Policies for Economic Growth - Cuba's New Era

Policies for Economic Growth: Cuba's New Era

By: Juan Triana Cordoví and Ricardo Torres Pérez



Editor's note: This paper is currently only available in Spanish. The

English translation is forthcoming.



Cuba exhibits profound paradoxes with regards to development. It has

some resources, but lacks a macroeconomic or institutional framework to

effectively leverage them. Similarly, it boasts a wealth of

highly-educated and qualified workers, yet its economic model does not

generate sufficient employment — either in quantity or quality — or

adequate wages. This economic model likewise has not exhibited the

flexibility to accommodate the changing external environment.



These paradoxes are further exacerbated by external and internal

factors. Externally, the U.S. embargo limits Cuba's access to the large

and nearby U.S. market and precludes Cuba's participation in

international financial institutions. Internally, Cuba faces a complex

interplay between the supply of labor and demand for goods and services,

especially within the context of international markets. Over the next 15

years, Cuba anticipates an aging population and rising dependency ratio

— from 54.7 today to 67.7 in 2025 — resulting in increased pressure on

public finances. Most growth in developing countries in the last 50

years has been the exact opposite, spurred by a growing youth population

and workforce. Together, these elements coupled with the current

economic model make setting Cuba on a sustainable long-term growth path

an immense challenge.



In 2011, the Cuban government, under President Raúl Castro, released new

economic guidelines to "modernize Cuban socialism." In practice, it

permitted some previously restricted economic activities, such as the

purchase and sale of homes and automobiles and creation of

non-agricultural co-ops. Beyond these limited specifics, however, the

implementation of the changes to Cuba's economic model in a way that

cultivates and integrates growth and development is unclear. As a

result, attention has turned to the need for a more modern

infrastructure (especially telecommunications), the necessity of foreign

direct investment and gross fixed capital formation, as well as

production policies that complement the new economic guidelines and

support the high levels of growth and development Cuba needs.



This paper analyses the structural factors that impact economic growth,

including workforce dynamics and quality, physical capital accumulation,

accumulation and structure of factors of production, access to

international markets and the domestic market. It then advances policy

options aimed at addressing the imbalances accumulated over time in

order to set Cuba on a path towards sustainable high-growth.



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Policies for Economic Growth: Cuba's New Era (Spanish)

30 pages, 2.8 MB

http://www.brookings.edu/~/media/research/files/papers/2013/10/politicas-crecimiento-economico-cuba-cordovi-perez/politicas-crecimiento-economico-cordovi-perez.pdf



Source: "Policies for Economic Growth: Cuba's New Era | Brookings

Institution" -

http://www.brookings.edu/research/papers/2013/10/politicas-crecimiento-economico-cuba-cordovi-perez?rssid=social+policy