The Cuban 'Big Bang' approaches

Cuba is preparing to deliver the hardest and most complicated part of its economic 'updating' process.
In a series of announcements made to separate sessions of the Cuban National Assembly by President Raúl Castro and by Marino Murillo, the politburo and Council of State member charged with overseeing the reform process, moves wereannounced that will see the unification of the dual currency system and the deregulation of virtually all state-run companies over the next few years.
This far reaching  reform is also expected to see virtually all state companies freed from most elements of central control and allowed to operate in a manner that enables them to retain a part of their profits for reinvestment or be closed if they make losses for more than two years running.
Speaking to the Cuban National Assembly on 7 July President Castro said a long and complex road lies ahead for Cuba as it updates its economic and social model, “while ensuring majority support of the population”.
The most difficult element would be the reform of Cuba’s dual currency system, which President Castro acknowledged, “constitutes one of the most important obstacles in terms of national progress”.
In his address to the National Assembly he said that the government intends that the process of eliminating the dual currency will need to be "orderly and integrated" since it will result in far-reaching changes in salaries, pensions, prices, tariffs, subsidies and taxes.
The process will “demand rigorous preparation and implementation” and, he suggested, will require all Cubans to accept the effect of the change at both a national and personal level.
Since 1994, two Cuban currencies have circulated on the island, the national Peso (pictured below) and the Convertible Peso (above), known as CUC. At present a Convertible Peso is equal to 25 Cuban Pesos. It is  the currency in which most salaries are paid.
The government’s Economic and Social Guidelines, which were approved in April 2011 by the National Assembly, explicitly state that “progress will be made towards monetary unification, taking into account labour productivity and the effectiveness of the mechanisms for distribution andredistribution. Given its complexity, this will require careful preparation and execution on the both the objective and subjective planes”.
During his speech, President Castro also said the process of change would continue to have a social dimension and exclude “the shock therapies and abandonment of millions of people characteristic of the adjustment policies implemented in recent years in various nations of rich Europe”.
Mr Murillo had earlier told the National Assembly that the first stage of the reform process involving the elimination of prohibitions was drawing to a close and that during the remainder of 2013 and 2014 “the most profound transformations” will be worked on. These include deregulating even the largest state-run companies so they can operate with greater autonomy in their management and distribution of earnings.

Cooperative Cuba emerges

As part of the economic "updating" programme, and as part of a general effort to speed up economic growth, the Cuban government announced on 28 June that that 124 new co-operatives would begin operations on 1 July in the agricultural, construction, transportation, recycling and produce marketing sectors. Of the 124 co-operatives, 99 will operate farmers’ markets in the western provinces of Havana, Artemisa and Mayabeque, two will focus on the recycling sector and 12 will be involved in construction activities. Another six will offer vehicle maintenance services while the remaining five will be involved in passenger transportation, such as taxi cabs and school buses. The new co-operative markets will function independently of state entities and businesses, be free to set prices in cases where they are not fixed by the State and divide profits as they see fit. “Through this new measure, we are hoping to manage as (private) cooperatives those state-run economic activities that have not been efficient,” Grisel Trista Arbesu, head of the Business Improvement Group of the Permanent Commission for Development and Implementation, said. “The measure also allows the State to gradually extricate itself from activities that are not of vital importance to economic development.”
The Cuban government hopes the new cooperatives will boost productivity and allow the State to cut public spending by reducing the number of people on the government payroll. Co-operatives can play “an important role in the country’s economy, although the main role will continue to be the socialist state enterprise,” said Ruben Toledo, a colleague of Grisel Trista Arbesu. Co-operatives are not new. There are several thousand agricultural co-operatives in Cuba. However, this is the first time that co-operatives have been created for non-agricultural activities. According to the government, more than 430,000 people now work in the non-state sector. This figure excludes those employed in agricultural cooperatives and around 400,000 small farmers.

Plan is "advancing"

Cuba’s reform plan is “advancing and the results can be seen”, President Raúl Castro declared after reports on individual reforms were made at a meeting of the Council of Ministers on 28 June. “We are moving at a faster pace than can be imagined by those who criticize our supposed slow pace and ignore the difficulties that we face,” he said, without making clear who he was referring to. President Castro has always insisted that the reform plan – approved by the National Assembly in April 2011 – would be implemented gradually “without haste”. However, the reforms have yet to translate into faster economic growth. The growth target for this year is 3.6%. Although GDP growth for the first half of this year is estimated at 2.3%, compared to 2.1% for the same period last year, Economy and Planning Adel Yzquierdo now expects the economy to grow by 2.5-3% in full year 2013. The economy grew by 3% last year. The slower than predicted growth rate is linked to a number of factors, including Hurricane Sandy, which caused an estimated US$2bn in damages last year, as well as “the deficiencies that are part and parcel of the Cuban economy”, including low productivity, labour shortages, and the global and regional economic situation, the Minister said.