Posted on 06/11/2002 3:19:26 AM PDT by Cincinatus' Wife
HAVANA (Reuters) - Communist Cuba's economy has been battered by falling tourism, low export prices and shortages of oil that will make life harder on the Caribbean island, experts and business sources said on Monday.
President Fidel Castro's government plans to shut down almost half of Cuba's inefficient sugar mills, which cannot compete at today's rock-bottom world price of about 5 U.S. cents a pound.
The drastic measure will leave tens of thousands of Cubans out of work in Cuba's largest industry, which for decades was the backbone of its socialist revolution.
Cuba's pressing need for hard currency to pay for essential imports of food and oil led the government to jack up prices for consumer goods sold in dollar shops by up to 30 percent.
The price hikes angered Cubans, most of whom earn local pesos but need dollars to buy a fan, a refrigerator or other basic consumer goods in the state-run shops.
"It is going to be a very hot summer in Havana, which can only mean more push for migration and more social tension," said Damian Fernandez, an expert on Cuba at Miami's Florida International University.
The Castro government has taken difficult steps long overdue, such as the closing of 71 unproductive sugar mills, but has done nothing to spur output, he said.
"The economic downturn can only widen the gap between the government and the people," Fernandez said.
"Tired is the word. People are tired," a member of Cuba's Catholic Church hierarchy told Reuters.
REMITTANCES DOWN
The world economic slowdown reduced the remittances sent by relatives living mainly in the United States, an estimated $800 million a year that for many Cubans has become vital for daily survival.
The communist government was forced to legalize possession of U.S. dollars in 1993 after the collapse of the Soviet Union, which subsidized the Cuban economy by buying sugar at good prices and supplied the island with cheap oil.
The economy shrank by one third between 1989 and 1994 and Cuba opened up to tourism and foreign investment to dig itself out of the crisis.
But the impact on world travel of the Sept. 11 attacks in the United States has meant tourism, Cuba's main source of foreign currency and the engine of its recovery, fell off by 15 percent in the first four months of 2002, officials said.
Ten days ago, Cuba began allowing tourists to pay in euros at its prime beach resort of Varadero, in an attempt to draw more visitors from Europe.
The Cuban government, which blames four decades of U.S. trade sanctions for its economic woes, forecasts 3 per cent growth this year, the same rate posted last year.
But Western diplomats do not expect to see any growth.
CASH NEEDED FOR U.S. FOOD
Following last year's devastating hurricane Michelle, Cuba's worst storm in half a century, Cuba began buying food from the United States for the first time since Castro took power in the 1959 revolution.
So far Cuba has bought some $90 million-worth in U.S. farm goods allowed after American agroindustrial groups succeeded in modifying the embargo. But the purchases must be made in cash.
Cuba's increasing international isolation and chronic credit difficulties have worsened the economic outlook.
Venezuela stopped supplies of 53,000 barrels-a-day on easy terms in April, when President Hugo Chavez was briefly overthrown.
Chavez, an admirer of Castro's, vowed to restart shipments as soon as he returned to power, but Venezuela's state oil monopoly PDVSA says shipments have not resumed because of Cuba's arrears.
A foreign executive in a joint venture with the Cuban state said shortages of diesel may force temporary industrial plant closures in coming weeks.
"I don't see any growth. If there is growth it will be minimal and offset by the fact that daily life is getting worse," Fernandez said.
"I propose the following: let's call a march on Wednesday to support the document presented here," Castro told a meeting of leaders of pro-government worker, student and farmer organizations.
The meeting followed rallies Castro has led for three Saturdays in a row to reject calls by President Bush that Cuba allow freedom of speech and open elections.
In policy speeches on Cuba on May 20, Bush called Cuba a "tyranny" and vowed to maintain a four-decade-old trade embargo against Cuba until its one-party state undertook reforms. Bush also announced increased aid for independent groups in Cuba, including grants for the children of political prisoners.
Speaking to 780 leaders of social groups, who chanted "Fidel, Fidel" and revolutionary slogans, Castro said Bush's speeches to anti-Castro exiles in Washington and Miami were "insulting and threatening." ***
you don't have to ride a loser for 40+ years to get the message
bozo should have taken the hint somewhere around 1962 instead of costing 11 million people 4 decades of prosperity
and if he thinks it's bad now, he ain't seen nuthin' yet, and they go into the storm with no reserves...
I don't understand this -- what "international isolation"?? I thought the reason for Cuba's economic woes was the US embargo. All the other countries of the world love this guy, don't they?
You can send this piece to Paul Gigot at the WSJ -- apparently he needs a refresher course on embargo efficacy.
Governments cannot design and build high quality consumer products like automobiles and televisions and they cannot design and build efficient sugar factories because governments do not have the motivation or the wealth to do these things.
Governments can expropriate the wealth but that very act kills the desired outcome. The best that government can do is wave a lot of money at the private sector in order to buy excellent fighter aircraft and such. It is the private sector that produces good stuff.
Bump!
Castro's trading partners finally got the message - the check was never in the mail.
Up until now the outcome has been a communist slave plantation with Castro as owner and beneficary. Looks like he's just about wrung out the last bit of wealth from his revolution. Well, he has if the Democrats don't get their way.
Castro's Cuba Bad for Business ***Cuba's much-touted Foreign Investment Law No. 77 is, like the Shakespearean comedy, much ado about nothing. It fails to resolve problems such as the restricted liquidity of investments, high risk for foreign exchange losses and reversibility of investment agreements.
The experience of foreign investors in Cuba is replete with horror stories. In 1995, when the "liberalizing" law was passed, the Cuban government unilaterally canceled Spanish utility company Endesa's investments in hotels. Mexico's Grupo Domos found itself arbitrarily slapped with enormous back-tax penalties, and Canada's First Key Project Technologies' proposal to build a $350 million power plant was stolen by the Cuban government and shopped around elsewhere.
Cuba last year devalued its currency by 18 percent and fell behind in debt payments of $500 million to private banks and firms in France, Spain, Japan, Canada, Chile and Venezuela. (This does not include the repayment of government trade credits to France for the last four years and the principal on foreign debt of $35 billion.) With export prices down in nickel, sugar and tobacco, along with a fall in tourism and remittances from abroad, Cuba will remain an economic basket case. Doing business in countries that violate labor rights is not considered good business practice.***
March 2002 - Forbes.com The World's Billionaires - "Royal Flush" - Castro - $100 Million.
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