Tag Archives: Cuban economy

The Sorry Tale Of Cuban Communism

By Dan Mitchell

Before communism arrived in Cuba, it was one of the most prosperous societies of the Americas. Now, its economy and society are both severely crippled by it.

Communism should be remembered first and foremost for the death, brutality, and repression that occurred whenever that evil system was imposed upon a nation.

Dictators like Stalin, Mao, Pol Pot, the North Korean Kim dynasty either killed more than Hitler, or butchered higher proportions of their populations.

But let’s not forget that communism also has an awful economic legacy. The economic breakdown of the Soviet Empire. The horrid deprivation in North Korea. The giant gap that existed between West Germany and East Germany. The mass poverty in China before partial liberalisation.

Today, let’s focus on how communism has severely crippled the Cuban economy.

In a column for Reason, a few years ago, Steven Chapman accurately summarised the problems in that long-suffering nation.

“There may yet be admirers of Cuban communism in certain precincts of Berkeley or Cambridge, but it’s hard to find them in Havana. The average Cuban makes only about $20 a month— which is a bit spartan even if you add in free housing, food, and medical care. For that matter, the free stuff is not so easy to come by. Food shortages are frequent, the stock of adequate housing has shrunk, and hospital patients often have to bring their own sheets, food, and even medical supplies. Roger Noriega, a researcher at the conservative American Enterprise Institute in Washington, notes that before communism arrived, Cuba “was one of the most prosperous and egalitarian societies of the Americas.” His colleague Nicholas Eberstadt has documented that pre-Castro Cuba had a high rate of literacy and a life expectancy surpassing that in Spain, Greece, and Portugal. Instead of accelerating development, Castro has hindered it. In 1980, living standards in Chile were double those in Cuba. Thanks to bold free-market reforms implemented in Chile but not Cuba, the average Chilean’s income now appears to be four times higher than the average Cuban’s. In its latest annual report, Human Rights Watch says, “Cuba remains the one country in Latin America that represses virtually all forms of political dissent.”

The comparison between Chile and Cuba is especially apt since the pro-market reforms in the South American nation came after a coup against a Marxist government that severely weakened the Chilean economy.

Chapman points out that the standard leftist excuse for Cuban misery— the U.S. trade embargo— isn’t very legitimate.

“The regime prefers to blame any problems on the Yankee imperialists, who have enforced an economic embargo for decades. In fact, its effect on the Cuban economy is modest, since Cuba trades freely with the rest of the world.”

Since the U.S. accounts for nearly one-fourth of world economic output, I’m open to the hypothesis that the negative impact on Cuba is more than “modest.”

Continue reading The Sorry Tale Of Cuban Communism

A message to American businesses: ‘There is no money’: cash-strapped Cuba is forced to cut vital imports

For almost a year we have been hearing that American companies are salivating about the great economic opportunities that are now available in Castro’s Cuba, since Barack Obama agreed to open relations with the dictatorship in the island.
But now reality is setting in: Cuba is broke and is only looking for idiots who are willing to sell them on credit, which is the same as giving it away since the Castro brothers never pay their bills.
Here is a report in The Guardian:

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Low commodity prices, a drought at home and Venezuela’s economic crisis have created a cash shortage for Cuba’s communist government, restricting its ability to trade just as it could be taking advantage of an economic opening with the United States.

State companies have cut imports and are seeking longer payment terms from suppliers, diplomats and foreign business people say.

The cash crunch, combined with Cuba’s hesitancy to embrace a recent softening of the US economic embargo, demonstrate some of the complications US companies face in Cuba even though Washington is chipping away at the sanctions.

The Caribbean island’s cash flow has been cut by low prices for nickel, one of its leading exports, as well as for oil.

Cuba receives oil on favorable terms from Venezuela and refines and resells some of it in a joint venture with its socialist ally. But prices for refined products are down in tandem with crude.

