Speech by Ricardo Cabrisas Ruiz, a Council of Ministers vice president and Minister of Economy and Planning, during the 10th Period of Ordinary Sessions of the National Assembly of People’s Power’s 8th Legislature
We present to our National Assembly, and to the people it represents, this report that outlines the main aspects of the Economic Plan for 2018, which is the result of a broad process of work initiated in the early months of 2017.
We cannot present this without first referring to the performance of the economy in the current year 2017, which faced disparate circumstances, many of them adverse; but that in the end, even with strains, exhibits positive results.
The international context for Cuba continues to be characterized by the persistence of the economic, commercial, and financial blockade of the government of the United States of America, which with the coming to power of a new administration, has meant not only a setback in the discreet advances achieved in bilateral relations, but also the intensification of the application of the blockade and its extraterritorial nature.
However, once again, the international community rejected, with the vote of 191 countries in the United Nations General Assembly, this genocidal policy, that has caused enormous damages to the Cuban economy, and which 77% of our population has suffered throughout their entire lives.
In this complex scenario, the Cuban economy fights tirelessly for its advancement, and, although it has not fully achieved the objectives set out, shows favorable results in several productive sectors and services to the population.
I. ECONOMIC PERFORMANCE.
Among the main factors that have influenced the performance of the economy in 2017 are failures to achieve: expected income from exports of goods and services; the availability of fuel; the implementation of certain investment programs; and climate problems such as the acute drought and Hurricane Irma, which affected 12 provinces, causing substantial losses.
Due to the threat posed by this dangerous hurricane, more than 1.8 million people were protected. Affected housing exceeded the figure of 179,000; more than 2,900 education and health facilities were damaged; there were serious damages to electrical, road, water, hotel and telecommunications infrastructure.
In the agricultural sector, the losses surpassed 4 billion pesos, with damages to sugar mills, poultry and pig sheds, as well as varied and sugarcane crops.
The total damages caused by the hurricane reached the figure of 13,185,000 pesos.
The swift and timely response of our people, their leaders and entities, allowed sectors such as tourism, power generation and distribution, and water networks to be fully restored just weeks after the event.
At the same time, efforts being made to recover housing are noted, with an intense work program underway, given the scope of these damages.
Work will continue in the recovery from the damages, constituting one of the main priorities of the Plan for the coming year.
Despite the abovementioned difficulties, the efforts made to drive the economy, allocating resources to the main activities, allows us to estimate that the Gross Domestic Product in 2017 has grown, at constant prices, in the area of 1.6%.
This growth was favored by the dynamics of tourism activities (up 4.4%); transportation and communications (3%); agriculture (3%); and construction (2.8%), primarily.
In foreign trade activity, the failure to make payments on overdue letters of credit has had an effect on imports, as have difficulties in the use of credits.
Production of oil equivalent (crude + gas) is expected to fall short by 38,000 tons.
The import of fuels, for the second consecutive year, has been very tense. Deliveries are not made and do not arrive according to the structure or the planned schedules.
The participation of renewable energy sources in the generation structure is estimated at 4.25% compared to the planned 4.65%. The shortfall is mainly due to the lack of generation of electricity by Azcuba.
The main agricultural products report favorable performances, among them: tobacco, vegetables, beans, root vegetables, beef and pork; with the exception of eggs and fresh milk production, which fell mainly due to the impact of the drought and Hurricane Irma.
The investment plan is estimated to have been 90.8% met. The fundamental causes are centered on delays in the import of supplies and non-compliance in the implementation of work schedules.
The levels of investments associated with development, infrastructure, and tourism programs, have performed as follows:
1- Water diversion program: 90.1% fulfilled, linked to shortcomings in the expected import of equipment. Concluded were 2 kilometers of the Birán-Báguano canal.
2- Program of recovery of refrigeration and freezing capacity: estimated to conclude at 56%, given shortfalls in planned imports.
3- Biopesticides, biofertilizers, and biostimulants production program: includes plants in Havana, Villa Clara, and Granma. The Plan was 69% met, due to delays in imports of technological equipment and problems with the workforce.
4- Food industry recovery program: fulfills the Plan by 83%. Imports were affected by defaults on the payment of letters of credit. Refrigeration and transportation equipment was received for the dairy and meat industries.
5- Roads affected by Hurricane Matthew: new roads were built to facilitate access to Baracoa-Maisí and Baracoa-Moa. Work continues on other roads.
