Is the Cuban Government’s Economic Strategy New?

Or is the strategy to implement what was already approved years ago?

Photo by Dorothea Oldani / Unsplash

By Omar Everleny  (Progreso Weekly)

HAVANA TIMES – One should not be pessimistic when the Cuban government approves a document, a law, a plan, or a strategy. However, over the last 12 years several documents have been approved with an appropriate logic for the development of the country, and although it has been indicated that changes should not wait for the Greek calends, the reality is that implementation has taken a long time.

We have read that there will be complementarity between all the economic actors in Cuban society: the socialist state enterprise, cooperatives in general, self-employed workers, micro, small and medium businesses, and foreign investment. It is something worth considering. However, since the approval of the economic guidelines of the 6th Party Congress, almost all of these actors were no longer being discussed.

Backtracking

A few years back approval of new cooperatives were completely stopped due to different factors, and even today the creation of this type of company, so necessary for the business fabric, has not been deployed with the necessary force. New cooperatives related to construction, for example, now need approval from the entities designated for that purpose given the high de-capitalization of the country’s real estate, including housing, especially in large areas of Havana.

The same occurred with self-employed workers — euphemisms still in existence — whose licenses were paralyzed to review some aspects that, according to the state, were affecting Cuban institutions.

Hopefully this time there will be no further attempts to stop these actors. And that the much announced negative list does not consist of several pages.

It would not be counterproductive for the local private sector to be authorized to develop initiatives with foreign capital, on a small scale or otherwise, and that its contribution is not necessarily measured in capital but in innovation and knowledge of the Cuban context.

The import or export possibilities by all these actors is a bold step, but one that had been demanded a long time ago given the economic crisis that the country has been going through as a result of internal and external factors that are harmful to the economy. Among these we must mention the criminal blockade of the United States, the adverse effects of COVID-19, which has kept the country spending large sums of money for the purchase of equipment and medicines, but also internal inefficiency and the failure to comply with goals and plans.

Here’s hoping small and miedium busnesses become a reality

I anxiously expect that the proposal for the creation of micro, small and medium-sized enterprises will not continue to be postponed, which should be a measure among those recently announced by the president of the Commission for the Implementation of the Guidelines, Marino Murillo. In other words, not only will the financial sphere be adjusted, but the counterpart of these changes will be what the country develops and offers, and many of them must be produced by these MSMEs.

Cuba has gone through several stages in the development process of foreign investment. From ‘complementary’ and not very significant within the Cuban economy, to being considered a decisive link in the economic development of the country. It has been stated that Cuba needs more than 2.5 billion dollars a year in direct foreign investment to achieve growth rates consistent with the current needs of the Cuban economy.

However, year after year we hear about the low uptake of foreign investment, or the plans not achieved in this area, and the same reasons are almost always repeated. The concrete thing is that it does not change radically, nor are the growth rates of foreign investment that are demanded obtained. At most, committed resources of $1 billion have been achieved in one year.

The dire need for investment capital

The Cuban economy demands investment, and foreign investment may be the most likely current source of attracting these resources in the medium term. The crisis already described should not allow itself the luxury of dismissing, or not serving as they deserve, those who wish to invest in Cuba.

The foreign investment approval process must be thoroughly rethought so that it can be successfully relaunched. It is not possible to be so persuaded that due to subjective aspects planned investments have not been achieved and that there already exists a perfect procedure to achieve them. Continuous mention of the one-stop shop is not going to produce the necessary results for foreign investment, although it is a very important step to speed up approvals.

The 15 recent measures to stimulate the Cuban State businesses, in addition to a group of others approved some time ago, are aimed at giving business entities autonomy. But I wonder how true are intentions to grant the required autonomy, with tag-lines that still appear on some of these businesses.

Shouldn’t we study monopolistic operations in some economic activities in the absence of healthy competition that benefits everyone? Couldn’t there be several cell phone companies in the country, even under the same state entity? In a world where electronic commerce guides the destiny of the internal commerce of the countries, it is vital to have a qualitatively strong telecommunications technological infrastructure.

A single national currency plus the US Dollar

What was recently announced highlights something unique, which is the circulation of a single national currency. But of course there will be a dollar / Cuban peso (CUP) exchange rate, since the transitory situation shows us a partial dollarization due to the existence of stores in convertible currencies (MLC) that create space for trial and error, reforms and adjustments, a safety net for trapeze artists, which lies in the existence of this network of stores to capture remittances of family aid in those currencies, all that satisfy the needs of the fortunate population with access to that convertible currency, and at the same time channel the currency profits for the good of the CUP.

An obvious doubt for Cubans without remittances is whether the state would sell some quantities of MLC for CUP. We believe that it would be prudent, but what happens is that the state must prioritize the purchases of products in MLC to guarantee sales in that currency and that there are no shortages of goods in those stores. At the same time they can channel a percent for the recovery of the national industry.

