How to understand Cuba

John Paul Rathbone traveled to Cuba and has an interesting article on the FT. He begins with a striking piece of data: "in a dusty Havana parking lot, a group of Cubans examine the prices of the modern cars they can now buy from the state for the first time: $263,000 for a 2013 Peugeot saloon that retails in Europe for $30,000". Yet his overall interpretation may not be the most accurate. According to the mainstream view on Cuba that he shares, Cuba is moving to slowly and timidly. Many liberalization reforms do not work because they are reversed or implemented too slowly. This type of approach assumes that a fully functioning market economy should be the ultimate goal and the faster you move to it the better. Yet Emily Morris, a UCL researcher,in her dissertation (and upcoming book) calls for a very different interpretation of Cuba. Using evolutionary economics, she shows how the Cuban government has always adopted a pragmatic strategy of "trial and error" and gradual adaptation. The issue is how to confront the problems of the present and gradually improve productivity, but without creating major disturbances or questioning the major objectives of the overall model (some level of equity and social provision for the whole population). Of course, this approach is not always the most efficient in economic terms but may be the most successful and politically savvy in the long run. In conclusion, we should evaluate Cuba in its own terms and considering the political constraints and development goals as a central component of the process and not simply as obstacles to a more market-friendly environment.

Public transportation, democracy and equity

The former mayor of Bogotá, Enrique Peñalosa, has an interesting TED talk on the need for public transportation. He (rightly) argues that improvement in bus and bicycle lines not only benefit the poor but also strengthen equity between individuals. Urban development and public transportation is one of the paradoxical areas in development: the social costs (even without considering the environmental implications) of private transport are much higher: cars are costly, roads are costly, infrastructure building also leads to corruption. Yet at the end public transportation is concentrated in rich country cities and is seen as a luxury that should only come when countries are richer. This is particularly problematic in middle income countries like those in Latin America, where roads are over-crowded but investment in public transportation does not always increase. Public transport is one more area in which state weaknesses are more significant than income levels to explain current problems.

Guatemala maintains its high ranking in... low taxation

Guatemala´s tax burden in 2013 was lower than expected: less than 11% of GDP. With this level of public income, it is almost impossible to meet any of the key development challenges that a country like Guatemala has. yet the likelihood of significant increases in the tax revenue are almost zero, a point Aaron Schneider made clearly in his 2012 book . Yet what are the main challenges for next year according to the Minister of Finance? Fiscal consolidation and to guarantee the payment of the public debt!

More of the same: fear of the bad left

Costa Rica will celebrate elections in less than a month and the candidate from the left-wing Frente Amplio, Jose María Villalta is polling quite well. This could seem surprisingly, but it reflects how tired Costa Ricans are with the PLN in power and how weak is the traditional leadership of the opposition PAC. Costa Rica's main newspaper has become nervous and has responded with the traditional approach of the Latin American elite: warning again the evils of communist. Yesterday's editorial reflects the power of the traditional division between good and bad left and how Venezuela has become the old Cuba. It also reflects how difficult it is to create modern, progressive movements in Central America... even after Funes' experience in El Salvador. This type of approach weakens democracy and prevents serious discussion of alternative social and economic policies to take place.

Inequality is receiving more and more attention... but is too focused on the US

This blog called Inequality Matters is one more sign of the growing attention to inequality among policymakers, academics and the press. One striking characteristic of this new move is its focus on the US and, to a lesser extent, the UK. It is much harder to find good discussions about the increase of inequality in Spain or other South European countries. Moreover, there is also limited attention to what other high inequality contexts can teach about the economic and political costs of a worsening in the income distribution. This provides a great opportunity for Latin Americanists, who understand this problem quite well and have witnessed its negative consequences for quite some time.

How worried should be about Latin America's future?

Check the interesting article on Latin America's future at Vox written by World Bank experts. It offers a nice contrast with the Wall Street Journal article I mentioned last week, and reminds us that all is not bad in Latin America. Many of the countries in the region increased investment during the 2000s and were careful in the management of inflation, their budget and their foreign reserves. The data is fascinating and all the arguments interesting even if controversial: 1. As the article recognizes, the region has failed to undertake important reforms. By this we should read market-friendly reforms, but policy changes that could contribute to improve productivity and reduce structural heterogeneity. Education systems are still problematic and unequal, industrial policy insufficient and support to small, informal firms quite absent and disorganized. More importantly, these problems are as significant in Mexico or Peru as they are in Brazil or Argentina--there are no two Latin Americas there. 2. Notice the significant differences between Central and South America in the numbers. Central America still invests little and grows through remittance-fueled consumption and growing imports. The key division in Latin America takes place between countries North and South of Panama and not between "good" and "bad" countries. 3. With some exceptions (sadly, Venezuela comes to mind), a sudden financial crisis is unlikely to happen in the region. Yet what we still can have is a long period of low growth and stagnant income distribution--sometimes these lack of advance is politically more worrying than sudden crises.

The good and bad Latin American again

An article on the Wall Street Journal a week ago echoes the traditional division between a "good" Latin America (opened to the world, responsible, modern) and a "bad" Latin America (closed to the world, opposed to globalization, irresponsible). Unfortunately this is still the type of simplistic dichotomy that does not take us anywhere... even more when Brazil is included as part of the bad group. There are several problems with the article: a. Is any one calling China "bad" in terms of its policies? Is Brazil doing any different when protecting certain sectors and making (a weak and ineffective) effort to develop its national champions? b. How much longer will we evaluate the success of specific policies through the growth rate of a few months or a year? And is anyone really going to call Mexico´s current performance successful?