Castro’s Plan to Loosen Controls Falters After Cuba Hurricanes
Jan. 29 (Bloomberg) — Aurora Garriga surveys the remains of the tobacco-processing plant where she worked in the Cuban town of Los Palacios. All that’s left are a few upright beams and heaps of ruined tobacco leaves. Nearby, her house is a pile of broken wood.
Five months after the first of three hurricanes hit Cuba, the damage from Gustav, Ike and Paloma — which officials estimate at almost $10 billion — continues to weigh on Cuba’s economy. The cost of rebuilding ravaged neighborhoods, roads and electrical lines may strain the nation’s financial resources as the global recession cuts prices for some exports and reduces the amount of money Cubans overseas send home.
That will likely delay President Raul Castro’s moves to loosen government controls in one of the world’s few remaining communist countries.
“Before the storms, the whole direction was to liberalize and open up the economy,” says Larry Birns, director of the Council on Hemispheric Affairs in Washington. “Then the hurricanes came, and the Cubans had to retrench on the economic reforms they were going to make.”
Castro, 77, has made halting steps to modernize Cuba since taking over in February 2008 from his ailing brother, Fidel, 82. Raul allowed people to buy mobile phones and DVD players and said that unused government land would be distributed to private farmers. This month, the government started licensing private cab drivers to operate in cities, allowing them to negotiate rates with passengers.
Worker Compensation
Other changes Raul Castro planned — included raising salaries, which average $20 a month, and setting up procedures to pay people based on production rather than flat rates — will probably be delayed, says Birns, citing conversations with Cuban officials. That’s partly because slumping commodity demand will likely reduce Cuba’s revenue.
The country is the world’s seventh-biggest exporter of nickel, producing 70,400 metric tons in 2008 that brought in $552 million, according to Prensa Latina, a Havana-based news agency. The price of nickel tumbled 56 percent last year on the London Metal Exchange.
Plunging oil prices may also cause companies exploring in Cuban waters to scale back plans or projects that could benefit the island, says Daniel Erikson, senior associate at the Inter- American Dialogue, a policy-analysis center in Washington, who adds that no cutbacks have been announced so far.
Exploration Agreement
In one deal, Petroleo Brasileiro SA, Brazil’s state- controlled oil and gas producer, signed an exploration and production agreement with Cuba’s oil company, Cuba Petroleo. The initial investment by Petrobras, which produces more than 80 percent of Brazil’s oil from offshore fields, was $8 million.
Erikson says he expects that tourism and remittances from families living abroad will also fall as recession spreads around the world.
“We will continue to have a tense and difficult situation,” Raul Castro said in a Jan. 2 interview with state- run television. “Perhaps we won’t be able to resolve many of the problems with the speed that is required.”
Damage from the hurricanes that hit in August, September and November equaled a fifth of gross domestic product, he said at a Dec. 27 session of the national assembly. That was a main reason the economy grew only 4.3 percent last year, almost half the government forecast of 8 percent, Economy Minister Jose Luis Rodriguez said at the same session.
Work Harder
Castro said Cubans will need to work harder to compensate for the slowing economy, while the government will cut its travel budgets and reduce workers’ subsidies to reduce costs.
Nearly every part of the country was affected by at least one of the storms, which forced the evacuation of almost half Cuba’s 11.4 million people and damaged or destroyed more than 500,000 homes.
Officials quickly rescued many of the victims and have made some progress on recovery. Most buildings that lost roofs in Los Palacios had new ones by this month, and residents, including Garriga, whose homes were demolished now live in small, temporary wooden houses.
“The response of the government was good,” she says.
Sixty-eight miles (109 kilometers) away, shoppers at a local supermarket in Havana say availability of fruits and vegetables is improving after the hurricanes caused shortages and higher prices.
No Cookies
Still, “there isn’t enough supply for the demand,” says Angel, 42, who works in the laundry room of a large tourist hotel and declined to give his last name. “The hurricanes came just before the harvest and wiped out many crops.” He says he can’t afford to buy cookies for his son after spending almost half his salary last month on a leg of ham for Christmas dinner.
Many Cubans are optimistic that U.S. President Barack Obama will help improve their economy. During his campaign, he vowed to loosen Bush administration regulations that cap the amount of money Cuban-Americans are allowed to send home from the U.S. He also said he’s willing to discuss easing sanctions that have restricted U.S. trade with the island for almost 50 years if Castro makes democratic moves such as freeing political prisoners.
In the meantime, Garriga, 49, is picking vegetables for the government. She says she worries that the tobacco company, which employed more than 100 people in Los Palacios, may not rebuild its ruined plant.
“This was full of benches where women used to work and now it’s totally destroyed,” she says, pointing to the area where the main hall once stood. “The workers want this to be up and running again.”