SUGAR AND SOCIALISM — CUBA’S ECONOMY
Brian Pollitt is a lifelong socialist activist and an Honorary Senior Research Fellow at the University of Glasgow. Brian spent many years in Cuba and in this article he looks at the challenges facing the Cuban economy. This article was originally published in the magazine Cuba Si.
It is widely known that the implosion of the USSR and the end of COMECON devastated the Cuban economy, primarily via their impact on Cuba’s export and import capacity. Average export values between 1985-89 and 1991-95 fell from 5.5 billion pesos to 1.7 billion pesos and imports from 7.8 billion pesos to 2.5 billion pesos. From their peak in 1989 to their trough in 1994, imports fell by 76 per cent – a fall greater than that experienced in the worst years of the Great Depression of the 1930s.
In the 1990s as in the 1930s, Cuba’s economy foundered on the changed fortunes of one commodity – sugar. In 1985-89 more than two-thirds of her total sugar exports were sold at premium prices to the USSR and East European members of COMECON. By 1993, however, East European purchases had fallen from one million tonnes to only 50 thousand tonnes, and while Russia and the other republics of the newly established CIS generally maintained their demand, it was at prices well below those paid during the Soviet era. As a result, while there was only a modest fall in the volume of Cuba’s sugar exports between 1989 and 1992, their earnings fell from nearly 4 billion pesos to less than 1.5 billion pesos. Moreover, the generous Soviet credits that had financed Cuba’s long-standing balance of payments deficit were also curtailed.
Special Period
The collapse of Cuba’s import capability was the dominant cause of the drastic fall in gross domestic product, employment, investment and popular living standards in what became known as the “Special Period”. Exacerbated by a tightened U.S. trading embargo that further restricted Cuba’s foreign trade, the bulk of the island’s shrunken revenues from sugar exports were perforce deployed to finance imports of basic necessities such as food and fuel. This in turn gravely damaged the productive capability of the sugar economy. Starved of imported agro-chemicals for fertiliser and herbicides, and with shortages of fuel, lubricants, replacement machinery and spare parts, cane-yields fell sharply and milling efficiency declined. Despite the 1993 conversion of State-owned cane-farms into ‘Basic Units of Cooperative Production’ (UPBCs) leased to the workers previously employed on them, sugar harvests from 1993/94 to 1999/2000 produced an annual average of only 3.9 million tonnes – little more than half the average of the 1980s.
From 1996, however, there was a slow but steady process of general economic recovery. The acute shortages of foreign exchange had prompted a reluctant encouragement of the tourist industry with an increasing number of joint-ventures, notably with Spanish enterprises. Nickel production was modernized and expanded with the deployment of Canadian and other foreign capital. Activities in oil exploration and extraction increased in association with such overseas oil companies as were willing and able to resist U.S. pressure. And China’s role as an investor and trading partner grew in importance. In 1999, however, arguably the most decisive boost to the recovery process was given by the inauguration of Hugo Chavez as President of Venezuela, providing Cuba with a politically sympathetic new trading partner and a potential source both of hard currency and cheap oil.
Venezuela
The establishment and growth of Cuban-Venezuelan trade relations could not have been more timely. High costs, low prices and stagnating production forced the adoption of a “restructuring plan” for Cuba’s sugar economy in 2002. With only 104 of a nominal total of 156 sugar factories then active, it was proposed to reduce the number yet further to 85, some manufacturing only cane by-products and derivatives. About 100 thousand workers were to be laid off, half in industry and half in agriculture. It was calculated that the concentration of production in a smaller number of mills, grinding cane from better-quality plantations, would sharply reduce unit costs and, after the initial phase of reorganization, stabilize annual production at around 4 million tonnes. This did not happen. The plan was implemented more swiftly and on a larger scale than expected and in an organizational context of considerable disorder. Moreover, there was nothing to suggest that yield-improving productive inputs had been transferred from newly-closed mills or abandoned plantations to the smaller number of active mills and the reduced cane area. The outcome over the harvest years 2001/02 to 2005/06 was a fall in sugar production from 3.6 million tonnes to 1.2 million tonnes, no significant increase being noted for 2007. And cane-yields per hectare harvested, reported at an unsatisfactory 33 tonnes in 2001/02 – down from an average of 54 tonnes during the 1980s – fell yet further to 30 tonnes from 2002/03 to 2005/06.
