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?

  • October 2, 2014 at 8:19 pm
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    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

  • October 2, 2014 at 8:37 am
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    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.

  • October 1, 2014 at 3:12 pm
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    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.

  • October 1, 2014 at 2:07 pm
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    Great comments from everyone. I hope Murillo and the Castros read them and ponder how do we grow an economy? Answer: Move to a real democracy. You can still protect the homeland and allow free commerce to flourish. Maybe they should look at Singapore and get some good ideas. China will eventually implode because of their lack of democratic reforms. Look at Hong Kong!

  • October 1, 2014 at 12:49 pm
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    Murillo’s job is to carefully introduce a select set of economic reforms designed to increase foreign cash-flow into the coffers of the regime and the pockets of the elite.

    These reforms will not do much to improve the lives of ordinary Cubans. The national economy will remain stagnant and unproductive, but the military dictatorship will control the business, so they will remain in power. And that’s the whole point of the reforms.

  • October 1, 2014 at 9:23 am
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    TALK, Talk, talk. NO change. Socialists PLAN, Plan, plan. Capialists take action. If it wasn’t so awful for the people of Cuba, it would be laughable.
    The economic health of a national economy is not defined by what it purchases, but by what it produces. In Cuba the consequence of Socialismo is production of LESS. Less. less.

  • October 1, 2014 at 9:03 am
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    I’m no economist–though I pretend to play one here at the HT–but some elementary observations would lead to possible ways significant portions of the national economy could be reinvigorated. For example, much of Havana is falling apart (homes, commercial properties, etc.); hence the construction biz. could be a much more dynamic source of employment than currently. Of course an important factor is its undercapitalization, so obtaining foreign capital (from China, from Europe, from the Cuban diasphora, etc.) is of paramount importance. If this industry is to be reinvigorated it must have a supply of skilled labor, access to materials, etc. Through economic policies, local contractors and suppliers could be created and encouraged (thus reinvigorating the national bourgeoisie–just the class which is dying here in the States!). Much of the raw materials exists in Cuba, and could be utilized in the transformion it into finished products, such as cement, cement blocks, roof-, bathroom- and kitchen tiles, furniture, (what about using maribu, and not just the ilegal cutting down of more valuable timber in national parks) etc. There are so many needs waiting to be fulfilled. A grave error made in the Urban Reform of the early 1960’s was the lack of incorporation of an adequate means of maintaining the properties thus intervened, such as a “maintenance fees” we have up here for those living in condos or cooperatives; instead, in Cuba these properties have been allowed to moulder and collapse. At the same time, some sort of mechanism should have been created for the financing and creation of additional construction needed for a growing and developing population.
    Of course what I am saying above reinvents the wheel, but why hasn’t this already become obvious to the authorities in charge??!! I know that in the 1960’s, 1970’s and 1980’s the Revolution had a lot on its plate, and was beseiged by the hostile–ane evil–empire to its north, but these needs should have been addressed before now. Since they haven’t, there is a lot of “catch up” to be done (just as a patient who fails to have regular dental visits, which results in some very expensive dental procedures having to be done when the patient, at long last, finally visits the dentist!)
    As the above article says, past failures are reflected in the elevated rates of emigration by young people, who see no hope for their future in Cuba and despair of conditions ever adequately improving.
    I believe that the Revolutionary Government has it within its power to change these conditions, to implement policies which will facilitate the fullfillment of these needs, while at the same time maintaining the system of social benefits, such as K-through graduate school education, a socialized health care system, etc. The shock therapy and pirate capitalism characteristic of Eastern Europe and Russia in the post-Soviet era is not the answer, as graphically demonstrated by its declining life spans, increasing drug- and alcohol adictions, increasing environmental degredations, etc.

  • September 30, 2014 at 3:12 pm
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    National economies grow as a function of what people can produce and sell, not by what people can buy. Allowing Cubans to stay at hotels, buy cell phones and even the permission to travel are feel good reforms but do little to grow the economy. Cubans must be freed to manufacture and sell what they make directly to foreign buyers. The only way Cubans can manufacture what they can sell is if the Castros permit Cubans abroad to become owners of the means of production. Until this happens, the moribund Cuban economy will continue to circle the drain.

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