The 1.6 percent GDP growth in 2017 is undoubtedly surprising and surpasses by far the 1.1 percent growth of the first semester of this same year. Taking into account the difficult conditions in which it was achieved, the combination of financial restrictions, outstanding short-term debts, the unsatisfactory evolution of the price of some export products, Hurricane Irma and the tensions generated intentionally by the new U.S. government has had an unquestionable impact. Having been able to achieve a positive performance is very good news.
Leaving behind the red numbers in the economic growth is positive, even compared with the growth expected in Latin America. But that growth rate compared to a 0.9% decrease in 2016 does not allow us to raise the average annual growth rate of the period above the 2%, still way far away from the necessary growth.
That growth is reached with an 11 percent deficit. It is what is planned, but not what is wished for, nor the healthiest thing for an economy. One would have to say that to the pressures put on by the foreign financial restrictions another must be added, that of the domestic deficit that affects the monetary balances and prices, even when State bonds are bought from the Cuban banking system at half the total deficit and with this that pressure on the domestic monetary balance is mitigated. That deficit is also somehow the measure of the growth effort in such difficult conditions.
The sectors that decisively contributed to that growth rate were fundamentally tourism (4.4%); transportation and communications (3.0%); agriculture (3.0%); and construction (2.8%). Those sectors had a considerable weight in the GDP of 2015 of 25.9%.
In Cuba’s GDP structure the sectors with the greatest considerable weight (in 2015) were commerce and the repair of personal effects (19.7%), public health and social assistance (16.9%) and the manufacturing industry (12.7%). In the recent report rendered by the minister of the economy it was not possible to know if the Cuban industrial sector grew in 2017.
Data on the total exports were not made known, especially in the export of services, which also play a positive role in the achieved GDP growth.
The relation between the temporary and the structural is decisive to understand the weaknesses of Cuba’s economic growth. The temporary problems of our foreign sector have a structural component of great weight. The dependence on imports to be able to export is just the manifestation of very deep causes associated to a longstanding weakness of our productive sector (technological backwardness, lack of complementariness between the different sectors of the economy, weak impact of innovation, productive concentration in medium and low technology sectors, not very efficient energy pattern, etc.) which has a negative impact on the insertion of our products into international commerce, in their “export quality” and their competitiveness.
These are the reasons why one of the strategic focal points in the foundations of the plan up to 2030 is the country’s productive transformation. It is true that it is a mid- and long-term matter, but it is also true that our policies in relation to this must be much more aggressive or, better still, much more revolutionary, in the strict sense of the term.
To the above one would have to add that our institutions – “the rules of the game” – still don’t generate sufficient incentives for the enterprises (the so-called export companies) and for those other ones that are not.
The export strategy still continues being fundamentally concentrated in the state-run sector and for the time being the intention to join the non-state sector to the export effort doesn’t seem to exist, even when it is true that its contribution could still not be significant.
Our export aspiration is still debated between the exchange rate distortion, deficient and inadequate incentives and paralyzing bureaucratic processes that include a long list of highly centralized “permits” that, as President Raúl Castro affirmed when referring to the currency and exchange rate problems, “no one can calculate, not even the wisest among all our wise people, the high cost it has meant for the state-run sector….” We could make it extensive to these other endemic evils of our economy that in Cuban hands can radically change.
A single example can illustrate the previous point in terms of the bureaucratic obstacles. A few weeks ago the placing of the cornerstone of the future joint venture between Nestle and the Ministry of Agriculture’s Coralsa group was announced in the Cuban press. That same article made public that the negotiation process began in 2014 and that the enterprise would start producing in 2019: 5 years after the negotiation was initiated.
“For example, the president of Coralsa pointed out, between 2011 and 2016 around 26 million dollars have been annually devoted to the import of 8,000 tons of coffee, and an average of 4.6 million to the purchase in the foreign market of 7,400 tons of cookies and crackers. To this is added the purchase abroad of more than 1,000 tons of seasonings, a figure that has maintained a continuous growth.” (November 26 Granma issue, “Nescor S.A., otra mezcla cubana con Nestlé”)
It is an enterprise that will save the country money in imports, will generate job posts and modernize the technology…. Well then, we have taken three years to start this business and two more years (if everything goes well) in making it produce. That is to say, 5 years for a cookie and cracker factory to start producing. Here it’s easier to do the math for the cost, just multiply the value of what has been imported in the years of the unnecessary delay and we would have an approximate total. There are many other examples of this type.
Without growth there won’t be development in the long term, without growth our aspirations of maintaining and improving those which are the backbone of our country’s social building, education, health, equity, will be seriously jeopardized, even when in the short term we can maintain them alive.
It is true that today Cuba is not a marketplace for the much-wished-for foreign investment as it was a few years ago. But it is also true that the rate of creation of new enterprises with foreign investment is very low if compared to the amount of business intentions that come to Cuba every month.
Even this year, when the business deals signed have reached amounts never achieved before, they continue being far from our needs.
In decisive sectors for our growth and development the offers of new business deals that appear in the 2017 Opportunities Portfolio are still insufficient or seem distant from our needs. Such is the case of the construction sector, where the insufficiency is evident in the production of cement and sand, and there is no proposal about the latter in the new business Portfolio. Will we be able to do it with our own capital at the speed required by our housing and infrastructure deficit and our tourist expansion plan?
In agriculture something similar happens. Last year a policy was approved for the creation of joint ventures with agricultural and livestock production cooperatives. Today we have no news about its results, but the country continues spending more than 1.5 billion on food imports, part of which could be nationally produced.
Just in chicken, 753,795 tons were imported at a cost of 828,950,000 dollars between 2013 and 2016. However, the 2014 Opportunities Portfolio already included nine new investment projects for the production of chicken, with a production capacity among the nine of 21,900 tons a year (24,000 chickens a day) which at the prices they were paid for in 2016 (according to the 2016 yearbook) would represent more than 21 million dollars. Until now it has not made public whether some of them have materialized. Why so much delay? Who pays for that delay?
Growth is a complex phenomenon, growing is more than the mere increase in the wealth we have today and much more than meeting an annual plan. That’s why it is important to not only grow and where to grow, but also how it is grown.
It is decisive to grow in a healthy way, to grow in the sectors that are key for the country’s productive transformation, to do so in such a way that that growth has a positive impact on the productivity profits, and that that growth generates employment in sectors of greater technological complexity, that allow for and produce a greater complementariness of our economy.
That that growth allows for a better integration of all the economic actors, from the provinces and the sectors and from the state-run to the non-state, is decisive; because Cuba is only one with many different realities.
Because of and for this the document of the strategic development focal points was discussed and approved, because of and for this it is necessary to advance in the realization of our long-term development program that is already mid-term.
We won’t be able to change the environment that surrounds us, but we can substantially change all that hinders our aspirations and that depend on ourselves.
To reach the long term we must carry out well the tasks for 2018, which will be difficult, complex and will have enormous challenges.
Much more than growing
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