What’s expected of the Cuban economy starting 2017?

Some answers and reflections.

Part of the port of the Mariel Special Development Zone, located 45 kilometres from Havana. The Cuban government is especially interested in attracting foreign investment to this logistic, industrial, port and free zone centre.

TOKYO, Dec. 1, 2016 (IPS) – Cuba must make big changes in its economy to rapidly overcome its structural problems starting 2017, when President Raúl Castro will face the first year without the physical presence of Fidel Castro and with Donald Trump heading the United States.

The presence of economic backwardness, derived from the combination of external and internal factors, places on the table the need to seek rapid and correct solutions, and those tasks that are undertaken have to be realized in a period of time that benefit the current generations so that they can participate in the search for that objective. There are recent events that confirm that there is a great deal of polarisation among the Cubans; a Cuba for all must try to be built, even if some don’t want to be included.


The possible attempt to again strengthen the U.S. blockade by the new administration in Washington will be an unquestionable obstacle to Cuba’s future development, though it would be necessary to concretely wait for the measures it would put into practice, since U.S. airline companies and tourism will also be affected.


However, a complex but very viable road is to speed up the pace of the key transformations undertaken by the Raúl Castro administration and set aside the rigid structure of decisions marked by the imprint of so many years of a high centralisation. This means that a new economic and social course must be boosted, new or different with respect to the one which has previously been followed.


It is not possible to grow at only an estimate of 0.4 per cent in 2016, and of -2 per cent in 2017. The change of tendency in the economic growth can only be achieved if the foreign investments that come to the country, of any origin, are rapidly approved, if the new law on enterprises is approved in the country, if the trades approved to exercise private work are expanded and together with this the creation of small and medium enterprises is authorised, if the large state enterprise is given more business facilities, if a real wholesale market is started up, if the mobile banking services are expanded, where there is a transparency in the operations of the private economic entities and with this an improvement in the taxes for the budget.


At the same time this would lead to the mass introduction of the internet through cell phones. And it must also be strengthened that the Cuban institutions of any form of ownership have outlet terminals; it is known that in the private businesses their existence is almost null. Of course this is not the only thing that must be done, but starting with this would greatly contribute to following a path for the growth aspired to.

Cuban economist and researcher Omar Everleny Pérez Villanueva.
Cuban economist and researcher Omar Everleny Pérez Villanueva.


This is not a mere wish, what I am presenting, since Cuba still has not achieved the structural transformation to which it aspires and an international insertion with distortions has been maintained and a growth, when achieved, preferably extensive.


The impact of education and science in structural transformation, productivity and efficiency has been less than the potentially possible, together with the fact that the expansion of social spending is far from the country’s productive capacity (*).


The low growth of the gross domestic product (GDP) must not continue, which is the first condition for increasing everyone’s wellbeing, the very low rates for Cuba’s conditions must pressure the policy makers to reflect.


The participation of the Gross Formation of Capital indicator in the GDP, which on average has moved approximately 10 per cent, must be surpassed in the future, thus also recognising the continued low effectiveness of the investment process in the country, that is to say, the aspiration will have to be more than 30 per cent.


There are basic rules in economy that, if violated, only achieve negative indicators, and one of them says that if you do not invest adequately, and in appropriate institutions, what you are doing is slowing down or immobilising the country’s productive activity, that is to say, not creating values in a growing way or said in other words not increasing the produced goods or services.


Cuba is perhaps unique in having invested so much in human capital and however generating such a limited economic growth, contrary to the experiences of economic development in other countries, after the 1960s, like Japan, South Korea, Singapore, Malaysia or in those most recent with a socialist course like China and Vietnam.


On the other hand, starting next year a wage increase for Cuban workers will be necessary because of their relationship with the increase in the standard of living. If this indicator were to continue being delayed, it will continue leading to the low productivity and favouring the diversion of the workers’ economic resources. But for this it is necessary that at least the manufacturing sector be given a greater margin in its decision making, and that it not be influenced by the decisions coming from enterprises’ higher levels.


The previewed debts were paid starting 2013 and a process of renegotiation took place that had a positive effect on Cuba’s foreign credibility. These renegotiations of the debt have led to establishing commitments for recent payments, that is, payments are being made for interests and for the principal currently derived from those agreements and that must be maintained.


The development of a vigorous domestic market is more than necessary. There is the case of China, which in times of international crisis has strengthened its domestic market and that has allowed it to maintain its economic growth. But this component has been absent in Cuban economic policies, that is to say the deployment at full capacity of the Cubans’ potentials is not encouraged, rather what is observed is a counter reform of the incomplete reform.


It is indispensable to modify the current economic planning, where all the forms of ownership that must contribute to Cuba’s development are included. If the planning continues being carried out as until now, it attempts against the very state sector.


The development proposal of the Cuban small and medium enterprises must be a pressing need because just with the creation of wealth the distribution of more wealth will be strengthened.


It would be opportune to accept in this scenario the portfolio investments. In this case it is even necessary to study the issuing of titles of value of fixed interest (bonds) and of variable interest (shares). The issuing of bonds is a possibility and a need in the search for new internal sources of financing – to finance the budget deficit – and foreign sources to provide guarantees to the creditor according to international practice.


For a country to prosper, from the economic point of view, it must be able to produce wealth. The enterprises, independently of the prevailing economic system, are the entities responsible for this to happen; therefore the slowing down of the productive forces must not be maintained, frequently because of ideological or political reasons. The nation’s wealth has taken long in being felt, in being seen.


What has recent economic history taught us? In the first place, it’s impossible to turn our backs on history. In the second place, incentives are necessary if the aim is to have productivity increases and economic efficiency. Third, it’s a mistake to think that, to build socialism everything has to belong to the state. Fourth, autonomous enterprises must exist, not units of administration of resources. Finally, the planning carried out until now is not the one that leads to development. And the market is not synonymous to private property.


In short, not thinking on the proposals starting 2017 would distance us from the Cubans’ aspirations of living in a more prosperous, inclusive and participatory society in the country.


Lastly, Commander Fidel Castro’s wish will increasingly allow for a reflection in the sense that to maintain the achievement of the social transformations he led it is necessary to obtain a greater amount of financial resources to face those social achievements reached.


* Monreal Gonzalez, Pedro (2016). “El plan de desarrollo hasta el 2030. ¿Cuadran los plazos y las cuentas?” Cuba Posible website, Havana, 2016.


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