“There is no money,” said the foreign director of a manufacturing firm in a joint venture with Cuba. Like others interviewed for this story, the director wished to remain anonymous to avoid annoying the government.

Comments about the liquidity shortage are echoed by others doing business with Cuba even with tourism up 17% this year.

“Cuba is clearly feeling the squeeze,” said the commercial attache of one of the country’s top trading partners. “They are falling behind on some payments and asking suppliers for credit terms of 365 days or longer, compared with 90 days to 180 days.”

The economy minister, Marino Murillo, speaking to the national assembly in July, said export revenue had been less than expected and “adjustments” would be made.

Identifying those adjustments is difficult as Cuba’s finances are opaque. It is not a member of any international lending organization and the local currency has no value abroad.
Cuba imports more than 60% of its food and more than 50% of its oil, but the benefits from lower international commodity prices have been offset by the need for more imports due to the worst drought in more than a century.

In addition, the collapse of oil prices punishes Cuba given the terms of its oil deal with Venezuela.

It receives more than 100,000 barrels of oil per day as part of an exchange that sends Cuban professionals to Venezuela. Some 30,000 doctors and nurses, plus another 10,000 professionals, are posted in Venezuela.

Cuba also receives cash for its professionals. Economists and oil market experts believe the amount is tied to oil prices, meaning Venezuela would pay less to Cuba when prices are down.

Continue reading A message to American businesses: ‘There is no money’: cash-strapped Cuba is forced to cut vital imports

Building a Business on Misery

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By Fernando J. Milanes, MD

“The most baffling about the human psyche is that even after seeing the misery and suffering all around.
He is convinced that these would befall only to others and not on to him.”
― Gian Kumar

In a most misleading front page article [on Sunday’s Miami Herald], the Cuba promoter, masquerading as a reporter, Mimi Whitefield speaks about how “Cuban private entrepreneurs” are building a business on “classic cars”.

She attributes the demand for these old automobiles on “nostalgia”. Of course, what she calls nostalgia is a reflection of one of the worse sentiments humans have, lack of compassion. Continue reading Building a Business on Misery

The Musician Calling BS on the ‘Cuba Libre’ Lies

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Jorge Gomez has always fallen afoul of the Cuban authorities—and now he’s planning a musical about growing up under Castro’s dictatorship.

Growing up in Cuba, Jorge Gomez would sneak up to his roof with a metal coat hanger late at night and fashion it into a makeshift antenna, desperate to pick up sound waves from Miami radio stations.

The fuzzy, clipped beats and melodies that crossed the ocean were unlike anything he’d heard in the streets of Cuba—and forbidden in Castro’s police state.

They niggled him while he labored over Liszt, Beethoven, and Brahms in Havana at La ENA, Cuba’s only music conservatory. He never dreamed that he would one day arrive on the shores of Florida and listen to this music on his own static-free radio, with the volume dialed all the way up.

Having fled Castro’s dictatorship twenty years ago, Gomez, 44, is a pianist, songwriter, and the founding member of Tiempo Libre, which bills itself as “the first authentic all-Cuban timba band in the United States.” (Their sixth album, Panamericano, comes out on Tuesday.)

Arriving in the U.S. in 2000, Gomez settled in Miami and reunited with childhood friends whom he studied with at La ENA. Within a year, he convinced six of them to start a timba band and bring Cuban dance music to the States.  Music producers were convinced timba would never take off in the U.S.

“People would say I needed to play Mexican or Country music to sell albums,” Gomez tells me in his heavy Spanish accent. “But I didn’t come to this country to sell albums. I came to play my music. I came to be happy with what I do and who I am.”

They were wrong about timba: U.S. audiences loved its unique sound of Afro-Caribbean rhythms and jazz harmonies infused with funk and contemporary R&B beats. And Gomez did sell albums, three of which have been nominated for Grammy awards, including Bach in Havana (2009), which earned Tiempo Libre respect from the classical community.

