Cuba: U.S. Sanctions Underscore the Need for Meaningful Reform

By Ricardo Torres*

Cruise ship at Havana Harbor in April 2018/ kuhnmi/ Flickr/ Creative Commons

Washington’s new measures to tighten the embargo will hurt the Cuban people, especially the private sector, but Havana has little choice but to double-down on reform and make its economy more efficient and independent. Holding Cuba responsible for Venezuela’s resistance to U.S. regime-change policies in that country, and for alleged “acoustic” incidents harming U.S. diplomats in Havana, U.S. Secretary of State Mike Pompeo and National Security Advisor John Bolton last week announced steps that, taken together, amount to almost full reversal of the engagement that former Presidents Barack Obama and Raúl Castro announced four and a half years ago, in December 2014.

  • Among key measures is full enforcement of Title III of the Helms-Burton law of 1996 – ending waivers that three predecessor administrations had invoked – and allowing even Cuban-Americans who were not U.S. citizens at the time to sue companies involved in business dealings (“trafficking”) involving properties nationalized by the Cuban government since 1959. The U.S. officials have also pledged regulations clamping down on remittances to Cuba (which had already been regulated to ensure that senior government officials did not receive them); prohibiting dollar transactions through third-party financial institutions; and stopping “non-family” travel to the island. Details will not be known until the regulations are published, a process that usually takes several months.

The U.S. actions come at a delicate moment for the Cuban economy, will certainly worsen the country’s balance-of-payments situation by increasing the cost of international transactions, and will directly affect key sectors that depend on tourism and remittances.

  • Among the hardest hit will be Cubans engaged in private businesses, who depend on remittances for investment and foreign visitors as customers. At the end of 2018, a little more than 1.4 million formal jobs were in the non-state sector, including the self-employed (cuentapropistas), members of cooperatives, and private farmers – almost equal to the 1.6 million in state enterprises. Many others work in the informal sector to supplement their incomes.
  • The perceived increased risk posed by the U.S. measures will also cause foreign companies to postpone or cancel entirely plans to invest in Cuba.

Trump Administration efforts last year to reverse Obama-era policies, coupled with other challenges – including the weakening of the Venezuelan economy and the shift of a previously key partner like Brazil – are taking their toll on the Cuban economy. In addition, an accumulation of important internal problems has made the country vulnerable. Austerity measures announced as early as in summer 2016, including a reduction in imports and energy rationing in the public sector, have already hurt. Even in the context of a good international environment and improving ties with the United States, the Cuban economy grew slowly over the past decade. The ups and downs in policies dealing with the private sector, agriculture, and in the derailed process of reform in the dominant state sector – as well as setbacks in efforts to attract foreign investment – underscore the economy’s deep structural flaws and damage caused by deficient responses and successive delays.

In these changing times, appeals to “Resist!” are no longer enough. Aggravated by the U.S. measures, the expected worsening of the economic situation will disproportionately affect the most vulnerable of the Cuban people. The external problems could be the argument that the Cuban government needs to push aside obstacles to domestic economic reform. The country has immense internal potential but has been held hostage to the ideological purism that many profess.

  • The government of President Díaz-Canel has already announced new measures to stimulate the development of state enterprises, cooperatives, and the private sector itself. Foreign dependence has proven to be disastrous for Cuba. No foreign power is going to come to resolve the flaws of the Cuban model. Broadening and deepening reform, liberating the domestic productive powers, seems to be the only possible way forward in addition to rethinking international alliances and embracing markets more broadly.

April 23, 2019

*Ricardo Torres is a professor at the Centro de Estudios de la Economía Cubana at the University of Havana and a former CLALS Research Fellow.

Cuba: Opening Pandora’s Box?

By Fulton Armstrong

Cuba constitutional reform

Reading about the constitutional reform project in Cuba. / Twitter: @SoberonGuzman

The constitutional reform process that the Cuban government is undertaking — controlled and cautious — and adjustments to one or two regressive regulations may be setting in motion political dynamics that will fuel pressure for more change.  After months of consulta popular, the constitutional drafting committee is preparing a new draft for consideration by the National Assembly during a two-day session beginning December 21.  Current plans are still for it to be subjected to a referendum vote in February 2019.

  • Skepticism about the real impact of the consulta, which reportedly resulted in hundreds of thousands of written comments, is deep, but most non-governmental observers believe that participation was so strong that the popular input had an impact. Debate about Article 68 — establishing the constitutional right of same-sex marriage — was most obvious.  Evangelical churches, with Catholic support, led the push against it, organized demonstrations, and circulated posters easily visible on Havana streets.  Local observers report that government officials were surprised by the mobilization and, fearing the article will spark abstention from the referendum or votes rejecting the whole constitution, now face the challenge of balancing the forces for and against it.
  • Debates are reportedly also taking place, including among senior officials, about the role of the Communist Party. Observers say that the party has accepted its subordination to the constitution and laws of the country, but — while it will remain the “fuerza dirigente superior de la sociedad y del Estado” — there reportedly is no consensus on its exact role and relationship with the government.  Another controversial provision deals with vague limits on the “concentration of property” versus the “concentration of wealth.”

