CUBA: ECONOMIC REALITIES PROMPT POLICY CHANGES

Created: 2/8/1985

OCR scan of the original document, errors are possible

rfER AGENCY

REFERRED FOR DIRECTIA,

Special Analjrera

RMlltkM Prompt Policy Changes

mounting economic problem, and Soviei criticism ofanagement probably arm behlntt FlOo!ecent amphaala on raduclng tension* with lha US, on securing graatar access lo Waatarn markala. and on carrying out austerity measures at home. The punitive action laken fairmonth against Iwo high-ranking partf hardllnera, praaumably lor opposing Caatro'a poller ahltta, la another $lgneaurgence by lha pregmatlata In lha Cuban laaderahlp. Thaaa leaders may counsel Caffro to raduca hi* support to loralgn radical groupa and lo raduca lanalona with tha US, but hla racanl public atatamanta Indlcata thai ha ramalna unwilling to modify hla tlaa to Moscow or ranounce hla commitment to armad revolution.

Havana gambled last yearurst of spending, on imports and government construction projects would stkmulata sustained economy growth. Although moderate growth was attained, it became clear by the time of the CEMAavana last Octoberuba coutd no longer afford to stimulate the economy through increased imports without concurrently expanding exports to earn hard currency. |

has been critical of Havana's economic perto*mance and has

indicated that It will not increase economic aid to Cubas

complained that Cuba's development plana for last year were unrealistic and too costly. They accused Havana ol wasting Soviet petroleum and frittering away scarce hard currency By buying goods from the West that are available from CEMA.I-

Declares Economic War

Following the CEMA meeting, Castroeeting of the top leadership to review the country's economic difficulties and revise5 economic plan quickly. He called on all Cubans to wage an "economic war" against waste and inefficiency, and warned them that they will face hardships lor at least anotherB

The thrust of the new economicexports to the West, meeting trade commitments to Communist countries, and limiting imports of consumerCuba's need to save foreign exchange. The new focus on austerity and conservation measures, however, probably will result in declining real growth.

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PMrwery

Energy rationing and cuts In construction and social service projects are likely to cause Cuba to fall far short ofercent growth target for this year.

f Policy Changes

Castro's economic battle plan suggests he Is needing the USSR's implicit warnings about future levels of assistance. He appears increasingly receptive to advice from those in the Cuban leadership who argue for more pragmatic policies that require improved trade relations with the West. These lectors may explain why Havana Is emphasizing diplomatic, comrnercial, and cultural tiesariety ot European and Latin American countries.

Castro's recent efforts to appear responsible and moderale probably form the cornerstoneew campaign to reduce Cuba's isolation, to deflect US pressure, and to open up new markets for Cuban exportsl

Cuba's new propaganda emphasizes its willingness to negotiate with the US and highlights the emigration agreement reached with the US last November aseneral improvement In Cuban-US relations.!

Castro's need to ease political tensions with the US and open his economy more to the West, however, does not portend any intention to dissociate himself from the USSR, indeed, Soviet pressure on Havana to address Its economic problems appears to be largely responsible for the Cuban policy shift.

The Cuban leader wants toontinuing dialogue with the US on bilateral issues of mutual concern, such as sea rescue and fishing rights, in an effort toroad mternational audience of his willingness to compromise and reduce tensions. Pressures on Castro also may cause htm to be more flexible on multilateral issues such as Central America and Angola, but he will not alter his bask: distrust of and hostility toward the US.|

Even in Castro's most recent public statements, in which he exerted himself to appear conciliatory, the Cuban leader reiterated his unwillingness to renounce either Ns broad commitment to revolution or his specific support for the Sandinistas and the Salvadoran insurgents.

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