5th February 2024
Deputy Prime Minister Alejandro Gil, Cuba’s Minister of the Economy and Planning, has said that the Cuban government expects this month to bring forward measures to control Cuba’s increasingly volatile foreign exchange market. In recent weeks the street rate of the Cuban Peso (CUP) has surged to close to CUP300 to US$1, compared to the official rates of CUP24 or CUP123 to the US Dollar.
Speaking at a meeting of Cuba’s Council of Ministers, during which he outlined an action plan and a timetable for introducing measures aimed at encouraging renewed economic growth while ‘rectifying’ past mistakes, he said that his ministry was developing plans to “resize the exchange market,” and take back “control of the exchange rate in the country.”
“Next month, progress will also be made in the presentation of proposals to resize the exchange market, the intervention of the informal sector, and the control of the exchange rate in the country, which includes the determination of the exchange rate and the formation of prices,” he was reported by Cuba’s Presidency website as having told the meeting. “We are working hard on this because of the impact it has on promoting and stimulating production,” Gil said.
The reference to the informal sector relates to government’s belief that actions by some of those in Cuba’s rapidly developing, independently managed non-state MSMEs are distorting demand for foreign exchange.
In his reported remarks the minister indicated that emphasis will also be placed on recovering remittance flows. This will involve, Gil said, encouraging their capture, and studying the feasibility of new channels, platforms, and the use of digital scenarios for remittances and banking operations for collections and payments from abroad.
In the first of what is expected to be a monthly update to the Council of Ministers on the progress being made in implementing the reforms announced last year, Gil said that another priority will be the implementation of a new approach to managing the financial resource held by both state and non-state businesses. This would involve he said a “new mechanism for the allocation and management of liquidity for all economic actors, based on the distortions that exist today, in order to achieve a more harmonious functioning of the economy.” It would enable, he suggested, progress to be made in enabling previously announced plans to encourage “the autonomy of the state company.”
Stressing the importance of what he described as government’s “high-impact plans,” he noted, among them would be a “currency allocation and management mechanism, which includes the resizing of the exchange market.” This, he said “is transversal to the entire economy and we are going to face it this year; the transition from subsidy to products to subsidy to people, which implies a change in the distribution of wealth, that is more fair and equitable; as well as the transformation in the institutional, regulatory and organisational environment of the economy.”
Gil’s remarks suggest that the intention, as previously announced, is that 2024 will be the year when most socialist state enterprises must control their own budgets and are required to operate under central and local government constraints to deliver surpluses, and if relevant to do so by working in conjunction with state and non-state MSMEs.
Previous statements indicate that the government’s longer-term objective is to create a circular domestic economy, making Cuba as far as possible self-sufficient. How rapidly this might happen in the light of shortages of inputs and foreign exchange, uncertainty on the part of managers, continuing migration, and other constraints such as constant power outages, has yet to be clarified.
In his remarks, Gil stressed that the group of economic measures announced in December by the island’s Prime Minister, Manuel Marrero, (Details Cuba Briefing 2 January 2024)are intended to deliver what is necessary to boost productive activity, increase national production, and generate exports and income in foreign currency with the objective of achieving macroeconomic stabilisation.
He also sought to reassure Cubans concerned about large increases in the cost of utilities and transport: “It is not about raising prices for the sake of increasing them,” he said, “but rather about encouraging savings, making more efficient use of resources, and seeking a more fair and equitable distribution of the wealth that is generated,” he stressed.
“That is the meaning of the rates and prices that we are updating, because they have been left behind in time, disconnected from costs, and today what is really happening is that waste is being encouraged,” Cuba’s state media quoted him as adding.
In his presentation to the Council of Ministers of an ‘Action Plan for the Implementation of the Government’s Projections to Correct Distortions and Re-boost the Economy’, Gil noted that every included action was linked to government’s macroeconomic stabilisation programme, including “price correction …. because it eliminates or reduces subsidies and increases tax revenue.”
Speaking about increasing and diversifying external income, Gil emphasised that “many of the projections included in the document will have more favourable impacts if more resources are available.” “Having more fuel, more inputs for national production, necessarily involves income in foreign currency, external income that must be encouraged,” he pointed out in a reference to the need to export more, and Cuba’s interest in increasing the role of foreign investment in a broader range of operations in Cuba’s domestic economy and productive sectors.
Among the objectives of government projections, Gil noted, is an increase in national production using installed capacities. In this respect and referring to recently introduced measures to reduce tariffs on imports of raw materials, inputs, and intermediate goods (Cuba Briefing 5 February 2024) he noted the need for Cuba to address idle capacities in industry, and the importance of products being produced domestically.
Developing the economy, Gil stressed, means “offering greater well-being to the people, and what we are doing goes in that direction.” The worst risk, he said, would be in not changing and not transforming.
At the Council of Ministers meeting, details of other aspects of the proposed timetable were reported to have been discussed, including plans to update regulations in February to allow the restructuring of the ways in which local development projects are managed.
More generally, the meeting heard that the measures being introduced across the year will be accompanied by several “political processes”.
Reports of the meeting quoted President Díaz-Canel as saying that the intention is to “confront everything that deviates from the spirit of the Revolution in our society.” A common thread, he said, will be the approach proposed by former President Raúl Castro, (Cuba Briefing 8 January 2024), and will be about ‘the decisive importance’ of maintaining Cuban unity, the work of the cadres, ideological work, and facing the problems of the economy.”
Cuba’s President said this will be a large-scale process that will involve “a discussion of partisan militancy, cover all administrative structures, and also groups of workers, students, and the population in communities,” and “therefore the entire Cuban society.” “It is a process,” he indicated, “that will contribute to reaffirming the need and strategic importance of unity, exemplarity and combativeness in the revolutionary ranks.”
Also speaking, Roberto Morales, the Secretary of Cuba’s Communist Party (PCC) and an increasingly high-profile politburo member, said that “the Party will promote discussion of the document: ‘Basic concepts for the correction of deviations and negative trends in Cuban society’.” A practice, he recalled, that is not new in Cuba.
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Photo: via @PresidenciaCuba
