Last updated 0100 hrs IST, Saturday, May 26, 2001
OPINION Bed and breakfast economy Tourism, a key element in Cuba's "emergency strategy" adopted to survive the harsh 1990s, has begun to pay dividends writes David Devadas The water is blue. Farther out, the colour gets deeper. This is Santa Maria, not one of Cuba's best beaches, but closest to Havana and hence most accessible. Varadero, say those who have flown to that part of the island, is the ultimate Caribbean paradise. But Santa Maria is not bad either. The sun is strong, but the water is fantastically cool and clean. Capacious, thatched, wooden shacks are strung along the beach, just metres from the water, each serving an array of lagers, the incomparable Mojito and mouth-watering seafood delights. Some of the shacks are discotheques and these come alive by afternoon and pulsate through the night. This nation can surprise anyone trained to think of Cuba as a relentlessly-regimented Communist prison camp. Not only are the beaches a pleasure-seeker's delight, the cabarets in Havana would make Sushma Swaraj see red. Left over from the pre-revolution years, when Cuba functioned as the US businessman's R&R retreat, they have been kept alive and kicking -the calisthenics involved in some of the routines are breathtaking - by the Communist regime. The cabarets are encouraged by the government and police personnel lurk in discreet corners of every beach to ensure that tourists are not hassled. The government has also spent millions in restoring the old city of Havana. Once a decrepit part of the town, the renovated plazas, museums and old buildings are truly charming. This focus on tourism is not incidental. Not only do the cabarets, beaches and the restoration efforts help in keeping the common people happy, or at least entertained, it's also a crucial part of the regime's economic strategy. Indeed, tourism is "Cuba's locomotive" and its number one foreign exchange earner, says Jose Luis Rodriguez, minister for economy and planning. The strategy is clearly a success. Tourists from Canada and from central and Latin America visit Cuba in droves. Despite the US sanctions, there are plenty of tourists from the US and Europe too. These aren't backpackers either. In fact, it's difficult to get a hotel room for less than $100 a day, and food, drink and T-shirts aren't dirt-cheap either - though they are certainly more attractively priced than on the Riviera. Rodriguez claims a 19 per cent growth in tourism every year. Indeed, the inflow currently stands at 1.6 million tourists (to a country of 11 million), bringing in $2 billion dollars annually. Tourism, then, has been Cuba's saviour. Rodriguez says his country went through "the most difficult economic period in its history" during the early 1990s. It had been orphaned, for the Communist bloc hitherto accounted for 80 per cent of the trade and scientific work. Having seen an average annual GDP growth of 4.6 per cent from its 1959 revolution to 1989, this figure shrunk annually from 1989 to 1993. The fiscal deficit was a third of the GDP in 1993 and imports had halved since 1989. Simultaneously, the US turned on the heat with its economic embargoes. "We have a ferocious economic war that interferes with all transactions and intimidates," says Francisco Soberon, president of Cuba's central bank. "We cannot use US dollars in international transactions. They confiscate it," he adds. Soberon talks of "insane levels of interference" whenever Cuba tries to reschedule repayments on its $11 billion foreign debt. (The current account deficit hovers at around $700 million, mainly owing to oil price hikes.) Of course, the focus on tourism as a growth strategy wasn't new. Nor was it the only part of the "emergency strategy" that Cuba devised to meet the challenges of the early 1990s. Rodriguez talks of "balance" in his strategy to "preserve the Socialist experiment in Cuba without neo-liberal restructuring." He gradually opened the economy to foreign investment- mainly through joint ventures - to draw finance, market access and technology. He drew $5 billion last year, mainly for telecom, tourism, nickel and oil exploration joint ventures. Soberon points out that among the many incentives for foreign investors, is a provision that allows post-dividend profits to be repatriated tax-free. Another part of the strategy has been to broad-base trade. Trade with Latin America, which stood at six per cent of Cuba's total before the Soviet Union collapsed, now accounts for 28 per cent. Trade with Europe has also grown. And Cuba sees China as a huge, potential partner. More importantly, Cuba decided on a double currency regime. Though it has bucked global lending institutions' pressure for full capital account convertibility, the regime has allowed almost total internal convertibility, says Soberon. In an effort to force deflation, it made certain goods - including Cuba's most famous products, cigars and rum - available only for US dollars. Although the regime insists that the exchange rate is 1:1, it actually hovers around two pesos to a dollar. Rodriguez acknowledges this but adds that the rate was 150 pesos to a dollar when the crisis was at its worst. And, he claims, 60 per cent of the population has some access to hard currency, even if it is just a little bit. While promoting deflation and a high savings rate, the regime has ensured that the 11 million citizens' basic needs are met. At a 22 peso exchange rate, Soberon calculates that a citizen who earns $10 needs to pay just $1.21 for rent, 28 cents for a telephone, 35 cents for gas and six cents for water. Basic rations, which include potatoes and milk for children below six, cost $2 a month. Plus, education and health care are free. The result is that while most Cubans can't drink rum or smoke cigars unless they are in Miami, no one on the island is malnourished. According to Rodriguez, the regime held massive discussions at the grassroot level, through unions and other bodies, before introducing the double currency regime. Given the political restrictions, the population really had no choice. Fidel Castro's regime is nothing if not garrulous in its consultations - or harangues, if you will. The 74-year old president of 42 years' standing, loves spending hours addressing large rallies. Castro loves the sound of his soft, husky voice. But more than that, he is a shrewd politician. He uses his never-ending speeches to deflect dissatisfaction away from the government, towards the US. He ensures that his people have no access to the foreign press or cable TV, or even videos, but ensures that state television shows detailed programmes on the chaos and poverty in Russia. With smart footwork by Rodriguez- his hair turned white at a relatively young age - the latent dissatisfaction of the 1990s doesn't show any sign of spilling over. And Cuba might just be getting out of its dark phase. Rodriguez says that despite the financial shocks of 1997 and the oil shock two years later, the economy has been recovering. The GDP grew by 4.7 per cent in 1999 and other indicators such as energy efficiency have also improved, he adds. Cuba's emergency adoption - though selective - of some elements of capitalism may yet allow one of the last bastions of socialism to survive.
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