Cuba’s economic measures “open a path, but they are not enough”

The Cuban economy is going through one of its most complicated moments in recent years derived from well-known external factors: the United States blockade; the world crisis; the increase in basic food and fuel prices; and the legacy of Covid 19, among others. From an internal point of view, the country is mired in food shortages and high inflation in unregulated markets. The purchasing power, based on wages paid, is very low. There is little availability of foreign currency; there are prolonged electricity blackouts in almost the entire national territory; and there is a lack of means of public transportation, which all derive from the structural imbalances that remain in the country.

Although it was raised in parliament that the country has changed the downward trend of its economy, which is true, those comparative results of 2022 with 2021 — a year of almost complete paralysis — should not be branded as achievements because everything that is achieved this year will surely be higher than last year’s. The comparison should be made with the year 2018 or 2019. To this we must add that the branches that grow do not have the impact that the Cuban population is hoping for. The activities with the highest positive numbers are public health and social assistance, communications, hotels and restaurants (from the opening of borders to tourism) and construction activity. In contrast, productive and commercial activities decreased, including the manufacturing industry, commerce and the supply of electricity, gas and water. 

What to do to mitigate the economic situation Cuba is going through?

In addition to enforcing a group of measures to relaunch agriculture (63 measures) the results are not perceptible by the population. Fifteen initial measures were adopted in the national industry which do not meet the needs of the country. Therefore, in its most recent legislative gathering, parliament decided to approve 75 measures aimed at the recovery of the Cuban economy.

In a simple analysis of the measures, there are some that are elemental and logical for any time of the Cuban economy, and are imbued more with desire than concrete results. Others I thought were already on the way, such as:

  1. Identify all the possibilities to increase foreign exchange earnings and implement the corresponding actions.
  2. Promote industrial and agricultural production to substitute imports in tourism.
  3. Implement measures to increase revenue collection in the municipalities.

On the other hand, there are approved measures that can contribute to increasing the supply of goods in the country:

  • Products offered by foreign and national suppliers will be marketed under the consignment sales modality.
  • This would be a good stimulus for recently created MiPymes, since it would make it easier to buy directly the goods that foreign suppliers bring on consignment, immediately recovering the value of what they sell.
  • Establish the regulatory framework for foreign investment with the non-state sector.

These measures, if handled without bureaucracy and without being impregnated with the obstacles that foreign investments have gone through with the state sector, could mean a great leap in the production of goods and services in the nation.

The measure of relaxation of importation by natural persons with a non-commercial nature is very positive, however, the director of the Ministry of Economy, in his presentation to parliament, said that private importation for commercial purposes was not convenient for the country. The question would then be what argument supports the inconvenience? Who is it not suitable for? Which entities are not suitable? Why is it not convenient? Remember that the money would not be provided by the state, and yet more imported goods would circulate in the country, and with greater supply, prices would tend to fall. Where in the world is the retail trade of goods controlled by the state? The state must regulate and manage regulated goods, but should not intervene in the importation of non-essential goods, such as beverages, etc., for example. 

The most debated measure at a popular level due to its possible impact is that related to the creation of a new foreign exchange market for the sale of foreign currency to the population with an exchange rate that is “economically based and where all currencies are worked, including bills based on the dollar.” 

This measure is logical and indeed it is a missing piece in the monetary order that was applied on January 1, 2021, which was the lack of a formal currency trading market. Said non-existence was causing a high inflationary rate in the informal foreign exchange market, which in turn had an impact on the price of goods.

The question then follows: Has the country studied the advantages and disadvantages of this measure? Are we aware of the risks we face? In other words, will the country have the resources to maintain this measure over time, without setbacks?

Doubts are based on reality:

  • If the stores in MLC (convertible currency) are currently out of stock, how is it possible to apply a measure to increase the demand for the products that would be sold in those stores in a climate of reduced supply?
  • Would Cuba sell by the use of MLC cards (magnetic credit cards) or can one buy with physical currencies?

We must not forget that there is a currency that no matter the efforts made in the country, its final objective is to leave the country, via emigration. Therefore it would be bought at a rate above the one that is proposed.

From a social point of view, the measure of “Encouraging state companies to dedicate financing from their profits to construct housing for their workers” is very useful. The difficulty here is the lack of materials for construction. Also positive, I must add, is the reactivation of the micro-brigade movement as an alternative to advance solutions to the needs of the population. One must remember, though, that the population of the 1980s and 1990s is no longer young enough for this arduous task. The Cuban population decreases per year, those over 65 increase, and those between the ages of 0 and 14 decreases. Obviously, the labor force is already scarce and the same is expected in the immediate future.

In general, we must remember that Cuba is a country of measures, plans, and goals where results are not always in line with the aspirations of the people. The time for waiting is over, and the people, that still do not see light at the end of the tunnel, are looking for other very painful alternatives, such as the departure of more than 155,000 Cubans, a large majority of whom are young, in the past nine months of fiscal year 2022, through the southern borders of the United States.

Therefore, in the hands and in the minds of the current decision makers are the destinies of this nation, which has resisted throughout the entire revolutionary period. But there is a clear exhaustion, so the proposed measures must be accompanied by new, more powerful ones which bring solutions in the shortest possible time. The 75 measures or guidelines open a path, but they are not enough, it is necessary to go deeper.