Cuba's new 'growth' rate fails to cure old
problems
By Marc Frank
Published: January 14 2005 02:00 | Last updated: January 14
2005 02:00
After 46 years in power, Fidel
Castro, Cuba's president, is known to play only by his own
rules. Even so, his recent move to disregard the standard
formula for gross domestic product - the world's standard
measurement of an economy's growth - has confounded both
economists and ordinary Cubans.
The move to declare GDP a capitalist
instrument has been brewing for the past year, after José
Luis Rodriguez, the economy and planning minister, called
GDP a tool designed to measure growth in market economies -
and useless as far as Cuba was concerned.
He reiterated the point in his year-end
economic report to the national assembly. "Health and
education are included if they come with a price, but not if
they are provided free," he said.
According to Mr Rodriguez, Cuba's 2.6 per
cent annual growth in 2003 was actually 3.8 per cent when
taking into account Cuba's free healthcare and education.
This year Mr Rodriguez simply declared
that growth was up 5 per cent, based on the adjusted method.
Economy ministry sources said that with
the conventional GDP formula, growth was actually 2.8 per
cent to 3 per cent.
Experts have found Cuba's economy
increasingly difficult to decipher. Since 2001, a drop in
tourism and five hurricanes slowed Cuba's recovery from a
1990s post-Soviet economic crisis.
The government acknowledges a worsening
foreign exchange shortage, due to shrinking credit and
investment, a hostile US administration, high oil and
shipping costs, hurricanes and drought.
Cuba is dependent on fuel and food
imports. Its current account has operated in the red since
the 1991 collapse of the Soviet Union, its chief benefactor.
The country, considered one of the world's
worst credit risks, is not a member of any international
lending organisation.
The new growth measurement formula could
further hurt Cuba's credibility and increase suspicion the
economy is not doing well.
"GDP percentages are meant to compare
performance, so if you start using other formulas, and don't
give the calculations, you make the comparison impossible,"
a European diplomat said, "which means they most likely have
something awful to hide."
Cuba's reserves have always been a well-guarded secret. The
central bank has provided no foreign debt or current account
information since 2001, when debt stood at $11bn. The latest
detailed trade and production statistics date to 2002.
Results from a much-publicised 2002 census have never been
released. Budget information is provided only in pesos,
although an important percentage of domestic spending is in
hard currency.
According to local economists, since recovery began in 1994
economic growth has averaged 3.7 per cent and less in recent
years - not nearly enough to upgrade deteriorating
infrastructure.
Cuba today is in the grip of its worst drought in 63 years.
Hundreds of thousands of people rely on water trucks to
survive, and agriculture has suffered huge damage. But
drought is only part of the problem: 30 per cent of pumped
water is lost between reservoir and consumer. The National
Institute of Hydraulic Resources reported $400m was needed
to upgrade Havana's century-old waterworks, as well as
$1.2bn for the rest of Cuba.
Many Cubans were puzzled by news of 5 per cent growth. The
state employs 90 per cent of workers and monopolises retail
activity. In Cuba's dual monetary system, government
exchanges offer 27 pesos to the US dollar, while the
convertible peso trades on par with the dollar.
The average monthly income is 345 pesos. Cooking oil, extra
milk, juice, pasta, soap and detergents all cost up to a
week's wages, and such "luxury" goods as decent clothes and
household appliances require weeks of labour, if not months
or years.
A
government report seen by the FT said peso prices increased
by 3 per cent, but gave no overall figure. The government
raised prices at its dollar shops an average 15.4 per cent
in May. Also last May, the US made it more difficult for
Cuban-Americans to visit Cuba and supplement family incomes.
"The reports at the National Assembly were very optimistic
because this year was very hard," a transportation worker in
central Camaguey province said. "For months I have had no
running water at home and for a number of months the
blackouts would not let us live in peace. Government prices
keep going up, but my government wage remains the same." |