Is This a Good Time for Cubans to Invest?

Erasmo Calzadilla

The Cuban economy is like an airplane that is currently warming up its engine, taking its place on the runway. You’re not going to see that it still hasn’t taken off yet; no, of course not, it’s still warming its engine. However, when our model is Updated and takes off, I think it will just like airplanes do, with a lot of force, upwards. – Francisco Borras, Economy professor at Havana University

HAVANA TIMES — Juan Triana is an intelligent analyst, bold and well educated in his field: the Cuban economy. Moreover, he is a very charismatic communicator; you enjoy reading his work. Thanks to all of these qualities, his articles have great impact and influence, and not only among economists.

However, we couldn’t understand his punch without taking a look at the product he’s selling: the most highly sought-after merchandise on the market which, when only mentioned, is like music to the ears of the most demanding: Development.

Triana has been explaining to us what we should and shouldn’t do in order to achieve it for years now. In his speeches and articles, he criticizes centralism, bureaucracy, the two currencies we have and low rates of investment. He has emphasized the need we have to be able to access the Internet, applauded the boom in private property and called for industrializing agriculture. All of this within the socialist framework of course, or at least what he understands that to be.

However, there is a blind spot in this analyst’s field of view: external factors. He and many others who think about development in Cuba leave out those factors that make development so slow in the entire world: a decline in strategic non-renewable energy sources, environmental degradation and climate change, just to name a few.

Such a slip up will lead the country to commit other mistakes. We’ll discuss one of these mistakes in this post.

In his latest article, the economist puts forward an idea for us “to get out of the situation we currently find ourselves in.” He more or less explains it like this: A lot of money has been deposited in Cuban banks by individuals (25% of Cuba’s GDP). Why don’t we promote the investment of this capital as a way to stimulate the economy?

“All of this money… is a resource which, used well, could also help to stimulate national production and create more supply, both of goods and services. […] the problem lies in converting a part of these savings into an investment or economic incentives (which are the same thing) so that people or businesses can go to the Bank and ask for credit to produce something or to offer a service.

“… in the sense that investment means purchase of goods and creating new jobs, thereby producing an increase in demand while stimulating a virtuous dynamic in the economy.

“Converting savings into investment – this is what Keynes’s theory tells us – is the best way for us to overcome this crisis and put our economy back on the track of economic growth.”

During the first and part of the second half of the last century – the golden age for Keynesianism – we could still put our foot down on the accelarator to leave this economic crisis behind us, encouraging our social metabolism. And it would have been possible because our environment had been almost untouched and we had abundant supplies of raw materials which were in fact considered infinite at the time. However, we’ve destroyed our surroundings and devoured our reserves at an alarming rate which took millions of years to make. Within this bleak landscape, let’s go back to the people’s economist’s concrete proposal.

Investing to get out of the crisis?

A massive investment of capital would immediately translate into a massive increase in demand, which couldn’t be met and wouldn’t stimulate production because of (among other things) the “external factors” I mentioned beforehand aren’t cooperating. Meanwhile, with demand unmet, prices will increase; but we don’t have to go to the future to see this, it is already happening within some sectors of the market. This, of course, affects the ordinary Cuban’s pocket, even if they do support the bid to development thanks to the persuasive work carried out by people like Triana.

Let’s look at another aspect of this issue. From the independent laborer’s viewpoint, the idea of investing at a time of economic crisis doesn’t look too good either, at least the way this economist is painting it.

At the gates of a long recession, it’s healthy to get money moving around (which will quickly lose its value anyway), however, in a more specific sense.

One of the priorities we should have is to secure and repair what we already have (just like we do when a hurricane is on its way). Another thing we should do is try to foresee the profound changes that the market will suffer and adapt ourselves to them: a shift towards local markets and to satisfying basic needs, for example.

Will those who invest believing Triana’s vision of a prosperous Cuba in the future: greater growth, greater globalization, more energy and more technology, be able to get back what they invested?

If the global economy continues to remain at a halt and Venezuela continues to fall into disgrace, it’s most likely that they won’t. I have a friend who is committed to setting up a well-equipped recording studio and he needs and another friend who is in debt up to his neck with a beauty salon. I pray for them.

Well, my dear readers, this is what I wanted to share with you. But, please understand this: I’m not an expert on the subject, I don’t have full access to the internet, I don’t deal with sensitive data, I don’t work for the Association for the Study of the Cuban Economy and OnCuba doesn’t pay for me to write down my speculations. This is why I say: don’t believe, but read. Look for information yourself and don’t let the sirens mislead you again; they don’t even apologize afterwards.