It has become increasingly difficult to assess the performance of the Cuban economy in recent years, because of the non-appearance of some important economic data. At the end of October, the Anuario Estadístico de Cuba, which is usually published by July by the Oficina Nacional de Estadísticas e Información (ONEI, the national statistics office), was missing three chapters: chapter 5, which covers national income accounts; chapter 6, public finances; and chapter 8, the external sector.
The biggest gap in the data is in the external accounts. Not only is the relevant chapter missing from the 2011 Anuario, but there were also important omissions from the previous two years’ reports. Earnings from services exports have not been reported since 2009, and there have been no published figures for Cuba’s external debt, changes in international reserves or the composition of capital flows since 2008, 2004 and 2001 respectively.
No official explanation has been given for the gaps. It is unlikely that the delays are merely due to administrative inefficiency. Cuba’s system of data collection is extensive and the ONEI is a well-run institution. The missing data in the 2012 Anuario may therefore have a deeper significance.
In the past, there have been two main reasons for the failure to publish economic data. One is the government’s habitual secrecy, officially justified in terms of perceived national security threats (for example, details of foreign investors and lenders are hidden, for fear that partners might be punished under US laws; and the level of international reserves is regarded as an official secret, as it might be of use to US legislators designing economic sanctions).
The other is severe economic upheaval, as in the early 1990s, when the economy contracted by more than a third due to the loss of Soviet preferences. This year, there has been no increase in the threat from the US, and the economy is not in difficulties. It therefore seems that the data shortage may stem from a combination of existing official secrecy and another kind of upheaval: the structural transformations.
Services: a huge gap in the current account
Services exports have been a key driver of Cuban economic growth for the past two decades: in 2009, the latest year for which a figure has been published, they reached US$7.6bn, or 73% of all Cuba’s export earnings, up from 9% in 1990 and 65% in 2000. In the 1990s, that growth was driven by tourism (with gross income up from less than US$250m in 1990 to almost US$2bn in 2000), but in the past decade, tourism growth has slowed, so that it now accounts for only around one-third of services earnings. Non-tourism services have now become the main driver.
An ‘oil-for-doctors’ agreement between Cuba and Venezuela, signed in 2004, clearly explains a great leap in non-tourism services income. The total inflow in this category rose from less than US$1.0bn in 2003 to over US$4.0bn by 2005, and by 2009 they had reached US$5.5bn. But these statistics do not give a clear picture of the contribution of the Venezuela connection. The valuation of Venezuela’s payments for Cuban professional staff is unconventional, as the price is linked with fluctuations in the oil prices. This makes it difficult to identify changes in volume from the 2005-09 earnings figures, and adds a wide margin of error for estimates (in the absence of any official data) for 2010-11.
Interpretation of the accounts is also hampered by the fact that the composition of the broad category of ‘non-tourism services’ has never been revealed in the accounts. It has been widely assumed that the increase in non-tourism services earnings can be entirely explained by Cuba’s growing ties with Venezuela, but this is an over-simplification. In the past five years, other types of non-tourism services have also been expanded, including the sale of professional services (mainly medical), and licensing production of Cuban-patented medicines, to China and other major non-OECD (Organisation for Economic Cooperation and Development) markets. These other activities are becoming increasingly important for Cuban economic prospects, but their scale remains a secret.
A further complication is created by another structural change that has coincided with the deepening of ties with Venezuela: an increase in Cuban medical aid to third countries, particularly to members of the regional left-wing wing integration bloc, Alianza Bolivariana para los Pueblos de Nuestra América (ALBA). Such donations appear as a new negative entry in the ‘current transfers’ item of the current-account of the balance of payments, turning net inflows (mainly remittances) of US$974m in 2004 to a net outflow of US$367m in 2005. This suggests that more than US$1bn of the income reported from the export of services is used to pay for Cuban medical aid programmes.
The capital account: information black-out
The supply of data on capital account flows has diminished in the past few years, presenting a puzzle for potential creditors or investors seeking to assess the degree of sovereign risk. While national security concerns may explain why there have been no figures for Foreign Direct Investment (FDI) or debt flows for more than a decade, the lack of debt stock figures in the Anuario since 2008 may be also be connected with the increase in ties with Venezuela.
