Castro’s economic policies s

Main periods Revolutionary period; Sugar rush; Dependence; All alone;

Revolutionary period Che Guevara in charge Goal: Cuba to escape from the tyranny of sugar  independent, industrialized economy Earnest debate; which crops? which industries? Problems: Experts, entrepreneurs, economists and technocrats had fled Cuba after the revolution  lack of competency Radical economists recruited from the Americas

Planned economy 1961: Juceplan (the Central Planning Board) European experts brought in – most from Eastern Europe Food shortages becoming apparent in 1961 Rationing introduced in March 1962  “economic realism” Peasants produced less for the market – Less need for cash; rents cut, less consumer goods to buy (US embargo) Industrialization attempted; Soviet machines imported  not good quality  unsuccessful

Back to sugar USSR had convinced Castro to stick to sugar in 1963; Cuba’s only “comparative advantage” The only Cuban commodity USSR was interested in Sugar production increased 40% between 1960 and 1990, occupied 45 % of the arable land, employed almost people 3.7 million tons produced in 1968 and 1969  10 million should be produced in 1970!

Los diez millones van! Half would be bought by the USSR 3 million sold domestically and to friends 2 million would be sold on the market  hard currency  import of “good stuff” “Battle for sugar” Nov ‘69- July ’70  everybody involved Target not achieved; “only” 8.5 million tons harvested Detrimental to other sectors of the economy Cuba’s economic situation still depended on sugar  1991

Dependency and control 1972: – Castro not in charge of the economy any longer – Cuba joined Comecon; the economic union of Communist countries Soviet control over Cuban economy – Ten thousand Russian advisers in Cuba – Oil and weapons from USSR – Soviet subsidies extensive – Loans, sugar sold at inflated prices, investments  Cuban economy benefited (at least short term)

“Sunny uplands of economic growth” First five year plan introduced in 1976; focused on industrialization. – State enterprises to be self-financed; profit, incentives, decentralization and efficiency : annual growth rate of 4.1% Castro’s role somewhat reduced by increased focus on the Communist Party – also “inspired” by Soviet experts…

Changes from the East Brezhnev died in 1982  changes in Soviet-Cuba relationship – Soviet defense guarantee not renewed 1986: New and revised economic program presented by Castro – return to planned economy – To deal with foreign exchange crisis – Restructure the economy to be less dependent on imports – Rectification; replace material with moral incentives  Rejection of markets and material incentives

1989: Gorbachev gave clear message to Castro that the economic benefits would come to an end Level of dependency: – 63% of food came from USSR – 80% of imported machinery came from USSR – 63% of sugar, 95% if citrus and 73% if nickel sold to USSR  The trade would now take place in hard currency based on market prices  catastrophic for Cuban economy

1990: Oil supplies failed to arrive Gorbachev eager to please the US to move forward with détente Anti-Cuba feelings in USSR and Eastern Europe

Catastrophe Import capacity reduced by 70% in three years Sugar earnings down from $ 4.3 billion in 1989 to $ 757 million by 1993 No external financing by 1992 Shortages of essential commodities; fuel, spare parts, fertilizers, feed for animals and food for people  Severe decline of the economy

Special Period in Peacetime “Economic defense exercise” Free healthcare and education preserved Austerity program Food production had to increase Tourism  supply of hard currency Privatization of foreign trade

New reforms, 1993 Legalization of US dollar (to eliminate the black market) Self-employment introduced Agricultural cooperatives established; replacement of state farms Private farmers’ markets returned