Cuba must hasten reforms to regain time lost, economist says
By Gerardo Arreola
From the Mexican newspaper La Jornada
HAVANA – Cuba cannot use shock therapy to open its economy but must do everything possible to speed up reforms and “regain time lost,” an academic report recommends.
Cuban economist Pavel Vidal did a comparative study of the reforms undertaken by Cuba and Vietnam that was published by the Institute of Developing Economies of Japan’s Foreign Trade Organization (JETRO, for its initials in English.)
The author recommends that the liberalization of Cuba’s economy not be limited to agriculture and microbusinesses but be used to facilitate the emergence of a broader private sector and the promotion of direct foreign investment. This would foster productivity and take advantage of the high level of social development on the island, especially in education.
Finding the right pace for the changes is crucial, Vidal stresses. Compared with Vietnam’s approach to reforms, Cuba’s disadvantages now are the big size of his state sector, the lack of recent experience with the market and the delay of its leaders to recognize “the structural problems of the model, and the need for dramatic changes. A pessimistic view of the current reforms is that they’re too few and too late.”
Vidal is a researcher at the Center of Studies of the Cuban Economy at the University of Havana. Using various approaches, he insists on the relevance of undertaking the changes at the right time.
For example, he recalls that, because it had already initiated its opening, Vietnam avoided a setback in 1991 when the Soviet Union disappeared, while the collapse of the former socialist power dragged Cuba into a deep crisis.
In the current circumstances, Vidal doubts that Cuba will modify everything at one blow, because that could lead to fractures in the stability of the institutional and macroeconomic sectors.
Even Vietnam, with shock measures in some periods, had to wait several years to achieve “significant transformations” in its model, Vidal writes. But he points to the need for Cuba to accelerate its current pace “to regain time lost.”
Most Cubans are skeptical that the government can achieve “an efficient and productive economy and improve the standard of living,” the author says. Raúl Castro is 80 years old “and a new generation of leaders is nowhere in sight. The current leadership is at a crossroads, because it wants to carry out a gradual reform but time is passing fast.”
When initiating Doi Moi (“renewal”) in 1986, Vietnam resembled today’s Cuba because of their Soviet-style model, the researcher writes. However, Vietnam’s state sector was small and allowed for a “big bang,” that is, a battery of reforms imposed at one blow. The abundance of small private enterprises in the country’s southern region facilitated the changes directed at the market.
On the contrary, the existence of a broad state sector in Cuba counsels a moderate pace. On the island, it is more difficult to change the people’s mindset “after 50 years of living under the same rules and maintaining an ideology against the market and the private sector.”
A specialist on public finance, the author examines the official goal of monetary unification between the Cuban peso and the convertible peso (25 times greater than the former and equivalent to 1 U.S. dollar.)
The opening of banking services to the private sector last year was “very positive,” Vidal says, but he underscores the “inevitable” need to devalue the rate of exchange (1 to 1) that exists for state enterprises, joint ventures, and official entities.
The devaluation would have to be more gradual than in Vietnam, Vidal concludes, because the numerous state enterprises, large and midsize, render the Cuban economy less prepared to react to exchange incentives.