There is, as part of the logic expressed by the leadership, the process of implementation of the country’s economic reform. Four measures would be carried out, which include leaving only the CUP circulating, establishing a single exchange rate for all actors in the country, a price increase and with it increases in wages and pensions. Which leads us to a question: Will people’s savings be affected? Is this obviously part of the collateral damage?

A safety net?

These same damages cannot be cushioned, since the country is currently suffering a generalized shortage of products and services, which prevent planning for expenses with a part of the savings. For example, if you had decided to remodel your house, or replace parts of the bathroom or kitchen, you find yourself with supply restrictions for these improvements. Obviously, the logic was the purchase of food in view of the country’s financial restrictions, the right policy, since it is about the survival of the population.

It is vital for Cuba to encourage the arrival of remittances. It is why we must create incentives for the location of remittances in productive efforts, rather than in consumption. The will to accept them must be demonstrated; politically, the authorities should look for ways to bolster this, and it should be part of the agenda of the postponed event of La Nación y su Emigración (The Nation and its Emigration).

Everything announced has been in the documents approved by the two previous Party Congresses (2011 and 2016), and approved in the different sessions of the Cuban Parliament, and at the highest levels of government, such as the Political Bureau, the Council of Ministers, and others. In other words, there is consensus on how to approach this. Therefore, what’s holding it up?

In conclusion, the roadmap has been announced. It offers hope. Our wish is that day zero for implementation is on the agenda policymakers regularly use and that they do not wait for a new agenda the following year. There is political capital: What else do they need?

Omar Everleny Pérez Villanueva is a Cuban economist.

Read more news and commentary on Cuba here in Havana Times.


2 thoughts on “Is the Cuban Government’s Economic Strategy New?

  • Anybody holding their breath waiting for change in Cuba, will expire !

  • Any rational economist will tell you the key to a successful democratic economy is freedom of entrepreneurs and businesses – the key players in all successful economies – to establish their individual enterprises and businesses without intense bureaucratic infringing decrees from government, and most important, for those successful risk takers to have the right to keep all their profound profits, minus taxes and expenses.

    Will the current Cuban government allow such private, free enterprise to flourish? Will unrestricted potential millionaires be allowed and even encouraged in Cuba today? Is there not a Cuban law in the Cuban Constitution that deters anyone from making more profits than the communist elites see fit? Such bureaucratic communist ideological nonsense makes absolutely no sense to an aspiring Cuban entrepreneur willing to take risks, invest, work hard and then be told the nascent business must not make “too much” money because if it does the communist regime will punish, restrict, deter, name your euphemism, the very purposeful, proud, Cuban operating a successful money making business.

    Perhaps a little historical factoid will shed further light to the hard line communist Cuban elite that their present entrenched economic ways are incompatible with modern progressive communism.

    Wasn’t it in the late 1970s when China was a poor, isolated, insular country much like Cuba today with bicycles everywhere the major mode of transportation and the Chinese government ruled the economic market. Under astute bold leadership and wanting to retain power the Chinese Communist Party began promoting a new form of economic ideology (capitalism light, if you will) that opened up their centrally controlled economy to private, market forces.

    The major point being made is that Chinese entrepreneurs encouraged by the Chinese Communist Propaganda machine were urged to “get rich” by working hard and producing products. The Chinese government did not decree by how much money potential workers were to become rich but simply instilled ingenuity and worker freedom so that their hard work resulted in tremendous tangible monetary results for the individual entrepreneur and by extension made the Chinese economy rich. In essence the Chinese Communist Party, sounds counter intuitive at the time, but encouraged the making of millionaires. It worked. China in 2020 is certainly not the China of the impoverished 1970s.

    Will it work in Cuba today? It seems all the Cuban communist Party elites are interested in is making a few minor economic changes around the economy’s edges but are resistant to allowing absolute full blown freedom to the very people who can make major economic progressive change on the island.

    Omar Everleny writes: “Everything announced has been in the documents approved by the two previous Party Congresses (2011 and 2016), and approved in the different sessions of the Cuban Parliament, and at the highest levels of government, such as the Political Bureau, the Council of Ministers, and others. In other words, there is consensus on how to approach this. Therefore, what’s holding it up?” Very astute question.

    May I add my humble observation. This is what is holding it up: The Cuban Communist Party elite do not want their absolute power challenged under any circumstances especially if they perceive any economic change that can be construed as classic capitalism in any form in Cuba. That would be contradictory to the Revolution ideals ingrained in Cuban society for 60 odd years and not to be challenged at any cost. The Cuban Communist Party modus operandi would come crashing down if forms of economic capitalism were allowed to take hold in a major way.

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