Cuban economy

Weekend Reading: Terrorism, Papal Visit and The Economist's Special Report on Cuba

Looking back on the past year in which change has finally and visibly come to the island of Cuba, and on the cusp of Pope Benedict XVI's visit to Cuba, the second papal visit to the island in 15 years, it seems fitting to highlight for readers a few items that offer crucial, and even detailed perspective on where Cuba has been, is going, and how the United States continues to fumble as if blindfolded on Cuba.  This week's issue of The Economist includes a special 10-page report (online here) that charts how change finally, if haltingly, came to Cuba this year, where it falls short and why, and what Cuba could look like in 2015.  The best thing about this special report is that a Cuba neophyte can pick up this issue and having read the complete article, actually come out reasonably informed about Cuba, its leaders, its people's daily struggles, the political heft and the changing course of Cuban exiles and emigrants in America, and what to make of an embargo that few Americans understand is still firmly in place after fifty years - let alone why.

For a taste of the "Wait, what?" moment that comes with the realization that the Cold War didn't actually end between the United States and Cuba when it ended everywhere else, Brigadier General John Adams (Ret.) and David Jones, writing in The Hill this week, urge the State Department to "get real" on keeping Cuba on its state sponsors of terrorism list. 

"Today, four countries are on the list: Iran, Syria, Sudan and … Cuba. Seriously, Cuba?  Countries not on the State Sponsors of Terrorism list include: Yemen, Lebanon, Pakistan, North Korea (the Department of State removed North Korea from the list in 2008) and Libya (removed from the list in 2006). . . "

Point by point, Adams and Jones poke huge holes in the State Department's case for keeping Cuba on the list , though, they hardly need to make their case when this is what the State Department's evidence looks like:

The 2008 U.S. State Country Report on Terrorism stated that Cuba “no longer actively supports armed struggles in Latin America and other parts of the world.” The same report further states, “The United States has no evidence of terrorist-related money laundering or terrorist financing activities in Cuba.”

The 2009 report stated: “There was no evidence of direct financial support for terrorist organizations by Cuba in 2009.” The 2010 State Department report stated: “The Cuban government and official media publicly condemned acts of terrorism by al-Qa’ida and affiliates.”

So, if Cuba doesn't appear to finance, plot or even support terrorism, surely there is some reason why they're on the list?

A Clash of Generations: U.S. 50 Year Old Embargo Meets Scarabeo 9

By Arturo Lopez-Levy and Jonathan Benjamin-Alvarado

Scarabeo 9, the semi-submersible oil rig contracted by the Spanish company Repsol completed its journey from Singapore to Cuba. Repsol’s rig will explore Cuba’s exclusive economic zone, an area in the Gulf of Mexico of about 112000 square kilometers. Oil exploration in the zone is being contracted to several foreign companies such as Venezuela’s PDVSA, Malaysia’s Petronas, and Vietnamese PetroVietnam.  Cuba’s Ministry of Basic Industry estimates the oil reserves in the zone are between 5 billion to 9 billion barrels of oil. CNN GPS host Fareed Zakaria referred to Cuba’s total oil potential as between 5 billion and 20 billion barrels of oil. 

The start of the oil exploration will not derail Raul Castro’s reform program. At a minimum, oil will not come from the offshore wells soon enough, while the reforms are needed immediately. The Cuban government needs to create jobs for the million and half workers that are supposed to leave the government sector in the next two years as part of the reforms program proclaimed last April by the Cuban Communist Party in its VI Congress. It must also alleviate critical situations of poverty in the five most eastern provinces, where unrest has been rising. With or without oil, the Cuban economy sorely needs to develop an environment in which businesses and individuals feel confident to invest.

¿A dónde vamos?- The Sixth Party Congress

Photo courtesy of Flickr/olivcris,

It’s finally here. Cuba’s historic Sixth Party Congress begins tomorrow, and with it, the official embrace of a radically new economic model that has gradually been unveiled by President Raul Castro since taking power from brother Fidel back in 2006.

