How Cubans heal their economic ills
By Robert Plummer
Business reporter, BBC News
My defining experience of Cuban economics came during a visit to the
island in 1999.
I was following the Havana tourist trail by visiting the Floridita bar
on the Avenida Belgica, where American author Ernest Hemingway used to
go for his regular double frozen daiquiri with no sugar.
Suddenly an old man came into the bar carrying a stack of copies of the
official newspaper, Granma.
I offered him the cover price, a mere 20 Cuban centavos, but he angrily
I assumed he was charging over the odds because I was clearly not a
local, and went away thinking that if a Cuban was trying to cheat a
tourist over the price of the Communist Party newspaper, revolutionary
idealism was definitely dead.
I later discovered that I could not have been more wrong – about the
cheating, at any rate.
It is established practice in Cuba for elderly people on low state
pensions to buy copies of the newspapers and re-sell them to the public
for one peso each.
It helps them to make ends meet and allows their fellow Cubans to assist
them without compromising their dignity.
A visitor to Cuba can easily find more such examples of how ordinary
people have found ways to raise their low standard of living by
operating below the radar of an inflexible, centralised state planning
Many of these dodges do centre on tourism. For instance, you may wonder
why the Saturday breakfast buffet at your hotel in the holiday resort of
Varadero often includes mountains of fried chicken – not normally
something you would eat first thing in the morning.
The likely explanation is that the staff are not expecting you to eat it.
Anything that is left over, they are allowed to take home – and with the
weekend about to get under way, they are preparing to go back to their
families with enough food to satisfy a houseful of relatives.
Likewise, if you talk to the young woman who plays the piano in the
hotel bar, you will probably find that she is a conservatory-trained
musician who realised she could make more money playing for tourist tips
than she could in concert halls.
Still, at least she has a legitimate skill to sell, unlike many of her
contemporaries who have resorted to prostitution in an effort to obtain
money from tourists.
Conditions in Fidel Castro's Cuba were not always as bad as this,
although people have been subject to food rationing ever since the US
economic embargo was imposed in 1962.
What really caused Cubans' living standards to plummet was the collapse
in 1991 of the Soviet Union, which had bankrolled the country's
inefficient economy as a means of irritating Washington.
The end of the Cold War brought a halt to plentiful supplies of cheap
crude oil in exchange for Cuban sugar, as Russian President Boris
Yeltsin served notice that he was pulling the plug on Soviet subsidies.
The rest of the 1990s were known as the "Special Period" – a time marked
by widespread food and fuel shortages.
The country was forced to come up with some creative solutions to its
problems, including the creation of the two-humped "camel" buses –
immense tractor-trailers that can carry a couple of hundred people.
Under pressure, President Castro authorised a few tentative steps
towards a more market-oriented system. In 1993, the US dollar was
allowed to circulate, while opportunities sprang up for the small-scale
entrepreneur as tourism became the country's biggest industry.
Turn and turn again
But this modest liberalisation was never intended to be permanent – and
as soon as Mr Castro felt more confident, he went into reverse gear.
Since 2000, subsidised Soviet oil has been replaced by subsidised
Venezuelan oil, as Havana looks to Hugo Chavez to prop up its tottering
China, too, has been providing support in the form of trade credits,
technology and investment capital.
This change in Cuba's fortunes soon led the regime to reassert its
economic supremacy. In 2004, US dollar transactions were banned and a
10% tax imposed on dollar-peso conversions.
As for the self-employed Cubans who run restaurants in their homes
("paladares") or rent out rooms to tourists, their numbers have fallen
In 1995, more than 200,000 of them were officially licensed, but a
decade later, fewer than 100,000 remained.
Cuban officials have stressed that Fidel Castro's death – which the US
has said may come within months – will not bring any changes to this
Mr Castro's brother Raul, his designated successor, is just as fiercely
opposed to the free market, and any easing of policy will not come
without a fight.
Story from BBC NEWS:
Published: 2007/01/03 22:38:31 GMT