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Future of Cuban Reforms
CubaNews / May 1995

By Larry Luxner

Two prominent economists from the University of Havana defended their government's economic reforms before a largely skeptical Washington audience of academics, Cuban exiles and potential investors.

The April 10 conference, attended by about 150 people, was sponsored by the law firm of Shaw Pittman Potts & Trowbridge.

The economists, Pedro Monreal González and Julio Carranza Valdés, both of whom have written books on economic reform, offered an interesting perspective on current economic thinking with Cuba's leadership.

"Debate about the Cuban economy is becoming more delicate and sensitive," Carranza said. "Since 1994, there has been an increasing consensus about the direction of reform. Discussions are concentrated on the details of reform rather than its general direction.

Among other things, Carranza said there must be a "restitution of financial equilibrium," and called for both modernization of Cuba's banking system and strengthening of the Cuban peso.

"The situation in Cuba is incompatible with any attempt to rejuvenate the Cuban economy," he said. "This is why so much attention is focused on this issue."

Pedro Monreal predicted that "there will be political debate in Cuba because most of the issues will be political problems by definition."

While neither man criticized the government or Fidel Castro by name, Monreal said "political reform will have to be introduced. The government will have to face issues such as the emergence of private property and self-employment."

While the Cuban government hasn't released official statistics since 1989, the Cubans in attendance estimated that the country's gross national product had declined by 50% in the last five years, from 1,828 pesos per capita in 1989 to 909 pesos per capita in 1993.

Interestingly, journalists covering the conference were told to turn off all tape recorded and video cameras while the two Cuban visitors were speaking -- a rule not applied to any of the other half a dozen panelists during the day-long meeting.

One of the other panelists, U.S. Department of Labor economist Jorge Pérez López, said restructuring of the Cuban economy could result in up to 500,000 excess workers. "This implies further talk of private enterprise," he said. "It's critical that this takes place in a financially strong Cuba."

Ernesto Hernández Cato, an economist with the International Monetary Fund, said Cuba's reforms are too timid. "Our Cuban guests' use of economic tools reads like a collection of all the policies that have hindered development in so many countries for so many years," he said. "Central planning has failed worldwide because it has failed to improve the standard of living. It didn't work when Cuba received enormous subsidies at the expense of the Soviet taxpayer. I can't see how it would work now that the party's over."

Added Luís Locay, a University of Miami economics professor: "If the Cuban government were serious about expanding the role of markets, it would have made self-employment legal, subject to some simple regulations. Instead it has amended the penal code to make it easier to prosecute profiteers and has limited the success people can achieve by not allowing the hiring of employees. The government's message is clear: if you need to engage in self-employment to survive, do so, but do not go beyond survival or you'll be punished. In the presence of a legal code that punishes success, future reforms are meaningless."

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