Cuba’s Papal Blessing Blemishes

Cuban debt saw rare actions in the exotics market as the Pope visited the island to encourage religious revival and was warmly received by the Castros at the same time Venezuelan benefactor Chavez underwent further anti-cancer treatment as opinion polls showed him tied with unified opposition candidate Capriles for the October presidential contest. The closed-end Miami-based Caribbean Basin fund which has targeted a post-US trade embargo for decades with investments in cruise lines and food companies, also enjoyed a brief pop as the visit triggered Washington discussion of further restriction removal with educational, family and remittance connections already flowering. According to outside observers GDP growth should be 3 percent this year after the leadership sanctioned individual private business launch to absorb the shedding of hundreds of thousands of state employees at loss-making firms. Smallholder agriculture could also receive credit and equipment inputs under the changes in an effort to revive commodity exports that have concentrated on nickel and recent discovery of offshore oil. Services, in particular medical professional deployment is the primary balance of payments support, offsetting a large bilateral goods deficit with Caracas. Chinese loans are available for commercial purchases, and Brazilian joint ventures operate in the tobacco and ports sector. While Havana has dismissed relation with the “colonial” Bretton Woods institutions with their historic Western dominance it has edged closer to regional lenders including the new “Bank of the South,” Andean Investment Fund and Caribbean Development Bank. Although not a member of the OAS democratic club, many members have urged participation and dialogue at periodic Americas summits such as April’s Colombian one. Cuban officials have reportedly sought technical advice in such areas as currency and pension regimes in an effort to control retirement costs and manage an eventual switch from the artificial “convertible peso” pegged at par to the dollar for tourist use. According to end-2011 statistics 350,000 citizens applied for a business license but most kept their state jobs against the goal of half private sector transfer by mid-decade.

Longer-term recovery is likewise elusive in neighboring Haiti despite strides the past year from the epochal earthquake, the IMF finds in its latest snapshot. GDP growth at 5.5 percent in FY 2011 was equal to the previous period’s contraction as inflation dipped to single-digits and fiscal and external positions strengthened. The currency has firmed against the greenback despite the financial system’s 60 percent dollarization level, but the tax revenue-output ration remains barely above 10 percent. Despite almost $1 billion in external debt relief, domestic arrears have accumulated and further liabilities will mount with Treasury-bill issuance. A new central bank law attempts to promote central bank monetary policy independence after long evading ruling power endorsement.