Updating the Cuban Economy: The First 10 Years

the process of updating the cuban economic model formally began when the Communist Party of Cuba (Partido Comunista de Cuba, PCC), in its congress of April 2011, adopted a resolution approving a number of socioeconomic policy guidelines (in Cuba, the "Lineamientos") for the country's development (PCC 2011). However, by 2007, certain changes were already apparent in the Cuban government's economic policy, with initial focus on the agricultural sector. Modification of the "model" is part of a broader process that transcends the economic arena. In the second decade of the twenty-first century, it can be viewed as an attempt to adapt to a world characterized by rules, as well as a balance of powers, that are not necessarily in line with the primary goals pursued by the Revolution.

In this unique scenario, Raúl Castro's administration has relied on the gradual introduction of socioeconomic reforms that seek a viable model for a small and underdeveloped nation subjected to the extremely high costs of a US embargo in the conditions of the twenty-first century. The scope of this proposition, a process known as "actualización," extends beyond short-term objectives in order to substantially change the rules that have governed the Cuban economy for the past 50 years. It represents the deepest transformations Cuba has embarked upon since 1959, and it is characterized by significant achievements as well as marked weaknesses.

CUBA'S NEED FOR A NEW MODEL

The nature of the transformations undergone by the Cuban model since the 1990s has been the subject of much discussion (Morris 2014). However, the tendency to compare Cuba's performance with other countries in transition may give rise to fundamental confusion.

Contrary to some observations in the existing literature, the severe economic crisis Cuba faced in the early nineties was not exactly a consequence of a transitional recession. Rather, this crisis stemmed from extremely aggravated failures within the Cuban model in the context of an external shock of major proportions. Cuba lost most of its external integration foundations, which had relied on the Council for Mutual Economic Assistance (CMEA), and in particular, the country's bilateral relations with the former Soviet Union.

In other words, Cuba's downturn did not occur due to the dismantling of the centrally planned economy system; instead, it resulted from the impact of the country's loss of foreign support for its development, and the inability of its production structure to swiftly reorient its course in line with the new terms of trade based on market conditions in an essentially capitalist world. This period helped illustrate the full scope of Cuba's poor international competitiveness. In fact, the country has not managed to recover its production capacities of the 1980s, even in the long run. For instance, exports of goods in 2016 were lower, both in volume and value, than in 1989.

While Cuba has chosen to preserve the fundamentals of its model, significant changes can now be observed in the country's socioeconomic structures. Up to 1989, the Cuban state exercised control over an overwhelming majority of the country's companies and economic assets. Around 90 percent of the total work force was employed in the public sector, and most of the country's supplies and production factors were allocated on the basis of government criteria defined by various central planning agencies.

In these conditions, the Cuban state could easily capture generated rents, most of which came from foreign trade transactions, and these resources were distributed in accordance with diverse social and production priorities. Through its control and management of the country's income, the Cuban state could critically influence both consumption and wealth distribution. Full employment and small wage differences were key components of this model, which propitiated levels of equity comparable to advanced nations under solid welfare states. Universal social policies were dominant, and eligibility criteria were seldom established to approve access to public services and/or to grant subsidies.

Cuba's social achievements in this period are indisputable, and in fact quite impressive, in light of the country's rather more...