Cuba 2018: What To Expect As Castro Rule Comes To An End

Cuba 2018: What To Expect As Castro Rule Comes To An End
By Simon Whistler

Should all happen as expected, February 24th 2018 will be a momentous
day in the lives of many Cubans. On that day, 10 years after officially
taking over from his brother Fidel, President Raúl Castro has promised
to step down from power, marking the first time that many on the island
will have ever known a head of state without his famous last name. Fidel
himself had been president between 1976 and 2008, and prior to that had
been the main power behind the throne since the 1959 Cuban revolution.
Nearly 60 years of Castro-led government, then, will finally come to an end.

For many Cubans, regardless of their political loyalties, the Castro
name has come to represent their country, for good or for bad. Raúl
stepping down from office, following on from the death of Fidel in
November 2016, is therefore a hugely symbolic moment by any account, and
one that will generate a great deal of uncertainty.

This is not lost on the Cuban authorities. The all-encompassing Cuban
state has been preparing for the moment since 2013, when Raúl first
announced his intention to step down. There is little doubt that the
handover of power will be carefully choreographed in public, the ruling
Cuban Communist Party (PCC) seeking to demonstrate that running the
country will be business as usual.

This will do little to stop the chatter, however, especially around the
big question that a Castro-less Cuba automatically entails: what are the
prospects for political and economic reform on the island? The easy
answer is that in the immediate term, probably very little will change.
The real answer to this question is more complex. Raúl's eventual
successor, the state of the economy, social pressures, and—perhaps in
time—relations with the US, will all play significant roles in defining
it. Inevitably, little will be resolved until Raúl has actually left the
presidency.

Next on the block

Perceived wisdom has the non-military technocrat Miguel Díaz Canal as
Raúl's most likely successor. In his 50s, Díaz Canal would mark a clear
break from the Castro-led generation of revolutionary figures who have
dominated Cuban politics over the last six decades. He has also been
central to Cuba's baby steps towards a more-market based economy.

However, the fact that his name comes up so readily in discussion over
successors does leave some pause for thought. The Cuban regime has
historically played its cards close to its chest, with few really privy
to the thoughts of the key decision-makers at its apex. It would be
little surprise if Díaz Canal's presumed coronation next year turns out
to be a smokescreen for a different candidate altogether.

Even if Díaz Canal is the man to step forward, what power – or indeed
desire - will he genuinely have to call his own shots and take Cuba down
a more liberal path? The military old guard, led by the likes of Raúl
and José Ramón Machado Ventura, current second secretary in the PCC,
will almost certainly retain residual authority behind the scenes.
Despite Raúl's technocratic bent, many others in the old guard have been
less enthusiastic about recent steps to liberalize elements of the
economy. Without a Castro in charge, and the perception of a more
pliable president in Díaz Canal in his place, opposition to further
change could become stronger.

That points to the truth that there are divisions within the PCC over
the country's future direction. But these divisions are not big enough
that they obscure the party's common goal – to retain power and to
retain control of its destiny. Technocrat and non-military he may be,
but Díaz Canal is almost certainly first and foremost a loyal cadre of
the PCC. It would be foolish to believe that he is automatically an
agent for political change just because he is not a Castro or is part of
a younger generation of leaders.

It's the economy, stupid

In fact, the performance of the economy and the Cuban state's
(in)ability to maintain its basic social contract with the population
are the most likely portents of future structural changes. In almost any
scenario, there is little real prospect of the regime rolling back the
tentative economic reforms of recent years; all but the most blind
ideologues have come to realize that the state simply lacks the
resources to manage all facets of the economy. Although still
controlled, pockets of private enterprise and foreign investment will
grow in time.

But there is little doubt that the economy is facing significant
pressure as its main sponsor, Venezuela, implodes. The Cuban economy
contracted by 0.9% in 2016 as Venezuela cut oil exports to the island
and Cuba's export of human capital in the other direction—mainly in the
form of doctors and nurses—was severely curtailed. Efforts to attract
increased foreign direct investment have been tortuously slow in their
execution. Should these patterns continue (and there is little sign of
Venezuela, in particular, picking up soon), the strain of government
finances will begin to become critical.

That matters not so much in terms of official growth rates, but more in
terms of the ability of the state to ensure that it can provide the
basic services on which it has always laid its moral and political
authority. That's why a series of power cuts in 2016, on the back of
lower oil imports from Venezuela, have caused such unease; they were a
deeply uncomfortable reminder of the so-called 'special period' of the
early 1990s, when the collapse of the Soviet Union pulled the plug on
Cuba's economic lifeline.

It also matters in the context of increasingly visible inequality and
regional divides. Different classes are emerging: particularly among
those who have access to foreign exchange, whether through their jobs or
through family overseas, and those who do not. The latter continue to
survive within the limited confines of the local economy. These
differences are intensified between rural and urban areas – the bustling
capital of Havana is increasingly a focal point of the 'haves', the
countryside that of the 'have-nots'.

The challenge ahead

This ultimately is the key challenge that the Cuban government faces
ahead of the presidential transition and beyond. Hand over the economy
in a resilient condition and on Cuba's own terms, and Castro's successor
has greater scope for ignoring the still small demands on the island for
political change. A fractured economy and a failing social contract, on
the other hand, spell difficulties ahead.

This would not necessarily play out in the form of widespread unrest or
immediate calls for political freedoms— there remains little overt
support to sustain such moves. But, perhaps more dangerously to the PCC,
it would result in a deeper sense of public disillusionment with a state
that has failed to deliver its promises. Without a Castro safety net to
fall back on, the foundations of a grassroots reform movement can emerge.

A business boom?

Businesses hoping for a Caribbean China or Vietnam to appear a year from
now will be disappointed. The conditions will not be ripe for a mass
opening of the Cuban market, yet. Díaz Canal, or whoever Castro's
successor proves to be, will almost certainly continue along the current
Cuban path to reform, with greater or lesser urgency dictated by the
economic situation. But the regime remains fearful of opening too fast,
too soon, for the impact they perceive it would have on social unity,
and ultimately on the PCC's ability to remain in control.

This will slowly bring more opportunities for the discerning investor,
but realities of doing business will remain complex. The Cuban regime
will remain slow in its decision-making and continue to bind investors
in reams of red tape. Meanwhile, the US embargo—unlikely to be lifted
this year or the next—will continue creating legal obstacles for US and
foreign companies alike. Although 2018 brings hope for a brighter future
in the longer term, in the meantime, the Castros' shadow will linger
over Cuba. Those thirsty for a Cuba libre, economically and politically,
will need to wait a while longer to be refreshed.

Simon Whistler leads the political risk analysis and consulting practice
for Latin America at Control Risks, the leading international risk
consultancy.

Source: Cuba 2018: What To Expect As Castro Rule Comes To An End -
https://www.forbes.com/sites/riskmap/2017/05/04/cuba-2018-what-to-expect-as-castro-rule-comes-to-an-end/#76bba5e967b8