After three years of modest economic growth, problems with Cuba's sugar harvest, a growing trade deficit and foreign debt are making Havana officials worry about a slowdown in 1997.
Cuban officials predict the economy will not shrink next year, and there may even be an upside to the downturn: The government may adopt more market reforms if it perceives any economic backsliding.
But Havana seems inordinately worried, apparently about shattering the rising expectations of Cubans who have seen their economy improve slightly after three years of crisis sparked by commu
nism's collapse in 1991.
Next year will be ``complex and tough,'' Vice President and economic czar Carlos Lage told Cuban enterprise directors last week. ``This is going to create very large tensions for us from the first days of the year.''
Lage predicted Cuba would notch 7 percent to 8 percent economic growth this year -- higher than the 5 percent he forecast in July -- and that 1997 would also register growth. ``There's progress in every sense,'' he added.
But he made clear that the 1997 growth rate would be far lower than this year's, and said socialism still demands ``austerity and rigor.''
Sugar crop blamed
Largely behind the slowdown is sugar, probably still Cuba's single largest earner of hard-currency profits despite the spectacular growth of tourism since 1991.
The harvest that began Dec. 1 and will finish around May will yield only 4.8 million to 5 million tons of sugar, Peter Baron, head of the International Sugar Organization, predicted during a recent visit to Havana.
That would be a 9 percent to 12 percent increase over last year's 4.45 million tons, but far short of a normal 6 million to 7 million ton harvest and nothing like the 30 percent jump between 1995 and 1996, from 3.3 million to 4.45 million tons.
Exactly what is behind the dim harvest forecasts is unclear.
Sugar Minister Nelson Torres announced recently that foreign loans needed to buy harvest imports, like fertilizer, had reached the same $300 million level as 1996, just $30 million short of his goal.
Interest rates fell ``slightly'' this year because of Cuba's prompt payments in 1996, Torres said. Havana has said the 1996 rates ranged from 12 percent to 20 percent, and President Fidel Castro recently cited figures that put the average at 16.6 percent.
Torres said the U.S. Helms-Burton law had affected the harvest because some foreign banks ``restructured'' their harvest loans and new lenders had to be found, causing delays in the arrival of some imported supplies.
But knowledgeable bankers say no foreign bank actually halted any loan. One ``sold'' its loan to a little-known offshore Caribbean bank, and another shifted its money to sugar operations not threatened by Helms-Burton.
Harvest below expectations
The amount of cane available for harvesting this year nevertheless appears to be far below expectations, and only partly as a result of Hurricane Lili.
Havana has hammered away at the chaos in the hundreds of sugar cane farm cooperatives, known as UBPCs, set up in 1993 to decentralize that part of the harvest. Only one of the 48 cooperatives in Havana province operates at a profit, Cuban newspapers reported last week.
And there's suspicion that to achieve last year's jump from 3.3 million to 4.45 million tons, harvesters cut down young cane that should have been saved for the 1997 harvest.
``They may have incurred in costs last year that they are paying for now. They apparently cut this year's cane,'' said Jorge Sanguinetty, a Miami business consultant who keeps close tabs on the Cuban economy.
On the plus side for the Cuban economy, officials say the cost of producing sugar in 1997 will be lower -- leaving a wider profit margin -- and record numbers of tourists are expected for the 1996-1997 winter season.
Nickel exports have hit a record 55,000 tons this year, and a small number of state enterprises are becoming profitable -- and getting off the government subsidy list.
But there the positive news ends.
Sugar prices lower
World sugar and nickel prices are lower than last year. Sugar's drop, from roughly 12 cents per pound during the 1996 harvest to about 10.56 today, may well wipe out any gains in production in the 1977 harvest.
World oil rices have risen from about $17 per barrel in November of 1995 to about $23 this November. Cuba imports most of its fuels, at an officially declared price tag of $1.12 billion for 1996.
The number of Cubans registered as self-employed workers such as car mechanics or hairdressers, a rough index of economic activity, dropped from 209,000 to 180,000 after the government enacted stiff new income taxes.
And the Cuban peso, which rose against the dollar this fall as the island's economy seemed to improve, fell from 18 to 20 to the dollar this month alone in official exchange shops and to 23 in the black market.
The slide came as National Bank of Cuba director Benigno Regueira announced on Dec. 8 that for the first time since 1994 the bank had been forced to print 100 million to 200 million pesos in 1996 -- a sign of trouble.
Deficit balloons
Largest of all the factors straining the Cuban economy, and perhaps least understood by independent economists and analysts outside Cuba, are the island's huge trade deficit and its internal and foreign debts.
Although Cuba still handles much of its economic data as state secrets, what is known about its foreign trade deficit and foreign debt paint a dark picture.
Cuba's officially declared trade deficit ballooned from $642 million in 1994 to $1.2 billion in 1995. And, according to figures cited by Lage last week, will likely hit $2.19 billion this year. That's a hefty increase in the deficit as a percentage of total trade, from 30 percent to 36 percent.
Such figures are huge for an island that must finance imports with expensive commercial loans because U.S. sanctions, and its disavowal of its foreign debt in 1986, block its access to cheaper government loans.
Increased short-term borrowing to underwrite imports may account, at least in part, for the sharp increase in Cuba's foreign debt reported by Lage in a mid-year economic assessment in July.
Internal debts multiply
Foreign debts grew from 9.7 billion in late 1994 to $11 billion by mid-1996, Lage reported, a 20 percent hike in 18 months. That does not include the 21 billion rubles owed to the former Soviet Union, contracted at one ruble equals $1 although no one expects the debt will be paid at that rate.
Internal debt -- unprofitable state companies not paying their bills, state farms not paying off their bank loans -- has grown into a crippling Gordian knot in Cuba's public-sector economy, experts in Havana say.
Numbers like those might have pushed other countries into drastic economic reforms. But Castro has adopted a go-slow approach, apparently trying to ensure he avoids explosive mistakes.
The solution to Cuba's financial problem, Lage said last week, ``must be found within our economy, not in one shot or in one year. We must . . . create conditions to begin progressively diminishing it.''
Copyright © 1996 The Miami Herald