Since taking over as president on a permanent basis in 2008, Raúl Castro has undertaken a self-described effort to “save” Cuba’s socialist system by introducing various market reforms. To date, that program has included the establishment of non-agricultural cooperatives, the legalization of private farms and small businesses, the recognition of private ownership of homes (and right to buy and sell), and the relaxation of restrictions on travel outside of Cuba.

Marino Murillo, the government’s “reform czar,” promised in July that the changes coming in 2014 will be the boldest yet. Anticipated moves include permitting state-run enterprises to retain one-half of their profits, with the aim of promoting greater workplace autonomy, which, it is hoped, will result in improved efficiency and create an incentive for innovation.

In late October, the government announced that it is planning to scrap its dual-currency system.

In late October, the government announced that it is planning to scrap its dual-currency system, which has contributed to a widening income gap defined by those who have access to U.S. dollars—a group that includes the growing number of Cubans earning private-sector income—and those who do not. This later group includes state employees, who are paid in a local currency that trades at a rate of 24 to the dollar.

The unification of the currency system will make it much harder for the government to reverse the process of economic decentralization. For that reason, action on that front is a measure of the regime’s commitment to the reform program.

Significantly, officials have given no timetable for completing the unification process, stating only that it will occur gradually so as to minimize the risk of economic disruption.


The PRS Group
About The Author The PRS Group
The PRS Group is a leading global provider of political and country risk analysis and forecasts, covering 140 countries. Based on proprietary, quantitative risk models, the firm's clientele includes financial institutions, multilateral agencies, and trans-national firms.

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