CHAPTER 3: DESPITE THE PROBLEMS AND CHALLENGES, THIS HAS BEEN ONE OF THE MOST PRODUCTIVE YEARS IN THE HISTORY OF THE CUBAN REVOLUTION

The year 2005 was undoubtedly one of the most productive years of the Revolution, as it marked the beginning of a series of important transformations in the Cuban economy and bore truly impressive fruits, despite the huge challenges posed by the evermore aggressive and hostile manner of the US government, the effects of natural disasters and drought and the constant need to develop a creative way of thinking in order to find solutions to the problems facing the country, based on the need to ensure the sustainability of its economic expansion in a world where an unjust and exclusive international economic order prevails.

Among the serious problems that arose, namely three hurricanes, the most severe drought in a hundred years and power failures, this year also saw the implementation of new and revolutionary ideas regarding socio-economic development, the continuity and development of important programmes in the Battle of Ideas and the strongest and most accurately measured economic growth since 1959.

The following facts confirm the aforementioned:

1. The intensification of the blockade. The accumulated cost of the economic, commercial and financial blockade imposed by the United States now exceeds 82 billion dollars. In 2005 alone, the heightened impact of aggression against our country represented a cost of 1.8 billion dollars.

2. The exceptionally active hurricane season. The country was hit by three strong hurricanes which caused substantial losses.

Hurricane Dennis ripped through 10 provinces, destroying 28 082 homes and damaging 175 615, totalling an estimated loss of 1.4 billion dollars. Hurricanes Rita and Wilma, although they did not directly hit the country, affected the economy. Their impact was calculated at 207 million and 704.2 million dollars respectively. The latter caused floods of unprecedented severity, as a result of the penetrations of the sea, particularly in Havana, affecting more than 100, 000 inhabitants.
These events were dealt with in a highly organized manner, once again showing that the country gives top priority to preserving human life and protecting the resources essential to the people. As usual, rehabilitation and recuperation measures were put into effect at once, and work is still underway to thoroughly evaluate risks and prevention measures.

The early warning and rapid response capacities that the country has acquired regarding natural disasters have been recognised by several international institutions, including the World Meteorological Organization which, when evaluating the impact of the hurricane season in Cuba in its 2005 publication, said that the material losses were estimated at 1.2 billion dollars, but there were no deaths. Television and radio were efficiently used as means of preparing the population, giving forecasts and warnings live from the National Forecast Centre of Cuba. The presence of Fidel Castro, the president of Cuba, at the Center and on several special televised broadcasts played an important role.

In a display of solidarity and altruism, Cuba offers aid to many countries based on the experience gained by the island in this field. Some noteworthy examples are: Guatemala and El Salvador (after Hurricane Stan), Indonesia and Sri Lanka (after the tsunami), Grenada, Jamaica and Haiti, after several hurricanes that hit these islands during the year. Following the devastation caused by Hurricane Katrina, Cuba offered to send aid to the United States, but the government of that country never responded.

3. The worst drought in 100 years. The levels of the country’s reservoirs fell to 26.7% of total capacity, thus making it necessary to transport water in trucks and rail wagons as part of a complicated and expensive operation which benefited 2.6 million people. This situation had an impact on the economy to the sum of 1.35 billion dollars.

4. The power failures. These caused so many problems for the population and cost the economy such a great deal that they brought about a veritable energy revolution, both in the way that electricity is produced and in the methods for its preservation and efficient use; this is being implemented with high quality resources that will consequently improve the quality of life of the people.
5. The work implemented to confront the weaknesses of the electrical system. This was aimed at a comprehensive solution to the problem which puts the country at an advantage in terms of efficiency, security in service and security for the defence and vitality of the country.

6. The increase of the average price of oil. This was around 56 dollars per barrel and even rose to 70 dollars during certain parts of the year.

Despite the aforementioned situation, Cuba achieved a significant GDP growth of 11.8%, the highest on record since 1959.

The result of the great effort made by the country reflects the Cuban situation, in which sectors as important and with as much weight in the field of employment as education, health care, culture and sport, do not depend on the sale and purchase of their activities, as happens in market economies.

The 11.8% increase in the GDP is real and not based on the production of weapons, the trafficking of drugs, the mass construction of jails or the private profits from health care, education or other mercantile activities that increase the GDP of countries such as the United States. It is based on the added value that these social services, of fundamental social and human importance, generate, although calculations still reflect rates much lower than international standards.

In this context we cannot overlook the rapid development of these services of high added value, which reflect the level of maturity achieved by the human capital created by the Revolution, a fact that is also internationally acknowledged.

The “Preliminary Balance of the economies of Latin America and the Caribbean 2005”, published by the ECLAC, mentions that the accelerated economic growth in 2005 corresponds, as indicated, to specialization in highly complex services in which Cuba has attained an internationally acknowledged level of quality, as well as to dynamic tourist services and construction.