That same year, they collaborated with renowned violinist Joshua Bell on his album, At Home With Friends, and performed with him on The Tonight Show. Fusing Baroque and Afro-Cuban music was an innovative passion project for Gomez and the other Tiempo Libre bandmembers who were forbidden to play anything but classical music at the conservatory.

Gomez’s life in Cuba couldn’t have been more different from the affluence displayed in T magazine several weeks ago in a story a provocatively titled “Cuba Libre.”

It featured a recently restored, pre-revolution Havana mansion, where an American woman, Pamela Ruiz, lives with her Cuban husband, the artist Damian Aquiles.

Ruiz immigrated to Cuba in the mid-90s after meeting Aquiles while scouting locations there for an American ad campaign. (Critically, Ruiz maintained her U.S. citizenship and, with it, her savings and income.)

Several years after arriving, Ruiz began a nine-year process of acquiring a dilapidated,100-year-old estate from an old woman. Ruiz and Aquiles have hosted a slew of rich and famous Americans since completing renovations last year, including Will Smith, his wife Jada Pinkett-Smith, and fashion designer Proenza Schouler.

Six months after President Obama lifted the 50-year embargo against the island, restoring diplomacy between the two countries, the magazine’s glossy feature of Ruiz and Aquiles’ “cultural salon” offers a utopian vision of a new Cuba: wealth in the form of art deco furniture instead of capitalist monstrosities like McDonald’s and Starbucks, and Cuba’s rich culture not just preserved but revitalized.

But outside the confines of Ruiz and Aquiles’ Havana villa, there is no “Cuba Libre.”

“It’s very easy to talk about things you don’t really know. You have to live it,” says Gomez, “Tourists go to Cuba and stay in hotels where they have everything they need. If you’re Cuban, you have nothing.”

After Gomez graduated from the conservatory at age 18 in 1990, his limited future was dictated by the Cuban government: he could either continue studying classical music for another five years or spend two years in the army.

“My heart was in Cuban dance music, not classical, so I joined the army,” Gomez tells me.

The Berlin Wall had fallen a year earlier, precipitating the 1991 collapse of the Soviet Union, which had been subsidizing Cuba since the mid-’60s.

Gomez spent his first year in military service training for combat. His musical talent allowed him to trade his gun for a piano during his second year, when he traveled to different military bases entertaining disheartened Cuban soldiers.

He earned 7 pesos a month—roughly $1—during his two years of service.

He returned home in 1992 to find his house as decrepit as Castro’s Communism: crumbling walls, a busted plumbing system, a collapsing ceiling.

Gomez worked as many tourism jobs as he could during the next three years, pocketing enough money in tips to incrementally rebuild his family home. But the reparations did not go unnoticed by the government.

“They said to me, ‘Where are you buying those materials? You know it’s illegal.’ I said, ‘Yes, I know, but if I don’t fix my home I’m going to die!’”

They threatened to throw him in jail if he continued.

“You support Communism, and then they put you in jail for fighting for your life. You think, ‘Wait a second, there’s something really wrong here.’”

Cuba had also plunged into famine, so Gomez and his mother were surviving on a diet of potatoes and white rice. He weighed only 90 pounds when he fled Cuba for Guatemala in 1995.

Gomez’s service in the military would prove crucial to his escape: the government gave him and his mother permission to visit family in Guatemala for several weeks. He arrived at the airport in Havana with one bag, knowing that anything more would betray his plan to leave Cuba for good.

“I left my whole life in that house,” he says. “Pictures, two pianos, my car—everything.”

Throughout Gomez’s life, the Castro regime had drummed into his head that Cuba was “the best country in the world,” he tells me, wide-eyed.

Guatemala was wracked by crime, but its people were free.

He recalls going to a Guatemalan street kiosk the first day he was there and seeing “meat” all over the menu.

“In Cuba, I would have gone to jail for thirty years if I was caught eating meat! I was afraid to eat it.”

