Cuba’s Uncertain Future

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Cuba approaches a critical juncture after the death of Fidel Castro. It will soon experience a complete generational change in leadership in February 2018, when national elections will elect a new National Assembly and a new President, shaping the way for the next Communist Party Congress in 2021. With as much as three quarters of the octogenarian Politburo leaving office at the Party Congress, a new Constitution and a new electoral law might provide a framework for more competitive elections. Nobody can forecast where this dramatic leadership overhaul will take Cuba in the next decade. However, Cuba’s deep economic crisis and loss of traditional sources of authority will expose post-Castro leaders to a challenging quest for new legitimacy.

As these political transitions begin, Raúl Castro, who assumed power ten years ago, has long been expected to re-invigorate the far-reaching reform program he launched at the outset of his government without giving up Cuba’s socialist identity. Recognizing that Cuba’s economic situation is “at the edge of the abyss,” Castro proposed careful market economy openings in agriculture, petty commerce, and small entrepreneurship—all of which caused a significant decrease in the state share of employment. About one quarter of Cuba’s important tourism sector is now in private hands; Cubans can now migrate without special permission; and increased access to new communication technology effectively ended the state’s monopoly on information. But more comprehensive market reforms have met delay or reversal under what many observers believe is implicit resistance from the still-surviving Fidel and his hardline comrades. The longer the necessary reforms are delayed, the tougher they will be to implement.

After Fidel passed away, Cubans expected Raúl to speed up economic and political reforms “with more hurry and less pause.” This hurry is important, particularly as Cuba’s economy, which experienced a recession in 2016, needs a dramatic boost to grow and sustain the country’s pride: its impressive welfare system. If domestic entrepreneurs cannot accumulate capital and invest, new sources of growth will not be available. The state will not be able to lure foreign investors if the U.S. embargo remains in place and if Cuba stays away from international financial institutions. As living standards decline and the historical legitimacy of the Revolution wanes, only an urgent overhaul of the Cuban regime will permit a new generation of leadership to proceed peacefully. At the end of the first quarter of 2017, however, all necessary changes seem to have stopped completely—and the sentiment in Havana is dominated by confusion over what will happen as the historic generation of leadership is phased out.

Both the United States and Cuba had clear incentives for initiating their 2014 rapprochement. The United States’ Cuba embargo increasingly isolated the United States and seriously diminished its leadership role in the Western Hemisphere, while the economic and political crises in Venezuela and Brazil—Cuba’s most important benefactors since the early 2000s—increasingly worried Cuba. Echoed by President Obama in his historic speech during his visit to Havana in March 2016, the younger Castro thought it was time to initiate normalization with a U.S. President willing to accept the Cuban people’s right to determine their own political system.

However, burying the United States’ imperialist enemy image, while moving toward a more market-friendly economy and pluralistic society, was difficult for the old-guard Cuban communists to accept. To date, military-controlled corporation managers, whom Raúl Castro put in charge of the Cuban economy’s most lucrative sectors have been the real “winners” of Raúl’s reforms. However, a large part of the state and party bureaucracy that has been hesitant to accept reforms or openly boycotted them, in addition to retirees and large segments of Cuba’s majority black population, are on the losing side. Party hardliners and Cuba’s security apparatus, worried about losing relevance if U.S.-Cuba relations become too friendly, have created an anti-reform alliance. As a result, Cuba has reversed some market reforms and diminished space for open debate, mostly after the April 2016 Communist Party Congress, which took place only a month after Obama’s visit to Cuba.

Under a new generation of leaders, and in light of a new relationship with the United States and with an anti-reform alliance in place, a post-Castro Cuba could proceed in many directions. A Sino-Vietnamese socialist neo-patrimonial model, which would combine a more market-driven economy with a continued authoritarian political regime, is the most likely scenario. Russian-style oligarchic neo-patrimonialism with private rent-seeking and massive appropriation of public property is another option. However, either model would produce corruption and more repression.

