How Cuba Can Rise from the Ashes Post COVID-19?

By Vicente Morin Aguado

Photo: Juan Suarez

HAVANA TIMES – The urgency of a country on the brink of starvation could condition changes, which the Cuban government has refused up until now. Holding onto this hope, four economists have agreed to answer a question from Havana Times.

All of the proposals are tipped towards granting greater freedom to producers, solving the toxic centralization role of the bureaucratic State – whose ideological straight-jacket of the economy keeps the country in a state of chronic parasitism-, getting by on exports, direct (medical professionals) or indirect (exile community), using different forms of blackmail, and the labor of its citizens.

Havana Times would like to thank the interviewees for their time, considering the current situation and urgency of the matter:

Faced with the worse possible scenario as a starting point, what needs to change for Cuba to make progress?

Omar Everleny Villanueva: (Professor and Researcher. Department of Cuban Economics at Havana University. Author of several books, the latest being The Cuban Economy in a New Era: An Agenda for Change towards Durable Development. Signed in 2018, alongside Lorena Barberia).

Cuba has been going through some tough and complicated times, the result of a combination of external and internal factors, where a harsher US blockade enforced by the current administration stands out among the external, and a lack of foreign currency stands out among the internal, which is the result of setbacks in Cuban exports of goods, as well as services, and ever excessive centralization which affects the entire business climate, along with sharp macroeconomic imbalances.

Photo: Juan Suarez

The country is knee-deep in a period of survival, where saving living Cubans from the clutches of COVID-19 is the most important thing. But what comes next? There are multiple courses of action to correct these imbalances, including the implementation of the delayed Guidelines, and currency unification, to name a few.

However, other feasible options include diluting the centralization that exists today, getting rid of the State’s monopoly on foreign trade, a more profound reform of Cuban agriculture, where intermediaries such as ACOPIO (Cuba’s State purchasing entity) is made obsolete, and second-degree cooperatives or services are allowed. Allowing the private sector to branch out, which means getting rid of lists of approved professions, and allowing small and medium-sized enterprises to exist. Facilitating access to international sources of microcredit, as well as other things.

It’s just a matter of implementing the actions that were passed by the government in the documents that are known as the “2030 Update of the Model, Conceptualization and Strategic Plan.

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Elias Amor Bravo: (Professor at University of Valencia, Spain. Author of “Cuban Economy: The Lost Opportunity”. 2010 and “Marketing and the fourth industrial revolution”. 2019. Check out his Cubaeconomia blog.)

First of all, the economic system needs to opt for a stable legal framework of respect and protection of private property rights, and the consolidation of private companies and the market as an instrument for resource allocation.

Photo: Juan Suarez

Secondly, consumers’ freedom of choice and the elimination of controls and subsidies.

Thirdly, reduce the State’s pressure on the economy and companies, allowing salaries and benefits to be in line with the market’s current conditions.

Fourth, suppress the centrally planned economy, privatizing state-led companies in an orderly fashion and giving the State its traditional functions back (distribution, allocation and stability).

Fifth, request that Cuba becomes a member of international finance organizations, which provide financial aid, such as the IMF or World Bank. 

Cuba will need to do a 180º, and go back to orthodox economics, such as Vietnam or China. Collectivist adventures have reached their end.

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Joaquin Pujol: (Dr. in Economics, Pennsylvania University. Over 20 years experience working at the International Monetary Fund. He has taken part in some of the highest-level negotiations with governments of many countries, including the transition process in some formerly socialist countries. Founder of the Association for the Study of the Cuban Economy. ASCE in English.)

The first thing the government needs to do is allow farmers to plant and sell their harvests freely. Cuba has fertile land in abundance and it should be able to produce enough food to feed its population, and even export the surplus.

Photo: IPS

Secondly, it needs to do away with the restrictions on private business, changing the list of what is allowed into a small list of what isn’t allowed instead. The self-employed sector is the only dynamic and relatively efficient sector in the national economy, and it has generated jobs and productivity even with the restrictions in place. Give the private sector a clear legal status.

Thirdly, allow Cubans living abroad to invest in the country, as they would not only be providing financial resources, but also their knowledge of foreign markets and other technological advances.

Fourth, allow farmers and the private sector to import and export what they need.

Fifth, close down state-led businesses and factories that produce losses and require subsidies.

Sixth, allow foreign investors to freely hire skilled labor without the intervention of a state agency, which would improve productivity.

Seventh, get rid of the dual-currency system and different exchange rates which are a source of corruption and inefficiency.