That same day, he put an ad in the newspaper offering piano lessons in exchange for computer and web tutoring. Two days later, he landed a job writing 30-second jingles for Coca-Cola.

Rubbing his hands, Gomez leans towards me as if to confess a secret or recount a horrible memory.

“I made more money in eight hours living in Guatemala than I did my whole life in Cuba!” he says with a smile.

Gomez has returned to Cuba twice since he fled 20 years ago, but his old friends don’t want to hear his stories of opportunity—of meat and money and freedom.

It’s not uncommon for people in Communist and ex-Communist societies to be skeptical of entrepreneurial ambition.

They associate it with corrupt upward mobility and a willingness to work for one’s oppressors, unable to recognize their own oppression.

It’s understandable then that Gomez’s friends in Cuba—where there’s been a maximum wage for decades; where less than 5 percent of citizens have heavily-monitored Internet access; where literacy rates are high but they can only read propaganda; where healthcare is free but the country lacks basic medical supplies—are skeptical of his fortunes and freedom.

So while Americans on the left, nostalgic for a dystopian fantasy of authentic Cuba, whinge about the prospect of McDonalds and mini-malls wiping out Cuban culture, Gomez (and many analysts) say they don’t have to worry about that.

“If they put a Starbucks in Cuba, no one will touch it,” says Gomez. “People in Cuba will still drink Cuban coffee.”

Cubans may be desperate for free speech and an end to food rations, but according to analysts, they’re not exactly dreaming of McDonalds’ golden arches. Even if there is political change within the country, the shift will likely be towards socialism.

Never mind that after Raul Castro made a deal with President Obama, he told his people that he would welcome U.S.-Cuban diplomacy “without renouncing a single one of our principles.”

Unless those principles are dramatically different from the totalitarian ones that the Castro regime has forced on its people since 1959, restless Cubans (and T magazine) can kiss their hopes of a “Cuba Libre” goodbye.

Meanwhile, Gomez is gearing up for his own ‘Cuba Libre.’ That’s the title of a Broadway-bound musical Tiempo Libre will be performing on stage in Portland, Oregon come October. “It tells the collective stories of Tiempo Libre’s band members growing up in Cuba under Castro’s dictatorship.”

“A lot of musical theater only shows the good parts about Cuba,” says Gomez. “I know people prefer to see Spiderman than a musical about Communism, but I want to tell the real story. And I don’t want to tell people they have to know and see this story. I want them to want to see it, to be drawn in by the music.”

The Daily Beast

When Helping ‘the Cuban People’ Means Bankrolling the Castros

The Wall Street Journal by Mauricio Claver-Carone ,  director of the U.S.-Cuba Democracy PAC