Another alternative, possibly attractive to President Trump, could be an alliance between U.S. big capital and Cuban military corporations. Some successful Cuban-American corporations in Florida would like to substitute obsolete Cuban industries and rebuild the country´s disastrous infrastructure. It is, however, doubtful that the free-wheeling capitalism that could result from this scenario would care about maintaining Cuba’s welfare traditions of free public health, education, and social security, thus making this option unattractive to most Cubans.

A third approach, increasingly discussed among Cuban intellectuals, is a social democratic mixed economy with expanding space for the emerging non-state sector. By taking advantage of family remittances and other medium-size foreign investments, the private sector could empower Cuban entrepreneurs, increase their desire for a political say, and expand pluralistic, democratic participation. Such authoritarian withdrawal could lead to more independent peasant and labor movements and to more autonomous cooperatives. This combination may be the only way to reconstruct a Cuban welfare state within a more liberal society and keep Cuba from violence and poverty. Strong military-party structures in Cuba and big would-be Cuban-American investors, allied with the Trump administration, however, share a deep skepticism in such an outcome. Significant economic and social changes must take place for an effective private, hegemonic bloc in favor of a social democratic alternative, to emerge.

In 2016, as Cuba prepared for fresh leadership, new reforms, and an uncertain future, then President-elect Donald J. Trump promised to overturn Obama’s Cuba policies. While most Cubans genuinely mourned the loss of their historical leader, Mr. Trump exclaimed jubilantly over Fidel’s death. Most Cubans viewed his ahistorical comments after Fidel’s death as tomb desecration. Misled by his Florida friends’ claims of a totalitarian Cuba that no longer exists, Mr. Trump tweeted about “a deal” that he wanted to re-negotiate. He seems to expect the Cuban government to admit defeat to its imperial neighbor, disregarding the most sacred principle of the Cuban revolution and oblivious to the complexity and mutual benefits of the agreements reached thus far.

The Cuban people now wait for President Trump to define his Cuba policy. If he sticks to his current attitude, his policy will most likely have the opposite effect of what he claims it will. His wish to distance his administration from Obama’s Cuba policy could easily harm any economic interests U.S. companies or Cuban-American families have accumulated since normalization began. Rather than preserving this political capital, Mr. Trump might start a war of words that ordinary Cubans may perceive as a return to a past of regime-change attempts they thought Mr. Obama had buried once and for all. This could provoke Cuba’s Communist hardliners to retrieve the imperialist corpse from the closet, perhaps fatally damaging Raúl Castro´s reform ambitions. More importantly, Mr. Trump’s words could derail incoming younger leaders’ plans to release the authoritarian structures of the soon to be ancien regime.

In another tweet addressing Fidel Castro´s death, Mr. Trump claimed he wanted to see more freedom and welfare for the Cuban people. He seems to believe he will obtain this by rolling back the U.S.-Cuban rapprochement and eliminating the effect of the positive chemistry between Presidents Barack Obama and Raúl Castro, thereby perhaps also reversing emerging economic relations between Cuba’s domestic and diaspora populations. The impact of all this will be to decrease the Cuban people’s freedom and welfare and reverse already painfully-made gains. The Trump administration should instead maintain the space Obama opened for the Cuban diaspora to invest through family remittances, allowing foreign investments to enhance domestic entrepreneurship and increasing the Cuban people’s freedom and welfare.

In this way, small and medium enterprises can save the crisis-ridden Cuban economy and social fabric, enhancing support for a mixed economy even among the less privileged segments of Cubans, who until now have reaped no benefits from the reforms. A “new deal” between the U.S. and Cuba must also respect Cuba’s historic claim of national sovereignty and lift the embargo that the international community unanimously condemns. If President Trump meets these conditions, it may be possible to negotiate carefully calibrated investment and trade relations in ways that favor private actors, thus moving political forces toward deeper reforms. However, empowering the private sector and agents of change in a way that will eventually lead to a more pluralistic Cuban society must not come about by foreign imposition, but rather through a domestically driven political process.

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Vegard Bye is a partner in Scanteam and a Senior Research Fellow at the Centre for Development and the Environment at the University of Oslo. He has followed the Cuban political situation since he worked there as a young United Nations employee 40 years ago.

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