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The Impact of the Global Crisis on Cuba's Economy and Social Welfare

Published online by Cambridge University Press:  08 February 2011

CARMELO MESA-LAGO  and
PAVEL VIDAL-ALEJANDRO
CARMELO MESA-LAGO
Affiliation:
Carmelo Mesa-Lago is Distinguished Service Professor Emeritus of Economics and Latin American Studies at the University of Pittsburgh. Email: [email protected].
PAVEL VIDAL-ALEJANDRO
Affiliation:
Pavel Vidal-Alejandro is assistant professor at the Centre for the Study of the Cuban Economy, University of Havana. Email: [email protected].
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Abstract

The mechanisms by which the world economic crisis has been transmitted from developed to developing economies are conditioned by domestic factors that may attenuate or accentuate external economic shocks and their adverse social effects. Cuba is a special case: it is an open economy and hence vulnerable to trade-growth transmission mechanisms, but at the same time, it is a socialist economy with universal social services. This article reviews the literature, summarises Cuba's domestic socio-economic strengths and weaknesses prior to the crisis, evaluates the effects of the crisis on the macro-economic and social services indicators, assesses the government response and suggests alternative socio-economic policies.

Abstract

Los mecanismos por los que la crisis económica mundial ha sido transmitida de las economías desarrolladas a las en desarrollo están condicionados por factores locales que pudieron atenuar o acentuar los impactos económicos externos y sus efectos sociales adversos. Cuba es un caso especial, ya que es una economía abierta y por lo tanto vulnerable a los mecanismos de transmisión comerciales y de crecimiento económico, pero al mismo tiempo es una economía socialista con servicios sociales universales. Este artículo revisa la literatura existente al respecto, sintetiza las fortalezas y debilidades socioeconómicas de Cuba antes de la crisis, evalúa el efecto de la crisis sobre los indicadores macroeconómicos y de servicios sociales, analiza la respuesta gubernamental, y sugiere políticas socioeconómicas alternativas.

Abstract

Os mecanismos que transmitiram a crise economica global das economias desenvolvidas às economias em desenvolvimento são influenciados por fatores domésticos. Estes fatores atenuam ou exacerbam os choques econômicos externos e seus efeitos sociais adversos. Sendo uma economia aberta, vulnerável aos mecanismos de transmissão do comércio-crescimento e ao mesmo tempo uma economia socialista, com serviços sociais universais, Cuba representa um caso especial. Analisando o que tem sido escrito sobre a questão, o artigo sintetiza os pontos fortes e as fraquezas socioeconômicas internas de Cuba antes da crise, avaliando seus efeitos sobre os indicadores macroeconômicos e os serviços sociais. Considera-se a reação do governo, e sugerem-se políticas sócioeconomicas alternativas.

Keywords

CubaCuban Revolutionglobal crisistransmission mechanismssocial welfaresocial policyCubaRevolución Cubanacrisis globalmecanismos de transmisiónbienestar socialpolítica socialCubaRevolução Cubanacrise mundialmecanismos de transmissãobem-estar socialpolíticas sociais
Type
Research Article
Information
Journal of Latin American Studies , Volume 42 , Issue 4 , November 2010 , pp. 689 - 717
Copyright
Copyright © Cambridge University Press 2010

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References

1 Despite the government's controls on the current account and the capital account of the balance of payment, Cuba has a high dependence on trade (both goods and services); in that sense we suggest that it is an open economy.

2 Economic Commission for Latin America and the Caribbean (ECLAC), Preliminary Overview of the Economies of Latin America and the Caribbean, 2009 (Santiago, 2009).

3 Inter-American Development Bank (IADB), The Aftermath of the Global Crisis: Policy Lessons and Challenges ahead for Latin America and the Caribbean (Washington DC, 2010).

