The Economic Competition of the Territories, the Tip of the Dying Cuban Economy

In his declining years Fidel Castro dedicated himself to the cultivation of moringa, “the magic tree.” (EFE)

14ymedio bigger14ymedio, Elias Amor Bravo, Economist, 6 August 2023 — A kind reader of the blog asks me why the Cuban economy is having so much difficulty getting ahead and improving the living conditions of the population.

And my first warning is the mention of the embargo/blockade of the United States as a limiting factor to the country’s economic possibilities. My answer is clear: if in Cuba there is no process of economic recovery as in other countries of the world and in Latin America, it is because there are internal factors that prevent it.

One doesn’t have to look for those responsible outside, because there isn’t anyone. The seed of economic failure was planted by Fidel Castro 64 years ago when he decided to transform the structural base of the nation’s economy, betting on an adventure that at that time was fashionable in the countries dominated by the Soviet empire or China, but that over the years was seen to be unsustainable.

And while other countries were leaving behind that useless and inefficient economic model, Castroite leaders clung to it, as if it were a DNA trait impossible to replace. And so we come to the present day, when the communist regime continues to believe that the key to the nation’s economic prosperity is based on the “control and efficiency” of the economy by the regime. As if it were a military barracks. That’s how it goes.

The economic history of the nation is sad and offers a balance for future generations that only serves one thing: to understand that you can’t live in Cuba and that the solution is to go abroad. The same thing that has happened on the Island since the flights of Camarioca (1965) were inaugurated, after the massive departure of the Mariel Boatlift (1980) and Rafter Crisis from Guantánamo (1994)

Every fifteen years, Cuban communism is forced to open the doors of the prison so that people who hate the system flee and the regime thereby strengthens itself and gains time. The operation has gone well for the Castro leaders, but not for the Cubans. The Island decreases in all its indicators. It ages, is depopulated, lacks international solvency, is technologically lacking and continues to lose the talent and energy of its young people.

And in a scenario like this, it now turns out that the regime wants the provincial councils, protected by the communist territorial power, to assume the planning and management of the economy as part of the competition that has been ceded to them from the central regime.

And that is where the local communist bureaucrats have found some meaning in their lives, elaborating statistics of dubious quality confirming that on the one hand there is economic recovery, but on the other, the opposite happens. And with these data they launch themselves into a competition with the other territories to impress the hierarchical leaders of the party and the regime, installed in their comfortable offices in Havana, who have done their homework well and deserve a little applause, in the form of a visit or some institutional act.

Then, the controlled and submissive state press is in charge of covering this activity as if it were something transcendental, but the reality is that people are still standing in lines, suffering from a shortage of all kinds of goods and services. Private enterprises are blocked, and with optimism at rock bottom, Cubans can’t wake up from the terrible nightmare in which they live.

This analysis of the territorial economies that has just begun will give surprising results, which will soon be put on the table.

The communist regime has led to a very unequal distribution of state income and wealth in the different parts of the territory, which is reflected in numerous aggregated indicators. No one is surprised that the highest wage levels in Cuba are paid in the western provinces, while the lowest are obtained in the eastern ones.

This depends, and a great deal, on the territorial specialization, the density of companies and the number of jobs that are assigned in each area of the country. And for this reason, territorial governments will begin to acknowledge the effects of these inequalities very soon, especially when they have access to the business activity and the results of the management.

That will be the moment when it will be possible to verify that the permanent shortage of food and products, such as bananas and sweet potatoes, rice, vegetables, fluid milk and beef, has little to do with acceptable business results, duly made up by the managers.

Even when the analysis of compliance or non-compliance with the plan arrives, an approach to management can be contemplated, which does not imply a clear improvement in people’s living conditions.

The instruments that support the economic model of central planning will not serve to determine the conditions in which people live. The data will give satisfactory information on one hand, but the reality of the people on the street, of the average Cuban, will be very different. The communist Tovarich — the comrades — of the Iron Curtain already faced this problem in the 80s of the last century, and perestroika and glasnost emerged as recipes to solve it.

The governments of these communist countries realized that while they spent their time measuring, for example, the indecipherable indicators of overcompliance with retail commercial circulation, the people turned their backs on them and took to the streets in a demand for freedom and a different and more prosperous model for the economy. And what no one thought would happen happened. The Berlin Wall came down, and the communist empire of the USSR disappeared from the history of humanity. Then China and Vietnam did their own homework and ended up being part of the global economy.

The world changed but Cuba didn’t. Fidel Castro was a decisive block on the arrival of those winds of change and took advantage of the last years of his life to reinforce the old Cuban communist economic model that became the disaster that currently presides over the situation of the Island.

It is a scenario in which there is a shortage of food, state companies with losses, international insolvency, absence of foreign investments, collapse of tourism, territorial decentralization, galloping inflation, destruction of the value of the national currency and an obsession of the regime to control the money in circulation.

And the leaders of 2023 are reluctant to implement changes in the economic model to get Cuba out of this disaster and want the measures that are applied to be based on central planning and not on the market. For example, when they threw themselves into the Ordering Task* because it was going to be the solution to all the problems, they were already warned of the consequences. Now they’re here, and let’s see how they turn out.

And with this balance of widespread poverty, local leaders, who lack a global vision of the economy and only attend to their territorial objectives, say they want to export to other countries, without previously covering the internal needs of the population, as is the case with fresh fruit. The objective of achieving foreign exchange is only achieved with the entry of remittances that bets on the informal market and moves away from the economic controls of the regime.

However, the export categories do not work and the non-compliances are significant. And what is worse, the party’s local leaders refuse to allow exports from each area to leave the country through airports located in other provinces, since this goes against the presentation of results to the higher authorities. Unfortunately, the market unity in Cuba has been broken. This is the situation now.

*Translators Note: The Ordering Task is a collection of measures that include eliminating the Cuban Convertible Peso (CUC), leaving the Cuban peso as the only national currency, raising prices, raising salaries (but not as much as prices), opening stores that take payment only in hard currency, which must be in the form of specially issued pre-paid debit cards, and a broad range of other measures targeted to different elements of the Cuban economy.  

Translated by Regina Anavy


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