It is Us Cubans In opposition to Ourselves

By Ricardo Torres  (Progreso Weekly)

Photograph: pixabay

HAVANA TIMES – The “Financial and Social Technique for the Strengthening of the Economic system” announcement has generated a far-reaching debate amongst consultants and residents, inside and out of doors Cuba. The second for the brand new financial coverage seems within the midst of a dire state of affairs corresponding to the deep recession of the early 1990s.

To get an thought of the acute difficulties that the Island goes by, within the first quarter of 2020 imports sank 45 p.c in comparison with the identical interval in 2019. Though this 12 months there are extraordinary conditions (the COVID-19 pandemic), exterior monetary tensions had been manifesting lengthy earlier than this.

The subjects which have been placed on the desk have been mentioned assiduously within the educational area for the reason that finish of the final century. Non-public corporations and cooperatives, overseas funding, meals manufacturing, export promotion, state-owned corporations, market regulation or decentralization, can hardly be thought of novelties within the debate on financial coverage.

In lots of circumstances they had been apparent, postponed or forgotten time and again, even if the basic political paperwork supported clear choices in lots of the points that are actually being taken up once more. Much more revealing is the scant evolution of options to ‘reform’ conventional centrally deliberate economies.

Since China started its technique in 1978, each the Soviet Union of “perestroika” and Vietnam have utilized variations of the identical rating. The bases of these efforts usually are not so completely different from what has been completed in Cuba within the final three many years, however maybe with much less dedication, and due to this fact, with little consequence.

The precarious state of the Island’s exterior funds confirms the failure of a technique of worldwide insertion based mostly totally on a focus of overseas commerce with allied nations underneath political agreements of doubtful sustainability over time. Any short-term aid from exterior constraint on this means is accompanied by future turmoil that has the potential to floor any critical improvement effort.

The obvious enchancment in numbers on the prime of the cycle solely serves to divert consideration to the important downside of low exterior competitiveness. In truth, the benefits extracted from the business companions distance the intense strategy to the issue and hinder the inefficiency of the state firm.

On this state of affairs, there aren’t any critical efforts to vary that actuality. The competitiveness downside is nourished by the profound decline of the home productive system that faces the various obstacles erected over the many years that reply to good intentions, however with poor financial evaluation.

The low stage of exterior competitiveness is the true reason for the dollarization that now seems as inevitable, and that bothers so many. Dollarization itself, a indisputable fact that many officers have tried to disclaim or restrict, is way from being an innovation in Cuban financial coverage. It has a not so distant historical past. Have been the corresponding classes realized? Hopefully… What comply with are two classes, which haven’t been so clearly outlined within the progress of the Technique.

First, macroeconomics is among the most complicated and engaging areas of financial evaluation. On the base of all international balances is the true sector, that’s, the productive system. Financial, fiscal or monetary devices can’t change structural insurance policies which might be aimed toward altering the principles of the sport that basically decide the framework for decision-making of the brokers: corporations, customers, the State.

For nearly twenty years Cuba managed to attain and maintain acceptable macroeconomic balances, nevertheless it postponed the restructuring of the state-owned corporations and the productive transformation was solely simply at first. The imbalances continued to build up, even when they weren’t seen. On the time, a transparent instance was the lack of convertibility of the CUC. As soon as the exterior compensation weakened, the consequence might solely consequence within the present morass.

The second downside, associated to the earlier one, is the belief behind the conviction that the State is usually a good re-distributor and allocator of the overseas forex that it captures from the completely different financial brokers. Hopefully they’re on the ideological antipodes, nevertheless it seems like a tropical variation of trickle-down economics. That’s, benefiting a couple of within the brief time period is the best way to profit the bulk within the close to future.

The topic is difficult, however it is rather dangerous to just accept that the place you failed earlier than you’ll be able to succeed now. If the Cuban State intends to play that card once more, it should make sure that it’s utilizing utterly completely different devices. Up to now — the 1990s — motion was restricted to extracting revenue from surplus forex sectors whereas doing little or nothing to reform the general public sector. What ended up occurring was that currencies had been misallocated and possibly wasted, acquiring low returns over time. Penalties of that misstep can now be seen.

Actually, new components seem this time, though permeated by the dogmas of the previous. A related constructive step is that this time dollarization will permit (with sure limitations) that the completely different brokers can entry the acquisition of technique of manufacturing. It’s a nice thought to make sure that a proportion of these {dollars} is successfully invested and ensures future returns.

The bottleneck occurs when state corporations function mediators on this scheme. Neither overseas commerce corporations, nor these associated to home wholesale exercise, have the capacities or the inducement construction to effectively fulfill this operate. In the event that they haven’t succeeded thus far for a a lot smaller and fewer demanding universe of state clients, there’s nothing to ensure that they are going to be capable to obtain it with a wider and extra various universe of actors.

Around the globe, corporations that have interaction in worldwide commerce buy help providers from specialised corporations to efficiently full this activity. As a rule, there’s competitors for the supply of those providers. That could be very completely different from what they intend to do right here. The state firm is once more working with a captive market and extracting commissions to proceed nurturing its personal inefficiency.

Lastly, it’s price highlighting two points of the exterior context that may mark the brand new programs of improvement of the Island.

The world is altering, and it appears to be heading in direction of a bitter confrontation between two powers, america and China. The dynamics of world commerce has been reversed over the previous decade. Development has been meager, and lots of anticipate the tip of globalization as we all know it. International worth chains shall be eradicated and turn into extra regional.

One of many penalties of those occasions is that any export-based progress technique is an uphill path. It’s fascinating that now that the world is receding a bit of, Cuba plans to place into apply energetic export promotion insurance policies. I’m positive they’re crucial, nevertheless it appears clear that, if it was tough earlier than, now it will likely be much more tough.

In any case, it’s not a lot the exterior context (though some will repeat it to the purpose of exhaustion), however slightly the inconsistency of home insurance policies which has wrecked, greater than as soon as, the previous variations of the “Cuban improvement technique.” It’s merely us in opposition to ourselves.

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