It has been a year of unquestionable achievements, but all this wouldn’t have been possible if the Revolution hadn’t made decisive changes to the concepts that should govern the direction of a truly socialist economy. The conditions that have been created have effectively made it possible to give prioritized attention to key sectors in order to ensure development, and to also begin to meet the principle needs of the population.

One programme that has constituted a profound change and been of strategic significance to the country is that which deals with the electrical energy sector. Several schemes have already been implemented which have completely revolutionized how electrical energy is produced, used and saved. Some of the most important examples are:

• The introduction of electricity generating sets.
• The rehabilitation and modernization of thermoelectric plants and transmission and distribution networks.
• Electric household appliances and energy-saving light bulbs.
• Solution to domestic fuel
• Alternate sources

With regard to the production of crude oil and gas – which fell by 3.7% in 2005 even though gas extraction increased -, the extraction of crude fell due to the fact that production did not reach the heights expected, and also because of delays in drilling and the problems caused by the hurricanes.

In the face of this situation, a programme was designed with more drilling equipment aimed at producing the maximum possible quantities of crude oil and gas, both for foreign associate countries and for the Cuban company CUPET.

An increase in the joint production of oil and gas has been forecast for 2006, while consumption of electricity should decrease as a result of the preventive measures put into place.

While searching for a solution to the problem that has been affecting the economy for years, a programme was designed to restore the country’s transport capacity, combined with energy-saving schemes. This important scheme, which has been given special priority, grew by 7.7% in 2005 and an increase of 15.5% is expected for 2006.

A decision of enormous importance which was adopted in 2005 was the approval of the Housing Programme, embracing new concepts regarding the policy for the construction and distribution of homes in Cuba, more in keeping with the economic and social situation.

The Programme has been afforded resources and an investment plan which is now being implemented. In this context, the country embarked on the recuperation of the building materials industry. The aim is to complete 150,000 homes between September 2005 and September 2006, and also to ensure that a minimum of 100,000 homes are built every year, starting with 2006.

The programme also provides for 280,000 conservation and rehabilitation schemes, a concept for which there was a 64% increase in 2005 and an increase of more than 10% is forecast for 2006.

A constant concern for the country’s leaders has been the improvement of the quantity and quality of the people’s food supply.

In 2004, work was carried out to prioritize the delivery of a number of products to the population; this was significantly expanded in 2005, ranging from agricultural products to industrial goods. In this sense, new investments were made and capacities were recovered in areas such as: factories producing noodles and pasta, soy bean yoghurt, tomato purée and bottles of refined oil, as well as the pork programme.

Food imports increased by 43.2%, thus filling out the shortages caused by the drought and increasing the necessary reserves.

During this year, nutritional consumption stood at 3,356 kilocalories and 88.0 grams of protein per day per capita, constituting an increase of 1.5% and 2.9% respectively in relation to 2004, which is higher that the average rates established by the FAO. In this sense, it is important to point out that the population received the majority of this food through regulated consumption, social consumption and self-consumption, at reasonable prices or free of charge, which is a confirmation of the Revolution’s policy to supply necessary resources in order to satisfy the people’s vital needs.
Programmes associated with the Battle of Ideas, which are pioneers of the Revolution that has taken place in the social services sector and examples of the equality and solidarity promoted by the socialist society, gained strength and progressed throughout the course of the year. Investments in these programmes have been given special attention, as an expression of the material assurance necessary to guarantee the perspective development of the country. Over the last six years more than 200 programmes have been developed and almost 7000 schemes have been completed.

Besides the progress made in prioritized areas, details of which are given in other chapters, favourable results were also achieved in other sectors and branches of the economy.

Foreign trade of goods and services expanded in 2005, with exports increasing by 27.9%, 70% of which corresponded to services. Imports, in turn, grew by 36.4% with the notable influence of the 37% increase in fuel prices. Food imports also increased, influenced in part by the decrease in national production resulting from the climatic problems.

Investments increased by approximately 39%, almost five times the growth produced in 2004; this reflects the great boost in strategic tasks during this year.

Nickel took its place as the country’s main source of export income, with a production rate similar to that of the previous year, reaching sales prices that were higher than foreseen.

Tourism, the most dynamic sector of the economy in recent years, grew by 12.3%, with the number of visitors reaching 2.3 million, a linear occupation of 62% and an increase in income of 10.7%, as well as a reduction in expenses, all of which testifies to greater efficiency.

Industrial production outside of the sugar industry rose by 3, 2 % with increases in 12 of the 20 branches that comprise it. The biggest increases were observed in ferrous metallurgy (19%), beverages and tobacco (6.4%) and fuel (6.1%)

Production of a significant number of goods was developed, including steel, electrical and telephone wires, cement, paint and pressure cookers.

Important progress was made in the field of communication and information technologies, with a registered growth of 8%, a digitalisation rate of 90% and a telephone density of 8.7%.

It should also be pointed out that to achieve these results throughout the course of the year, it was necessary to create conditions based on the profound changes adopted in the economic and monetary policy, which made it possible to centralize decisions regarding the use of hard currency.

