Cuba's Upturn: Sweet but Partial

By , Special to The Christian Science Monitor

AFTER six years of crisis, Cuba's economy started to slowly bounce back in 1995, according to government statistics and foreign experts.

Cuban Vice President Carlos Lage estimates that the economy grew by 2.5 percent in 1995, after six years of negative or near-zero growth. Cuba has seen big jumps in nickel and tobacco production, tourism, and likely in the sugar harvest.

''In general the Cuban economy has bottomed out and is starting to recover,'' says Peter Boot, speaking at the Havana office of Dutch-owned ING Bank. ''Some sectors you see that more clearly. Other sectors, it's just starting.''

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Looking out his window, Mr. Boot notes that Cuba's positive growth is hardly grounds for rejoicing. The country still faces major shortages of food and basic consumer goods. Although electrical blackouts have been reduced, they occur several times a week in the capital city. Businesspeople and ordinary citizens alike have a hard time getting a dial tone from the tottering phone system.

Cuba's gross domestic product (GDP) dropped 34.3 percent from 1989 to 1993. Experts now predict the economy will grow this year by about 5 percent. ''That should trickle down to the ordinary Cuban in the form of more food and better services,'' says a Western diplomat in Havana.

Romero Canazares, a professor of English at Havana's dentistry college, says his economic situation has improved slightly, but remains precarious. He earns the equivalent of $16 per month, and his wife is unemployed. ''My salary pays for about half a month's worth of food,'' he says. They survive the rest of the month on loans and by bartering with neighbors.

Mr. Canazares supports recent government economic reforms, including legalizing private restaurants and farmers' markets. ''We're happy that these markets are open,'' he says. ''We can't afford them, but we know that if we work hard, we can gain access to these things.''

Cuban agricultural production is improving. Farmers in the countryside report that the sugar harvest is going well so far. Sugar remains the country's largest source of foreign exchange, but the harvests have declined by more than half since the late 1980s.

Mr. Lage says the 1995-96 harvest will increase at least 20 percent over the prior year. Foreign investors provided $300 million in loans to help boost this harvest.

Boot says both foreign investors and the Cuban government will benefit from the larger harvest. ''At the current [international] price, I think there will be a profit for everybody,'' Boot says. ''If prices move in an unfavorable sense, both parties will not have such a easy time.''

''Given Cuba's history of defaults,'' the diplomat adds, just ''repaying these loans will help them get financing for other industries as well.''

The skyline of Varadero, the resort town 100 miles from Havana, is dotted with high-rise hotels, mostly financed by European companies. On Jan. 22, the resort Club Mediterranee announced plans to open a resort in Cuba next winter. France and Spain have together loaned about $180 million to Cuba in the past year, mainly to buy food and petroleum. That's a far cry from the early '90s, when Cuba was unable to get any significant international credit.

In 1989, with the Soviet empire's collapse, Cuba lost a major source of subsidies and the source of 85 percent of its foreign trade. The ongoing US economic embargo forces the island to purchase goods at higher prices from other nations, and deprives it of a major trading partner.

In response to these problems, President Fidel Castro Ruz's government declared a ''special period.'' At first it deviated little from orthodox Marxist policies. By 1993, the economy hit rock bottom, with widespread food shortages, electrical blackouts, and a jump in unemployment. Even critical export industries couldn't get enough electricity and transportation to function properly. This economic crisis was reflected in the political unrest that led tens of thousands of Cubans to raft towards the US in August 1994.

Since 1993, Cuba has introduced belt tightening measures and reforms that have contributed to the current progress.

Cubans are now allowed legally to possess US dollars. People receiving hard currency from abroad or from the tourist industry can legally buy goods in government-owned dollar stores. While most Cubans depend on rationed food bought in pesos, the dollar stores of Havana are usually jammed.

In October 1995, the government legalized free exchange of pesos for dollars, thus undercutting the black market. The peso has increased in value from a low of 125 pesos to the dollar in August 1994 to 25 at the end of 1995. The government reduced its budget deficit from 33 percent of GDP in 1993 to 7.4 percent in 1994.

But the private sector remains severely restricted. Legally registered businesses must remain small and only employ family members. Cubans cannot buy and sell most cars or even their own houses.

Is full-blown capitalism coming?

''I don't think that that's the general wish of the population,'' Boot says. ''I would look for a socialist system with some market elements.''

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