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 AU-SSRC Implications of Normalization: Scholarly Perspectives on U.S.-Cuban Relations April 2015

 TED A. HENKEN AND GABRIEL VIGNOLI

Original here: ENTERPRISING CUBA

After cautiously consolidating his new government once becoming president in 2008, Raúl Castro made a series of unprecedented moves in late 2010 to encourage the reemergence of private self-employment (known as trabajo por cuenta propia or cuentapropismo in Cuba)—explicitly ending Cuba’s previous policy under Fidel Castro that, according to Raúl’s own bold assessment, had “stigmatized” and even “demonized” it.

Subsequently, both the number of legally allowed private occupations (up from 178 to 201) and of Cubans licensed to practice them have grown significantly, with the island seeing a veritable “boom” in entrepreneurial activity between 2011 and 2015. Indeed, in that time, the number of Cuba’s cuentapropistas (self-employed workers or micro-entrepreneurs) has more than tripled, growing from less than 150,000 in 2010 to nearly half a million by early 2015. Additionally, 498 new non-agricultural cooperatives have been authorized to operate on the island between 2013 and 2014, with another 300 under review at the start of 2015.

Moreover, on December 17, 2014, as part of a momentous diplomatic thaw between Washington and Havana, the Obama Administration announced a new policy of engagement targeted explicitly at “empowering” Cuba’s new class of private entrepreneurs by allowing U.S. companies to “support the emerging Cuban private sector,” in Obama’s historic words.

How might Washington’s new policy of “empowerment through engagement” and the larger bilateral process toward normalization impact the island’s emerging entrepreneurs as well as the emergent “non-state sector” of its economy? While there are many potential economic benefits of concerted U.S. private sector engagement with Cuba’s cuentapropistas, the monopolistic Cuban government poses significant challenges to those who want to do business on the island, reach out to island entrepreneurs, and hire Cuban workers—as many European and Canadian companies can already attest. How will this work in practice, who will be the likely winners and losers (both in Cuba and abroad), and how can the Cuban government deal effectively with the growth in socioeconomic inequality that will inevitably follow an expanded private sector?

Direct U.S. engagement with Cuban entrepreneurs through freer travel and more remittances; access to banking and other financial services; increased exports of badly needed inputs to island cuentapropistas; the import of private or cooperatively produced Cuban goods and services to the U.S.; and technology and know-how transfer are all encouraging elements of Obama’s new Cuba policy. These changes have the potential to both “empower” individual entrepreneurs—the stated goal of the U.S. policy shift—and incentivize the initial, if exceedingly cautious, private sector reforms already begun by the Cuban government.

However, to increase Cuba’s economic independence and overall prosperity, the U.S. should focus on addressing the specific economic needs of Cuban entrepreneurs, rather than framing its engagement as a way to effect “regime change” by other means. That is, given the need to build bilateral diplomatic trust after more than fifty years of mutual antagonism, Washington should eschew any “Trojan horse” approaches to entrepreneurial engagement that aim to empower the Cuban people by undermining the government. Such an antagonistic and divisive approach has not worked in the past and could derail Obama’s promising effort to encourage the incipient pro-market reforms already underway.

At the same time, a U.S. policy based on empowerment through economic engagement—even when motivated by the best and most transparent of intentions—will be a dead letter if the U.S. Congress insists on clinging to the outdated and counterproductive embargo and the Cuban government stubbornly refuses to ease its own auto-bloqueo (or “internal embargo”) against island entrepreneurs. As it implements a self-described economic “updating of socialism,” will Cuba continue to hold fast to its monopolistic “command and control” economic model—one that “ya no funciona ni para nosotros” (“no longer works even for us”), as Fidel Castro himself famously admitted in a rare moment of economic candor in 2010?

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