These measures need to go hand-in-hand with a reforms process and political freedom.”

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Carmelo Mesa Lago: (Senior Fellow of Economics and Latin American Studies at Pittsburgh University. Author of 80 books, over half of which are about Cuba. Latest publications. Co-author of “Voices of Change in Cuba from the Non-State Sector” 2016 and “Cuba Under Raúl Castro: Assessing the Reforms” 2012.)

  1. Food shortages

Cuba should follow successful Chinese/Vietnamese economic policies: letting every farmer choose what they want to plant, who they want to sell it to and to set prices according to supply and demand. Vietnam is a net exporter of agricultural products. For example, it exports 350,000 tons of rice to Cuba (which the island could produce for itself).

  1. Unemployment
Photo: Juan Suarez

The private sector needs to expand. For this to happen, I suggest: a) replacing the list of authorized self-employment activities with a list of banned activities; b) allowing professionals to set up their own businesses and get rid of barriers in the private sector; c) end the trial phase of non-agricultural cooperatives and services, and approve more of them; d) set up wholesale markets so as to provide supplies to the private sector; e) set up banks (including foreign ones) that give microcredit; f) letting the private sector import and export directly; g) getting rid of heavy taxes on the private sector; g) tax profits instead of gross income and allow all expenses to be deducted; h) empower an independent association of micro entities to negotiate conditions with the government and be active in drafting relevant legislation.

  1. Foreign investment

In order to increase this, Cuba needs to: a) allow foreign companies to hire and pay all of their workers directly; b) approve foreign capital investment (including from Cubans living abroad) in every sector of the economy, as well as in micro entities and non-agricultural cooperatives and services; c) publish up-to-date statistics in key areas where there are gaps so as to instill trust abroad, such as about the country’s total foreign debt (not only what has been negotiated).

We recommend you read Pedro Monreal’s blog, Elestadocomotal.com , where these and other Cuban economists frequently write.

4 thoughts on “How Cuba Can Rise from the Ashes Post COVID-19?

  • Spot on Moses.

  • The reason that the Castro dictatorship is wan to implement ANY of these suggestions is simple. To do so would extend the irreversible opportunity to Cubans both inside and outside of the country to become economically independent of the dictatorship. Allowing economic independence will inspire political independence and the Castros are mortally in fear of losing political control of the country.

  • Professor Elias Amor Bravo and Senior Fellow Carmelo Mesa Lago both refer to the economic success demonstrated by Vietnam. Vietnam once a harden collectivist communist state (North and South) with its citizens dressed up in paltry pajamas toiling in rice fields is, today, all but historical – almost seems fictional if one does not read history.

    The Vietnamese (after a brutal war) have been given economic freedoms and are proliferating in that economic scenario yet do not mind having as their government a one party system. When the stomach is full, and money making opportunities in existent, and the government not an interferent, who really cares what politicians politicize in their offices. The Vietnamese decision makers know these facts and acted.

    Why isn’t Cuba making some effort to follow a quasi capitalist approach to their economy? Initiating such an approach allows the economy to prosper, the people to become producers and uninhibited entrepreneurs and commerce to flourish, all contributing to citizens financial independence. Isn’t this a win – win approach? Why the inaction?

    The collectivist approach to a country’s economy may look alluring on paper and theoretically sounds interesting in university lecture halls but, in today’s reality, is a complete failure as demonstrated by countries once enamored with this form of economic and societal organization: extreme socialism bordering on communism.

    The authors also alluded to citizens’ freedoms. A citizen without the personal freedom to express his/her thoughts and ideas freely, without having the ability to elect politicians in a multi-party system, without giving citizens the opportunity to invest individual capital and retain profits from risk taking, all these things, among others as duly listed, preclude any rising from the post-pandemic ashes.

    The authors have outlined many very progress, bold, sensible opportunities that presently exist in a resource rich Cuba today and for the present Party administration to either ignore, resist, or defer indefinitely immediate action on the economy and by extension allow its citizens some personal freedoms is, and will be, a travesty.

  • The Phoenix -renewal-always rises. Whether The Ship of State-Cuba- and Others sink or not is going to depend on the resource-fullness of the authorities in creating the proper initiatives and The Mass of The People in how they respond to those initiatives. – Nations organized or not , private-corporations-or public-at tax payer expense- must now respond to this grave threat that Nature caused and whose aim is not known because we are creatures of NATURE and not creators of Nature, although we like to be.

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