Of the four affected bridges, three were completed. The bridge over the Toa River is at 62%, with completion expected by the close of the first quarter of 2018.
6- Transportation capacity recovery program: the railway branch is expected to comply with the import of 15 Russian locomotives, seven have already arrived and the other eight will arrive in early January 2018. The 225 freight cars foreseen in the Plan were received.
7- Fuel storage capacity recovery program: 310,000 m3 of the planned 550,000 m3 were achieved, due to problems with the delivery of supplies of metals, paints, and consumables, delays in the contracting of these resources, as well as the effect of the incompletion of the workforce.
8- Storage capacity recovery program. San Luis logistics base: after the completion of the first two warehouses, work continues on the different objectives, although the completion of warehouses 20 and 16 does not meet the foreseen scope.
9- Tourism development program of Havana, Varadero, the Northern Keys, and Holguín: the Plan is 87.5% fulfilled, mainly due to damages caused by Hurricane Irma, and dedicating all human and material resources to the recovery of damaged hotel facilities, managing to restore 16,639 rooms.
10- Sustaining the National Electricity System: the contract to guarantee the repair of the “Felton” thermoelectric plant has already been signed and the corresponding credit is operative. The planned constructive actions have been carried out.
11- Renewable Energy Sources Program: it is estimated that the Plan will be 90.1% met.
Parque Herradura 1 (wind farm). 75.3% completed, due to delays in the execution of the credit and not undertaking the necessary imports for the planned installation, an aspect that has been resolved.
Parque Herradura 2 and the Photovoltaic Solar Program are advancing according to plan.
12- Project for the modernization and expansion of Antillana steelworks: efforts are underway on the different elements, but accumulated delays to the General Program have not been overcome.
13- Housing program: the completion of 10,200 homes is expected, for fulfillment of 105%.
Freight transport achieved 94.6% of its plan, this result is mainly due to the low contribution of railroads to total traffic.
Attention was returned to the silos recovery program, aimed at increasing the reception capacities in agricultural warehouses and silos, one of the main causes of ship demurrage charges.
Passenger transportation improved discreetly and surpassed plans by 4.5% reaching the figure of 2,000,026,000 passenger-trips.
In industrial activity, the tense financial situation during the year has led to the identification and prioritizing of financing and payments to suppliers that guarantee the main productions, but this goal could not be achieved in all cases.
The year closes with shortfalls in the production of personal hygiene and cleaning products and construction materials.
The total stock of packaging and containers did not cover the demand presented by the food industry, as such a commercial strategy has been drawn up with the suppliers of raw materials and investments in the industry to increase productive capacities and approach fulfillment of the demands. Such is the case of the investment to acquire a “palletizer” that will permit an increase in the current production capacity.
In the medication program, the actions and work strategy undertaken to ensure financial resources have allowed for a gradual decrease in shortages of medicines that midway through this year showed a difficult and complex situation, both of domestic production and those imported.
It is estimated that the year will close with shortages of 44 nationally produced medications and special attention continues to be paid to supplying this program, by all the entities involved.
The infant mortality rate stood at 4.2 deaths per 1,000 live births up to November, and the maternal mortality rate was 38.5 deaths per 100,000 live births by the same date; life expectancy at birth in women reached 80.45 years, with an average for both sexes of 78.45 years.
The 2017-2018 school year began satisfactorily in September, with enrollment of 1,761,000 students at different levels of primary and secondary education.
It is forecast that 100% of the Plan will be achieved in terms of water management, with more than 7.8 billion m3, with the impact of Hurricane Irma and the wet season having a favorable effect.
Tourism foresees an increase of 11.9% in visitors, reaching the figure of 4,700,000, which exceeds plans by 500,000 visitors.
Retail market distribution foresees exceeding projections by 14.6% in both currencies, mainly due to the increase in the participation of non-state forms of management, while the commerce system (Ministry of Domestic Trade, Mincin) is expected to surpass plans by 1.8%.
Meanwhile, retail market distribution in CUC ends the year surpassing projections by 4.1%.
Despite these results, supply levels do not meet the growing demands of the population and work is ongoing to advance toward this end.
The year 2017 has been characterized by great challenges in productive and services activities, the result of financial, material and climatic strains. However, based on the directive to protect the main priorities, it has been possible to guarantee the sustainability of basic services to the population, as well as the main levels of activity contemplated in the Plan, and work systematically continues in the recovery from damages caused by Hurricane Irma.
