To jot down about statistics and Cuba is, inevitably, to talk of oxymoronic phrases. At any time when somebody tries to strategy the Cuban case from the lens of years previous to 1959, and even after, the stats are both obscure, non-transparent, or nonexistent.
That isn’t to say that the work on this subject doesn’t exist. Quite the opposite, varied third events have tried to plan methods to investigate the Cuban case. A few of these people and organizations have been elToque, Steve Hanke, and Pedro Monreal. But, it’s indispensable to make the clear and concise assertion that even with these contributions, we nonetheless are behind the curve relating to info on the Cuban financial system.
On the aspect of the Cuban regime, the Nationwide Workplace of Statistics, generally identified in Spanish as “Oficina Nacional de Estadistica e Informacion” (ONEI), has achieved a uneven job of offering exact and clear particulars that we will depend on, as has been identified by Diario de Cuba. Each statistic or graph you may even see in regards to the state of the funds of the Cuban state or its financial system should be taken with a pinch of salt.
The opposite day, I got here throughout a graph Hanke posted on his Twitter timeline, stating that Cuba’s inflation was 81%. Such a quantity considerably impacted me. For the reason that pandemic is already over, reforms are on their solution to form a “non-public market,” and even remittances would begin reopening. At this level, there was no excuse for the Cuban authorities to not management the inflationary pressures. The Economic system Minister of Cuba, Dr. Alejandro Gil, has stated quite a few instances that the main reason for inflation in Cuba was a “nationwide deficit within the provide of products.” Though the wording of the reason being complicated, Gil is saying there aren’t sufficient merchandise within the peso denomination to again up the notes the federal government has been emitting. In different phrases, a generalized shortage provokes costs to soar. Nonetheless, this doesn’t make any sense. In any “regular nation,” the central financial institution and even the federal government would look to manage inflation by reducing output utilizing financial coverage.
Financial Concept in Motion!
Following this logic, I used to be excited to check Milton Friedman’s well-known quote the place he stated: “Inflation is at all times and in all places a financial phenomenon.” To obviously show this, I ready a graph within the outdated, elegant means Milton Friedman would do it. Though I took the M2 information from the ONEI, since there is no such thing as a different different supply to confer with, I used the GDP deflator from the World Financial institution for my inflation fee. Despite the fact that it appears awkward to as we speak’s commonplace to make use of GDP deflator as a measure of inflation, it was the one measure I discovered that had supplied information because the Nineteen Nineties. The outcomes are expressed within the graph beneath.
Supply: Oficina Nacional de Estadistica e Informacion (2021) & World Financial institution (2021)
Even essentially the most brute eye take a look at would see that as the amount of cash will increase, costs should additionally enhance. As if it have been obligatory, I additionally did a correlation take a look at that got here as much as roughly 0.91.
The query that now arises is, why would the Cuban authorities debase its forex so closely? The reply to this, as some might guess, is sophisticated. If we define a few of the causes, we might positively conclude that the financial system has not recovered but from Covid. Even after two years, the Cuban financial system is taking time to get again on monitor. The proof of that is that the GDP development remains to be decrease than earlier than the pandemic. Which may trigger the general public income to say no, forcing the federal government to spend extra.
Supply: Oficina Nacional de Estadistica e Informacion (2021)
Additionally, with inflationary pressures underway, the federal government elevated the salaries of the general public employees, which as a substitute of serving to, added extra gasoline to the already burning fireplace. Rafaela Cruz, a Cuban economist, famous that these will increase in wages would trigger will increase within the base cash to satisfy these. Once more, given a unsuitable prognosis, it isn’t bizarre to anticipate an incorrect resolution.
Lastly, a notable point out is that Cuba’s finances deficit is simply similar to what it had within the Nineteen Nineties when the particular interval was happening. In truth, final week I tweeted the graph beneath, exhibiting the finances deficits as a proportion of GDP. Though these deficits might not clarify the will increase within the financial bases altogether, it partially places colour into why the Cuban authorities has been printing cash currently. As a final comment, we should keep in mind that Cuba is concerned in a court docket case that may decide whether or not Cuba would default on its debt.
Supply: Buying and selling Economics (2021)
The monetarists‘ premises nonetheless apply to as we speak’s economies, exhibiting how will increase in base cash would inevitably result in value will increase. The Cuban case is likely one of the many nonetheless to be studied and described to the general public. Outdated financial doctrines are now not useless; they have been by no means killed, simply forgotten.
Carlos Martinez is a Cuban American undergraduate pupil attending Rockford College. He’s pursuing a BS in monetary economics. Presently, he holds an Affiliate of Arts diploma in economics and information evaluation.