[Congressional Record Volume 141, Number 130 (Saturday, August 5, 1995)]
[Extensions of Remarks]
[Pages E1651-E1652]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


        CUBA'S WORSENING ECONOMY AND CASTRO'S BRUTAL OPPRESSION

                                 ______


                        HON. LINCOLN DIAZ-BALART

                               of florida

                    in the house of representatives

                         Friday, August 4, 1995
  Mr. DIAZ-BALART. Mr. Speaker, please submit for the Record the 
following article brought to my attention by Frank Calzon of Freedom 
House.

[[Page E1652]]

  Last year, many apologists for the Castro dictatorship argued the 
Cuba's economy was rebounding and that the dictator had survived his 
latest economic crisis. The following analysis by University of 
Pittsburgh economist and Cuba specialist Carmelo Mesa-Lago clearly 
illustrates the fallacy of these optimistic predictions.
  The truth is that with each passing day, Cuba's economy worsens and 
Castro's brutal oppression of the Cuban people inreases.
     Cuba's Economic Recovery, How Good Are Those 1995 Predictions?

                         (By Carmelo Mesa-Lago)

       Judging from Fidel Castro's pronouncements and recent CNN 
     coverage, Havana's recovery is already on its way. ``Trust 
     but verify'' is the old Russian proverb; and to assess the 
     situation Freedom House sent its Latin American specialist, 
     Douglas Payne to Cuba in late April. His appraisal appears 
     here, together with an article by the dean of Cuban economic 
     analysts, Professor Carmelo Mesa-Lago.
       Dr. Mesa-Lago advises caution. ``Statistical series were 
     halted in 1989.'' he says. Adding: ``. . . an economy that 
     has declined by one-half in five years could eventually 
     bottom out and show signs of improvement, but unless a 
     vigorous growth rate occurs it will take decades to recover 
     to the previous economic level.'' According to him, ``even a 
     modest growth rate of two percent (one percent per capita) 
     will be difficult to achieve in 1995.'' His article follows.
       Most Cuban and foreign economists agree that the island's 
     national product declined by one half in 1990-1993, but there 
     is no consensus on whether the economic deterioration was 
     halted in 1994 and a recovery will occur in 1995. Carlos 
     Lage, vice president of the State Council, declared to Granma 
     January 25 that the economy had bottomed out in mid-1994. 
     Three days later (at an international economic forum held in 
     Switzerland) he reported to a group of potential foreign 
     investors that the growth rate in 1994 was 0.7 percent. 
     Furthermore, Alfonso Casanova, director of the Center of 
     Economic Research at the University of Havana, predicted last 
     February a two percent rate of growth for 1995.
       Optimistic, but ultimately erroneous forecasts of Cuba's 
     economic recovery have been common in recent years. For 
     instance, early in 1993, Andrew Zimbalist (Smith College) and 
     Pedro Monreal (CEA-Havana) predicted a growth rate of 0.4 
     percent that year; later in 1993 Zimbalist changes his 
     estimate to a decline of 10 to 15 percent, while Monreal 
     postponed the elusive recovery to 1994 or thereafter. Jose 
     Luis Rodriguez, Cuba's minister of finance, and Raul Talarid, 
     the vice-minister of foreign investment, assured at the end 
     of 1994 and the beginning of 1995 that the economy had 
     bottomed out in 1993 and that some ``signs'' of recovery were 
     present in 1994. Even more cautious were Osvaldo Martinez, 
     the minister of Economics and Planning, and Julio Carranza, 
     the deputy director of CEA, who, respectively, foresaw
      either stagnation or slowdown in the rate of decline in 1994 
     and ``modest possibilities'' of recovery in 1995.
       The growth forecasts have been based on the following 
     arguments: the end of the recession in 18 out of 21 
     industries; cuts in the monetary hangover, state subsidies 
     and the fiscal deficit; higher prices for sugar and nickel in 
     the world market; greater foreign investment, and a growing 
     number of tourists and hard-currency revenue in that 
     industry.
       And yet some of the forecasters have candidly pinpointed 
     persisting problems and obstacles to the recovery, such as:
       1) inability to increase sugar and agricultural output.
       2) a significant labor surplus maintained through huge 
     state subsidies to two-thirds of non-profitable enterprises.
       3) insufficient export revenue which precluded buying 
     imports needs to expand both domestic production and exports.
       4) not enough foreign investment in spite of the 
     acceleration reported in 1993-94.
       Members of the Cuban Association of Independent Economists, 
     located in Havana, have argued that continuous stagnation or 
     decline is due to the slow and piece-meal implementation of 
     timid market-oriented reforms; according to them, the 
     reduction in the monetary hangover has not generated an 
     increase in output.
       Three notes of caution are important in the assessment of 
     the previous forecasts of growth.
