To say, once again, that the Cuban economy should grow around 0.5% in 2019 is not a simple repetition. Returning to the figure, in this case, serves to recognize its significance, although seen alone, it does not tell us much, nor does it impact Cubans’ quality of life in an appreciable way.
But in economic terms, the fact that a decline was avoided, despite the strong limitations we faced, offers the most precise definition of 2019. This was an extremely tense year, according to the Deputy Prime Minister and Minister of Economy and Planning, Alejandro Gil Fernández, who spoke with Granma about results over the past 12 months, the impact of the U.S. economic, commercial and financial blockade, and the country’s own management deficiencies and, above all, prospects for development in 2020.
«The Economic Commission for Latin America and the Caribbean has made an estimate of economic growth for the region on the order of 0.1% in 2019. We have forecast 0.5%. We are making the final calculations and should be at that level.
“This result was influenced mainly by social sectors such as health and education, as well as communications and construction, with works in the Mariel Special Development Zone (ZEDM), repairs following the tornado, the construction of 4,000 hotel rooms for tourism and the completion of more than 40,000 homes.
“We are talking about modest growth, which still does not have an impact on quality of life; but we reiterate that what is really significant is not having declined.”
-Although the blockade has always been the greatest obstacle in Cuba’s economy, 2019 marked a very noticeable tightening…
-As a result of the aggressive escalation by the U.S. government, as of April we began to face fuel shortages, which forced us to make adjustments in short-term economic strategies and redirect resources in the plan. Since then, the Trump administration’s penalization of shipping and insurance companies has been maintained and increased.
In 2019, Titles III and IV of the Helms-Burton Act were also activated, impacting tourism and foreign investment; cruise ship travel was eliminated, when we expected to receive some 800,000 cruise passengers during the year; direct flights to the country’s provinces, except for Havana, were recently suspended. In other words, this is a series of measures meant to stifle the economy and prevent development.
The U.S. government insists on saying that the blockade is not against the people. But who is affected, if not the people, by the limitations on public transportation, electricity, food production…?
Nevertheless, despite this context , we did not have power outages, for example. Many malicious people said that we were inevitably heading for a second special period; but, in those complex times, the Gross Domestic Product (GDP) fell by more than 30% in a short time. That is not happening now, nor will it happen, because we have found ways to overcome.
Production and services, transportation and distribution have been affected; we have been obliged to slow down some investment projects… But we have been able to protect levels of activity that are fundamental to the economy.
The main demands this summer and at the end of the year were met. Today there is a reasonable level of supply in retail stores, even better than at the beginning of 2019, and the people are celebrating the arrival of the new year under relatively normal conditions, when the enemies expected a setback.
We believe that this has been made possible by the efforts of all in the search for solutions and not justifications, by our political will and history of resistance.
-Given the increasingly hostile environment, what are Cuba’s strategies to continue advancing economically?
-We must prepare, without a doubt, for a panorama with a tighter blockade. But regardless of U.S. plans to strangle us, we will continue to update our economic model.
During the National Assembly, 12 priorities for the economy in 2020 were identified and we will move forward in this direction. In this sense, we should highlight strategies to increase exports, which constitute the fundamental path to be followed, that is, to move toward serious action around exports.
Secondly, in order not priority, is correcting deficiencies in the investment process, in which the solution depends on us, and has nothing to do with the blockade.
Thirdly, continue strengthening state enterprises and deepening links between different economic actors: the state sector with the role it plays and the non-state sector with its important growth dynamic, so that all contribute to the country’s development.
This is our strategy and we are not going to vary it even a millimeter, in response to the aggressiveness of the blockade. May 2020 mark a deep transformation in the way we have been working on these activities.
-In line with these strategies, what are development prospects for the year?
-In 2020 we aspire to achieve economic growth on the order of 1%, a figure that we consider objective, given pressures in the national and international context. And to accomplish this, we have proposed two important increases: expanding retail circulation, that is, the supply of goods and services to the population; and the investment process, a matter of total relevance, because this is where economic development lies.
To do so, yes, many things must be done: Encourage productive linkages between national industry and exporters, reduce the portion of supplies for tourism we import and expand the economy’s relations with the Mariel Special Development Zone.
