ETECSA and the Cuban Economy to Which We Aspire

Historically, socialist governments have faced numerous economic dilemmas, generally shaped by their prevailing ideological frameworks. While in theory similar, socialism has been conceived and implemented differently across countries. Some of the recurring dilemmas they have faced include: more versus less centralization; greater or lesser market participation, with freer or more controlled prices; a stronger or weaker presence of the private sector; more or less foreign investment; more or less worker participation in ownership and profit-sharing; greater or lesser autonomy for state enterprise managers; performance-based salaries versus centrally determined wage scales—among others issues.

Undoubtedly, one of the most significant dilemmas is the notion of what constitutes the “people's rights.” If housing, water, or other goods are defined as falling within such rights, then they must be guaranteed by the state. But to guarantee them, the resources must come from somewhere. As signs in Cuban hospitals remind us: “public healthcare is free, but it has a cost”. Nothing in life is truly free.

This is true not just about healthcare, but also about housing and water. Although water lies underground for all to access, it still requires resources to extract, pump, purify, and treat it for consumption. As long as an economy produces sufficient revenue, some of the revenue can be redirected to cover these so-called “people’s rights.” But there comes a time when there are simply no resources left to redirect. In fact, if too many resources are pulled by the State in the form or taxes or other levies from revenue-generating sectors, this will stress the continued funding of public goods, and those very revenue-generating sectors may collapse. The Cuban sugar industry is a prime example—but not the only one.

This raises a difficult question: which “people’s rights” should remain protected at all cost - financed by the state regardless of the burden? And which services should operate under a business model—covering its costs, generating profits—even if that means an additional expense for the population?

Should the telecommunications sector receive state subsidies in foreign currency to remain viable? Or, should it cover its own expenses and contribute some of its profits to help fund other core public services?

ETECSA: The State Enterprise

ETECSA is a Cuban state telecommunications enterprise and, as such, must be sustained. If it becomes unprofitable—and cannot be shut down—it must be subsidized by the state, further inflating the national budget or the deficit in foreign currency. Any deficit has consequences, such as inflation, which continues to severely impact the Cuban population.

It's true that well into the 21st century, Cubans did not have widespread access to mobile phones—not because they were banned, but because they were seen as symbols of social inequality and thus the state did not make them widely available. Only select individuals had access to them, only through their workplaces and as a result of their official positions.

When mobile phones were finally approved for general use, services had to be paid for in Cuban Convertible Pesos (“CUC”), although salaries were paid in Cuban Pesos (“CUP”). Only a few workers received bonuses in CUC—usually around 15 CUC per month. Ironically, that same convertible currency, once heavily criticized, is now sorely missed ^[1].

Until the 21st century, Cubans had no access to mobile phones, although mobile networks have existed globally since the 1970s.  From the moment they were allowed until 2021, Cubans paid for them in CUC. And social discontent about that fact remained relatively muted. The public desire for internet and mobile access was so strong that few complained about having to pay with a CUCs – a currency they didn’t earn. ^[2] The country’s communication landscape changed quickly. Soon, the number of mobile lines surpassed landlines. External mobile top-ups from friends and relatives abroad became a major source of foreign income for ETECSA.

These revenues allowed the enterprise to upgrade from 2G to 3G and later to 4G, expand coverage areas nationwide, improve mobile data access (beyond the initial availability in crowded public parks), enable internet-based international calls, and bring long-awaited internet access to the population, among other services. Many complained of the quality of the services ETESCA provided, but the fact remains: it grew its mobile user base from a few thousand to over 8 million within a relatively short period of time. And it did this without state subsidies in foreign currency.

The reference to subsidies does not mean to suggest that ETECSA is unprofitable in CUP, or that it needs state subsidies to cover losses like many other Cuban government-owned enterprises. The reference to subsidies is to subsidies in foreign currency. When a company spends in foreign currency but doesn't earn enough in the same, someone must cover the gap—whether the state or foreign suppliers. It’s been acknowledged recently that ETECSA owes a significant amount to such suppliers—debts that didn’t exist before the currency unification, as discussed below.

Currency Unification and Its Consequences

In January 2021, Cuba implemented currency unification. The entire economy eliminated the CUC and shifted to CUP, with an official exchange rate of 1 USD = 24 CUP. This might have worked if the unification were real and the exchange rate could have fluctuated to adapt to economic realities. But the fixed, unrealistic low exchange rate proved disastrous.

For example, a 1 GB data package cost 100 CUP—equivalent to 4 USD at the official rate. But with the informal market now valuing 1 USD at 370 CUP, that same package effectively costs 0.27 USD. Of course, it’s wrong to view prices through the informal exchange rate alone. The more important question is what the current price of 1 GB—CUP 1,120 for a 3 GB package—means in relation to average salaries. The conclusion: the service is expensive. These data packages consume a large portion of workers' income.

