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Research Report

Cuba’s Economic Reintegration: Begin with the International Financial Institutions

Pavel Vidal
Scott Brown
Copyright Date: Jul. 1, 2015
Published by: Atlantic Council
Pages: 28
OPEN ACCESS
https://www.jstor.org/stable/resrep03626
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Table of Contents

  1. (pp. 1-1)
    Peter Schechter and Jason Marczak

    Last year, the Adrienne Arsht Latin America Center released a nationwide poll that found widespread support for engagement with Cuba. It called attention to a radical shift in American public opinion and helped give President Barack Obama the political proof he needed to change five decades of failed policy.

    Since then, seismic changes in US-Cuba relations have reshaped the landscape of each country’s interactions with Latin America and the global community. Ongoing negotiations and new legislation continue to dismantle this relic of Cold War policy. Such progress is applauded across the world.

    US policy toward the island is in transition....

  2. (pp. 5-5)

    Since 2008, when Raúl Castro took office as President, Cuban society has been changing. The economy is undergoing market liberalizations and macroeconomic adjustments. While the process may be at an early stage, reforms have already tripled the number of private and cooperative businesses, state lands have been distributed to farmers, the purchase and sale of vehicles and houses is now permitted, and consumer options (including hotels and cell phones) continue to grow.

    From a macroeconomic perspective, the government has advanced toward reestablishing fiscal and balance of payments equilibriums, maintained low inflation, and promoted a more rational public expenditure. Cuba is...

  3. (pp. 6-10)

    Despite a host of reforms introduced since 2008, Cuban economic growth has been weak. From 2008-2014, average annual GDP growth reached only 2.8 percent. While this is close to the Latin American and Caribbean average, it is only around half the originally anticipated 5.1 percent forecast by the Cuban government. Growth in the agricultural and industrial sectors fell particularly short of expectations, with average annual rates of only 0.6 percent and 2.5 percent respectively, while private household consumption registered only 2.6 percent growth—well short of the amount needed to provide the hoped-for, and long-awaited, improvement in living standards.

    Over...

  4. (pp. 11-15)

    Cuba is not the first country to undertake an accession process to the IFIs. Many others have done so with Albania and Vietnam providing two useful examples. Although their conditions differ in important ways from those faced by Cuba, each provides relevant experience from which lessons can be drawn when considering the Cuban process. In both cases, acceding to the IFIs was a significant turning point, in terms of both providing a boost to economic performance and giving support to a process of structural transformation.

    Cuba and Albania both emerged as independent states in the early twentieth century, and spent...

  5. (pp. 16-17)

    The international community broadly supports Cuba’s integration into the global economy and would welcome a decision to pursue joining the IFIs. For the United States, legal obstacles remain to acceptance of Cuban membership.⁹ But Cuba’s accession to the IFIs would be consistent with the new US policy, while demonstrating US support for Cuba’s wider international engagement.

    International ramifications of the US-Cuban rapprochement are already apparent: in June 2015, Cuba announced a breakthrough in negotiations with the Paris Club with an agreement on debt arrears now expected before the end of the year. Discussions with the European Union toward a cooperation...

  6. (pp. 18-19)

    Cuba is at a moment of profound economic transformation and the openings in US policy—with more movement expected from Congress—have recast both the bilateral relationship as well as Cuba’s broader international engagement. Economic reform and full reintegration into the global economic community will provide further momentum for a nascent Cuban private sector while improving the lives of everyday Cubans.

    Isolation is increasingly a policy of the past; Cuba, the United States, and the international financial institutions must catch up to this reality. To do so, each must rethink outdated policies. The end goal is to understand that joining...