Blackouts, Economic Decline, and Bleak Prospects
After a month of midterms, it's time to get back on track.
Over the last month, my schedule was overwhelmed with midterms and simply keeping up with class readings. It is only now that time and current circumstances have become more favorable for my writing.
As some of you who follow Cuba more closely may know, it has become impossible to ignore the ongoing blackouts on the island. At the beginning of the year, around February, blackouts became increasingly severe and prolonged over time, as I reported in previous updates. These blackouts affected anywhere between 20% and 45% of the population, lasting up to 16 hours in some areas, particularly in the central and eastern parts of the country.
At the end of last month, the Antonio Guiteras Plant failed, compounding the already dire circumstances caused by the lack of fuel in the country. This left the population in darkness for several days. The economic conditions on the island have worsened considerably due to recent tropical storms and hurricanes that have battered the country. Miami Herald reporter Nora Gámez Torres has reported:
"Two hurricanes in a month, plus the lack of electrical service and oil, will worsen what experts call 'food insecurity,' or the lack of available food on the island. The government’s disastrous agricultural policies, premised on price caps and a centralized distribution system that forces producers to sell most of their crops to the government at below-market prices, have caused food production to plummet on the island."
Her statement succinctly summarizes the current state of market forces on the island, which faces immense governmental pressure in the form of price controls, central planning, and a lack of Smithian gains. Private entrepreneurs are suffocated by the heavy-handed policies that the regime has imposed, particularly through its recent legislation on imports.
In response to Nora’s article, I wrote the letter below to criticize these policies and highlight the notion that Cuba is in its worst possible state, primarily because it lacks the very mechanisms that market economies rely on to mitigate risks, such as those posed by hurricanes:
CUBA’S ECONOMY
The Nov. 8 article, “Hurricane left trail of collapsed homes, lost crops, and damaged infrastructure in Cuba,” highlighted the devastation left by Hurricane Rafael which, along with recent blackouts and a prior storm, has deepened Cuba’s crisis. El Nuevo Herald reporter Nora Gamez effectively connected these crises to Cuba’s worsening food insecurity.
According to a USDA study, 37.8% of Cubans faced food insecurity in 2023, a figure likely even higher now1. Beyond natural disasters, Cuba’s centrally planned economy poses additional challenges.
Without resilient supply chains or private insurance, as found in free-market economies, Cubans are left without essential goods or financial support after disasters. The state’s monopoly over these services limits responsiveness, slowing recovery and compounding hardship.
Even humanitarian aid may fall short, as many Cubans in exile lack trust that the Cuban government will distribute these resources transparently. Cubans are now on their own to do what they can to survive.
Carlos Martinez
Silver Spring, MD
This year has been quite hectic for the Cuban regime. Not only have they had to confront the issues listed above, but they have also faced an even longer list of additional problems. For instance, they removed the former Minister of Economy, Alejandro Gil, citing “grave” errors and alleged corruption. Similarly, they recently dismissed Vice Prime Minister Jorge Luis Perdomo Di-Lella due to errors in the performance of his duties. Moreover, as I shared in my Substack Chat, the regime reported a GDP growth rate of -1.9% last year compared to 2022.
It could be argued that this has been an especially bad year for agricultural production in Cuba. Persistent adverse weather conditions, along with structural inefficiencies, have made it clear that the economy has been unable to recover. However, next year is unlikely to bring any relief. Current Minister of Economy Joaquín Alonso Vázquez has already indicated that Cuba is expected to face another contraction in economic growth.
This prediction adds to the grim legacy of the "Ordering Task" (Tarea Ordenamiento), a policy initiative that has only worsened inflation, deepened poverty, and exacerbated economic imbalances since its implementation. What initially seemed like a “special year” in terms of hardship is instead becoming the norm, with no meaningful reforms in sight to reverse the ongoing decline.
To conclude, I would like to cite a recent study by Dr. Pavel Vidal that details the state of the informal currency market in Cuba following the government's crackdown on currency traders.
“The absence of shocks in the trajectory of foreign exchange supply and demand leads to an equilibrium that explains the stability of exchange rates. In turn, the invariability of exchange rates discourages speculative operations, creating a feedback effect that reinforces market stability. On a cumulative monthly basis, in August, the supply and demand for dollars fell by more than 40% compared to July levels. In September, there was a further contraction in the volume of operations in the informal dollar market, averaging a decline of more than 50%.”