According to a report by Reuters, Cuba’s government is responded to a liquidity shortage by cutting imports and extending credit terms with trading partners.
The effects of a severe drought and low commodity prices are the culprits in the latest challenge for the struggling island nation.
Cuba is dependent on both exports of commodities and imports of food to sustain growth. Domestic food production has been hit by the drought, causing Cuba’s Civil Defense agency to act.
According to Granma, the government said about the drought, “To minimize the impact of this danger, vigilance and monitoring of the evolving situation, risk assessment, timely communication with the population and appropriate authorities must increase.”
Cash derived from the domestic production of nickel and oil has suffered in the recent commodities rout.
According to Reuters, Marino Murillo, Economy Minister, indicated to the National Assembly that export revenue had been less than expected and “adjustments” would be made.
There is no way to track Cuba’s foreign exchange reserve balances. In recent years, it’s annual trade deficit has been estimated at $2bn. According to the World Trade Organisation, Cuba ranked 108th in the world as an exporter of goods in 2013 and represented just 0.03 per cent of world merchandise exports.
Barter is the primary method of trade with it partners. For many years, Cuba has bartered services such as medical care professionals in exchange for oil with Venezuela. According to Pavel Vidan, a former Cuban central bank official, this arrangement amounts to an implicit subsidy worth $2.7bn a year. But with oil’s recent decline impacting Venezuela, Cuba’s cash position has deteriorated accordingly.