The government’s handling of opposition to regulations announced last summer (but scheduled to take effect this month) has also left opponents — justifiably skeptical about any government signals of compromise — wondering where process and policy are headed.

  • The day before a regulation tightening controls on private sector businesses was to be implemented on December 7, the government rescinded several harmful provisions. Under the original version, Cubans could hold only one business license, and private restaurants could have no more than 50 chairs, but both measures were overturned as a result of private sector complaints, according to Labor and Social Security Minister Margarita González.  In a speech to law students, President Díaz-Canel reportedly emphasized the importance of cuentapropista input as well.  There were also hints of a softening of a regulation increasing government control on artists — requiring their credentials to hold shows be validated by a government office — when the government delayed implementation and said it was subject to further elaboration.  With both regulations, officials tried to appear to be listening to the strong opposition they faced.
  • The government has left in place, however, new controls on private transportation operators, particularly the ancient private vehicles (almendrones) running on established routes where public buses are lacking. The government claimed drivers were overcharging, not paying taxes, and not maintaining their cars adequately.  The measure itself, as well as many private drivers’ work slowdown and surrender of their special transport licenses in protest, have significantly hindered Havana citizens’ ability to get around the city.  The government has announced that it is importing several hundred microbuses to cover the routes but has given no sign of compromise on the regulation.

The road to reform in Cuba is littered with unfulfilled expectations; the skepticism of common folk affected by the revised constitution and various regulations, as well as government opponents, is not unwarranted.  It is impossible that the National Assembly could give the thousands of proposed changes to the constitution draft serious consideration in a two-day session.  But some aspects of the ongoing processes, such as the government’s recognition of affected sectors’ concerns, appear likely to create new expectations of government attentiveness and even civic participation.  Non-fulfillment of those expectations may not lead to destabilizing protests in the short term, but it would be yet another negative signal about the Party’s willingness to allow the country to evolve toward the new and more stable model it has claimed interest in establishing since 2011.  The public statements of former President Raúl Castro, President Díaz-Canel, and others suggest awareness that, in the post-Castro era, legitimacy will come from economic results and improved living standards – which require broader and deeper public inputs into policymaking.  Everyone will be watching whether the recent, partial consultations were a short-term show, an experiment, or a hint of a shift in approach.

December 18, 2018

Cuba: Sticking to the Plan

By Fulton Armstrong

Miguel Diaz Canel

Cuban President Miguel Díaz-Canel. / Irene Pérez / Cubadebate / Flickr / Creative Commons

As Cuban President Miguel Díaz-Canel passed the six-month mark in office this month, his administration – not surprisingly – continued to produce no surprises.  His rhetoric and policies, similar to the package of constitutional reforms now undergoing consulta popular and scheduled to be approved by referendum next February, are an extension of Raúl Castro’s tightrope walk between continuity and gradual change.

  • Speaking at the UN General Assembly in September, Díaz-Canel condemned the “selfishness and exclusion” of capitalism as the cause of poverty, instability, climate change, and other ills. He also proclaimed, “The generational change in [Cuba’s] government should not deceive the enemies of the revolution; we are continuity, not rupture.”  He welcomed the almost-friendless Venezuelan President Nicolás Maduro to join one of his biggest public appearances.  Showing his pragmatic side, however, Díaz-Canel also met in New York with U.S. technology companies and icons of U.S. capitalism – Google, Bloomberg, Microsoft, Twitter, and others – declared his hope to “computerize [Cuban] society,” and welcomed the announcement of the first U.S.-Cuban biotech joint venture.  Upon his return to Havana, he launched his own Twitter account.
  • On economic reform, Díaz-Canel has continued the same halting approach toward market socialism as did Raúl. New regulations announced in July, to be implemented in December, seemed designed to restrain the growth of the private sector rather than accelerate the reform program.  New mechanisms to ensure that cuentapropistas pay more taxes and operate within the law will dampen their growth in the short term and aggravate contradictions in current policies – for example, curbing black-market purchases of supplies without creating wholesale markets for them.

Ongoing national discussions on constitutional reforms, launched by the National Assembly in July, are compatible with Díaz-Canel’s approach to change.

  • The new document reaffirms two tenets of the Communist Party’s revolutionary platform – the party’s continued leading role as sole political representative of the Cuban nation, and a commitment to a socialist system in which state property predominates and universal social services remain free. But, importantly, the draft omits the goal in the 1976 constitution of “building a Communist society,” signaling the leadership’s recognition that private property and markets will be a permanent feature of the new Cuban model.  It reconfigures policymaking processes to increase efficiency (such as by formalizing the position of Prime Minister), increases the autonomy of local government, and separates more clearly executive and legislative functions.  An amendment allowing same-sex marriage has sparked heated public debate and given rise to an unprecedented political organizing drive by churches opposed to it.
  • The amended constitution does not significantly expand the space for private enterprise, but it provides a stronger legal foundation for the reforms that have already been implemented in various waves since 1992. The draft also strengthens protections of Cuban and foreign-owned private property and investment, providing guarantees against future expropriation.

