Castro warns Cubans: a dire economic crisis might be on its way
Cuba’s foreign debt has grown at an alarming rate in the past few years despite the government reporting multimillion-dollar revenues from a controversial medical services export program, a new official report shows.
In just three years, between 2013 and 2016, the country’s foreign debt grew by almost 53% percent, from $11.9 billion to $18.2 billion, according to the recently published 2018 annual report by Cuba’s National Office of Statistics and Information, known by its initials in Spanish, ONEI.
The agency said the figure refers only to current debt but does not clarify whether it includes the current portion of long-term debts that were renegotiated in recent years with the Club of Paris, Russia, Japan and other creditors.
The government did not publish the updated debt amounts for the last two years, but public statements by Raúl Castro, the current secretary of the Communist Party, and other Cuban officials about payment delays suggest that the problem continues.
“We are anticipating that the import plan is not going to be fulfilled because the credits are not achieved due to, among other reasons, the arrears in the payment of debts,” said Economy Minister Alejandro Gil, in a session of the National Assembly in April of this year. The minister estimated that the country needs $5 billion in food and fuel imports for this year.
The report contains, for the first time, data on government foreign-exchange earnings. Last year, the medical services export program generated $6.4 billion and was Cuba’s largest source of income. The government does not publish data on remittances received from abroad, estimated at more than $3 billion yearly.
“Support services” and “telecommunications, transmission and information provision services” generated more than $2 billion, according to the official report.
It is not clear if these “support” services were carried out inside or outside the country; or if they are associated with the so-called “medical missions” abroad through which Cuban authorities collect a high percentage of the salaries that foreign governments pay Cuban doctors.
At the end of last year, the new president of Brazil, Jair Bolsonaro, stopped hiring Cuban doctors, but around 20,000 are still working in Venezuela. The United States recently sanctioned the Cuban officials in charge of these missions, considering them as participating in “human trafficking.”
Tourism, which accounts for most foreign investment on the island, generated another $970 million for “accommodation and food and beverage supply services” in 2018. In total, tourism revenues fell 3.6 percent from the previous year, according to calculations by Cuban economist Pavel Vidal, a professor at the Universidad Javeriana in Colombia.
Gross revenues for transportation services, including the transport of tourists and fees paid by airlines and cruise ships, reached $605 million.
In total, the income from “services” in 2018 amounts to a little more than $11.2 billion, not enough to cover the $11.4 billion the government spent on imports.
The 2018 figures show the harsh realities of the Cuban economy, Vidal said.
“It’s been already five years without real growth in exports,” he said. “This continues to force the adjustment of imports, which decreased by 2 percent and [have fallen] for the third consecutive year.”
These and other indicators in the report reveal the extent of the ongoing economic crisis on the island, partly caused by the fall in oil subsidies from Venezuela and the failure of the economic reforms undertaken by Castro.
Between 2011 and 2017, the export of goods and services decreased by 23 percent, according to the Miami-based CubaGeográfica magazine. The export of goods, directly linked to local production, suffered a spectacular fall of 59 percent.
Experts estimate that the country needs to spend at least $2 billion in fuel this year to make up for the decline in shipments from Venezuela. Although ONEI did not disclose data for the past three years, imports of “fuels and lubricants, minerals and related products” fell more than half, from $6.3 billion to $2.4 billion.
Tourism has also been affected by new travel restrictions and sanctions imposed by the United States on a growing list of hotels run by Cuban military companies.
The sugar industry had one of its worst years, with a contraction of more than 40 percent. The losses brought by Hurricane Irma added to a crippled infrastructure and the fall in sugar prices.
Vidal questioned the math the state agency used to declare a 2.2 percent growth in GDP despite the shortages of food and medicines and contractions in imports, exports, tourism and sugar production. According to ONEI figures, the expansion of household consumption and the self-employed sectors were the main drivers for the increase in the GDP.
“These statistics of consumption are key to show an economy that grows, when in reality the situation is still more like a slight recession,” said Vidal.
“The dynamics of the Cuban economy have always kept a straightforward relationship with what happens in foreign trade and the balance of payments,” added the economist. “So, if we have not had real growth in exports for five years and we keep adjusting imports, how is it possible that consumption and GDP continue to grow?”
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