Corona exacerbates Cuba’s crisis: on the verge of collapse

Corona exacerbates Cuba's crisis: on the verge of collapse

The island nation of Cuba was already feeling bad before the pandemic. Now there aren’t even aid loans – and the United States is blocking money transfers.

Queuing for food is part of everyday life in Cuba, because almost everything is imported. The revenge in corona crisis and the US sanctions complicate the island’s survival. Reforms have been announced, but no one knows what they will look like.

Mariposa and Martica were the two cows of Fernando Funes Monzote. Both had calved a few days earlier. But the thieves didn’t care, they stole the ruminants on May 17 from the small organic farm near the small town of Caimito, slaughtered and sold them, according to Monzote in a post on Facebook. Caimito is close to Havana and people queue for hours for everyday products.

“Everything is scarce. From chicken to cooking oil and tomato puree to soap,” says Ricardo Torres, social scientist at the University of Havana. “The level of food imports has been falling since 2019 – there is simply less and less money available,” Torres says. With the massive tightening of the US embargo, the decline in exports for years and the stagnation in economic reforms, Torres names three key factors for the recession that was already evident before the pandemic.

As early as November 2019, the government in Havana was unable to service the debt due to the Paris Club, the informal association of state creditors, and requested that the payment be deferred for a few months. Waste long ago. “The issue now is to defer payment until 2022,” says Torres.

The Cuban negotiators have good arguments for the delay, because the economic consequences of the corona crisis have hit the island fully. While the pandemic appears to be under control with 2,446 infections and fewer than a handful of infections per day, the worst economic crisis has been looming for around 30 years. 235,000 private self-employed people have suspended their license to work for their own account, as the self-employed work is called – around 40 percent of small business owners officially registered at the end of 2019.

However, even more alarming for Torres is the slowing down in tourism, the decline in exports for years and the impending slump in family members’ money transfers to the island. It is estimated to be between $3 and $6 billion a year.

Gloomy scenarios for the island economy, which on top of that cannot apply for bridging loans such as Chile or Peru from the World Bank or the International Monetary Fund (IMF). “We are not a member and Cuba is not a trusted debtor. We only have hope for bilateral loans from China or Russia,” Torres describes the precarious situation. The US is contributing to this with its economic “strangulation strategy”, as Cuba’s President Miguel Díaz-Canel calls the tightening of the US embargo.

The United States has targeted trading partners as well as investors on the island. The chronically clammy government in Havana had to buy a tanker in February to get the gasoline on board. Since the beginning of June, the sanctions from Washington have made it virtually impossible to transfer money to Cuba via Western Union. Western Union’s Fincimex partner was blacklisted by the White House.

The new sanctions primarily affect the civilian population. It is dependent on foreign currency for the economic restart. The best example is the supermarket chain opened a few days ago, where groceries are only sold for foreign currency. The social gap is widening, critics also complain on the Cubadebate homepage, which is close to the government.

A problem that is also seen by Economics Minister Alejandro Gil, who announced a “profound transformation” of the economy. Concrete reforms are still missing, but it is clear that local food production should be boosted. Overdue for the fact that around 85 percent of the calories consumed in Cuba are imported. That is why Cuban economists such as Torres or his colleague Pavel Vidal advise more pragmatism, a move away from the state-run agricultural purchasing system Acopio and its fixed prices. This works like a brake, farmers from the island criticize.

Ricardo Torres suggests that they should be given more freedom to have the necessary means of production imported directly. “Irrigation systems, seeds or even a tractor could be procured from state import companies like Cimex.” A proposal that would also be practical for private companies and cooperatives to bring much-needed means of production to Cuba. This could help prevent the crisis from becoming existential.

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