MADRID, Spain. – Agriculture and tourism are two sectors of the Cuban economy that are going through the worst times. Both are burdened with similar problems that thwart growth opportunities.
They are two crucial fronts in the economy that require a considerable participation of private operators and are dependent on foreign factors. Agriculture needs to import phytosanitary products, fertilizers, technology and supplies. Tourism need tourists who can supply currency.
We know that the agriculture sector has collapsed, and that the first semester of the year has seen very limited harvests. With regard to tourism, we know that visitor arrivals plummeted to 90% of what it was in 2019, and the same is true for hard-currency income.
We know about both sectors that solutions are not in sight. With food issues, the regime has had to accept donations from other countries in order to avert a food crisis; that was the case last year with [donations from] the United Nations World Food Program. With regard to tourism, there will be no improvement unless the spread of coronavirus is brought under control; this is what keeps many international travelers away, as they switch travel destinations to places like Costa Rica and the Dominican Republic.
Let this brief introduction suffice to show the surely problematic scenario for these two sectors. About tourism, it’s true that this sector, which accounts for only 5% of the workforce and a little more than 6% of gross domestic product (GDP), does not have a “carry-over” effect on the economy since its role is small. However, tourism is one of the principal sources of income to the current account, which compensates for the elevated deficit in the trade balance.
The Cuban economy stopped generating tourism income in March 2020 when coronavirus forced confinement internationally. The sector has not generated income for approximately a year and a half, income that is vital to the State coffers. The effects of this have been intense.
This is not a scenario that is exclusive to Cuba. All countries that rely on tourism have been affected by the drop in international travel and by measures enacted to end the pandemic. Each nation has attempted to solve what has been, in fact, a new problem by enacting fiscal and monetary instruments.
In the case of Cuba, the government’s actions leave much to be desired. It has been involved in other matters since the beginning of the year, like for example, the application of the disastrous Ordering Task; it has watched as international tour operators who manage the hotel chains reassigned workers to other jobs and readied their development accounts for hard times. However, the government has continued on with its hotel construction investment plans, and the landscape in Havana and in other tourist zones has been altered by the surge of new facilities that increase the number of hotel rooms and jobs.
On the other hand, small private businesses linked to international tourism have had to close their doors and fire their employees as they hope for better times to come. There are serious doubts about whether these businesses will do a comeback when the economic cycle changes. It they get no State assistance for that purpose –consider that the budget is depleted and the public deficit is around 30% of the GDP- it will not be easy for them to recuperate from such a long period without earnings.
The regime has explored alternatives to keep the hotel sector in “idle mode” at this time, but the scarce data available does not allow us to reach conclusions. One idea has been to open the international hotel and gastronomic availability to domestic tourism as long as clients pay with US dollars or other hard currency. The decision has compensated some of the businesses that were able to open with a moderate amount of work. However, the bad side is that productivity has been reduced as businesses have opened with lesser capacity for a lesser demand, while bearing costs that are difficult to lower in a short time. Price changes have made hotel services noticeably more expensive, thus making it very difficult for a Cuban clientele to enjoy these benefits.
If we compare the 2010 figures with those of 2019 –the last reported year in which tourism reached reasonable results, albeit on a low scale- income dropped 75% from one year to the other, after a first quarter where the Caribbean tourist season went well and before international confinements started as a result of the pandemic.
Income was reduced to half, by 56.4%, because the currency in which calculations were performed was the CUC, which allowed for it. Overnight stay by foreign visitors, and the occupancy rate, as field indicators, diminished by 68.1%, practically by half, while overnight stay by domestic clients diminished less, by 48.1%. The purchasing power of Cubans prevented, at least for now, the development of tourism for domestic demand, as was happening in Spain, France and Italy.
Trends in the sector for 2021 have not improved, on the contrary. The latest data relative to the period January to May indicate that 137,138 foreign tourists visited Cuba, which represents an 89% drop in comparison to 2020 results which, as already stated, were bad. The sector remains in a state of collapse with inauspicious perspectives for the following months, inasmuch as the pandemic continues to affect the domestic population and thus puts a damper on demand.
If Cuba doesn’t want to miss out on the Caribbean high tourist season, which starts in November, the efforts should concentrate on prioritizing the eradication of COVID-19 in the island. The Cuban tourism model does not allow for rehearsing alternative formulas such as distance working or combined stays. The government must think of ways to reactivate the private sector that provides services to the tourism industry. The loss of entrepreneurial muscle that has hit this sector could make its comeback a very difficult proposition. This is why special support measures should be taken, a complete agenda that pays maximum attention to the changes that are happening on an international level with tourists and the use of digital technologies. We are talking about a sector that requires more participation from the private sector and less from the State. Will the Cuban government rise to the occasion?
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