed to push forward the economy and social welfare.
Between 1960 and 1990, Cuba received $USD 65,000 million from the USSR, two thirds of which did not have to be reimbursed; this aid was higher than that received by all of Latin America throughout the Alliance for Progress. With the disappearance of Soviet socialism came the “Special Period,” a marked decline in all economic and social indicators, followed by a gradual recovery, especially at the beginning of the 21st century, due to substantial economic aid from Venezuela, which was equivalent to 10% of Cuba’s GDP in 2010.2 I have suggested that in order to improve the poor economic performance, it is paramount to advance Raúl’s structural reforms, while the beneficial but costly social services should be made financially sustainable in the long term.
In multiple publications I have analyzed the structural reforms implemented by Raúl between 2007/08 and 2016, concluding that these are the most important under the Revolution. They attempt to solve the problems inherited from Fidel and are in the right direction, but they are excessively slow, and face severe obstacles and disincentives. For these reasons, they have not yet had a tangible impact on the economy; in fact, some reforms have regressed.3 The grave economic crisis in Venezuela has contributed to these problems.
Cuba’s economic growth rate, which was 12% in 2006 largely due to Venezuelan economic support, has since exhibited a declining trend: 4.4% in 2015, and -0.9% in 2016,4 the first decrease in 23 years. Gross capital formation averaged 13% per year in 2008-2015, half of the 25% required for sustained economic growth. The industrial production index in 2015 was 38% below that of 1989; the fall was most pronounced in fertilizers (95%), sugar (80%), cement (60%), steel (29%), and textiles (25%). On the other hand, the production of oil, natural gas, electricity and nickel was higher (but nickel production was still 26% less than in 2008). A similar decline was seen in agriculture: citrus fruits (88%), fish (70%), cow’s milk (56%), raw tobacco (42%), rice (22%), head of cattle (18%) and eggs (13%). Only vegetable and tuber production increased. Foreign sector statistics in 2015, compared to 2014, indicate an exacerbation of the crisis: goods exports fell 31%, exports of professional services (Cuba’s primary source of foreign currency income, and mainly sold to Venezuela) decreased by 18%, and the surplus between the positive balance of services minus the negative balance of goods fell by 47%.5 If this happened when the economy grew 4.4%, the deterioration must have been greater in 2016 with the contraction. Cuba is experiencing its worst crisis since the 1990s.
The structural reforms have had adverse effects on social indicators. Between 2008 and 2015, in order to reduce the unsustainable social cost, the budgetary allocation to social services (education, health, pensions, housing, social assistance) fell from 55% to 47%, and from 37% to 28% of the GDP. The medium state wage, adjusted for inflation, in 2008 was 25% of what it was in 1989 and, although it rose to 38% in 2015, purchasing power was 62% lower than in 1989.6 The medium pension adjusted for inflation in 2008-2015 was half of that in 1989. All rural hospitals as well as urban and rural posts were closed in 2011; between 2008 and 2015, the number of hospitals decreased by 30%, the total number of health staff shrank by 22%, and the number of family doctors providing primary care went down by 65%. On the other hand, the number of doctors increased by 15% (although45% is providing services abroad), the infant mortality rate continued its fall from 4.7 to 4.3 per 1,000 live births, and the maternal mortality rate declined from 46.5 to 41.6 per 100,000 births (although this is still higher than 29.2 in 1989). University enrollment decreased from 743,979 to 165,926 (78%) between the 2007-08 and 2015-16 school years. Housing construction fell from 44,775 to 23,003 between 2008 and 2015 and per 1,000 inhabitants shrank from 4.0 to 2.0. The budgetary allocation to social assistance decreased from 2.1% to 0.4% and, as a percentage of the population, from 5.2% to 1.6%.7 The open unemployment rate, which reached a low of 1.6% in 2006, grew to 3.5% in 2012 due to the need of dismissing 1.8 million unnecessary state employees, but only half a million were discharged and the rate increased by 3.5% in 2012. And yet, only 500,000 employees were actually fired because the non-state sector grew less than needed to absorb all the surplus and open unemployment decreased to 2.4% in 2015.8 Cuba has never published statistics on income distribution, but proxy indicators suggest that in 1989 it was the least unequal in the region; the reforms have diametrically changed the situation, due to high incomes in the non-state sector and the drop in the state real salary.
An important advancement has been the condonation or reduction of most of the external debt; Cuba began to pay the remaining debt in October of 2016 but it is unknown if it will be able to continue doing so. The most outstanding aspect is foreign tourism. The normalization of relations with the United States and Obama’s executive have virtually opened the doors to U.S. visitors, who jumped from 95,254 in 2004 to 161,233 in 2015 and nearly 200,000 in 2016; furthermore the number of tourists from other countries has also grown, so that the total number of visitors went up by 17% in 2015 and reached 4 million in 2016. Likewise, gross revenue from tourism increased by 11% in 2015 and is projected to reach $USD 4 billion in 2016.
Overall, the adverse factors far outweigh the favorable ones, and 2017 will be very tense. In order to amend Fidel’s legacy, Raúl has one year to accelerate and deepen his structural reforms. If Trump reverses Obama’s measures and reforms do not advance, the crisis will worsen in Cuba.
1 C. Mesa-Lago: Cuba en la era de Raúl Castro: Reformas económico-sociales y sus efectos, Colibrí, Madrid, 2012.
2 C. Mesa-Lago: «Institutional Changes in Cuba’s Economic and Social Reforms» en R. Feinberg y T. Piccone (comps.): Cuba Economic Change in Comparative Perspective, Brookings Institution / Universidad de La Habana, Washington, DC, 2014, pp. 49-69; «El lento avance de la reforma” en Política Exterior Nº 171, 5-6/2016, pp. 94-104; y con R.Veiga, L. González, S. Vera y A. Pérez-Liñán: Voces de cambio en el sector estatal cubano, Iberoamericana, Madrid, 2016.
3 Raúl Castro Ruz, Discurso en la clausura de la Asamblea Nacional del Poder Popular, Granma, 28 diciembre 2016, p.3.
4 Cálculos del autor basados en Oficina Nacional de Estadísticas e Información (ONEI): Anuario estadístico de Cuba 2015, La Habana, 2016; datod de 1989, del Comité Estatal de Estadística: Anuario Estadístico de Cuba 1989, La Habana, 1991.
5 La CEPAL, Balance preliminar de las economías de América Latina y el Caribe 2016, Santiago de Chile, diciembre 2016, cuadro 4.4, estima un crecimiento de 43% en el salario medio real, el mayor en la región, pero con base en el año 2010 cuando estaba 27% por debajo del nivel de 1989
6 Cálculos del autor basados en ONEI: Anuario Estadístico de Cuba 2008, La Habana, 2009, y cit.
7 Basado en C. Mesa-Lago: «El desempleo en Cuba: de oculto a visible” en Espacio Laical Nº 4, 2010, pp. 59-66, y ONEI: Anuario 2015, cit.
8 C. Mesa Lago: «La desigualdad del ingreso y la experiencia de América Latina” en Temas Nº 84, 10-12/2015, pp. 35-43.
Carmelo Mesa-Lago is a Distinguished Service Professor Emeritus of Economics and Latin American Studies at the University of Pittsburgh, a visiting professor, researcher and lecturer in 40 countries, and the author of 92 books and 300 articles published in 7 languages in 34 countries. Past President of the Latin American Studies Association, member of the National Academy of Social Insurance and of editorial boards of six academic journals. International Labor Organization Prize on Decent Work shared with Nelson Mandela.
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