To put in writing about statistics and Cuba is, inevitably, to talk of oxymoronic phrases. Each time somebody tries to method the Cuban case from the lens of years previous to 1959, and even after, the stats are both obscure, non-transparent, or nonexistent.
That’s not to say that the work on this subject doesn’t exist. Quite the opposite, numerous 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 concerning info on the Cuban economic system.
On the facet of the Cuban regime, the Nationwide Workplace of Statistics, generally recognized in Spanish as “Oficina Nacional de Estadistica e Informacion” (ONEI), has accomplished 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 economic 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 option to form a “personal 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 occasions that the main reason behind inflation in Cuba was a “nationwide deficit within the provide of products.” Though the wording of the reason being complicated, Gil is saying there should not 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 regulate inflation by lowering output utilizing financial coverage.
Financial Idea 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 every single place a financial phenomenon.” To obviously display this, I ready a graph within the previous, elegant means Milton Friedman would do it. Though I took the M2 knowledge from the ONEI, since there is no such thing as a different various supply to confer with, I used the GDP deflator from the World Financial institution for my inflation price. Despite the fact that it appears awkward to at this time’s commonplace to make use of GDP deflator as a measure of inflation, it was the one measure I discovered that had supplied knowledge for the reason that Nineteen Nineties. The outcomes are expressed within the graph under.
Supply: Oficina Nacional de Estadistica e Informacion (2021) & World Financial institution (2021)
Even probably the most brute eye take a look at would see that as the amount of cash will increase, costs should additionally improve. As if it had been mandatory, 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 foreign money so closely? The reply to this, as some could guess, is sophisticated. If we define among the causes, we’d undoubtedly conclude that the economic system has not recovered but from Covid. Even after two years, the Cuban economic system is taking time to get again on observe. The proof of that is that the GDP progress 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 an alternative of serving to, added extra gasoline to the already burning hearth. Rafaela Cruz, a Cuban economist, famous that these will increase in wages would trigger will increase within the base cash to fulfill these. Once more, given a fallacious prognosis, it’s not bizarre to anticipate an incorrect resolution.
Lastly, a notable point out is that Cuba’s price range deficit is barely corresponding to what it had within the Nineteen Nineties when the particular interval was going down. In reality, final week I tweeted the graph under, displaying the price range deficits as a share of GDP. Though these deficits could not clarify the will increase within the financial bases altogether, it partially places coloration into why the Cuban authorities has been printing cash these days. As a final comment, we should keep in mind that Cuba is concerned in a court docket case that will decide whether or not Cuba would default on its debt.
Supply: Buying and selling Economics (2021)
Conclusion
The monetarists‘ premises nonetheless apply to at this time’s economies, displaying how will increase in base cash would inevitably result in worth 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 not useless; they had 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. At the moment, he holds an Affiliate of Arts diploma in economics and knowledge evaluation.