To help shed some light in what is driving this VI Party Congress, its implications for Cuba’s future, and that of U.S.-Cuba relations, lecturer and PhD Candidate at the Josef Korbel School of International Studies at the University of Denver, and frequent Havana Note contributor, Arturo Lopez-Levy has authored an excellent new report that addresses these questions and much more. The report will be made public at the New America Foundation’s U.S-Cuba Policy Initiative website next week, but in the meantime we wanted to provide you with a few excerpts here.

On President Raul Castro’s economic reforms:

“Most of these ideas about economic reform are in their initial stages. It is not yet clear just how mixed the new economic model will be and whether Raul Castro’s government will be able to efficiently implement its adjustment plan. There are obviously many impediments and flaws to the process, the most important of which is the lack of funds to ameliorate transition costs and speed up the implementation of the new policies. Equally important is the Cuban leadership's preference for gradualism. Shaped largely by what is seen as Russia's horrific experience with a shock-therapy approach to economic reform, this predilection for slow change has seemingly rendered Cuban leaders oblivious to the problems associated with excessive gradualism.

A great challenge for the reform process will be addressing the fact that workers in Cuba’s social services, such as education and health, have already been disadvantaged by the development of Cuban tourism and other industries with access to hard currency, or CUC. The reforms are obviously generating winners and losers and it is difficult to determine what kinds of policies the government will use to compensate the latter. There is no evidence that in the coming years, even if the economy prospers, health and education professionals will share in rising wages or improvements to living standards. The same can be said about the reforms' impact on the most vulnerable and poor segments of the Cuban population.”

This Time is Different for Cuba’s Economic Reform

A question many Cuba observers ask is whether the current wave of economic reform is a mere repetition of a cycle in which the Castro government shows signs of openness for a while but it is ready to close them as soon as it finds a way to survive without them. This skepticism is legitimate because several times in the post 1959 history of Cuba, Fidel Castro’s government opened spaces to market practices in the middle of a crisis, only to close them as soon as the situation improved.  In the 1990’s, this was the case when originally many Cubans attempted to create a vibrant private sector but their hopes were crushed by asphyxiating taxes, regulations and a hostile attitude toward the market.

For decades, any political debate about economic reforms in Cuba was biased in favor of the communist experiments. If someone advocated anti-market policies, but which would lead to economic disaster, he or she might be reprimanded for lack of realism but the leaders would look with benevolence to his mistakes since they were the result of some revolutionary fervor. On the contrary, if one advocated pro-market reforms, he could have been denounced as a follower of a capitalist deviation (I personally know the experience) and therefore in need of ideological re-education.

In Cuba, Fidel Castro is never a force to underestimate. The historic leader of the revolution is stubborn and there are things he will only accept with bitterness and pain. Nobody can guarantee that he cannot protest or lash out against some of the current changes.

Will Raul Castro's New Cuban Economy Embrace Sustainable Growth?

If you’ve walked, bussed or driven around Washington, DC much over the last two months you have surely noticed the sudden appearance of bike share stations, seemingly around every corner.  These stations can be quickly assembled and dropped in place, or even moved to another location in the city, depending on the seasonal traffic. This is part of a DC and Arlington County initiative - the largest of its kind in the nation - that has so far put 1,100 shiny new red bicycles on the streets in our region.  This is the sort of initiative that’s really taken off in some of the world’s most interesting urban oases, like Paris and Montreal, where it’s become trendy to leave the car at home.  Given the serious infrastructure limitations Cuba’s capital faces, particularly when U.S. travelers finally reach the island, why not Havana?

That subject came up this week when I got the chance to have a quick visit with Miguel Coyula, an architect and planner who dedicates his efforts to building sustainable communities, who was in town this week for meetings with the Center for Democracy in the Americas.  Miguel is constantly thinking about things like how much energy Havana’s outdated leaky water system wastes, how to invest locals in the health of their buildings (when they only own the apartments inside), blocks and transportation, and how to bring more American specialists in green technology and design to share their knowledge and experiences with Cuban architects (and perhaps avoid the building of more beautiful glass buildings in Havana that end up being better green houses than office buildings).

