Cubans suffered near-famine and almost day-to-day power blackouts, and tens of thousands accepted the sea aboard homemade boats throughout the economic crisis in the 1990s known as the “ Special Period. ”
The government eventually acknowledged that will after losing all Soviet financial aid and trade with the former socialist bloc, its Gross Domestic Item (GDP) dropped by 35 % during the crisis.
Cubans who have long suspected that this crisis was actually much even worse than the government admitted appear to are actually right.
A brand new study by the Inter-American Development Financial institution (IADB) shows that Cuba’s GDP, actually dropped by “ more than fifty percent” during those years, which the impact of the crisis continues to be being felt.
“ The Cuban GDP stands in 23 percent below the pre-crisis level of 1989 and 35 % below the 1985 level, ” says the study conducted by a group directed by Pavel Vidal, the Cuban economist teaching at Javeriana University in Colombia.
The study also shows that Cuba is much poorer than its government’s data would indicate, because it overestimates the value of the Cuban peso simply by artificially making it equal to one Oughout. S. dollar.
The government issues two currencies – the Cuban peso and the Cuban Convertible Peso (known as CUC) – and uses different prices of exchange depending on the type of financial activity. One dollar could be approximately counted as one peso or twenty-four pesos, depending on the sector.
Vidal created a formula that will tries to calculate an average exchange price based on the size in the GDP of every sector of the island’s economy that will handles CUCs or pesos.
The study estimated for each capita GDP for 2014, recent times calculated, at “ $3, 016, much lower than the $7, 177 that might be derived directly from the Cuban nationwide accounts using the official exchange price. ”
The state figure brought Cuba close to the GROSS DOMESTIC PRODUCT of Colombia that year, whilst Vidal’s estimate places Cuba using a GDP similar to Bolivia, El Salvador and Guatemala.
“ I have been studying the Cuban economy for more than 55 years, plus there’s no study more important than this, ” said Carmelo Mesa Lago, emeritus economics professor at the University or college of Pittsburgh. “ We economists had reached the same conclusions, however the difference is that he proved this. ”
“ When you have multiple exchange rates, as well as the difference between the strongest and poorest rates is very large, as it is within the cases of Cuba and Venezuela, the distortion of relative costs is phenomenal and that makes it very hard to correctly measure economic facts, ” said Augusto de una Torre, a former World Bank main economist for Latin America as well as the Caribbean who teaches at Columbia University in New York.
“ In this context, the job that Pavel Vidal does will be heroic and super useful. He or she uses available indicators to try to rebuild what could be a key series of macroeconomic variables, ” de la Torre added.
Economists have long discussed the credibility of statistics released by the Cuban government and then released by international entities like the Entire world Bank and the International Monetary Finance.
“ The particular bias in estimates of the Cuban GDP in dollars is not just from the Cuban government, ” said Vidal, “ but by multiple establishments that have tried to look at the issue as run into the difficulty of arriving at an ideal number because of the dual currencies thinking absence of comparative statistics about asking prices. ”
Tonel is not a member of the World Bank, and then the data published by the government ıs just not independently confirmed by the international dateneinheit. If Cuba ever joins just about the international financial institutions, it could receive any assistance to produce more reliable data, entre ma Torre said.
Vidal’s new GDP estimates can not influence possible foreign investors, keen on the future of the business climate in Tina than the past. But they could surely lead to changes in Cuba’s standing in multilingual rankings like the United Nations’ User Development Index, which measures every country’s standing in terms of properly being, education and living standards.
“ The Human Designing Index has been systematically overestimating generally the per capita Gross Domestic Remedy of Cuba. If they pay attention to regarding study, Cuba will drop by a great number in the Index, ” said Dirección Lago.
Considerable emigration and low investments yet productivity are holding back cost effective growth.
More sections of the Vidal study present to that low productivity is one of the points holding back the Cuban price-pint.
Using to clean formula to reconsider relative country prices and the rate of purchasing horse power parity (PPP), Vidal re-calculated Cuba’s annual GDP from 1970 for 2014. Then he compared those songs with the data from 10 gets with similar populations: Bolivia, Panama and nicaragua ,, Ecuador, Guatemala, Honduras, Jamaica, Around, Paraguay, Uruguay and the Dominican Republic.
He determined that Cuba had lost ground to the countries during those years.
“ In 1970, an Cuban GDP in PPP pounds was 5. 3 times higher than close to of the region’s economies of additional size, and in 2011 it was only one. 5 times higher, ” Vidal shared el Nuevo Herald. “ Of Cuba fell back, other establishments grew and rose up the rates like Ecuador, Dominican Republic, You will additionally and Costa Rica. ”
The lack of investments largely is the reason the drop in Cuba’s earnings. Cuba has one of Latin Numerous lowest investment rates, an average of 13.5. 7 percent of its GDP in the last 20 years.
However other factors like high emigration and as a consequence low birth rates also the grave impact on the economy. Government physionomie show nearly 660, 000 Cubans emigrated from 1995 to 2017. More than 56, 000 came to american in 2017 alone – many of working age.
“ The calculations talk the macroeconomic costs of emigration, the low birth rate and the maturation of the population, which adds another downside when compared to other economies in the region, ” Vidal said. “ While the economic climates of similar size in the region mature by 3. 8 percent [per year] in the last two decades, Tonel did it at 1 . 7 p’cent. Demographic factors account for 25 percent of that difference. ”
Chief IADB economist Juan José Ruiz said Vidal’s browse also showed that despite Cuba’s economic peculiarities, the island confronts complaints similar to those faced by men and women in the region.
“ There is something in Latin America’s period of volatility, investment, assignment associated resources and the workings of employment markets that explains why efficiency grows very little even when the personal economy systems are so different, ” Ruiz said.
In the case of Cuba, “ the advances put together the Cuban revolution in terms of bookmarks progress have marched in seite an seite with a great loss of economic conservation, ” the Vidal study deducted.
And the global financial reforms launched by Raú addition Castro have not managed to turn challenges around.
Truth that productivity has been recovering from the “ very sharp depression” of the Really fantastic Period in the 1990s, the speed of their recovery has “ slowed down” since Castro replaced brother Fidel in 2006.
Vidal important a number of measures to free our economy and promote growth, among them that broader opening to foreign haut, more freedom for the private división and the elimination of the two-currency physique. All those steps were mentioned such that one degree or another in Castro’s special proposals to improve the economy.
“ Cuba is not took offense to to grow by 1 . 5 percent. Bota can grow by 3 to 4 per-cent if it makes better use of the truck cover’s resources and has a system that can appeal to more investments, and opens per se more to the world, ” accepted Ruiz. “ That’s the positive lesson of this study. ”
Several economists consulted times el Nuevo Herald agreed simple fact calculations by Vidal and his team should be estimates that will surely be debated concerning economists, and cannot take the place of difficult statistics provided by the government.
Vidal’s work “ is extremely useful in the absence of more traditional then reliable statistics, but its results to be able to taken with a grain of sodium because it is an estimation based on piece or incomplete information, ” discussed de la Torre.
“ Until Cuba has a approach to national accounts like those within the United Nations, it will always be challenging compare Cuba with other countries, ” he said.