How Cubans heal their economic ills

By Robert Plummer
Business reporter, BBC News

Elderly man selling Cuban newspapers in Havana, 28 November 2006

Elderly Cubans re-sell newspapers to supplement their incomes

My defining experience of Cuban economics came during a visit to the island in 1999.

I was following the Havana tourist trail by visiting the Floridita bar on the Avenida Belgica, where American author Ernest Hemingway used to go for his regular double frozen daiquiri with no sugar.

Suddenly an old man came into the bar carrying a stack of copies of the official newspaper, Granma.

I offered him the cover price, a mere 20 Cuban centavos, but he angrily demanded more.

I assumed he was charging over the odds because I was clearly not a local, and went away thinking that if a Cuban was trying to cheat a tourist over the price of the Communist Party newspaper, revolutionary idealism was definitely dead.

I later discovered that I could not have been more wrong – about the cheating, at any rate.

It is established practice in Cuba for elderly people on low state pensions to buy copies of the newspapers and re-sell them to the public for one peso each.

It helps them to make ends meet and allows their fellow Cubans to assist them without compromising their dignity.

Chicken tonight

A visitor to Cuba can easily find more such examples of how ordinary people have found ways to raise their low standard of living by operating below the radar of an inflexible, centralised state planning system.

Many of these dodges do centre on tourism. For instance, you may wonder why the Saturday breakfast buffet at your hotel in the holiday resort of Varadero often includes mountains of fried chicken – not normally something you would eat first thing in the morning.

Fried chicken

Fried chicken for breakfast? Only in Cuba

The likely explanation is that the staff are not expecting you to eat it.

Anything that is left over, they are allowed to take home – and with the weekend about to get under way, they are preparing to go back to their families with enough food to satisfy a houseful of relatives.

Likewise, if you talk to the young woman who plays the piano in the hotel bar, you will probably find that she is a conservatory-trained musician who realised she could make more money playing for tourist tips than she could in concert halls.

Still, at least she has a legitimate skill to sell, unlike many of her contemporaries who have resorted to prostitution in an effort to obtain money from tourists.

‘Special Period’

Conditions in Fidel Castro’s Cuba were not always as bad as this, although people have been subject to food rationing ever since the US economic embargo was imposed in 1962.

What really caused Cubans’ living standards to plummet was the collapse in 1991 of the Soviet Union, which had bankrolled the country’s inefficient economy as a means of irritating Washington.

Cuban camel-bus in Havana, 22 November 2006

Cuba’s distinctive humped buses were created in the 1990s

The end of the Cold War brought a halt to plentiful supplies of cheap crude oil in exchange for Cuban sugar, as Russian President Boris Yeltsin served notice that he was pulling the plug on Soviet subsidies.

The rest of the 1990s were known as the “Special Period” – a time marked by widespread food and fuel shortages.

The country was forced to come up with some creative solutions to its problems, including the creation of the two-humped “camel” buses – immense tractor-trailers that can carry a couple of hundred people.

Under pressure, President Castro authorised a few tentative steps towards a more market-oriented system. In 1993, the US dollar was allowed to circulate, while opportunities sprang up for the small-scale entrepreneur as tourism became the country’s biggest industry.

Turn and turn again

But this modest liberalisation was never intended to be permanent – and as soon as Mr Castro felt more confident, he went into reverse gear.

Since 2000, subsidised Soviet oil has been replaced by subsidised Venezuelan oil, as Havana looks to Hugo Chavez to prop up its tottering economy.

Hugo Chavez visits Fidel Castro in hospital in Cuba, August 2006

Cuba is now relying on Venezuelan largesse

China, too, has been providing support in the form of trade credits, technology and investment capital.

This change in Cuba’s fortunes soon led the regime to reassert its economic supremacy. In 2004, US dollar transactions were banned and a 10% tax imposed on dollar-peso conversions.

As for the self-employed Cubans who run restaurants in their homes (“paladares”) or rent out rooms to tourists, their numbers have fallen dramatically.

In 1995, more than 200,000 of them were officially licensed, but a decade later, fewer than 100,000 remained.

Cuban officials have stressed that Fidel Castro’s death – which the US has said may come within months – will not bring any changes to this rigid system.

Mr Castro’s brother Raul, his designated successor, is just as fiercely opposed to the free market, and any easing of policy will not come without a fight.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: