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The Miami
Herald. Posted on Thu, Jun. 06, 2002.
Cuba's economy falters again; no relief seen for island residents
By Nancy San Martin. nanmartin@herald.com.
Cuba's economy has taken another dive as international market prices for
sugar and nickel continue to tumble, fewer tourists are visiting the island and
the amount of money sent by Cuban Americans to relatives has decreased.
The economic setbacks come as Cuba finds itself facing a crude-oil shortage
since Venezuela stopped shipments in April and bad credit increasingly has
forced the government to use cash or rely on short-term, high-interest loans to
pay for imported goods, which include $90 million worth of mostly food products
purchased from the United States.
As a result, the government this week raised prices on consumer goods and
hopes to lure more European visitors by accepting the euro at resort hubs such
as Varadero to pay for meals, hotel rooms and souvenirs.
The impact for Cubans on the island: no relief in sight from economic
hardships that have now stretched for more than a decade.
''The prospects are bleak,'' said Evaldo A. Cabarrouy, an economist at the
University of Puerto Rico in Rio Piedras. "There is a pattern of
instability, a see-saw type of economic growth.
''For the common Cuban, it means more of the same,'' he said. "Things
continue to be tight. Life is hard. There will continue to be scarcity.''
Cuba has been struggling to overcome its economic crisis since the early
1990s, following the loss of subsidies from the former Soviet Union.
Between 1989 and 1994, there was a sharp decline in living standards for
Cuban citizens, including an energy crisis that led to electrical blackouts
known as apagones, a reduction in transportation services and industry
shutdowns. There also was a reduction in domestic food production and in food
imports, which led to food shortages.
SELF-EMPLOYMENT
''Citizens responded to the decline in the standard of living by pursuing
self-employment activities, most of which were illegal at the time, resorting to
illegal or black market activities and exchanges and finding means to acquire
U.S. dollars that were vital for survival,'' according to a research paper,
Cuba's Economic Performance and the Challenges Ahead, by Archibald R.M. Ritter,
a professor of economics and international affairs at Carleton University in
Ottawa.
The illegal activity subsided when the government allowed Cubans to legally
possess dollars in 1993 and established retail stores the following year that
initially were only for foreign customers and later expanded to include Cubans.
But even as the economy began to make modest gains in the mid-1990s, Cuba
has been hit with a series of setbacks that has prevented the economy from a
full recovery, including last year's devastating Hurricane Michelle, an
international economic slowdown and a drop in tourism following the Sept. 11
terrorist attacks.
In coming months, the unemployment rate -- officially 5.8 percent, made
worse by underemployment -- could rise if the government moves forward with a
plan to shut down more than a third of its sugar processing facilities because
of chronically poor crop harvests caused by a variety of ills. This would
further hamper efforts to get past the so-called período especial, a term
used by the government to refer to the economic crisis.
Cubans continue to scramble for dollars because Cuban pesos, which have a
current exchange rate of 26 to $1, no longer cover living expenses.
The average monthly income for Cuba's estimated 4.5 million workers ranges
between $9 and $17.
The government has said that about 30 percent of its 11 million citizens
have direct access to U.S. currency but up to twice as many depend on dollars
for subsistence.
When rumors of price increases began to circulate last week, Cubans with
dollars flocked to stores that sell everything from packaged food to electronic
equipment to buy consumer products.
But confusion settled in as the new pricing system, the first hike in the
price of basic necessities in more than a decade, took effect this week.
The costs of items -- from food products to clothing -- are expected to
increase up to 30 percent. Among some of the changes released by the government:
domestic cigarettes will increase to 34 cents from 26 cents per pack; imported
cigarettes up to $2.50 from $1.50 per pack; and the cost of beer will rise from
85 cents to $1. Other products such as mayonnaise, crackers and hair dye already
have increased by 5 to 10 cents.
''The dollar store price increases are clearly designed to rapidly gain
additional dollar revenues,'' said John Kavulich, head of the U.S.-Cuba Trade
and Economic Council, a New York group that monitors the island's economy. "It's
unlikely, though, that the revenue stream is likely to be sustainable.''
Meanwhile, many are bracing for an increase in the price of gasoline, which
could disrupt an already unreliable public transportation system. Regular
gasoline, now at $2.85 a gallon, would rise to $3.99 under the government's
proposed increase.
In an article recently published in the Communist Party daily Granma, the
government stated that the suspension of petroleum shipments has ''caused grave
damage to our country,'' and that Cuba would have to turn to its petroleum
reserves to maintain "a stable supply for the economy and the population.''
Cuba consumes about 160,000 barrels of oil per day, a third of which is
imported.
Cuba also imports about $600 million annually in food and food products, a
figure that for the first time in four decades now includes purchases from the
United States.