4 See Juan Carlos Moreno-Brid, ‘Crecimiento económico y escasez de divisas’, in Comisión Económica para América Latina y el Caribe (CEPAL), La economía cubana: reformas estructurales y desempeño en los noventa (Mexico City, 2000), pp. 238–48; Yenniel Mendoza and Leonel Robert, El crecimiento económico y las restricciones en el sector externo: una aplicación al caso cubano (Havana, 2002); José Antonio Alonso and Jorge Mario Sánchez-Egozcue, ‘La competitividad desde una perspectiva macro: la restricción externa al crecimiento’, in Rubén Tansini (ed.), Tecnología, competitividad y capacidad exportadora de la economía cubana: el desafío de los mercados globales (Havana, 2005), pp. 5–44; Vidal, Pavel and Fundora, Annia, ‘Trade-Growth Relationship in Cuba: Estimation Using the Kalman Filter’, CEPAL Review, no. 94 (2008), pp. 97–116Google Scholar.

5 For an analysis of the impact of the global crisis on these variables, see Pérez, Lorenzo L., ‘The Impact of the Global Financial and Economic Crisis on Cuba’, in Association for the Study of the Cuban Economy, Cuba in Transition, vol. 19 (Washington DC, 2009), pp. 116–23Google Scholar.

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9 International Labour Organization, América Latina y el Caribe frente a la crisis financiera: recomendaciones de la OIT e iniciativas de los países (Geneva, 2009), and The Financial and Economic Crisis: A Decent Work Response (Geneva, 2010).

10 IADB, Social and Labour Market Policies for Tumultuous Times: Confronting the Global Crisis in Latin America and the Caribbean (Washington DC, 2009).

11 International Social Security Association, ‘Social Security Responses to the Financial Crisis’, Social Security Observer, no. 5 (June 2009).Google Scholar

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13 Carmelo Mesa-Lago, ‘Historia y evaluación de medio siglo de políticas económico-sociales en Cuba socialista, 1959–2007’, in Consuelo Naranjo (ed.), Historia de Cuba (Madrid, 2009), pp. 507–37.

14 Vidal and Fundora, ‘Trade-Growth’, pp. 97–116.

15 Oficina Nacional de Estadísticas (ONE), Anuario estadístico de Cuba, 2001 (Havana, 2002), and Anuario estadístico de Cuba, 2008 (Havana, 2009).

16 Banco Central de Cuba (BCC), Economic Report, 2007 (Havana, 2008).

17 The main problem with monetary duality lies in the multiple exchange rates for the CUP/CUC: 24×1 for the population and 1×1 for enterprises. The currency exchange markets must be unified to eliminate the dual monetary system, but this would require a correction in the overvaluation of the CUP in enterprises.

18 Vidal and Fundora, ‘Trade-Growth’, pp. 97–116.

19 Cuba consumes around 160,000 barrels per day in petroleum products, more than 50 per cent of which comes from Venezuela under preferential financing arrangements. The rest is pumped from the north-west coast. Some oil is also processed at a joint-venture refinery with Venezuela in Cienfuegos province, and then exported to other countries in the region. However, Cuba is still a net importer of oil, with the result that price increases have a negative effect on its balance of payments.

20 For more details about the costs of the hurricanes, see Granma, 28 Dec. 2008.

21 ONE, Plan económico y social y presupuestos del estado para el año 2009 (Havana, 2008).

22 EFE, Havana, 2 Nov. 2009.

23 ONE, Panorama económico y social, 2009 (Havana, 2010).

24 Ibid.

25 Ibid., and the Economist Intelligence Unit (EIU), Country Report: Cuba, 2009 (London, 2010). The current account deficit estimated by the EIU in 2009 is credible, and matches the official data for the trade balance reported in ONE, Panorama, 2009.

26 ECLAC, Preliminary Overview, 2009.

27 Reuters, 17 Dec. 2008.

28 Vidal and Fundora, ‘Trade-Growth’, Table 5.

29 At the time of writing there were only preliminary data for 2009, and there are reservations about the predictive capabilities of the model in the short term.

30 The same methodology of Vidal and Fundora was applied: the last estimation of the elasticity was multiplied by the logarithmic difference of the real values of the variable. The increase of 7.3 per cent in the terms of trade was used to estimate the real values of exports and external financing.

