Pavel Vidal Alejandro

Pavel Vidal Alejandro

Cuban economist. He is currently a professor at the Javeriana University in Cali. He previously worked at the Central Bank of Cuba and at the Center for Studies of the Cuban Economy. Specialist in macroeconomic issues, monetary policy and the use of applied econometrics of time series. Consultant of international institutions and in Colombia. Guest professor at universities in the United States and Europe.

Photo: Otmaro Rodríguez.

The economic reform in Cuba: stuck in the middle

It is clear that Cuba has gone from a long first stage in which reforms were understood as a necessary but reversible evil (between 1990 and 2008), to another in which reforms are conceived as desirable, although a comprehensive conception of the process and a sufficiently dynamic sequence of change is lacking. Fear of the costs that the reforms entail―in very diverse fields, also in the political one―has led the definition of a comprehensive framework of reforms and the scenario that leads to the Cuban economy to be postponed again and again. It is important that this stage be also closed and that the reform be ambitiously seen as a program of simultaneous and comprehensive action. The reforms in some areas require actions in others if they are to bear fruit. Although the value of caution is recognized, the fragmentary nature of the actions has its costs. Sequencing and partiality of the measures adopted has led the Cuban economy to an adverse situation. The logic of the past doesn’t govern, nor has a new economic logic been allowed to prosper. We could say that for years Cuba has been in no man's land, stuck in the middle of a process...

Photo: Otmaro Rodríguez.

Cuba: re-dollarization of the economy and failure of the CUC

A few weeks ago the Cuban government announced a group of monetary transformations to face the complex financial and balance of payments situation that is overwhelming the economy. They are not related to the monetary reform that has been announced for years. They are not aimed at unifying the monetary system, but instead they produce new fragmentations. They don’t point to a definitive and long-term solution to the complex and distorting system of multiple types of exchanges and monetary duality. They are measures to face the current crisis and seek some quick relief from the growing financial imbalances that have been accumulating since 2015 in the wake of the Venezuelan crisis and the freezing of the promised structural reforms, a situation that since the end of 2017 has worsened with the intensification of the current U.S. administration’s economic sanctions. The motivation is not to structure a monetary system that effectively contributes to the country's long-term strategy and the development of the entire productive system. Again they are measures that are taken in the heat of an emergency and looking for an immediate result, without much time to think about future implications. In fact, the monetary reform that until recently was...

Photo: Otmaro Rodríguez.

Cuba: redollarization of the economy and the failure of the CUC

This week the Cuban government announced a group of monetary transformations to face the complex financial and balance of payments situation that is extremely overwhelming the economy. It is not about the monetary reform that has been announced for years. They are not aimed at unifying the monetary system, but instead they produce new fragmentations. They don’t point to a definitive and long-term solution to the complex and distorting system of multiple types of exchange rates and monetary duality. They are measures to face the current crisis and seek some quick relief to the growing financial imbalances that have been accumulating since 2015 in the wake of the Venezuelan crisis and the freezing of the promised structural reforms, a situation that since the end of 2017 has worsened with the intensification of the economic sanctions of the current U.S. administration. The motivation is not to structure a monetary system that effectively contributes to the country's long-term strategy and the development of the entire productive system. Again they are measures that are taken in the heat of urgency and looking for an immediate result, without much time to think about future implications. In fact, the monetary reform that until recently was...

Photo: Kaloian

Salary increase and distributive tensions

The Cuban government surprised by decreeing a significant increase in wages for half of the workers in the state sector. Anticipating the inflationary effects of such a decision, it also decreed the setting of ceiling prices, including markets that were supposed to operate under the logic of supply and demand. Both decisions have been well-received by a large part of the population, which perceives that this may ultimately represent an improvement in their income’s purchasing power. Certainly, the officials and professionals responsible for designing and executing public policies and making public services work (education, health, safety, social assistance, culture, sports, housing and defense) had been relegated and weren’t part of the “winners” in the reform process. The average income gap had widened up to ten times less than the average income received in the private and cooperative sector. Such inequality constitutes one of the sources of resistance to change. The professionals who must implement the transformations see themselves as "relative losers" in the reform process. The government itself has repeatedly called attention to the bureaucracy for holding back the changes. Migration to the private sector or abroad has been decapitalizing the public sector, leaving it with a demotivated workforce that...

Photo: Desmond Boylan / Reuters.

New financial regulations in Cuba: monetary policy, foreign capital and microcredit

So far the issuing of a new regulatory framework for the Cuban financial system has had little impact. On October 12, 2018, decree-laws 361 and 362 were published in the Official Gazette of the Republic of Cuba, aimed at reorganizing the general operations of the Central Bank of Cuba, commercial banks and the rest of the financial system. These regulations replace decrees-laws 172 and 173 that in 1997 gave rise to the Central Bank of Cuba, brought banking regulations closer to international standards and gave more autonomy to the monetary policy, although it never operated in a completely independent way. These were the two decrees that gave general legal coverage to the banking reform of the 1990s. The new regulations issued last year do not distinguish the intention to promote a new structural banking reform, although new nuances are introduced in the regulations and new concepts that could provide some insight into the management of monetary, credit and financial policies in the future. Perhaps the most interesting is the new space granted to foreign capital and microcredit within the financial system. New regulatory framework for the Central Bank Decree-Law 361 establishes the mission, functions, and norms for the organization and...

Private businesses in Havana. Photo: Roby Gallego.

The Cuban private sector: size does matter

In spite of everything, the expansion of micro and small private enterprises in Cuba has been sustained. In 2010, the year in which the government started giving new licenses for private activities and introduced some flexibility in the markets, the number of businesses grew by 59 percent. In 2011 the increase was even bigger and reached 72 percent. Starting 2012 there was a cooling when the sector approached the potential levels and when they faced a lack of other complementary policies. Despite the Cuban private sector’s difficulties to have legal access to supplies and the capital it needs, and the extremely restrictive regulatory framework in which they operate, the micro and small enterprises have continued generating employment since 2012 to a rate of 6.4 percent each year, on average. Last year, even with the recession and the financial crisis on the macroeconomic level, the amount of private jobs registered a 7.2 percent increase. Private businesses in Havana. Photo: Roby Gallego. For the time being, the Cuban private sector is mainly concentrated in the microenterprise (the average number of workers per enterprise is around four), although there are some cases in which it is higher, but without...

Ilustration R10

Small and Medium Private Enterprises: a Bridge for Cuba-U.S. Relations

Right since December 17, 2014, the White House said that one of the principal objectives of its new Cuba policy would be promoting the expansion of the private sector on the island. For this it drew up a list of products and services that the Cuban private sector could export to the United States. In addition, the U.S. government has been studying the mechanisms to allow the sale of construction materials, medium goods and equipment for private workers and small farmers. It also announced that it would authorize projects for the development of microfinances in Cuba. However, those decisions practically have had no effect. On the one hand, the U.S. government wants this aid to directly reach the private sector without benefiting the Cuban state apparatus. But this seems impossible given the Cuban economic structure, where the state-run enterprises retain the monopoly over domestic wholesale commerce, foreign trade and the banking system. The Central Report of the 7th Congress of the Communist Party of Cuba directly referred to private enterprise: “Cooperatives, self-employment and private medium, small and micro enterprise are essentially not anti-socialist.” The Report also confirmed the will of freeing the State of a group of activities, and cited...

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