Cubas risk score has improved this year, but ECRs contributors remain unconvinced by the pace of change in one of the worlds last bastions of communism.
The sovereign rated Caa1 (stable) by Moodys, but with no coverage by either Fitch or S&P has climbed 12 places since the start of 2012 and has continued to improve since Q2. However, on a score of just 19.7 (out of 100), it remains a high-risk strategy, sitting firmly within the fifth of ECRs five-tiered groups, ranked 154 out of 186 countries.
Moderate reforms introduced in 2011 under president Raul Castro who took over from his brother Fidel in 2008 are widely regarded as a step in the right direction. The sclerotic state-controlled economy has been opened up a little, allowing private-sector self-employment and land purchases, as the government seeks to address its financing problems.
Yet implementation has been slow and uneven: the dual exchange-rate system still exists, a new customs tax on imports is likely to impede private-sector growth, there are few signs of the US lifting its trade embargo and the country has become overly reliant on Venezuela, its main benefactor and trade partner.
Cubas points differential to the Caribbean average is therefore unchanged compared with two years ago, at -10. A nine-point narrowing of the gap with the Latin America average is encouraging, but at -25 it remains considerable, with scores for virtually all of Cubas economic, political and structural risk factors still lagging.