Cuba’s Reforms Pick Up Pace

Cuba’s Reforms Pick Up Pace

Cuba is once again in the international spotlight with news that Edward Snowden, the former U.S. NSA contractor, was potentially seeking to fly there. This is not too surprising given the decades-long strained relations between the United States and the island country. Indeed, an odd, often fractious relationship has long existed between the two countries, which predates the rise of Fidel Castro in 1959. However, Snowden has not boarded the flight to Cuba and importantly, it seems that Cuba does not want him.

Why would a country, which in the past has seldom shied away from provoking U.S. outrage and international crisis, not want to play host to a potentially big catch, who has already caused the U.S. much grief and trouble? The short answer is that in 2006 Cuban officials gave assurance to the U.S. that they would no longer harbor ‘new’ fugitives, political or otherwise. The long answer is that Cuba itself has undergone some significant changes and will likely undergo more in the years ahead.

Given both its geographical proximity and the considerable influence the U.S. wields in the international system, improvements in U.S.-Cuban relations are essential to Cuba’s economic success. Prospects for better relations are perhaps the best they have been in over half a century. In his first term, President Obama eased travel and money transfer restrictions towards Cubans. This past October, the Cuban government headed by Raul Castro, reciprocated in a similar fashion.

Recent voting demographic shifts within the U.S. may further support the process, as younger Cuban-American voters have broken the decades-long tradition of voting for the Republican Party, thus perhaps giving both parties more flexibility in policy implementation. Moreover, the recent death of Venezuelan president Hugo Chavez, who actively solicited an alliance with Cuba predicated in part on anti-U.S. grounds, may entail a greater likelihood of improved relations. However, in a relationship with animosity that has lasted over a century, no such change is easy or immediate, as other recent events have indicated.

The long-held U.S. embargo against Cuba, born of the Cold War era, remains in place over two decades after the collapse of the Soviet Union. Cuba is on the U.S. State Departments’ terrorism sponsor list, a listing that helps ensure the embargo stays. Talk of removing Cuba from the list, including rumors that then-incoming Secretary of State John Kerry planned to do so, elicited sharp and predictable backlash from prospective 2016 Republican Presidential front-runner Senator Marco Rubio of Florida, and other important voices across the aisle such as Foreign Relations Committee ranking Democrat Senator Robert Menendez of New Jersey, both states with high Cuban-American populations.

Even a recent trip to Cuba by U.S. musicians Jay-Z and Beyoncé provoked scorn and derision from some U.S. politicians and the media. Yet, while the embargo and the listing continue, the U.S. foreign policy community has consistently grown against such policies, perhaps indicative of a change some view as necessary and even more view as inevitable. Important voices in the U.S. foreign policy community have further called the policy into question and view it as both archaic and heavily representative of lobbying efforts counterproductive to long-term U.S. interests.

In 2006, Fidel Castro stepped down as the leader of Cuba after a long illness, ceding control to another key participant in the 26th of July revolutionary movement that came to power in 1959: his younger brother Raul Castro. Fidel himself proclaimed three years ago that “the Cuban model doesn’t even work for us anymore.” In this vein, Raul Castro has implemented important gradual reforms since heading the government. While some originally displayed skepticism towards Raul implementing reforms, a trend towards greater liberalisation of the economy has emerged.

Calling it a realisation of the Cuban model, reforms have been introduced that scale back state payrolls and the role of the welfare state, and allow greater movement and freedom for small businesses. Production, property ownership, and investment have similarly seen a greater degree of public and private mixed forms of control. Additionally, a progressive tax code has been formalized, and agricultural reforms have been implemented. The government has even set the rather ambitious goal of having 50 percent of the country’s GDP come from the private sector within five years.

However certain sectors of the economy will continue to be state-run in what has been thus far a fairly cumulative and slow-moving process. Real estate, wholesale, and private credit markets have begun to sprout up as a slow economic transition has begun to emerge. Another telling reform implemented has been migration. Now Cubans can live abroad anywhere from eleven months to two years without the risk of losing their homes, businesses or bank accounts.

Even more significant is the elimination of the expensive exit permits, giving a greater travel flow to Cuban citizens, as well as allowing those who left the country illegally the right to return. While the state still has the ability to deny passports for national security reasons, the government of Cuba will no longer require its citizens to request permission to travel outside the country. These reforms, while lacking cohesiveness, bode well for prospects of greater change in the future.

Cuba faces significant obstacles. Politically, Cuba remains a one-party state. Raul Castro has announced that he will not serve another term following the conclusion of his current time in office in 2018. The current Vice President Miguel Diaz-Canel, who at 53 is not from the revolutionary generation that has dominated much of the government, is expected to take office following Raul. Importantly, Raul has sought to encourage greater debates in colleges and a more independent media, both of which could sow the seeds for a multiparty Cuba in the future.

While trends towards greater liberalisation in the market and greater foreign investment from countries like Brazil are encouraging, Cuba has a significant demographic problem, with 18 percent of the population over 60 and an infrastructure in severe disrepair. Low productivity and a service sector-dominated economy present further problems. The pace and timing of reforms are belated for a country that has long been in dire need of them. Uncertainty will likely continue to abound in Cuba politically and economically. But one thing is certain: significant change is coming to Cuba and the way investors have been conditioned to think of Cuba must keep pace with these changes.

Categories: Latin America, Politics

About Author

Sean Durns

Sean Durns worked as a research assistant to a former high ranking Pentagon official and the Director of National Security Strategies at a DC based think tank. His analysis has been referenced by a variety of media outlets including The Wall Street Journal, Roubini's EconoMonitor, OilPrice, and many more. He holds a M.Sc. in History of International Relations from the London School of Economics where he focused on US foreign policy, security studies, and energy security.