In 1998 Hugo Llorens wrote the paper that follows. Llorens is the US ambassador to Honduras. The paper clearly indicates his political philosophy. It is either capitalism or chaos.  There are no other options. Oh, in the process, Cuba was also a country that did not need a revolution...

But, of course, Llorens did not participate in the ouster of Zelaya. And, of course, don't trust your lying eyes...
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RENAISSSANCE AND DECAY:
A COMPARISON OF SOCIOECONOMIC INDICATORS IN
PRE-CASTRO AND CURRENT-DAY CUBA 1

 

Kirby Smith and Hugo Llorens

"The choice is between capitalism and chaos." - Ludwig von Mises

An enduring myth is that Cuba in the 1950s was a socially and economically backward country whose development, especially in the areas of health and education, was made possible by the socialist nature of the Castro government. Despite the widespread acceptance of this view, readily available data show that Cuba was already a relatively well-advanced country in 1958, certainly by Latin American standards, and in some cases by world standards. The data show that Cuba has at best maintained what were already high levels of development in health and education, but that in other areas, Cubans have borne extraordinary costs as a result of Castro-style totalitarianism and misguided economic policies. Indeed, with the possible exception of health and education, Cuba's relative position among Latin American countries is lower today than in it was in 1958 for virtually every socioeconomic measure for which reliable data are available.

SOURCES AND ANALYTICAL APPROACH

This paper draws a comparison between the socioeconomic development of Cuba prior to Castro's taking power and the Cuba of today, after 40 years of revolutionary socialist government, and compares Cuba's development in each of these periods with that of all other countries in Latin America for which data are available.2 We have relied most extensively on United Nations (UN) data, particularly from the Statistical Yearbook and Demographic Yearbook, which we consider among the most extensive data compendiums in the development field. Other trade and macroeconomic data are derived from the International Monetary Fund's Direction of Trade Statistics, which provides a consistent data series dating back to the pre-revolutionary period.

For the various international comparisons and rankings given below, only those countries acquiring independence prior to 1958 and having relatively consistent data available for the period 1955-present have been included. The former stipulation excludes many highly developed Caribbean countries from consideration. In some cases, this noticeably affects our results. For example, The Bahamas, Guyana, and Barbados all would rank ahead of Argentina and Cuba as the most literate countries in Latin America and the Caribbean, according to the UN's latest Statistical Yearbook published in 1997 (pp. 85-86).

1. A previous version of this paper was released by the State Department's Bureau of Inter-American Affairs (State 1998). The present version has been revised and expanded and as such, reflects only the personal views of the authors.

2. For a study of the changes in Cuba's socioeconomic indicators relative to Chile, Costa Rica, and Mexico during the period 19201990, see Romeu (1995).

HEALTH CARE GAINS EXAGGERATED

The health care system is often touted by many observers as one of the Castro government's greatest achievements. One Latin American head of state, for example, recently called Cuba's health care system "spectacular," adding that Cuba "proved the dialectic truth that revolutions produce healthy children" (Cawthorne 1998). What this and other similar analyses ignore is that the revolutionary government inherited an already advanced health sector when it took power in 1959. In the early 1950s, a World Bank-organized mission declared that for a tropical country, Cuba enjoyed "remarkable freedom from disease" (1951, p. 4).

Indeed, the 25 years prior to Castro's takeover constituted a period of rapid growth in the number of healthcare facilities on the island. A 1977 article in the Journal of the Florida Medical Association (Navar-ro) lists 72 large hospitals operating in Cuba in 1958-double the number that existed just 25 years earlier-with more than 21,000 beds among them. These numbers exclude municipal centers, which provided emergency clinical and surgical assistance in large cities, and the 250 privately-run medical centers, most of which were structured on a "mutual aid" basis that gave patients access to medical and surgical care for less than five pesos per month. At least a half million Cubans were enrolled in such programs as of 1958. Including governmental, municipal, and private hospitals and clinics, Cuba had about 35,000 beds for 6.6 million inhabitants-an impressive one bed per every 190 inhabitants.

Cuba's infant mortality rate of 32 per 1,000 live births in 1957 was the lowest in Latin America and the 13th lowest in the world, according to UN data. Cuba ranked ahead of France, Belgium, West Germany, Israel, Japan, Austria, Italy, Spain, and Portugal, all of which would eventually overtake Cuba in this indicator during the following decades (UN 1979, pp. 67-188).

Today, Cuba remains the most advanced country in the region in this measure, but its world ranking has fallen from 13th to 25th during the Castro era, according to UN Data (1997b, pp. 93-100). Also missing from the conventional analysis of Cuba's infant mortality rates is its staggering abortion rate-0.71 abortions per live birth in 1991, according to the latest UN data-which, because of selective termination of "high-risk" pregnancies, yields lower numbers for infant mortality. Cuba's abortion rate is at least twice the rate for the other countries listed in Table 1 for which data are available (UN 1997a, pp. 322326, 369-370).


