After 50 years, Cuba's economy still isn't self-sufficient

 

Fifty years after the Cuban revolution, the island nation still has not been able to break the ties of dependency.

mwhitefield@MiamiHerald.com

Three weeks after Cuban revolutionaries claimed victory, Fidel Castro declared that the island wanted not only political freedom but also freedom from an economic system that at the time was intertwined with the United States.

It was Cuban sugar that Americans stirred into their morning coffee and U.S. industrial and consumer goods that steamed to the island.

Castro called Cuba a ''colony of the United States'' -- and made it clear he wanted to break with old ways. But over the past five decades, Cuba has traded a sugar quota and trade and investment dependence on the United States for massive handouts from the former Soviet Union and, now, for big subsidies from oil-rich Venezuela.

''You have 50 years of the revolution, and, despite all the subsidies, Cuba has been incapable of changing the structure of the economy to be self-sufficient,'' said Carmelo Mesa-Lago, professor emeritus of economics at the University of Pittsburgh.

In the early years following their Jan. 1, 1959, triumph, Castro and his followers set out to create a ''new man,'' who would respond to moral incentives rather than the profit motive.

But through the years, especially when times have been tough, Havana has invited back foreign investors, allowed self-employment, legalized and then prohibited the American greenback and courted foreign tourists who were shunned for most of the 1960s and 1970s. In 1968, a mere 3,000 tourists -- mostly Eastern Europeans -- visited Cuba. This year, Cuba is expected to host a record 2.34 million visitors.

''Cuba has had an awful economic policy, which has changed every four or five years -- but always within the economic parameters of socialism,'' said Mesa-Lago.

Jorge Piñon, an energy fellow at the University of Miami's Center for Hemispheric Policy, said the problem isn't so much Cuba's centralized economic model as ``inefficiency and lack of strategic planning. Instead of setting the basic umbrella policy for the economy and bringing in the experts for day-to-day operations, Fidel Castro has always wanted to micro-manage.''

Sugar is a case in point.

In 1970, Castro staked the honor of the revolution on achieving a 10-million-ton sugar harvest. Cuba managed a record 8.53 million tons but the huge mobilization of workers to bring in the cane disrupted other economic goals.

Then in 2002, Cuba announced that it was closing 71 of its 156 sugar mills and laying off 90,000 sugar workers. By 2006, Cuba was once again trying to increase sugar production.

Even though Fidel Castro's younger brother, Raúl, succeeded him as president in February, the elder Castro still casts a long shadow over Cuban policy.

Here's a short list of some of the most significant events that have shaped the economy since the revolution:

• Expropriation of U.S. property: In 1959, five U.S. sugar companies controlled more than two million acres in Cuba and foreigners owned about 75 percent of arable land. The first agrarian reform law announced in May 1959 put limits on private land holdings. What remained was distributed to landless peasants. Over the next year, Cuba nationalized U.S.-owned oil companies, banks, industries and other businesses.

• The embargo: As political, diplomatic and economic relations with Cuba continued to deteriorate, the Eisenhower administration imposed a partial trade embargo against Cuba on Oct. 19, 1960, prohibiting all U.S. exports except food, medicine and medical supplies and a few other things requiring special licenses. But Cuban imports -- including sugar -- were allowed. In 1961, President Kennedy cut the Cuban sugar quota to zero but it wasn't until 1962, after the Bay of Pigs invasion of the previous fall, that Kennedy announced a total embargo of Cuba would begin.

Although the embargo has remained tight, it has been modified through the years to include the export of U.S. food products and medicine to Cuba as well as the import of Cuban art and music to the United States.

• The special relationship with the Soviet Union: Cuba signed its first major trade agreement with the former Soviet Union in February 1960. For decades, the Soviet Union was Cuba's staunch ally and buffered its economy. It bought its sugar and nickel at high preferential prices, provided technicians for its industries, forgave trade deficits and sold oil to Cuba at cheap, fixed prices.

Mesa-Lago estimates Soviet net subsidies to Cuba from 1960 to 1990 at $64.5 billion. Now, he said, Venezuelan President Hugo Chávez has taken the Soviet Union's place with an oil subsidy he estimates hit $2.5 billion in 2007. Mesa-Lago said Cuba also is highly compensated for the doctors, nurses and teachers it sends to Venezuela.

• The end of the Soviet era in Cuba: In 1989, with political upheavals in Europe, the old Soviet-led trading bloc began to fall apart. That was bad news for Cuba, which depended on the Soviet Union for about 85 percent of its trade.

By 1992, Soviet oil shipments had shrunk from a peak of about 13 million tons annually to four million to six million tons. By that November, Cuba said it had lost some 75 percent of its foreign trade. Rather than a gradual weaning away from the special relationship with the Soviets as Cuba had hoped, the change was abrupt and devastating.

Cuba was oil-starved, its streets dark, its vehicles idled and its people hungry during the early 1990s, known as ``the special period in a time of peace.''

Then a slow process of reform began as Cuba scoured the world for new trading partners and sources of revenue. It opened to foreign investment, put more emphasis on food production, allowed limited self-employment and farmers' markets, legalized the dollar and put out the welcome sign for tourists.

Despite help from Venezuela and Cuban-American remittances, analysts say the quality of life for the average Cuban is still below 1989 levels, and its social welfare model emphasizing education and access to healthcare has eroded in the intervening two decades. The gap between the haves and have-nots that the revolution worked hard to close has widened, said Mesa-Lago.

• Cuba under Raúl Castro: ''It's clear that Raúl Castro has made many accurate and clear diagnoses of Cuba's economic problems'' since becoming president and allowed the official Cuban press to make criticisms, said Phil Peters, a Lexington Institute vice president who studies international economic programs. ``But Cuba, in a sense, is between two presidents as we are now. Some of the momentum [for reform] has stopped as Fidel's health has improved.''

So while there's been a lot of discussion, there hasn't been much action except in agriculture, which was hit hard by hurricanes this year. Cuba recently began distributing more land to private farmers and raised the prices the government will pay them for beef, milk, potatoes and other products.

''I think what Cuba is doing in agriculture is showing positive results,'' said Peters, who visited Cuba earlier this month. But, he said, ``It's very clear that to solve its economic problems, Cuba needs policies that will stimulate growth, create more jobs and generate growth in personal income.''

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