Summary of the presentation by Francisco Soberón, Minister President of the Central Bank of Cuba at the Congress of the National Association of Cuban Economists (NACE).

We Are on the Right Track --

In all probability there is not another example in the world of an
economy so much talked about but so poorly-known and understood as
the Cuban economy.

This situation originates in a number of causes, among them:

1. The rush of broad sectors of international social sciences,
including those self-proclaimed progressives, to unconditionally
subscribe the ideas of the so called Washington consensus as the only
"scientific" and "modern" alternative to solve the world's
problems,
and their refusal to consider alternative models as a result of the
perplexity caused by the collapse of the Soviet Union.

2. Control of the world press by media transnationals, mainly from
the USA and Europe, which offer biased and superficial coverage of
Cuban reality.

3. A distorted view of the Cuban economy stemming from political
prejudice that leads many foreign economists and journalists to
discuss it with pre-conceived criteria and try to find by all kinds
of practical explanations to support their negative criteria.

4. Strong financial resources invested by American administrations to
fabricate a negative image out of everything that happens in Cuba.

Generally, such circumstances prevent the necessary in-depth study to
understand the fundamental principles of the Cuban economic policies,
namely:

1. Before 1959, the capitalist system in Cuba led the country to
extreme poverty and total political dependency on the United States;
this situation generated a revolution that developed into a socialist
system. Thus, any road that leads back to capitalism is viewed as a
return to a humiliating past utterly rejected by our people.

2. Cuban economic policy is not aimed at developing a consumer
society as modeled by First World countries, because we are convinced
that such a model alienates and diminishes the human being, is not
sustainable and leads to the disappearance of the human species much
sooner than we are able to predict today.

3. The Cuban economy is aimed primarily at materializing a project of
the revolution which, from the outset, proclaimed that every human
being should receive: basic nourishment, free high quality medical
services, unlimited and excellent education, dignified employment,
access to all cultural and sports opportunities and, in general, the
full exercise of their physical and spiritual capacities.

4. Considering that the country has limited material resources and
lives under the everyday pressure of the US blockade, it must
constantly determine priorities for the use of its resources;
priorities that differ considerably from those of capitalist
countries. For example, we prioritize expenditures to save the life
of a child over the purchase of state-of-the-art cars for elite
consumers or luxury buildings for transnational offices. This is
precisely why in Cuba fewer children die than in the rest of the
Latin American countries and why in the rest of Latin American
capitals there are more luxury buildings and cars than in Havana.

To sustain these principles, after the collapse of the Soviet Union,
it was imperative to redesign the Cuban economy and survive in a
hostile international environment.

This process caused many distortions and mistakes -- publicly
analyzed and criticized by companero Fidel -- which allowed for
contradictions incompatible with the policy of the Revolution.

Since 2003, we have been working intensively to face and resolve
these contradictions.

In the monetary field, far-reaching measures have been taken, such as
Central Bank Resolutions 65, 80 and 92 aimed at reducing the presence
of the U.S. dollar in the Cuban economy.

We must stress that, despite these measures, possession of foreign
currency in cash or savings accounts is not forbidden and will not be
forbidden.

However, the growing preference of our people to have their savings
in national currency must also be underlined. Proof of this are the
numerous exchanges of dollar accounts for convertible pesos or Cuban
peso accounts requested by the population.

During the last twelve months, bank accounts in dollars have dropped
by 57%, while convertible peso accounts have tripled and Cuban peso
accounts show an increase of 35%.

Some of the main results of the adopted measures are the following:

1. A concentration of the International Reserves of the country in
the Central Bank. This confers a greater solidity to our financial
system and allows for a better control of these resources.

2. More liquidity and solvency for the Cuban financial institutions.
This allows for a higher contribution to the development of the
country with an increase in financial mediation efficiency, both in
the management of national resources and the capacity to obtain
credits in international financial markets.

3. Centralization of State hard currency income. This has
considerably reinforced the negotiating capacity of the Socialist
State which is beneficial for the country's commercial and financial
management. It has also contributed to the successful implementation
of the policy, outlined by companero Fidel, of honoring all
obligations derived from new foreign financial commitments and
renegotiated debts.

4. A more precise determination of the monetary offer. This allows
for more accuracy and fluency in the decision making process to
maintain the monetary and financial balance.

5. Larger presence of the banking system in internal and external
financial transactions, and a significant increase in bank-channeled
remittances.

6. A considerable reduction of the U.S. dollar component in the
country's cash flow input, which in the past reached 80%, versus a
dominant presence of Euros, Canadian dollars, Pounds Sterling and an
approximate 30% U.S. dollars at present.

7. A strengthening of money exchange control measures, resulting in a
better commercial and financial discipline, a more rational
expenditure and the disappearance of intermediary agents who
unnecessarily raised the cost of our imports.