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U.S. legislation to ease sanctions will instead primarily benefit Havana’s state-owned monopolies.
Three bills full of lofty but disingenuous rhetoric about “supporting the Cuban people” were recently filed in the U.S. Senate to ease sanctions. To have an honest debate about sanctions on Cuba, it’s important to understand how that totalitarian regime conducts business. The bills primarily benefit three monopolies in Cuba, all owned and operated by the Cuban government: Etecsa, Alimport and Gaesa.
Let’s look at each piece of legislation:
• The Cuba Digital and Telecommunications Advancement Act. This bill’s purpose is to provide millions of U.S. dollars to develop telecom infrastructure for the Empresa de Telecomunicaciones de Cuba, S.A. (Etecsa), owned by the Cuban government. The company works with the secret police of Cuba’s President Raúl Castro, tapping phone lines, monitoring conversations, censoring the Internet and persecuting Cubans discovered with homemade satellite dishes.
Etecsa is very good at what it does, according to a recent report by Freedom House, a nongovernmental organization based in Washington, D.C., that ranks Cuba, China, Iran and Syria as the world’s most Internet-repressive governments.
The cosponsors of the Cuba Digital and Telecommunications Advancement Act, including New Mexico Democratic Sen. Tom Udall and Arizona Republican Sen. Jeff Flake, argue that foreign investment in Etecsa will lead to greater Internet connectivity for the Cuban people. Apparently they are unaware that Telecom Italia owned a 27% stake in Etecsa from 1995-2011. Or that America’s Sprint Corporation provided Etecsa with its first Internet connection in 1996, and that France’s Alcatel-Lucent laid new fiber optic cable for Etecsa in 2012.
None of those “foreign investments” improved connectivity for the Cuban people. What the investments did was improve the Cuban government’s ability to control its people.
Etecsa already provides Internet service in Cuba. The problem is that the Cuban government only allows foreigners and its own apparatchiks to access the Internet. So this Senate bill purports to solve a problem that doesn’t exist and offers nothing to change the real problem.
•The Agricultural Export Expansion Act. This bill seeks to provide lines of credit to the Empresa Cubana Importadora de Alimentos, S.A. (Alimport), the Castro brothers’ import monopoly. This government organ is already well supplied by U.S. taxpayers. Since Congress passed the 2000 Trade Sanctions Reform and Export Enhancement Act, nearly $4 billion in U.S. agricultural products have been sold to Cuba. The only buyer was Alimport. As the U.S. Agriculture Department reports: “The key difference in exporting to Cuba, compared with other countries in the region, is that all U.S. agricultural exports must be channeled through one Cuban government agency, ALIMPORT.”
One result is that little of the food and medicine that Cuba imports from the U.S. ever makes it to stores where Cubans shop. It isn’t available on ration cards either. Instead, agricultural imports from the U.S. end up on the tables of Cuban government-owned tourist resorts and in government-owned stores that accept only “hard currencies,” such as dollars or euros.
Experience demonstrates that exporting to Cuba is not about assisting small and midsize farmers on the island, as the bill’s cosponsors, including Sens. Heidi Heitkamp, a North Dakota Democrat, and John Boozman, an Arizona Republican, would like their legislative colleagues to believe. It’s about financing the monopoly run by the Castros.
• The Freedom to Travel to Cuba Act is a billion-dollar windfall for Grupo de Administracion Empresarial, S.A.—the most notorious and vile of the Cuban-government monopolies.
Gaesa is the holding company of Cuba’s Ministry of the Revolutionary Armed Forces, Cuba’s military. It is the dominant driving force of the island’s economy. Established in the 1990s by Raúl Castro, who succeeded his brother Fidel as Cuba’s leader, it controls tourism companies, ranging from the very profitable Gaviota S.A., which runs Cuba’s hotels, restaurants, car rentals and nightclubs, to TRD Caribe S.A., which runs the island’s retail stores. Gaesa controls virtually all economic transactions in Cuba and is run by Raúl Castro’s son-in-law, Gen. Luis Alberto Rodríguez López-Callejas.
Arizona Sen. Jeff Flake, one of the cosponsors of the Gaesa bill along with Vermont Sen. Patrick Leahy and others, says that it allows Americans to travel to Cuba. But that is misleading. Any American today can travel to Cuba under one of the 12 broad categories of purposeful travel. What Mr. Flake proposes to lift are restrictions imposed in 2000—Trade Sanctions Reform and Export Enhancement Act—on tourism-related transactions with Gaesa. Those restrictions are there because tourism is to Cuba’s military and security forces what oil is to Iran’s military.
Spending by Canadian, European and Latin American tourists enjoying Cuba’s all-inclusive beach resorts sustains the government’s military and security services. It finances the government’s operations to share intelligence with terrorist groups and rogue regimes and promote violence to subvert democracy in Venezuela—and finances a government that has been caught twice in the past two years smuggling heavy weaponry to the world’s worst violators, including North Korea. Nonetheless, Mr. Flake’s bill effectually earmarks millions in U.S. tourist dollars for Gaesa.
U.S. support for Cuba’s government monopolies can only strength that brutal regime’s totalitarian grip. The Cuban people know it, and U.S. senators ought to be able to figure it out.

