29 May 2023

Deputy Prime Minister, Alejandro Gil, the Minister of Economy and Planning, has told Cuba’s National Assembly that “tourism continues to be the fundamental way to stimulate the recovery of the economy.”

In a detailed address to Deputies on the country’s economic performance and priorities for recovery, he said that the sector was “essential to accompany and advance the gradual recovery of the economy.”

Although observing that by 3 May the country had welcomed 1mn visitors, he warned that achieving the tourism visitor plan for 2023 remained challenging, stressing “it does not depend only on us, but we are on that path.” In his remarks Gil noted that arrivals numbers at the end of April represented 28% of the hoped for 3.5mn arrivals this year and as such was 119% up on 2022 but was just 51.1% of the number recorded in the same period in the pre-pandemic year 2019. Growth in arrivals from Canada and Russia, he said, were of particular importance

Economic priorities

In his address, Gil identified Cuba’s economic priorities for 2023. These were, he said,  advancing macroeconomic stabilisation, consolidating foreign exchange allocation mechanisms, recovering the capacity of the national electrical system, and accelerating the introduction of renewable energy sources. In addition, he said, the intention is to make progress in reducing social inequalities, consolidate the process of decentralising powers to Cuba’s provinces, and to  comprehensively transform socialist state enterprises.

The non-state sector

In part, Gil focused on the increasing role of Cuba’s non-state sector in the economy and government’s concern about the level of imports of finished goods rather than raw materials. Noting  that in 2022 non-state forms of management had generated US$4.8mn in exports and US$270.1mn in imports, he observed that in the first four months of the year “these forms of management have imported US$166.6mn dollars. “At this rate we will exceed the figure of more than one billion in the course of the year,” he cautioned.

Warning that many such items were imported ready for sale often at high prices, he pointed out that the non-state sector must do more to contribute to the development of the country’s economy. New forms of management he said can import for production, but in recent months the trend has been “towards imports for direct marketing.”

Noting government’s concern about the tendency of the private sector to buy and sell finished goods, Gil reminded delegates that Cuba has “only one business system” that he said has to  function in the economic and social interest of the country as the law requires. He also expressed concern about speculation. “Excessive lucrative profits cannot exist, and it is a responsibility that we must face and that is billed and sold to the population.”

The foreign exchange market

Speaking about the foreign exchange market and the changes since August 2022 when the economy  was rapidly dollarising and hardly utilising Cuba’s domestic currency, he said that to ensure future economic development it had been necessary to  establish a market through CADECA with an exchange rate higher than the unification rate of CUP24 to US$1.

Noting that despite the CADECA  rate of US$1 to CUP120 being only available on a limited basis, demand “exceeds 100 days to buy foreign currency”,  and “an illegal market exists with an exchange rate that exceeds CUP180 or CUP190 to US$1,” he said that the Cuban state is now obtaining more foreign currency.

In an apparent acknowledgement that the currency unification undertaken in January 2021 (Cuba Briefing 5 January 2021) had been badly handled, he said, “Even with these insufficiencies, we are buying 10 times more currency than what we bought with the exchange rate of US$1 to CUP24.

This means, Gil said, captured currencies are being invested in the reactivation of industries such as electronics and agriculture and to purchase products such as rice and pork, and cleaning products. “The exchange market operates within its own resources. If we buy more we put more, and if we buy less we have less chance of boosting national industry and selling foreign currency to the population,” he told delegates. In doing so he made clear that while the sale of foreign currency to the population is not enough, government must now face down the informal market.

The digitisation of financial transactions   

In other remarks he suggested that there was a need to advance the digitisation of financial transactions and move away from the use of bank notes.  Gil recognised that the level of demand for paper currency exceeded the Central Bank’s capacity to provide it. Observing that the printing of physical banknotes “is costly in their issuance, custody and handing”, he stressed the importance of ETECSA, the state telecommunication’s company’s  mobile wallet, despite resistance in some parts of the country. This allows for electronic payments in Cuban Pesos and in foreign currency.

Reform of state enterprises

Addressing continuing concerns about the losses, poor productivity, and accountability of many state enterprises, he reported that in the first four months of 2023, 84% of state companies had achieved positive results and were generating profits. He warned however this did not mean they are all operating at maximum capacity or were efficient.

Gil told the National Assembly that the number of state enterprises losing money had been reduced to 285 but because  they had capped prices so as not to contribute to inflation it was not always possible to measure true outcomes. Still others , he said, are losing money  “due to lack of innovation, strategic thinking, due to the accommodation of managers, because they are not creative.” This Gil warned would require further analysis.

Speaking about closed currency schemes which allow some state exporters of goods and services to not depend on a central financial allocation, he noted that this had been particularly beneficial in the case of tourism, nickel, transportation, and communications. In his remarks he confirmed that this “innovative form of the Cuban economic model” now applied to 159 state affiliated companies and 105 state MSMEs.

More generally, when it came to state enterprise, Gil told the National Assembly that progress was being made in classifying state companies into different groups as it was recognised that a single system of management could not be universally applied. He also reported that work on a business law is progressing and confirmed that there are now  8,012 independently managed  enterprises of which 105 are state-owned, the rest private, and 65 are non-agricultural cooperatives, creating in all some 212,400 non-state jobs.

Agricultural Production

Regarding agriculture, he said that production levels of root and other vegetables, eggs, milk, rice, beans, and other products had decreased in relation to 2022 . Speculation in food prices for staples, he recognised had become a matter of great concern to Cubans. Making clear that maintaining the regulated family basket was costing government between US$1.5bn and US$1.6bn as most items were based on imports, he stressed that national producers must participate more in providing the inputs. The minister also called for progress in each municipality, to calculate the basic local demand for food in order “to promote local development” in 2024.

Elsewhere in his address Gil noted: there had been no progress in the country’s housing construction programme; that to achieve a gradual recovery in public transport, government was looking for new sources of financing for the sector; official inflation in the year from April 2022 amounted to 45.4%; there was a need after high levels of spending during the pandemic for new resources to recover social programmes, improve pensions, and care for the vulnerable. The requirement now, he said is for “more production, more efficiency, less resale, less diagnostics and more solutions.”

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Photo via: 14ymedio.com