Cuba In The IMF: More Than A US Conflict

It is well documented that Cuba and the United States of America have had very little political and economic ties with each other for over 50 years. This strained relationship has kept Cuba out of the economic system that the US has been hegemon over since the end of the Cold War. One of the tools the US has used to maintain the current economic system is the International Monetary Fund(IMF). Surprisingly enough Cuba was one of the original members of the IMF. But in 1964 Cuba decided to leave the fund. Some obvious reasons for denouncing the IMF are Cuba’s lack of trust in the US and, at the time, Cuba’s relationship with the anti-US Soviet Union. But one must look more in depth to realize why, even now, Cuba isn’t a part of the IMF.The IMF has received much criticism for its neoliberal policies. Neoliberal policies are meant to decentralize and deregulate the domestic economic markets. Neoliberalist also believe that the market can take care of itself and governments shouldn’t interfere. The IMF uses these ideas to create policy to help economically struggling nations by providing loans to help these nations develop. But of course, these loans come with some conditionality. The IMF asks member nations to shrink the power of the domestic governments to allow the market to grow freely. I will discuss how this idea is completely against how Cuba’s leaders like to run their country. The Castro’s have mentioned that the IMF’s policies have done a terrible job of helping developing nations and is also a way to make developing nations follow and rely on the IMF(Seilijos, 7).My research is significant for multiple reasons. First, this is a topic that has been looked at from different perspectives. Most obviously, the US/Cuban relationship, before and after the Cold War. This debate has been going on for more than fifty years. But now I am looking at this relationship through the IMF lense. Because the IMF guidelines states that no nation can directly keep another nation from joining, it is interesting to research what can currently be reasons for Cuba not being in the IMF. There are domestic reasons. For example, leadership that doesn’t want to be completely transparent with an institution that is partially controlled by a fifty year old enemy. Or a domestic market that is mostly owned and controlled by the government in Cuba. There are historical reasons. Cuba has had over fifty years of disconnect with the US and its economic institutions while crippling embargo. But the most important factor is the neoliberal policy, that would be prescribed by the IMF to Cuba, has shown many critics to be incapable of improving a developing country’s economy, like Cuba. The Cuban leaders are well aware of the IMF’s results in other developing countries(Peet, 119).For over fifty years the US has had an economic embargo on Cuba as a result of Cuba renouncing US aid and interference, and Cuba’s decision to align with the US’ primary adversary at the time, the Soviet Union. Cuban leaders have criticized the US for advocating and pushing for the fall of the Castro regime, going so far as to plot assassination missions. Cuba was placed on the list of states that fund terrorism. Trade was halted between the two countries and the US has encouraged other states to denounce their relationship with Cuba. As a result, Cuba has imprisoned any who denounce the Cuban government or the Castro regime and some supporters of US encroachment. They shot down US passenger planes and repatriated property owned by US companies. Some congressmen have encourage policy that will strangle the Cuban economy until the country fails and Castro will leave office.In recent news, Cuba’s current leader Raul Castro has made comments expressing a desire to reform Cuba’s failing economic model. He has mentioned that the IMF could be beneficial to Cuba in helping to create policy that will gradually update Cuba’s economy. One of Cuba’s main issues is its dual currency monetary system. These currencies do not have a consistent and manageable exchange rate, which causes imbalances and inefficiencies that need to be solved in order for domestic stability and international investment to arrive on the island. So what is stopping Cuba from being apart of the IMF? Chapter 1: IMF RequirementsIn this chapter, I will spend much time describing the IMF and the way their policy affects developing country economies. It will be important to show how the IMF has treated other states that were not allies of its main members. The IMF claims that all states are welcome to join the IMF. Once a state has chosen to join they must pay their quota relative to their size. This may be difficult for Cuba but this is not a main deterrent.Scholars have argued that the IMF uses the neoliberal idea of market fundamentalism(Peet 107). This assumes that the international market performs in a perfectly predictable way and problems can be solved using theory. This is a big problem because the policy makers are not always impartial. They could make policy that guides member states to follow their ideas of success. Critics of the IMF believe the policy that the IMF prescribes to its members, especially the developing countries, are standard policies that are used universally for all countries in the same situation and don’t solve a country’s specific problems. Many members have received loans and policy suggestions from the IMF. The changes are made and improvement is expected. But research shows that many of these members remain in need of assistance from the IMF. This might actually be what the leaders of the IMF want so that states will always have to come to them for help. And now members are indebted to the IMF. So they must continue to follow the IMF’s terms.Much of the policy changes prescribed to member states have a goal of improving the member’s economic standing. In some cases the improvement is minimal. For some the policy advice is beneficial. But no matter what, the policy given to members from the IMF makes it so that the member is indebted to the IMF. In this section, I will explain the desired goal of neoliberal policy. I will give two examples of IMF prescribed policy in southeast Asia and in Latin America and what the results of these policy suggestions had on these economies. After which I will discuss scholarly critiques of neoliberalism. It is important to know that the Cuban economic policy makers have been observing the IMF and the economies that they have prescribed new policy. In these two cases, the economy’s development decreased significantly.One can argue that the IMF stratified societies, creating a rich and a poor class. It provides money to the policy makers who in turn will create policy controlling the masses and creating more profit, all the while increasing the divide between classes. These are some of the the reasons that Cuba chooses to remain outside of the IMF. In this section, I will narrow it down to neoliberalism the main reason. Questions to answer in this section:-What does the IMF require from its members?