After reading Internal Foreign Exchange Sales in Cuba by Pedro Monreal, I have some comments that I share below.
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The author’s exercise in abstraction is very valuable, especially considering the lack of information—which means that a certain risk must be taken when constructing quantifications, no matter how skilled the researcher is.
In the case discussed in this article—and as with all science—we work with a series of implicit theoretical assumptions and models, which always leave the door open to other scenarios, questions, and assumptions.
Split prices—which is what Monreal uses as an example to illustrate the analysis—can affect the private importing sector (SPI) to the extent that they cannot approach the price determined by the “center of gravity” of the Split good. Without a doubt—at least for now—the state sector can, as a monopoly, maintain the quantity of products that guarantee it can set prices and maintain the “center of gravity.”
It is worth including the use of time frames in this reflection. Will the state sector be able to sustain the volume of equipment imports in USD to establish this “center of gravity” in the medium term, or will it only be a short-lived situation, at least until it manages to “dismember” the SPI? To this, we must consider the political will—the will behind the new measures. Judging by the slight inconsistency observed in the guidelines and the position expressed in the constitutional draft, and the back- and -forth seen with the private sector, it is not inconsiderable that the measure—the sale of products in dollars that compete with those imported privately—will be maintained until non-state competition is eliminated.
Another factor is how the agents—the private ones in the importing sector—will assimilate the measure (of course, this is the most difficult to predict, and is beyond the accustomed range of “economic policy” makers in Cuba). We’d have to wait and see, because the behavior of the private sector we’re dealing with—which is very difficult to homogenize—will result in a very Cuban style, one that doesn’t fit into the models the academy is trained to implement; not because of the latter’s inability, but because of the system of rules within which the former operates.
For subsequent analyses, it is important to consider the impact on the rest of the import basket; that is, there must be some internal link between the set of privately imported goods. Thus, for example, if travel to Panama cannot be sustained due to competition from state prices in Split, other goods ranging from cell phones to clothing will cease to be imported. Thus, the domino effect that state offers in MLC can generate on the rest of imports is another aspect, at least for studying the impact of such measures on the private sector.
Finally, and returning to the idea of the creativity of this unique importing sector, it must be considered that, given its access to foreign currency, some of it will shift to something I don’t have a name for, but it would be nothing less than being the bearer of the MLC that mediates between citizens and stores. In this way, part of the shift for all importers whose profitability is affected would be to play with the monetary market informally.
What is clear, after seeing everything, is that the state sector can, with a single finger, put an end to a group that has been developing over the years to establish itself as an undisputed monopoly.