by Tom Arnold , March 28, 2021
In response to crippling economic stagnation, Cuba has passed regulations which hint at a turn towards a more market-driven economy. However, political control over key sectors including education and the media still lies heavily with the state. The most striking policy, which allows thousands of professions to run outside the remit of the state, will change the character of business within Cuba and may lead to increased innovation and interaction with international markets. Could Cuba’s economic liberalisation lead to further political freedoms?
Hints of Change
In 2020, the number of tourists visiting Cuba dropped by 80% and its economy accordingly shrank by 11%. Times are hard for Cubans, with queues growing outside grocery stores and businesses being forced to close. The economic downturn has been lurking for many years. In particular, Cuba has suffered from the Trump Administration’s sanctions, imposed to placate the Republican voter base by designating the Cuban government as a “sponsor of terrorism” from its support for Venezuela’s Maduro.
In response to economic hardships and US sanctions, Cuba has indicated an intention to liberalise the economy. A strong signal of change to Castroist economic ideas are demonstrated by the Díaz-Canel government’s removal of the somewhat confusing dual currency system in January 1, 2021, previously established in 1994 after the loss of Soviet subsidies. This major change, which led to a surge in inflation and devaluation of the peso, had costly implications for Cubans by placing downward pressure on the purchasing power of salaries and pensions.
A Landmark Shift in Business Privatisation
The currency change is just one part in a series of major reforms. On 6th February, Labour Minister Marta Elena Feito Cabrera stated that the government would allow private participation in more than 2000 professions; a stark contrast to the previous limit of 127 professions. The expansion in private participation means that previously illegal enterprises can now function openly.
It is hoped that this will unleash a wave of innovation in a wide range of sectors. This could work in tandem with recovery from the pandemic. For instance, there has been encouraging news regarding Cuba’s own “Soberana 2” Covid-19 vaccine: The government believes that it can administer this vaccine to the whole of Cuba’s population by the end of the year and export the vaccine to Latin America as a source of income.
However, the new private business law does have many caveats: private enterprises lack certain resources and access to supply chains that state-owned enterprises possess. For instance, the government maintains control of all large industries and wholesale shops and monopolises 124 professions, thereby restricting options for obtaining supplies. In the short-term, the large restructuring of the economy will inevitably cause painful effects with bankruptcies and unemployment rising. Yet, in the long-term, opening up may yield positive benefits through increased opportunities for entrepreneurs. The sectors included within the 124 professions remaining under state remit (including law enforcement, defence, the media, education) suggest that Cuba is looking to follow the model of China or Vietnam through the introduction of capitalist economic policies with the maintenance of tight political control.
Could Improved Relations with the US Spur Political Change in Cuba?
One follow-on effect of Cuba’s economic liberalisation could be a strengthening of relations with the Biden administration. Indeed, the recent theme of economic policy changes would require more foreign investments and capital, for which improved relations with the US would be important.
Strengthened ties could have political liberalisation effects in Cuba. The Obama Administration’s relationship with Cuba was emblematic of this trend: Obama’s approach of normalising relations with Cuba, which was designed to “create economic opportunities for the Cuban people”, increased US influence in other spheres of Cuban society. Citizens began to criticise issues such as access to medical care, education, unemployment and domestic media sources while religious leaders and artists started to articulate positions contrary to the official narrative. This suggested that civil society was for the first time open to vocally opposing the political system, despite the government responding with detentions of some dissidents and censorship of blog posts . A similar phenomenon is possible if Havana’s new economic policies leads to a strengthening of economic ties with the Biden Administration.
Is a new Cuba Realistic?
Cuba is ripe for change. The push and pull of reform efforts in recent years suggest disputes between traditionalists and more progressive, youthful factions. In April, Raúl Castro will step down as leader of the Communist party which will see the end of the Castro name in Cuban politics for the first time in over 60 years. This has major symbolic significance: Fidel Castro established the political and economic systems that endure today, such as the characteristics of a one-party state with complete control of the media. Combined with the election of Biden, who will likely take a more lenient approach to Cuba in comparison to Trump, and an array of free market policies in the midst of an economic crisis, it seems a realistic possibility that Cuba could undergo major structural change in the coming years.
