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    Monday, October 15, 2007
    Che's Economic Failure

    Ernesto "Che" Guevara helped destroy Cuba's economy, including its key
    sugar industry, experts say.


    Shortly after the revolution, as Fidel Castro was wounding up one of his
    many long speeches to a large throng of supporters in Havana, he asked:
    "Are there any economists here?" Ernesto "Che" Guevara raised his hand
    and Fidel immediately proclaimed: "Comrade Che, you are the new
    president of Cuba's National Bank!' After the meeting, Fidel sought out
    Che and said: "Che, I didn't know you were an economist?". Che looked
    shocked and then muttered: "Economist? I thought you said Communist!"

    So goes an old Cuban joke to illustrate part of the reason why Cuba's
    economy went into a dramatic free fall after Che, an Argentine-born
    radical physician, was named National Bank president in November 1959,
    succeeding Felipe Pazos, Castro's first central bank president.

    Che is credited with having had a significant influence on Fidel
    Castro's radical policies after the 1959 revolution, including
    restricting human rights and centralizing the economy at the expense of
    private and U.S. companies.

    Today, he is credited with inspiring Latin American presidents like Hugo
    Chavez of Venezuela, Evo Morales of Bolivia, Rafael Correa of Ecuador
    and Daniel Ortega of Nicaragua. Last week, the world marked the 40th
    anniversary of Che's death. Latin Business Chronicle took a closer look
    at his economic record.


    "His main "achievements" were the repressed inflation that led to
    rationing and the expropriation of all private banks," says Jorge
    Salazar-Carrillo, a professor of economics at Florida International

    Jaime Suchlicki, the director of the Institute for Cuban and
    Cuban-American Studies at the University of Miami, also is critical of
    Che's achievements. "As President of the Central Bank, a subject he
    knew little about, Guevara was best known for his disrespectful actions
    against the Cubans," he says.

    One example: he signed all currency with his nickname "Che," not with
    his full name. That was, Suchlicki points out, "a gesture some thought
    cute, but most saw as a disdainful action toward the Cubans."

    Che's monetary policies did not exactly instill confidence in the
    markets. "Under his stewardship the Cuban currency deteriorated against
    the U.S. dollar," Suchlicki says.


    In February 1961, Che was named Cuba's first industry minister.
    Formally, Che headed up the department of industrialization at INRA,
    which became a de facto industry ministry. INRA was the institution
    from where Fidel initially ran Cuba. As Minister of Industries Che did
    little to enhance the economic development of Cuba or to foster the
    island's industrial potential, Suchlicki argues.

    "As the first Minister of Industry the promises were to make Cuba the
    leading industrial power in Latin America, vying with the European
    countries," Salazar-Carrillo says. "To achieve this he proposed
    renouncing "the yoke of the American sugar quota". This decimated the
    Cuban sugar industry. The rest was destroyed by his insistence on moral

    Che's policy played a key role in the disastrous sugar harvest of 1963 –
    Cuba's worst since World War II.


    Che also helped Fidel with the 1960 nationalizations of 36 US-owned
    sugar mills, two oil refineries, two utility companies and two nickel
    companies. Companies affected included Shell, Standard Oil, Esso and ITT.

    In a move eerily reminiscent of Daniel Ortega today (see Nicaragua
    Confiscation Illegal, Unsafe), Che had ordered Esso, Texaco and Shell to
    start processing 900,000 tons of Soviet petroleum arriving regularly
    aboard Russian tankers, according to Time magazine. "The oil companies,
    whom Cuba owes $60 million for previous shipments from Venezuela,
    refused," the magazine wrote in June 1960 article that included some
    praise of the leftist firebrand (see The Marxist Neighbor).

    All in all, the nationalizations cost companies and individuals some
    total $1.8 billion in 1960 dollars, according to US government
    estimates. In Latin America, Che-inspired policies have led to losses of
    $1.3 trillion, according to Martin Hutchison of He
    arrived at that figure by estimating that without the legend of Che, the
    Latin American annual growth rate might have been one percentage point
    faster in the past four decades.

    Concludes Suchlicki: "He implemented policies to confiscate foreign and
    domestic businesses and industries [and] his policies fostered
    uncertainty in the business community and led to great misery for the
    Cuban people."

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