Friday, 2 January 2009

Cuba (Part 3)

And these will be my last words in Cuba (for a while ...)

There´s been lots of wishful thinking seeking to present Raul Castro’s presidency and his recent reforms as a new chapter in the economy of Cuba. The policies so far implemented (boosting access to mobile phones and hotels and giving out land to private farmers) will hardly make a difference in terms of economic life for Cubans. Raul and the men who control Cuba are the men of the revolutionary generation. Vice Presidents Jose Ramon Machado Ventura and Abelardo Colome are old-guard. Why would you expect a new departure from three men well into their 70s?

But what may be the most significant and subtle development in the past two years (since Fidel fell ill) is the leadership’s change in focus. From blaming the outside world, Cuban leaders are now moving on to looking within for answers. Yoani -- the Cuban blogger I recommended you to read a few days ago, -- may say ''Are you crazy, Parra-Bernal?´´ But I can see some changes, and they are, we like them or not, positive: the leadership is going from blaming class differences within the country to lashing out the bureaucracy and the deficiencies of the system. More domestic issues are being debated, rather than marching hard and chanting anti-U.S. slogans. This is the reading I have from the initial reforms implemented by Raul. These are the issues I would rescue from his initial stance. And finally, the most interesting of all this is that the government is praising reward for individual initiative and instead of imposing restrictions, it is lifting some.

So, in my view, the media is confusing Raul Castro’s dampening of investment restrictions and changes in wage pricing with reforms. Changes in agriculture are accelerating and the next focus is likely to be measures to revamp the construction industry (this should come sooner than later, we believe.) We are still waiting for immigration reform (which was scheduled to be announced by the end of 2008.) At about the same time we were expecting the government to announce state restructuring plans. If you read the speech carefully, Raul wants (in his way) Cubans to understand reality as he presses for more productivity and works toward a model that subsidizes the truly needy and not everyone. Although the government has so far tried to show citizens it averted a serious crisis in the island (remember that the hurricanes in July-September triggered as much as $10 billion in losses, according to Reuters,) and there’s still money coming in from Venezuela, Raul is using the threat of a global recession to push his agenda.

I might be too optimistic, but in general this is the feeling that I got from a series of chats with other Cuba analysts. The political and economic scenario may be different within three to five years. Maybe at that point, there is going to be a new discussion in Cuba. But, unfortunately, it is unrealistic to think the final caretaker of the Revolution will change the premises of the Cuban economy and political system in the next two to three years. As the global recession unfolds, a shortage of capital in the marketplace will hinder foreign investment anywhere -- Cuba included. But five years from now, there may be a business upturn, and the revolutionary generation will step down, opening room for a new generation that may be mostly led by soldiers. We will talk about this later, but there are good and bad things about this. Let´s say that at a first glance the military-led entrepreneurship revolution isn´t that bad at all.

Raul Castro knows he must take steps quickly to help the Cuban economy navigate through the upcoming global slowdown. At some point in the future he will have to end the two-currency system, revalue the peso to cut import costs and seek ventures with allied countries to boost domestic output of raw materials and capital goods. Within the next 18 to 36 months, the government will seek to speed up experiments in agriculture so it effectively tests the military entrepreneurial model -- this is what a good source told me a few months ago. We shouldn’t rule out that the central governments grants more say at the municipal level.

Finally, one of the biggest challenges confronting Raul is corruption in Cuba. If there is something that the government is really concerned being more transparent about, it’s their handling of graft and embezzlement cases in office. How do they plan to tackle that if they are handing more economic and institutional power to the military? I wonder how.

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