When Cuba held its Sixth Communist Party Congress in April—the first since 1997—the rituals felt familiar. It kicked off with a mass military parade through the streets of Havana and closed with a rousing rendition of the “Internationale.” Raúl Castro, who in the past few years has assumed the reins of power from his ailing brother Fidel, praised the revolution and promised he would never permit the return of capitalism. Politics as usual? Yes and no. Despite appearances, major—if gradual—changes are afoot on the island.
Cuba is undergoing a kind of silent transition. A series of economic reforms are shrinking the size of the state-run economy and making room for a greatly expanded private sector. The socialist dream isn’t over, but it’s been sharply redrawn. That Cuba is becoming a mixed economy is no longer under debate. What is under debate is what exactly that new economy will look like, how widely the benefits will be spread and why the reforms are proceeding so slowly.
One year ago Raúl Castro announced twin initiatives: mass layoffs to relieve the state’s budget and a long list of newly approved categories in which people can start small private businesses. After a draft version of the reforms was released, massive assemblies were held throughout the country, organized in places of employment or neighborhood associations. In April the final draft of the reform package was passed in the Communist Party Congress.
Since the policy began, the government has granted some 330,000 licenses, and for the first time since the 1960s the newly self-employed (known as cuentapropistas) are allowed to hire other Cubans, not just family members. The government’s stated goal is to have nearly half the populace working in the private sector by 2015. For a country where nearly 90 percent of the economy was once in state hands, that will be a major about-face.
Several weeks ago a new law permitted the sale of cars, with some restrictions. Additional proposals on the table would permit the sale of houses, establish a system of government-provided credit and eventually eliminate the food rationing system. These are all staggering announcements in the Cuban context.
But the biggest change of all may be how the role of the state is reconceptualized. Cuba’s leaders now argue that the state can no longer afford the “paternalism” of the country’s socialist heyday. They imply that citizens are a burden on the state, enjoying costly social services and goods at negligible prices. In his speeches, Raúl has downplayed the old themes of Cuba’s heroic struggle against imperialism and its bright socialist future. The new mantra stresses efficiency, productivity, the need to work. And so, unable to maintain its “bloated” payrolls, the state has begun shedding workers. Although Raúl assured Cubans that no one would be “abandoned to their fate,” he also sternly warned that the idea of Cuba as “the only country in the world where you can live without working must be erased forever.”
Cuba has experimented with liberal economic reforms in the past, most notably in the 1990s. Battered by the fall of the Soviet Union, the government encouraged private foreign investment and granted licenses for small private businesses such as family restaurants and bike repair shops. But these concessions were viewed as a necessary evil. By the end of the decade, as the economy stabilized, they were scaled back. The difference now is that the leadership actually embraces the notion of a robust private sector. According to Omar Everleny, a professor at the Center for the Study of the Cuban Economy at the University of Havana, this time the reforms won’t be temporary. “When you read the Guidelines and Raúl’s speeches, you realize he’s determined to change things. At the same time, I also realize he’s committed to the past, and that’s the complicated part—his commitment to history,” he said. “But he’s made the decision not to turn back.”
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Despite all the fanfare, the reforms have proceeded slowly. In fact, the changes are not always immediately perceptible to ordinary Cubans. When I asked a friend what she thought of the economic reforms, she rolled her eyes. “When I see them, I’ll let you know,” she said. Her response was typical and reveals one of the state’s major challenges: how to get an exhausted, often pessimistic citizenry on board. It’s not that Cubans necessarily oppose the reforms, but many express legitimate concerns about when and how much they will benefit.
Since the fall of the USSR, which had subsidized the Cuban economy, much of the population has been consuming at subsistence level. “I’m not living; I’m just surviving,” is a frequent refrain. Those who can’t tap into the tourist sector and don’t receive remittances from family members abroad are weary of the daily struggle to make ends meet on minimal state salaries.
For many Cubans, the long-term benefits of the economic reforms seem distant. But the impact of rising food prices and diminishing rations is immediate. During my visit to the island in May, new signs outside shops in Havana announced prices for the so-called “liberated” products—that is, foods previously available at nominal cost on the ration book. Considering that many families were already spending nearly 80 percent of their salaries on food, it’s hard to imagine them tightening their belts even further.
