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Four Cuban economies, again

January 10, 2012

After some thought I may be better using different definitions for the 4 categories. The CUC/CUP differentiation is probably a fair one. In my head they differentiate 2 phases of Cuban economic development. One from the days of Soviet patronage and subsidies, along with a subsidised state socialist economy, and the other the post Soviet era when Cuba had to make its own way in the world and interact with a capitalist global market. The Soviet era economy carries through in the heavily subsidised (albeit far smaller) social wage and the low cup wage structure. The CUC represents the need to pay pay international prices in a tradeable (semi) globalised market (accepting the US embargo places a big caveat on the extent of globalisation).

These are 2 typologies for the sake of analysis rather than seeking to define exactly the line between them. The line may be quite gray and quite wide given the manner people move (need to move) between the 2 currencies and economies.

The labels of tourist and cuban economies are probably a bit misleading. For me however they do go some way to reflecting the purchasing power of the two groups and the pricing of items to those 2 markets. I note the ability for the 2 groups to move between the 2 currencies. I used Colectivo cup taxis in Havana and saw Cubans making CUC purchases.

I divided the second economy up into licensed/legal and ‘other/everything else’. The article by Archibald Ritter was mentioned where he divides the second economy into 4 quadrants. With the expanding of private licenses I am trying to divine the divide between legal/licensed and ‘other’. Seemingly a highish % of the new licenses granted have been to persons with no former listed occupation. I am assuming they operated in the more shadowy areas (wanna buy a cigar? etc) but are taking the opportunity to become legitemate. The legitemate second economy is growing, parts of the ‘other/everything else’ are moving out of the shadows.

One side issue I noted in my trip, whether this is correct or not, was the pricing of shiny consumer items in CUC and not cheap either (eg the substandard bike I bought). The state has a monopoly of selling consumer durables. I suspect part of the reason for the state cuc stores and the relatively high prices is so the state can soak up some of the ‘excess’ money flowing through the country (remittances, legal self employed earnings, extra legal or illegal second economy earnings, tourists stupid enough to purchase a bicycle etc).

A decent source of info about the Cuban economy, second economy etc is here (goes back 20 years):
http://www.ascecuba.org/publications/proceedings/

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