Cuba's Economic Reforms: Progress or Survival Tactic?

Cuba's Economic Reforms: Progress or Survival Tactic?
Mark Keller
November 10, 2011
Raúl Castro speaks at the Sixth Congress of the Communist Party. (AP Photo)
New regulations guiding the sale of private property go into effect in
Cuba today. The laws were announced on November 3, and mark the first
time Cubans can buy or sell property since the 1959 Revolution. The new
regulations fit into a larger scheme of reforms undertaken by President
Raúl Castro since assuming power from his brother Fidel in 2008. These
reforms aim to shore up the Cuban economy, which is highly dependent on
Venezuela (whose government provides nearly $5 billion a year in aid),
and which has experienced sluggish growth since the 2008 economic crisis
in comparison to the rest of Latin America and the Caribbean. Since
taking office, Castro instituted reforms that include easing
restrictions on purchasing luxury goods, supporting small businesses and
entrepreneurship, and allowing the private sale of cars and homes. While
the reforms are changing Cuban society, undoing decades of state-control
and interventionist economic policy, many question their effectiveness.
Some of the most significant reforms undertaken by Raúl Castro include
the following:
• Cell phones and electronics. In 2008, the government eased
restrictions on the purchase of luxury goods such as DVD players and
cellular phones. By 2010, Cubans registered nearly one million cell
phones on the island.
• Agriculture. In a bid to improve agricultural productivity and to
achieve food self-sufficiency, the government agreed to lease government
land to private farmers in 2008. The government currently leases around
3.2 million acres to small farmers. Farmers must set aside a certain
amount of their production to the government based on the size of their
plot, but are permitted to keep the surplus to sell on their own.
However, the industry still suffers from lack of easy access to
necessities like seeds, fertilizer and modern machinery.
• Self-employment. Since assuming office, Castro repeatedly expressed
the need to reduce the state workforce, proposing to fire as many as
half a million people. To that end, the state has eased restrictions on
self-employment, and the self-employed, or what Cubans call
cuentapropistas. In 2011, the government expanded the number of
permitted professions, which now includes things like event planning,
street vending, and taxi driving. Small businesses may also now hire
employees outside their family. Restrictions were also eased on the
number of guests that could be hosted at small restaurants, called
paladares, and the tax burden was reduced on Cuba's casas particulares,
or small hotels. The number of self-employed Cubans more than doubled in
the past year, now numbering 330,000—far surpassing government
expectations.
• Cars and private property. In October, the government legalized the
buying and selling of cars, and it legalized the buying and selling of
private property in November. The government's rationale for both was to
eliminate the middleman in interactions between Cubans, as the
transactions previously required complicated government-run trade or
bartering systems. Both reforms give average Cubans access to collateral
for small loans, which could potentially be used to start small businesses.
However, while the reforms are expansive, many question their validity.
Some criticized the reforms for contributing to class divisions in the
Communist country, since cell phones, small businesses, cars, and homes
are prohibitively expensive in a country where the average monthly wage
is $20. This makes capital available only to those with family abroad. A
recent survey by Freedom House found that 41 percent of Cubans are happy
about the reforms undertaken by the government, and believed their
country was making progress, compared with only 15 percent previously.
But Arturo Lopez-Levy, a former political analyst in the Cuban Interior
Ministry, questions the wisdom of financial liberalization without
political reform: "They are trying to let the economic genie out of the
bottle while keeping the political genie in. That's not going to work."
AS/COA's Christopher Sabatini tells The Globe and Mail the heart of the
reforms are really about staying alive, more so than politics or
economics: "Cuba's future will boil down to whatever it needs for
political and economic survival, rather than any principled commitment
to the revolution.".
http://www.as-coa.org/articles/3781/Cubas_Economic_Reforms:_Progress_or_Survival_Tactic_/