The challenges awaiting Cuba

30 March 2010 by Eric Toussaint

External and internal factors are creating a tense and difficult situation in Cuba. The global financial and economic crisis is impacting the Cuban economy on five fronts:

- 1. the price of nickel exported by Cuba on the world market dropped from $50,000 to $10,000 per ton between 2008 and 2009;

- 2. while the number of tourists increased slightly in 2009, tourist spending decreased sharply (reducing revenues from tourism by 10%);

- 3. plunging oil prices, which directly affected Venezuela, slowed down this country’s payments for services provided by Cuba to Venezuelans, particularly in the area of healthcare;

- 4. the long-term effects of the damage wrought by major hurricanes on parts of the island in 2008;

- 5. continuation of the US embargo by the Obama administration. The new president failed even to lift the ban on tourism or healthcare visits to Cuba by US citizens. Yet given the proximity of the US and Cuba, tourism from the US would significantly increase the island’s revenues in this sector.

The outcome of all these factors is a balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. of trade deficit, with Cuba needing to import a high proportion of the food consumed in the country. The government has reacted by seriously reducing imports, a move which has affected the day-to-day existence of the Cuban population. When talking with Cubans in the street, food supply is always an underlying concern. It must be noted that contrary to the overwhelming majority of developing or emerging countries, no-one is dying of hunger in Cuban nor is the population visibly underweight. Cubans do not suffer from undernourishment. Inequalities are significantly lower than those observed in neighbouring countries, and Cubans enjoy access to sufficient food and to quality health and education services. In 2009, the average Cuban consumed 3,200 calories per day whereas the national fixed minimum stands at 2,600.

Nevertheless, Cubans are frustrated at having to spend an abnormal amount of time queueing for various categories of food products, the price of some having increased: since potato prices were freed, the cost of this product has doubled.

Highly restricted access to external financing

It should be recalled that Cuba is neither a member of the IMF IMF
International Monetary Fund



nor the World Bank World Bank

It consists of several closely associated institutions, among which :





, preferring to remain independent of their diktats. Cuba therefore has no loans with these two institutions. What is more, Cuba has for years been refused credit by the member countries of the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

, but given the conditionalities attached, this is not a matter for regret [1]

The international private banks that are willing to extend credit demand extremely high country-risk premiums to protect themselves from the US embargo on Cuba. In concrete terms, most of the loans to Cuba come from China, Brazil and Venezuela. This situation is frustrating given that the countries which, last February in Cancún, were involved in the creation of the Community of Latin American and Caribbean States (comprising all American States except the United States and Canada), hold $500 billion in foreign exchange reserves. Instead of using these reserves to invest productively in the region or to come to the aid of Southern countries with a balance of trade deficit, a considerable portion of these reserves is loaned to the US government through the purchase of treasury bills [2]. The situation is all the more frustrating in that, at the political level, the de facto creation of this new organization puts an end to an anomaly that has persisted for nearly half a century, namely the existence of an Organization of American States (OAS), with headquarters in Washington and from which Cuba is excluded thanks to pressure from the US authorities.

Continuing delay in starting up the Bank of the South created by seven countries [3] (operations will be in principle limited to South America) preclude the possibility of a solidarity loan being extended to Cuba in the short or medium term. And finally, the ALBA [4] bank, still in the very early stage of development, does not have sufficiently rich members, apart from Venezuela, to provide a genuine source of financing for Cuba.

Much-needed reforms in the agricultural sector

So much for the external factors. Now for the internal factors.

The results of 50 years of Cuban agricultural policy are negative since, as mentioned above, more than half the calories consumed on the island come from imported products. This is a far cry from food sovereignty. In response to the situation, the authorities have recently granted usufruct rights to some 100,000 families for one million hectares of idle land. This welcomed decision is unlikely to provide a sufficient an adequate solution to the problems. When the subject of property rights is broached with the authorities, they reply that it is out of the question to modify current legislation in favour of extending private ownership either in the agricultural or services area. They quite rightly wish to prevent the re-establishment of large, privately owned estates (latifundia). Undoubtedly measures must be taken to avoid a revival of production-capitalist ownership relations in the agricultural sector as in the rest of Cuban society. But it is evident to the observer that the small family private ownership model is most effective in the matter of food production. Yet this sector accounts for only a small percentage of the country’s arable land. The State could increase the number of families eligible for land ownership on condition that they produce food. These small farmer families would not be allowed to sell their land to third parties so as to prevent a concentration of territory and the re-forming of large private estates. The State could stimulate the extension and stabilization of a productive community comprised of farming families using organic methods to produce sufficient quantities of quality foodstuffs. The family owning land should be directly involved in production and could take on employees to help, provided it respected the labour code, ensured fair wages and working conditions and made the necessary social security contributions. In this way, the private sector would be restricted to small productive family entities, co-existing with the cooperative and State sectors. Another measure, in addition to these sectors, could be to develop municipal, urban or semi-urban agricultural production, under the responsibility of district authorities. Over the last twenty years, Cubans have in fact been producing food in urban and semi-urban vegetable gardens, with remarkable effectiveness. This experiment could certainly be developed.

