A few years ago, it would have been difficult to imagine Cuba knocking at the doors of the World Bank and the International Monetary Fund. Now, with the United States having just restored diplomatic ties with the island after more than a half-century of enmity, it seems to be only a matter of time before it joins both institutions – to the benefit of all involved.

Membership in the IMF is a precondition for joining the World Bank, and the advantages that Cuba could gain from membership in the latter are easy to see. Cuba is rightly proud of its social achievements, but ensuring that they remain sustainable will require that its economy continues to grow. For that, Cuba will need to pursue and deepen the economic reforms that it has started, address its technological obsolescence, and upgrade its public infrastructure.

All of this requires raising capital. And, though Cuba could (and possibly should) seek financial support from sources other than the World Bank, there are problems with many of the multilateral alternatives. The Andean Development Corporation’s financial support could be limited. The procedures for accession to the BRICS countries’ New Development Bank are not yet established. And joining the Inter-American Development Bank could be politically sensitive, given its link to the Organization of American States.

Cuba could of course borrow from bilateral creditors. But state-to-state loans usually include conditions that are less transparent than those attached to funds from rules-based international financial institutions. Moreover, none of these other potential sources of financing would match the World Bank’s technical support.

Likewise, joining the IMF could yield tangible benefits for Cuba. The country’s balance of payments is under chronic strain, and attracting foreign direct investment – including from the Cuban diaspora – would be easier if the country could bring its reforms to fruition and rationalize its complex exchange rates. Cuba prints two currencies, the convertible peso (paired one-to-one with the US dollar) and the Cuban peso (pegged at 24 to the dollar). In addition, there are also several special exchange rates – for things like oil purchases, imports for hotels, and export revenues.

Rationalizing its exchange rates would strengthen Cuba’s competitiveness and increase its exports. But it would also be challenging – even if carried out gradually. Prices and salaries would be significantly affected, and the authorities would need to make the case that the long-term gains will eventually outweigh the intermediate hardships.

Persuasion alone, however, will not suffice. Preserving social consensus for economic reforms will also require active fiscal policies. It takes more time to build up skills and open trade opportunities than it does to lay off workers and shut down inefficient firms. Cuba could use the IMF’s financial assistance and technical advice as it compensates short-term losers, retrains the unemployed, and supports new businesses.

The World Bank and the IMF would also benefit from admitting Cuba – which currently is the most conspicuous exception to both institutions’ near-universal membership. Given that combating poverty is its overarching goal, the World Bank should be interested in helping Cuba preserve its social achievements and supporting its transition from a centralized planned economy to one with an entrepreneurial private sector. For the IMF, Cuba’s membership would fit squarely into its mission of facilitating international trade and eliminating the foreign-exchange restrictions that hamper it.

Cuba may or may not be politically ready to join the international financial institutions, but it clearly meets the conditions needed to apply for accession to the IMF. Cuba is a “country,” with the attributes of statehood as defined by international law. Its government should have no problem demonstrating that it is willing and able to fulfill the obligations of membership contained in the IMF’s articles of agreement. Indeed, Cuba was one of the IMF’s founding members, before voluntarily leaving the organization in 1964.

The process for accession is relatively simple. As soon as Cuba files an application, the IMF will send a technical mission to gather the necessary data and prepare a paper describing the economy and recommending a quota of voting rights and contributions. Determining Cuba’s quota is the crux of the accession process, and the country will need to choose an executive director to represent its interests during that discussion. Theoretically, Cuba could choose any of the current 24 executive directors, though it is likely to prefer one from Latin America.

Cuba’s application will require the support of a simple majority of the IMF’s executive board. Although the US does not have enough votes to block Cuba’s admission on its own, it wields enough influence to derail the process. So Cuba will need to obtain, at the very least, American acquiescence.

Assuming the US raises no objections, the board’s decision to proceed with Cuba’s application will be followed by the establishment of an ad hoc committee of executive directors, including the one chosen by Cuba to represent its interests. This committee will use the background paper prepared by the IMF to determine Cuba’s initial quota, as well as the other terms and conditions of membership. If Cuba agrees with the committee’s proposal, the chairman will submit its recommendation for Cuba’s accession to the board, where once again a simple majority is required. The last hurdle would be a resolution that obtains the support of the majority of the IMF’s board of governors.

Arrangements would then be made to sign the IMF’s Articles of Agreement. In the case of Cuba, this ceremony would have special resonance, as it normally takes place at the US Department of State, where the original document is held. Having signed, Cuba would once again formally become a member of the IMF, at which point it would be automatically entitled to membership in the World Bank.

This article is published in collaboration with Project Syndicate. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Hector R. Torres, is a former Executive Director of the IMF and a former Chair of the G-24 Bureau in Washington, DC.

Image: The Cuban flag flies in Havana. REUTERS/Enrique de la Osa.