Table 1.   World: Infant Mortality
(Deathsper 1,000 live births)
               1957 1990-95
Japan             40 4
Iceland           16 5
Sweden            18 5
Norway            21 5
Switzerland       23 5
Finland           28 5
Netherlands       18 6
Canada            31 6
Germanya          36 6
Luxembourg        39 6
Australia         21 7
United Kingdom    24 7
Ireland           33 7
France            34 7
Austria           44 7
Denmark           23 8
Belgium           36 8
Italy             50 8
Spain             53 8
New Zealand       24 9
United States     26 9
Israel            39 9
Greece            44 9
Portugal          88 9
Cuba              32 10
Source: UN 1979, pp. 67-188; UN 1997b, pp. 93-100.

 

a. For 1957, includes only the Federal Republic of Germany,

In terms of physicians and dentists per capita, Cuba ranked third in Latin America in 1957, behind only Uruguay and Argentina-both of which were more advanced than the United States in this measure. Cuba's 128 physicians and dentists per 100,000 people in 1957 placed Cuba at the same level as the Netherlands, and ahead of the United Kingdom (122 per 100,000 people) and Finland (96) (UN 1960, pp. 569-573; UN 1979, pp. 67-188). Unfortunately, the UN Statistical Yearbook no longer publishes these statistics, so more recent comparisons are not possible,but it is completely erroneous to characterize pre-rev-olutionary Cuba as backward in terms of healthcare.

LITERACY IMPROVES WITH THE REST OF LATIN AMERICA

Cuba has had one of the most literate populations in Latin America since well before the Castro revolution, when its literacy rate ranked fourth in the region (UN 1957, pp. 600-602). Its relatively advanced educational system produced a highly skilled workforce. The World Bank's Report on Cuba stated in 1951,Cuba's people are intelligent, able and quick to absorb modern knowledge; her business men are shrewd and capable, her doctors and surgeons among the best in the world, her architects bold and imaginative. In other fields, many Cubans are already alert to modern methods and technology and there is no insurmountable obstacle to training as many more as may be required or, in the meanwhile, to obtaining technical advice from abroad. (p. 5)

One should not overstate pre-Castro Cuba's reliance on imported human capital, however. Baklanoff (1975, p. 25), citing U.S. government data, shows that fewer than one-fourth of the 2,000 supervisory, professional, and technical personnel employed by U.S. subsidiaries in 1957 were sent from the United States.

Since the 1950s, Cuba has increased its literacy rate from 76 to 96 percent, which today places it second only to Argentina among those 11 Latin American countries for which comparable 1950s UN data are available (UN 1957, pp. 600-602; UN 1997b, pp. 85-86).3 This improvement is impressive, but not unique, among Latin American countries. Panama- which ranked just behind Cuba in this indicator during the 1950s-has matched Cuba's improvement when measured in percentage point terms. In fact, a review of the UN statistics below reveals that the whole hemisphere has made enormous strides in literacy over the past 40 years (see Table 2). We will show that these other countries making significant progress in this area have done so with far less degradation to other measures of human welfare than socialist Cuba has.


Table 2.   Latin America: Literacy Rates a (Percent)
Latest avail.
 data for 1950-53 1995 Pct. pt increase
Argentina 87b 96 10
Cuba 76 96 19
Chile 81 95 15
Costa Rica 79 95 16
Paraguay 68 92 24
Colombia 62 91 30
Panama 72 91 19
Ecuador 56 90 34
Brazil 49 83 35
Dominican Republic 43 82 39
El Salvador 42 72 29
Guatemala 30 56 26
Haiti 11 45 34
Source: UN 1957, pp. 600-602; UN 1997b, pp. 85-86.
a. Data for 1950-53 are age 10 and over. Data for 1995 are age 15 and over,
reflecting a change in common usage over this period.
b. 1947 data, the latest available, are for age 14 and over

Teaching children to read, of course, is but one aspect of primary and secondary education, albeit an important one. We suspect, however, that in other areas, Cuba's government-run schools fall short because of the strong ideological content present in the instruction and the lack of alternatives available to parents. The Cuban government forbids religious or private schools. Pope John Paul II, during his first mass in Cuba in January, strongly criticized the Cuban state's "substitution of the role of parents" in education. He noted that the state's boarding schools in the countryside feed a host of social ills such as sexual promiscuity and have a "traumatic" and "profoundly negative" impact on students (Moore 1998).

