Cuba's Banking Sector Transformations: Causes and Prospects for the Future

Abstract

During the last three decades of the Cold War, Cuba had one of the most collectivized, egalitarian, and subsidized economies within the Socialist Bloc. The disintegration of the Soviet Union and its Eastern European allies in the early 1990s resulted in a severe multidimensional economic crisis for the island.1 The magnitude of this external sector shock prompted the Cuban leadership to implement a series of structural reforms to reinsert the country into the world economy, while preserving the socialist character of the Cuban revolution.2 The structural and organizational reforms implemented in the banking sector since the mid 1990s were among the most notable of these policy measures.This paper examines the transformation of Cuba's banking sector from the onset of the Special Period to the present.3 Section one outlines the principal measures implemented to modernize the Cuban banking system during the 1995-1997 period. Section two describes the institutional reforms that took place during the era of...