The deal with Venezuela provides for concessionary finance for oil imports when the oil price is high, so with the average oil price having more than doubled since the agreement was signed, the level of Cuba’s debt will have increased sharply. Although Cuba’s debt service burden will have been mitigated by Venezuela’s favourable terms for the new debt, an unwillingness to reveal the extent of the deterioration in the debt stock ratios may explain the lack of official debt figures.
In the absence of debt figures, Cuba’s creditworthiness can only be judged indirectly, using other data, reports by creditors and official statements. A current-account deficit of more than 4% of GDP in 2008 (arising from a sharp fall in the nickel price that coincided with three major hurricanes) was eliminated thanks to a sharp fall in import spending (down by a remarkable 37% in 2009, and remaining below the 2007-08 peak since then). Official statements claim that debt arrears incurred in 2008-09 have been cleared, and this impression is confirmed by the lack of recent creditors’ complaints of late payments. The tone of official discussions of foreign payments has become more confident over the past two years, perhaps suggesting that new sources of financing are becoming available (particularly from China) and the level of international reserves is being rebuilt, but in the absence of further data, creditors and potential investors remain wary.
Economic performance in 2012: piecing together evidence
The structural change in Cuban international economic relations, with its increased dependence on non-tourism services exports, has resulted in less transparent national accounts. At the same time, the Cuban economic system is undergoing profound changes, which will be affecting how the accounts are compiled and the structure of the fiscal accounts. This has combined with existing habits of secrecy to make it very difficult for business partners to assess how the Cuban economy is performing, or the extent of its vulnerability to changes in international conditions.
The only economic indicator that is published monthly by the ONEI is tourist arrivals. A 5.1% increase in arrivals in January-September confirms that the sector continues to grow despite weak GDP among its traditional source countries, but since tourism revenue accounts for less than one fifth of total exports of goods and services, this information provides little indication about economic performance more generally. For that, the only evidence available is snippets of information reported in the Cuban press. These suggest that the economy has been expanding in 2012, but at a disappointingly slow rate.
In the National Assembly in July, officials reported that annualised GDP growth in the first half of the year was 2.1%, weaker than the full-year target rate of 3.4%. There have been reports of improvements in the sugar sector, and modest increases in construction and manufacturing activity, while public services are being rationalised.
A cautious policy approach, with foreign exchange rationed and fiscal spending tightly controlled, appears to be preventing slippage in the trade and fiscal accounts and allowing debt servicing obligations to be met, but as yet there is no evidence of any significant boost to output (or fiscal revenue) arising from the restructuring of agriculture and much-vaunted economic reforms.
It remains possible that the delay in the publication of the final chapters of the Anuario may be not because of a trend towards less transparency, but because the accounting systems are being revised and improved. If so, new data should be available in the next few months.
For instance, Cuba’s Finance and Prices Minister Lina Pedraza was recently in Moscow to sign a five-year cooperation agreement between the Cuban and Russian treasuries. The 2013-2018 agreement includes training in Russia for Cuban administrators. Prensa Latina reported that Pedraza and a Cuban delegation also toured Russia to examine tax collection and budgeting methods. In 2011, the two finance ministries inked an MOU covering budget policy, including judicial regulation, planning, accounting and budget execution.
But if not, the dearth of information will not only add to uncertainty and risk perceptions among potential foreign investors and creditors, but also undermine the government’s claims to be improving accountability and promoting participation in economic policy debates.
- “While national security concerns may explain why there have been no figures for Foreign Direct Investment (FDI) or debt flows for more than a decade, the lack of debt stock figures in the Anuario since 2008 may be also be connected with the increase in ties with Venezuela.”
- “A cautious policy approach, with foreign exchange rationed and fiscal spending tightly controlled, appears to be preventing slippage in the trade and fiscal accounts and allowing debt servicing obligations to be met, but as yet there is no evidence of any significant boost to output (or fiscal revenue) arising from the restructuring of agriculture and much-vaunted economic reforms.”
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