3. Uruguay's 97-percent literacy rate ranked ahead of Argentina's in 1995, but comparable data for the 1950s are not available. We already have noted that the literacy rates of several former Caribbean colonies also ranked ahead of Argentina's in 1995.

CONSUMPTION COLLAPSE:
THE IMPOVERISHMENT OF THE CUBAN PEOPLE

The Cuban people have been deprived not only of luxuries now increasingly enjoyed by the middle classes in other Latin American countries but also of basic commodities such as food.

Food Rationing has been a feature of Cuban life since the early 1960s. During the early 1990s, the variety and amount of food consumption deteriorated sharply, when massive amounts of Soviet aid were withdrawn and food imports plummeted. On its own without Soviet largesse and abundant food imports, Cuban agriculture was paralyzed by a scarcity of inputs and poor production incentives resulting from collectivism and the lack of appropriate price signals. In pre-Castro Cuba, by contrast, food supplies were abundant, and its people were among the best fed in the hemisphere. The UN's Statistical Yearbook, 1960 (pp. 312-316) ranked pre-revolutionary Cuba third out of 11 Latin American countries in per capita daily caloric consumption. This was in spite of the fact that the latest available food consumption data for Cuba at the time were from 1948-49, almost a decade before the other Latin American countries' data being used in the comparison. Looking at the same group of 11 countries today (see Table 3), Cuba ranks last in per capita daily caloric consumption, according to the most recent data available from the UN Food and Agricultural Organization. Indeed, the data show Cuba with a food situation slightly worse than that of Honduras (UNFAO 1998). A closer look at some basic food groups reveals that Cubans now have less access to cereals, tubers, and meats than they had in the late 1940s. According to the latest UN data (UNFAO 1998), Cuba's per capita supply of cereals has fallen from 106 kg per year in the late 1940s to 103 kg today, half a century later. Per capita supply of root crops shows an even steeper decline, from 91 kg per year to 63 kg. Meat supplies have fallen from 33 kg per year to 23 kg per year, measured on a per capita basis.



Table 3.   Latin America: Per Capita Food Consumption (Caloriesper day)
 Latest data available for 1954-57 1996
Mexico 2,420 3,137
Argentina 3,100 3,136
Brazil 2,540 2,938
Uruguay 2,960 2,830
Chile 2,330 2,810
Colombia 2,050 2,800
Ecuador 2,130 2,592
Paraguay 2,690 2,485
Venezuela 1,960 2,398
Honduras 2,260 2,368
Cuba 2,730a 2,357
Source: UN 1960, pp. 312-316; UNFAO 1998.
a For 1948-49.

The Cuban leadership's claim that the country's food problems are due to the
U.S. embargo does not hold up to scrutiny. The food shortages are a function
of an inefficient collectivized agricultural system and a scarcity of
foreign exchange resulting from Castro's unwillingness to liberalize Cuba's
economy, diversify its export base, and pay off debts owed to its Japanese,
European, and Latin American trading partners during the years of abundant
Soviet aid. This foreign exchange shortage, not the U.S. embargo, has
severely limited Cuba's ability to purchase readily-available food supplies
from Canada, Latin America, and Europe. We believe that the U.S. embargo has
added, at most, relatively small increases in transportation costs by
forcing Cuba to import food from non-U.S. sources elsewhere in the
hemisphere.

The statistics on the consumption of nonfood items tell a similar story of
economic deprivation.

Automobiles

The number of automobiles in Cuba per capita has actually fallen since the
1950s, the only country in the hemisphere for which this is the case.
Indeed, the latest available UN data for Cuba used in this comparison are
for the late 1980s, a period when Soviet aid to Cuba was at its peak and the
rest of Latin America was in the midst of the "lost decade," a period
characterized throughout the region by economic stagnation.

These data show that the number of automobiles per capita in Cuba declined
slightly between 1958 and 1988, whereas virtually every other country in the
region-with the possible exception of Nicaragua- experienced very
significant increases in this indicator (see Table 4). Within Latin America,
Cuba ranked second only to Venezuela in 1958, but by 1988 had dropped to
ninth. We strongly suspect that Cuba's position relative to other Latin
American countries has deteriorated even further over the past 10 years, as
U.S.-manufactured cars from the 1950s and Soviet Ladas have reached the end
of their mechanical lives without replacement.4

Table 4.   Latin America: Passenger Cars per Capitaa (Cars per 1,000
inhabitants)
 1958 1988 Avg. Annual Increase (Pct.)
Argentina 19 129 6.6
Uruguay 22b 114 5.3
Venezuela 27 94 4.3
Brazil 7 73 8.1
Mexico 11c 70 6.4
Panama 16d 56 4.3
Chile 7 52 6.9
Costa Rica 13 47c 4.4
Cuba 24 23 -0.1
Dominican Republic 3d 23e 7.3
Colombia 6 21f 4.3
Paraguay 3c 20 6.5
Peru 7g 18 3.1
Ecuador 2 15 7.0
Bolivia 3c 12 4.7
Guatemala 6 11 2.0
El Salvador 7 10 1.2
Nicaragua 7d 8 0.5
Honduras 3 6 2.3
Source: UN 1960, pp. 332-339; UN 1979, pp. 67-188; UN 1996a, pp. 534-549; UN
1997a, pp. 152-159.
a. For most countries, excludes police and military cars.
b. 1956.
c. Includes police cars.
d. Excludes all government cars.
e. 1987.
f. Includes cars no longer in use.
g. 1957.

