Economic hardships in Cuba spark rumors of a new “Special Period”

A classic American car passes by a stall selling onions in Havana, Cuba in 2014.
A classic American car passes by a stall selling onions in Havana, Cuba in 2014. AP

Cuban ruler Raúl Castro may have ruled out a return to the “Special Period” — the devastating economic crisis sparked by the loss of Soviet subsidies in the early 1990s — but he was clearly somber earlier this month when he confirmed that the island faces a grim future.

Castro predicted the economy would grow by only 1 percent — half the previous forecast — and confirmed that deliveries of Venezuelan oil have fallen “despite the firm commitment of President Nicolás Maduro.” Key Cuban exports such as nickel and sugar face low international prices, and the latest sugar harvest was 19 percent smaller than the previous year's.

But here’s the real headline, according to some experts: “The most striking part of this is that we could see it coming,” said Cuban economist Pavel Vidal, among various experts who had long predicted that Venezuela's economic and political crisis would force the Cuban government to rethink its economic strategy and accelerate the warming of relations with the United States.

“It was clear the Venezuelan crisis at some point would have a negative impact on the Cuban economy. Nevertheless, the commercial and financial dependence on Venezuela remained high and not enough was done to search for alternatives,” he said.

“Cuban diplomats have renegotiated with debt-holders and opened new spaces for international integration as alternatives to Venezuela, but until now that has not translated into bigger flows of trade, finances or investments,” Vidal added.

The shortage of liquidity is so serious that Castro informed the population that Cuba has not been paying its foreign debts on time and Minister of the Economy Marino Murillo — who was later reassigned to a new position — said the government would not be paying new debts for the rest of the year.

His public statements came as U.S. agricultural producers are lobbying Congress, hard but without success so far, to ease laws and regulations that currently require Cuba to pay cash and in advance for its U.S. agricultural purchases.

Rep. Rick Crawford, R-AK., recently withdrew his proposal to ease those requirements after agreeing with Florida members of congress to look for different ways to meet the interests of U.S. agricultural producers. Crawford's office issued a brief statement saying that Cuba's failure to pay its debts and lack of liquidity “will not affect the Congressman's efforts.”

Castro ruled out, however, dire predictions of a new “Special Period” along the lines of the concerns expressed recently by the deputy editor of the Communist Party's Granma newspaper, Karina Marron, about possible outbreaks of large-scale protests against the government.

“As was expected, in an effort to spread despondency and uncertainty among the people, we are starting to see omens and speculations about the imminent collapse of the economy and a return to the worst part of the Special Period we faced at the beginning of the 1990s — and which we knew how to survive thanks to the Cuban people's capacity to resist and its unlimited trust in Fidel (Castro) and the (Communist) Party,” he said. “We do not deny that we could have problems, perhaps even worse than the ones we have now, but we are now more prepared and in better condition to overcome them.”

Murillo promised that any electricity blackouts would not affect either citizens or tourism, although other sectors like street lighting might have to be cut by 50 percent.

Some state employees already have been sent home on “vacation” and private taxis have raised their prices because they depend largely on gasoline bought on the black market, where the fuel has been increasingly scarce.

At the end of the recent National Assembly session, an official announcement said Murillo was removed as Minister of the Economy so he could focus on “updating the economic model” — the package of economic reforms pushed by Castro since he succeeded brother Fidel 10 years ago. The government recently acknowledged that only 21 percent of the “guidelines” established to achieve the reforms have been implemented.

Murillo retained the post of vice minister of the Council of Minister and was replaced as minister of the economy by Ricardo Cabrisas, also a vice minister and a key figure in Cuba's foreign debt renegotiations. Experts say Cabrisas, well known abroad, faces a tough task because the worst is yet to come.

Vidal, who had developed his own index for measuring the Cuban economy, had predicted a 1.8 percent growth in Gross Domestic Product this year if all trade links to Venezuela were halted. He now estimates GDP growth in 2016 at zero or slightly lower.

“The worst will come next year, 2017,” said Vidal, a professor at the Universidad Javeriana in Colombia. “In 2016, Cuban officials could cushion the blow by using up inventories of raw materials and finished products. Our forecast is a drop of 3 percent of GDP in 2017, with the subsequent contractions of real salaries and consumption.”

For now, Cuba continues to count on tourism as a lifeline. More than 94,000 U.S. visitors — not counting Cuban Americans — set foot on the island in the first four months of this year and regular commercial flights between the two countries are expected to start in the fall, despite concerns among some U.S. Congress members about security at Cuban airports.

But in the short run, Cubans face another hot summer of shortages and economic uncertainties.