The first sign

The Cuban economy’s 4 per cent growth is the first encouraging result after the approval in 2011 of the process of transformations of the country’s economic model.

The Cuban economy grew in a year with a strong take off of the tourist industry.

This year the Cuban economy grew 4 per cent as a first visible reaction to the measures adopted by the government since the start of the process of transformations called the Updating of the Economic Model. The advance, reported inmid-December at a meeting of the Council of Ministers, contrasts with the meagre gross domestic product (GDP) growths of previous years, and which had its worst moment in 2014 with a 1 per cent increase.

Presented by Economy Minister Marino Murillo, the report attributed this result to the fact that “the availability of an advance of liquidity, advanced contracting of credits and their execution was achieved, and there was also a tendency toward a lowering of prices for imports.” This circumstance would have compensated for the traditional obstacles of the U.S. blockade and the financial restrictions, alluded to in the government report and which persist despite the renewal of diplomatic relations between Cuba and the United States this year.

 

In another analysis published a few days before, the Economic Commission for Latin America and the Caribbean (ECLAC) confirms this data of the GDP, but warns that the price dropped for export products important for the Cuban economy like nickel and sugar. The negative impact of this decrease, however, is less today because of the reduction of the weight of those products for the Cuban external economy, in which services like tourism and the medical missions have acquired greater magnitude due to the profits they contribute.

 

The government of the Caribbean country assessed as favourable the results of industry, construction, agriculture and other sectors; material production “is increasing its percentage participation in the GDP from 59.3 in 2014 to 6.11 this year.” The report indicates that all the productive sectors are growing with respect to the previous year, though it admits plans were not met in the cases of agriculture, the sugar industry, construction, transport, storage and communications.

 

For four consecutive years the sugar industry was able to achieve a two-digit growth: 16.9 per cent, but it did not meet the plan by 5.3 per cent due to organisational deficiencies that caused low yields and an unsatisfactory use of the industrial capacity, according to Murillo’s report. At the start of the 2014-2015 harvest, the Cuba press mentioned delays in the starting up of some sugar factories due to delays in the reception of inputs for the repair and conditioning of the installations.

The drought affected the production of milk, rice and other food products.

The drought affected the production of milk, rice and other food products.

 

Livestock and agricultural production, including forestry, as a whole grew 3.1 per cent, but the production of vegetables, milk and rice were below the plan, in addition to tobacco, another important product for exports. Drought, one of the most serious for several decades, appears among the causes.

 

According to the information provided at the Council of Ministers meeting by the president of the National Institute of Hydraulic Resources (INRH), Inés María Chapman, the drought has affected “considerably the water supply to the population and the agricultural sector throughout the country.” Almost half of the national territory registered low indices of precipitations. Out of the country’s 169 municipalities, 137 have been declared dry: 37 with a moderate drought, 50 with a severe drought and 50 with an extreme drought.

 

Meanwhile, ECLAC estimates that the greater growth of the GDP this year responds to the boost given to the domestic consumption of homes and the dynamism being witnessed in investments. While consumption increased by 3.2 per cent, domestic investment, “an element that revitalises the Cuban economy,” according to the preliminary report by ECLAC, “will grow by around 20 per cent, with which the negative rate achieved the previous year (-4.9 per cent) will be reverted.”

 

Despite the progress made, the bad investment activity, repeated in the Cuban economy, is among the causes for non-fulfilments like the repair of sugar factories and several sectors’ construction works. Though the construction sector grew by 11.9 per cent in a general sense, it did not meet the plan; it was 8 per cent below what had been previewed. Among the reasons cited by the government report was the deficient technical preparation of the investments.

 

The restructuring of financial relations with foreign creditors – the chapter on the Paris Club is the most recent -, the reorientation of the Cuban policy in the face of investments by foreign businesspeople and the already visible effect of the talks for the normalisation of relations with the United States, added to reactions in the face of the internal measures adopted five years ago, are encouraging expectations of a more solid reaction in the upcoming years. ECLAC forecasts that the country’s economy will grow 4.2 per cent in 2016. It estimates that domestic consumption and investment, and especially foreign investment, will play a more relevant role in the Caribbean nation’s economy. (2015)

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