Although the privatization measures brought a temporary relief in political tensions, the “Jefe” of the revolution followed them with suspicion. But life in Cuba could no longer be imagined without these rudiments of a private sector, especially as most self-employed people were active in the tourist industry. A three-point joke did the rounds in which the Máximo Líder said: “The people don’t want it, the Party doesn’t want it, and I don’t want it. But we’ve still got to do it.”
The situation was similar with regard to joint ventures with foreign firms, which the state and Party leadership had authorized in 1986, more out of necessity than of its own free choice, in the rectification period following the Third Party Congress. Early in 1991, when the crisis hit Cuba in the wake of the Soviet collapse, there were already 55 joint ventures, with a total foreign stake of some $500 million. By the end of the decade, the figure was approaching 400, with foreign investment expected to rise above $2 billion.12 Tourism has been the main sector for investment, with the result that between 1989 and 1993 the number of visitors doubled to approximately 550,000, and turnover soared 350 percent from $200 million to $750 million.
After the stimulus to joint ventures and the lifting of controls on the dollar, this sector continued to grow between 1993 and the end of the decade, achieving nearly two million visitors and gross income of $2 billion (the highest turnover in the Cuban economy). It has been estimated, however, that only 15 percent of this sum remained as net income, since the domestic economy was not in a position to produce most of the high-quality goods that tourists required and good foreign currency had to be spent on importing them. The main investors in the tourist industry came from countries with the highest number of Cuba-bound tourists: Spain, Italy, France, Canada, Germany, Sweden, Brazil, Mexico – countries, therefore, which clearly opposed the US pressure for an embargo. At first there was an emphasis on quantity, but the late nineties saw attempts to move away from cheap mass tourism toward city breaks and cultural trips, ecological and health tourism, and treatment at increasingly exclusive spas.
Joint ventures also proved attractive in heavy industry and the exploration and development of mineral resources. With the help of Canadian and European partners, the Cuban oil corporation Cubapetróleo managed to triple output in the space of a decade: from approximately 700,000 tons in 1989 to more than 2 million tons in 1999. Although Cuba still had to import a good three-quarters of its energy requirement, mostly from Mexico and Venezuela, it was producing by the end of the nineties more than 40 percent of its electricity from its own crude oil. Eventually, at the beginning of the year 2000, Cuba announced that it was opening up an area of 43,250 square miles of territorial waters in the Gulf of Mexico for deep-sea exploration of oil – and explicitly asked the US corporations expropriated 40 years before to develop the oil fields. “Our country,” Castro admitted, “cannot tap and exploit the potential oil deposits … in the Gulf of Mexico without technology and capital from abroad.”13
In another focus for the earning of foreign currency, the Cuban government built up the biotechnology sector to such a degree that by the early nineties Cuba was the world’s largest exporter of such products, the demand being particularly high in the fields of skin regeneration and immunization against meningitis, hepatitis B, and other diseases. Although the pharmaceutical corporations of the USA, Europe, and Japan bitterly opposed it on international markets, Cuba was already making a profit by 1991 and aggressively competing as a supplier of low-priced products, especially to Third World countries. Nevertheless, this sector’s share of total exports was no more than 3 to 5 percent, with a value estimated at less than $50 million. Cuba’s competitiveness as a Third World country, in such a highly specialized area as biotechnology, was bound up with the high medical standards that had developed there over the decades. UN comparative statistics, on such crucial aspects as infant mortality and life expectancy (75.3 years in Cuba14), had for a long time placed it above countries in the First World, even the United States.
