Cuba’s Gov. Sees Centralized Economy as the Way to Face Recession

Ministry of Sugar Workers receive as a stimulus, a bag with pork, on a busy street in Vedado. Photo: Juan Suarez

HAVANA TIMES – The Communist Party of Cuba (PCC) announced a series of “financial guidelines” at a time of recession in the country, which grew the first half of 2016 by one percent of the GDP, half the expected, state television reported this afternoon.

The new document acknowledges “the objective existence of market relations” but keeps the centralized economy as the government’s guiding principle.

The final version of the 274 agreements updates the guidelines approved by the PCC in 2011.  It continues the prohibition of “the concentration of property and wealth.”

Among the proposals, the text states the intention to improve the internet service on the island “gradually, as permitted by economic possibilities.”

Last month the then Economy Minister Marino Murillo, announced that the country was experiencing a time of economic recession. He said that overall energy consumption would be reduced by 6 percent, the most savings coming in state enterprises and public administration so as not to affect the residential sector.

Raul Castro’s presidency has been characterized by promoting a series of legal reforms that have allowed the growth of small businesses, especially self-employment in the service sector, although it has maintained the prevalence of the state in most areas of the economy.

Last April the VII Congress of the PCC discussed the legal recognition of the small and medium business sector beyond self-employment, but so far the Cuban government has not posted legal reforms for that to become a reality.

In the Communist conclave, Raul Castro defended the state enterprises as the “economic engine” of the economy. At the same time he recognized the increase in self-employment.

Castro told the 1,000 Communist delegates that the rise of small private business was not a “restoration of capitalism” on the island.  However, there are still many within government sectors that have a strong reluctance against any changes in what was a totally centralized State economy.

16 thoughts on “Cuba’s Gov. Sees Centralized Economy as the Way to Face Recession

  • Raul Castro is absolutely correct in describing the state enterprises as the “economic engine” of the Cuban economy. By “state” Raul is including the fifty seven GAESA subsidiaries under the control of his son-in-law General Luis Alberto Rodriguez Callejas who could be described as the “chief mechanic”.
    The economic engine is however coughing and sputtering and has almost ceased performing. In order to avoid a family dispute, Raul sacked Marino Murillo the supposed Minister of Economics as the fall-guy. The ancient four cylinder gas guzzling engine desperately requires replacing, but the regime does not have a skilled experienced engineer capable of making the change..
    The talk about small businesses is largely about the ever increasing number of hair dressers. In the capitalist banking world, the expression for the ever suffering Cuban people would be that they as the actual investors in the economy will have to take yet another haircut.

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  • I wonder when the CUC will finally be dropped.

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    • It’s more likely the CUP will be dropped, as it’s almost worthless now anyway, and the CUC issued as the national currency. Meanwhile, Raul Castro has declared there will be no political reforms to go along with the limited economic reforms he has introduced.

      And for those people in the cheering section who have insisted the economic reforms are irreversible, this news should clarify the situation: the reforms remain subject to change, roll-back & repeal anytime Raul feels like it. Furthermore, the largest impact of the reforms has been to consolidate even more of the economy under GAESA, the military conglomerate, with the aim of directing the cash flow into the regime.

      Which is why the government is responding to the recession by increasing centralization of the economy. If they really wanted to boost the economy, they would allow greater economic freedom, not less. But that would empower the people, at the regime’s expense. Therefore, the slowing cash flow will be monopolized by the regime, to guarantee regime survival.

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      • Don’t agree Griffin about removing the CUP. With an old age pension of 200 pesos, it is possible to make some purchases for as little as 3 pesos – not possible with CUC.
        Otherwise I don’t disagree with your view especially regarding GAESA and further constriction of the economy.

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        • Carlyle & Eden,

          Thank you for your comments, which I accept with awareness of your personal experience in Cuba. If that’s the stated policy plan from the regime, then well, that may well be what they do… however, I was writing from an economic analysis of the current condition of inflation in Cuba, particularly for the CUP. It makes little sense to drop the CUC which is nominally pegged to the US dollar in favour of a currency unknown in the world currency exchanges.

          Switching to one currency is half the journey. They also need to open their currency to the world. The first thing that will happen is the world’s currency traders will issue their opinion on the real value of the CUP, which is even less than the official Cuban government’s arbitrary exchange rate.

