At this month’s annual meeting of the U.S.-based Center for the Study of the Cuban Economy, economists offered opinions on issues relating to the Cuban economy; currency unification and economic centralization.
First, they asserted that it was highly unlikely the Cuban government this year would be able to achieve its long-hoped for unification of its two currencies: the Cuban Peso (CUP) , which is generally used by the Cuban population, and the Convertible Peso (CUC), which is used by tourists, foreign companies and some state enterprises and private entrepreneurs.
The Cuban Government and the Communist Party have long wanted to have such a unification. Indeed, last December, Raúl Castro, still the country’s president, said unification could not be delayed much longer.
Omar Everleny Pérez, a Cuban economist with the Centro Cristiano de Reflexión y Diálogo, Cárdenas, Cuba, said while “it will be impossible to achieve significant and sustainable improvement [in the economy] without currency reform,” it won’t happen this year. Why? Such unification is likely “to lead to higher inflation and hurt inefficient state enterprises that have essentially been subsidized by overly favorable exchange rates, even causing them to fail.” Such consequences might adversely affect voters in the upcoming referendum on the draft of a new constitution.
This opinion was shared by Dagoberto Valdés, of the Coexistence Studies Center, an independent think tank in Pinar del Río, Cuba. He said, “We think it [currency unification] could have a devastating economic impact, the strongest in 60 years of the revolution.”
Another person at the meeting, Luis Luis, a consultant and principal at International Research & Strategy Associates, agreed. He said it also would be difficult for Cuba to push through currency unification this year because it has very low international reserves. “They don’t have the reserves to have a currency that would be stable.” It could have been more easily done in 2010, when Cuba still had a huge subsidy from Venezuela and the economy was growing.
These thoughts were echoed by Rafael Romeu, president and chief executive of DevTech Systems and a former senior economist at the International Monetary Fund. He said, “The source of foreign transfers, Venezuela, is on the ropes.” Without Venezuelan subsidies, he said, “The fiscal balance of Cuba is deteriorating. There is a need to continue financing these yawning deficits, which also doesn’t augur well for currency reform.”
Also concurring with these opinions was Armando Linde, a retired IMF economist.
Decentralize the Economy?
Another topic at the meeting of the Association for the Study of the Cuban Economy was whether the existing centralization of the economy was a positive or negative factor.
Three economists– Omar Everleny Perez , Mario González-Corzo and Dagoberto Valdés–agreed that the reforms promoted since 2007 by then President Raul Castro have not yet rescued the economy.
Perez, of the Center for Economic Studies of Cuba, stated that economic development is impractical. One of the main hindrances to economic growth, in his opinion, is the current ” bureaucratic state business system,” its “high centralization of decisions” and “rigidity of plans”, with few incentives and still, today, without a “law of companies. ”
González-Corzo, Professor of Economics at Lehman College, City University of New York, highlighted that the last sugar harvest was the lowest in history (1,100,000 tons for 2017-2018) and that only 54 plants or factories of this sector are operational. The “decline” of the agricultural sector and the “inefficiency of a centralized and decapitalized sector” reduce the economic growth of the Caribbean country, he said, and added that the only road to recovery is the “expansion of private property, the freedom to contract and to choose production” and, in short, “deep structural changes.”
Valdés, of the Center for Convivencia Studies, described the Cuban economic situation as “critical” with shortages of food, medicines and housing continuing to “impact on everyday life” because of a “centralized” and “statist” economic model despite the fact that the” private sector has shown efficiency for creating new wealth.
Finally all there agreed that elimination of the dual currency was one of the “big problems” needing a solution without delay.
 Whitefield, Cuba badly needs currency reform, but it won’t happen yet, economists say, Miami Herald (July 26, 2018); ASCE, Cuba: After Raúl? (July 26-28, 2018); Experts: The Cuban economy continues to be ‘strangled due to its high ‘centralization,’ Diario de Cuba (July 27, 2018). See the posts listed in the “Cuban Economy” section of List of Posts to dwkcommentaries—Topical: CUBA.