These standards were largely maintained even through the grave shortages of the special period. “In spite of budgetary restraint,” noted the Financial Times, in a special report on Cuba in March 1999, “spending on health and education has been increased in real terms.” UN social indicators showed that in 1997 Cuba was still at or near the top in Latin America, “with one of the lowest rates of poverty and illiteracy on the continent;”15 in fact, the literacy rate was just under 97 percent at the end of the nineties.16 The finance minister at the time, Manuel Millares, could claim: “We have tried to guarantee social fundamentals. Our people are in a better condition than the majority of Latin Americans.”17
The free public health system also remained an essential feature of the Cuban Revolution, continuing to employ 340,000 staff and 64,000 doctors through the years of the special period – a ratio of one doctor per 193 inhabitants, compared with one per 313 in Germany.18 For Castro, the negative example was the former Soviet Union: “They’ve published that the life expectancy in the part of the USSR which is Russia is now 56 years, 20 years less than in Cuba, 20 years!”19 And he assured his audience: “We make sure that those medications which are vital, those which save lives, those which are essential are never lacking; we prioritize them.”20
Yet, despite Castro’s protestations, the population soon lacked the most basic medicines such as aspirin. At the beginning of the year 2000, the American Association for World Health (AAWH) reported that “more than 300 medicines and basic medical supplies are unavailable in Cuba, … . Surgery is performed only on selected cases, and there are limitations on ambulance services… . Also unavailable are several AIDS medications.” A special cause for concern was the rising incidence of water-borne diseases such as typhoid fever and other intestinal infections, and viral hepatitis. The AAWH partly blamed the US embargo for this situation. In a report published in 1997, it stated: “A humanitarian catastrophe has been averted only because the Cuban government has maintained a high level of budgetary support for a health-care system designed to deliver primary and preventive health care to all of its citizens. Cuba still has an infant mortality rate half that of the city of Washington, D.C.”21
The crash and new beginning also involved a reordering of economic priorities. Forty years after Batista and his American friends were driven out, tourism was again in first place. The second-largest source of foreign currency was the very gusanos or “worms” who drew Castro’s scorn, the 1.25 million Cuban exiles in the United States, whose money transfers to poorer relatives were estimated in the late nineties to have reached $1.2 billion a year, a fifth of Cuba’s total inflow of foreign currency. Sugar came only third in the economic statistics, although this was due more to necessity than to planning. Antiquated technology in the country’s 156 sugar factories (more than a quarter of which had to stop running), plus the shortage of spare parts, fuel, and fertilizer, had brought down the sugar harvest from more than 8 million tons to the lowest level in 50 years: a mere 3.2 million tons.
The export of Cuban cigars, however, still among the best (and most expensive) in the world, was a thriving business. Between 1997 and the end of the millennium, efforts were made to double production to 200 million units and a turnover of $200 million – though even that was far from satisfying demand. Banned from the US market because of the embargo, Cuban cigars were greatly in demand there – at black-market prices.
The evolution of Cuba’s balance of payments and state budget presented a “generally positive picture,” admitted the Financial Times report of March 1999, and the government operated “a tight monetary programme which would have made any capitalist finance minister proud.” At the beginning of 1999, the Cuban National Bank calculated the external debt in freely convertible currency at $11.2 billion;22 this actually seemed rather modest in Third World terms, but it did not include the debt in non-transferable rubles to the former Comecon, the exact size of which was a matter of dispute because of wide differences ove
r the rate of exchange that should be applied. In any event, the United Nations Economic Commission for Latin America (CEPAL) also praised Cuba’s stabilization measures, especially the gearing of a “second economy” to market criteria.
CEPAL’s comparative economic statistics suggest that in 1999 the Cuban Revolution reached the point at which it had been 40 years before, in 1959. New taxes and a 70 percent reduction in subsidies for unprofitable state enterprises (which now had to make a profit or shut down) had helped to bring the budget deficit down from 33 percent of GNP in previous years to just 3 percent. This had led to massive redundancies: in the sugar industry, for example, nearly 10,000 of the 90,000-strong workforce had been asked to look for work elsewhere.
