Cuba’s Ministry of Economy and Planning: ‘In Six Months, It Will Be Worse Than Now’

Cuban Ministry of Economy and Planning, Alejandro Gil (Cubanet)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, 24 March 2023 — Prime Minister Manuel Marrero was present last Wednesday at the annual meeting of the Ministry of Economy and Planning, headed by Alejandro Gil. The extensive participation included the communist leader of the party’s productive economic department, Joel Queipo; the Minister of Finance and Prices, Meisi Bolaños; the Minister of Labor and Social Security, Marta Elena Feitó; and the new Minister-President of the Central Bank of Cuba, Joaquín Alonso Vázquez. From this economic conclave of the leadership, several conclusions can be obtained that are highlighted in this blog.

First, Gil and all his ministries are mistaken in proposing a GDP growth of 3% in the Cuban economy in 2023. Without reforms there is no possibility of growing, except by manipulation. What is needed are In-depth structural reforms that eliminate the obstacles and impediments that prevent the effective linking of sectors and productive activities. They have been proposing this type of message since they launched the Guidelines, but the results are not seen. In addition, growing by 3% is an unambitious figure, which not only prevents the economy from returning to the pre-pandemic situation, but is insufficient to correct serious problems, such as inflation and currency depreciation.

Second, according to what was stated at the annual meeting, the Cuban economy will stagnate in 2023, and this will take place because of the adverse effects of the dollarization of the economy, retail inflation, centralized access to foreign exchange, the insertion of new economic agents and the adverse results of companies with losses, still more than 400, which will remain unresolved. These effects are not the only ones, because blackouts, lack of food and deterioration of infrastructure have an even more negative influence. The Cuban economy has been dragging for several consecutive years for cyclical and structural reasons, and this can make it more difficult to correct imbalances and to slow the growth of them.

Third, the recipe proposed by Gil, based on consolidating the restructuring of the currency allocation mechanism of the economy, the decentralization of competences to the territories and the integral transformation of the socialist state enterprise is not what the Cuban economy needs at the moment. It falls short, and this may be due either to technical ignorance of the rules of operation of an economy or to the lack of effective instruments to face problems. Or both at the same time.

The Cuban economy needs a more effective policy mix of monetary and fiscal policies to promote growth. Delaying  decisions over time can further aggravate the current scenario. For example, the idea of decentralizing spending to the territories may further increase waste, deficits and indebtedness, which is exactly what is not needed at the moment. Similarly, the Cuban communists say they want to advance in the macroeconomic stabilization of the country in 2023, but they neither adopt measures nor know in which direction they have to move to do so. The result will be a failure.

Fourth, Marrero said that there are still distortions that must be corrected to continue developing the economy and active participation in society, a disturbing message if they do not specify what those distortions are. In any case, they have their origin in the interventionist model of the regime since they are only found in Cuba. In that sense, Gil’s proposals for economic actors, consisting of creating an institute and a general direction of the ministry for attention, coordination and control of economic actors, more bureaucracy and intervention, have as its main objective to further subordinate the performance of economic actors to the decisions of the regime. Farewell to economic freedom.

The announcement of fiscal stimuli only to economic agents dedicated to producing and importing goods and raw materials in the Cuban economy to create productive chains within the socialist state company seem more like an unproductive expense that is useless, than like a program aimed at consolidating the productive structures of the economy. Why don’t they stimulate everyone? In reality, this type of asymmetric and partial measure, instead of improving the general functioning of the economy, cause negative effects with dangerous intersectoral transfer of resources.

Fifth, with regard to the transformation of the socialist state enterprise, Gil said that in order to advance in this area and achieve effective performance as the main actor of the economy in the production of goods and services, two things are required: to start the classification of state companies, which has all the aspects of a bureaucratic task, and to present the proposed law of companies that, clearly, seems to show a preference for state companies without any glimmer of hope for the private sector. The 400 companies with losses will not see their situation improve.

Sixth, and closely related to the design of economic policies, it is useless for Gil to defend maintaining the principles of more equity, social justice and benefits to the population if this does not produce more and better. This will not be achieved if the priority is not set correctly. And it seem sthat in this balance-sheet meeting, the importance of production and supply is is not taken into account.

Conclusion, more of the same, without being able to see signs of improvement in the Cuban economy. In six months the Cuban economy will be much worse than now. What’s the point of voting on March 26?

Translated by Regina Anavy


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