          So what I say makes sense… not that doing the sensible thing is high on the agenda in Havana.

          Did you know, Carlyle, that the Cuban banknotes are minted in Winnipeg? Funny old world it is.

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          • I think Griffin that you over estimate the talents of the Castro regime. They know full well that exposing a Cuban currency to the world markets would result in massive inflation. They are currently scared about the possible effects of reverting to a single currency, the internal economy could collapse like the proverbial house of cards. My view remains that the CUP (pesos) not the CUC, will survive.
            You are correct about it being a funny old world, so in turn, did you know that the beer Bucanero was developed by Labatt?
            As for the banknotes, I can accept the CUC’s being minted in Winnipeg, but are you sure that the CUP are? I’m thinking that the cost of producing a 1 peso note there would exceed its value – back to the Weimar Republic!

      • “… It’s more likely the CUP will be dropped, as it’s almost worthless now anyway, and the CUC issued as the national currency…”

        Not unless the government does a complete reversal on their already published policy.

        The end of the dual currency was announced in the autumn of 2013. VP Marino Murillo confirmed the CUP as the future single currency shortly thereafter. The newly minted large denomination CUP bills have been in circulation for quite some time now. The new CUP/CUC acceptance signs are cropping up everywhere now, even in establishments that have never taken a single CUP in their entire existence.

        Time will tell.

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  • Canada also has serious problems due mainly to low demand / prices for our export commodities. Alberta is in very bad shape due to the low price of oil. I expect the government of Canada to take some action very shortly.

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    • Well Gordon, the low value of the Canadian dollar – about 77 cents US today, makes it easier to export to the US in particular – they are Canada’s largest export market and Canada is the largest US market (something that Trump doesn’t appear to have noted!).
      Regarding Alberta, don’t expect the Liberal Government of Justin Trudeau to provide assistance because of the low energy prices – such generosity is preserved for Ontario (car industry) and Quebec (just for being French).
      It has taken Canadians a while to realise that the Alberta energy sector was making a major contribution to the Federal coffers. The concentration of thought was upon the do-gooders carping about and criticizing the province which was providing them with succour.
      But Canadians know little about the reality of the miserable conditions of life for the average Cuban (I exclude your own family and political connections). If in Canada, Cubans would have access to the food banks – but whoever heard of a food bank in Cuba?

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    • You are right about the oil fields but you can easily get a job in Canada paying $15 to $25 per hour Canadian if you drive lorry or fix them. You can also get many jobs in construction may to the end of nov. In Canada with the high housing cost many people live in mini vans or small campers on the back of pickup trucks. In Canada I have the freedom to say what want when I want. In Canada if you are out work there are places that you can free meals and a free shower every day in return helping to prepare the food or clean the place. This did not seem to be the place in Cuba. I have hired people from Europe and other countries and they tell me the cost gas and some foods and clothes are much cheaper in Canada. I have a job opening for a lorry driver and second job opening for mechanic both must under 29 to bring them into to the country and able to speak English and work 45 to 60 hours per week . Our government just raised the child support to $500.00 per month per child for low income parents.

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  • How are these 1000 delegates appointed? and by whom? Do the ordinary Cuban people have a chance of becoming a delegate and representing local people?

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    • Only if they are a member of the PCC

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  • Canadians are over their head in all levels of debt. My pension plan is being restructured. I feel 2017 will be very hard year for many western countries.

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    • Gordon, my curiosity makes me enquire what the relevance of your statement is for Cubans?
      Speaking of pensions, do you happen to know the size of pension that will be provided by the regime when Machado Ventura retires – or is that too being restructured following the downturn in Cuba’s economy?

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  • Thank you Carlyle.

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    • I wish Gerard that I could respond by saying: “It’s a pleasure.”, but I can’t because it is the hideous truth.
      Living as I do most of my time in Cuba, I experience the day to day existence of my Cuban family and friends. I observe their struggles to feed and clothe their children with such pitifully low incomes. How much longer should they suffer such obvious indignity?
      There are those who contribute to these pages, who apparently admire and support the merciless communist system which the Castros have imposed upon Cuba – but they do not seek such conditions for themselves!
      I look at my lovely little God-daughter and wonder whether she will ever know the freedom which you and I are so fortunate to possess, or will she continue throughout her life to be exposed to a system which at best, can only be described as inhumane – and perhaps more truthfully as evil.

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