Welcome Mr. Day Zero. Will the arrival of monetary unification work miracles in Cuba?

HAVANA, March 11th When the day that many of us are waiting for comes, unforeseen and unexpected events will come to light; we will see that the list of pending issues in the Cuban economy is bigger. He stopped in front of everyone, stared at them and then spoke: Yes, I am Mr Day Zero.

Although it won’t be exactly that way, Day Zero of monetary and exchange rate unification will come and although we have all been waiting for it for a long time, some with a kind of expectations and others with others, some armed with technical knowledge and others with “street” knowledge, the truth is that Mr Day Zero will always have a card up his sleeve to surprise us.

No matter how much we’ve wanted to anticipate ourselves, there will be many unforeseen and other unexpected events. As a famous economist once said when asked about the predictability of economic science: the theory is always grey, but the tree of life is always green.

What I am convinced of is that it will not be possible to foresee everything or anticipate a good part of the effects, in the same way, that I am sure that neither the monetary and exchange rate unification will be the magic wand that will resolve or change such decisive issues for our country, namely:

  • inefficiency,
  • low productivity,
  • increase in exports,
  • adequate reduction of imports,
  • short-term debt and long-term debt,
  • reducing the time to start a new foreign investment business,
  • the waste of skilled workforce and its bad allocation,
  • the poor execution of investments and poor performance of the funds derived from this,
  • the terrible dependence on fossil fuels,
  • the poor use of land and water,
  • tourism’s low competitiveness compared to its Caribbean counterparts,
  • excessive bureaucracy,
  • the low aggressiveness of the Cuban banking system to operate the money that remains in bank accounts,
  • excess regulations,
  • bureaucracy’s resistance, etc. etc. etc.

None of this is news, the entire previous list has been dealt with again and again by our government’s main officials, you just have to access the Cuban government’s website or Granma to see how many times these issues have been the subject of discussion and analysis, especially in the review meetings of the different ministries.

It is true that the day after Mr Day Zero makes his appearance many things will change and with his appearance, a number of important signals for the economic functioning of the country must also improve.

We will be better able to know who is really efficient and who is not. We will know how true our substitution of imports, how real the need for foreign investment is, among other things.

But having an exchange rate adjusted to reality and a single currency in our economy will not guarantee that we have the shelves full of products and, even less, that the average Cuban has the purchasing power to be able to buy those products because Mr Day Zero is not Santa Claus, who gives you toys if you behave.

Mr Day Zero will not bring us the money to settle the defaults, nor to face the financial cost overrun of any operation that Cuba must pay, caused by those debts and by the persecution of the perverse duo (Rubio-Trump).

We must solve this matter before Mr Day Zero makes his appearance. There are options, those options even exist in the short term, I again raise some of them:

  • let’s reduce the volume of foreign exchange investment in new hotels of doubtful recovery in the established terms and invest that money where the return is safer or to alleviate to a certain extent the shortage, or to pay part of the debts in that same sector;
  • let’s tender a minority part of the property of those more than 300 hotels that are one hundred per cent owned by the people and convert it into liquid money with which we pay part of the debts;
  • let’s tender for a certain period of time a part of that almost one and a half million lands that are not cultivated and use part of that money to pay debts and the other to invest more indecisive agricultural sectors;
  • let’s also tender a part of those empty spaces in cities and dedicate that fund to investing in the construction materials industry. I know what I say is thorny, but the thorns are part of the matter.

Mr Day Zero will not make our country more competitive so that many investors decide to risk their money in this market.

That also depends on us, but while a cubic meter of earth movement costs in Cuba three and four times what it costs in a country in Central America, or the rates of certain services are one and a half and up to twice those of those same countries, for example, the cost of the square meter of housing in the real estate sector, as well as Internet connection and cellular telephony; or that an investor has to pay for a car up to three times what he must pay in any Caribbean country, or is forced to pay for the service of haring labour force he has not asked for….

Until then it will be very difficult to be able to compete with other destinations, especially if we add to this OFAC’s persecution of those who negotiate with Cuba and the paranoid fear of some banks.

But it is true that much depends on us, on the trouble to grab the largest piece of cake and the advantages we give to certain “players” who enjoy quasi-monopolistic conditions and are not forced by the competition. It happens with the foreign investment out of which everyone wants to get the biggest part of the cake and we forget to think as a country.

Mr Day Zero will not make us export more. Exporting is much more than an adequate exchange rate. It requires a production system capable of putting the products the market wants there where the market says and when the market asks for them.

Very recently I was surprised to read the report on the review meeting of the Ministry of Foreign Trade and not seeing anything being said about two issues essential in my opinion; the first, the fact that our state enterprises have to ask for permission to export (this type of restriction always reminds me of my classes on the mercantile system, when the states granted certain enterprises the right to trade abroad). What a contradiction, something like that in a country that year after year sees its export earnings decrease.

The second, the existence of a positive export list for each enterprise, that is, someone somewhere in the bureaucratic organization of some ministry decided that Cuban state enterprises have to export only what is established in their list, something fabulously convenient for the bureaucracy, but totally counterproductive for our state enterprises and for our country. For the record, it wasn’t always that way.

Imaginemos una empresa que identifica una oportunidad de exportación, quimbumbias por ejemplo, tiene al cliente, puede desarrollar el producto, incluso logra un financiamiento, pero….. la quimbumbia no está en su nomenclador, pues ese producto esta decidido que los exporten tres o cuatro otras empresas. Entonces debe ir a “negociar” una excepción, el tiempo pasa, el futuro cliente se aburre y el mercado es tomado por otros productores, lamentablemente no cubanos.

Mr. Day Zero will not make those who produce for export, which today are probably those who appropriate a smaller part of the added value of the product, can receive the benefits they really deserve. It is our rules, the ones we have today, that have to be changed.

Mr. Day Zero will not reduce the chain of intermediaries that exists today between those who produce and those who sell the product, we must do it ourselves and it should be now.

The price paid today for a kilogram of prime beef to the producer is 17 times less than the price at which it is sold in the network of stores in CUC. The producer takes between 36 and 48 months in the fattening, the benefit is only minutes and the sale takes no more than 72 hours. State intermediaries eat 95% of the value.

The same goes for the list of trades in self-employment. The regulation has multiple damages to the positive side. This list reduces the opportunities to generate more employment, to generate more income via taxes, and in addition to that, it helps to encourage the emigration of skilled labour.

Do we want a greater incongruity than to encourage something like that in a country that needs employment, that needs more tax revenue, that invests so much in the qualification and health of its young people to then “give them away” to any country? What is more damaging to Cuba? What is less socialist?

If we have repeatedly recognized that we must unblock the Cuban business system (all of it, state-owned, cooperative and private, foreign enterprises) then why delay an enterprise law for two more years, why maintain the experimental condition for non-agricultural cooperatives, why forget Raul Castro’s statement when he said it was necessary to recognize the existence of small and medium-sized businesses. It is not necessary to wait until Mr Day Zero arrives distributing miracles that he will not really work.

It would be great to have some, or perhaps all, of these issues resolved before Mr Day Zero shows up. Then we could give him a big welcome.

First published in Oncubanews