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More inflation looms: Castroism demonstrates its incompetence by stimulating demand

One must be ignorant of the basic fundamentals of economics to propose, under the current circumstances in Cuba, a 6% bonus for customers who use cards or payment gateways.

La Habana
Offerings at an MSME in Havana.
Offerings at an MSME in Havana. Diario de Cuba

Even a cursory analysis of the Cuban economy leads one to the conclusion that those who run this island have no idea what they are doing.

This, however, is not true; one tends to base their analysis on the premise that these leaders want the economy to progress, when the reality is that their main objective is to stay in power, for which they use the economy as a tool of social and civic impoverishment and to foment individual dependence on the State, such that what might seem to be failed economic policies are really very well thought out, designed to sustain the current power structure.

Despite this proven truth, there are times when it must be recognized that, apart from being downright malevolent, those who run Cuba are also quite incompetent, even in the pursuit of their own interests, since one must be ignorant of the basic principles of economics to propose, given the current conditions in this country, a 6% bonus for customers who pay for goods and services through cards or payment gateways, which is what the Central Bank of Cuba has just done to stimulate electronic commerce.

And, although within the state's plan to minimize the use of cash, it is consistent to include incentives to promote the use of banking systems, it seems that they have been controlling the economy for so long via mandatory decrees that they no longer even know how to incentivize.

They do not understand that, in the Cuban situation, characterized by maximum scarcity and a systemic lack of competition in terms of supply, demand becomes inelastic, being forced to settle for whatever it finds, practically no matter how bad values are, such that the 6% bonus on the demand side will not make any difference in terms of purchasing trends —which, by the way, were already relying on e-commerce as much as possible, due to the lack of cash that the country has been suffering for months—.

The only thing that the Central Bank of Cuba is going to achieve with this measure is to reduce its intake of money by 6%, which will make possible more monetary circulation, which (take a wild guess) will generate more inflation.

It would be very different if they had offered a 6% bonus to businesses; that is, to those who are on the supply side, the ones that, under threat of confiscation and closure, have to make a significant outlays to adapt their businesses to e-commerce in less than six months.

It is those on the supply side —that is, merchants— who are most averse to this bankarization because it prevents them from accessing the underground currency market, which is where they stock up on dollars to keep their businesses supplied. In short, merchants are those most hurt by bankarization, which is why it would have been much more effective to target them with incentives.

And, if those who run the Cuban "economy" weren't such fools, they wouldn't stop there. It would be extremely beneficial for Castroism, for example, to subsidize the acquisition of the hardware and software necessary to render e-commerce viable, or to offer tax incentives for certain volumes of electronic invoicing. The possible variations to align resources with their interests are infinite, but they are so incompetent that they have done the only thing they should not do: boost demand in a country where nothing is available .

Of course, we are not suggesting that the Government do any of this. Rather what we seek to stress here is that the Central Bank's measure illustrates an acute lack of the most basic knowledge of economics, which causes the Government to make stupid decisions.

It is bad enough to realize that Castroism is a criminal organization, but now, in addition, we must bear in mind that it is also a foolhardy one, which is worrisome because, as the anti-Nazi Dietrich Bonhoeffer stressed, "stupidity is a more dangerous enemy of good than malice. One can protest against evil. It can be exposed and, if necessary, prevented by force," but in the face of stupidity we lack certainties about the enemy, such that it is difficult to foresee his actions, even when we know that his intentions are malicious.

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