Why is Cuba’s economic reform progressing so slowly?

Abstract

Cuba has moved from a lengthy first stage (1990–2008), in which reforms were considered a necessary but reversible evil, to another in which reforms are seen as necessary and desirable. However, the lack of a comprehensive and timely approach to those processes has severely hampered the outcomes of reforms already underway. The purpose of preserving political control and the inherited institutional framework explains, in turn, why authorities have tried to maintain a logic of rationed economic reforms at the cost of harming their effectiveness.

Keywords:

• Economic reform
• institutional change
• political economy
• Latin America
• self-employment
• state

Acknowledgements

The article was written in the framework of the Jean Monnet Network: Europe–Cuba Forum, co-financed by the European Union. The authors thank the forum’s colleagues for comments received on a prior version of this article.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Mesa-Lago (2012), Alonso and Vidal (2013) and Vidal (2016) evaluate the challenges of the economy in the first years of Raúl Castro’s presidency, and Brundenius and Torres Pérez (2015) and Triana Cordoví (2016) characterise the elements that distinguished Castro’s reforms.

2 The main sectors of the Cuban economy that generate the highest export revenues are professional services (mainly medical services), international tourism and nickel mining. In addition, remittances (mainly from the US) represent the third largest source of foreign currency income in the current account, following tourism exports and export of professional services (ONEI 2021). For more details on the importance of remittances and travel from the US, see Duany (2021).

3 Official Cuban national accounts statistics are recorded at the official exchange rate, which has remained overvalued relative to the parallel exchange rate, and the economic activities of the informal market are not fully captured. This can introduce biases in the proportions and metrics calculated with these data.

4 An alternative measurement of Cuban GDP in dollars that considers the different exchange rates in the economy can be found in Vidal (2020).

5 The Economic and Social Policy Guidelines of the Party and the Revolution in the Period 2016–2021 [Los lineamientos de política económica y social del partido y la revolución para el período 2016–2021]; the National Plan of Economic and Social Development of Cuba 2030 [Plan nacional de desarrollo económico y social 2030 de Cuba]; and the Conceptualization of the Cuban Economc and Social Model of Socialist Development [Conceptualización del modelo económico y social Cubano de desarrollo socialista].

6 See Decree 335 in the Extraordinary Official Gazette, No. 58, of 13 December 2017.

7 The WGIs are intended to cover different dimensions of governance using hundreds of variables that capture the perceptions of non-government organisations, commercial business information providers, and the public sector (Kaufmann, Kraay, and Mastruzzi, 2010). The six indicators can be divided into three dimensions of governance:

A) The process by which governments are selected, monitored, and replaced, approached by way of (i) Voice and accountability and (ii) Political Stability and Absence of Violence/Terrorism.

B) The capacity of the government to effectively formulate and implement sound policies, captured by (iii) Government Effectiveness and (iv) Regulatory Quality; and

C) The respect of citizens and the state for the institutions that govern economic and social interactions, measured by (v) Rule of Law and (vi) Control of Corruption.

Additional information

Notes on contributors

Jose Antonio Alonso

José Antonio Alonso is Professor of Applied Economics at Universidad Complutense de Madrid. He has published extensively on developmental issues in various specialised journals. His most recent books are: Alternative Development Strategies for the Post 2015 Era (with G. A. Cornia and R. Vos); Global Governance and Rules for the Post-2015 Era (with J. A. Ocampo), both with Bloomsbury Academic; and Trapped in the Middle? (with J. A. Ocampo), published by Oxford University Press in 2020.

Pavel Vidal

Pavel Vidal Alejandro is Professor at the Pontificia Universidad Javeriana. He served as a visiting researcher at Harvard University, Columbia University, the Universidad Complutense de Madrid, and the Institute for Developing Economies (Japan External Trade Organization). He has been a consultant to the Inter-American Development Bank, World Bank, Brookings Institution, Atlantic Council, UNDP and Banco de la República de Colombia. He worked in the Monetary Policy Division of the Central Bank of Cuba (1999–2006).