“The reforms are facing a huge challenge,” said Roberto Veiga González, a progressive Catholic intellectual and editor of Espacio Laical, a lively and sophisticated journal published by the Archdiocese of Havana. Veiga explained that the leadership is constrained by current conditions—the global recession, constant conflict with Washington—and consequently wants to implement reforms gradually. Veiga himself approves of a gradual transition, describing it as the most “responsible” decision. “But the populace can’t take it anymore. They need those reforms now. Immediately. And only insofar as they see those reforms benefiting them will they support the changes and help the country transform. How can those two realities be reconciled?”
The slow pace of the reforms partly reflects the fact that the state has had to undertake a delicate balancing act as it negotiates the economic transition with different sectors. Among poorer Cubans, anxiety about the reforms is palpable. Although the leadership has stated over and over that despite the planned layoffs and diminished social services no one will be left behind, Everleny admits, “there will be winners and losers.” During my visit I noticed more indigents on Havana’s streets than in the past. Their number is minimal compared with the misery one finds in other Latin American capitals, but the specter of the dispossessed is something of a shock in Cuba and serves as a stark warning of the potential social costs of privatization.
Cuba’s professional class is also anxious. The new small-business licenses in the cities are largely artisanal and service-oriented. How, then, will young professionals—doctors, engineers, graphic designers, educators—enter the expanding private sector without de-skilling? One friend was toying with the idea of opening a consultancy to advise fledgling cuentapropistas on marketing strategies. Considering all the first-time business owners in the making, it wasn’t a bad idea. But under the current provisions, it wouldn’t be legal.
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Even for those best positioned to take advantage of the new opportunities, many questions remain. How sustainable will the new businesses be? Without access to credit or wholesale markets, most new entrepreneurs have been taking the path of least resistance. As a result, small businesses requiring almost no start-up capital have proliferated in Havana, especially pirated-DVD stands and tiny home-front eateries selling sandwiches, coffee and soda. The ensuing competition can be fierce. A friend told me about one sandwich kiosk that opened in his neighborhood, only to be quickly trumped by another across the street, which offered better food, a more varied menu and twenty-four-hour service. “Now how’s the first guy going to survive?” he asked.
Many probably won’t. In fact, 25 percent of the new cuentapropista licenses initially granted were relinquished within a few months, defeated by high taxes, low profits and, in most cases, no savings to weather the inevitable period of adjustment any new business requires. The government is studying ways to tweak the reforms, for example by giving new entrepreneurs a six-month tax exemption, lowering tax rates on certain forms of revenue or extending small loans. Still, it’s clear that some who left state jobs to try their hand at private businesses will soon seek to be reincorporated into government payrolls.
Yet state employment is shrinking, not growing. The only growth areas are the two sectors the government has designated as strategically important: construction and agriculture. Persuading Cuba’s highly educated population to accept jobs in these sectors won’t be easy, but the government is trying to change attitudes. During my visit, the University of Havana lowered the number of spots available for humanities majors and raised the number for agricultural engineers. The same week, the state-run newspaper Juventud Rebelde featured an interview with a young dairy and cattle farmer. He assured readers that the quality of life in the countryside was much higher than they thought: “I have everything a young person living in a city would have. A color TV, DVD player, electric fans…. Today’s farmers aren’t like those from half a century ago.”
The Cuban economy has been struggling for years. Actually, with some ups and downs, for decades. So why is the transformation happening now? There are external reasons, such as the global economic crisis and the costly hurricane damage of 2008. But mostly the reforms are the result of Raúl Castro’s gradual consolidation of power. The political shift may seem subtle, but it is important. Raúl’s style of governance is more procedural and institutional, less charismatic and spontaneous than Fidel’s. He’s less of a crusader, more of a planner and negotiator. And it’s clear that he wants to implement the reforms with the widest possible consensus.
