Wednesday, July 27, 2016

Cuba - Open for Business?

Cuba: Open for Business?
07/26/2016 06:29 pm ET
Enrique J. Rueda-Sabater

visiting fellow at the Center for Global Development, senior advisor to
The Boston Consulting Group (BCG), lecturer on scenarios and strategy
The recently published book by Richard E. Feinberg provides a good
opportunity to revisit the economic prospects of Cuba. In the book's
title the question is omitted, so it echoes the official slogan that the
Cuban government has been using to signal that something has changed.
The content of the book, however, does include much to warrant a
question mark.

Cuba: Open for Business provides a useful foundation for thinking about
what the future of Cuba could be like and about the pitfalls to
navigate. It is a well-crafted up-to-date review of the challenges and
opportunities that faces the country and of some of the dynamics at play
in Cuba and in the relationship between the US and Cuba. However, the
very skimpy Appendix on "Basics Facts" makes it clear how little solid
information the author was able to garner -which probably explains why
its analysis is for the most part confined to the realm of anecdote. In
the final analysis, the book begs more questions than it actually raises
and offers less fact-based analysis than will be needed to forge
constructive, creative avenues for exploring the options that Cuba's
leaders need to consider if the country is to realize its potential.

It is not clear what it will take for the Cuban government to shift away
from an implicit denial of the fundamentally serious economic situation
and start looking at realistic options. Political considerations seem to
be one major reasons of the official mental blockade (more pernicious
even that the economic blockade?) that afflicts the island. But as
examples across the world—Vietnam to mention one—show, it is possible to
revitalize an economy by resorting to market mechanisms without it
necessarily implying political regime changes.

The dire—and very peculiar—situation of the Cuban economy is best
characterized by its sources of foreign exchange. Although official
statistics do not provide enough data for a detailed analysis, the basic
facts are clear. The main sources of foreign exchange are: the provision
of services abroad by Cuban medical personnel under state-to-state
contracts; the remittances and gift parcels sent by expatriate Cubans;
and tourism. Commodity exports used to be a fourth significant source
but no longer ... low commodity prices for Cuban minerals and the
combined effect of lower world prices and reduced oil shipments from
Venezuela (part of which Cuba used to resell) have stymied that source.

Medical services—with the state, rather than the health professionals,
keeping the lion's share of the revenue—and remittances and gifts hardly
seem a solid foundation for future economic growth. Tourism—given the
need for major facility upgrades and new hotels—will be quite foreign
exchange intensive for years to come, so unlikely to be the engine of
economic growth and net earner of foreign exchange that Cuban hopes for
... plus the weak and decaying infrastructure could well take a toll on
the tourist experience in Cuba—denting hopes for the lucrative repeat

The official strategy that appears to envision an economy dominated by
state enterprises and complemented by tightly controlled foreign
investment fails to address the fundamental weaknesses of the Cuban
economy. Only unleashing market forces and entrepreneurial
dynamics—beyond the current scope allowed through the 'cuentapropista'
phenomenon offers a chance for the change of gears that the Cuban
economy desperately needs.

Exploring the options for doing that and facing the reality of the
certain failure "non-business as usual" is an urgent matter. But it
needs to be done with a combination of creativity, imagination and with
courageous pragmatism. All of those things are in abundant supply in
Cuba—though maybe less so in official circles. Scenarios of the future
integration of Cuba in the global economy would be a good way launching
that exploration. Let's find a way to make them happen and hope that
kind of exercise will help overcome all the blockades afflicting Cuba.

Source: Cuba: Open for Business? -

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