Cuba: Change in the Wind

Three American University professors recently traveled to Cuba for research and discussions on Cuba’s reform process – called “Updating Socialism” – and the island’s relations with the United States.  Today’s entry looks at the economic changes.

Photo by: Globovisión | Flickr | Creative Commons

Photo by: Globovisión | Flickr | Creative Commons

In offices, shops and on the street in Havana, “change” seems to be one of the most commonly used words.  Billboards proclaim “The changes in Cuba are for more socialism” and “Updating socialism is the answer.”  But the words “reform” and – in some conversations – “privatization” pop up with significant frequency.  Party members previously reluctant to talk about change now speak of introducing “elements of capitalism” to make Cuba a “mixed economy” patterned closely after the “Vietnam model,” with its economic loosening but one-party rule.  Previous reforms have brought better, if sometimes expensive, food to many Cuban dinner tables, but the strong consensus in and outside the party is that a lot more needs to be done.

  • The law-decree on “non-agricultural cooperatives” provides a politically correct way ahead for the formation of small and medium private enterprises.  Cuentapropistas were given a prominent place in the May Day parade, and some are being nominated for office on the Communist Party slate.
  • The government is making another run at tearing down the barriers between hard-currency and peso purchases, with an eye to unifying the currency in the future.  Price tags at at least one major Havana store list prices in both convertible and national currency, at a 23-to-one conversion rate.
  • The law already allows Cubans to hire workers – a right previously given only to the state – and a draft labor law will further legalize private workers’ activities and integrate them into the economy.
  • Some 200-plus state enterprises are being put on a sink-or-swim program in which new management selected by the workers will be given a year to transform the firms into businesses closely resembling private cooperatives.
  • In January, the National Assembly will take up amendments to foreign investment laws.  Under consideration are direct foreign sales to non-state cooperatives and the direct hiring, firing, and paying of Cuban workers by foreign companies.
  • The travel reform law that goes into effect on January 14, ending the necessity for an exit visa and removing restraints on most Cubans from obtaining a passport, will also stimulate interaction with foreign countries.

The macro situation is still a mess, and the reforms have a long way to go to attain even the level of Vietnam’s prosperity.  Cuban stores sell Vietnamese cookies, not vice versa.  As the rhetoric indicates, the government – long expert at managing popular expectations – continues to emphasize continuity as the changes proceed.  But while no one is expecting a fast shift to capitalism, many middle-aged and elderly Cubans have a renewed sense of hope that life ahead will be better, which has political benefits and risks for the government.  One thing for sure is that the socialism that is being “updated” is a far cry from the communism that Cuba attempted in the 60s, 70s and 80s.

Peru: Humala’s Difficult Balancing Act

Photo: Peruvian mine | Mihai (clandestino_20) | Flickr | Creative Commons

Peru’s new cabinet installed in July – President Ollanta Humala’s third since his inauguration a year earlier – faces the daunting task of sustaining national development while increasing social enfranchisement.  The reshuffle came amid loud criticism of a crackdown, which killed five people, on protests against the proposed $5 billion Conga mining project in Cajamarca.  The incident underscored the difficulty for Humala as he endeavors to implement a dual strategy of capitalizing on the growth potential of Peru’s mining industry – primarily gold and copper (60 percent of exports) – while respecting community concerns about the environmental consequences of extraction.  Mining wealth is needed to improve the lives of ordinary people –28 percent of Peruvians live in poverty – but unlike preceding governments this administration has committed itself to consultation with residents of localities that will be affected directly.    The new prime minister has announced suspension of the Conga project until the U.S. mining company involved provides better environmental guarantees.

Humala’s popularity has plummeted.  Despite new laws increasing Peru’s mining revenue, the creation of a new Ministry of Social Inclusion, and a new Prior Consultation Law, indigenous protesters feel betrayed by Humala.  They accuse him of continuing the aggressive extractive policies of his predecessor, Alán García, and insist his administration has not given adequate attention to concerns of local communities on issues such as the integrity of the water supply in zones affected by the mining ventures.  Recent signs of a resurgence in violence by the Sendero Luminoso (Shining Path) guerrillas and of setbacks in efforts to curtail the influence of the narcotics trade are also eroding Humala’s support.

Humala narrowly won the presidency as a center-left candidate, committed to creating a framework for the more equitable distribution of the wealth generated by Peru’s natural resources.  Now, some of his political allies say he has courted foreign investment for the mining sector without adequate consultation, and further protests seem likely.  Humala’s challenge is not unlike that of other countries, including Bolivia and Ecuador, trying to balance between these competing interests.  His success or failure will have an impact beyond Peru’s borders, as South American countries dependent on commodity exports struggle to walk the tightrope between satisfying foreign investors and domestic electorates.