Cuban economist Pedro Monreal shared a critical analysis on Thursday via his account on X, addressing the recently sanctioned Decree 127/2025. This decree aims to overhaul the operational framework of budgetary units in Cuba, yet Monreal cautioned that its influence on the nation's economy might be minimal.
Monreal didn't mince words in his assessment: "Decree 127 concerning budgeted entities and its supplemental norms reinforce a conservative — not just gradual — approach to 'improvement.' It might only modestly reduce spending, as it adopts the inadequate state enterprise as its model."
His perspective starkly contrasts with the government's optimistic stance.
Berta Iris Rojas Gatorno, the Director of Financial Policies at the Ministry of Finance and Prices, praised the measure as having "significant impact," asserting that it brings "stability and parity between the budgeted sector and the state business sector."
The decree, published on Wednesday in Cuba's Official Gazette (No. 32 Ordinary), received approval from the Council of Ministers alongside complementary resolutions from the Ministries of Finance and Prices, Labor and Social Security, and Economy and Planning.
This regulation affects approximately 2,443 budgeted units, which account for over 50% of the active state workforce in Cuba.
Key Changes Introduced by the Decree
Among its notable amendments, the decree formally defines the legal framework for the budgeted sector, granting legal status to its financial management for the first time.
Units with "special treatment" can now devise their own salary systems based on performance, aligning them with the state business sector, and they are permitted to engage in self-financed activities without requiring financial support from the state budget.
Furthermore, positions not directly tied to each entity's specific activities cannot exceed 30% of the total staff. Budget management is also being transferred from the Ministry of Economy and Planning to the Ministry of Finance and Prices.
Exclusion of Key Sectors Limits Broader Impact
However, the decree specifically excludes the health and education sectors — the largest and lowest paid — from its most significant benefits, thereby limiting its broader impact.
This exclusion is particularly significant considering the wage context: in 2025, the average salary in the budgeted sector was approximately 5,900 pesos, compared to 7,331 pesos in the state business sector, a disparity that drives workers toward the private sector.
Monreal's critique aligns with his previous analyses. In March 2026, he had already expressed skepticism about Decree-Law 144/2026 concerning partnerships between state and private enterprises, arguing that it portrayed an image of openness without altering the centralized model's core structures.
Economic Outlook Intensifies Skepticism
The macroeconomic situation exacerbates doubts about the decree's actual impact: Cuba's GDP fell by 5% in 2025, marking a cumulative contraction of over 15% since 2020, and the government fulfilled just 51% of its economic plans that year.
The Economist Intelligence Unit forecasts an additional 7.2% drop in Cuba's GDP for 2026, a stark contrast to the 1% growth projected by the regime itself.
Understanding Cuba's Economic Challenges
What is the main criticism Pedro Monreal has about Decree 127/2025?
Pedro Monreal criticizes Decree 127/2025 for reinforcing a conservative approach and having a potentially limited impact on reducing spending, as it models itself on the inefficient state enterprise.
How does the new decree affect the Cuban workforce?
The decree impacts about 2,443 budgeted units, involving over half of Cuba's active state workforce, by defining a legal framework for financial management and allowing units with special treatment to determine their salary systems and engage in self-financed activities.
Why are health and education sectors excluded from the decree's benefits?
The decree specifically excludes the health and education sectors, which are the largest and lowest paid, from its most significant benefits, limiting its overall effectiveness and impact on these crucial areas.