-How is neoliberalism a problem for a country like Cuba?-How did the IMF deal with countries in similar situations as Cuba? Chapter 2: Cuba Survives without the IMFIn this chapter, I will show that Cuba’s domestic market would not be a good fit for the IMF. Since Cuba’s government can be classified as a socialist republic, economic and political power is centralized in the government. Economic policy is made so that the state owns most of the resources and industries. These state owned enterprises have have been ran inefficiently because of this, It will be incredibly difficult for Cuba to reform its policies. Cuba would need to promote policy to encourage its entrepreneurs in the private sector.Cuba has historically valued its social systems. The government plays a huge role in the economy. The government owns most of Cuba’s resources. The government provides jobs, and welfare stipends for necessities, such as gasoline and food. Also the education system is state ran and happens to be one of the best in the world. These are all accolades that Cuba takes pride in. The Cuban policy makers have been adamant that they want these social programs to remain. Neoliberal policy would require the Cuban government to abandon these programs.After researching I find another issue that Cuban policy makers have with rejoining the IMF. It appears that transparency with this institution is not desired. Transparency is a main deterrent to Cuba rejoining the IMF. The leaders of Cuba, from Fidel to Raul, have been reluctant to being completely open with internal economic information. The distrust between the US and Cuba is a main reason for this. Cuba has observed, from the outside, IMF-promoted neoliberal policy being prescribed to developing economies and the effect was mostly negative. So they questioned the role and intentions of the IMF for using this kind of policy. Many critics of the IMF have been skeptical of whether meeting the neoliberal conditions will benefit the country or just make them follow the IMF board member’s interests. Cuban leaders have been adamant that they do not want to be obligated to USpromoted IMF policy. Questions to answer in this section:-What Cuban policy would be a hinderance to IMF policy?-What does cuba’s economy look like without the IMF?-How would market fundamentalism affect Cuba?-What does Raul Castro think of transparency? Chapter 3: US role in the IMFWe all know that the US holds undeniable influence on IMF decisions, even though the IMF’s charter states that no state can stop another state’s inclusion in the IMF. The US holds 17% of the votes to decide membership. It takes 85% to make changes. The US cannot alone stop Cuba’s reinstatement into the IMF even though the Helms-Burton Act of 1996 opposes US acceptance of Cuba in any International Financial Institutions(IMF and WTO). But they have used incentives as a way to keep other states from voting for Cuba’s inclusion. Research shows that states whose votes in the UN are the same as the US receive more benefits in the IMF. The strained relationship of the past comes into play here. Fidel Castro has always been an opponent to the favoritism that is prevalent in this US-led neoliberal system. Both he and Raul know that they won’t receive any preferential treatment if Cuba was to rejoin the IMF.It is important to note the many ways that the US pushed for neoliberalism into the IFIs in in the 1970 s. There was a very important reason which will be discussed in this chapter. This factor is another reason for Cuba to distrust the US.The contemporary relationship between the two countries has changed recently. Both sides are negotiating ways to build new Cuban-US ties. The embassies in both countries have reopened. Cuba has been removed from the State Sponsoring Terrorism list. So why hasn’t Cuba rejoined the IMF? There are some US politicians who believe that the US’ goal of a democratic Cuba has not been reached and the Castro regime is still in power. They believe that these are some of the reasons that the US should not end its embargo and include Cuba into the current liberal international economic order.In this way, the US Congress has veto power over Cuba’s reinstatement. Congress must put different policies to a vote. For issues in the past that the US didn’t agree with the ruling, the US withheld funds and froze IMF activity until concessions were made. The recent changes in policy between the two countries has been criticized by some in Congress. Some congressmen go so far as to say that once this president leaves office they will try to undo the recent changes so that Cuba will remain restricted.This brings me to the next issue of the upcoming US elections which could bring in a new president that opposes the current president’s policy towards Cuba. This will have a major affect on Cuba’s inclusion into International Financial Institutions. Some of the candidates have already stated their staunch disapproval of the new foreign policy and their desire to undo the changes. Many of them feel that the current US president is abandoning the 50 year fight for democracy for Cuba.This chapter shows that the US has a lot of influence in the IMF. This influence has allowed the US to be influential in choosing the type of policy used in the IMF. Not only can the US slowdown the IMF decision making process but the US has encouraged the use of policy that seems to benefit the US and not the countries that need to develop. Neoliberal conditions shrink the power of domestic governments and allows multinational corporations, many of them from the US, to benefit and profit. Cuban policy makers have observed this and this adds to the distrust. Questions to answer in this section:-In what ways has the US influenced the IMF?-Could Cuba rejoin the IMF if the US Embargo isn’t dropped?-Why did the US promote neoliberalism? ConclusionIn this Chapter, I will summarize the reasons for Cuba not joining the IMF. We know that the strained relationship between Cuba and the US is a main reason for the divide. But after my research I have found more reasons. Neoliberalism, transparency, and distrust are the reasons that will be discussed.