NS4540 Winter Term 2017 Cuba Up-Date 2016 Federal Reserve Bank of Chicago, Strong Dollar Weak Dollar

Cuba Up-date 2016 II Seventh Congress of Communist Party, April 2016 Economy was main focus Just as in 2011 when Castro launched the updating of Cuba’s Soviet Era economic model Sought to replace it with a Cuban version of market socialism Three economic documents produced Review of economic performance since 2011 A plan for 2016-2021, and A broad national development plan looking out to 2030 William LeoGrande, Cuba’s Communists Face Contradiction of Economic Reform vs. Ideology WPR, April 22, 2016

Cuba Up-date 2016 I Performance review was disheartening Only 21 of the 313 economic guidelines adopted in 2011 have been fully implemented Castro attributed this to “the burden of an outdated mentality” and “an attitude of inertia.” Annual GDP growth rate from 2001-2015 just 2.8% not enough Castro conceded to improve standard of living for most people Tourism and export of medical services were bright spots with tourism growing 17% in 2015 However agricultural production lagged despite the expansion of market incentives for farmers Cuba still imports 60% of its food at a cost of $2 billion annually when it should be exporting food Private sector lacking seeds, fertilizer, pesticides and equipment

Cuba Up-date 2016 III Process of rationalizing state enterprises which still produce about ¾ of Cuba’s GDP slow Hampered by managers not encouraging initiative and entrepreneurship Castro vowed to push ahead announcing Cuba would legalize small and medium-sized private businesses and Continue devolving small state enterprises and cooperatives Only strategic sectors of the economy “decisive for national development” would remain in the state sector

Cuba Up-date 2016 IV On the questions of how to stimulate growth and manage relations with the U.S. – Dilemmas Cuba’s leadership faces tensions between economic imperatives and political necessity Cuba wants normal relations with the U.S. to increase trade, tourism and investment – all key to improving growth With engagement comes political risk that Cubans may become less tolerant of poor economic performance – blamed for many years on the U.S. Embargo State’s restrictions on civil liberties – blamed on need for unity in face of U.S. aggression

Cuba Up-date 2016 V Contradiction between economic dynamics and political needs evident in current problem of rising food prices With private farmers able to sell produce to hotels full of tourists, supply of food in free farmer’s markets shrank earlier in 2016 driving prices up Economic logic would dictate higher prices would stimulate greater production in long term but that was a political risk government unwilling to take Forced farmers to sell more of their produce through state distribution systems at controlled price Pleased consumers, but undercut incentives for farmers to raise production

Cuba Up-date 2016 VI In addition with economic transformation underway income distribution is worsening Major challenge to the Communist Party Sustainable and prosperous socialism requires economic change but Near-term dislocations that change produces are undermining political supports for reform process both in elite circles and on streets.