Investment, freight declines reflect Cuban woes

[El Presidente]

Investment, freight declines reflect Cuban woes

By Marc Frank

http://www.reuters.com/article/idUSN0810508920100908

HAVANA, Sept 8 (Reuters) - Cuban investment and freight transportation fell significantly through June as the Caribbean nation grappled with a two-year old financial crisis and recession, according to government reports released this week.

The National Statistics Office (NSO) reported that all investment, in foreign currency and local pesos, fell 14.7 percent from January through June and freight traffic 12.2 percent, compared with the same period in 2009.

Investment was reported down across the board, from construction to the purchase of machinery and agricultural inputs.

Investment fell just over 15 percent in 2009 and freight transportation 5 percent, according to the government.

Cuba does not release overall performance data until the end of the year, but the statistics office (ONE.CU) had reported earlier that manufacture stagnated and food production fell 7.5 percent through June.

Local economists say import-dependent Cuba's economic performance has always been tied to the level of supplies purchased abroad the previous year.

With further reductions in spending in place for 2010, Cuba's economic problems will likely continue for a while, they said.

The declines follow severe budget cuts and a reduction of more than $5 billion or 30 percent in imports last year as Cuba fought off the effects of the international financial crisis, hurricanes, policy errors and the long-standing U.S. trade embargo against the communist-led island.

Economic growth has fallen from 7.3 percent in 2007 to 4.1 percent in 2008 and 1.4 percent last year, according to the government.

LIVING WITHIN ITS MEANS

President Raul Castro, who took over for his brother Fidel Castro in early 2008, replaced his economic cabinet last year and declared the country had to live within its means and improve efficiency.

Castro has warned of hard times throughout the year even while promising to modernize the Soviet-style economy, the last on the planet except for North Korea.

He announced last month that as much as 20 percent of the state's labor force, or 1.2 million people, would be let go or transferred over five years and said he would allow more family businesses and private hiring to pick up part of the slack.

"We have to erase forever the notion that Cuba is the only country in the world in which people can live without working," he said.

Castro's critics at home and abroad have repeatedly warned he has been too slow off the mark with needed changes.

He has undertaken a series of reforms in agriculture, from leasing fallow state land to loosening the state's straitjacket on farmers' purchase of supplies and sale of their produce.

Similar reforms began this year in the retail sector where some minor services were leased to employees, more licenses to peddle food granted and cooperatives planned.

Modernization will also include warming up to foreign investors, local analysts believe, with the government recently extending from 50 years to 99 years the amount of time they can lease land.