Given the complex economic situation facing the Cuban economy, at the ANPP session on July 21, the Minister of Economy and Planning announced the adoption of 75 measures "... aimed, among other things, at increasing foreign exchange earnings and increase and diversify exports.”

These measures must give continuity to the solution of part of the unresolved aspects of the Planning Task, especially with regard to the increase in external financial flows and the inflation that persists in the first half of 2022.

Specifically, the information provided by the Minister of Economy and Planning in the ANPP of July referred to a part of the 75 measures adopted, which imposes restrictions to evaluate their feasibility, taking into account their sequence and interrelation with different spheres of the national economy. .

However, it is possible to highlight that the measures set out in the sphere of the problems addressed with these decisions should contribute to possible solutions to achieve a stable macroeconomic balance in the shortest possible time.

Taking into account the above, the analysis will be concentrated in several blocks that cover those measures of greater importance and complexity.

In the first place, in 

 of the greatest importance, it is about implementing a new foreign exchange market[2] "...for the sale of foreign currency to the population with an "economically based" exchange rate and where we can work with all currencies, including dollars in cash”, explained the Minister of Economy and Planning.

This was an aspect not addressed by the Planning Task and constitutes a fundamental link for the country's monetary-financial balance.

This market is based on a fundamental premise that results from supposing that the population and the non-state sector -later it was clarified that international travelers can also access- sell their dollars or other convertible currencies with the aim of acquiring pesos, which would have a greater purchasing power in the domestic market.

Thus, the Minister pointed out “The Cuban pesos that are obtained by exchanging currencies must guarantee purchasing capacity, otherwise there are no incentives to make that exchange.”

Giving continuity to the implementation of the measures, the reopening of the foreign exchange market was already reported on August 3 as a way to obtain foreign currency, in this case the one that today circulates through the informal economy and that does not impact in the solution of essential problems for the population of the country in the current circumstances.

Explaining the measure, the Minister of Economy and Planning pointed out that this would be a gradual process given its complexity and risks at the moment.

This decision offers a set of advantages.

First of all, it implements “…a missing piece in the gear, in the working mechanism of the economy.”

that was not included in the Ordering Task.[3]

Second, it will allow the purchase and sale of foreign currency to the segment of the population, the non-state sector and foreign visitors through a legal and secure mechanism.

And thirdly, international transactions will be stimulated by sending remittances through transfers

In the information provided on August 3, it was reported about the gradual establishment of this foreign exchange market where it was decided to start with a phase in which foreign currency is purchased from the population, foreign visitors and the non-state sector, but without transiting -for the moment- to the sale of foreign currency, since it is assumed that the exchange market itself -in its operations- is capable of generating them.

This criterion is based on the finding that the country cannot divert the scarce foreign currency available from core objectives – such as the purchase of food and fuel – to feed the foreign exchange market

To achieve the objective of the first stage of the foreign exchange market, an exchange rate of 120 pesos per USD was established, based on the need to create a strong stimulus for the sale of foreign currency by the participants in that market, upon receiving a higher number of pesos than those offered in the informal economy, pesos that -on the other hand- would increase their purchasing power in national currency by increasing the volume of sales in that currency in the domestic market, financed with part of the foreign exchange that are obtained, assuming that prices do not increase.

Thus, the Minister of Economy and Planning highlighted “Success lies in having a level of supply in national currency that generates the incentive for people who have foreign currency to exchange it for Cuban pesos, because with these they will have a level of consumption in the country. ”

This operating logic is supported by another group of premises that must be examined in the light of the risks assumed.

In the first place, it cannot be ignored that the USD or the euro are strong currencies throughout the world and act as refuge or reserve currencies against devalued currencies, so their sale to the State in the foreign exchange market would have to be sustained with a stimulus. too strong for it to actually take place.

Secondly, there is currently a segment of the Cuban market that sells in convertible currency (represents approximately 24% of the country's retail merchandise circulation) and that -if it continues, even temporarily- demands foreign currency to access it, which can inhibit its sale in the state exchange market.[4]

Third, with the reintroduction of the foreign exchange market by the State, competition from the informal market intensifies,

More recently, in an intervention by the Minister of Economy and Planning on August 22, it was reported that the second stage of implementation of the foreign exchange market would begin with the sale of foreign currency to natural persons as of August 23.

