Academic Warns of Economic "Shock" if Cuba’s Dual Monetary System is Maintained

It was nearly 26 years ago that Cuba allowed the dollar to enter its economy (14ymedio)

14ymedio bigger14ymedio, Reinaldo Escobar, Havana, 30 March 2019 — There are issues that appear cyclically in the official media. Discussions that get heated in the streets and later cool down waiting for institutional responses. Among these is the end of the dual monetary system, a measure that at times seems to be around the corner and at others appears to be in a distant and improbable future.

The debate on this sensitive situation, which affects the pockets of every Cuban, has returned this week after the publication in several official media of an article signed by Armando Nova González, doctor of Economic Sciences, professor and researcher at the Center for the Study of the Cuban Economy.

The text stands out not only for its lapidary truths but also for having been published on digital sites more prone to praise than to criticism, more focused on highlighting “the achievements of the Cuban system” than on pointing out its flaws. Instead of applause, Nova Gonzalez urges the elimination the monetary duality because postponing its end increases social, economic and political costs.

The imperative that the author emphasizes contrasts with the scant information that has been offered in recent months about the process of ending the “economic schizophrenia” of the Cuban convertible peso (CUC) and the Cuban peso (CUP). Since December 2017, when Marino Murillo, vice president of Cuba’s Council of Ministers of Cuba, stressed that the Government was continuing the work to end that duality, very little more has been reported.

Twenty-six years have passed since the dollar was introduced into the Cuban economy, a measure that, together with the subsequent appearance of the convertible peso (CUC), was conceived as transitory but has extended “much further in time,” warns the economist. It has not even been possible to achieve the purpose of “bringing closer” the values of the CUP and the CUC, nor the necessary correspondence between the CUC and the US dollar.

Instead, the academic regrets that more CUCs have been issued than can be backed with dollars, so it has depreciated. Something that is reflected in “the increase in prices in the hard currency stores and, at the same time, in the markets of free supply and demand in Cuban pesos.” A reality that is palpable in the fact that in recent years the purchasing power of families has continued to decline in sync with the currency’s loss of value.

Nova González knows the complexities of a process of currency unification in a nation with very low productivity, and recognizes that the end of the monetary duality depends on solving the structural problems of the economy. His proposals to clean up such a mess are daring and tend an opening to the detriment of centralism, but they are gripped by a maxim that seems more like a religious dogma than a political premise.

His reflections can hardly take flight because they carry the burden of not altering, with any of these measures, “the socio-economic system aspired to.” Among the variables that could be used to clean up national finances and the Cuban monetary system, the authorities rule out those that put at risk a social structure based on forced social justice and false egalitarianism.

The assertions of the academic confirm the official fear of a worsening of the popular malaise, and a possible reaction in the streets after the monetary unification. Like the rationed market, the monetary duality has not come to an end, to a large extent, because the government fears losing support and power. Its end is delayed not only by low productivity but by fear of rejection.

The author ventures some proposals to alleviate the negative impact of this unification, among them “closing the inefficient state enterprises that could be transfered to their workers in the form of cooperatives” with the initial financial support of the State (…), direct foreign investment or investment mixed with national capital and/or loans from international financial institutions.”

One of his most daring suggestions is to avoid the flight of foreign currency. Those millions of dollars that each year leave the country in the hands of mules that buy goods abroad. For them, Nova González proposes opening national establishments where local entrepreneurs can buy in foreign currencies “at prices even lower than those found in the underground market.”

Finally the academic knows that he walks on a tightrope and does not renounce having a protective mesh under his feet, perhaps that is why he indicates that this whole process “should be undertaken with the necessary observation and the required restraint that guarantees the continuity and sustainability of the economic-social model to which it aspires, one that is fair and with the greatest possible equity.”

However, Nova Gonzalez seems to be a responsible man and warns that “to continue with immobility, the risks will multiply and could generate a strong shock to the economy, with unwanted results.” Something that can be summarized in the Cuban authorities losing if they unify the two currencies and losing each day that they take to unify them.


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