The 1988 data on automobiles also reveal that countries in Asia and Europe
that once ranked far behind Cuba in this measure have since surpassed it by
a wide margin. Japan, with four cars per 1,000 inhabitants in 1958, was far
behind Cuba (24 per 1,000 inhabitants) then, but by 1988, Japan's number had
grown to 251, whereas the figure for Cuba-even at the height of Soviet
aid!-remained frozen at its 1958 level. Similar comments could be made for
Portugal (increased from 15 in 1958 to 216 in 1988), Spain (increased from 6
to 278), and Greece (increased from 4 to 150). Indeed, Italy's 29 cars per
capita was not far ahead of Cuba's 24 in 1958, but by 1988, Italy boasted
440 cars per capita, whereas the figure for Cuba was unchanged from the
1950s.

Telecommunications

Telephones are another case in point. While every other country in the
region has seen its teledensity increase at least two fold-and most have
seen even greater improvements-Cuba's has remained frozen at 1958 levels. As
of 1995, the latest year for which UN data are available, Cuba had only
three telephone lines per 100 people, placing it 16th out of 20 Latin
American countries surveyed and far behind countries that were less advanced
than Cuba in this measure in 1958, such as Costa Rica (16 lines per
100 people in 1995), Argentina (16) , Chile (13),
Panama (11), Venezuela (11), and several others
(UN 1997b, pp. 147-149).

Radios

Cuba also has not kept pace with the rest of Latin America in terms of
radios per capita. During the period 1956-1958, Cuba ranked second only to
Uruguay in Latin America, with 169 radios per 1,000 people (UN 1958, pp.
576-578; UN 1960, pp. 608609). Worldwide, this put Cuba just ahead of Japan.
At that time, Argentina and Cuba were very similar in terms of this measure.
Since then, the number of radios per capita in Argentina has grown three
times as fast as in Cuba (UN 1997b, pp. 132-134). Cuba also has been
surpassed by Bolivia, Venezuela, El Sal-
4. Since 1988, the 10 Latin American countries for which the most recent UN
data are available, grew by an average of 33 percent in this measure over
the 7-year period ending in 1995. Growth was strongest in El Salvador, where
the number of passenger cars per capita increased by 97 percent, and Costa
Rica, where it rose 61 percent (UN 1997b; UN 1998b, pp.155-156).
vador, Honduras, and Brazil in this indicator. Today, Cuba ranks just above
average for Latin American countries.

Television Receivers

In terms of television receivers per capita, Cuba in the 1950s was far ahead
of the rest of Latin America and was among the world's leaders. Cuba had 45
television sets per 1,000 inhabitants in 1957, by far the most in Latin
America and, amazingly, fifth in the world, behind only Monaco, the United
States, Canada, and the United Kingdom (UN 1958, p. 580). In fact, its
closest competitor in Latin America was Venezuela, which had only 16
television sets per 1,000 people. Today, Cuba has 170 television receivers
per thousand, behind Uruguay (232 per capita), Argentina (219), and Brazil
(209) (UN 1997b, pp. 132-134). It should be noted that of these three
countries, Uruguay in 1957 had fewer than one television set per 1,000
people, and Argentina and Brazil each had only five per 1,000 people-numbers
far inferior at the time to Cuba's 45 sets per 1,000 inhabitants.

A WORD ON NATIONAL PRODUCTION STATISTICS

Historically, the most widely cited economic development indicators are per
capita national production measures. Unfortunately, due to the prevalence of
exchange rate distortions and vast differences in inflation rates among
Latin American countries, as well as the lack of continuity in data sources
and methods, we are wary of drawing any firm conclusions from these measures
alone about the relative progress or lack thereof made by Cuba in economic
development during the past 40 years. However, for the sake of completeness,
we venture a few comments on the indicators here.
Cuba in 1958, with a per capita gross domestic product (GDP) of $370, ranked
fifth out of 20 Latin American countries, according to UN estimates based on
commercial exchange rate conversions

(1964, p. 322).5 Cuba ranked behind only oil-rich Venezuela ($975),
Argentina ($474), Uruguay ($450), and Chile ($409). In 1995, also according
to the commercial exchange-rate based, per capita GDP statistics published
in the national accounts database of the Statistics Division of the UN
(1998a), Cuba ranked 11th. Keeping in mind the difficulties inherent in
comparing per capita GDP statistics across decades and countries, it is
nonetheless interesting to note that the two countries in the region
suffering the greatest declines in terms of ranking among Latin American
countries in this indicator are the only two countries in the region to have
significantly embraced Marxism: Nicaragua fell from 11th to 19th place, and
Cuba, as we have already noted, slid from fifth to 11th place.