With this decision, the purchase-sale operation that should characterize this market is completed.[6]

However, the sale of foreign currency will be subject -for the time being- to a group of requirements.

In the first place, the sale will be –on this occasion- only for natural persons, so the sale of foreign currency to the non-state sector is not included, which was included in the purchase of foreign currency by the State in the first stage.

Therefore, for the moment it will not be possible to expect non-state sector operators to buy foreign currency with pesos if it is not in the informal market, where it is possible that their price will increase.

Second, the sale of foreign currency per natural person will be limited to 100 dollars (or its equivalent in other currencies), which will be reported daily in the 37 exchange houses (CADECA) authorized for this purpose throughout the country, based on the fact that the sale, to a greater or lesser extent, will be determined by the income in foreign currency that CADECA has at any given time.

Thirdly, it was also reported that, for now, foreign currency will not be sold to travelers at airports, which implies that they buy it at CADECAs or elsewhere.

This decision imposes a way of operating with tourists that was not clearly based on the aforementioned explanation, since it does not correspond to international practice, where in airports there are both exchange houses for the purchase of national currency (when entering the country ), as well as for the sale of foreign currency (when leaving the country).

The beginning of the sale in foreign currency that has been implemented, is an essential step for the beginning of the regular operation of the foreign exchange market and it is to be hoped that a group of aspects that remain pending solution can be addressed in a short time to perfect the mechanism. .

Finally, an issue that also remains to be resolved is that the time it takes for the increase in supply in national currency to be reflected in the market -without price increases- will modulate the role of this important element as a factor in stimulating the sale of foreign exchange to the State by the population.

If this does not happen within a reasonable period of time, liquidity in national currency, which is increased by the sale of foreign currency by the population itself, will be an inflationary factor, which can be aggravated if there is additional growth in prices in the economy. non-state that cannot be fully controlled.

This last aspect was another element not resolved by the Ordering Task, since it designed a price increase that was below reality.

The control of inflation - a need taken up by the Minister of Economy and Planning in his speech on August 3 - demands the elaboration of an anti-inflationary program that allows facing the problem in all its complexity and forms part of a medium-term macroeconomic stabilization program. term.

Similarly, the implementation of this measure is linked to the need to restore external financial flows, which are not available today due to the level of external debt faced by the country, as analyzed earlier in this paper.

The reopening of the foreign exchange market is, without a doubt, a complex process and subject to risks of a different nature, but it is necessary for the proper functioning of the Cuban economy.

Linked to the external sector, complementary measures were also reported aimed at the essential increase in exportable funds through the development of MSMEs aimed at exports, developing foreign direct investment with the non-state sector, promoting the substitution of tourism imports. , develop the consignment sale of imported products, implement a new foreign exchange allocation scheme for state and mixed entities and the flexibility of non-commercial imports by natural persons.

All this is convenient and will help, but one must also think about the extent to which it will be possible to carry out these decisions without rethinking the need to relax or not the state monopoly of foreign trade, an issue that -at least- demands reconsideration.

A 

 has to do with changes in the relationships between the different forms of property.

This includes the creation of joint state-private companies and the development of foreign direct investment in the non-state sector, already mentioned above, all in a context in which there is an expansion of the private and cooperative sector.

This increase in the role of the so-called "new actors" in the Cuban economy requires -among other things- new considerations in terms of credit policy and fiscal policy so that these actors play the complementary role that has been defined for them in the Conceptualization of the Cuban economic model already approved.

It was also decided to implement FDI in the wholesale and retail trade sectors, sectors until now that were not included in association schemes with foreign capital.

A 

 supposes, more than new decisions, the increase in the efficiency of decisions already adopted previously and that will undoubtedly contribute positively to our development, but they do not have the depth of the measures included in the two blocks analyzed above.

Among them, the downsizing of the state budgeted sector should be highlighted due to its importance, a measure that should perhaps be seen, as was also done in the 1990s, together with the business downsizing that the projected change process imposes.

Thus, today a process of transformations is opened that are essential to face the adverse situation that the country has been facing and that supposes decisions such as the proposals, always evaluating the risks that are faced and the necessary balance between costs and benefits that the changes that are proposed imply.

