Thursday, August 24, 2006

The real problem with the Cuban economy

The reason the Cuban economy has been such a basketcase for so many years is the US embargo. Right?

Well, that has been the excuse used by Fidel Castro for the past 45 years to explain the endless shortages, the lack of investment in infrastructure, the rationing system in place since 1962, the long queues, the medicines that go missing, the empty shelves, the crumbling buildings ... You name it.

I have even seen the old embargo chestnut used by Communist Party officials to explain to visiting journalists who should know better why Cuban musicians can't find guitar strings in Havana music shops.

Let's face it, it has been a PR master stroke for the old dictator. But the reality is very different, of course.

According to Carmelo Mesa-Lago, a professor of Economics at the University of Pittsburgh and probably the foremost expert on the Cuban economy outside the island, the US embargo has had an impact over time on the Cuban economy but this impact has been limited.

In an interview published yesterday in the French newspaper, Le Monde, Professor Mesa-Lago explains the obvious: despite the embargo, Cuba can trade freely with the rest of the world.
Something else: Food is not covered by the embargo, which is why the US is now the largest exporter of food to Cuba. Read that again: the American imperialists are now the largest exporter of food to Cuba.

Instead, Professor Mesa-Lago says the key problems with the Cuban economy are the erratic policies of the Castro regime and poor management.

In particular, he explains, Cuba has a serious trade imbalance. While the island imports about $US6 billion a year worth of goods, it manages to export just $US1.7 billion worth - mainly commodities such as nickel, tobacco, seafood, citrus fruit, drugs and sugar.

Even tourism, which was portrayed by the regime back in the late 1990s as the great economic saviour, has failed to generate the expected multiplier effect on the wider economy because it is necessary to import much of the goods (and services) offered to visitors.

On top of this, the regime has a shocking credit history. Apart from the estimated $US26 billion Cuba still owes the now-disappeared Soviet bloc (money that will never be repaid), Castro has defaulted on $US13 billion worth of credit from capitalist countries over the past four decades.

Not surprisingly, few countries want to sell Cuba anything on credit. Because they know Castro won't pay in the long run.

That's why the Cuban economy is in serious strife.


Blogger Henry "Conductor" Gomez said...

If the US liftes the embargo, Cuba will more than likely be eligible to borrow from the World Bank. Of course the US is the largest shareholder of the world bank. Given castro's record of non-payment of Cuban debt I think our current policy is wise. Why throw a dying tyranny another lifeline (at US taxpayer expense)?

3:19 am  

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