Congress can still threaten Obama’s honeymoon with Raul Castro

Restoring US and Cuba ties not a done deal as Congress may still be a threat.

As countries move to reopen embassies, analysts warn Republicans pose potential hurdle in agreement to end more than 50 years of hostility.
President Obama’s goal of restoring diplomatic ties with Cuba by reopening the US embassy next month and sending secretary of state John Kerry to Havana for a highly symbolic flag-raising ceremony could yet be thwarted in Congress, experts believe.
The Obama administration plans to announce early in July details of the deal with Raúl Castro’s communist government that would formally end more than half a century of hostility between the countries, according to a report published on Friday.
But analysts of US-Cuba politics say the approval of Congress could still be a major obstacle to the agreement, and doubt whether the Republican controlled Senate and House of Representatives would approve the funding that would be necessary.
“Congress has to get on board,” said professor Bruce Bagley, an expert in Cuban affairs at the University of Miami’s department of international studies.
“I doubt sincerely we will see any big budgetary moves before President Obama leaves office, certainly not enough to open an entire embassy. It’s not clear it can happen unless Congress approves the money.”
Additionally, only Congress has the authority to lift the decades-old US trade embargo with Cuba, and must be notified by the state department at least 15 days in advance of any plan to upgrade the status of the US interests section building in Havana to that of a full-fledged embassy.
Formal negotiations between administration officials and Havana have been ongoing since December, when Obama announced groundbreaking and sweeping changes to US policy following 18 months of secret talks and a controversial prisoner exchange. In April, Obama and Castro met face-to-face for the first time at an economic summit in Panama, a significant moment in the new era of diplomacy.
Kerry’s visit, which is still scheduled for 2 July despite him breaking his leg in a bicycle accident in Geneva last month, and the plan for both countries to reopen their embassies, are “proof of progress in the conversation” Bagley said, especially following the US move last month to drop Cuba from the list of countries that sponsored terrorism.
“This continued advancement and Kerry’s trip have symbolic value to the US in that they maintain the momentum, and other countries see that the US wants to reestablish relations,” Bagley said.
But he acknowledged that deep divisions remain over Cuba’s human rights record and the trade embargo, and that some politicians with strong opinions on Cuba were deeply opposed to Obama’s desire to thaw relations.
“There is ferocious opposition from Marco Rubio and others,” he said. “Change will be slow whatever happens.”
Rubio, a Florida senator with Cuban parents who is seeking the Republican nomination for the 2016 presidential election, is one of the most vocal opponents in congress of the Obama policy. He declared the decision to take Cuba off the terror blacklist as “terrible” and “a chilling message to enemies that the White House is no longer serious about calling terrorism by its proper name.”
Rubio has also been a leading proponent of legislation that would prevent taxpayer dollars supporting the more relaxed US policy towards Cuba, or directly benefiting the Cuban economy.
“It is not in the interest of the United States or the people of Cuba for the US to become a financier of the Castro regime’s brutality,” he said last week as he announced a bill that would specifically outlaw transactions between American companies and the Cuban military and security forces.
Andy Gomez, a Miami-based veteran expert in Cuban studies, said such opposition in Congress could upset Obama’s timetable for progress and even hamper the president’s desired legacy over Cuba, particularly the end of the trade embargo, before he leaves the White House in January 2017.
“I think we’re still very far away from reconciliation,” Gomez said. “There are a series of these bills to lessen trade or guarantee no taxpayer money will be used to pay for it.”
Gomez said he also suspected Obama might wait until Washington politicians were on summer recess before announcing a new US ambassador to Havana as an administrative appointment, knowing he would not have senate support for a confirmation.
“I still have many questions. I want to know what’s in Cuba that’s so interesting to the US. Tourism? Godfather 4?” he said.
According to White House sources quoted anonymously in Friday’s report, negotiators have been able to overcome differences in the freedom that US embassy staff would have to travel around Cuba. Only a few minor differences remain, the source said.
Gomez also believes Cuba has been working behind the scenes in its discussions with Washington to try to present a more favourable image.
“Politically I’ve seen nothing, but Cuba is moving to show the world that it is restructuring economically,” he said.“It’s been said that the US has put everything on the table and Cuba has brought nothing, but Cuba has made some interesting moves.”   The Guardian

Cuba After the Castros: The Likely Scenario

An article by José Azel in The Wall Street Journal:

The armed forces control 70% of the economy now. It’s not likely they’ll give that up for a free market.

