Growth is practically arrested in Latin America, according to first-quarter figures on the gross domestic product.
The balance for 2001 will show a new drop in per capita gross domestic product in the region, asserted the Banco Bilbao Vizcaya Argentaria in its latest report on Latin America. The bank has lowered its prediction of growth in this group of countries from an initial 3.9% down to 1%, a rate that fails to match population growth.
The reasons for this more pessimistic view are to be found in a world economic slowdown greater than estimated at the beginning of the year.
The feeble growth of the main economies has translated into a heavy reduction in external demand and, as a result, in Latin American exports as well.
The Mexican economy has been the hardest hit by the consequences, given its high degree of dependence on industrial activity in the United States. Its growth this year will be limited to 0.2%, according to the bank, as compared with the 6.9% growth registered in 2000. (Spanish newspaper Cinco Días, 04/09/2001)
The number of layoffs announced in the United States has already surpassed one million so far this year, despite the fact that the pace of cutbacks was curbed in August. In all, U.S. companies announced plans to eliminate 140,019 jobs that month, which was 32% less than the total for July, but over double the cuts registered in August of 2000. As a result, the sum total for the first eight months of the year reached 1,120,000 jobs eliminated, a number 83% greater that the total cuts in the year 2000. The telecommunications sector continues to be the hardest hit, with 19% of jobs in the sector eliminated so far this year. (Spanish newspaper Cinco Días, 05/09/2001)
The serious budgetary difficulties in Germany and Italy and less severe difficulties in Spain are joined by those of France, whose cash deficit rose by 16% in the first five months of the year. (Spanish newspaper Expansión, 05/09/2001)
German Minister of the Economy Werner Müller admitted that growth in the gross domestic product of the German giant will not reach 1.5% this year. Up until now he had only admitted that growth would be under 2%. Müllers declarations will act as a further bucket of cold water for those who had predicted a swift recovery for the German economy. (Spanish newspaper Cinco Días, 05/09/2001)
While U.S. industry was beginning to give off positive signs of recovery, it is now the service sector that is responsible for throwing a new bucket of cold water on expectations. Activity in the service sector declined once again in August, according to figures from the National Association of Purchasing Managers. The monthly index of activity dropped from 48.9 points in July to 45.5 points in August, which represents the second consecutive month below the 50-point level, considered the dividing line between recession and growth. In August there was a sharp drop in new orders, indicating a serious decline in activity for the coming months. The figure far exceeded the predictions of analysts who expected a minimum reduction to 48 points at most. (Spanish newspaper Cinco Días, 06/09/2001)
According to figures from the International Monetary Fund, between 500 billion and a trillion and a half dollars a yearbetween 1.5% and 4.5% of worldwide gross domestic productgenerated by illegal activities are laundered through the banking system. (Spanish newspaper El País, 06/09/2001)
The Central Bank of the United Kingdom recently cut its prediction for gross domestic product growth in 2001 to 2%, the lowest level since the recession in the early 90s. (Spanish newspaper Cinco Días, 06/09/2001)
Moodys, a rating agency specializing in risk assessment and considered a world leader in this area, warned yesterday of the possibility of lowering the rating of Japanese sovereign bonds.
Today the gross domestic product figure for the second quarter of the year will be announced, and analysts predictions point to a drop of between 0.9% and 1%. If this is the case, the economy would technically enter a recession after a 0.2% fall in gross domestic product between January and March. The figure raises questions about the future of the worlds second economy in the context of a slowdown heightened by the weakness of the United States. (Spanish newspaper Cinco Días, 07/09/2001)
As can be seen, the economic crisis is not a consequence of the September 11 attacks and the war against Afghanistan. Such claims could only be made out of total ignorance or an attempt to hide the real cause. The crisis is a consequence of the resounding and irreversible failure of an economic and political conception imposed on the world: neoliberalism and neoliberal globalization.
