Thursday, August 03, 2006

Where Now the Cuban Economy?

I begin this post with a comment from a yahoogroup on Venezuela, and the article that prompted it.

Cuban economy looks healthier as Castro declines by Marc Frank
Posted by: "Walter Lippmann"

You would think, from the headline, that there's some kind of causal
connection between the improvement of Cuba's economy and the health
problems of the island's Commander-in-Chief.

Cuban economy looks healthier as Castro declines
by Marc Frank

Reuters 08/02/06

HAVANA, Aug 2 (Reuters) - Despite uncertainty swirling around ill leader Fidel Castro, Cuba's long-ailing economy has recently begun to get healthier, helped by deals with allies China and oil-rich Venezuela.

"The Cuban economy, supported by hugely increased trade with China and Venezuela, is humming along," said John Kirk, one of Canada's leading academic experts on Latin America.

After an operation to halt stomach bleeding, Castro on Monday handed over power on a provisional basis to his younger brother and Defense Minister Raul Castro.

Cuba, ruled by Fidel Castro since 1959, has been quiet with no signs of social unrest or public dissent. That, and the robustness of the economy, is welcomed by foreign investors.

"Tourists and foreign investors see they can rest easy. There will be no major or violent changes, no takeovers of investment," Kirk said.

Cuba's economy all but collapsed after the Soviet Union broke up in the early 1990s, and rioting broke out in August, 1994, amid widespread shortages.

Until this year, the country suffered long energy blackouts, transport failures and industry shutdowns, especially in the hot summer months, and as recently as 2005 minor unrest broke out due to blackouts and other problems.

But economic growth averaged nearly 10 percent in the last 18 months - more by the country's own measure.

Venezuela is now providing the Caribbean island with a minimum of 98,000 barrels of oil per day on generous terms and ally President Hugo Chavez is spending billions of dollars from oil sales on Cuban medical personnel and supplies, teachers, athletic coaches and other professionals.

Castro has managed to leverage Cuba's better financial situation into relatively cheap credit, mainly from China, and is pouring the money into Cuba's long-neglected power grid, waterworks, transportation, housing and other sectors.

Improvements in the economy may keep Cubans from seeking any radical change in government, at least in the short term, analysts say. "Castro has benefited from a combination of shrewd political strategy and extraordinary luck and that has paid off so far this week," said
Daniel Erikson, Caribbean programs director at the Inter-American Dialogue.

"Oil prices have increased four-fold since Cuba and Venezuela first cemented their doctors-for-oil swap in 2000, and Chavez has been amenable to expanding and deepening the relationship," he added.

It is the new structure of Cuba's economy, based on services, not sugar, that is most significant, analysts say.

Tourism, professional labor and other service exports now account for 70 percent of foreign exchange earnings, compared with 10 percent in 1989, while nickel accounts for 15 percent and sugar just 2.4 percent.

Cuban economists say huge problems remain, including ever-harsher U.S. economic sanctions, state control and foreign debt of more than $14 billion.

"There are inefficiencies inherent in the economy where the cost of production and quality of goods cannot compete on the international market or in the case of agriculture meet basic needs at home," a local economist said, asking that his name not be used.

Yet foreign business executives welcomed what appears to be a succession plan now in motion for Castro's absence.

There has been no run on deposits or other financial paper, no change in currency, our business has been absolutely normal. They are obviously very well prepared for any political changes," said the manager of one of Havana's busiest foreign bank branches.

An executive at one of Cuba's most important foreign investors agreed. "This is the best thing, and exactly what foreign businesses want: a succession plan is underway and there is stability," she said.

"The message is clear: there is one government, and they are in control," said the executive, who also asked not to be named.


My view is that in fact it is only a 'healthier' economy at all if you accept typical western consumerist markers of 'health' and 'success'. The post-Soviet collapse of large scale successful embargo breaking created a post-oil society which, whilst hardly painless, left a leaner and fitter society as a result.

An excellent DVD on this, The Power of Community : How Cuba Survived Peak Oil, was shown at the Peak Speak 2 Peak Oil Conference - London, July 15th, 2006. There will be a review of the conference on bluegreenearth soon. The DVD is available from

The good done in aiding this recalibration to the type of economy we may all need to aquire in the coming decades has been in part undone by the more recent increase in oil imports. The oil economy in Cuba has begun to tick back up, and this has slowly allowed what some western observers might mis-diagnose as 'good' economic growth.

In fact, I think, Chavez has (ironically) aided the renewal of Cuban dis-satisfaction - as suggested by the 'relative deprivation' model in psychology. W F Wertheim, in his 1974 book Evolution and Revolution: The Rising Waves of Emancipation (Penguin), applied the model as a tool in historical analysis, and I used it in my mid-80s degree thesis (I only came across the book in the early nineties, having actually read of the model in psychology papers at Bolton Institute). At this time, while I applied it to historical models of revolution as a way showing a small aspect of 'revolution' that has an element of predictability, I saw a possible application vis predicting the fall of Gorbachev.

In the event, the model worked. Gorbachev lost more ground
when he offered his hopeless people hope than he had before, when they had no hope - due to their wanting it all and feeling it possible for the first time in decades, despite the unrealism of such demands. Similarly, Castro (either of 'em) may now find themselves up against a new round of battles against those who measure security and success in selfish and consumerist terms, since they now have raised expectations and indeed are in some ways 'better off'.

Without Castro at the helm, this may be a battle too far. Thus, in a way, I expect to see a real correlation between these changes (already occuring) and Fidel's health. But to the detriment of the country there.

It would be ironic if they lose what they have gained,
at just the time the rest of the world is teetering on the brink of a collapse towards a 'Cuban-model' economy! They should, rather, be a model for handling future high-energy fuel depletion, so far as their economy and sustainable practice is concerned. Indeed, pemaculture and allotment culture, things many of us are promoting in the West already, are at the heart of some of the post-oil enterprises in Cuba. Autonomy appears to be thriving too, despite the expectation of many who expect increased state control in such circumstances.

A Bookchinite social ecology experiment, and model for us all? Perhaps, or at least it showed signs of heading that way. An positive experiment destroyed by free market tactics and the breakdown of community when bribed by wealth and greed? Probably.


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