August 3, 2015    3 minute read

Cuba: A Path to Internationalisation

   August 3, 2015    3 minute read

Cuba: A Path to Internationalisation

It was 1960, the year in which the Cuban Stock Exchange closed. The anti-capitalist principles of Fidel Castro, el lìder màximo, were the main reason for this. Since then, there have been more than fifty years and nothing appears to have changed, at least financially. However, the island has recently seen some important results on the social and economic fields. Just consider the fact that the number of tourists in Cuba has increased by 54% compared to the last year. Moreover, with the decision of US to end the notorious embargo and the reinstatement of diplomatic relations, marks a new historical phase in Cuba. This will lead to a normalisation of relations not only diplomatic, but also economic, as John Earnest, the White House spokesman reported.

At the door of the IMF

Cuba is currently aiming to increase and sustain its economic growth. A necessary condition is to knock on the doors of the World Bank and IMF and ask for acceptance. In the case of a “yes”, the benefits for Cuba would be tangible, useful to improve public infrastructure and solve technological obsolescence, as well as to attract foreign direct investment and to streamline the complex exchange rates system. In fact, currently the government prints two currencies: the convertible peso for tourists (1 to 1 with the US dollar) and the Cuban peso (1 peso is equivalent to 0.0377 US dollars). Moreover, there are other rates, which are used in special cases (such as for the trade of oil) that further complicate the situation. If Cuba rationalised the exchange rates it would strengthen the competitiveness and the ability to increase use of peso in exports.

For the World Bank and the IMF, this would support a project of reintegration and to help a country to fight against poverty. The international community would have the advantage of being able to learn more about its economy. All would be invested in favor of its development.

Requests vs benefits

Article IV of the IMF is their greatest request, which states a stricter control and order of exchange rates. This will mean a particularly hard change that is being requested of Cuba by the IMF. Havana, however, would gain two very important benefits. The first would be the technical assistance that the IMF could offer, to address issues such as taxation, public expenditure management, and overall administrative capacity. The second would be a greater financial rigor: a necessary condition for the development of a country that has seen the chaos in its economy for so many years.

The way to the international fund, however, is not so simple. Cuba should expect more controls required in the field of human rights and politics. Although the IMF already operates in socialist countries such as China and Venezuela, the keenest supporters of the communist regime will have to step aside for a more international climate. Gone are the days of the Stock Exchange of Havana, but we know that behind the delicate balances that exist now, even scenarios in appearance less likely could be protagonist of this economic phase.

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