Sunday, May 22, 2011

Cuba Attempts to Depart From Its Centralized Economy Through Major Economic Changes

The Miami Herald: Cuba Publishes List of Proposed Economic Changes
Guardian Media: Raul Castro has Launched a Campaign of Genuine Renewal and Redirection
Guardian Media: Cuba's Theater of the Absurd
BBC: Cuba's Economic Changes

Last week, the Cuban government announced various broad goals in a 313-point economic plan. The plan details Cuba’s effort to revive and shift its economy from a state-controlled Communist system, in which the government controls every aspect of the economy, to a more market-based economy where citizens will be allowed to participate in private enterprise and sell their products and services in the market. The economic plan was unanimously approved at the Communist Party Congress, but remains for the Cuban National Assembly to work out the specifics and translate the guidelines into law. The plan purports to allow Cubans to purchase and sell homes, a practice which currently only takes place in the black market. Today, the only way for Cubans to acquire new property is through an exchange of their homes, in which multiple families must coordinate the transactions and money is often exchanged under the table. However, the details of how the purchase and sale system will work and the restrictions or taxes to be applied have not yet been revealed.

Another important feature of the plan is the establishment of private cooperatives. The new guidelines will allow Cubans to form cooperatives that would function as mid-size companies, capable of hiring private employees. The cooperatives would also be allowed to determine the salary of each worker according to their productivity. Currently, such entities have only been allowed in the agricultural sector. Additionally, for the first time, Cubans will be allowed to hire employees that are not family members.

The guidelines will also permit the sale of cars between citizens. Under current law, Cubans can only obtain cars by purchasing them from the government and with special permission. Cubans often circumvent such restrictions by illegally selling their cars in the black market, while claiming to government authorities that the transaction is simply a lending of the vehicle. Still, the change will be welcomes by Cuban citizens who hope to upgrade their cars to more efficient ones without fear of breaking the law. Other guidelines included in the plan are a reduction of travel restrictions for Cuban residents, an elimination of the dual currency system, the legalization of the sale of construction materials at unsubsidized prices, the promotion of the fishing industry, and the connection of sugar prices paid to Cuban producers to those prices paid on international markets.

Moreover, despite the government’s official announcement, there are various conflicting views about what these purported changes will actually mean to the Cuban people. On the one side, many welcome the changes as a genuine renewal and redirection of the economy. On the other side, some Cubans are wary as to how these changes will actually be implemented and whether they will truly lift the Cuban economy out of its crisis.

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