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    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.


    Policies for Economic Growth: Cuba’s New Era (Spanish)
    30 pages, 2.8 MB

    Source: “Policies for Economic Growth: Cuba’s New Era | Brookings
    Institution” –