PRODUCTION PLUMMETS IN KEY SECTORS

We can gain additional insight into Cuba's economic performance today
vis-a-vis 1958 by looking at specific subsectors of the national economy.

Sugar
The erosion of Cuba's productivity in the sugar sector-by far its top export
commodity-has been well documented elsewhere and does not require lengthy
elaboration here. Suffice it to say that in 1958, Cuba ranked just ahead of
the Soviet Union as the largest sugar producer in the world (UNFAO 1961, pp.
71-73). Today, it barely ranks among the top 10 producers. Indeed, Cuba is
the only one among the top 25 world producers whose production of sugar
today is lower than it was in 1958 (UNFAO 1997, pp. 157-58). This decline
has taken place despite the fact that Cuba's installed milling capacity
today is more than 10-percent greater than it was in 1958 (Perez-Lopez 1991,
pp. 39, 42).

Tourism
Cuban government officials are fond of making estimates of the "costs" of
the U.S. embargo, but they carefully avoid mention of the enormous costs in-
5. U.N. estimates (1964, p. 328) based on purchasing power parity exchange
rates (1964, p. 328) put Cuba in seventh place among 20 Latin American
countries in 1958. Unfortunately, the U.N. no longer publishes this
purchasing power parity exchange rate-based data series.
volved in their own neglect of tourism facilities, infrastructure, and
promotion during the first three decades of revolutionary government. Only
in the past 10 years have they allowed foreign investment and management in
hotels and other tourism facilities on the island -and even then only under
restrictive conditions. Of the six countries in Latin America and the
Caribbean for which comparable 1958 and 1995 data are available (Cuba, Costa
Rica, Dominican Republic, Haiti, Mexico, and Peru), Cuba ranked a
comfortable second in 1958, behind only Mexico, in terms of tourist
arrivals. By 1995, Cuba's ranking had fallen to fourth, as it was surpassed
by the Dominican Republic and Costa Rica (UN 1997b, pp. 797-799). When one
considers that in 1958, the Dominican Republic received a mere one-fifth of
the number of tourists that Cuba did, and that 37 years later tourist
arrivals in the Dominican Republic were twice those received by Cuba, Cuba's
foregone opportunities in this sector of the economy become apparent.

Energy
Cuba's difficulties in the provision of basic public utilities such as water
and electricity have been well documented by its own state-run media. In
electricity production, UN data show that Cuba's relative ranking among 20
Latin American countries has fallen from eighth to 11th during the Castro
era (UN 1960, pp. 294-296; UN 1979, pp. 67-188; UN 1997c, pp. 432-441; UN
1998b, pp. 155-156). In fact, in terms of the rate of growth for electricity
production over the past 40 years, Cuba ranks 19th of 20 countries in the
region, with only Haiti showing less accelerated development.

Agriculture
Turning to agricultural production, Cuba is the only country in Latin
America whose production of rice is lower today than it was four decades
ago, when it ranked fourth in the region in production of this staple (UNFAO
1961, p. 50; UNFAO 1997, p. 70). Two of the countries in the region ranking
ahead of Cuba in rice production in 1958-Colombia and Peru-have since seen
their rice production grow by more than three-fold (see Table 5). Cuba's
Caribbean neighbor, the Dominican Republic, has increased

Table 5.    Latin America: Rice Production (1,000 metric tons)
Avg. Annual
Increase
 1958 1996 (Pct.)
Brazil 3,829 10,035 2.6
Colombia 378 1,787 4.2
Ecuador 176 1,346 5.5
Peru 285 1,203 3.9
Argentina 217 974 4.0
Uruguay 58 868 7.4
Venezuela 22 733 9.7
Dominican Republic 99 555 4.6
Mexico 240 455 1.7
Bolivia 11 296 9.1
Panama 86 230 2.6
Cuba 261 223 -0.4
Nicaragua 33 219 5.1
Costa Rica 34 186 4.6
Chile 102 154 1.1
Paraguay 20 119 4.8
Haiti 42a 96 2.3
El Salvador 27 51 1.7
Honduras 21 41 1.8
Guatemala 11 33 2.9
Source: UNFAO 1961, p. 50; UNFAO 1997b, p. 70.
a. 1959.