Worker control, self-management, citizen control, the organization of open debate…

However, the first and most essential condition for solving Cuba’s problems is to take a major qualitative stride towards popular participation in its various forms: worker control, self-management, citizen control, the organization of forums for open debate, etc.

Indeed, the fundamental problem in Cuba is the fact that workers and citizens do not feel directly involved in decisions affecting their work (working conditions, end use of the product they make, equipment maintenance, etc.). It is a situation that leads to very low productivity, serious wastage and a high rate of theft in the workplace. This internal factor is key to explaining the intrinsic weaknesses of the Cuban system. Certainly the history of the 20th and early 21st centuries provides few instances of lasting success in the area of worker control and self-management. Countries that have embarked on socialist experiments have rapidly seen them marred by bureaucratic and authoritarian deformation, and eventually by a degeneration of the system. Notwithstanding the objective and subjective difficulties, if no radical progress in made in this area, all attempts to improve and reform will be likely to fail, while disillusionment and frustration will gain ground. Questioned on the issue of popular participation, the response of the authorities is particularly evasive.

Postponing the end of the libreta

As a specific measure to counteract decreasing State revenues, the Cuban government decided over a year ago to gradually discontinue the libreta. The libreta is a booklet given to each Cuban citizen allowing him to buy a series of basic products at very low, almost symbolic prices. These products provide about 30% of a person’s food intake needs. According to official calculations, this ration book system costs the State $1 billion per year. To supply all Cubans with libreta products at highly subsidized prices, the State must spend this sum either in the form of hard currency purchases of imported products, or by buying from local producers. The overwhelming majority of Cubans are attached to the libreta and take it for granted. In the present situation, the government appears to realize that discontinuing the libreta would lead to widespread discontent. The decision will probably not be implemented in the next year or two. But the threat is there.

For the last 20 years, commentators have been announcing the imminent demise of the Castro regime and/or the re-establishment of capitalism. Neither of these scenarii has come to pass and Cuba is still the country which banished capitalism 50 years ago following a revolution. This country - the victim of a US blockade each year condemned by over 98% of the members of the UN General Assembly - is once again faced with challenges that can only be met by a renewal of mass self-mobilization.

Translated by Judith Harris

Eric Toussaint is co-author with Yannick Bovy of the book Le Pas suspendu de la révolution. Approche critique de la réalité cubaine, published by Le Cerisier, Mons (2001).


[1Cuba suspended payments to the Paris Club in the mid-1980s (see Damien Millet and Eric Toussaint, 60 questions/60 réponses sur la dette, le FMI et la Banque mondiale, CADTM-Syllepse, 2008, p 258).

[2See Eric Toussaint, The Bank of the South, VAK publication, Mumbai-India, 2007.

[3See Eric Toussaint, The Bank of the South, VAK publication, Mumbai-India, 2007

[4ALBA (Bolivarian Alliance for the Americas) is a project for alternative integration proposed in 2003 by the Venezuelan president in response to ALCA (Free Trade Area of the Americas), a US initiative. ALBA has been operational since 2004, and now comprises Venezuela, Cuba, Bolivia, Nicaragua, Dominica, St. Vincent and the Grenadines, Ecuador, Antigua & Barbuda. The integration proposal includes projects in several areas such as fnance, education, infrastructures, science and technology, energy, the environment, etc. The most important initiative to date is that of Petrocaribe, which supplies Venezuelan oil at affordable prices to the other member countries. At its peak in 2008, the total value of Venezuelan oil exports to Petrocaribe partners reached $10 billion.

Eric Toussaint

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