Cuba’s New President Faces Struggling Economy

HavanaCuba has undergone its most significant political change since the 1959 revolution in electing Miguel Díaz-Canel as its new president. He takes office at a time of growing economic difficulties in the country. According to the World Bank, the economy is growing at its slowest pace since the 1990s.

In 2011, Raúl Castro implemented reforms to the communist system which allowed some Cubans to buy and sell houses as well as become self-employed. Today, there are over half a million self-employed Cubans. These entrepreneurs had advocated for further economic reforms to help the private sector grow.

However, the ruling Communist Party was unwilling for further changes to take place. Last year, Castro halted the issuing of most new licenses for private enterprises. In doing so, he took responsibility for what he described as his earlier “errors” in the reforms.

“You have this entrenched bureaucracy that clearly sees the nonstate sector—the private sector—as a threat,” said Carmelo Mesa-Lago of the University of Pittsburgh. “Right now, the challenges [to the Cuban economy] are clearly the worst they have been since the 1990s,” explained Mesa-Lago, referring to the period after the collapse of the Soviet Union when the government rationed fuel and food.

In addition to a stagnant private sector, Díaz-Canel will need to face the problems of Cuba’s dual currency, inefficient state industries, and decaying infrastructure. Falling prices for two key exports, nickel and sugar, are compounding the economic problems. Increasing foreign investment to help generate new export markets would bring revenue into the country, but the government has been slow to approve new applications for international ventures.

The recent tension in relations between Cuba and the U.S. has had a chilling effect on potential business between the two countries. “The hopeful scenario was that, with the Castro brothers either gone or in the background, some of the bile in U.S.-Cuba relations will have been drained, but I don’t see any interest in improving U.S.-Cuba relations in the short term,” said Richard Feinberg of the Brookings Institution, a Washington, D.C. think tank.

With Venezuela undergoing the worst economic crisis in its history, Cuba may not be able to rely for much longer on its closest ally in the region. Cuba depends on subsidized oil from Venezuela, but shipments have fallen by over 40 percent in the last decade. If Venezuela cuts its aid altogether, “I don’t believe Cuba has the cash flow” to pay for the oil it needs, said Jorge Piñon, Director of the Latin America and Caribbean Energy Program at the University of Texas at Austin.

Jose Fernandez, assistant secretary of state in the Obama administration, questions whether Díaz-Canel will have the ability to address these economic issues. “He’s a product of the system. He’ll be constrained in what he can do exactly because he’s not a historic figure.”

Meanwhile, the economy has become so distorted that trained professionals are leaving their positions in government because they can earn more money driving taxis for tourists. Alejandro Menéndez, who owns a music label in Havana, sums up the lack of hope many younger Cubans feel about their future. “Right now,” he said, “I feel a profound sense of apathy.”

Sources

04-18-2018 Cuba’s Struggling Economy Needs a Jolt

04-11-2018 Think You Can Do Business in Post-Castro Cuba? Sorry, but It’ll Still Be Tricky

04-04-2018 Cuba’s Next President Faces Choice between Economy and Communism

Image: Christopher Michel