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Castro’s economic policies

Castro’s economic policies. 1959-1990s. Main periods. Revolutionary period; 1959-1963 Sugar rush; 1963-1971 Dependence; 1972-1991 All alone; 1991 - . Revolutionary period. Che Guevara in charge Goal: Cuba to escape from the tyranny of sugar  independent, industrialized economy

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Castro’s economic policies

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  1. Castro’s economic policies 1959-1990s

  2. Main periods • Revolutionary period; 1959-1963 • Sugar rush; 1963-1971 • Dependence; 1972-1991 • All alone; 1991 -

  3. Revolutionary period • Che Guevara in charge • Goal: Cuba to escape from the tyranny of sugar  independent, industrialized economy • Earnest debate; which crops? which industries? • Problems: Experts, entrepreneurs, economists and technocrats had fled Cuba after the revolution  lack of competency • Radical economists recruited from the Americas

  4. Planned economy • 1961: Juceplan (the Central Planning Board) • European experts brought in – most from Eastern Europe • Food shortages becoming apparent in 1961 • Rationing introduced in March 1962  “economic realism” • Peasants produced less for the market • Less need for cash; rents cut, less consumer goods to buy (US embargo) • Industrialization attempted; Soviet machines imported  not good quality  unsuccessful

  5. Back to sugar • USSR had convinced Castro to stick to sugar in 1963; Cuba’s only “comparative advantage” • The only Cuban commodity USSR was interested in • Sugar production increased 40% between 1960 and 1990, occupied 45 % of the arable land, employed almost 400.000 people • 3.7 million tons produced in 1968 and 1969  10 million should be produced in 1970!

  6. Los diezmillones van! • Half would be bought by the USSR • 3 million sold domestically and to friends • 2 million would be sold on the market  hard currency  import of “good stuff” • “Battle for sugar” Nov ‘69- July ’70  everybody involved • Target not achieved; “only” 8.5 million tons harvested • Detrimental to other sectors of the economy • Cuba’s economic situation still depended on sugar  1991

  7. Dependency and control • 1972: • Castro not in charge of the economy any longer • Cuba joined Comecon; the economic union of Communist countries • Soviet control over Cuban economy • Ten thousand Russian advisers in Cuba • Oil and weapons from USSR • Soviet subsidies extensive • Loans, sugar sold at inflated prices, investments  Cuban economy benefited (at least short term)

  8. “Sunny uplands of economic growth” • 1975-1985 • First five year plan introduced in 1976; focused on industrialization. • State enterprises to be self-financed; profit, incentives, decentralization and efficiency • 1970-1988: annual growth rate of 4.1% • Castro’s role somewhat reduced by increased focus on the Communist Party – also “inspired” by Soviet experts…

  9. Changes from the East • Brezhnev died in 1982  changes in Soviet-Cuba relationship • Soviet defense guarantee not renewed • 1986: New and revised economic program presented by Castro – return to planned economy • To deal with foreign exchange crisis • Restructure the economy to be less dependent on imports • Rectification; replace material with moral incentives  Rejection of markets and material incentives

  10. 1989: Gorbachev gave clear message to Castro that the economic benefits would come to an end • Level of dependency: • 63% of food came from USSR • 80% of imported machinery came from USSR • 63% of sugar, 95% if citrus and 73% if nickel sold to USSR  The trade would now take place in hard currency based on market prices  catastrophic for Cuban economy

  11. 1990: Oil supplies failed to arrive • Gorbachev eager to please the US to move forward with détente • Anti-Cuba feelings in USSR and Eastern Europe

  12. Catastrophe • Import capacity reduced by 70% in three years • Sugar earnings down from $ 4.3 billion in 1989 to $ 757 million by 1993 • No external financing by 1992 • Shortages of essential commodities; fuel, spare parts, fertilizers, feed for animals and food for people  Severe decline of the economy

  13. Special Period in Peacetime • “Economic defense exercise” • Free healthcare and education preserved • Austerity program • Food production had to increase • Tourism  supply of hard currency • Privatization of foreign trade

  14. New reforms, 1993 • Legalization of US dollar (to eliminate the black market) • Self-employment introduced • Agricultural cooperatives established; replacement of state farms • Private farmers’ markets returned

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