Foreign Relations of the United States, 1961–1963, Volume X, Cuba, January 1961–September 1962

330. Current Intelligence Memorandum⁰

OCI 1265/62

Washington, April 25, 1962.

SUBJECT

• The Economic Situation in Cuba

1. The economic section, (see attached Annex),¹ of NIE 85-62, “The Situation and Prospects in Cuba,” 21 March 1962,² remains valid. In these paragraphs we said that, despite record exports of 6.4 million metric tons of sugar, 1961 was a year of economic decline in Cuba. The reasons for this were complex, but among the most important were the fact that lower prices and the shift of the largest proportion of sales from the US to the Bloc brought no more returns than a normal crop and the lowest amount of convertible exchange in modern Cuban history. Cuba obtained some foodstuffs and other consumersʼ goods from the Bloc, but not in the quantity or of the quality of those previously imported from the US. During the first half of 1961 there was an acute shortage of industrial raw materials, but much more serious was the accelerated depreciation of the Cuban industrial plant, including transportation facilities, for want of replacement parts. Bloc credits promised—$357 million for new industrial plants—have thus far had little effect on the economy. The Soviet credits, which make up $200 million of the total, are mainly for industrial and mineral processing plants which are not expected to become operational until 1964-1965. In addition, of course, there have been dislocations due to the reorganization of the economy and the shortage of managerial talent. None of these adverse factors have been or are likely soon to be corrected.

2. We estimated in NIE 85-62 that the Cuban economy would continue to face problems in 1962 like those which caused the decline in 1961. Evidence continues to come in in support of this judgment. Indications are that the sugar cane harvest—still not completed—will be about 4.5 million metric tons, as compared with 6.6 in 1961 and an annual average of 5.6 million tons in the period 1957-1960. Cuba is curtailing its commitments to export to the Bloc in order to maintain the level of sales to the Free World. We believe it unlikely that Cubaʼs earnings of convertible exchange from all sources will be sufficient to prevent a net worsening of its convertible exchange position during 1962. This and other restrictions on Cubaʼs capacity to import will seriously hamper the Cuban economy during 1962, and it is likely that the total output of the Cuban economy in 1962 will be below the 1961 level.

3. Castroʼs recent offer to release the Bay of Pigs prisoners for ransom was probably motivated by his interest in finding additional foreign exchange, as well as by reasons of propaganda.

4. Beyond 1962, the development of the Cuban economy will depend not only on the rate at which capital goods are made available under Bloc credits, but also on the success of the regimeʼs efforts to expand and diversify agricultural production. We believe that Bloc economic commitments to Cuba were seriously made and that the flow of capital goods from the Bloc is likely to increase substantially by the end of 1962. We think it likely that the industrial area of the Cuban economy will begin to expand in 1963, although these sectors most reliant on US replacement parts may continue to deteriorate. In any event, the rate of expansion is likely to be limited by poor production in agriculture. Such expansion will not, however, affect the welfare of the individual Cuban for some time. At any time, of course, the Bloc could take more extensive action to raise Cubaʼs levels of consumption, but there is no evidence that this is going to happen.

5. The prospect is for two or three years during which the Cuban people will be on short rations, both as to foodstuffs and other common consumer goods. Acknowledgement by Castro and other regime leaders of the countryʼs economic difficulties and the imposition of stringent food rationing in March are indicators of the seriousness of the problem. We believe that we can expect continued efforts to blame the deprivation which Cubans are subjected to upon the US. Castroʼs success in dealing with the political implications of the economic situation will be limited. Economic dislocations and deprivations are unlikely to affect the attitudes of pro-and anti-Castro groups, but they will probably make the bulk of the population less well disposed to the regime. Still, we do not foresee an economic situation in Cuba during the next two or three years which will be the critical factor in the ability of the Castro/Communist regime to maintain control of the country.

0. Source: Kennedy Library, National Security Files, Countries Series, Cuba, Subjects, Intelligence Material, 1/62-9/62. Secret. Prepared in the Office of Current Intelligence of the CIA. A handwritten note on the source text indicates the memorandum was sent to McGeorge Bundy and President Kennedy on April 26.
1. Not printed.
2. Document 315.