|
Kevin Gale.
Business Journal,
FL. June 26, 2003.
Cuba's economy once seemed to be on the rebound after the disastrous
curtailment of aid from the Soviet Union, but a deteriorating picture has
re-emerged.
Fallout from a political crackdown on the island is adding to woes caused by
a lukewarm global economy and slowness in travel after Sept. 11. The nation also
has suffered from a drop in the prices for nickel, lackluster harvests of sugar
cane and the devastating effects of Hurricane Michelle in 2001.
The nation's economy, which declined 35 percent to 50 percent from 1989 to
1993, had grown about 4 percent a year from 1998 to 2001, but fell back to zero
growth last year, according to a Congressional Research Service report.
In January, a growth rate of 3.2 percent was forecast for this year, but
that assumed improvement in the global economy, which has not occurred. The
projections did not foresee a political crackdown that has drawn the scorn of
the European Union and the United States.
"There is no question it [the Cuban economy] is once again in serious
trouble," said Teo A. Babun Jr., managing partner with Cuba Caribbean
Consulting in Miami.
"It's not as bad as it was in 1992, 1993 or 1994, but its recovery has
been stalled at best," said Max J. Castro, senior research associate at the
University of Miami's North-South Center.
Rapport with the United States, which seemed to be warming up in the Clinton
administration, is back in the deep freeze with the Bush administration. "Relations
between the United States and Cuba over the past months have been caught in a
downward spiral," says the Latin America Working Group, a coalition of 60
groups that promotes peace, justice and sustainable development.
A series of problematic developments
Among the events:
In March, 78 Cuban dissidents were tried and imprisoned on charges of
conspiracy to harm national security for allegedly collaborating with the U.S.
Interests Section in Havana. Prison terms ranged from 6 years to 28 years.
On March 24, the Treasury Department announced elimination of licenses that
some estimate account for about 60 percent of legal travel by non-Cuban
Americans.
On April 11, Cuba executed three men who, seeking freedom, tried to hijack a
ferry.
In May, the Bush administration expelled 14 Cuban diplomats on charges of
espionage.
The executions and prison sentences caused international outcries. The
European Union is reviewing its policies towards the nation and has already
pulled back on diplomatic and cultural ties. The Cuba that gained a reputation
as a cheap place for tourists may lose some of its luster among vacationers.
An Associated Press account said Cuban Foreign Minister Felipe Pérez
Roque used language usually reserved for Washington when he accused Spain of
funding dissident groups organized by the United States.
On June 13, Castro led hundreds of thousands of marchers past the Spanish
Embassy in Havana to protest the EU's decision while his brother, Raoul, led a
similar march past the Italian Embassy. On June 14, Cuba's foreign ministry said
it was canceling an agreement for Spain to run a cultural center in Havana.
Image versus economy
The Cuban government's top priority remains "regime survival and
political control," Max Castro said. "If they have to give up in the
tradeoff some international approval or get condemnation or forego trade
opportunities to avoid getting close to an east European scenario, they would do
it."
The sentiment among the Cuban public is one of worry, Babun said. In the
wake of U.S. wars with Iraq and Afghanistan, Fidel Castro's regime is rattling
the public by saying Cuba may be next.
The Cuban government also has scared the public into believing it might
close the U.S. Interest Section, a quasi-embassy which operates under the
umbrella of the Swiss Embassy in Havana. A letter from the U.S. Senate Cuba
Working Group, which seeks to end the embargo, acknowledges hearing those
reports.
"The Cuban government has gone into a paranoia against the head of the
U.S. Interest Section in Cuba, James Cason, and has scared the Cuban people into
thinking perhaps the government may even close the U.S. Interest section, which
means one of the few escape valves the Cuban people have to leave the country
may disappear," Babun said.
The Interest Section's Web site says it has issued more than 125,000
immigrant and travel documents since 1994.
The back-and-forth accusations may have fully short-circuited efforts to
liberalize travel and trade with the United States, which has been advocated by
Cuba working groups in the House and Senate. The House group has grown to 25
members from each party and the Senate group lists six from each party.
Notably, Florida politicians, who can be expected to carry heavy clout on
the issue, have all avoided joining either group. With the governor's brother in
the White House and the state playing a pivotal role in presidential elections,
there is doubt the Working Groups will succeed.
"Our take on Congress is that whatever direction anything was moving a
few months ago is on a standstill now," Babun said. "The Senate
particularly is quite concerned about what happened with the dissidents."
Fidel as a partner?
Another question is whether trade would jump that rapidly anyway, because
Castro's regime has a bad rap as a business partners.
"The country has a high-risk business environment, where many foreign
ventures have failed," a profile of Cuba by Canada's Department of Foreign
Affairs and International Trade states. "Negotiations with government
entities are characterized by deep distrust of capitalist motives and abrupt
changes in position. Even after a deal has been reached through bargaining in
good faith with Cuban negotiators, senior officials may demand amendments. Some
Cuban government companies can be financially unreliable. Collections of even
secured debts can be difficult. Business ethics have been adversely affected as
Cuba's liquidity situation deteriorates."
Max Castro said it's difficult to tell what's happening with the flow of
foreign investment in Cuba now, but Mariela Ferretti, spokeswoman with the Cuban
American National Foundation in Miami, said it's plummeting.
That is "a strong indicator of what can be expected in the short term,
the medium term and perhaps in the long term," she said.
The situation has gone beyond the moral issue of foreign currency paying for
what amounts to slave labor working for the Castro regime, she said.
France and Spain, who are major customers of the Cuban government, "have
been left holding the bag while Castro moves his millions to pay Americans in
cash for the purchases he has made recently trying to put his foot in the door
for credit, which is what he really wants," Ferretti said.
The visitor industry in Cuba may be getting saturated as well, Max Castro
said.
"It's Canadians and Europeans and they are not getting a lot of
tourism. The real hope would be increasing American travel and that is meeting
the Bush administration's resistance to open travel."
E-mail Editor Kevin Gale at kgale@bizjournals.com.
© 2003 American City Business Journals Inc. | 