This does not mean that we can feel satisfied, but if we take into account the combination of the factors mentioned that have impacted the national economy in this period, we can conclude that progress is still being made with discrete steps; but the gradual trend of the development dynamic is sustained.
II. 2018 PLAN
It is important to highlight that the results of 2017, together with the present tension in terms of the availability of hard currency and fuel - which is influenced by the decrease in income due to shortcomings in exports of goods and services, and the fall in export prices of some of our products - to which are added, as has been explained, weather events, significantly impact the objectives that are recognized in the Economic Plan for next year.
The 2018 Plan is aimed at maximizing compliance as far as possible with the main “priorities within the priorities,” based on the efficient use of available financial and material resources, which constitutes a first degree element of attention, and monitoring to achieve the proposed objectives.
Among the priorities are:
1- The recovery from damages caused by hurricanes Irma and Matthew.
2- Investments associated with development, infrastructure, and the strengthening of hard currency income, including: Tourism Program; Mariel Special Development Zone; rail transport development; renewable energy sources development; maintenance of the national electrical system; expansion of storage capacity, particularly for food and fuel.
3- Food production based on satisfying national demand and the growth of tourism. 4- Ensuring the sugar harvest.
5- Sustainability of basic services for the population such as health, education, culture, passenger transport, among others.
6- Main industrial productions such as: steel, cement, personal hygiene and cleaning products, packaging, construction materials, spare parts and equipment.
7- Water programs; saving water and confronting the drought. The “Tarea Vida” Program.
8- Assurance program for the list of basic medicines (national production and imports).
9- Ensuring the highest possible level of supply in retail and wholesale markets, prioritizing products in greatest demand by the population and those essential to economic activity.
Expected dynamics in construction activities (up 12%), trade (6.7%) and tourism (4.2%), fundamentally, allows for estimates for the year 2018 of Gross Domestic Product growth at constant prices of around 2%.
Supported are productive levels and investments associated with exports of goods and services, development programs, infrastructure, and tourism demands. Meanwhile, health, education, and basic services are guaranteed to the population and those of other organizations whose budgets are not significant, but where their interaction with society is.
Regarding the availability of financial resources, the factors already explained confirm the tense situation in the hard currency balance sheet, of a short-term nature.
The country has been meeting obligations established in agreements already signed, as part of the insured government debt restructuring process, a policy that will remain unchanged.
Cuba reiterates that it will fulfill such financial obligations in the future, recognizing the understanding and support of the majority of its creditors. Great efforts are being made toward this end, given the importance of this matter.
At the same time, we confirm priority attention to guaranteeing exports of goods and services, their payment, and the identification of real, existing possibilities of substituting imports of any magnitude.
In comparison with the 2017 estimate, a higher level of exports of goods and services is planned, fundamentally driven by activity in tourism and selected industry, tobacco, and beverage productions.
Imports also grow, but a positive trade balance of 54,800,000 dollars results.
In food, imports of 1.738 billion dollars are projected; 66 million more than the estimate for 2017, which supports the demands of the Plan.
The food industry improves its productions and the main agricultural products project favorable growth. Root vegetables, beans, corn, fruit, and tobacco are highlighted. The production of consumable rice should grow by 10.8%.
The production of physical raw sugar is planned at 133,000 tons below the estimate for 2017 as a result of the effects of Hurricane Irma.
The total value of investments reaches the figure of 10.8 billion pesos, principally motivated by recognition of important prioritized programs, mainly in the tourism and energy sectors.
Particular attention must be paid to foreign investment to ensure that it plays a fundamental role in the economic development of the country, in correspondence with what is stated in Guideline No. 78, approved during the 7th Congress of the Communist Party of Cuba. The value of foreign investment is planned with a share of 5.6% with respect to the total value of the investment.
The post investment studies carried out should serve as experience in the evaluation of similar projects. Current results indicate that economic technical feasibility studies are not always used as tools for controlling the execution and exploitation of investments.
The Plan projects the completion of 13,754 homes and the start and development of 7,146 homes, incorporating those impacted by Hurricane Irma, where the recovery of affected homes is prioritized.
The total consumption of fuel equivalents (crude oil + gas) reflects growth of 4.9%, which includes that necessary for the generation of electric power, recovery from the damages caused by Hurricane Irma, response to investment programs, and levels of activity in prioritized sectors, as well as the non-subsidized sale of LPG (Liquid petroleum gas) to 500,000 new customers.
