In Cuba: no cash no party
Thinking in the high-jump event, Cubans must jump a bar at World Record levels every day to get food and medicine. In some places because of high prices, in others, there is simply a lack of offers. In any case, the bar is fixed at a higher level the next day. And we have a new "competition": the battle for cash. If there's going to be a crisis, make it a full-blown one. "It shouldn't be so hard to get the money you work for yourself", said recently a business manager who, after seeing his hopes dashed in line at an ATM, was finally able—not without stress—to withdraw his money at a bank. To make matters worse, many businesses ignore a government regulation that mandates the acceptance of electronic payments in all stores.
A Cuban economist lists four causes of this sub-crisis: 1) the fiscal deficit, 2) the non-existence of larger denomination bills, 3) skyrocketing inflation, and 4) the non-return of money to the banks. The latter is due to the very inconsistency of the banking system, and to the fact that many private actors buy high volumes of dollars in the informal market, at a rate that every day is further away from the "official" value. It is a scandalous distortion: the State does not guarantee them a legal window for the purchase of foreign currency—it really cannot—, and then turns a blind eye when processing their imports with dollars purchased by who knows how. Besides, the Government said a year ago that "printing physical bills is costly in its issuance, custody and treatment".
Cubans queue to withdraw money in a central boulevard of the capital (source).Tourism does not want to lift
Cuba has not seen easy times since the 1980s, when it lived in tow of the Soviet bloc, with commercial steroids back and forth. People here remember with much nostalgia that period, when consumption managed to look quite similar to expectations. Under highly advantageous financial conditions, the USSR sent so much oil that Cuba even re-exported the critical commodity every time it managed to save it. In terms of food, Eastern Europe contributed thousands of tons of cereals for human and animal consumption, wheat flour, rice, peas, fresh and canned fish, raw vegetable oil, frozen chicken, butter, condensed and powdered milk, cheese, canned meat, malt, among other products. For industry, Cuba received fertilizer, sulfur, lumber, caustic soda, sodium carbonate, and other raw materials. The Caribbean country in turn collaborated in areas such as sugar, nickel, and citrus fruits.
In that context, tourism and foreign investment were seen as unnecessary evils. But the Eastern cataclysm uprooted 85% of Havana's trade volume, so they became necessary evils. Tourism brought in 400 million dollars in 1991, already in the great crisis euphemistically called "special period". By 1996, income grew to 1.4 billion dollars. Thus, at the dawn of the 21st century, it was the main source of foreign exchange, surpassing the sugar agroindustry. Although the leadership only lasted about four years—ceding the title to the export of professional services—, it continued to be a key locomotive that ran at its best speed ever under the influence of Obama's thaw. Cuba is the only country where U.S. federal law prevents tourism, but the former Democratic president made travel options to the island as flexible as possible.
The AF1 descending in Havana with Obama on board on March 21, 2016 (source).Then Donald Trump, in marriage with the influential Cuban-born right-wing in Florida, progressively blew up all the bridges built since 2015 in this regard. Individual travel without needing the auspices of organizations, direct flights to several Cuban cities other than Havana, cruises... All this was demolished by Trump, who with his gross designation of Cuba as a state sponsor of terrorism—a costly "irritant"—also limited in the long run the travel of European tourists to the Island (although it was the Biden administration that activated this trigger). Cuban authorities recently denounced that the West-aligned government of Javier Milei has denied gasoline to the planes of the Cuban state airline, citing fears of U.S. sanctions, something unusual.
And on top of all this bureaucratic nightmare mounted in Washington, the impact of Covid-19. So, the country has not recovered from this "perfect storm". For this year, the aspiration is for more than 3 million tourists to arrive,half a million more than last one, but still well below pre-pandemic levels. The occupancy rate is only a quarter of the installed capacity, while other destinations in the region, such as Punta Cana and Cancun, are in excellent health, although without any unfair pressure. Under these conditions, the sector is not able to replenish itself to improve its devalued services, which configures a vicious circle difficult to overcome given the economic context, also marked by shortcomings in internal management.
SourceJapan brings energy
Trump was also surgical in attacking the energy sector in 2019, although Havana did not need to interrupt electricity service—in the residential sector—until 2020. Without foreign currency to buy all the fuel needed, and monitored and sanctioned by the world's leading power, the country has not raised its head steadily on this point either, so blackouts—especially outside the capital—are as common in Cuba as sunrise. To tackle the issue, the authorities advance a medium-term strategy to change the energy matrix and reduce dependence on fossil fuels. In this sense, a modest yet important contribution from the Japan International Cooperation Agency has been introduced: the donation of 20 million dollars to install solar photovoltaic parks in a Cuban province. Something good.
A Photovoltaic Solar Park in a central province (source). Not the same where Japan is contributing.And this is all for our report today. I have referenced the sources dynamically in the text, and remember you can learn how and where to follow the LATAM trail news by reading my work here. Have a nice day.