Despite the drastic downsizing of the sugar economy, however – the harvested cane area was more than halved, falling by no less than 600 thousand hectares between 2001/02 and 2005/06 – and despite ambitious targets set for it in November 2003, there was no compensating increase in aggregate non-cane agricultural production.. There were increases in some food products, such as root crops, non-citric fruits, pork and eggs, but these were offset by falls in the production of beans, cereals, citric fruits, beef, poultry and milk. Fish and seafood production also fell. One consequence was a rise of 54 per cent in Cuba’s import bill for food products and livestock from an average of 780 million pesos over 2001-03 to 1.2 billion pesos over 2004-06. Over the same years, Cuba’s export earnings from sugar, tobacco, other agricultural products and fisheries fell by 27 per cent, from 735 million pesos to 536 million pesos. To put the matter in brutal perspective, while Cuba’s sugar exports alone could finance the island’s total food imports four times over in 1989, over 2004-06 her exports of sugar, tobacco, other agricultural products and fisheries combined could not finance even one half of her food imports.
The stagnation of non-cane agriculture was explained partly by the intractability of much of the land, labour and capital previously employed in the sugar economy. The mothballed sugar factories themselves had no obvious alternative use and neither did the specialized machinery and equipment deployed in the highly mechanized operations of cane harvesting, cleaning and transshipment. Much of the land hitherto under cane was suitable for forestry or the extensive grazing of cattle but not for food production. And the skilled industrial workers of newly-closed factories as well as the specialist operatives of cane-loaders and harvesters made unwilling unskilled agricultural labourers. They were thus offered generous compensation packages, on full pay and with opportunities for further education or re-training rather than a pressured redeployment into onerous, low-productivity activities in non-cane agriculture. The poorly organized implementation of the “restructuring” plan itself was also undoubtedly demoralizing: in December 2006 the Commission for Economic Affairs of the National Assembly noted “a decline in labour productivity and also in the average hours worked” in agriculture as well as “subjective deficiencies” and “negative factors” in management.
There were also sustained shortages of productive inputs such as agro-chemicals, animal feedstuffs and restricted irrigation capabilities, with lack of spare parts, high breakdown rates and excessive repair and maintenance costs for the nation’s aging stock of trucks, tractors and associated farm machinery. Additionally aggravating for both producers and consumers were the many inefficiencies and losses reported for State activities in the production, purchase, collection and distribution of food crops grown by individual or cooperative farmers – all resulting in the loss or deterioration of farm produce. State recognition of its poor performance in agriculture was reflected in July 2008 when up to a maximum of 33 acres of uncultivated State-owned farmland was made available for rental by landless agricultural workers. Private and cooperative farmers were also permitted to rent unused State land, providing their total holdings did not exceed some 100 acres. This was an important measure, calculated to increase aggregate food production by increasing the share of State-owned land actually under cultivation, but on its own was unlikely to be decisive.
Urban Allotments
The gravity of Cuba’s agricultural condition was partly masked by the favourable publicity given to the successful ‘green’ cultivation of urban allotments. These provided welcome relief for some urban consumers but made up a negligible fraction of national agricultural activity. Far more important in the national economic panorama was the dramatic expansion in the export of services. In 1989 services comprised no more then 10 per cent of Cuba’s export revenues, with sugar accounting for over 70 per cent. In 2006, by contrast, it was sugar exports that made up 10 per cent of overseas earnings while services accounted for 70 per cent. In brief, the island had been transformed from a commodity export economy to one now dominated by the export of services and in 2006 a balance of payments deficit on merchandise trade of some -6.7 billion pesos was virtually eliminated by a surplus of similar size reported for services.
Some 2.4 billion pesos – or little more than one-third – of the surplus reported for services in 2006 could be attributed to gross revenues from tourism. The bulk of the remainder, although unspecified in published Cuban statistics, consisted of hard currency payments made to the Cuban State by Venezuela for services provided by medical, educational and technical personnel.
