Poverty in Cuba increases as government slashes social spending, expert says

The reforms pushed by Cuban ruler Raúl Castro are necessary to fix the country’s economy, but are eroding social services and have not led to increased productivity, economist Carmelo Mesa-Lago said Saturday.

Social services accounted for 55 percent of the government budget and 37 percent of the Gross Domestic Product (GDP) in 2007-2008, one of the highest levels in Latin America but one “that could not be sustained,” Mesa-Lago said.

The latest official figures show social spending – essentially health, education and welfare – dropped to about 30 percent of GDP, said the professor emeritus at the University of Pittsburgh, who is considered the leading expert on the Cuban economy.

“The result of all of this is that there’s more poverty,” he added, estimating the poverty rate in the communist-ruled country of 11.2 million people at about 26 percent.

The combination of “zigzagging” reforms and cuts in social spending “cannot end well,” he told a seminar at the Ermita de la Caridad in Miami organized by the church as part of Catholic Social Week.

Cuban officials have estimated that state payrolls have a surplus of up to 1.8 million workers, he said. Yet Castro’s hopes to expand the private sector so that it can take in laid-off state workers have not come through. By the end of 2012, only 365,000 state workers had been laid off.

The purchasing power of salaries plunged by 73 percent since 1989 – when the Soviet Union began halting its massive subsidies to the island – while the prices of food and utilities have been rising, Mesa-Lago said.

Trying to improve incomes, Castro five years ago abolished salary caps, ordered that salaries be tied to productivity and made it legal to receive extra payments in hard currency and hold more than one job. Yet those changes have shown “no results at all,” he added.

Cuba’s public health system was once the best in Latin America, the economist said. But cuts in government spending have led to the closure of hospitals and clinics, reductions in diagnostic tests, shortages of medicines and long waits for surgeries.

The 1.8 million pensioners get an average of $10 a month, equal to about 7 percent of the GDP. With the country’s population growing older as youths leave and birth rates remain low, “that problem has no solution in the long run,” Mesa-Lago said.

Spending on public education also has been cut, but the impact has not been too harsh because there are fewer youths to enroll in schools and the government shut down costly operations, such as university classes offered at the municipal levels, he said.

Housing is the country’s worst problem, the economist added, with a shortage of about one million dwellings due to lack of maintenance, a growing population and damaging hurricanes. About 111,400 units were built in 2006, but only 21,000 last year.

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