6/30/13

*Cuban Economy UQ*

Cuban Economy in Shambles Now
Sweig, Nelson and David Rockefeller Senior Fellow for Latin America Studies and Director for Latin America Studies, July/August 13 (Julia E., July / August 13, http://www.cfr.org/cuba/cuba-aftercommunism/p30991, Accessed 6/30/13, ARH) Nevertheless, Cuba faces serious obstacles in its quest for greater economic vitality. Unlike China and Vietnam at the start of their reform efforts, Cuba is an underdeveloped country with developed-world problems. Not only is the population aging (18 percent of the population is over 60), but the country's economy is heavily tilted toward the services sector. When Vietnam began its doi moi (renovation) economic reforms in 1986, services accounted for about 33 percent of GDP, whereas the productive base represented nearly 67 percent. By contrast, services in Cuba make up close to 75 percent of the island's GDP -- the result of 20-plus years of severe industrial decay and low rates of savings and investment. Service exports (mainly of health-care professionals), combined with tourism and remittances, constitute the country's primary defense against a sustained balance-of-payments deficit. Cuban officials and economists recognize this structural weakness and have emphasized the need to boost exports and foster a more dynamic domestic market. Yet so far, the state has not been able to remedy the imbalance. In the sugar industry, once a mainstay, production continues to flounder despite a recent uptick in global prices and new Brazilian investment. Meanwhile, a corruption scandal and declining world prices have weakened the nickel industry, leading to the closing of one of the island's three processing facilities. More broadly, Cuban productivity remains anemic, and the country has been unable to capitalize on its highly educated work force. Although important, the expansion of the small-business sector cannot resolve these core issues. There are now 181 legal categories for self-employment, but they are concentrated almost exclusively in the services sector, including proprietors of independent restaurants, food stands, and bed-and-breakfasts. Start-up funds are scarce, fees for required licenses are high, and some of the legal categories are senselessly specific. It also remains unclear whether the chance to earn a legitimate profit will lure black-market enterprises out into the open.

Cuban Economy Low NowIndicators Prove

Adams, Times Latin America Correspondent, 09 (David, 8/7/09, http://www.tampabay.com/news/world/in-cuba-theeconomy-is-so-bad-the-shantytowns-are-looking-good/1025725, Accessed 6/30/13, ARH) Cuba's economic crisis is hitting the island hard. Faced with a record postrevolution $11-billion trade deficit because of the dramatic rise in food and

fuel import costs, the government has had to slash spending, cutting back on monthly food rations, subsidized lunches in workplace cafe-terias, housing construction, public transportation schedules, as well as limiting air conditioning to only five hours each afternoon in state stores and offices. Cuba has long blamed the U.S. economic embargo for cutting it off from cheaper import sources, as well as international lending organizations. But Cuban officials recognize they need to improve housing and state salaries. In a speech in July 2007, Ral Castro said a Cuban state salary was "clearly insufficient to satisfy all necessities." He noted this brought "social indiscipline" and black marketeering. Due to the economic crisis, the government appears to be taking a lenient approach to the squatters. A law that requires illegal squatters to be evicted and returned to their home towns is not being enforced. Nor is the state doing anything to prevent squatters from stringing illegal lines to state utility poles to get free electricity. Indeed, Castro has publicly advocated formalizing the squatter communities and incorporating them into local municipalities.

Cuban Debt Increasing Empirics Prove

Frank, Columnist for Reuters, 08 (Marc, 12/18/08, http://havanajournal.com/business/entry/cuba-delayingdebt-payments-to-france-and-businesses/, accessed 6/30/13, ARH) Three hurricanes and the global financial crisis have left Cuba strapped for cash, forcing the government to juggle debt payments and seek new financing, diplomatic and business sources say. France is the latest government to receive notice from Cuba that it needs to reschedule upcoming debt payments, European diplomats said. A few months ago, Cuba told Japan and Germany it could not meet debt payments but those problems apparently have been worked out. Now France has received the same news, a diplomat said. The information was confirmed by French business sources. Cuba, whose foreign debt rose by $1.1 billion to $16.5 billion in 2007, recently rescheduled some debt with China. The government did not immediately respond to a request seeking comment, but Cubas planning and economy minister, Jose Luis Rodriguez, recently said the island, like all countries in the region, faces a difficult year ahead due to the global financial crisis. Various foreign businessmen, who like the diplomats asked that their names not be used, said payments had slowed from Cuban state-run banks, with cash transfers that usually took 48 hours now sometimes put off for weeks. It appears they do not have the cash on hand so they delay and then pay you and delay payment to someone else, one Western businessman said.

Cuban Economy Suffering Now

Michigan State University, GlobalEdge Research Team, NDG (Post 11, http://globaledge.msu.edu/countries/cuba/economy, accessed 6/30/13, ARH)

The Cuban economy suffers first and foremost from a lack of productivity and an overdependence on the external sector. Cuba suffered a significant decline in gross domestic product of at least 35% between 1989 and 1993 as the loss of Soviet subsidies laid bare the economy's fundamental weaknesses. To alleviate the economic crisis, in 1993 and 1994 the government introduced a few marketoriented reforms, including opening to tourism, allowing some foreign investment, legalizing the dollar, and authorizing self-employment for some 150 occupations. These measures resulted in modest economic growth, although the official statistics are deficient and provide an incomplete measure of Cuba's real economic situation. From 2000 to 2009, Cuba experienced a series of severe economic disruptions, including lower sugar and nickel prices, increases in petroleum costs, devastating hurricanes in 2001, 2004, and 2008, a major drought in the eastern half of the island, increasing external debt, liquidity issues, and stagnant or decreasing agricultural and industrial productivity. Significant economic assistance from Venezuela, and to a lesser degree China, has helped keep the Cuban economy afloat. Living conditions in 2010 remained well below 1989 levels. Moreover, the gap in the standard of living is widening between those with access to convertible pesos and those without. Jobs that can earn salaries in convertible pesos or tips from foreign businesses and tourists have become highly desirable. Over $1 billion in yearly remittances exacerbates the gap. Prolonged austerity and the state-controlled economy's inefficiency in providing adequate goods and services have created conditions for a flourishing informal economy in Cuba. As the variety and amount of goods available in state-run peso stores has declined and prices at convertible peso stores remain unaffordable to most of the population, Cubans have turned increasingly to the black market to obtain needed food, clothing, and household items. Pilferage of items from the work place to sell on the black market or illegally offering services on the sidelines of official employment is common. A report by an independent economist and opposition leader speculates that more than 40% of the Cuban economy operates in the informal sector. In the last few years, the government has carried out an anti-corruption campaign, including the creation of a Comptroller Generals Office, repeated street-level crackdowns, and ongoing ideological appeals. So far, these measures have yielded limited if any results.