The 2008 succession from Fidel to Raúl Castro was efficient and effective. But the popular hallucination outside the island—in which Gen. Castro intervenes forcefully to end the communist era and inaugurates a democratic, market-oriented Cuba—is not going to be how the story ends.
Given Raúl’s age—84—there will be another succession in the near future. The critical question is not what economic reforms Raúl may introduce, but what follows him.
José Ramón Machado Ventura, second secretary of the Communist Party, is also 84 years old and Cuba watchers do not see him as the next leader. If Miguel Díaz-Canel, 55, the first vice president of Cuba, ascends to the presidency, he will most likely be a “civilian” figurehead for the generals to present to the international community.
Raúl was head of the armed forces for nearly 50 years and now, as head of the country, he has appointed his military officers and military family members to positions in government and industry. One possible scenario after he is gone would be a reversion to a military dictatorship such as Cuba under Batista, Brazil from 1964-85, or Egypt today. Yet another outcome, equally disquieting, is possible.
By some estimates, including the University of Miami’s Institute for Cuban and Cuban-American Studies, the Cuban Revolutionary Armed Forces controls over 70% of the economy. Enterprise Management Group (GAESA), the commercial holding company for the Cuban Defense Ministry, is involved in all key sectors of the economy. Through government-owned subsidies, the company is heavily involved in tourism, retail sales, mining, farming and energy, and joint ventures with foreign investors.
Raúl, as a matter of survival not ideology, has introduced some tentative economic reforms, while continuing to expand the metamorphosis of his officers into businessmen. Some might present this as a positive development, where warriors exchange their weapons for calculators. But what does it mean for the future of Cuba when the Raúl era comes to an end and military officers are in political and economic control?
In a system where enterprises are state-owned and managed, the military officers-turned-business executives will enjoy the privileges of an elite ruling class. Yet it will not take long for the military elite to realize that managing government-owned enterprises offers only limited benefits—owning the enterprises is a far more lucrative option.
Once the Castro brothers are no longer in the picture, the military oligarchy might decide to champion a far-reaching but phony reform—that is, a manipulated privatization of the industries under their managerial control. Not unlike the rigged privatizations in Russia in the 1990s, an illegitimate and corrupt privatization process would give birth to a new class of government-created oligarchs—instant capitalist millionaires, the new Cuban “captains of industry.”
The Cuban population might not view these ownership changes as particularly undesirable or nefarious, mistakenly viewing them as a positive transition toward free markets and prosperity. The international community would likely also acclaim the mutated generals as agents of change bringing market reforms to Cuba. In the United States, of course, the change in U.S.-Cuba policy introduced by President Obama would be declared a success.
Cuban Communism, to be sure, would come to an end, leaving in its wake generals, new captains of industry and assorted other nouveau riche in charge of country devoid of democratic culture. And like Russia after the collapse of the Soviet Union, Cuba’s economy would be riddled with monopolies and oligopolies whose owners would have the power to stifle any pro-competitive policies or international investors that might threaten their position.
It is often argued that the introduction of economic reforms, even without political reforms, will lead sequentially and inexorably to democracy. As in the case of China after Mao, this is not necessarily, or even probably, the case.
Without profound political reforms, putative economic changes conducted by Cuba’s military will only transfer wealth from the state to a ruling military and party elite. It will not lead to democracy or prosperity.

