Reforms and the Cuban economy

LUIS O. GALVEZ TAUPIER, director of Cuban Institute for the Research of Sugar Cane By-products (ICIDCA) and member of the national parliament and the central committee of the Cuban Communist Party, was in Sydney recently where he was interviewed for Green Left Weekly by ROBERTO JORQUERA. Question: Six years after the collapse of the socialist bloc, what is the state of the Cuban economy? Throughout 30 years of the revolution, up to 1989, the Cuban economy sustained an average growth of 4%. This fared positively with the rest of Latin America which, throughout the same period, only registered an average of 1.8%. One reason for this was, no doubt, the help revolutionary Cuba received from the socialist camp, particularly the Soviet Union. This support helped us create a strong infrastructure in electricity, water, roads and industrial installations sectors which has helped us overcome the difficulties. The main aim of our economic policy up to 1989-90 was, with the help of the socialist block, to create industrial sectors to help the country's productivity. However, we did face technological limitations. Between 1991 and 1993 our main goals were to preserve the social gains of the revolution, and complete the period that was termed "resist". We had to confront the new situation with a high morale so that the country did not fall and the economy with it. We also had to rediscover the world market. This was particularly important considering that 85% of our trade was with the socialist camp. The two major problems between 1991 and 1993 was a 30% decrease in the country's GDP, and a 75% reduction in imports. Since then, a number of measures were taken to change our relationship with the world market, and at the same time look for new forms to develop our economy. One of the first was to eliminate the monopoly in foreign trade, which was previously concentrated among a few state enterprises. A decision was taken to allow state enterprises with the capacity to export and import to also compete in the world market. As well a number of financial measures were taken to balance the books. This was necessary to begin to overcome the large deficit and the loss in the value of the peso which had become so devalued that people did not have sufficient motivation to work. These measures, together with the development of tourism, permitted the country's economy, from the start of 1993, to develop. Tourism began to quickly bring in much needed foreign currency. Also, a number of important contracts with foreign investors were signed for the exploitation of nickel, oil (50 zones) and the development of telecommunications. The economy began to respond and by 1994 growth was registered at about 1%. Particularly promising has been the economic growth in the first six months of this year — about 2%. Over the same period state structures were simplified: 15 ministries were eliminated which meant the bureaucracy was curtailed and costs cut. New laws were introduced permitting foreign investment. By early this year more than 250 foreign companies had taken up the offer, 25% of which are mixed. All these signs point to the fact that the economy is being reactivated. There are still some basic problems, particularly in the sugar cane industry, which continues to effect our national economy. Measures are being taken to increase the sugar production. At the moment, Cubans have not yet received the benefits of the economy's recuperation. So far the advances have only been in the macro-economic arena, and it will take time before it is felt in the micro-economy. Before the 1991 changes, 150 pesos bought US$1 in the informal sector. Currently, the exchange rate ranges between 20 and 30 pesos per US$1. This has had very positive economic effects. The United Sates has responded by making it increasingly difficult for US citizens to send money to Cubans. But we are pleased that a number of channels have been found to send money through. Question: What about unemployment? Due to the decline in imports a number of industrial sectors became paralysed or semi-paralysed. A number of principal industries are not working to full capacity and some manufacturing industries have come to a halt. An important section of the labour force is thus currently without work. However these people are subsidised by the state which pays 60% of their would-be wage. They also continue to receive the other social benefits such as education and health services. The youth sometimes feel more affected. They may have just left university and find that they might not get the job they wanted. Work is guaranteed but sometimes it does not correspond exactly with their training. However, I don't think that the unemployment problem effects one sector of society more significantly than any other. Question: What were the legislative changes in September with regard to foreign investment? The September legislation further opens up national enterprises to foreign investment. The aim is to use this to restart those enterprises that have stagnated and provide employment for those who have lost their jobs. Foreign investment is being allowed in every sector of society except the military, education, health and interior ministry, and in some cases 100% ownership will be allowed. So far there are no cases of 100% ownership, but the road has been opened for that to happen. Large state farms have also been subdivided into basic agricultural production units, which provides more incentive for the rural worker. However, land is still owned by the state. The legalisation of self-employment in about 100 different professions — another major reform — has allowed people to alleviate some personal difficulties and provide a greater service to the population. Agricultural markets have also been opened up where peasants and state farms can sell their excess production after they have achieved their targets which they sell to the state. The prices at these markets are not set by the state. Workers employed in the joint enterprises are paid by the Cuban state at the same rate as other Cuban workers. Foreign investors have to go to the state employment service which provides the enterprises with the work force they require. The Cuban government charges the foreign investor international rates for labour. The government uses any excess money to guarantee workers' social benefits. If we didn't do this we would be creating a very privileged work force in some sectors.