Cuba Attempts at Privitization

by Michael Diaz Jr. on November 8, 2010

The Cuban Communist Party is expected to unveil a broader agenda for economic growth later this year or in early 2011, which could hint at preparations for a political transition to life beyond the aged Castro brothers.  Announcing public sector layoffs of over 10% of the nation’s 5.5 million workers and a plan to relax rules on non-state-owned industries in order to foster private sector job creation, Cuba has yet to create financing vehicles, licensing protocols, and tax structures to support the self-employed and the creation of small businesses.

Some compare Cuba’s attempts at privatization to those we’ve seen in China. However, the reality, I’m afraid, is quite different. The Chinese model is a form of state capitalism that has been proactively evolving over the past 20 years where as Cuba’s moves are striking a defensive tone.  They have an economy that is running out of options.

The reforms, however, are an important first step, even if they are mostly symbolic.  At the very least they represent a crack in an otherwise closed system.

If, after the reforms are in place, the government continues to allow a strong, free market–style parallel economy with limited government intrusion, I think you can start to look at this as a move toward a Chinese-style model.  Still there is a lot of play for skeptics because in the past the government has introduced economic reforms only to curtail them shortly afterward. I do, however, think the motive behind these reforms is based more than ever before on a wholesale mind-set shift of those who conduct central economic planning.

Some believe reforms could lead the U.S. to scrap or modify its long-standing embargo on the island, and I tend to agree. The time may be right for a U.S. policy change regarding an embargo that Cuba’s foreign minister Bruno Rodriguez Parrilla says has cost the island $751 billion.

The bottom line is that if the Cuban people are going to see past their government’s rhetoric, which blames the economic plight on the United States, we need to seize the opportunity and assist in this economic conversion.

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