Is Cuba's reform going in reverse?

Is Cuba's reform going in reverse?
By Bert Hoffmann, German Institute of Global and Area Studies | Nov.
1, 2016 at 2:56 PM

When U.S. President Barack Obama made his historic March 2016 visit to
Havana, Cuban expectations of better times to come were high. As the
United States goes to the polls to select its next president, it's clear
that rapprochement with Cuba will be a key achievement of the Obama
administration.

But the slow pace of reform in Cuba is raising questions about President
Raúl Castro's legacy. Frustration has begun to set in, with energy cuts
paralyzing production, the economy shrinking and the country's economic
"updating process" seemingly going in reverse.

What is derailing Cuba's much anticipated reform course?

More questions than answers

With the economy forecast to decrease by 2.9 percent in 2016, the
country's socialist government is reimposing price controls and putting
brakes on the emerging small-scale private sector.

Is Cuba's backtracking the fallout from Venezuela's drastic reduction in
oil shipments to the country, forcing it to slash imports and adopt
austerity measures? Or does Havana fear losing control as White House
policy turns from strangulation to embrace?

Or perhaps the retrenchment is the result of the Raúl Castro government
gathering strength to finally tackle its most complex economic problem:
overcoming the highly distorting co-existence of two competing
currencies, the dollar-linked Cuban convertible peso (CUC) and the
greatly devalued Cuban peso (CUP)?

The answer probably is a combination of all three according to a recent
study assessing the prospects of Cuba's development model, which I
undertook alongside other European and Cuban scholars for the Third
World Quarterly.

The beginning of 'a very long journey'

In Cuba, economic and political considerations go hand in hand. As
Havana-based economist Ricardo Torres has stressed, in the 10 years
since Raúl Castro assumed office, the island's economic structure has
indeed been substantially transformed.

What's more, Raul's reforms over the past eight years have not been ad
hoc changes; they form part of a long-term strategy of gradual reform,
backed by programmatic documents adopted at the Communist Party's
conferences.

But unresolved contradictions in the economy have limited positive
effects on growth and salaries. Torres concludes that it is becoming
increasingly clear that Cuba's reforms over the past eight years are
just at the early stage of a very long journey.

The most dramatic contradiction of the Cuban economy is the
uncomfortable co-existence of two disparate currencies. State salaries
are paid in CUP, averaging 687 pesos per month. At official currency
exchange houses, this is less than 40 CUC, or $40.

Since Cubans need to buy more and more everyday items – from cooking oil
to shampoo – in the convertible currency, the chasm with their peso
salaries widens. This is not only damaging the economy but also tearing
apart the island's social fabric.

Combining these two currencies will be monumentally difficult, with
implications for all sectors of economy and society. And it has long
been on Raul's agenda.

Some reports suggest that the often postponed monetary unification is
set to occur before year's end. That may necessitate slashing imports,
not just to adjust to reduced Venezuelan supplies but, crucially, to
build up reserves that could defend the currency against foreseeable
inflationary pressures.

It's not (just) the economy, stupid

In Cuba, political factors weigh very heavily. Laurence Whitehead from
Oxford University stresses that the puzzle of the exceptional resilience
of the Cuban regime cannot be understood without taking into account its
sources of legitimization and discursive justifications.

For half a century, Havana's uncompromising stance against the United
States played a key role in bolstering support for the socialist
government, even when such political isolation meant hardship for the
Cuban people. The recent rapprochement with Washington is a diplomatic
victory, but normalization – and particularly the decidedly warm welcome
given to Obama – weakens this pillar of legitimization.

Norwegian analyst Vegard Bye argues that Obama's opening to Cuba may
have actually imperiled the reform process. Fears in Havana that
friendly ties with the United States, combined with a strengthened
entrepreneurial sector at home, will eventually undermine the
revolutionary project could lead to retrenchment.

While foreign observers usually see the emergent private sector only in
tourist-targeted restaurants (paladares) and B&Bs (casas particulares),
Yailenis Mulet from the University of Havana shows a much more complex
picture in her analysis of Cuba's shoe-manufacturing sector.

Based on field research, she estimates that the private sector
associated with the shoe production chain employs over 12,000 Cubans,
making it a sizable industry in the shrunken island economy. But
restrictive regulations, the weak legal standing of many producers in
the supply chain and the lack of wholesale markets for production inputs
raise manifold obstacles to the growth of this remarkable domestic sector.

Meanwhile, the country is importing brand-name shoes to sell in the
state-run shops aimed at Cubans with sufficient access to hard currency.

'More participatory' and 'democratic' socialism

When Raúl Castro steps down as head of state in 2018, as he has pledged,
his legacy will depend on both the results of the economic reforms he
initiated and his agenda for political change.

While he has forsworn transition to a multiparty democracy, he did
promise to make Cuban socialism more participatory, the Communist Party
more democratic and the media more critical.

And indeed, since Raúl Castro took over from his brother Fidel 10 years
ago, Cuba has turned from a model of charismatic socialism to one of
bureaucratic socialism. This has meant depersonalizing politics and
strengthening the nation's institutions.

As I argued in my contribution to the Third World Quarterly, Raúl's
"bureaucratic socialism in reform mode" has changed Cuban politics in
two additional ways.

First, the liberalization of travel and migration laws has expanded
citizen rights vis-á-vis the state: Cubans no longer depend on an exit
permit and goodwill from above to go abroad.

Second, the de facto (if unsteady) tolerance of emerging digital media
voices has led to the most diversified Cuban public sphere since before
the 1959 revolution. The state still defends the state media monopoly as
a constitutionally enshrined Communist pillar. But the reach of
government publications like Granma is eroding.

In practice, Cubans – especially the young and urban – can now access
all sorts of information via mobile phones and flash drives.

Meanwhile, as Cuban socialism is digesting the impact of reconciliation
with the United States and the fallout from Venezuela's economic and
political crises, Raúl Castro's broader agenda of political change seems
paralyzed.

Quite a number of the major projects he had announced still await
implementation, including reforming the country's constitution, revising
electoral law, and reducing the number of delegates in the National
Assembly.

As Obama's tenure comes to a close, Raúl Castro has over a year left in
his presidency. But the clock is ticking, and Raúl certainly knows he
shouldn't leave the reforms to his successors in Cuba's soon-to-come
post-Castro era.

Bert Hoffmann is a senior research fellow at the German Institute of
Global and Area Studies.

Source: Is Cuba's reform going in reverse? - UPI.com -
http://www.upi.com/Top_News/Opinion/2016/11/01/Is-Cubas-reform-going-in-reverse/2151478023719/