The VI Cuban Communist Party Congress: The Time to Engage is Now.

Barack Obama-Raul Castro

Giving Hugo Chavez the second copy of the proposal of a new economic model for Cuba (The first was given to Fidel Castro); President Raul Castro announced two important events that will make history in Cuba during 2011. First, Raul called the VI Congress of the Cuban Communist Party (PCC) in April 2011 to discuss a new economic and social model; second, he announced the plan to have a National Conference of the PCC by the end of the next year to discuss internal party issues and the renewal of its leadership.

These two events would most likely conclude the long succession from Fidel Castro to his brother that began in 2006 after the older Castro got sick. The call of the two meetings as parallel tracks makes sense from the view of the Cuban Communist leaders. In the first case, there is a consensus on the need to introduce major economic reforms in Cuba. The PCC is facing the challenge of the end of Fidel Castro’s charisma as one of the pillars of its rule. As result, it is trying to build up its legitimacy through economic liberalization, increased openness and growth.

Raul Castro defined the Congress as “of all the members and all the people which will participate in the main decisions of the revolution”. But this debate is about “one unique issue”: the “updating” of the Cuban socialist model, the solution of the economic problems, “the economic battle” from which the “revolution’s preservation depends”. All these code words confirm one thing, the population would have the chance to participate actively and change the margins and shape of the economic and social model.

Fidel Castro Adds 2+2 and Gets 5

Can someone out there in cyberspace please explain to me (as if I were a little child) the logic behind Fidel’s most recent statement last Friday?  According to him, although he did in fact say, “The Cuban model doesn’t even work for us anymore,” when the Atlantic’s intrepid journalist Jeffrey Goldberg asked if the “Cuban model” should still be exported abroad, what he REALLY meant was that the capitalist model doesn’t work.

I've heard a few theories that attempt to explain his first statement - some quite plausible, others more humorous.  Was it an illumination provoked by the dolphins of the Aquarium, involuntary cynicism, a miracle of the Virgin of Charity, a new political transition strategy that makes space for reforms, or a burst of sincerity.  You can go here to vote for your favorite theory or add your own.  But no one has yet explained to my satisfaction how saying that Cuban socialism doesn’t work was meant to convey that capitalism is bankrupt.

In other words, how does 2 + 2 = 5?

Goldberg offers his own succinct explanation here, which ends with the words: “I’m not sure how this statement –accurately quoted, according to Fidel– could mean anything other than what it means.”  To this, I say – Amen, brotha!  You can rule a country, even invent your own rules of economix, but not invent your system of logic.

Seismic Shift Ahead for Cuban Labor Force?

Photo available at

Ever since Raul Castro stepped in for his brother Fidel more than four years ago, and officially was elected President by the Cuban National Assembly 30 months ago, he has repeatedly highlighted the shortcomings of the current Cuban economic model and promised to reform it.  First he announced a few mainly cosmetic, but symbolically meaningful changes like authorizing Cubans to set up their own cell phone accounts, ending an unwritten policy that kept most Cubans from patronizing tourist facilities occupied by foreigners, and allowing Cubans to purchase high-energy consuming electronics like toasters. 

He then followed those measures with a long, drawn out reform of the country’s agriculture sector in hopes of reducing the country’s foreign grocery bill (Cuba reduced purchases due to a liquidity crunch, but the reforms have yet to reliably increase domestic crop production appreciably), including by giving Cubans land tracts in “usufruct” to farm and sell both to the state and in their own communities.  One reason the reforms have sputtered was the delay of associated reforms, such as last month’s announcement that Cuban farmers could now purchase their supplies and equipment in stores, rather than wait (and wait) for an unreliable supply chain to get to them.  That could certainly help, especially if the supplies are actually available in the stores.

From the outside, and from the inside too, the reforms were interminably long in coming and short on impact.  They signaled things were heading in a more constructive direction, but simply didn’t reach enough people.  But as Marc Frank reports from Havana, a possibly “seismic shift” now appears to be on its way.