The total market value of U.S. agricultural products tapped for purchase by
Cuba since November is about $90 million, with approximately 60 percent of
deliveries already in or on their way to the island, according to the U.S.-Cuba
Trade and Economic Council.
In addition, Cuba intends to purchase an additional $48 million worth of
agricultural goods from U.S. companies this year, making the United States among
the five largest suppliers of food products to Cuba in 2002.
U.S. law requires the sales to be on a cash-only basis and, though there is
no way to monitor the transactions, companies appear to be receiving payments.
''Companies wouldn't be reporting sales if they weren't sales,'' said
Kavulich. "The question is where is Cuba getting the money?''
TOURISM HURT
Tourism, the island's most important source of hard currency, also has been
hurt.
Cuba's Ministry of Tourism recently reported a 14 percent drop in visitors
during the first quarter, compared to the same period last year. In an effort to
raise that figure, tourists can now use euros in lieu of dollars in Varadero.
More than half of the estimated 1.7 million tourists that visited Cuba in 2001
were from Europe, according to official figures.
Remittances, the second most reliable source of hard currency, also have
declined by about 25 percent since the fourth quarter of 2001, according to
government figures.
According to Ritter, the Canadian economist, Cuba is in a ''pre-transition''
phase, similar to the situations in Hungary and Poland prior to their departure
from central planning and one-party rule in the late 1980s. And no major changes
will likely occur until Fidel Castro is no longer in power.
This report was supplemented with material from Herald wire
services.
Cuban biological weapons called deterrent, not threat
By Tim Johnson. tjohnson@herald.com
WASHINGTON - Backpedaling from recent pronouncements, a Bush administration
official said Wednesday that Cuba's biological weapons research is an ''effort''
and not a full-fledged weapons "program.''
Cuba has experimented with biological agents to harm humans, livestock and
crops, but Cuban officials view the research on the biological weapons more as a
deterrent against a U.S. attack than for first-strike use, said Carl Ford Jr.,
the State Department's assistant secretary for intelligence and research.
"Do I go home every night and worry about it before I go to sleep?
No.''
FIRST EXPLANATION
Ford's remarks were the first real attempt by the Bush administration to
explain a surprising speech May 6 by a more senior State Department official,
John Bolton, that amounted to a five-star alarm over what he called Cuba's "limited
offensive biological warfare research and development effort.''
The speech, which seemed to signal a stark reassessment of Cuba's hostile
potential toward the United States, brought headlines.
In a prepared statement, Ford told the Senate Foreign Relations subcommittee
on the Western Hemisphere that the U.S. government has ''a sound basis'' for
making the assertion.
Responding to senators' questions afterward, Ford said that the assessment
that Cuba can ''build the bug'' is based on ''substantial information'' but
noted that "our information is indirect.''
Saying he had been briefed by other officials in the intelligence community,
Ford explained: "The research and capabilities of Cuba include work on
areas -- biological agents, pathogens -- that could be effective against people,
livestock and crops.''
''I didn't ask them which crops,'' he told Sen. Bill Nelson, a Florida
Democrat who pressed for details. "I'm assuming that they're talking about
those close by. As you know well, both the cattle industry and the fruits and
vegetables in Florida would be clearly at least on my list of things to be
worried about.''
A CAUTION
But Ford cautioned against undue concern.
''I don't want to give you the impression that we are suggesting . . . that
there is a person with a satchel on his way to Dade County or St. Pete with a
bag of biological weapons,'' he said. "Indeed, if you want to talk about
intentions, it has to do with their fear of the United States and wanting to
have a deterrent, wanting to have something in their capability that they could
strike back at us.''
Ford said Cuba was far from the No. 1 concern of U.S. policymakers keeping
tabs on hostile biological weapons programs around the globe.
Sen. Christopher Dodd, the Connecticut Democrat who chairs the subcommittee,
said he was ''terribly disappointed'' at Secretary of State Colin Powell's
decision to block Bolton, the department's undersecretary for weapons
proliferation, from appearing at the Senate hearing.
Visibly peeved, Dodd said he would provide Powell's department ''with an
equivalent level of cooperation'' until the matter is cleared up.
Dodd asked whether Bolton's speech at the conservative Heritage Foundation
was timed to undercut a May 12-17 trip by former President Jimmy Carter to
Havana.
SEEKING DETAILS
Dodd said he was seeking details of Cuba's biological weapons capability to
ensure that U.S. defenses against terrorism are properly managed.
''If we're off chasing an issue here that is not substantiated by facts,
then we are misallocating resources,'' he said.
In a speech May 11, Cuban leader Fidel Castro called Bolton's assertions
''heinous slander'' and ''a string of Olympic-size lies.'' He said Washington
might be trying to sandbag efforts by Cuba to market its bio-engineered
medicines around the world. | 
