Monday, September 15, 2008

Cuba’s growth ambitions laid to waste

By Marc Frank in Havana

Published: September 15 2008 17:03 | Last updated: September 15 2008 17:03

Only six months after President Raúl Castro officially took over from his ailing brother Fidel, two destructive hurricanes have left in ruins his promises to improve people’s “material and spiritual lives”.

In two short weeks, hurricanes Gustav and Ike have left catastrophic destruction at both ends of the island, and ravaged most of what lies in between.

Strains were already appearing in Cuba’s import-dependent economy before the storms. The government slowed investment and stopped debt payments to some countries and suppliers over the summer, asking for them to be restructured after the rise in fuel and food prices and a significant decline in the price of nickel – the main export.

The communist-ruled island, under an economic embargo imposed by the US more than 40 years ago, is not a member of the International Monetary Fund, World Bank or any other multilateral lending institution with a US presence.

“Material improvement was planned to be a key source of legitimacy of the Raúl government, and if he can’t deliver on this – for whatever reason – this is a much more serious political problem for his rule than it would have been for Fidel,” said Bert Hoffman, a Latin American expert at the German Institute of Global and Area Studies.

It has been the “retired” Fidel Castro, 82, who has been rallying Cubans to “battle” in a series of columns and messages.

According to the elder Castro, who is consulted on policy but has not been seen in public for more than two years after undergoing surgery, President Hugo Chávez of Venezuela – the government’s leading ally – has taken “measures that make up the most generous gesture of solidarity that our country has known”.

For the first time, the Communist party has allowed UN emergency relief and broad support from western non-government organisations. Aid is coming from dozens of countries, with estimates for the storm damage at many billions of dollars.

US aid has been mired in the bitter 50-year confrontation between the two countries, with Washington demanding the right to inspect damage and Cuba countering that it simply wants to buy emergency supplies and receive private credit for food purchases, and that restrictions on Cuban-American travel and remittances should be lifted.

Raúl Castro has stayed behind the scenes and, apparently busy on the phone since the crisis began, has sent Ramón Machado Ventura, his second-in-command, and other top officials to survey damage and rally recovery efforts.

There will be no more talk for now of pay rises, building 50,000 new houses a year, and lowering food prices when he next addresses the public.

“We need to save and use to rebuild everything salvageable, including the nails,” urged Mr Machado Ventura as he toured Cuba. The hurricanes have damaged 500,000 homes and many thousands of other buildings, as well as utilities and the communications infrastructure, and wiped out crops.

In an effort to boost output, Raúl Castro has decentralised the agriculture sector, increased what the state pays for produce and granted a little more autonomy and state lands to farmers. Caps on wages have also been lifted in the hope of improving manufacturing.

Copyright The Financial Times Limited 2008

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