The terrorist attacks and the war did not give rise to the crisis, but they have considerably aggravated it. What had already been rapidly advancing was abruptly and untimely boosted even further. Humanity must now confront three extremely serious problems, which feed off of one another: terrorism, the war and the economic crisis.
The economic crisis also means the aggravation of major problems that are far from being solved: poverty, hunger and disease, which kill tens of millions of people in the world every year; illiteracy, lack of education, unemployment, and the exploitation of millions of children through child labor and prostitution; the trafficking and consumption of drugs, which mobilizes and absorbs hundreds of billions of dollars; money laundering; the lack of drinking water; the scarcity of housing, hospitals, communications, schools and educational facilities. The crucial rights of all human beings are affected.
The crisis will have an especially negative impact on the struggle for sustainable development, the preservation of the environment and the protection of nature from the merciless destruction to which it is being subjected, and which is causing the poisoning of the waters and the atmosphere, the destruction of the ozone layer, deforestation, desertification, and the extinction of animals and plants. How could this possibly not be taken into the slightest account?
There are nations and even entire regions on some continents that could be annihilated if terrifying plagues like AIDS are not urgently combated and defeated by humankind; and if terrorism, war and the economic crisis are not resolutely confronted. Now is the time when cooperation among all countries is needed more than ever before.
Although it is essential to return to this theme before I finish my presentation, I would first like to explain how the current international situation and the economic crisis are influencing and will undoubtedly continue to influence our own country.
The economic crisis had already been affecting some of our main sources of convertible currency.
The most direct immediate consequences: the price of sugar on the world market has fallen from 9 to 6.53 cents a pound; the price of nickel, another export line in which production had increased alongside a reduction in costs and fuel expenditures, dropped from 8.64 dollars to 4.715 dollars a pound; sales of tobacco, another of our most important export products, are declining in all markets. The crisis has also limited other exports of goods and services that were being developed.
Direct consequences of the terrorist attacks and the war
Despite the world economic crisis that was developing and the rise in airfares resulting from increased fuel costs, we had received a total of 1,304,597 tourists as of August 31 this year. This represented growth of 7.8% in comparison with the same period last year, when 1,200,076 tourists were received.
The number of visitors staying in tourism industry facilities grew by 11.3%.
In September, the total number of visitors decreased, in only 20 days, by 9.9% in comparison with the same month last year. It is estimated that the decrease for the month of October will reach 14%. Varadero and the city of Havana, the countrys two most important tourist destinations, are also the most affected.
The goal of receiving a total of two million tourists was feasible, and the first million was reached three weeks earlier than last year, during the first quarter. Now the growth achieved will likely be only 3% to 6%.
The blow dealt to the Caribbean after September 11 was even more severe. They depended more on tourism from the United States.
There have been other negative effects resulting from the causes mentioned above and from other causes aside from terrorism and the war: The possibility of obtaining credits has been reduced due to the reduction in our convertible currency income; We have financial obligations that must be met despite the reduction in convertible currency income.
Foreign exchange bureaus
Cubas foreign exchange bureaus (known by the acronym CADECA) felt an immediate effect as soon as the bombing started. To allow for a fuller understanding, I need to explain that during the most difficult moments of the special period,1 the depreciation of our currency, the Cuban peso, led the exchange rate to 150 pesos to the dollar. The measures adopted and the creation of the CADECAs improved the rate to 20 pesos to the dollar. This brought major benefits to the population: their money rose in value, and all the people were given access to stores operating in convertible currency.
Over the course of more than five years, our country achieved an unprecedented feat, unique in the world: despite the blockade and the economic war, it managed to maintain a stable exchange rate for its currency, with minor fluctuations in one direction or the other. The bank always obtained a small difference in its favor, because the CADECAs met with a greater supply of dollars for pesos than the supply of pesos for our convertible pesos (equivalent in value to U.S. dollars within Cuba). The difference obtained was devoted entirely to acquiring raw materials sold in convertible currency in order to manufacture products for sale to the population in Cuban pesos, from French bread to brand-name beer, along with many other products. The national currency funds thus recovered served in turn to maintain the stability of the peso-dollar exchange rate.
