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By José Luis Rodríguez*

Cuban imports of goods were also affected in 2013 and — according to estimates by ECLAC — they must have diminished by close to 29.2 percent. At the same time, the value of food imports rose, essentially due to the price factor, from $1.645 billion in 2012 to a figure estimated around $1.747 billion, for a 6.2-percent growth.

During the December session of the National Assembly, it was stated that due to the rise in prices $17.1 million were paid in excess of the plan, and due to higher volume than planned $31.1 million more were spent, for a total of $48.2 million. In that aspect, it’s worth noting that part of this increase was due to the non-fulfillment of the import substitution plan.

It’s important to point out that the dynamic of international food prices shows a mixed tendency. Comparing year-end prices with those of 2012, there were increases in the price of beans (+51.1%), powdered  milk (+42.3%), pork leg (+33.1%), chicken (+7%), and soy meal (+1.6%). On the other hand, there were decreases in the price of wheat (-37.1%), corn (-29.4%), green peas (-14.1%), rice (-13.8%), and soybean oil (-11.8%), among the most significant categories.

In general, the international index of food prices in 2013 shrunk 1.6 percent compared to the previous year, and some analysts point out that this tendency will continue in 2014, even though they will remain generally high.

Similarly, the WTI reference price of fuel imports rose 9.1 percent in 2013, although the Venezuelan oil basket declined 7.5 percent. In the current year a decline of 3.5 percent is predicted for the WTI, as well as a decline for the Venezuelan basket, which would have a favorable impact in Cuban fuel purchases.

We should expect a decline of imports in 2014, in accordance with the availability of financing and the expected GDP growth of 2.2 percent.

Also, the situation of international finance continues having a negative impact on the economy, due to the contraction of credit and high cost for loans. This is shaped by the low classification ratings agencies give Cuba, which is considered high-risk, notably due to the U.S. economic blockade.

Even so, 2013 closed with a favorable trade balance of $1.256 billion, and a positive result in the processes or external debt renegotiation.

In fact, during the past three years an appreciable quantity of Cuba’s debt has been renegotiated, which was accompanied by punctual debt service.

Special mention deserve the favorable results with Japan and China in previous years, to which was added in 2013 the pardoning of 90 percent to the debt owed to the former USSR, which was claimed by Russia. Also, the favorable conclusion of the renegotiation of the $478 million debt with Mexico was recently announced.

Cuba’s new position regarding the settlement of pending payments, renegotiation of debt, and beginning to comply rigorously with its commitments, should have a positive effect on the country’s credibility to access new financial flows.

The latter aspect stands out in 2013, with the re-launch of a direct-foreign investment policy, which began with the announcement of the creation of a Mariel Special Development Zone. In addition, at the end of the year came news that a new foreign investment law will be discussed in March by the National Assembly.

Nevertheless, despite the advances achieved in the country’s improved financial image, a relaxation of tight liquidity is unlikely in the short term, which is reflected in the estimates of the very restrictive plan for 2014.

*José Luis Rodríguez is a former economy and finance minister and now a consultant with the Centro de Investigaciones de la Economía Mundial (CIEM) in Havana. He can be reached at joseluis@ciem.cu. This article was first published in Cuba Contemporánea.For Part 1, click here


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