The Real "Cuban Market"
Excerpt from Harvard Business Review's "The Potential and Pitfalls of Doing Business in Cuba":
To deflect attention from challenges, the Cuban government has introduced various distortions into the country’s official economic statistics, which are used largely unaltered by entities such as the World Bank and CEPAL. To guard against possible revenue losses, American business leaders must also be attentive to how currently available data on this economy tends to overstate the sales opportunity.
Let’s look at the two largest of those distortions. The first is in regards to wages in the public sector, which as reported by the Cuban government stand at an average rate of over $7,000 USD per year. In fact, when paying local workers, the government uses the country’s non-convertible currency, or the CUP, in contrast to the convertible currency, the CUC, but reports these wages as if they were paid in CUC. This effectively means that these wages are overvalued by as much as 2400%.
A further over-representation of the actual market size is determined by methodological inconsistencies. Between 2003 and 2007, the Cuban government enacted a series of methodological changes that produced a jump in GDP of approximately 15%. For instance, the government decided to assign an arbitrary value to the free social and medical services provided to its citizens. This is why U.S. healthcare companies, among the first to do business in Cuba, have told us that official statistics regarding the healthcare sector just don’t match the demand they see in reality.
To deflect attention from challenges, the Cuban government has introduced various distortions into the country’s official economic statistics, which are used largely unaltered by entities such as the World Bank and CEPAL. To guard against possible revenue losses, American business leaders must also be attentive to how currently available data on this economy tends to overstate the sales opportunity.
Let’s look at the two largest of those distortions. The first is in regards to wages in the public sector, which as reported by the Cuban government stand at an average rate of over $7,000 USD per year. In fact, when paying local workers, the government uses the country’s non-convertible currency, or the CUP, in contrast to the convertible currency, the CUC, but reports these wages as if they were paid in CUC. This effectively means that these wages are overvalued by as much as 2400%.
A further over-representation of the actual market size is determined by methodological inconsistencies. Between 2003 and 2007, the Cuban government enacted a series of methodological changes that produced a jump in GDP of approximately 15%. For instance, the government decided to assign an arbitrary value to the free social and medical services provided to its citizens. This is why U.S. healthcare companies, among the first to do business in Cuba, have told us that official statistics regarding the healthcare sector just don’t match the demand they see in reality.
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