Transcript Economic restructuring, recent trends and main challenges

CUBA:
ECONOMIC RESTRUCTURING,
RECENT TRENDS, AND MAIN
CHALLENGES
The collapse of the European socialist block
caused a deep crisis in the Cuban economy,
which suddenly lost:
•
Its main suppliers of equipment, raw materials,
food and particularly fuels
• The
markets for over 80% of its exports
• The
sources of spare parts and assistance for
most of the technology installed in the previous 30
years
•
Its sources of financing and economic preferences
At the same time, the United States’ Government
reinforced its economic embargo with several additional
measures, aimed at defeating the Cuban Revolution
Effects of the external shock
1990-1993
121%
Money supply
158%
-35%
Budget deficit
Gross Domestic Product
-77%
Foreign Trade
-79%
Exports
-75%
Imports
-61%
-100%
Gross Investment
-50%
0%
50%
100%
150%
200%
Economic Reforms to Face and Reverse the Crisis
• Macroeconomic adjustment to correct some imbalances.
• Structural reforms (decentralization and reorientation of
foreign trade, opening to foreign investment, banking restructuring, enterprise rationalization and decentralization)
• Resources were concentrated in a few sectoral programs
(aimed at developing hard currency earners or substituting
imports)
• Continued development of medical services and infrastructure (not only for Cuban nationals, but also aimed at
exports)
• The US $ was allowed to circulate in the country (a network
of state dollar shops was set up and $remittances were allowed)
• Reintroduction of small private property (agricultural
markets, industrial and handicraft private markets, selfemployment)
• Conversion of most state lands and agricultural companies
into semi-private cooperatives.
THE STATE PROPERTY KEPT PREVAILING IN MOST
KEY SECTORS
THE PHILOSOPHY OF TRANSFORMATION
MAIN DECLARED GOALS
• To preserve the country’s
independence
• To keep and improve socialism
• To create the economic and social
basis to re-launch a development
program once the crisis was over
RESULTS
Gross Domestic Product
GDP Growth Rates
1990-2000
15,0
10,0
4,3
5,0
0,0
-5,0
-10,0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Annual rate
Average 94-2000
-15,0
-20,0
2000
Gross Domestic Product
GDP Growth Rates
2001-2006
(%)
14
Annual rate
12
11,8
12,5
AR 01-06
10
9,9
AR 01-03
8
AR 04-06
6,3
6
5,4
3,8
4
3
2
2,8
1,8
0
2001
2002
2003
2004
2005
2006
Cuban strategy for reinsertion in world
markets brought changes in sectors acting
as growth engines
- Sugar, traditional engine  now secondary
- Tourism and Remittances emerged with the
reform  displaced sugar
- Healthcare services, biotech patent licensing,
nickel, oil & gas  recently emerged as key
sectors
For some of these sectors foreign
investment played an important role
40
35
30
25
20
15
10
5
0
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
BUDGET DEFICIT / GDP
(%)
3,2
Breakdown of Budget Expenditures
5250
( Million Pesos)
4250
3250
2250
Education
Defense
Dwelling and Communal Services
Healthcare Pública
Social Security
06 P
05 E
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
250
1990
1250
UNEMPLOYMENT
7,9
8
7,1
7
6,3
5,4
5
5
4,1
4
3,3
3
2,3
2
1,9
1,9
2005
6
6,2
2004
9
( %)
1
2003
2002
2001
2000
1999
1998
1997
1995
1989
0
EXTERNAL SECTOR
Foreign Trade: Goods and Services
12000
10000
8000
6000
4000
2000
0
-2000
2000
2001
Exports
2002
2003
Imports
2004
2005
2006
Balance
Trade of Goods
Million USD
12000
Exports of Goods
10000
9357,4
Imports of Goods
8000
Balance
6000
4000
2448,4
2000
0
-2000
-4000
-6000
-6909,0
-8000
2000
2001
2002
2003
2004
2005
2006
Exports of Goods Structure
100%
90%
80%
Others
70%
Agriculture
60%
Fishing
50%
Tobacco
40%
Mining
30%
Sugar
20%
10%
0%
1990
1994
2004
Exports of Services
USD Million
8000
6864,9
7000
7283,7
6000
5000
3932,8
4000
3000
2978,3
2643,6
2571,5
2450,3
2000
2001
2002
2000
1000
0
2003
2004
2005
2006
Structure of Cuban Exports
100%
10
80%
60%
40%
70
36
30
2003
2005
90
20%
0%
64
1989
Goods
Services
Current Account
(million USD)
400
200
0
-200
-400
-600
-800
1999
2000
2001
2002
2003
2004
2005
PERFORMANCE OF FDI
Sales
Exports
Dividends for the country
3000
2500
2000
MMUSD
1500
1000
500
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Active Joint
62
Ventures
123
170
210 258
306
330
373
392
407
403
342 313
258
Reinforcement of the social content of
the economic policy
Improvement of the free educational
system in all levels
Refurbishment, expansion and retooling of
the free healthcare system
Increases of wages, pensions and social
assistance
MAIN CURRENT CHALLENGES
• The low productivity prevailing in some
manufacturing sectors and most of the
agriculture
• An increase of petty and mid corruption
• Critical condition of dwellings, transportation,
and part of the infrastructure
• The need to eliminate the dual currency
system introduced to face the crisis
Economic Policy Measures to
face these challenges
 To increase the productivity in manufacturing
and agriculture:
• The government has deepened the
restructuring of state companies, emphasizing
on accounting, control and discipline
• Cooperatives and other flexible schemes are
being extended in agriculture
• State companies, cooperatives and private
producers have been granted state financing
• Foreign investment has been allowed and
promoted in particular areas.
 To face corruption:
• A partial re-centralization has taken place
in most sectors
• Foreign exchange controls re-established
• Approval is now required for high-value
import transactions
• Revenues of state companies were
concentrated in a single account at the
central bank.
 To face the critical condition of infrastructure, dwelling and transportation:
• Program to build 70,000 houses and
refurbish 150,000 per year.
• Gradual recovery of transportation
• Energy revolution
• Investments in highways, water pipelines,
ports
 To move towards currency unification:
• US dollar withdrawn from the domestic
economy
• Gradual revaluation of the two Cuban
currencies
The prevalence of State Property in most
relevant economic sectors has been
confirmed as the main strategic economic
policy principle of the Cuban Government.