Then the situation was reversed: the supply of dollars decreased and the demand for convertible pesos increased. For 20 consecutive days, with the exception of three, the bank supplied more dollars than it received. The adverse balance reached almost four million dollars.
The CADECAs operate on the principle of supply and demand; it can be no other way. As a result, the peso began to decline in value. At one point, the exchange rate reached 28 pesos to the convertible peso in a number of provinces. Three days ago it stabilized at 26 pesos to the convertible peso; convertible pesos are equivalent in value to U.S. dollars and can be immediately changed into U.S. dollars upon request.
The peso, in these circumstances, lost 18.18% of its value. This is a situation that must be monitored closely. At the moment, the country should not take any risks with its convertible currency resources. It is our duty to inform our people, so that they may adopt the decisions they deem most advisable under any given circumstances. At times when the situation calls for the devaluation of the peso, they should not let themselves be influenced by the advice of speculators or by fear.
It should not be forgotten that the Revolution, in such difficult conditions as those prevailing in 1994, succeeded in bringing about the decrease in the exchange rate from 150 pesos to the dollar to 20 to the dollar, and it kept this rate relatively stable for many years. The population has the possibility of making term deposits in pesos, which pay an interest rate of 7.5% annually, triple the interest paid on accounts in dollars, and 50% more than the interest paid on convertible pesos.
In the end, the Revolution will win this battle against the consequences of the international economic crisis as well, no matter how serious that crisis becomes, and its currency will eventually increase in value once again.
The Revolution, with all its moral authority, guarantees all citizens:
1. That the CADECAs will not be closed
2. That all bank deposits, whether in regular Cuban pesos, convertible pesos or dollars, will be absolutely respected.
3. That the stores that sell goods in convertible currency, and to which everyone has access, to a greater or lesser extent, in accordance with their income in one currency or the other, will not be closed.
4. That the farmers markets will remain open.
5. That the value of the Cuban peso will be resolutely defended. The prices of goods and services currently offered to the population at official prices, whether rationed or not, will not go up by a single cent. In accordance with this policy, the only prices that may vary are those in the farmers markets, for obvious reasons, since they operate on the basis of supply and demand, and those in the state-run farmers markets, which should use the regular farmers markets as a point of reference, but maintain lower prices, depending on the resources available to us. The prices in convertible currency stores may vary as well, as they always have.
6. The prices of the 700,000 Chinese television sets that will be distributed and sold to the population in national currency will be calculated at the exchange rate of 20 pesos to the dollar, as was previously established. They will be paid for in the installments agreed upon, with no interest charges whatsoever.
We have not lived through ten years of the special period in vain.
Today, of course, the main concern of our people and the planet as a whole is the preservation of peace, because without peace, the world would be headed towards a fatal abyss. And we will struggle for peace with the same courage, honor and dignity as we always have.
We will confront the economic crisis successfully. No sacrifice intimidates us, not even the sacrifice of our lives. This is very well known. We have endured all manners of sacrifices for many years. Those who thought the Revolution would only last a matter of weeks now admire our heroic capacity to resist and move forward.
Many pages could be filled with accounts of the feats we have achieved. We need only mention a few:
Before the special period, out of every peso invested, 80 cents were exploited, and that figure fell to 50 cents in 1994; today it stands at 91 cents. In 1994, it took approximately 12 days to build one hotel room; in 2000, the time was reduced to 2.2 days.
The budget deficit has been maintained at less than 3% of the gross domestic product over the last five years, after reaching 33.5% in 1993.
Labor productivity has increased by 19%. Almost 75% of the growth in the economy has resulted from this factor.
The tourism sector has experienced an eight-fold increase in income and a five-fold increase in the number of tourists. This has been achieved by merely tripling the number of hotel rooms and doubling the number of workers.