New Proposals for Getting Cuba’s Economy Off the Ground

By Alejandro Langape

HAVANA TIMES – Months ago, I read an economist’s opinions on an independent media platform (the kind that the government accuses of being vile mercenaries on the Empire’s payroll because they show other aspects of Cuban society) about a growing phenomenon in our country: Cuban citizens purchasing a wide range of products abroad to then resell them in Cuba.

I can’t remember the name of the author of that article, but I do remember that it mentioned the large sum of money that hundreds of Cubans were leaving behind in Panama when they traveled there to buy air-conditioning units, motorcycles and other things that aren’t sold on the Cuban State’s retail network. These people resold these goods in Cuba and profits went towards financing new trips in a cycle that greatly benefits hotels, taxi drivers and different markets in Panama.

I don’t know whether one of our brilliant Cuban economists (who still haven’t managed to pick the national economy up off the ground in a country where the economy is growing slower than the rest of Latin America), had read the article about shortages. Or if they had just stepped foot outside of their ministry and took to the street to figure out how it is that Cubans managed to get a hold of these devices that they need. Then like being struck by a bolt of lightning suddenly figured out how they could stop this capital outflow of hard currency (not only to Panama and not only targeting the purchase of these products).

We’ll give these private importers a run for their money, our government economists thought, and, at the same time, they’d take the dollars that Cubans are holding onto. This is how a complex mechanism was put into place which involves people with dollars depositing these into a bank account that is associated with a card which is then used to make purchases in stores that are set up specifically for this, with a range of electrical appliances including fridges, TVs, split air-conditioners, to name a few.

Dollars deposited in these accounts are subject to a 10% tax rate and the state-controlled media ensured that these establishments would have a stable supply of these goods.

Like many other government initiatives, this proposal’s flaws were soon revealed. Half-empty stores, never-ending lines when a highly sought-after product was put on sale, cases of corruption, hoarding and reselling, as well as complaints from those who deposited their dollars into these bank accounts with the hope of being able to buy certain products and were never able to. These concerns were even voiced on the official Mesa Redonda’s website and Cubans questioned the information the government gave when this new initiative was implemented.

This past week, the Mesa Redonda TV show spoke about success, about the upcoming opening of new retail stores, new products entering the catalog. Shortages of highly sought-after goods were recognized (euphemistically called instability), because this demand was higher than expected.

And I want to take a moment to reflect upon this constant ill of the Cuban economy: planning mistakes and dreadful niche market strategies.

Outrageous failures such as El Trigal wholesale market or the scandalous reopening of Mercado de Cuatrocaminos, have proven that a concentration of highly sought-after products in certain points leads to all kinds of negative outcomes. It’s highly questionable whether the new retail network that is being proposed will be constantly stocked up in a country where even basic items are in shortage such as cooking oil, soap, toothpaste or toilet paper.

Prices of most of these products (with fantastic profit margins for the State) don’t really stimulate the investment of Cubans who have foreign currency (a lack of competition would be the only reason to buy things there to set up small businesses such as gyms, sewing workshops and other things that would benefit from the products the State would import).

The government claims that these new measures will inject foreign currency into the State’s coffers and that this will have a positive impact on sectors that are suffering great difficulties such as public transport. However, the Cuban population is still doubtful and disagrees with the way that banks are dealing with their customers’ foreign currency when they aren’t able to withdraw dollars from these very same accounts.

Alejandro Gil, the Head of the Economy and Planning Department has announced that nothing has been improvised in this alternative “to win out over the strict US blockade.”

Can we trust then that these stores won’t be empty again? Will they still have exorbitant prices that make products almost inaccessible even to Cubans with greater purchasing power? Will there be spare parts to ensure that these appliances don’t live the same fate as the thousands of rice cookers the government stores sold that no longer work and are being stored in a corner of Cuban homes?

Will the dollars that the population holds save an economy that has been hit by fuel shortages, planning mistakes, structural inefficiency and obsolete industrial equipment? Will imports of electronic devices by Cuban citizens finally kick off small and medium-sized businesses outside of the State’s direct control? Time will soon tell…