For Cuba, Few See Rapid Change, Especially in Economy

Dec 22, 2014

Every day, dozens of Cubans gather in Havana’s Parque Central to trade gossip and talk baseball. It is a tropical, if less offbeat, version of Speakers’ Corner in London’s Hyde Park.

On Thursday, however, the excited chatter wasn’t home runs but news that the U.S. and Cuba were ending five decades of hostility and re-establishing diplomatic relations.

“For once, in a country where you breathe immobility, something real was happening,” wrote Victor Ariel, a Cuban dissident journalist who described the scenes around Havana for online newspaper 14ymedio.

From barber shops to the beach, the talk was Wednesday’s surprise announcements by U.S. President Barack Obama and Cuban leader Raúl Castro. Among the moves, which included Cuba’s release of dozens of political prisoners, the U.S. said it would make it easier for relatives of Cubans to send money back to the island and seek to take Cuba off its list of state sponsors of terror.

All Cubans seemed to agree the news was historic. The disagreements came in how much change it might actually bring to a country where change happens at a snail’s pace, if at all, where communism has survived for nearly 25 years after the end of the Cold War.

For the glass-half-full crowd, the U.S. moves will provide badly needed economic relief for many Cubans and help struggling entrepreneurs get access to money and materials in an economy still dominated by a Soviet-like state.

For the half-empty crowd, any deeper change in the hemisphere’s last communist government is likely to be very gradual, both because the U.S. embargo remains in place and because Cuba’s own government has been unwilling to make deeper economic reforms or loosen its grip on power.

“Cubans aren’t popping the champagne just yet,” said Michael Shifter, who is president of the Inter-American Dialogue, a Washington, D.C. think tank, and who was visiting Havana. “Change for the average Cuban is going to be slow and gradual and modest.”

Some said Cuba’s regime clearly took the move at a time of weakness, with a feeble economy and its closest ally and patron, Venezuela, reeling from the drop in oil prices.

Since Raúl Castro took over from his brother Fidel in 2008, the government has undertaken a series of tentative economic reforms, though they are a far cry from the changes that other communist regimes like China or Vietnam took in opening up their economies.

Some 170,000 farmers now work their own land, and approximately 300,000 people have set up their own small-scale businesses, though these have to come from a list of 201 approved professions by the government, from hair stylist to restaurateur. The government has trimmed about 600,000 from the bloated state payroll.

But the changes fall well short of what many economists say are needed. Some 2,000 state enterprises still dominate the economy, all trade and currency is controlled by the government, and small businesses are suffocated by lack of capital, corruption, constant government inspections and a complex and baroque tax code that has been modified three times over the past three years.

The results have been disappointing. The government said economic growth this year was likely to be about 1.4%. An estimated 40,000-50,000 Cubans emigrated in the past year.

“The reforms have been a good thing, but they haven’t been profound enough or fast enough,” said Peter Schechter, head of the Latin America center at the Atlantic Council in Washington.

Cuban economists have been urging the government to deepen the reforms, but the government is largely divided between a younger generation that wants to speed up reforms and an older generation worried about change.

“The government is at a crossroads,” said Ted Henken, former president of the Association for Study of the Cuban Economy and author of “Entrepreneurial Cuba,” a book about the private sector in the Communist island. “It should allow more private professions, give more autonomy to the private sector, permit the concentration of wealth and allow private property as a right, instead of just being tolerated. But they may be fearful of losing control or giving up too much of their power at once.

In many ways, the U.S. moves this week to re-establish ties with Cuba are aimed at people like Niuris Higueras, a 46-year-old owner of the Atelier restaurant in Havana’s central Vedado district.

Ms. Higueras is one of a rare but growing breed of entrepreneurs in Cuba that are trying to be capitalists in a country where Marxism-Leninism is still the official creed. In 2010, she opened a small paladar, as privately run restaurants here are known. Her staff has grown to 15 from eight, and sales jumped 50% since then.

Under new U.S. rules announced by Mr. Obama, however, she will now be able to accept credit cards from American guests, and an influx of extra money to Cuba should help bring in more business.

“We were really happy because this represents a historic development,” she said on Thursday in a telephone interview, “and will open opportunities to the country´s entrepreneurs.”

The biggest boost in the short-term from the U.S. steps will come from remittances, which will now allow relatives of Cubans to send back $2,000 a month to their homeland, up from $500 at the moment.

Remittances are the island’s leading source of income. In cash and in kind (think appliances and clothes), they account for $5.1 billion a year in income, nearly double tourism at $2.6 billion, according to government statistics.

The U.S. exported $359.4 million to Cuba last year, although U.S. officials said that they had issued licenses for even more, including $300 million of medicine and $3 billion of food. But now, Mr. Obama’s reforms mean that the Cubans could receive a range of other U.S. products, including much-needed construction supplies. Telecom companies can begin to operate in Cuba, an island that is far from being as wired as its neighbors in Latin America.

Another key move for Cuba is getting off the U.S. terror blacklist, which restricted Cuba from getting financing from U.S. and non-U.S. companies. Many European banks like BNP Paribas that used to give financing to Cuba stopped doing so in recent years because of the U.S. sanctions, said Philip Peters, head of the Cuba Research Center in Alexandria, VA.

“The biggest economic impact in this package is the terrorism list, which made it hard for Cuba to do business internationally,” he said.

Source: The Wall Street Journal

Corrections & Amplifications

The U.S. exported about $359 million of agricultural and other products to Cuba in 2013. An earlier version of this article incorrectly said the U.S. exported $300 million in medicine and $3 billion in food. Those figures were the amounts licensed by the U.S. Commerce Department for export, not the amounts actually exported. (Dec. 21, 2014)