It is time to act
There seems to be a force that delays the essential part of the economic reform, that is, the transformations that deal with production of goods and services. Although these have already been announced by Cuba’s leaders, and are registered and based on essential documents such as recently approved Conceptualization and the Constitution of the Republic of Cuba, they have not been emphasized or has progress been sufficiently made on these essential reforms.
Monetary order, without this other dimension, leads to the inflationary pressures, excessive shortages, long queues, and the growth of the informal market, including the notable appreciation of the dollar on the black market, none of which can be overcome with administrative decisions.
The U.S. blockade and the impact of the pandemic have given rise to a complex and very difficult situation, but a lot can be advanced despite both of them. To put it another way, it is necessary to advance the reforms in spite of both the difficulties, and the fact is that this situation was recognized by government officials when the monetary order was started.
The necessary monetary reform and the devaluation of the Cuban peso (CUP) have “allowed the genie out of the bottle” and force us to quickly continue with the rest of the transformations.
However, it seems (so far) that for the conservative and bureaucratic forces accepting changes in the monetary circulation is much easier than accepting them in the productive structure of the system. It seems that “ideological schemes” and / or bureaucratic interests, with no basis in reality (and in history), are preventing it. They are unable to appreciate and accept the necessary comprehensiveness of the process.
Conditions must be created so that state-owned companies can adjust their costs and seek the necessary efficiency (essential for their condition as leaders of the economic system). They cannot do this if the productive fabric is not diversified with small- and medium-sized private companies and cooperatives that, on the one hand, generate more employment and absorb the excess workforce from the state sector, and that the devaluation makes it evident and unsustainable. On the other hand, greater goods and services that alleviate the lack of current supply make these entities essential for the operation of the socialist economy as a system. All of this, accompanied by the proposed targeted subsidies, a progressive tax policy, and greater decentralization and other components of the reform have been referred to at length in other written texts.
On the other hand (ignoring the problem of generalization of stores in convertible currencies, necessary but not in just any form), it is difficult to understand (even for informed economists) the reason for the permanent shortages in these stores when they finance themselves by generating important income to the state through foreign exchange necessary to alleviate the tremendous existing financial pressures and improve the country’s balance of payments. None of the explanations about the urgency of “taking” foreign currency for other priorities justifies affecting the circuit of these sales for the same reason that it is explained that they exist; that is, the need to maintain that flow of freely convertible currency. The factors that generate foreign exchange income must be well structured and preserved. They themselves are a priority!
We insist that one of the keys to the success of the reform is in its integrality. This implies, on the one hand, including all the necessary transformations and, on the other, that they are made with the appropriate sequentiality, otherwise, success is not possible. The economy is a complex system and must be treated that way. Its different factors are interconnected, the lack of action in one of its parts can cancel or affect the action taken in another. In this there are not only economic consequences involved, but also social and, of course, political. Analysis of evidence and data of what is reality demonstrates this.
As this year begins, three factors could lead to a better scenario: firstly, the possibility of controlling the pandemic with the application of vaccines; secondly, a very probable change in U.S. policy; and thirdly, decisions expected at the next party congress. However, the comprehensive advancement of the economic reform is the essential factor in any scenario — to deal with the worst or to enhance opportunities that opens up what is best. In my opinion, defending and arguing for this idea is a fundamental task here and now. It is time to act.
Julio Carranza is a Cuban economist. He is director of UNESCO in Guatemala.