Mr. Azel is a senior scholar at the Institute for Cuban and Cuban-American Studies, University of Miami, and the author of “Mañana in Cuba”

 

Oppenheimer: Cuba: Very big fuss over very small economy

President Barack Obama’s historic normalization talks with Cuba have brought about a lot of excitement in business circles, and hardly a day goes by without new reports of U.S. investors, lawyers and entrepreneurs flocking to the island. But I’m afraid most of them will lose their shirts there.
A dispassionate look at Cuba’s reality shows that, despite all the hoopla about last week’s U.S. removal of Cuba from its list of terrorist nations, which opened the way for re-establishment of full diplomatic relations between the two countries and international loans, Cuba remains one of the most backward countries in Latin America. And it will take many years to get its economy back to life.
Yes, Obama’s opening to Cuba is by an large a good idea. And, granted, there will be opportunities in the tourism industry to build new hotels. But the scope of these business opportunities will be much more limited than the Obama administration — eager for a foreign policy legacy-setting victory in the aftermath of its Middle East failures — is leading us to believe.
Consider the facts:
First, Cuba’s gross national income per capita, although nearly impossible to measure because the island does not measure its economy by international standards, is estimated by the World Bank at $5,800 a year. That’s almost three times less than Chile’s per capita income of more than $15,000 a year, and way below Latin America’s average of $9,500 a year, according to World Bank figures.
Cuba’s average wage is of about $20 a month (yes, you read right, a month.) That will make it very hard for average Cubans to buy more imported goods, wherever they come from.
Second, Cuba’s 11 million population has an average age of about 40, one of the oldest in Latin America, because of few births and massive migration. That will make it hard for Cuba to become a magnet for investments in factories or outsourcing services.
While other Latin American countries will benefit from young populations in coming years, Cuba’s demographic scene is likely to worsen.
In a recent report entitled “Big fuss, small market,” John Price, managing director of the Americas Market Intelligence consulting firm in Miami, argued that “if East Germany is any guide to what may happen next in Cuba, an additional two million Cubans would leave the island within five years of an end to travel restrictions.”
He added, “Most of those anxious to leave will be the best educated working-age adults who can pursue higher wages and better opportunities abroad. Cuba will become a nation of elderly, with limited growth prospects.”
Third, despite Obama’s executive orders to open up tourism and some investments to Cuba, only the U.S. Congress can lift the full U.S. commercial embargo on the island, and that’s not likely to happen anytime soon.
Even if some Republican legislators from mid-Western farm states support lifting the U.S. embargo, the prevailing mood within Republicans in Congress will be to deny Obama a vote that would allow him to set a foreign policy legacy as the U.S. president who “opened up” Cuba, much like Nixon “opened up” China.
“I don’t see the U.S. embargo lifted while Obama is in office,” Price told me.”I doubt that anything will happen within the next two or three years.”
Fourth, despite a big influx of dollars from U.S. tourism and family remittances, Cuba is threatened with a worsening economic crisis if Venezuela can’t keep up with its oil subsidies to the island. That may delay Cuba’s economic resurgence further.
Fifth, Cuba lacks and independent judiciary to protect investors’ rights, as so many Spanish and Canadian business people have learned the hard way. And that’s not likely to change anytime soon.
In a recent interview, U.S. Secretary of Commerce Penny Pritzker told me that even though Cuba is a small economy, the Cuban people are entrepreneurial , and have a great economic potential. “It’s a beginning, you have to start. And by starting, things will evolve,” she said.
My opinion: Maybe so. But for the time being, as Florida International University business professor Jerry Haar has rightly — and only half-jokingly — commented, the most profitable businesses dealing with Cuba will be those that put together conferences and seminars on doing business in Cuba.
Obama did the right thing in starting normalization talks with Cuba’s military dictatorship, although he should be much more forthright in demanding basic freedoms on the island. But the administration should tone down its claims that the U.S.-Cuba honeymoon will lead to political and economic changes on the island, and to great business opportunities for foreign companies. It won’t, at least in the near future. The Miami Herald