A socialist society thus found itself facing what was, officially at least, an unprecedented phenomenon: unemployment. According to diplomatic sources, this was running in 1995 at 8 percent of the total labor force of 4 million. A plethora of countermeasures managed to reduce this over the next few years to 6 or 7 percent. But the IRELA institute in Madrid estimated in May 1999 that nearly a third of all Cuban workers were either jobless or underemployed.23
The architect of the new turn in economic policy, Carlos Lage, told the author in May 1999: “The collapse of the Communist system and the demise of the Soviet Union in the early nineties meant that we lost 85 percent of our external trade. So, between 1989 (or, to be more precise, 1991) and 1994, we had to swallow a 34 percent decline in our gross national product.”24 More than a third of this was recuperated in the years from 1995 to the end of the millennium; growth was running at a “yearly average of 3.5 percent.” In 1999, according to CEPAL figures, the Cuban economy then surged by 6 percent to reach a GNP of $17.5 billion.25 By that time, Lage said, “well over 50 percent of the Cuban population had access to dollars” – and the trend was continuing upward. The government hoped that the numbers would rapidly increase, so that the glaring inequalities between those with and those without dollars could be further narrowed.
Undoubtedly, dollarization did lead to a kind of two-class society: on one side, those who depended on a wage paid in pesos; on the other side, the self-employed and others working under privileged conditions, who received payment in dollars. “Dollarization has led to an inversion of the social pyramid,” the Hamburg Institute of Latin American Studies put it in one of its analyses.26 Whereas “the traditional supports of the regime – highly skilled income groups such as doctors, teachers and academics" had scarcely any access to dollars, “waiters, taxi drivers, prostitutes and domestic personnel … in the new economic milieu" were part of the country’s “up-and-coming elite.” What is more, many goods were no longer obtainable except on the black market, which was thought by experts still to account for 30 percent of all economic activity in the country.27
In the spring of 1999, Castro announced average pay rises of 5.7 percent for six out of ten employees, bringing the average wage to 223 pesos a month,28 although for some occupational groups, such as doctors and teachers, it was raised by as much as 30 percent, to 530 pesos. (It should always be borne in mind, of course, that most social services, as well as housing, basic food, and local transport, cost next to nothing.) Many enterprises – above all, the joint ventures – had meanwhile gone over to paying a part of wages in dollars. But since the dollar was not an interchangeable but a “parallel” currency, a “convertible peso” was introduced with its own notes and coins, which were also accepted in diplomats’ shops (the so-called diplotiendas) and newly emerging shopping centers. In the tourist industry, it was no longer the case that all employees had to hand in tips given to them in foreign currency. With all these measures, the government hoped to have spread the ownership of dollars quickly enough for popular discontent to start waning again.
Experts doubted that a monetary reform could in the long term both end the problem of two currencies circulating alongside each other and “speed up the country’s integration into the international trade and finance system.” The previously mentioned Hamburg study, for instance, pointed to experiences in other societies that had undergone transformation: “The monetary reform in Russia led in 1992 to a rate of inflation of 1600 percent; the associated losses of purchasing power have continued to destabilize the country more or less up to the present day.”29
This example gave the Cuban leadership a degree of selfassurance. “We have done this by ourselves, with no support from any international financial organization,” Castro’s deputy, Lage, emphasized. “The blockade imposed by the USA means that we have no access to other finance markets and therefore to long-term loans. The World Bank and the International Monetary Fund are controlled by the USA.” Cuba’s annual financial requirement was estimated to be in the vicinity of $6.5 billion, but it could obtain loans only on the private capital market, at extortionate rates of interest that Lage put at “usually around 15 percent.”
Representatives of German banks who accompanied the president of the German Confederation of Industry, Hans-Olaf Henkel, on his trip to Havana in spring 1999 held up Cuba’s repayment standards as exemplary in comparison with other Latin American countries.30 Surprisingly, Henkel was rather taken with his Cuban interlocutors: “It felt like meeting up with company colleagues and board members, rather than ministers and politicians.” The Máximo Líder himself took Henkel prisoner for a four-hour talk, during which the German discovered – despite underlying ideological differences – such “an amazing number of areas of agreement”31 that he made another (private) visit to Fidel Castro for the millennium celebrations. It was thanks to Henkel’s pressure that the SPD-Green government of Gerhard Schröder restored the Hermes loan guarantee, which its predecessor had suspended in 1988 because of the lack of clarity surrounding Cuba’s debt with the Soviet Union and other Comecon countries. Henkel was evidently concerned that the German economy was now falling behind.