31 Based on ONE, Panorama, 2009.

32 Ibid.

33 ECLAC, Preliminary Overview, 2009, p. 137.

34 BCC, Economic Report, 2007.

35 ONE, Anuario, 2008.

36 ONE, Panorama, 2009.

37 UNESCO, Statistics (Paris, 2008), available at stats.uis.unesco.org.

38 United Nations Development Programme (UNDP), Human Development Report, 2007/2008 (New York, 2007).

39 Granma, 3 Nov. 2008; ONE, Anuario, 2008.

40 EFE, 8 July 2008; Granma, 3 Nov. 2008 and 10 July 2009.

41 Trabajadores, 10 Nov. 2008; Bohemia, 12 Dec. 2008.

42 ONE, Anuario, 2008.

43 ONE, El estado actual y perspectivo de la población cubana: un reto para el desarrollo territorial sostenible (Havana, 2008).

44 ONE, Panorama, 2009.

45 Mesa-Lago, Carmelo, ‘Social and Economic Problems in Cuba during the Crisis and Subsequent Recovery’, CEPAL Review, no. 86 (2005), pp. 177–99Google Scholar.

46 UNDP, Human Development Report, 2007/2008.

47 Bohemia, 9 Nov. 2007; Opciones, Havana, Jan. 2008; Lianet Arias and Lourdes Pérez, ‘¿Con el agua al cuello?’, Granma, 9 Jan. 2010.

48 ONE, Panorama, 2009.

49 Granma, 11 Feb. 2008.

50 ONE, Panorama, 2009.

51 Granma, 9 Jan. 2010.

52 Mesa-Lago, Carmelo, ‘Envejecimiento y pensiones en Cuba: la carga creciente’, Nueva Sociedad, no. 216 (2008), pp. 123–32Google Scholar.

53 Ibid.; ONE, El estado actual; ONE, Anuario, 2008; ECLAC, Cuba: evolución económica durante 2008 y perspectivas para 2009 (Mexico, 2009).

54 Mesa-Lago, World Crisis Effects on Social Security.

55 ONE, El estado actual.

56 Mesa-Lago, Carmelo, ‘The End of Half a Century of Rationing in Cuba?’, Hemisphere, vol. 17 (2006), pp. 30–4Google Scholar, updated with a list of prices compiled by Cuban economists (Havana, Jan. 2009).

57 ONE, El estado actual.

58 The pensions deficit rose from 41 per cent in 2008 to 41.3 per cent in 2009, one year after implementation of the law (authors' estimate based on ONE, Panorama, 2009).

59 Mayra Espina, Políticas de atención a la pobreza y la desigualdad: examinando el rol del estado en la experiencia cubana (Buenos Aires, 2008).

60 Mesa-Lago, ‘Social and Economic Problems in Cuba’, pp. 177–99.

61 ONE, Anuario, 2007 (Havana, 2008); ONE, Panorama, 2009.

62 Mesa-Lago, ‘Social and Economic Problems in Cuba’, pp. 177–99.

63 Juventud Rebelde, 9 July 2008.

64 ONE, Anuario, 2007; Granma, 1 Aug. 2009. Leal has beautifully reconstructed part of old Havana, but most of the city remains in ruins.

65 ONE, Panorama, 2009.

66 ONE, Panorama, 2009.

67 Marino Murillo, ‘Informe sobre los resultados económicos del 2009 y los lineamientos del plan económico y social para 2010’, Granma, 20 Dec. 2009; ECLAC, Preliminary Overview, 2009.

68 For a summary of the structural reforms proposed by Cuban economists, see Villanueva, Omar Everleny Pérez, ‘Aspectos globales’, in Omar Everleny Pérez Villanueva et al., Miradas a la economía cubana (Havana, 2009), pp. 9–27Google Scholar.

69 Armando Nova, ‘Agricultura’, in Pérez Villanueva et al., Miradas a la economía cubana, pp. 43–98.