Cuba: Time for New Thinking  

Guest Column

March 16, 2019

The message from a trip that we just took to Havana is that revolutionary Cuba is at a tipping point, second only to the economic collapse that occurred in Cuba after the Soviet Union ended its support in 1990. Then, Cuba’s GDP dropped 35 percent in three years. That led the Castro regime to adopt some reforms (termed a “necessary evil”), which were later walked back as economic conditions improved.

Today, like then, experts across the board recognize that if Cuba doesn’t adopt genuine economic reforms, the results will be disastrous. Cuba suffers from a huge bureaucracy that sees, as one speaker put it, “no solution for which it cannot find a problem.” All decisions — wages, prices, housing, you name it — are made through central planning. Attempts to open the economy to foreign investment are stymied by an opaque legal framework, inconsistent enforcement, and the government’s fear of losing control. There’s no “Cuban Deng Xiaoping” yet visible who can lead the people into the uncertainties of an open economy, let alone democracy. 
Meanwhile, day-to-day life for Cubans is getting harder. Wages are stagnant at $30 a month; 80 percent of food is imported, and the average citizen has trouble getting eggs, chicken, and other basics, while the best imports are snapped up by the many new hotels and restaurants catering to tourists. Agriculture is in such bad shape that Cuba now must import (!) sugar and coffee. There is no banking system to support entrepreneurs and severe restrictions on creating and running your own company.

With little access to capital, Cuba’s macro economic outlook is also bleak. The key sources of hard currency are tourism and $5 billion in remittances by Cuban family members living in the U.S. (When Obama met Raul Castro in Havana three years ago, Raul insisted that the U.S. “give back Guantanamo.” Obama jokingly replied, “When you give back Miami.”) Neither Russia nor China are offering bailouts. And now with the Venezuela crisis, Cuba may lose its source of oil.
All of this creates pressure. Will the government act? No one knows, but, for the first time since 1959, Cuba is ruled by someone other than a Castro. Although President Miguel Díaz-Canel is a Communist Party loyalist, his relative youth (58) and his need to prove himself as Cuba’s new leader make some experts hopeful that he might try to adopt much needed reforms.

Across Havana, there are signs of a restive younger generation, one impatient for improvement. Cuba now has a “private” economy which employs 600,000, plus another half-million working in “cooperatives.” But, reflecting the heavy hand of Cuba’s central planners, these new self-employed workers are restricted to only one of 210 fields! What we heard during our trip is that it’s time to go much further; Cuba’s universities don’t even offer a business curriculum!

The government is under particular pressure to encourage foreign investment. Cuban law currently limits foreign ownership of joint ventures to 51/49 and totally bans foreign ownership of land. Land leases are allowed only for 25 years; when Vietnam reformed, it allowed 50 years. Want to build a hotel? You put up 100 percent of the hard currency, and the Cuban government owns 51 percent of what you build.

Central to the debate: How do investors trust the government not to renationalize assets as they’ve done before? How much support really exists for opening up the Cuban economy? Yes, there is an emerging self-confident and impressive group of younger Cubans, particularly in Havana. But there is also real anxiety about reform from the half-million-member Communist Party and other Cubans who are understandably reluctant to risk losing hard-earned social benefits. These include safe streets (in part through strict restrictions on guns and drugs); a very good (but declining) education and healthcare system; and genuine progress in integration and social mobility for Cuba’s diverse races — from which the U.S. could learn a thing or two.
U.S. policy toward Cuba is the 800-pound gorilla in the room. We have isolated Cuba and stopped U.S. engagement through a 60-year long embargo. Is this justified any longer, particularly when the U.S. trades and deals with many countries whose behavior is far worse? After all these decades, easing up U.S. pressure might turn younger Cubans into supporters of better U.S.-Cuban relations and help create conditions for reform. 

But it appears President Trump wants to increase the pressure on Havana. The president has not just rolled back Obama’s cautious opening to Cuba; he’s reversed it. Last week, the White House applied new restrictions under the 1996 Helms-Burton Act’s Title III that now lets Americans — including Cubans who have since become U.S. citizens — sue companies that "traffic" in property confiscated by Cuba after 1959.

That may go down well with some Cuban-Americans who are rightly disgusted with how badly Cuba has been mismanaged. But what we heard during our visit is that it makes it less likely that current Cuban leaders will experiment with reform since they need to avoid being perceived as “buckling under” to the big brother to the north.

We met warm, friendly people everywhere in Havana. We can’t do the heavy lifting that the Cuban government must do to replace its socialist “paradise” with something that actually works, but we could at least move beyond old thinking by old people in both countries and let the younger generation chart a new path.

Karen Puschel Segal and Jack Segal co-chair the International Affairs Forum (IAF, which at 6pm, March 21 at Milliken Auditorium in NMC’s Dennos Museum, will host Dr. Samuel Kling to discuss “Reinventing Our Cities” for 21st Century technology. The trip to Havana was organized by Ambassador Charles Shapiro of the World Affairs Council in Atlanta, who will discuss Cuba and Venezuela at the IAF’s May 16 event.