Cuba faces deep financial woes

Cuba faces deep financial woes
Tourism increase is great hope in 2017.

HAVANA (AP) — Alex Romero was delighted when President Barack Obama came
to Havana in March bearing the promise of a bright new future.

Like so many other Cubans, the 42-year-old state photography shop
employee was thrilled with the president's vision of restored ties
between the United States and Cuba. Families would reunite. A flood of
American business would lift the stagnant centrally planned economy,
fueling its slow path toward reform. Even as Obama spoke, an 80 percent
surge in U.S. visitors was drenching state-run and private businesses
with hundreds of millions of desperately needed dollars.

Nine months later, the world seen from Havana looks different.

President Raul Castro faces what could be his toughest year since he
took power in 2006. 2017 brings a possible economic recession and a U.S.
president-elect who promises to undo Obama's normalization unless the
Cuban government makes concessions on civil rights. Resistance to
pressure from Washington is a founding principle for the Cuban communist
system, making domestic concessions in exchange for continued detente a
virtual impossibility.

"People expected that after Obama came there would be changes in the
relationship between the U.S. and Cuba but that we could keep the best
of what we have, the benefits for the people," Romero said. "Trump's not
going to be able to get what he wants, another type of Cuba. If the
world's number one power takes us on, 2017 is going to be really bad for
us."

Castro must manage these twin economic and diplomatic challenges during
a year of transition. The 85-year-old general has promised to hand over
the office in early 2018 to a successor, widely expected to be Miguel
Diaz-Canel, a 56-year-old official with neither the Castro name nor
revolutionary credentials. The change will occur without Castro's older
brother Fidel, the revolutionary leader whose largely unseen presence
endowed the system he created with historical weight and credibility in
the eyes of many Cubans before he died last month at 90.

"Even if those two events hadn't taken place — Trump's victory and
Fidel's death — 2017 was going to be a very difficult year for Cuba,"
said Cuban economist Omar Everleny Perez, a visiting professor at Keio
University in Tokyo.

Cuba publishes few credible economic statistics, but experts expect the
country to end this year with gross domestic product growth of 1 percent
or less. It maintained a rate close to 3 percent from 2011 to 2015.

One bright spot is tourism, booming since Obama and Castro's Dec. 17,
2014, detente announcement set off a surge in overall visitor numbers,
up more than 15 percent in 2015 and again this year.

"I've never seen as many tourists as I have this year," said Magalys
Pupo, a street-corner pastry vendor in Old Havana. "They're everywhere
and they're the income that we need in this country."

The slowness of macroeconomic growth despite a surge of interest in
foreign investment and the greatest tourism boom in decades attests to
both long-term mismanagement of the Cuban economy and the depth of the
crisis in other sectors, particularly aid from Venezuelan in the form of
deeply subsidized oil.

Analysts believe that as Venezuela's Cuba-inspired socialist economy has
disintegrated, exports to Cuba has dropped from 115,000 barrels daily in
2008 to 90,000 in recent years to 40,000 a day over the past few months.

Venezuela was the prime destination alongside Brazil for Cuban doctors
and other professionals whose salaries go directly to the Cuban
government, providing another vital source of hard currency believed to
be slackening in recent years. Nickel, another of Cuba's main exports,
has seen a sharp price drop this year.

The revenue drop might be creating a vicious cycle for Cuba's state-run
industries. Experts said cutbacks in imported industrial inputs this
year will lead to lower productivity in Cuba's few domestic industries
in 2017 and make zero growth or recession highly likely.

"It's going to be a tough year," said Antenor Stevens, a 66-year-old
retired public water specialist. "We're a people who've suffered a lot.
We've felt a lot of need, but there's still a revolutionary consciousness."

Source: Cuba faces deep financial woes | Business | columbiatribune.com
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