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Research Report

Five Steps to Grow the Cuban Economy: What the US and Cuba Can Do in Obama’s Final Year

Michael W. Klein
Pavel Vidal
Copyright Date: Feb. 1, 2016
Published by: Atlantic Council
Pages: 20
OPEN ACCESS
https://www.jstor.org/stable/resrep03640
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Table of Contents

  1. (pp. 2-2)
    Peter Schechter and Jason Marczak

    When President Obama travels to Cuba on March 21, he will see the new private sector forces unleashed since December 17, 2014. More US tourists bring more customers for Cuban small business owners. The elimination of remittance caps allows a greater influx of dollars and capital. Businesses like Airbnb and Sprint, household names in the US, are now operating in Cuba.

    The embargo will eventually be lifted by Congress. But in the meantime, the United States and Cuba can start by helping to put in place a working financial system, which would substantially improve the lives of Cubans.

    An improved...

  2. (pp. 4-5)

    Cuba is at a crossroads. The last year was marked by an unprecedented opening with the United States, unimaginable in November 2014. The European Union is now on the cusp of signing a Political Dialogue and Cooperation Agreement with Cuba. In April, the Cuban Communist Party holds its seventh Congress. And building on all of this, European and Latin American firms are among those stepping up interest in investment. With the world quickly changing, the Cuban government must look carefully at how its financial system must adapt to meet this new international paradigm.

    Economic changes are clearly underway. Small private...

  3. (pp. 6-6)

    Cuba has seen many changes in its financial structure over the past two decades, mostly prompted by the hardships of the “special period” in the 1990s when it had to adjust to the fall of the Soviet Union. Today, Cuba has nine commercial banks and fifteen nonbanking financial institutions.¹ Eight of the nine commercial banks are fully owned by the Cuban state and the ninth is owned by the Venezuelan government.

    Banks do not serve retail consumers as in other countries. There is very limited lending to households for home mortgages or car loans, and consumer financial services like credit...

  4. (pp. 7-12)

    Cuba faces five main financial hurdles: liberalizing the financial system; unifying the dual currency system; boosting lending to small and medium-sized enterprises; providing greater financial services to its people; and becoming part of the international capital market. Meeting these challenges will stimulate the development of the Cuban financial system and improve the well-being of the Cuban people.

    Financial liberalization would mean that banks become more than just deposit institutions, as they largely are today. It would allow newly formed banks or branches and subsidiaries of foreign banks to serve as lending institutions that provide credit for the nascent entrepreneurial class....

  5. (pp. 13-13)

    The Cuban government has a dominant role to play in determining the future landscape of the country’s financial markets. This is a multifaceted issue. Finance operates in combination with a constellation of other factors, including sound laws, institutions that respect property rights, and confidence that rules will not be arbitrarily changed to suit government activities. In addition, Cuban finance can be brought into the modern era only if financial firms and banks have access to information technology and computing power.

    begin a gradual path of financial liberalization that includes appropriate oversight of financial institutions and the development of an interbank...