Perhaps even more telling are Cuba's yields per hectare in rice production.
Whereas the Dominican Republic has increased rice yields from 2,100 kg per
hectare in 1958 to 5,400 kg per hectare in 1996, Cuba's yields today are
only 2,500 kg per hectare, a negligible increase from the 2,400 kg per
hectare registered in 1958, according to the Food and Agriculture
Organization of the United Nations.

Cuba's milk production in 1996 was only 11 percent higher than it was 38
years previously, by far the smallest increase in all of Latin America and
the Caribbean (see Table 6). In 1958, Cuba ranked fifth in the region in
milk production, producing 828,000 tons (UN 1966). By 1996, Cuba's position
in Latin America had fallen to ninth, according to UNFAO data (1997b), as
Cuban production stagnated while production in Ecuador, Venezuela, Chile,
and Uruguay took off.

Construction materials

In 1958, Cuba ranked sixth among the 17 Latin American and Caribbean
countries surveyed by the United Nations in the production of cement, but by
Table 6.   Latin America: Milk Production11 (1,000 metric tons)
 1958 1996 Increase
Brazil 4,603 19,845 331%
Argentina 4,481 9,176 105%
Mexico 4,206b 8,059 92%
Colombia 2,085c 5,000 140%
Chile 764 1,873 145%
Ecuador 375 1,848 393%
Venezuela 387b 1,417 266%
Uruguay 627 1,342 114%
Cuba 828 920 11%
Peru 372 905 143%
CostaRica 76c 536 605%
Honduras 111 529 377%
Guatemala 128 321 151%
Paraguay 132 300 127%
Panama 51 155 204%
Source: UN 1966, p. 136; UNFAO 1997b, pp. 216-217.
a. Cows Milk Only
b. 1959
c. 1957
1994, its regional ranking had fallen to 11th (UN 1997b, pp. 488-493). In
the intervening years, Cuba's production was surpassed by Peru, Chile,
Ecuador, the Dominican Republic, and Guatemala.

CUBA'S EXTERNAL ACCOUNTS: FROM PLENTY TO POVERTY

By virtually any measure, Cuba's external accounts were in far better shape
in 1958 than they are today. The economic reforms which have swept the
region have literally transformed the region's economies, resulting in
massive increases in exports and foreign investment inflows. To date, Castro
has refused to implement even what other Latin American leaders would regard
as basic, "first generation" economic reforms. As a result, Cuba is falling
further behind its neighbors with each passing year.

Cuba's exports have not kept pace with other countries of the region. Of the
20 countries in the region for which comparable IMF data are available, Cuba
ranks last in terms of export growth-below even Haiti (IMF 1964, 1997). A
startling fact is that Mexico and Cuba had virtually identical export levels
in 1958-while Mexico's population was five times Cuba's. Since then,
Mexico's exports have increased by almost 130-fold, according to IMF
statistics. Cuba's export earnings, on the other hand, are merely
twice as high as they were 40 years ago. Looking at other countries, one
finds that Cuba's exports in 1958 far exceeded those of Chile, Colombia, and
Peru, countries which have since left Cuba behind (see
Table 7).
Table 7.   Latin America: Total Exports (Million US $)
Average Annual
 1958 1996 Growth i
Mexico 736 95,991 14
Panama 23 2,722 13
Ecuador 95 5,243 11
CostaRica 92 3,826 10
Chile 389 15,396 10
Brazil 1,243 47,747 10
Paraguay 34 1,282 10
Honduras 70 2,469 10
Argentina 994 23,794 9
Colombia 461 10,437 9
Guatemala 103 2,330 9
Peru 291 5,854 8
Bolivia 65 1,216 8
Uruguay 139 2,397 8
Venezuela 2,319 23,149 6
El Salvador 116 1,020 6
Nicaragua 71 621 6
Dominican Republic 136 886 5
Haiti 48 181 4
Cuba 732 1,831 2
Source: IMF 1964; IMF 1997.