Evidence of the success of this measure is the fact that in our trade
with China, formerly we used services of third countries which are no
longer needed. This, together with the good health of our mutual
relations and the punctual fulfillment of our obligations, has
brought our trade with China from 551 million in 2004 to 775.3
million in 2005. In other words, an extraordinary increase of 40%
with important savings and more fluency in the transactions.

Looking at the external sector, in 2004 the current account of the
balance of payment was positive for the first time in the Special
Period, due mostly to the action of the service industry that reached
a 57.6% of the total income in the country's commercial balance.

By the way, I should say that as part of the permanent campaign to
diminish the positive aspects of Cuba's economic activity, some
foreign media have recently overemphasized our country's deficit in
the trade of goods, disregarding the fact that the balance also
includes the result of services which show a positive balance six
times higher than in 1993.

Such behavior of the balance of services is particularly important,
and we can predict a further strengthening of this tendency in 2005.
This will validate in practice the possibility, explained in detail
by our Commander-in-Chief that our country's economy will
increasingly rely on the service sector. Such strategy is
particularly relevant in view of the current scenario of world
economy.

As we all know, after the unilateral termination of the Breton Woods
agreements by the United States and the disappearance of the US
dollar gold standard, the world has been flooded by dollar liquidity
generated by US commercial deficits which become reserves for
countries with superavits to trade with the US. These reserves are
later placed in US banks or are used to purchase debt instruments and
create a self-feeding credit expansion. So far, no adjustment
mechanism for this phenomenon is foreseen.

The total deficit in the US current account for the last 30 years is
close to 3 trillion dollars, and with their present deficit levels
(more than 600 billion a year) they will accumulate a similar figure
in only 5 years.

Part of this huge liquidity is administered by institutional
investors (investment funds, coverage funds, etc.) and is used for
stock market speculation not only in monetary transactions but also
in commodities and intermediate goods. Consequently, the economic
future of the producing countries depends on these speculations; this
is tantamount to playing a blind lottery.

These facts explain and justify the policy of the Revolution which
has chosen, as the only viable way, to live on science, on
specialized services and on all the possibilities generated by the
colossal investment on human resources the Revolution has made for 46
years.

On the subject of our foreign debt, I will only point out the
remarkable change in the structure of the financial commitments of
the country, of which only 27% are short term, while the remaining
73% are mid-term and long-term financial agreements.

The smaller proportion of short-term debt has the following causes:

1. Bilateral refinancing agreements reached in the last two years
with official entities, banks and providers by means of which
originally short-term obligations were renegotiated to long-term
conditions.

2. New mid-term financial facilities as a result of Cuba's increased
credibility in international markets.

3. Long-term payment of part of the energy bill according to present
agreements.

4. Important mid-term and long-term credits obtained in the last two
years for current transactions and investments.

All this shows that we are on the right track. However, in no way can
we disregard the need to correct the mistakes and deficiencies in our
economy. Among them, a harmful tendency to squander resources. I
always think of the Dutch, a hard-working and economizing people who
proclaim that the easiest and safest income is to save. Let us take
heed of this wise notion and think of how much welfare could be given
to our people, how far the quality of their life could be advanced,
if the resources the socialist state provides were used more
rationally.

Special attention must be paid to economizing fuel in today's world
scenario of no elasticity in the cost of hydrocarbons.

If in politics, with total conviction and not a bit of exaggeration,
we cry out Patria o Muerte!, in economy we could very well say,
Ahorro o muerte!

Apart from all the above, there is unquestionable evidence of the
success of the Cuban economy during all this period, in the fact that
it has served as the foundation for the country's extraordinary
social development, unique in Latin America. And despite being
subject to the harshest and longest economic war in world history,
Cuba, among all Third World countries, shows the highest life
expectancy rate, the lowest child mortality rate and the best
education; Cuban athletes win the more medals. In proportion to
population figures, Cuba has the highest number of professionals per
inhabitant, and more Cuban families own the houses where they live in
and enjoy drinking water and electricity. Cuban society enjoys the
furthest-reaching welfare system and has the lowest criminality
rates.

To be worthy of a people the Revolution has placed as high as the
Everest -- not only metaphorically but with the presence of our
excellent and self-sacrificing doctors in the Himalayan mountains -
we who hold a responsibility in the conduction of the country's
economy, must endeavor to achieve the objective, the cornerstone of
the task Comrade Fidel has undertaken without a minute's rest: the
formula of a socialist distribution according to work contribution.

With this in mind, we need to restore the role of the salary as the
incentive for production and productivity, to continue the policy of
a gradual, cautious and progressive reevaluation of the national
currency and put an end to the unfair and distorting purchasing power
of the US dollar in many spaces of our society.

It is therefore our inescapable duty to achieve the goal of making
work a source of honor for every Cuban and the instrument to
determine their standard of living. To say it with the accuracy,
wisdom and dignity of José Martí, "Without honor, man is no more. A
man must live of his own sweat, or not live at all."

Havana City, November 26, 2005

JUVENTUD REBELDE
November 27, 2005

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