Recipes to Reconstruct a Country in Ruins

Buildings in Cuba, like this one in Havana, have routinely been allowed to collapse, during decades of state control of the economy.

14ymedio bigger14ymedio, Mario J. Pentón, Miami, 20 April 2018 — The almost unanimous support received in Parliament by Miguel Diaz-Canel, who assumed his duties as head of state on Wednesday, has not been accompanied by a concrete commitment to rebuild the country left in ruins by almost six decades of state control of the economy under the directions of Fidel and Raúl Castro.

With a stagnant economy dependent on Venezuelan oil, and a Soviet-style state apparatus that consumes the nation’s scarce resources, the new president faces a monumental challenge: to continue and deepen the economic reforms undertaken by Raúl Castro and to avoid the floundering of the political system, as several experts explained to 14ymedio.

“Miguel Diaz-Canel’s biggest challenge is to direct the economy along the path of economic growth,” says Emilio Morales, president of Havana Consulting Group, based in Miami.

Díaz-Canel, who will turn 58 this Friday, received power from Raúl Castro after a decade of slow reforms and must “rekindle the thaw with the United States,” he adds. Morales sees as the main obstacle to this “the shadow of the octogenarian generation” that, in his opinion, will continue to hold power from its control the Cuban Communist Party (PCC). If he reaches the end of his term, Raúl Castro will continue at the head of the PCC until 2021.

In order to “rekindle the thaw” with the United States (the process initiated by President Barack Obama in 2014), Morales says the new Cuban leader would have to solve the problem of the confiscations of American companies in the early 1960s, free Cuba’s productive forces through a law that allows free enterprise, and authorize the private investments of Cubans of the Island and the diaspora. These measures have been a historical demand from the opposition, but Havana has always responded with more economic centralization.

“The decade of Raúl Castro’s presidency has been a lost decade,” he says, although he points out that opening up to small private companies was a step forward. More than half a million Cubans have moved to employment outside the state since 2010, when Raúl Castro promoted self-employment as a way to alleviate the burden on public finances.

Morales adds that the government should let the laws of supply and demand operate in a free market, allow the direct hiring of Cuban personnel by foreign companies without requiring that they can only do so through contracts with the state, revitalize transport and deepen structural reforms in agriculture.

“It is necessary to eliminate the monopoly in agriculture of Acopio — the state procurement and distribution agency — and let the farmers who are leasing unproductive land decide what to produce, whom to sell it to, and set their own prices, without state intervention, in addition to extending the lease contracts indefinitely,” he says.

Cuba spends around two billion dollars every year to import products for the domestic market that could be produced on the island. The inefficiency of the state, owner of all the large and medium-size companies in the Island, has been recognized by the authorities themselves, but they continue to rely on “socialist state enterprise” as the backbone of the economy.

Elías Amor, a Cuban economist and human rights activist based in Spain, believes that it is “nonsense” to maintain the current economic system. He recently published a list of 50 urgent actions that the country’s executive must take to reactivate the economy.

“Cuba must move towards a market economy socialism, where the axis of the economy is private enterprise and the state recovers its role as a distributor of income, allocator of resources and promoter of economic development,” explains Amor, who urges the Government of the Island to abandon its regent role.

“The so-called Guidelines have to be reviewed in depth because they are unattainable within the current economic system. I think it is vital that public accounts are balanced and the (system of two) currenc(ies) is unified,” the expert added.

The system proposed by Amor includes a privatization policy that allows farmers to own the land and reduces the weight of the state sector in the economy by substantially reducing the number of personnel in the Army and State Security apparatus. “In Cuba, 85% of employees are work for the State, which should be reduced to no more than 15% to make the country prosper,” he explained in a telephone conversation.

For the Cuban professor Carmelo Mesa-Lago, the election of Diaz-Canel rests on his loyalty to the Communist Party. “The party chose him because they see him as a loyal person, who will not change anything,” the economist told Bloomberg Businessweek.

Mesa-Lago stressed that on the island “there is a stagnant bureaucracy that clearly sees the private sector as a threat,” in reference to the glacial winds blowing over Cuban entrepreneurs after the government backtracked and decided to freeze the issuing of licenses for the most profitable private sector businesses.

Last year Mesa-Lago and other experts presented Voces of change in the Cuban non-state sector, a study on the incipient private sector in the Cuban economy. At that time, the self-employed were asking for more opportunities to invest in their businesses and fewer bureaucratic obstacles. They also demanded the opening of wholesale markets and the free importation of merchandise, but so far the Plaza of the Revolution has remained deaf to their needs.

With regards to the challenges facing the new president, Mesa-Lago is not optimistic. The crisis, he says, is not as severe as when the Soviet Union disappeared, but the challenges are greater since 1990.


The 14ymedio team is committed to serious journalism that reflects the reality of deep Cuba. Thank you for joining us on this long road. We invite you to continue supporting us, but this time by becoming a member of 14ymedio. Together we can continue to transform journalism in Cuba.