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Friday, 12 July 2013

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.

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