Cuban economy minister details austerity measures

Cuba is drastically cutting electricity, imports and investment, as well as reducing fuel consumption by 28% through the end of the year, its economy minister said on Friday in a closed-door speech to the National Assembly published by official media yesterday.
The measures are sure to put the import-dependent economy into negative territory, despite a tourism boom in the wake of a growing detente with the United States.
They also represent a huge setback for a country struggling to reform an already decapitalised and often dysfunctional system.
Cuba’s economy grew just 1% in the first half of this year after expanding 4% in 2015, according to the government, which says it imports 17 cents of inputs, such as raw materials, for every $1 equivalent of economic activity.
“We planned to import $14.416bn to support 2% growth this year, but with the adjustments we will spend $11.973bn,” Economy Minister Marino Murillo said, a reduction of nearly $2.5bn, or 15%.
President Raul Castro said on Friday that lower commodities prices were battering Cuban exports of nickel, refined oil products and sugar, while revenue from the sale of professional services to oil-producing countries such as Venezuela and Angola had suffered.
Castro, also speaking to the National Assembly, said the economic crisis in Venezuela was affecting its oil supply to Cuba, with Venezuela’s shipments of crude oil and refined products to Cuba down 20 % this year according to a Reuters report on Friday.
Murillo announced that 17% of planned investments for the year were being put on hold, as well as unspent credits, such as from banks, governments or suppliers to purchase goods.
He said that further imports on credit would be strictly regulated by the Communist-run country where the bulk of the economy is in state hands.
Cuba has a history of liquidity crises and energy rationing, especially in the 1990s after the collapse of the Soviet Union.
Cubans dread a return to the daily power black-outs of eight hours or more, dearth of transportation and other severe shortages.
The current restrictions will not be as severe, but they come at a time when Cubans’ expectations are higher thanks to the detente with Washington and economic reforms.
Murillo took pains to explain that the cuts would be selective, for example, sparing residential electricity while cutting public lighting by 50%.
He said electricity consumption for the year was being reduced 6%, but the reduction would all fall in the second half of the year, which just started, and selectively.
Sectors such as tourism and nickel would be spared, while others that do not contribute to export earnings or import substitution would bear the brunt of the cuts.
Murillo told Cuba this week there were problems with energy companies’ capacity.
Although he avoided mentioning the dreaded words “power outages”, he sent a clear warning that energy-saving measures were necessary as a reliance on imported oil from crisis-hit Venezuela and an increase in demand have led to an apparent energy crunch on the communist island.
“These provisions will prevent blackouts or any impact on basic services,” Murillo promised at a meeting of the National Assembly’s economic commission.
His comments were an effort to keep people calm in the absence of official information and confirmed recent warnings by public sector workers that their workplaces had seen cutbacks in electricity usage of 50%.
“I don’t want to think blackouts could return when we have this terrible heat,” Maydellis, who didn’t want to give his surname, told DPA on the way out of a government building in Havana.
“From 7am there’s no electricity at home.
The electric company says it’s because of maintenance work,” said one pensioner sitting on a bench near the famous Melia Cohiba hotel, which thanks to its own power generator, hasn’t been affected.
Despite the anxiety of some Cubans, experts say the island is a long way from experiencing another “Special Period”, the name given to the economic crisis Cuba suffered in the 1990s following the collapse of the Soviet Union.
Cuba lost its main fuel supplier overnight and the whole country had power cuts most of the day.
“As for this whole phenomenon of fuel cuts and energy cuts, this country cannot go through another year like 1993 or 1994 unless we want to see protests in the street,” warned Karina Marron, assistant director of Granma, the official newspaper of Cuba’s communist party, last week.
Marron was referring to the protests in August 1994 on the famous Malecon, Havana’s seaside promenade, which were extinguished after the personal intervention of then president Fidel Castro.
“Now there is no Fidel to go out and do that again, no public figure who can explain to the country what is happening.
Today it will be much harder to manage,” Marron said during a meeting of the union of Cuban journalists attended by first vice-president Miguel Diaz-Canel.
The current socioeconomic situation in Cuba is much better than it was in the 1990s.
The economy has diversified markets and foreign currency earnings from sectors like tourism.
But any cuts are happening at a time of raised expectations of economic improvement among the population because of thawing relations with the United States.
The economic reforms implemented by Cuban president Raul Castro have meant a 30% jump in energy consumption in the last five years because of an increase in small businesses, like bars and restaurants, and because families are using new household appliances.
Cuba’s oil demand is at 140,000 barrels a day, of which it produces 50,000 and imports 90,000 from Venezuela at a special price in exchange for Cuban doctors.
Venezuelan oil is also resold by Cuba to other countries in exchange for foreign currencies.
But Venezuelan President Nicolas Maduro’s political crisis has created uncertainty in Cuba and anxiety that one day — without its ally — the supply of oil at preferential rates will come to an end.
“At current oil prices, that deal is worth $1.3bn.
If Cuba loses it, it will have to buy crude oil on the international market,” Jorge Pinon, a professor at the University of Texas, told DPA.
“The island is totally dependent on energy from fossil fuels with just 4% of its production coming from renewable energy,” said Pinon, who is also an expert in energy studies in the Caribbean.
By the year 2030, the Cuban authorities want to generate 24% of energy from renewable sources but that would require new infrastructure and foreign investment.