What Will Change in Cuba’s Economy with Murillo’s Re-Appointment?

What Will Change in Cuba's Economy with Murillo's Re-Appointment?
September 30, 2014
By Emilio Morales*

HAVANA TIMES — What does Marino Murillo Jorge's re-appointment as the
head of Cuba's Ministry of the Economy and Planning spell for the
island? Are there reasons to believe a change in the island's economic
strategies is coming, or is this merely a cosmetic change in the high
spheres of power?

Murillo's recent appointment as Minister for the Economy and Planning
has awakened as much interest as it has doubt among experts and the
international press, but, concretely, I dare quickly speculate that I
don't believe it means much. The problem facing Cuba's economy does not
lie in the person heading the Ministry of the Economy, in whether it is
Murillo or some other economist appointed by the Council of State, but
in the structural conception of the reforms and the strategic conception
underlying the change in the country's economic model.

To date, the reforms implemented by Raul Castro have not shown any signs
of taking off. On the contrary, the stagnation of the economy persists.

Hindering Growth

Since the readjustment, the Cuban economy has shown practically no signs
of growth and has stagnated, with a forecast of a very modest 1.4 growth
for this year. The measures that have been applied thus far to broaden
the private sector have reached the point of saturation, and the number
of self-employed has not been able to break the 500,000 barrier [there
is also no information on how may who took out licenses have since
turned them in]. Limiting the number of legal self-employment categories
to 201 reduces the threshold of opportunities and limits growth in the
sector.

In addition, four years have gone by and the wholesale market that was
to satisfy the needs of the private sector has not yet been created.

Though the changes currently underway have been more wide-encompassing
than those carried out 20 years ago, the truth is that they do not go as
deep as the situation demands. The productive forces have not been
freed, nor are they being incentivized with new opportunities, making
these the missing link of the reforms process.

The most tangible indication that Raul Castro's reforms have not been as
effective as expected is the rapid increase in Cuban emigration over the
last four years. This is clearly a sign that people are both unsatisfied
and disappointed, and it should be a direct indication that the
government ought to reassess its strategy and make the adjustments
needed to bring about a change in the way the country's economic model
is being changed.

A Generational Problem

Something has evidently failed in the current strategy and I do not
believe Murillo can change the country's economic panorama all by
himself. We are dealing with a conceptual problem that is very hard to
overcome by a generation that has been applying the same conceptions to
govern the country for 56 years. The government has shown a tendency to
enter into inner disputes and change its economic strategies, but, in
fact, the content of its policies is the same one we heard in the
nineties, when the Soviet era was coming to an end.

Though opportunities for foreign capital afforded by the new Foreign
Investment Law and the Mariel Special Development Zone are both viable
and timely, the strategy appears to focus on the development of the
country's macro-economy and not its micro-economy, such that the
reforms, in their entirety, are obstructed.

Many are the opportunities (at least on paper) offered foreign
investors, and very few are those made available to Cubans living in
Cuba or abroad. This brings about the stagnation of the domestic market,
something which is going to make the elimination of the two-currency
system (scheduled for the end of the year or beginning of 2015) very
difficult and have adverse effects on measures aimed at encouraging
foreign investment.

The development of the domestic market must be included in the same
strategy the government has designed to encourage foreign investment –
the two must become the parallel tracks of the same mechanism, through
the essential development of a network of private enterprises. The State
has no other realistic alternative other than yielding ground to private
enterprises, if it wishes to develop the country's productive forces.

If it fails to do so, the change to the country's economic model will be
yet another turn of the wheel and positive results will always be
something still to come – with Murillo or whoever at the helm, if enough
of Cuba's economy is still standing to experiment with inertia some more.

*Emilio Morales is a Cuban economist, ex-head of strategic planning for
marketing in the CIMEX corporation and author of the books "Cuba: silent
transition to capitalism?" and "Marketing without Advertising, Brand
Preference and Consumer Choice in Cuba", and president of the Havana
Consulting Group in Miami.

Source: What Will Change in Cuba's Economy with Murillo's
Re-Appointment? - Havana Times.org - http://www.havanatimes.org/?p=106451