This leads to another dilemma: Are telecommunications essential enough to justify state subsidies in foreign currency? Weren’t Cuban state enterprises supposed to be self-sustaining? Should we let ETECSA fail to meet its obligations to foreign providers, miss out on necessary investments, and settle into a state of unstable and low-quality survival?

I don’t think we can compare telecom services to essentials like water, gas, or electricity. Those must be priced in close relation to salaries, even if it means subsidizing them in foreign currency. Communications, on the other hand, include use for personal calls or research; they include entertainment—social media, movies, series, and music.

Nonetheless, the government has encouraged e-commerce and digitization. Transport shortages have driven a rise in telework. Emigration has skyrocketed, dividing families who now stay connected via social media.

Recently, a colleague told me the government needs to make up its mind: it can't keep preaching socialism while relying increasingly on capitalist methods. I asked him: what kind of socialism are you referring to? Because there have been many versions—Yugoslavia’s, with its emphasis on cooperatives; the Soviet war economy; Lenin’s National Economic Program; Brezhnev’s stagnation; China’s and Vietnam’s market reforms; Venezuela’s model—and more.

Even Cuban socialism has gone through various phases. But none of them can survive without generating wealth. A stagnant or shrinking economy is fatal. There’s no contradiction between socialism and so-called capitalist methods. The difference lies not in the methods, but in who owns the means of production. In socialism, they belong to the state—not simply for the sake of ownership, but to ensure they produce value, remain profitable, and benefit the public. In other words, the people.

What’s happening now with ETECSA is further proof that the monetary unification failed. In just a few years, a previously profitable enterprise has become unsustainable in foreign currency. No action was taken earlier due to government fear—common worldwide—of introducing an unpopular “shock package,” especially given Cuba’s notions of the importance of maintaining “free services” or protecting “people’s rights.”

Take the price of eggs at 3,000 CUP. Some view it as a necessary sales price for a small private business (MIPYME) to import eggs, sell them in CUP, and reinvest the earnings. Others argue that it's nearly a month’s wage and call for price caps or shutting down MIPYMEs—even if eggs then disappear entirely from the market.

Under current law, ETECSA cannot use CUP to buy USD on the informal currency exchange market. The company is instead raising prices in CUP to make external top-ups by friends and family attractive again. Because no matter how many pesos ETECSA collects, it can’t convert them into foreign currency—leaving the enterprise unsustainable. This is yet another unresolved issue stemming from the recent flawed monetary reform.

So What’s the Real Problem?

The issue is not ETECSA’s prices or those of any other state enterprise or private business. The issue is our economy—one that generates very little foreign income, employs a massive workforce in unprofitable, subsidized enterprises or budgeted state sectors, and underpays workers in profitable sectors. A salary that barely covers a mobile top-up from abroad cannot reflect the real value those workers generate.

As a state enterprise, ETECSA’s separate legal existence is not acknowledged and its revenues are diverted for other state priorities—some noble, others questionable—effectively draining the enterprise's financial resources and its ability to reinvest.

It is no surprise the public is outraged by ETECSA’s new large rate increase. What is more surprising is the lack of similar outrage over the disappearance of basic goods from the ration book—such as eggs and chicken – a ration book that now covers almost nothing that it previously did. Why are they not more outraged at the chronic lack of medicines in pharmacies and hospitals—where the true people’s right, “healthcare”, is at stake?

What about the gas shortages during electricity outages, which prevent people from cooking? In those cases, prices may not rise—but the quality of service certainly drops, often to the point of complete absence.

So we return to the eternal socialist dilemma: Is it better to have a slightly more expensive product or service that is available, sustainable, and high quality? Or to have a nominally cheap service that is frequently unavailable or subpar?

It is legitimate to demand prices in line with workers’ incomes. But what we should demand is that state enterprises become profitable, manage their finances responsibly, retain earnings (beyond taxes and declared profits) in the currency they generate, set their own prices (with few exceptions), pay fair wages according to the value they create, and decide how to reinvest.

Once more state enterprises are able to do this, a $20–30 monthly flat rate for all communication services will no longer seem expensive to most Cuban workers, even then it seems unaffordable to the majority of the population. The problem lies not in ETECSA’s pricing—but in deeper Cuban economic failures.

The solution does not lie in rigid price controls (though some vital sectors may require them), but in wealth generation by state enterprises and the fair distribution of the value they create.

[1] The implementation of the Tarea Ordenamiento in Cuba (which, among other things, eliminated the “monetary duality” between the CUC and the CUP, leaving only the latter) — far from stabilizing the economy — triggered a sharp devaluation of the Cuban peso and an inflationary spiral that significantly eroded the population’s purchasing power. Ironically, many people now miss the CUC, a currency that was heavily criticized at the time but offered a certain level of price stability and access to basic goods compared to the current monetary chaos. The collapse of the system of relative prices and the unresolved dual exchange rate following the elimination of the CUC have generated a widespread loss of confidence in the Cuban peso, fueling the informal market and the partial dollarization of the economy.

[2] See, Miranda de Parrondo, Mauricio, "The 'Monetary Reordering' and Exchange Rate Distortions".