Internal and External Constraints of the Cuban Production Sector

Abstract

This paper aims to explain the growth of the Cuban production sector between 1975 and 2014 in a more comprehensive way, by considering both demand and supply factors simultaneously. The research provides new empirical data on this topic through the application of a simultaneous equation model that considered the effect on the product of internal and external constraints most relevant to the Cuban economy, and the impact of these over time. Its results confirm that the growth of the Cuban production sector was primarily limited by two factors: On the one hand, an overly centralized regulatory framework that reduces the global efficiency of the Cuban economy; and, on the other hand, a foreign exchange deficit that restricts its import capacity and the sustained growth of the Cuban capital stock. Therefore, the Cuban production sector's growth could be fostered by both a greater decentralization of its regulatory framework and the implementation of industrial and commercial policies geared to make Cuban exports more competitive.