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Sunday, November 27, 2016

Castro is Dead but Politics Still Reign

by Roy C. Smith


Fidel is dead at 90; Raul still rules. When will things really start to change in Cuba?

Fidel Castro has been a world celebrity since leading his revolutionary army into the City of Havana in 1959 and subsequently ruling the country as a Communist state to the great annoyance of the United States. Under a mantle of “Socialismo,” Fidel improved public education and health care under a 30-year satellite arrangement with the Soviet Union, but left Cuba, once the jewel of the Caribbean, as a totalitarian economic ruin.

Fidel became ill a few years ago and turned power over to his brother, Raul, now 85, who is the less flamboyant and more practical of the two. After the USSR voted itself out of business in 1991, Cuba was left on its own and nearly starved until rescued a second time by another socialist country – Venezuela – which exchanged valuable oil subsidies for the services of Cuban doctors. Now Venezuela is on the verge of collapse, and Raul knows that any future that the Castro’s Cuba may have will depend on economic reforms achieved through a vibrant private sector.

So, Raul undertook several economic reforms even before the announcement of “normalization” of relations by Barack Obama and Raul Castro in December 2014. But the reforms were cautious and limited to the retail sector. No big businesses from abroad would be invited in (with a few exceptions for non-US companies in the hotel and port-management businesses).

Since then two years have passed and not much has happened. 300,000 more American tourists have visited the island, and remittances from Cubans living abroad have increased significantly, but the “Embargo” of US-Cuban commercial activity, constituted by a series of legislative actions beginning in the 1960s, remains in place and Cuba has done little to reform its economic practices to attract the transformational foreign direct investment that it badly needs.

Raul is afraid that if he moves too fast to free things up, Socialismo will be swept away just as Communism was in Russia, Eastern Europe, and China. Indeed, the main argument in the US for repealing the embargo is to effect regime change through economic means that political isolation could not accomplish.

There are those in Cuba who would speed things up, particularly in the agricultural sector (Cuba imports 70% of its food, despite large quantities of arable but uncultivated land), but in industrial sectors also. But as long as Raul breathes, even after he is replaced by a successor in 2018, he will determine the pace of change. Presently it is pretty slow.

And there are those in America who believe Raul is as ruthless and brutal a dictator as Fidel, and resist doing anything that will ease the economic pressure on Cuba that the embargo provides. They say that the regime change they are seeking will occur because of the embargo, and the Castro’s should not be rewarded by repealing it. The Republican majority in Congress has favored retaining the embargo, insisting that it cannot be lifted until Cuba becomes more democratic and agrees to settle claims for property seized after the revolution. Reince Priebus, Mr. Trump’s chief of staff, said after Fidel’s death was reporte, that the President-elect was inclined to reverse Mr. Obama’s Cuban initiatives unless more progress was seen on the Cuban side.

As we are becoming more accustomed to Mr. Trump, we are learning that everything is negotiable. The Deal King has simply announced his opening position, which he expects will lead to some give and take, followed by an announcement of an improved agreement.

But, maybe things will move along anyway. Both sides are under considerable pressure from public opinion to put the past behind and open things up. Cuban can do some of this by encouraging major investments by European or Asian companies not subject to the embargo – there is much to do on many fronts. If this happens, US companies will lobby fiercely for repeal of the embargo so they don’t lose out.

Still the Cuban market is small, Cuba has no money to modernize it, and investors still see plenty of political risk. In the long run, it is hard to know whether the new Cuba will look like Singapore, another island entrepot economy servicing its neighbors, or Puerto Rico, an economy that has never lived up to its golden potential when becoming a US territory (entitled to citizenship) at the same time that Cuba became independent in 1902.

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