       First, today it is extremely difficult to measure Cuba's 
     national product, because the state sector is shrinking while 
     the informal-private sector is expanding and the value of 
     goods and service generated by the latter is unknown. (For 
     instance, only 170,000 self-employed workers have registered, 
     thus the value of their output can be measured, but possible 
     500,000 or more are working without registration and the 
     government does not have any idea of the value of their 
     output.)
       Second, statistical series were halted in 1989 and 
     subsequent data collection has been harmed by the virtual 
     demise of central planning. If official growth rates were 
     difficult to check before the crisis, the situation is worse 
     now.
       Third, an economy that has declined by one-half in five 
     years could eventually bottom out and show signs of 
     improvement, but unless a vigorous growth rate occurs it will 
     take decades to recover the previous economic level.
       In my opinion, even a modest growth rate of two percent 
     (one percent per capita) will be difficult to achieve in 1995 
     for several reasons. The 1995 sugar harvest is officially 
     expected at best to reach 3.5 million tons. A compensatory 
     factor could be the increasing world market price of sugar in 
     1994 and early 1995, largely boosted by the sharp decline in 
     Cuban exports since 1993; but such prices are leveling off as 
     other sugar producing nations have increased their exports.
       A more difficult problem is the 500,000 tons of the 1995 
     sugar harvest that Cuba has mortgaged to finance last year's 
     imports of Russian oil. In addition, Cuba was 500,000 tons of 
     sugar short in committed exports to China in 1994, vital for 
     the import of rice, bicycles and other Chinese products. This 
     will
      cut availability of sugar for new exports. The actual 
     availability of sugar for export in 1995 should be from 2 
     to 2.5 million tons.
       Minister of Agriculture Alfredo Jordan has acknowledged 
     that the new cooperatives (UBPC) that replaced most state 
     farms in 1993-94 are not efficient and have failed to 
     increase both sugar and non-sugar agricultural output. He has 
     reported a decline of 36 percent in the production of grains, 
     fruits, vegetables and tubers in 1992-94. Tobacco leaf 
     production decreased 57 percent in 1989-93 and torrential 
     rains harmed the 1995 crop in Pinar del Rio province. Jordan 
     announced an increase of cattle heads to 4.5 million in 1994, 
     but this actually was an eight percent decline in relation to 
     the 4.9 million head officially reported in 1989.
       Nickel output reached a peak of 46,000 tons in 1989 and 
     declined to 33,349 in 1991 due to the obsolete technology of 
     the Soviet-made plant in Punta Gorda, problems in the old 
     U.S.-made plants, and lack of world demand. In spite of 
     Canadian investment, nickel output in 1994 declined, although 
     Cuba is hoping for improvement this year. (See Cubanews, 
     April 1995)
       In 1994, the number of tourists reached a record of 630,000 
     and generated $850 million in revenue, but actual profit was 
     only $255 million because of the high costs of imports 
     required to cater to tourists. Even as the number of tourists 
     increase in 1995 at the previous pace, the target of 1.5 
     million tourists will not be met and profits will not exceed 
     $300 million.
       Cumulative foreign investment reached $1.5 billion in 1990-
     94, an annual average of $300 million, equal to 5-6 percent 
     of the $5-6 billion in annual Soviet aid received by Cuba in 
     the 1980s.
       These negative factors will affect foreign investment:
       1) the Mexican crisis, which has led to the cancellation or 
     suspension of some Mexican investment projects.
       2) the withdrawal of Total, the pioneer French corporation, 
     after two years of unsuccessful oil exploration.
       3) the ranking of Cuba as the worst among 167 countries in 
     terms of risk for foreign investment by Euromoney in 1994.
       4) the potential enactment of a Republican-endorsed bill to 
     penalize foreign investors in U.S. property confiscated by 
     Cuba in 1959-60.
       The value of Cuban exports declined from $6 billion in 1985 
     to $1.8 billion in 1994. Carranza and Monreal forecasted in 
     1993 exports for $4-5 billion for 1995, while the government 
     prediction was even higher. But Casanova's estimate for 1995 
     exports is $1.5 billion and Talarid acknowledged that ``only 
     $4 billion'' more were needed to finance the necessary 
     imports. The 1995 combined hard-currency revenue from 
     exports, tourism and investment can be estimated at $2.5 
     billion, 78 percent less than the corresponding figure for 
     1989.
       All the evidence summarized above suggests that the Cuban 
     economy will either stagnate or continue its deterioration in 
     1995, although at a lower rate of decline. Cuban figures 
     showing a growth rate for 1995 will have to be backed by hard 
     data in order to be credible.
     

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