Martes, 12 de Diciembre de 2017
18:57 CET.
Economics

What the reform measures implemented by Raúl Castro in 2006 have achieved, and failed to

The close of 2016 marks a wasted year for the Cuban economy. A few days ago the CEPAL announced that GDP growth would be 0.4%, one of the lowest in Latin America, marking an economy close to stagnation. This situation is particularly aggravated by the overlapping factors of a growing fiscal deficit estimated at 6.8% of GDP, despite the fact that the State takes in about 60% of the GDP, closely related to the poor internal figure, and a  marked imbalance in visible trade, with a very low coverage ratio of below 40, which contrasts, however, with the more favorable development in Tourism revenues and remittances from families abroad.

Analysts note that the reform measures introduced by Raúl Castro in 2006 are not producing the expected results. Despite the thawing of relations with Obama, those responsible for the economy have kept the private sector on a tight leash, despite the fact that it is the only force capable of reversing the adverse economic situation. Since 2015, the number of self-employed workers has not risen over half a million, a mark achieved in the early stages, and this stagnation is not related as much to the limitation on trades and professions that the regime imposed on the private sector as it is to the lack of prospects, the absence of funding, and difficulties operating within the framework of an economy based on state intervention, without a market or property rights.

Neither does the new regulation to attract foreign investment, or the international marketing campaigns for the Mariel Special Development Area seem to be yielding the expected results; while it is true that businesspeople are attracted by the "project portfolio," they vanish when they see who is on the other side of the table, the shortage of domestic funding, and the problems they will face freely hiring workers. These are aspects on which the regime insists that it does not intend to make changes, which will further repel potential investors.

The authorities blame every ill on the US embargo and blockade, despite the progress made since the meeting between Castro and Obama, and the fact that Cuba currently trades with every country in the world, and has even managed to secure very generous debt forgiveness and payment deferrals rarely granted to countries with such a poor track record when it comes to meeting their payment obligations. In addition, its external dependence is increasing, because remittances from families abroad and increased travel have become the main sources of revenue, while Venezuela's oil commitments have experienced a clear dip.

Most investors currently operating on the Island agree that collecting for services takes more than a year, and that the Central Bank has no control over payments, which depend directly on the elite running the country. Doing business on the Island requires taking out loan insurance on exports in their countries of origin. Almost always, funded by state enterprises. In any case, the control of foreign currency and capital movements is far from being liberalized.

In 2016 looming economic alarm bells started to ring. The ageing of the population is accelerating, without the adoption of measures to deal with a process that threatens potential long-term growth. Meanwhile, immigration tension has accelerated due to fear of a change in US policy towards Cuban arrivals. Adjustments at inefficient state enterprises came to a halt as a result of union protests, which has meant the maintenance of high levels of underemployment, which systematically undermines productivity in most sectors. Finally, the obsession with control and the centralization of commercial distribution and logistics continues to cause supply problems, not only for consumer markets, but even worse, for those of intermediate goods. It is clear that the model of the old Central Planning Board (JUCEPLAN) is absolutely incapable of solving these problems, whose severity has increased.

The dual currency system remains in place, accepted as a lesser evil by the population, despite the problems of credibility that functioning this way entails for an economy. Plans for the lifting of the dual system apparently have been forgotten. There have been timid advances in the field of Telecommunications and the Internet, but home penetration rates are still low. The astronomical rates relative to the salaries paid in Cuba, and technological levels, remain far too low to make possible actions improving basic services, such as banking or payment at shops or service companies, to cite a couple of examples. The so-called "Guidelines " have not even managed to improve the interaction between productive sectors and activities (the most obvious example is the construction of housing, insufficient to meet the population’s demands) nor to reduce imports.

Cubans suffer the direct consequences of this dreadful economic management in two ways. First, they face structural situations of shortages and, at times, price increases, which have spurred the authorities to set price ceilings – one of the most inefficient solutions to address these problems. Therefore, although nominal wages have increased, the average is so low that real wages have suffered due to price increases and a reduction in regulated rations, which the regime was forced to implement as a result of the increase in the deficit. Secondly, the realization that current policies yield little hope for economic improvement, and only uncertainty about the future, increases disaffection with the ruling class.

With Fidel Castro out of the picture, many are already placing wages on how long Cubans will put up with things before taking to the streets to protest and confront a system that runs contrary to human reason.

In the end it all goes back to the problems of the Castroist economy and its hallmarks: the lack of a legal system safeguarding private property rights, the lack of a market as the basic tool for resource allocation, a low level of investment in the GDP, the inability of prices to perform their function as indicators of value, and it can be concluded that none of the reform measures introduced since 2006 have managed to solve these problems, which constitute the true burdens weighing down an economy that could get worse in 2017. Ten years wasted in the management of an economy that has not benefitted all Cubans.

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