CUBA/USA: As Raul Castro settles into the seat of power in Cuba, the economy stands as one of his biggest tests

With all eyes on Cuba after President Fidel Castro stepped down temporarily early this week after 50 years of rule, many are now looking at the new incumbent, Raul Castro and how he will battle one of the biggest challenges facing the nation - the economy. Raul has his work cut out for him as he takes over at a time when oil prices are hovering at more than $75 a barrel. But billboards in Havana paint a different picture, claiming "We are doing well," and new alliances have much to do with this economic optimism. Some analysts say that Raul is more open to economic reform than his brother - but the question of whether he will have the mandate or political will to introduce change is the key question. An integration agreement with oil-rich Venezuela guarantees Cuba a minimum 98,000 barrels per day on generous terms. Venezuela's largesse has allowed Cuba to emerge from a deep slump triggered by the collapse of the Soviet Union, Havana's former benefactor, which brought long blackouts, transport shortages and industry shutdowns. In one of his last public appearances before his illness, Castro vowed that soon the entire nation would have electricity. "I can say that we will save two thirds of the electricity we have been consuming, but I want to add that in the near future a hundred percent of families that were cooking with kerosene will be cooking with electricity," he told crowds who had gathered to celebrate the July 26th anniversary of the attack that marked the beginning of the revolutionary struggle which ended the dictatorship of Fulgencio Batista and brought Castro to power. With the Venezuelan integration plan, Cuba is guaranteed the minimum oil it needs and it has allowed him to leverage Cuba's better financial situation into relatively cheap credit from China - opening the door to new Chinese products like pressure cookers, fridges and buses. Now Cuban-Venezuelan joint ventures are refurbishing a super-tanker port and refinery to make Cuba the hub of Venezuelan oil exports to much of the Caribbean and they run a joint tanker company. Such ventures are turning around the Cuban economy that all but collapsed between 1989 and 1993, then began a slow recovery of less than 4 percent annually until recently. Growth averaged nearly 10 percent the last 18 months, and more if one uses the country's own criteria. But it is the new structure of the economy, based on services not sugar, that is most significant. Over 80 percent of Cuban trade was with the former Soviet Union and another 10 percent with Warsaw pact countries, while today 47 percent is with the Americas, 35 percent Europe and the remainder mainly Asia. Castro has made a point of courting China, with Chinese President Hu Jintao visiting the island less than two years ago. It seems as Castro's own health has ailed, the island has experienced an upswing. Tourism, professional labour and other service exports now account for 70 percent of foreign exchange earnings, compared with 10 percent in 1989, while nickel accounts for 15 percent and sugar just 2.4 percent, compared with 90 percent before. Cuban economists are the first to point out that huge problems remain, not the least being ever harsher U.S. sanctions. But according to Jaime Suchlicki of the Institute for Cuban and Cuban American studies at the University of Miami, the U.S. embargo is not the reason for Cuba's economic difficulties. "The embargo is not the cause of Cuba's economic problems. The cause of Cuba's economic problems is that the system doesn't work, the same as in Eastern Europe, in the same way it didn't work in all communist countries. The fact that there are no bananas and mangos and guavas in Cuba has nothing to do with the embargo, it has to do with the system that exists in Cuba. It has to do with the fact that Cuban people don't produce because they work for the state. If they worked for themselves they would produce a lot more," he said. Apart from what many see as an untenable system, Cuba also carries the burden of a more than $14 billion foreign debt and a dependence on political events in Venezuela. The state controls more than 90 percent of the economy, making it one of the least free in the world, according to various business studies. And many Cubans are looking for this to change in the hope that they can make their own private businesses grow. Liliam owns a small, private restaurant that she runs from her own house. When she first began, she was happy to keep the business contained. But as her own experience grows, she feels the need to expand and is looking for an opening to allow her to do so. "When the revolution triumphed I was fifteen years old. I never worked under capitalism. It's not that I like the fact that they limit me at all, especially when you have a business that you hope to grow. Now what I would like, now that I have more experience and more knowledge, and have more clients, I would like there to be an opening," she said. Although Cuba has found new economic partners to fill the void left by the Soviet Union, many see the fate of the communist regime as intrinsically linked with that of its leader. As the world waits with baited breath for reports on the 79-year-old president's health, many are waiting to see if the nation's economic health will undergo a radical change under Raul.

ITN Source | August 3, 2006

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