We also need to achieve more timely allocation of resources, especially in agriculture and industry, to make better use of existing options for access to foreign exchange, and to strengthen collaboration between academia and the business sector.
Objectively, we are in the first phase of the Economic and Social Development Plan until 2030, from 2019 to 2021. In this period we have projected moderate growth rates, such as this year’s 1%. But if we achieve what we have planned in terms of investment and retail trade, we could perhaps speak of qualitatively greater growth, which would contribute more to development and the population’s quality of life.
-In terms of the 28 measures approved in 2019, to provide socialist state enterprises more flexibility, where has the most progress been made?
-Of these 28 measures, not all apply to all companies. There are measures, for example, directed toward exporters, allowing them to retain part of the foreign currency that enters the country, for their re-provisioning.
Another measure to promote closed financing schemes – which today are within the authority of Central State Enterprise Management bodies – at the level where productive processes take place, thus offering greater benefits to producers.
Also notable, among the strategies with the greatest impact, is the possibility of transferring foreign exchange earned by tourism today to national producers, who can meet the demands of this activity, and replace imports.
But in this case, we must develop an optimistic, favorable perspective regarding national production and not always be viewing it with a critical eye, because Cuban industry can only develop if it has work.
Today we must achieve an increase in the economy’s net profitability, with the same amount of dollars now entering the country, without decreasing supply or affecting the quality of services. It is a matter of meeting the demands of tourism, everyday more so, with good quality national products, at competitive prices.
Unfortunately, the measures adopted, some more than others, have been implemented slowly. The enterprise community is accustomed to foreign exchange being allocated, not managed, and changing that mentality takes time.
This year, however, more use must be made of measures approved, otherwise the planned growth of 1% will not be achieved.
-Beyond these measures and their limited implementation, there is also talk of further flexibility in the management of state enterprises. Are any further measures under consideration?
-Alternatives are being studied, including how the enterprise sector relates to the plan for the economy. There is still significant dependence on the allocation of resources and we can take steps to deal with this.
We are also evaluating the way in which the enterprise sector is structured today, the search for incentives to stimulate exports, and for these to reach the workforce, as well as the simplification of management indicators, in order to give companies more options to make decisions based on demand, even territorially.
But with all the measures, we must have one thing clear: In the economy nothing works under the concept of zero risk. In 2020 we must achieve a profound transformation in the functioning of state enterprises, moving toward greater management autonomy, despite the restrictions that persist on the financial and material order.
-With the opening of hard currency (MLC) retail stores, questions have emerged regarding dollarization of the economy. Can you explain why this is not the case?
-In the context of such opinions, we have defended several premises. The dollar is not circulating in cash; these stores are oriented towards a very specific segment of the market, offering medium and high range products, which were not previously available, and that our monetary policy is not directed toward replacing our currency (CUP and CUC) with the dollar.
Cuba has the right and the duty to adopt, in accordance with its conditions, the provisions that are most favorable to the population and the country’s development.
The measure has been well received and was adopted to solve a problem we had in terms of foreign currency acquisition. And like all economic decisions we make, it favors monetary and exchange rate unification.»
-This step was also taken to redirect foreign currency toward national industry, to support its progressive integration in this market. A little more than two months since the measure’s implementation, what impact has been noted?
-Without a doubt, one of the most important objectives of this measure is the channeling of foreign currency toward our industry. But the priority, at the moment, is to maintain supply. We do not have an appreciable amount of the resources needed to pre-finance industry, and supply would be affected.
The stability of supplies during the start-up depends on imports. But we are creating the basis for national industry to be able to produce and gradually offer more products, without affecting availability.
This is the second step. In 2020, we must have a greater presence of goods, with greater integration of national industry, especially of replacement parts and components for automotive vehicles and domestic appliances.
-One of the priorities for 2019 was to strengthen production chains with the non-state sector. How much progress was made and what are the main problems in this effort?
-There is a lack of progress in alliances between the state and the private sector. This year, for example, state companies were authorized to pay private companies in CUC, that is, steps have been taken, but they are insufficient.
Cuba continues supporting the non-state sector. In fact, this is where the greatest growth in employment is occurring. In 2019, employment in the state sector grew by 12,500, and in the non-state sector by 20,000.