The comparison between Cuban and Chilean export earnings is particularly  striking. Much of the divergence in export performance between the two  countries in recent years can be traced to differences in economic policy.  Both countries in 1958 were similar in terms of population, each having  about 7 million inhabitants. Cuba's exports in 1958, however, were twice  those of Chile (IMF 1964), reflecting pre-socialist Cuba's relatively  pro-market, pro-export policy stance. Beginning in the late 1970s, Chile  began implementing bold economic and trade reforms, closing its export gap  with Cuba until the Latin American debt crisis of the 1980s hit Chile's  economy hard, resulting in a severe depression. Chile weathered the massive  external shock and began a very strong expansion in 1988. In fact, Chile  declined to participate in the U.S.-sponsored Brady Plan; officials in  Santiago argued that their economic reforms and market-based debt reduction  schemes were sufficient. Indeed, Chilean exports rebounded strongly from the  crisis and have since grown by an average 13 percent per year during the  last 10 years. The critical elements of Chile's reform plan identified by  Edwards (1995, pp. 135-36)-the liberalization of foreign trade, pursuit of  stable macroeconom-ic policies to spur investor confidence, and the strict  respect for property rights-were all absent in Cuba as it faced its own  external shock when Soviet assistance was withdrawn beginning in 1990-91.  The divergence in the export performances of the two countries in the face  of external shocks is quite significant, as is demonstrated by the chart  above for the period 1975-97. 6

Cuba's enviable productive base during the 1950s was strengthened by sizable  inflows of foreign direct investment. Although foreign investment figures by  source country during the 1950s are scarce, Cuba's attractive foreign  investment climate at that time is apparent from U.S. data. As of 1958, the  value of U.S. foreign direct investment alone in Cuba was $861 million,  according to U.S. government figures published in 1959 (Commerce 1959, p.  30). Adjusting for inflation, that foreign investment number amounts to more  than $4.3 billion in today's dollars. The value of U.S. foreign direct  investment in Cuba as of 1958 was greater than U.S. direct investment in  Mexico, Argentina, or Chile. Among European countries, only the United  Kingdom received more U.S. direct investment than did Cuba, while world  economic powers such as France and Germany received less.

Contrary to popular perception, these U.S. investments were not limited to  raw materials such as sugar. U.S. firms began to gradually sell their Cuban  sugar holdings to Cuban firms beginning in 1935. By 1958, U.S. firms owned  fewer than 40 of Cuba's 161 mills (Schroeder 1982, p. 258). While U.S. firms  were moving away from sugar, they were rapidly investing in a range of other  ventures, especially in infrastructure development. According to U.S. gov- 6. IMF trade statistics are issued on a more timely basis than those from  the United Nations. When possible, we have used IMF trade statistics in this  study. However, prior to 1993, IMF data for Cuba excluded Cuba's trade with  the former Soviet Union. This situation was remedied in 1993, when Russia,  Cuba's most important trade partner, began reporting to the IMF. For Cuba's  trade, we use UN statistics for the period 1975-1992 and IMF statistics for  1993-present. Despite the discontinuity, we believe that this usage provides  the best picture of Cuba's exports during this period.

ernment statistics (Commerce 1959, p. 30), 41 percent of US direct  investments in Cuba were in utilities as of 1958. U.S. investments also were  significant in manufacturing, petroleum processing, chemicals and  pharmaceuticals, and food processing. In fact, during the decade of the  1950s, U.S. investments in non-sugar sectors of the economy doubled. (Franco  and Ventura 1996, pp. 7, 18).

Franco and Ventura (1996) describe the wave of diverse American firms that  launched operations in Cuba during the 1950s. Proctor & Gamble chose Cuba as  the site of its first detergent plant in all of Latin America. In retail  business, Sears Roebuck & Co., F.W. Woolworth, and others launched  operations throughout the island. Also in the 1950s, Goodyear and Firestone  Tire & Rubber made large-scale investments, following on the success of B.F.  Goodrich Co., which built the island's first tube and tire factory in the  1940s. Finally, by the 1950s, Coca-Cola, which had previously imported  inputs such as concentrate and bottles, was conducting nearly all of its  manufacturing, processing, and bottling on the island.

Today, figures on foreign investment in Cuba are obscured in government  secrecy in an attempt to protect investors who may be trafficking in  confiscated U.S. properties from possible U.S. government sanctions. Cuba  has occasionally released data on the number of joint ventures contracted  with foreign enterprises, but statistics on the value of these investments  are hard to find. One official claimed in December 1995 that Cuba had  received about $1 billion in paid-in foreign investment (Lage 1995), but the  statement was not clear as to whether this figure represented a stock value  or a flow value, and if the latter, for what period. Reliable intertemporal  or intercountry comparisons, therefore, are not possible at this time.

As the numbers above imply, Cuba had a very favorable overall balance of  payments situation during the 1950s, contrasted with the tenuous situation  today.

In 1958, Cuba had gold and foreign exchange reserves -a key measure of a  healthy balance of payments-totaling $387 million in 1958 dollars, according  to IMF statistics (1960, p. 90). (That level of reserves would be worth more  than $1.9 billion in today's dollars.) Cuba's reserves were third in Latin  America, just ahead of Mexico and behind only Venezuela and Brazil, which  was impressive for a small economy with a population of fewer than 7 million  people. Unfortunately, Cuba no longer publishes information on its foreign  exchange and gold reserves. However, we suspect that if Cuba had $1.9  billion in reserves today, its much-publicized balance-of-pay-ments problems  would be solved.