That search for consensus may be one reason behind the slow pace of the rollout. Within government circles alone, there are different camps. Some fully embrace the reforms, seeing China and Vietnam as positive models. The economist Everleny, for one, was struck by the vibrancy of the Vietnamese economy when he visited, and was hopeful that Cuba could learn from the successful reforms implemented there. It’s a view that is probably shared by many powerful stakeholders in the government and the armed forces. Others want Cuba’s reforms to be tailored in a way that would give priority to small, worker-owned cooperatives, resulting in a new, sui generis model of decentralized socialism. One young economist I spoke to was inspired by cooperatives and worker-generated enterprise in other Latin American countries, where the “pink tide” has rejuvenated the left. “This is an opportunity to improve our system,” she said of the reforms. “But there’s a risk that the prevailing paradigm here will be privatization and the market socialism of Vietnam and China.”
Beyond government circles, some see the political moment as an opportunity to make Cuban socialism more democratic, representative and plural—proof that the old dream of a more democratic socialism has not been extinguished. Within Cuba’s small but growing circle of independent organizations, some warn that with major economic transformations on the horizon, open debates about Cuba’s future are more urgent than ever. For example, members of Observatorio Crítico, a network of small working groups dedicated to issues like racial justice, labor and the environment, have warned of the costs of Cuba’s economic transformation for the country’s most vulnerable. Others have called for a re-elaboration of the fraying social pact. As Veiga has argued in Espacio Laical, Cuban society needs to collectively redefine concepts like sovereignty, democracy, social justice and human solidarity: in essence, to rethink the revolution from the ground up.
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A final factor slowing down the reforms is undoubtedly the US embargo. The embargo has a toxic, distorting effect on internal Cuban politics. Washington’s openly stated goal of destabilization and regime change creates a sense of permanent crisis, a siege mentality, in the leadership. This has long had the effect of limiting internal debate and bolstering hardliners who view any critique as a dangerous prelude to subversion. On the economic front, that siege mentality inevitably retards the reforms’ progress. To give merely one example, during my visit in May the word “microcredit” was on everyone’s lips. It is clear that for Cuba’s small private sector to really get off the ground, cuentapropistas will need access to credit. In theory, the cash-strapped government could allow international NGOs—some of whom have already expressed interest—to float tiny loans. But the State Department’s continued funding of USAID programs openly dedicated to destabilization campaigns has made the Cuban government wary of foreign funding.
So far, Washington has barely reacted to the economic reforms, even though they clearly raise new dilemmas for the embargo. As Cuban-born political scientist Arturo Lopez-Levy points out, many of the new cuentapropista licenses are for tourism-oriented services. But by blocking American tourism, the US government is in effect slowing the growth of Cuba’s private sector, “something that is counterproductive to our stated policy.” Lopez-Levy, co-author of a new book about Cuba under Raúl, explains that the embargo is based on the 1917 Trading With the Enemy Act. The question now, he adds, is whether the United States will treat the Cuban nonstate sector, including Cubans working to promote market-oriented growth, as enemies too.
Opposition to the embargo has been slowly building, especially among agricultural and other business interests. The prospect of oil drilling off Cuban shores has sparked intense interest among US oil companies, which have watched from the sidelines as China and other countries have bid for drilling contracts with the Cuban government (for example, Halliburton has been lobbying the US government to ease Cuba sanctions since at least last year).
But for the moment, at least, US policy-makers have their hands tied, because Miami’s Cuban-American leadership and their Congressional allies have established nearly insurmountable conditions for formal re-engagement. For example, the 1996 Helms-Burton Act specifically prohibits the United States from recognizing a transitional government that includes one of the Castro brothers or that fails to compensate major properties nationalized after 1959. The rise in Congress of two Florida hardliners, Ileana Ros-Lehtinen and Marco Rubio, after the 2010 midterm elections has made the prospect of normalization even more distant.
Yet looking back at the developments of the past few years, one could plausibly argue that a transition of sorts has already happened in Cuba. Raúl Castro has consolidated power. He and his cohort now openly embrace market reforms and have implemented measures to foster a larger private sector. A small but growing class of entrepreneurs will take advantage of the government’s new pro-business mood. In addition, with the Catholic church serving as intermediary, the government recently released most political prisoners. New interest groups and power brokers are emerging: the church, cuentapropistas, the more pragmatic and market-oriented “Raulistas.” If there has ever been a time for the US government to acknowledge internal reforms and reciprocate with increased diplomacy, that time is now.