By Marc Frank
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HAVANA (Reuters) — New Cuban President Raul Castro's promise to improve daily life is running up against soaring fuel and food prices for the import-dependent country and belt tightening is in order, the official media said on Tuesday.
"Adjustments and restrictions are inevitable" warned Radio Rebelde, leading off its national morning newscast with coverage of a parliamentary hearing on the economy.
Raul Castro took over from his ailing older brother Fidel Castro in February promising to "improve the material and spiritual life" of Cubans after more than 15 years of hardships that followed the demise of the Soviet Union.
He has lifted some restrictions on consumer goods and services such as mobile telephones and computers, increased prices for agricultural products, lifted caps on wages and granted more autonomy to food producers, but the soaring prices for imported food and fuel have begun to undercut his efforts.
No information was available on what adjustments and restrictions were under consideration except that they involved social spending and retail prices. The government subsidizes consumer food and fuel costs.
Economy and Planning Minister Jose Luis Rodriguez told the hearing on Monday the economy was performing relatively well, with industrial production up 6.2 percent over the first half of 2007, agriculture 7.5 percent, and tourism 14.5 percent, among other key sectors.
At the same time he said wages continued to rise more than productivity in an economy more than 90 percent controlled by the state.
Rodriguez warned there was no escape from soaring prices given the country imports 50 percent of its fuel and more than 50 percent of its basic food stuffs.
"The substantial increase in the prices of fuel and food on the international market so far this year and projections for the remainder will inevitably force adjustments and restrictions on the economy and plans for next year," the Communist party daily Granma quoted Rodriguez as stating.
Business belt-tightening
There also may be some belt-tightening on the business side.
Canadian oil firm Pebercan, which produces oil in Cuba, said in late June it had not received debt payments totaling $37 million in April and May from state-owned Cuba Petroleos due to "the difficult economic situation" and rising food and raw material costs.
Vice President Carlos Lage announced in June that "some of the main investment projects have been reduced and further reductions will be necessary," providing no further details.
"The country spent $1.47 billion last year to import 3.423 million tonnes of food and to import the same amount this year at current prices will cost $2.554 billion, a billion dollars more," Lage said.
"The 158,000 barrels of oil per day that we consumed last year cost $8.7 million per day and this year costs 32 percent more, or $11.6 million per day," he said.
Domestic gasoline and food prices have remained relatively unchanged in Cuba this year due to state-control of the economy and prices, forcing the government to spend more on subsidies.
At the same time recent prices for its most important export, nickel, have fallen from the highs of a few years ago.
The Caribbean island has gradually emerged in recent years from an economic crisis in the 1990s that followed the demise of former-benefactor the Soviet Union.
An integration agreement with oil-rich Venezuela, soft credits from China and high nickel prices have produced significant growth and investment, eliminating blackouts, improving public transportation, the availability of consumer goods and increasing investment in social services and housing.
At the hearing on Monday various ministers made clear that the adjustments might slow, but would not end the recovery.
(Editing by Jackie Frank)
July 8, 2008
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