When introducing changes over the years, the government has routinely, if not obsessively, emphasized continuity – and Díaz-Canel’s administration is proving to be no different.  The signs of change are often nuanced, whereas hardline positions, which tamp down progressives’ expectations and assuage conservatives’ anxieties, are unmistakable.  Díaz-Canel’s adherence to Raúl’s program gives him both essential political cover emphasizing continuity as well as a platform for continuing gradual change.  That formula doesn’t help him with some major challenges, such as the need to unify the country’s two currencies, that have loomed large for several years.  But Díaz-Canel’s gradualist approach – particularly if enshrined in a new constitution next year – is compatible with the view held by many Cubans that change should be evolutionary, not disruptive, even if they wish it went faster.  Washington’s curtailment of bilateral normalization is depriving the private sector of much-needed resources to drive change, but the country’s continued international outreach and expansion of internet access have given entrepreneurs a moral, if not economic, lifeline.  Cubans have often said they’ll do change “their own way,” and Díaz-Canel, with his abundance of caution, may be leading that process. 

October 31, 2018

Changing of the Guard, Cuban-Style

By William M. LeoGrande

Cuba Coat of Arms | Wikipedia Commons

Cuban Coat of Arms | Wikipedia Commons

In his speech to the closing session of Cuba’s National Assembly on February 24, Raúl Castro formally announced that he would retire at the end of his current presidential term in 2018. Even now, only a handful of “los históricios” – the founders of the revolutionary regime – remain in office, though they still dominate the Communist Party’s Political Bureau. Raúl also announced the immediate retirement of several elderly comrades-in-arms, including First Vice-President José Machado Ventura. In his place, the Assembly elected 52-year-old, Miguel Díaz-Canel, putting a leader born after the triumph of the revolution in the direct line of political succession for the first time.

But Díaz-Canel is not the first presumptive heir to appear on the Cuban political scene. He is preceded by several others, all of whom came to a bad end, falling into disgrace and obscurity as quickly as they rose. The first was “Landy” – Luis Orlando Domínguez, a rising star in his forties whose power derived from his leadership of the Grupo de Apoyo, Fidel’s personal staff. He was arrested in 1987 for embezzlement and sentenced to 20 years in prison. The next was Roberto Robaina, the charismatic pony-tailed head of the Young Communist League. In 1993, Fidel appointed “Robertico” foreign minister at the age of 36, then sacked him six years later for disloyalty. Robaina, it turned out, was a little too friendly with foreign businessmen and officials.  Next came Felipe Pérez-Roque and Carlos Lage. Pérez-Roque served as Fidel’s personal assistant for a decade before being appointed, at age 34, to succeed Robaina at the Foreign Ministry. Announcing his appointment, Granma explained that he was qualified for the job despite his age because, “He is familiar, as very few others are, with Fidel’s ideas and thoughts.” Lage served as Fidel’s economic adviser during the Special Period, becoming one of the vice-presidents of the Council of State and executive secretary to the Council of Ministers – the closest thing Cuba had to a prime minister. Pérez-Roque and Lage were both removed by Raúl in 2009 for criticizing los históricos behind their backs and being too eager to push the older generation off stage. They were, as Fidel wrote, “seduced by the honey of power.”

All these early heirs owed their ascent to their personal relationships with Fidel.  Before his illness, the elder Castro was, as we social scientists say, a “minimum winning coalition” all by himself. If Fidel decided on a policy, the rest of the leadership dutifully fell into line. Political power, then, was directly correlated with proximity to Fidel. It was no accident that the principal path to power for an aspiring young politician led through Castro’s personal staff. But the meteoric rise of Domínguez et al., denied them the political savvy only experience can provide, and imbued them with the hubris of Icarus.

Díaz-Canel appears to be an heir of a different order. An electrical engineer by training, he has spent his career rising through the ranks of the Communist Party, building a reputation for competent, pragmatic management. He served as Party first secretary in Villa Clara and Holguín provinces before moving to the national stage, becoming Minister of Higher Education and a vice-president of the Council of State. In public, his austere demeanor suggests the archetypical apparatchik, but in person he is said to be warm, personable, and modest – disdaining the prerogatives of office. While serving as first secretary in Villa Clara, he visited far-flung towns and villages by bicycle.

Díaz-Canel seems to be as different from the earlier heirs as Raúl is from Fidel. Fidel was always suspicious of institutions that might constrain his freedom of action, and never hesitated to circumvent them when it suited his purposes. Raúl, on the other hand, has been the quintessential organization man, valuing careful management, sound administrative processes, and institution-building. His proposal for term limits for all senior government and party officials represents the final institutionalization of the revolution, elevating the system over the pretensions of individuals. In 1973, Granma ran a headline, “Men Die, but the Party is Immortal.” Now, as los históricos are dying, the future of the revolution is finally being vested in the institutions they built and the successors those institutions have produced.