How the IMF and World Bank could save Cuba's economy – defying the US embargo

A new Brookings Institution report from Richard Feinberg offers a plan for the international community to aid Cuba's economic reforms, even in the face of US opposition.

By , Guest blogger

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    A "Cuba Taxi" driver on the street of Havana. This is a state-run business that operates on "Pesos Convertibles," which is the currency tourists use.
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I’ve just finished reading a new report by Professor Richard Feinberg, a former Clinton administration official and non-resident fellow at the Brookings Institution.  “Reaching Out: Cuba’s New Economy and the International Response,” clocked in at a daunting 101 pages but should nonetheless be required reading for anyone following the island nation’s long-awaited economic restructuring. 

Cuba’s economic transformation is a hot topic, to be sure; another excellent report, Cuba’s New Resolve: Economic Reform and Its Implications for U.S. Policy, written by Cuba expert Collin Laverty for the Center for Democracy in the Americas, offers a detailed look at Cuba’s economic reforms to date, and in so doing, lays to rest any question of whether these reforms are just a temporary fix or irreversible.  If Cuba’s New Resolve argues that Cuba is serious about its economic reforms, Reaching Out offers what the international community should do about it with an 800-pound gorilla – the US embargo – in the room.

I’ll admit that after reading Professor Feinberg’s introduction, I next skipped to the middle for both a history lesson and a pragmatic, creative vision for Raul Castro’s Cuba to reconnect with the International Financial Institutions (IFIs) – the World Bank and the International Monetary Fund, as well as with regional development banks – in spite of opposition from the United States.  

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IN PICTURES: Cuba's economy

Feinberg unravels the conventional wisdom that says Cuba and the IFIs would make unhappy bedfellows – Cuba withdrew from the World Bank and the International Monetary Fund more than 40 years ago – by pointing to successful IFI engagement with nonmembers like Kosovo and South Sudan, and with proud and strong states like Daniel Ortega's Nicaragua and Vietnam, with which Cuba shares key similarities.  The IFIs are more interested in “the long game,” Feinberg argues, and their willingness to take things step by step would fit nicely with Cuba’s (urgent) need for gradual changes.  He talks to both sides, and a senior Cuban diplomat tells him that “Cuba has no principled position against” engagement with the IFIs – a statement Feinberg believes signals a real shift in Cuban policy (hopefully a Cuban official will field that question publicly in the not too distant future).  

Meanwhile, IFI experts are more than ready to engage Cuba, and Feinberg argues that US opposition to IFI assistance isn’t as insurmountable as it might seem.  In particular, IFIs can work through trust funds and other donors can administer programs.  Feinberg also sees a role for regional development banks such as the Inter-American Development Bank and the Andean Development Corporation, as the US isn’t a member.

At a time when the United States is noticeable absent and seemingly oblivious to the critical moment at hand in Cuba, Feinberg offers immediate, actionable recommendations for the international development community to engage Cuba now, when it can clearly have a tremendous impact on the breadth, depth and success of the reforms.  His recommendations for the IFIs, Cuban policymakers, and the United States include:

The IFIs must build up their Cuba expertise up now, and begin to develop a relationship built on “small confidence-building measures” (Feinberg offers specific examples of what that would look like) and working with other partners to work around statutory U.S. opposition to traditional IFI assistance to Cuba;

Cuba must with all “deliberate speed” implement its announced reforms to inspire confidence of trading partners, donors and lenders, should complement its South-South strategy with re-invigorated collaboration with Canada and Europe, and should reach out to the IFIs for technical consultations;

The United States must better grasp the significance of the economic reforms underway in Cuba, and pursue policies that encourage greater economic reform.  In particular, the U.S. must not stand in the way of IFI engagement of Cuba.  After all, as one senior staffer on Capitol Hill remarked to Feinberg, would Congress really object to, “Asking the Cubans to enter the Temples of Communist Doom?”

What makes this report so refreshing and timely is that it doesn’t need to retread the failure of US policy to achieve its goals on the island, nor is it about the crucial role the United States should play but isn’t in Cuba’s economic reforms.  In the run-up to the 2012 presidential election, the Obama administration surely, however mistakenly, sees its hands as tied on more progressive Cuba policies fiercely opposed by a small but forceful segment of the Cuban American community in Florida. 

And it may well be best that the United States just stays out of the way, as too much interest from the Enemy to the North could politicize an already sensitive reform process.  As Feinberg has hit upon, the real players at bat should be the world’s best, brightest and most experienced economists, who are champing at the bit to help their Cuban counterparts achieve reforms everyone – well, almost everyone – wants to succeed.

--- Anya Landau French blogs for The Havana Note, a project of the "US-Cuba Policy Initiative,” directed by Ms. Landau French, at the New America Foundation/American Strategy Program.

IN PICTURES: Cuba's economy

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