The fact that “Castroism” not only outlasted Soviet Communism but was able to spare its people the neoliberal chaos which engulfed other Eastern bloc countries led many Western businessmen with a stake in the Cuban economy to make a (by no means politically correct) admission: “When you compare Cuba to Russia, they’ve done pretty well.”32 The other side of the coin was that no fundamental reform of Cuba’s political system was likely in the near future. Yet Carlos Lage could also recognize: “We live in a globalized world, and globalization is not only irreversible but will actually grow deeper.”
Despite these thoroughly unfamiliar tones coming out of Havana, there was no doubt about Lage’s (and his master’s) ultimate position. He told the author:
All past and future changes in our socialist system are designed to tie our economy closer and closer to the world economy, but while maintaining the dominant role of state ownership. Even if we increasingly seek and permit the involvement of private foreign capital, we do not and will not have a privatization policy here. We don’t believe in neoliberalism. We have not opened up in order to sell our country. I think that a firm’s chances of holding its own in the world market depend not on the property relations but on its capacity to adapt its technology and management to world-market demands and to motivate its own workforce. Also, Cuba offers investors conditions that they will not find in other Third World countries: security, stability, and a population with high levels of health and education; an economy that has found its own way and achieved continuous growth; a country without corruption, without drugs and without organized crime.33
For a long time the “Cuban model” appeared to sketch out a third way between capitalism and Communism, and there is a lot to suggest that this impression was intended. But Carlos Lage, who is now seen as one of Castro’s possible successors, emphatically rejects such an analysis. To admit it openly might only provoke further restrictions, both internally and externally.
The West does not like granting Castro his triumph over all opponents living and dead, especially as he is not prepared to accept economic reforms or a privatization of st
ate firms comparable to the measures adopted by the Fifteenth Congress of the Chinese Communist Party. In this respect, the major industrial nations – at the instigation of the United States – do not allow Cubans the right of national self-determination, and any support from international organizations is subject to more rigorous conditions of regime change (in the direction of the neoliberal “new world order”) than with regard to any other country. If Cuba integrated more into the international finance system and recovered on the basis of a “dollar economy,” Castro would scarcely have any choice but to allow more and more political freedoms. But this also means that, the more the economy recovers against Washington’s will, the more arguments there are for a further tightening of Castro’s political system.
The Fifth Congress of the Communist Party of Cuba, held between October 8 and 10, 1997, marked the thirtieth anniversary of Che Guevara’s death and put on a demonstration of unity with Fidel Castro and the Party and state leadership. Castro made his longest speech since 1960 – nearly seven hours in all. CIA director George Tenet told Congress in his extensive report on Cuba: “Fidel Castro appears healthy for a man of 70, and his political position seems secure.”34
The 1,482 congress delegates did not, however, adopt any really new economic and political perspectives, apart from a reduction in the size of the Central Committee from 225 to 150 members. The most striking aspect was the strengthening of the role of the military, and therefore of the Party’s orthodox wing, in the political apparatus; military men would in future comprise about a third of the Politbureau35 and head six key ministries (defense and internal affairs, as well as communications, fisheries, transport, and sugar).36 Castro seemed to regard the military as the institution which could ensure that the revolution moved in a disciplined manner into the new millennium. The Congress also made it clear that, far from showing readiness for a real political opening, the concessions to the market were intended only to maintain the state-run economy and to make it more efficient. It rejected a proposal to privatize at least small- and medium-sized state enterprises, and merely allowed people working on their own account to hire employees under certain circumstances.
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