The control of currency exchange, the consolidation of the convertible peso and the withdrawal of the dollar from circulation have represented very important steps taken by the Revolution. It was joined this year by the re-evaluation of the Cuban peso and the devaluation of the dollar.

These decisions regarding the monetary policy have strengthened the sovereignty of the country, and have also denied the United States weapons with which to fight their economic war against Cuba and have helped to structure the economy according to the strategic interests of the nation.

The correct direction taken by the monetary policy and the improvement in the general economy, together with the rigorous fulfilment of external financial commitments, have increased the country’s credit capacities, allowing 73% of financing to be secured in the long or medium term. Strategic decisions taken centrally and with the country in mind are showing that this is the only way to move forward with the construction of socialism.

In this regard, it should be mentioned that the country has been able to increase its capacity to obtain credit, re-evaluate the Cuban peso by 7.4% against the convertible peso and devaluate the dollar by 8% with respect to the latter.

This has made it possible to attend to priorities of the utmost importance to the development of the country and to respond to the principal needs of the population. All of this has been done with a secured unemployment rate of 1.9%.

The outlook for 2006

For the upcoming year, the State Budget law includes the resources necessary to follow up the important changes that have been implemented in 2005 in the various sectors and reflects the favourable perspectives that lie ahead, which will undoubtedly make it possible to continue attaining significant goals in the economic and social spheres. It also takes into account the main tendencies of the world economy, one of the most important being the considerable rise in oil prices, the impact of which has obviously not missed the Cuban economy.

There is also the negative effect of the economic war waged by the US against Cuba ―losses caused by the genocidal blockade now exceed 82 billion dollars. This has been stepped up a notch over recent years as a result of the intensification of the anti-Cuban aggressiveness of the Bush Administration. This will increase over the course of 2006 with the new actions and measures to reinforce the blockade, announced by this government.

In the midst of all this, the main plans for 2006 could be summarized as follows:

• To continue to give priority to increasing the defensive and combative capacity of the country and its military invulnerability in order to be equipped to deal with an eventual attack.
• To continue to give priority to ensuring that the population receives a regulated diet and that social consumption increases.
• To guarantee the fuel which is indispensable to the country’s economy and to the population’s consumption, while at the same time ensuring adjustments to the energy revolution.
• To guarantee the control and saving of resources, a fundamental premise of the economic plan for the next year, particularly the saving of energy.
• To continue to reorganize the country’s economic activity.
• To continue to support the social programmes of the Battle of Ideas.
• To guarantee the resources necessary to deal with the adverse natural phenomena that could occur.

The unequivocal will of the Revolution to continue to prioritise the sustained improvement of the well-being of the population and the country’s economic development, which are provided with all the material and human resources necessary, has, in the midst of both internal and external persisting difficulties, once again guided the creation of the State Budget. Expenses in the sectors of education, health care, culture and art, science and technology, sport, security and social welfare represent 70% of those envisaged to receive budget money.

An allocation of 3, 502 billion pesos was set aside for social security payments, representing an increase of 20% with respect to estimates for 2005. With these funds, 500,000 pensions will be paid out, including measures to increase the minimum pension and the pension rates of all other recipients.

Income for the contribution to social security is calculated at 2, 058 billion pesos, which covers 59% of expenses. The difference between expenses and income, to the sum of 1, 444 billion pesos, is covered by resources from the Central Budget.

Subsidies for differences in prices ―aimed at maintaining basic household goods at retail prices well below their real cost― as well as that set aside for schools, hospitals, day care centres and other socio-cultural institutions represents 900 million pesos of the budget.

Resources have been set aside for centrally financed investments to the sum of more than 6.4 billion pesos, double the estimated amount of 2005. These resources support the prioritized programmes of the Revolution, giving the greatest weight to the work of the Battle of Ideas, the construction of new homes, the development of the electrical and hydraulic infrastructure, the increase of food production and energy saving programmes.

Taking into account the impact of the drought and hurricanes over recent years, measures have been planned, for the first time, to deal with these and other possible natural disasters, with a total of 500 million pesos being spent.

Likewise, prioritized attention will be given to developing the human capital created by the Revolution and to the expansion of this as a factor for the economic development of the country, as well as the impact that this is already starting to have as a decisive element in increasing the people’s quality of life.
It is hoped that the supply and export of services will reach the highest growth rates of the economy, especially those of high added value in the health sector, as well as in education, biotechnology and information technology.

Real solutions are now being found and conditions are being created to overcome the pressing difficulties. The growth and sustained development of human capital is planned as part of the work of the Revolution, revealing the strategic meaning of the Battle of Ideas. With all of this work, it is hoped that the country will be able to grow at a rhythm of about 10% in 2006. This is something that must be attained in the midst of the important challenges that the Cuban people continue to face on the road towards an evermore just and satisfactory society with greater economic and social development, where human, ethical and supportive values continue to be the heart of their programmes..