Finally, all this demands a social communication process that ensures the inclusion and active participation of all economic actors and the population.

For this, it will be necessary to explain in detail the objectives that are being pursued and how to achieve them, counting on the participation of the specialists who handle the complex issues that we face and also with the mass media.

In this sense, the teachings of the Special Period and -especially- the ideas of the Commander in Chief for the introduction of highly complex measures that require the consensus of the population should not be forgotten.[7]

BIBLIOGRAPHY

-ASOCAÑA (2022) “International Sugar Price” July 31, 2022 www.asocaña.org

-CUBADEBATE (2022) “The United States announces limited measures towards Cuba” May 16, 2022 www.cubadebate.cu

-CUBADEBATE (2022a) “Foreign investment in Cuba.

Under negotiation 57 projects in prioritized sectors” July 20, 2022 www.cubadebate.cu

-CUBADEBATE (2022b) “Minister of Economy: In the first quarter of 2022 GDP grew, but it does not reach pre-pandemic levels” July 21, 2022 www.cubadebate.cu.

-CUBADEBATE (2022c) “New measures approved to recover the Cuban economy” July 21, 2022 www.cubadebate.cu

-CUBADEBATE (2022d) “Minister of Energy: Situation of the national electrical system is complex, but there is a solution” July 18, 2022 www.cubadebate.cu

-CUBADEBATE (2022e) “How will the new exchange market be implemented in Cuba?

August 3, 2022 www.cubadebate.cu

-CUBADEBATE (2022f) “The sale of foreign currency in the Cuban exchange market begins this August 23” August 24, 2022 www.cubadebate.cu

-Cuba Noticias 360 (2022a) “Report on the delay in the annual housing plan in Cuba” July 21, 2022 www.cubanoticias360.com

-Cuba Noticias 360 (2022) “Cuba owes 5,211 million to the Paris Club” June 17, 2022 www.cubanoticias360.com

-DATOSMACRO (2022) “West Texas Intermediate Oil Price 2022” July 31, 2022 www.datosmacro.expansion.com

-El Toque (2022) “Currency exchange rates in Cuba today” August 7 2022 www.eltoque.com

-FAO (2022) “The FAO benchmark index of food prices shows a fall in international prices for cereals, vegetable oils and sugar” July 8, 2022 www.fao.org

-INFOBAE (2022) “Crisis in Cuba: There is a shortage of basic medicines and they warn that the situation is “very complex” July 19, 2022 www.infobae.com

-La Patilla (2022) “Cuba forced to buy fuel oil from Russia because PDVSA hardly produces anything” July 14, 2022 www.lapatilla.com

-Los Angeles Times (2022) “There is still no clarity on the situation of remittances in Cuba” May 24 2022 www.latimes.com

-MINSAP (2022) “Cuba reports 97 new cases of COVID-19 and no deceased person” July 30, 2022 www.cubadebate.cu

-On Cuba News (2022) “Russia approves an extension until 2027 of the payment of credits granted to Cuba” February 22, 2022 www.oncubanews.com

-Temáticas (2022) “Nickel price in 2022” July 27, 2022 www.temáticas.org

-Terrero, Ariel (2022) "Tepid revival of tourism in Cuba" July 22, 2022 www.cubayeconomia.blogspot.com

Closing of information: August 10, 2022.

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GRADES

[1] Expanded version of the article “Cuba: The international situation and the complex economic situation in the first half of 2022” 

[2] See CUBADEBATE (2022c and 2022e).

Hereinafter, all information whose source is not expressly cited comes from these publications.

[3] In the case of the Planning Task, the objective was to eliminate the country's monetary and exchange rate duality, which meant the non-existence of an exchange market until the economy could be stabilized and the national currency strengthened.

As is known, this objective was not achieved.

[4] In this regard, the Minister of Economy and Planning stated 

today there is a demand for foreign currency by the population, because there is internal consumption of foreign currency and a demand for emigration, which is most likely above the supply level.”

[5] See The Touch (2022).

[6] See CUBADEBATE (2022f)

[7] See Fidel's speech delivered on August 6, 1995 at www.discursos.cu

(Taken from Cubaperiodistas)

See also:

Cuba: Factors of the complex economic situation in the first half of 2022 (I)