Austerity bites as Cuba fails to revamp

Listen to this article

00:00
00:00

Cubans are in no mood to party today as Raul Castro, the president, turns 78. They are suffering the toughest austerity measures since the post-Soviet crisis of the 1990s, despite diplomatic achievements that have left the US isolated in its tough policy towards the Communist nation.

It has been just over a year since Mr Castro took over from his ailing brother Fidel with a pledge to improve people’s lives and remake one of the most statist economies in the world. But now the population is being called on to sacrifice by a government many view as old and bureaucratic.

Cubans this week jostled one another in ever longer lines waiting for buses, sweated to meet mandated reductions in power consumption and grumbled over a 50 per cent reduction in lunch portions served at work place cafeterias.

At the same time, the region’s foreign ministers battled the US over Cuba’s status in the Organisation of American States at a meeting in Honduras which began on Tuesday. The austerity measures that took effect on Monday have stirred up memories of the dark days after the Soviets fell, called the Special Period, when 18-hour blackouts and food shortages traumatised the population.

Cubans are once more confronting darkened stores and offices that are going without air conditioning into the early afternoon. The government has threatened to black out entire provinces if they do not reduce power consumption.

“With a combination of global and domestic factors driving a new round of economic and material deprivation, it’s hard to imagine a birthday celebration will be on the Cuban president’s mind,” said Julia Sweig, senior fellow at the Washington-based Council on Foreign Relations and author of the forthcoming book, Cuba: What Everyone Needs to Know.

“The diplomatic environment for Cuba is arguably the best in memory, but Raul Castro surely understands that it will be hard to leverage a favourable external environment domestically if life is about to get even harder than it already is,” Ms Sweig said.

The austerity measures followed warnings by the government that it could not meet rising electricity demand because of a cash crunch that has forced it to restructure debt and put off payments to foreign businesses. The import-dependent country purchases more than half its fuel and food requirements abroad and Venezuela, its main ally and economic partner, is struggling with a 50 per cent decline in oil revenues so far this year.

The Caribbean and Latin America have seen export earnings, remittances and tourism revenues drop significantly and credit dry up as the international financial crisis and economic downturn spreads to the developing world.

The United Nation’s Economic Commission on Latin America forecasts foreign investment will decline by as much as 45 per cent and trade by 11 per cent in the region this year, undermining years of steady growth.

The Cuban government reduced its growth forecast from 6 per cent to 2.5 per cent last week and said the fall in nickel and tourism revenues alone could exceed $1bn in 2009 because of the crisis and US sanctions.

But there is a growing feeling among Cubans that Raul Castro’s failure to revamp the state-dominated economy as he promised upon taking office is at least partially to blame for renewed hard times.

“These people are just plain stupid. A few weeks ago they put new restrictions on private taxis and this week they cut the buses. I do not understand them anymore,” a frustrated women waiting for a bus in Havana said, asking that her name not be used.

Rafael Hernandez, editor of the often critical Temas Magazine, said that Raul Castro faced not only the international financial crisis, but “an inefficient domestic economic model due to its extreme centralisation and waste, where a dysfunctional bureaucracy resistant to change has prospered”.

The state-run media have increasingly taken the bureaucracy to task for a range of shortcomings, including its failure to implement wage reform and move crops from the fields to consumers.

Bert Hoffmann, Cuba analyst at the German Institute of Global Area Studies in Hamburg, said that Raul Castro recognised that “only a policy of change – controlled, gradual as it may be – can hope to regain public support.” But believes he has run into fierce resistance that to date means, “not even the modest reform agenda initially spelled out has proved politically viable.”

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.