What Castro's death and Trump's election mean for Cuba's economic awakening
Brian Gendreau, University of Florida Published 5:21 am, Wednesday,
December 14, 2016
Before his death on Nov. 25 at the age of 90, Fidel Castro had made no
secret about his reservations about the normalization of relations with
the United States and had insisted that the ideals of the Cuban
Revolution would never be abandoned.
So following his death it is natural to wonder if the economic reforms
initiated by his brother, Raúl Castro, will accelerate or what else
Since his death, we haven't seen any instability. This is unlikely to
change: Raul has been in charge since 2008 and has no plans to step down
until his term as president is up in 2018. He has remained a supporter
of the reforms despite disagreements with his brother.
But it would be unrealistic to expect a swift transition to a more open
market economy, as I've learned from 25 years spent following Latin
America's economies and politics. Internal opposition to the reforms
persists in Cuba, which helps explain why implementation of the reforms
has been slow, and with the election of Donald Trump, the thaw in
relations with the United States that has encouraged those reforms is,
for the time being, in question.
Since Raúl Castro began a series of reforms after replacing his ailing
brother as president in 2008, market forces have begun to play a larger
role in the Cuban economy.
Cuban citizens are now allowed to operate small businesses such as
restaurants, barber shops and room rentals, and they can buy and sell
homes. Individuals and cooperatives are allowed to cultivate unused
plots of land. Managers have been given more autonomy to allocate resources.
These reforms have been accompanied by fewer restrictions on travel by
Cubans abroad and by the gradual spread of communication technology.
Cellphones are more common in Cuba than they were just a year ago, and
Wi-Fi spots have become popular in Havana, though so far not many exist.
The pace of reform, however, has been uneven and slow. Self-employment
is still limited to specific and usually unskilled activities.
Architects, for example, may drive taxis but still cannot go into
business in their own profession.
The government explicitly prohibits the accumulation of wealth – hardly
an incentive to entrepreneurship – though it is hard to imagine that
this is enforced effectively. And backtracking has occurred in some areas.
In January, for example, the state shut down some street vendors and
asserted control of part of the food distribution system, which had
earlier been opened to private participation.
And not everyone in Cuba is happy with the reforms. The Cuban government
laid off almost 600,000 government workers from 2010 to 2014 in an
effort to improve productivity and free up labor for the private sector.
While there have been no announcements recently of plans for further
layoffs, the three-quarters of Cuba's workers that are still on
government payrolls are apprehensive. Complaints that tourists and
rising incomes in the private sector are raising prices are common in
As the government seeks to encourage a more vibrant economy in the face
of resistance to change, the outcome is likely to be a continuation of
the reforms, but at a controlled pace. Raul Castro indicated as much at
the Communist Party Congress in April, when he said Cuba's reforms would
proceed with "neither haste nor pause."
Cuba's economy, meanwhile, is in trouble after growing at a brisk 4.4
percent in 2015 as tourism- and construction-related investment boomed.
Growth is decelerating sharply this year as Cuba struggles to cope with
two external shocks.
First, prices for Cuba's traditional exports of nickel, refined oil and
sugar have fallen with global commodity prices since mid-2014 and remain
low. Second, with its own economy in shambles, Venezuela cut supplies of
oil to Cuba by as much as 40 percent.
Cuba has traditionally swapped medical services for oil with Venezuela
and sold the oil it refines from Venezuela to the rest of the world. As
a result of the cutbacks in oil imports, Cuba has had to ration energy
domestically and delay payments to foreign creditors, while its oil
export earnings plummet.
While rumors of a return to the hardships Cuba suffered in the early
1990s after the loss of subsidized trade with the Soviet Union are
exaggerated – earnings from tourism will help offset the lower oil
imports – Cuba will be lucky to eke out any growth at all in 2017.
Cuba may yet be hit with a third shock: a chilling of relations with the
Donald Trump has said he will reverse the deal President Barack Obama
reached in 2014 to reopen relations with Cuba and relax restrictions on
trade and travel unless the Castro regime agrees to free political
prisoners and restore political freedoms. Cuba released 53 political
prisoners a few weeks after the Obama administration's 2014 announcement
but has resisted calls to free more political prisoners since then.
The normalization of relations between the two countries has supported
Cuba's reforms by supplying a stream of new visitors to the island and
by increasing Cuba's connectivity with the rest of the world. Although
tourism is still banned under the Helms-Burton Act of 1996, in 2015
140,000 U.S. citizens took advantage of one of the 12 licenses
established in December 2014 under which the United States permits
travel to Cuba – a 54 percent increase over 2014.
U.S. airlines commenced regular air service to Cuba this year, and
several cruise lines now offer trips to the island. Several U.S. mobile
carriers have signed voice, text and data-roaming agreements with
Etecsa, the Cuban telecommunications provider. A Florida-based bank has
issued a credit card intended for use in Cuba, and U.S. credit cards are
accepted for currency transactions at state-owned foreign exchange
facilities in Havana, though they so far do not work elsewhere in Cuba.
Absent details on the president-elect's intentions on Cuba, it is
difficult to see how relations will unfold. Here's my read on the situation:
The new administration will initially take a hard line on Cuba – to do
otherwise would appear to be backing down from campaign promises.
History suggests, however, that Cuba will steadfastly resist demands on
human rights or democratic reforms, even if it means enduring
considerable hardships. This means that a standoff and worsening of
relations is possible, which could involve restrictions on travel and trade.
But there are long-term costs to isolating Cuba.
A chill in relations would mean U.S. businesses would lose out to
foreign competitors. Cuban-Americans could have their ability to see and
support relatives in Cuba hampered. Americans would not be able to enjoy
travel to the island or to buy Cuban cigars and rum.
In fact, a New York Times/CBS poll has found that nearly six in 10
Americans support normalizing relations with Cuba, and a 2016 Florida
International University poll found that a majority – 56 percent – of
Cuban-Americans in Miami-Dade County "strongly" or "mostly" favors a
reengagement with the island.
Cuba, meanwhile, has an obvious interest in avoiding isolation. Tourism
provides a good example. According to a 30-year development plan by
Cuba's Ministry of Tourism, capacity in Cuba's hotels is to grow from
63,000 rooms today to 85,000 in 2020 and 200,000 in 2030. It is hard to
see how those hotel rooms can be filled with a full U.S. trade and
travel embargo still in place.
The day after Fidel Castro's death, Trump called him a "brutal dictator"
and said "our administration will do all it can to ensure the Cuban
people can finally begin their journey toward prosperity and liberty."
The second phrase suggests that he is leaving the door open to a
rapprochement. Trump sees himself as the "negotiator in chief," so the
temptation to try to get a better deal from Cuba will be strong. Such
negotiations, however, are bound to be to be difficult: Human rights,
claims for expropriated property and Cuba's insistence on compensation
for damages from the embargo – issues on which little or no progress was
achieved in past talks – will all be on the table.
This article was originally published on The Conversation. Read the
Source: What Castro's death and Trump's election mean for Cuba's
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