Special attention will continue to be paid to strict compliance with consumption rates during the implementation of the Plan, since it is considered that there remain important efficiency reserves to be exploited.
Electrical power generation grows 6.1% with respect to the 2017 estimate, and the share of the residential sector in total electricity consumption is 58.3%.
In the generation of electricity, the contribution of renewable energy sources for the year is planned at 4.35%.
There are capacities to support the demands of freight transport. The equipment expected to be acquired during the next year for rail transportation should begin to reverse the situation, together with the organizational measures adopted in this sector.
Passenger transport will reach the figure of 2,000,082,000 passenger-trips, which represents growth of 2.7% with respect to the 2017 estimate.
The delivery of 269 DIANA buses, to be produced in 2018, to provinces will increase transportation by more than 42 million passenger-trips.
The Plan guarantees the Minsap demand for medicines, foreseeing the financial resources that allow for contracting according to the productive cycle of the industry.
The analysis of packaging and containers considers the production of 50 million tin cans for the food and agriculture industry, which represent 25 million more units than the 2017 estimate, covering 83% of factory capacity.
The personal hygiene and cleaning program ensures basic products for the population, health services, education and partially the domestic hard currency market.
The water analysis supports 98% of total demand and that of agriculture, sugarcane and rice crops to a high percent. The program to confront the drought and its actions are maintained.
Tourism activity expects to reach 5 million visitors for the first time and growth in the total numbers of days tourists stay and tourism income.
In total retail market distribution, 7.4% growth is projected, as well as a slight increase in the sales of the Mincin Commerce System and a higher level in retail market sales in convertible pesos.
It is necessary to take into account the levels of existing and estimated operational inventories at the end of the year, under the premise of considering these in efficient management and as resources of the 2018 Plan, which allows us to lower import levels and the need to assume new financing.
Projected for 2018 is a similar employment rate to the 2017 estimate, the productivity of employees should see growth of 2.8% and the average salary 2.2%, with a favorable correlation with regard to the 2017 estimate, as well as in the enterprise system, where productivity increases 2.2% and the average wage 1.6%.
The analysis of the monetary programming allows us to estimate that the conditions of domestic monetary equilibrium will be maintained.
To achieve the above, we insist that it is essential to avoid payments that are not supported by productivity, both in terms of salaries and payments to the non-state sector, and to achieve an adequate relationship between these and the availability of goods and services.
We reiterate that the above objectives will be achievable insofar as we are able to fulfill, above all, the indications provided by the President of the Councils of State and Ministers Army General Raúl Castro Ruz in the Council of Ministers on November 25, which in essence we summarize below:
a) Achieve sustainable levels of income, investment, and debt, while ensuring the main “priorities within the priorities.”
b) Maintain the principle that debts can not be assumed that we are not able to honor promptly when due. Pay particular attention to the debt restructuring process for overdue and soon to be due letters of credit.
c) Not renounce the development programs that are underway and have their financing guaranteed, ensure greater exports, the substitution of imports, and the creation of new sources of employment for our population.
d) The adjustments that have been introduced in the Economic Plan must be implemented purposefully, so that the effects on our people are minimized as far as possible.
e) There is no alternative but to work with urgency, seriousness, and discipline in the drafting of a realistic Plan and its implementation, which will be difficult and complex, but not impossible.
Based on the above, we emphasize:
a) Guaranteeing anticipated income from the export of goods and services and advancing in the promotion of new exportable goods, regardless of their productive scale.
b) Advancing in the country’s economic development investment programs.
c) Eliminating unnecessary expenses in all activities, highlighting attention to travel expenses abroad and other items that impact the financial constraints we face.
d) Being extremely demanding in the rational use and control of hard currency and energy.
e) Guaranteeing efficient management of operational inventories as resources in the Plan.
f) Avoiding the payment of wages without productive support and maintaining strict monitoring of monetary equilibrium in the population sector.
g) Advancing in the principles of territorial planning, which will allow us to identify and enhance the capacities available in every corner of the country.
Even when we are faced with complex scenarios, it has been demonstrated that, with the efforts of all, we are capable of ensuring the main strategic and development objectives of the country.
To conclude, I once again return to the words of Army General Raúl Castro Ruz in the aforementioned Council of Ministers, and I quote:
“… in the midst of the complicated conditions we face, we will not renounce the development programs that are underway and have their financing guaranteed, as they will ensure greater exports, the substitution of imports, and the creation of new sources of employment for our population.” End of quote.