MASS MEDIA FALLS VICTIM TO SOCIALIST CENSORSHIP

It is no exaggeration to state that during the 1950s, the Cuban people were  among the most informed in the world, living in an uncharacteristically  large media market for such a small country. Cubans had a choice of 58 daily  newspapers during the late 1950s, according to the UN Statistical Yearbook.  Despite its small size, this placed Cuba behind only Brazil, Argentina, and  Mexico in the region (UN 1960, p. 602). By 1994, government controls had  reduced the number of dailies to only 17 (UN 1997b, p. 120).7

We suspect that similar comments could be made about the number of radio and  television broadcasting stations, although the UN no longer reports these  statistics. However, it should be noted that in 1957, Cuba had more  television stations (23) than any other country in Latin America, easily  outdistancing larger countries such as Mexico (12 television stations) and  Venezuela (10) (UN 1960, p. 610). Cuba also was the first Latin American  country to broadcast television programs in color (Franco and Ventura 1996,  p. 14). It also led Latin America and ranked eighth in the world in number  of radio stations (160), ahead of such countries as Austria (83 radio  stations), United Kingdom (62), and France (50), ac- 7. Totalitarianism, rather than the economic depression of the 1990s, is to  blame for the decline in daily newspapers in Cuba. Indeed, the number of  dailies in Cuba in 1994 was unchanged from the number in 1980, according to  UN statistics (1997b, p. 120). cording to the UN Statistical Yearbook (1960, p.607).

CONCLUSION

Not long after the previous version of this paper was published (State  1998), the Washington Times quoted the Cuban Interests Section's objections  to the statistical presentation found in the study (Carter 1998). It did not  dispute the statistics themselves, the majority of which are reported by the  Cuban government itself to multilateral institutions discussed earlier.  Rather, a spokesman asserted that the statistics did not take into account  the social achievements of the revolution in relation to the distribution of  wealth. For example, he said, "[B]efore the revolution, the rich had more  food and the poor had less." This statement is, of course, indisputable, but  it leaves unanswered how a society in which virtually everyone is poor is  preferable to one in which some people are poor, others are middle class,  and still others are rich.

In fact, the Cuban government's focus on the relative fairness of Cuban  society today reminds us of socialist claims during the post-World War II  period, as reported by the great Austrian economist Ludwig von Mises:

The Marxians used to recommend socialism on the ground that it would  multiply productivity and bring unprecedented material wealth to everybody.  Only lately have they changed their tactics. They declare that the Russian  worker is happier than the American worker in spite of the fact that his  standard of living is much lower; the knowledge that he lives under a fair  social system compensates by far for all his material hardships (1966, p.  679n). Mises goes on to note that "this haughty indifference with regard to  material well-being is a privilege reserved to ivory-tower intellectuals,  secluded from reality... " Most Cubans, if given the choice, would prefer  the opportunity at a better life under capitalism over the "fairness" in  poverty guaranteed by the Castro government. Perhaps that is why Fidel  Castro steadfastly refuses to hold fair and free democratic elections. He  realizes that if he were to do so, he would lose, just as his Nicaraguan  companero Daniel Ortega was defeated in 1990 and again in 1996.

As we have already stated, the chances that the living standards of Cubans  will improve under the current regime relative to living standards elsewhere  in the hemisphere are remote. This bleak outlook contrasts strongly with the  optimism of the 1950s. The opening paragraphs of the 1,000-plus-page study  of Cuba by the economic mission organized by the World Bank (1951, p. 3)  read:

Cuba today faces both a problem and an opportunity. Her problem is to reduce  her dependence on sugar, not by producing less sugar but by developing  additional enterprises. Her opportunity is that her present prosperity  offers her the means to do so by further diversifying her economy. Ample,  unused human and material resources are available in Cuba with which her  people might increase the nation's output, broaden its economic base and  create a better standard of living for the population as a whole. Also, at  the present time, Cuba has a financial potential of her own, which-if it can  be effectively tapped-is adequate for her development.

That such optimistic words would open a publication dedicated to a  discussion of the socioeconomic problems in a country is striking. Today, by  contrast, sound economic policies have been eschewed in favor of anti-U.S.  diatribes, which government and party functionaries have repeated with  sufficient frequency to divert the world's attention from the degree to  which their own actions are responsible for the material deprivation  suffered by the Cuban people. That the government continues to show such  indifference to the material poverty outlined in this study, steadfastly  holding to a completely discredited economic model-and at the same time  calling capitalism unsustainable!-constitutes the saddest chapter in the  history of the once great Cuban nation.


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