Cuba’s capability to train medical personnel had been greatly expanded in the 1970s. The university system was extended to include all the island’s 14 provinces and newly created faculties of medicine provided free education for students drawn from the regions in which these institutions were located. From the 1980s on, Cuba had more doctors working in Africa, Asia and Latin America than the World Health Organisation. Moreover while the exigencies of the “Special Period” slashed imports of chemicals, finished pharmaceutical products and medical equipment of all kinds, they were not allowed to check a sustained expansion of medical training that doubled the number of Cuban doctors from 34.8 thousand to 71.5 thousand between 1989 and 2006, with the number of family doctors rising from 9 thousand to 33.2 thousand. The latter lived and worked in local communities, emphasizing preventative medicine and encouraging the use of traditional herbal and other remedies to offset shortages in imported medical supplies. Scarcities in pharmaceutical products were exacerbated by deficiencies in hospital equipment and by disruptions in the supply of energy and transport. In consequence, medical personnel, whether in practice or in training, learned to improvise and to develop a wider range of diagnostic skills within an environment that forced everyone to make the best of what was practically available. To the astonishment of many overseas observers, the grave economic difficulties of the “Special Period” were accompanied by improvements in major public health indicators such as life expectancy and infant mortality rates, the latter, at 5.3 per 1,000 live births in 2006, being matched in the Western Hemisphere only by Canada. And of course the public health practices perforce adopted within Cuba during its crisis years were precisely those required by the medical contingents that were to be despatched to live and work within deprived communities abroad.
The prime overseas destination of Cuban medical personnel from 1990 was, of course, Venezuela. On assuming office as President in 1999, Hugo Chavez announced a number of key social “missions”. One was to provide free public health services to the mass of Venezuelan citizens living in deprived urban or isolated rural areas and without access to, or unable to afford, professional medical assistance. It was immediately obvious that such a “mission” could not be fulfilled by Venezuela’s own medical profession which was well-remunerated and for the most part lived in a comfortable urban environment. They did not work – never mind live – in the shanty towns of Caracas or amidst deprived rural communities. By 2004, however, and in the teeth of opposition from Venezuela’s medical profession, some 10 thousand Cuban doctors and three thousand nurses were working in Venezuela, and this number had risen to almost 20 thousand by 2007. From the standpoint of the Chavez regime, such an influx of competent Cuban medical personnel, willing and able to work in difficult material conditions, enabled the fulfillment of a key social “mission” that might otherwise have remained the empty rhetoric of yet another Latin American populist.
Revolutionary Surgery
Accompanying the provision of basic medical services was a spectacularly successful programme for the provision of free sight-saving surgery. Glaucoma, cataracts and detached retinas were a notorious and preventable scourge of poor communities in Third World countries. With Venezuelan finance, “Operación Miraglo” deployed both fixed and mobile teams of Cuban ophthalmic surgeons not just in Venezuela but in several countries in Central and South America and the Caribbean. By November 2006, the programme had treated more than 400 thousand patients, no fewer than 290 thousand in Venezuela itself. And by December 2007, the total treated numbered one million with continued expansion plans and facilities in place.
As with public health provision, Cuba was also able to tap its own experience and expertise, supported once more by Venezuelan finance, to assist Chavez to fulfill his “mission” of providing basic education to those lacking literacy or elementary schooling. Cuban teachers and Cuban trained instructors deployed a teaching package of Cuban design both within Venezuela and elsewhere. Awarded a UNESCO prize for its economy and efficacy, this package is currently practiced in at least 15 countries and has to date resulted in more than two million poor people having learned to read and write.
While not its original intention, the formidable expansion of her medical and other professional training facilities has established Cuba as the preeminent provider of medical, educational and technical expertise for numerous Third World countries. Over the period 2000 to 2006, this capability has coexisted with the emergence of a political regime in Venezuela committed to the improvement of the health and welfare of its underprivileged majorities and commanding oil revenues enabling it to remunerate the Cuban State handsomely for the services of its medical and other personnel. This has permitted the Chavez regime to fulfill key social “missions” and thereby widen and consolidate its popular support. On the other hand, the exchange has given Cuba vital access to cheap oil and hard currency revenues to offset the drastic decline of its traditional commodity export sector. But at the same time, Cuba has developed an economic dependence on the continued existence and policies of the Chavez regime – i.e. on factors entirely outside its control - and it would do well now to address much more directly and vigorously the acute problems of poor performance that are so notable in its agricultural sector. The bill for the island’s food imports is already unacceptably and unnecessarily high, and rising international food prices will inflate it yet further. To date, the State has enforced a plethora of controls over production, collection and distribution partly to check the growth of an intermediary stratum that it finds socially and ideologically objectionable. But the State has been unable itself to fulfill the role of such a stratum in stimulating food production and effecting the rapid collection and delivery of quality produce to hard-pressed consumers. Agriculture has always and everywhere been the Achilles heel of socialist economy, resistant to effective central planning, in need of a significant degree of decentralization, and with a clear, if circumscribed role for local “market forces”. It would be better if the Cuban State could grasp that nettle sooner rather than later.