What Will Change in Cuba’s Economy with Murillo’s Re-Appointment?

By Emilio Morales* (Café Fuerte)

Marino Murillo
Marino Murillo

HAVANA TIMES — What does Marino Murillo Jorge’s re-appointment as the head of Cuba’s Ministry of the Economy and Planning spell for the island? Are there reasons to believe a change in the island’s economic strategies is coming, or is this merely a cosmetic change in the high spheres of power?

Murillo’s recent appointment as Minister for the Economy and Planning has awakened as much interest as it has doubt among experts and the international press, but, concretely, I dare quickly speculate that I don’t believe it means much. The problem facing Cuba’s economy does not lie in the person heading the Ministry of the Economy, in whether it is Murillo or some other economist appointed by the Council of State, but in the structural conception of the reforms and the strategic conception underlying the change in the country’s economic model.

To date, the reforms implemented by Raul Castro have not shown any signs of taking off. On the contrary, the stagnation of the economy persists.

Hindering Growth

Since the readjustment, the Cuban economy has shown practically no signs of growth and has stagnated, with a forecast of a very modest 1.4 growth for this year. The measures that have been applied thus far to broaden the private sector have reached the point of saturation, and the number of self-employed has not been able to break the 500,000 barrier [there is also no information on how may who took out licenses have since turned them in]. Limiting the number of legal self-employment categories to 201 reduces the threshold of opportunities and limits growth in the sector.

In addition, four years have gone by and the wholesale market that was to satisfy the needs of the private sector has not yet been created.

Though the changes currently underway have been more wide-encompassing than those carried out 20 years ago, the truth is that they do not go as deep as the situation demands. The productive forces have not been freed, nor are they being incentivized with new opportunities, making these the missing link of the reforms process.

The most tangible indication that Raul Castro’s reforms have not been as effective as expected is the rapid increase in Cuban emigration over the last four years. This is clearly a sign that people are both unsatisfied and disappointed, and it should be a direct indication that the government ought to reassess its strategy and make the adjustments needed to bring about a change in the way the country’s economic model is being changed.

A Generational Problem

Something has evidently failed in the current strategy and I do not believe Murillo can change the country’s economic panorama all by himself. We are dealing with a conceptual problem that is very hard to overcome by a generation that has been applying the same conceptions to govern the country for 56 years. The government has shown a tendency to enter into inner disputes and change its economic strategies, but, in fact, the content of its policies is the same one we heard in the nineties, when the Soviet era was coming to an end.

Though opportunities for foreign capital afforded by the new Foreign Investment Law and the Mariel Special Development Zone are both viable and timely, the strategy appears to focus on the development of the country’s macro-economy and not its micro-economy, such that the reforms, in their entirety, are obstructed.

Many are the opportunities (at least on paper) offered foreign investors, and very few are those made available to Cubans living in Cuba or abroad. This brings about the stagnation of the domestic market, something which is going to make the elimination of the two-currency system (scheduled for the end of the year or beginning of 2015) very difficult and have adverse effects on measures aimed at encouraging foreign investment.

The development of the domestic market must be included in the same strategy the government has designed to encourage foreign investment – the two must become the parallel tracks of the same mechanism, through the essential development of a network of private enterprises. The State has no other realistic alternative other than yielding ground to private enterprises, if it wishes to develop the country’s productive forces.

If it fails to do so, the change to the country’s economic model will be yet another turn of the wheel and positive results will always be something still to come – with Murillo or whoever at the helm, if enough of Cuba’s economy is still standing to experiment with inertia some more.

*Emilio Morales is a Cuban economist, ex-head of strategic planning for marketing in the CIMEX corporation and author of the books “Cuba: silent transition to capitalism?” and “Marketing without Advertising, Brand Preference and Consumer Choice in Cuba”, and president of the Havana Consulting Group in Miami.

8 thoughts on “What Will Change in Cuba’s Economy with Murillo’s Re-Appointment?

  • Excellent suggestion! There has been some movement to discuss this idea. It’s the percentage of ownership that’s a major obstacle. Cuba cannot continue much longer with the status quo regime. If it weren’t the billions infused yearly by expats there would be no economy

  • Your facts are backwards: since the fall of Communism in eastern Europe, the countries which did introduce “shock therapy” transformation have experienced strong economic growth, an increase in life spans, lower drug & alcohol abuse rates. Poland is a prime example. The countries which wavered on democracy, have suffered prolonged economic stagnation, increased crime, drug & suicide rates and continued environmental pollution. Russia is the prime example there.

    The ideas you urge the Cuban government to adopt are all fine and dandy, but you must know they never will. To liberate the Cuban economy will threaten the regime’s grip on power. They will prefer to keep control of the economy and political power within the military-party complex. If that means the Cuban people will remain poor and wanting, so much the better. Starving people have always been easier to repress.

  • Accepting Emilio Morales comments, I would suggest that there may be a good reason for giving Murillo more authority. Many of the recent reforms have sent mixed messages, including allowing Cubans to buy cars and then placing ridiculous taxes on new cars or allowing for private shops and then cutting off sources of imports. Maybe having a single economic czar will allow for more – hopefully positive – policy coherence. Just maybe.

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