In other words, the country continues to promote this sector, where it is more convenient for the economy and, at the same time, we must advance in the state management model, and greater correspondence between the two modes of operation must be achieved.
One thing is certain, efficiency and quality are not exclusive to one type of property or the other. In the near future, to improve state enterprises, changes must be made in the gastronomy sector, in order to achieve greater flexibility, and be more in line with demand, offering quality goods and services.
There is no intention of slowing down the non-state sector. And we are working on a strategy that will generate greater opportunities, both for the state and non-state sectors, so that both contribute to the country’s economic growth.
-With the approval of Policy Guidelines in 2011, Cuba began the process of updating its economic model. How much progress has been made?
-The fundamental advances are in coordination of the country’s macroeconomic, fiscal and monetary policies, which place us in a more favorable scenario for planning in the medium and long term.
Plus all the work undertaken with respect to the Economic and Social Development Plan through 2030, plus short term changes, which include what has been done to boost the productive forces, especially state-owned enterprises.
-There is much talk in the streets these days about elimination of the dual currency. In what phase is the process, and what are the most complex tasks at hand?
-Just as the President of the Republic said, the monetary re-ordering is in an advanced stage of study and approval. The scope of the process and its complexity have been confirmed. Furthermore, we reiterate that bank deposits are guaranteed; as well as cash in the hands of the population, and the population will be informed of all measures, in a timely manner.
Precisely for this reason, there is no justification that in certain places CUC is not accepted, or that exchange rates are lower than those officially established, because as has been said, those holding CUC will not be affected.
-Another priority was avoiding further increases in the national debt. What progress was made in 2019?
In practical terms, stopping the spiral of the country’s indebtedness means maintaining an adequate correlation between credits and financing that the economy assumes and what we have the ability to repay; and that has been accomplished.
In other words, during 2019, the control of new financing was maintained, so that the country would not increase its foreign debt.
But this does not mean that our debts to suppliers are up to date. We are facing overdue payments, associated with the country’s financial situation; but we reiterate our commitment and thank creditors for their understanding, who, in spite of the situation, continue to have confidence in Cuba.
-One of the most serious economic problems in the economy is associated with deficiencies in the investment process. Was progress made in addressing this issue in 2019?
-Unfortunately, there has not been much progress on this issue, and as we have reiterated: this is hurting the economy. Not only are investments failing to yield what is projected in feasibility studies. The problem begins with the studies themselves, many times, conducted in formal manner without objectivity, as a way to get the project approved, with indicators established that are only real on paper. This is a serious problem.
As the project advances, and earnings do not manage to amortize the investment or reach the level foreseen in the feasibility study, the country is impoverished, although it may seem contradictory.
One of the aspects that most illustrates deficiencies of the investment process is that the growth rate of investment projects in recent years is higher than that of GDP.
Furthermore, control of the investment process has been associated with the construction and assembly stages and not with returns. At least we have made progress this year in modifying these concepts. But we need workers to be involved in these analyses, as well.
Another problem is that many of the investments that have been made depend on imports for their sustainability. From the very conception of a project, we must analyze what inputs are needed and who will provide them. It can be a state enterprise, a non-state one, or the foreign investor, but for a minimum of imports, national actors must be included.
-During the fuel shortage, Cuba attempted to mobilize all untapped potential for savings and notable results were obtained. How then can the generalization of these good practices be achieved, in economic planning?
-The concept of savings, which is sometimes distorted, must be reiterated. It is not a question of reducing levels of activity, but of maintaining or increasing activity with fewer resources, based on more efficient management. This is savings.
Under this concept, this year we managed to implement a series of measures – which are not the only ones – and they must be maintained without thinking that the «conjuncture» is behind us.
In fact, the Plan was developed with levels of activity that support 1% growth in the GDP, with less fuel consumption, that is, the plan was designed with savings in mind.
The measures adopted put us in a position to face 2020 confident that we are capable of executing the plan, regardless of pressure from the U.S. government.
But there are several problems of our own making, which we must solve: deficiencies in the investment process; unleashing the productive forces, particularly state enterprises; increasing and diversifying exports. It is up to us to enter a phase of more accelerated economic growth, as part of the second stage of the Economic and Social Development Plan, from 2022 onward. (Taken from en.granma.cu)
