Business Perspective on Change

Cuba and the slow road to reform

David Roberts

Is Cuba tiptoeing towards an open economy and even a form of genuine democracy?
Reforms enacted over the last year or so by President Raúl Castro have already gone further than many expected, or hoped for, when he took over from his brother Fidel some four years ago.

A degree of private enterprise has been introduced in agriculture and many former public employees performing services such as hairdressing are now effectively self-employed. Mortgage reforms have been introduced, along with subsidies to allow people to build their own homes. Many of the country's political prisoners have been released (a process marred by the recent death of dissident Wilmar Villar after a 50-day hunger strike), and the lifting of travel restrictions on Cubans wishing to go abroad, including the scrapping of the dreaded tarjeta blanca or exit visa, is said to be in the pipeline (although in late December the younger Castro brother poured cold water on hopes that the restrictions would be ended imminently saying it was too early). It's perhaps ironic, therefore, that US travel restrictions on those visiting the Caribbean island, although eased somewhat by Barack Obama, remain in place.

This may all sound rather paltry given the enormous distance the country still needs to go to become a western-style liberal democracy, but nevertheless it does represent some progress and the Cuban authorities need to be encouraged to go further down the reform road and to bring the Cuban people the standard of living they deserve. Figures often cited put the average monthly income in Cuba at US$20 at the official exchange rate. Clearly, this figure is somewhat misleading given the artificial exchange rate and the cost of living, and the CIA's World Factbook puts 2010 GDP per capita, on a purchasing power parity basis, at US$9,900 - higher than many countries in the region including the Dominican Republic and Jamaica, along with almost all of Central America.

In fact, the Cuban figure is very close to Brazil's US$10,800, and almost certainly comes with a much more uniform distribution of wealth than in most countries in Latin America.

None of the above is an attempt to make excuses for the dire economic situation that Cuba is in and has been in for many years, certainly since the demise of the Soviet Union, but it's merely to put things in some sort of perspective. The performance of the Cuban economy also needs to be seen in the context of the five decades-old trade embargo imposed by the US. Clearly the "logic" that in order to lift the embargo Washington needs to see substantial progress towards democracy in Cuba doesn't hold up - if it did there would be similar embargos against a whole slew of countries, including close allies of the US such as Saudi Arabia, the UAE and Bahrain (did someone mention oil?), all of which score worse than Cuba in the Economist Intelligence Unit's 2011 democracy index.

If anything the embargo hinders rather than encourages the process of democratization in Cuba, as the Castros can use the measure to defend their authoritarianism, as well as cite it as a reason (only partly justified) for the island's economic woes.

A full or even partial lifting of the embargo may not be politically feasible in the present electoral climate in Washington, but it is something that whoever wins in November should seriously consider for the wellbeing of ordinary Cuban people and for US relations with the region (the demand to lift the embargo is one of the few things that seems to unite Latin American leaders), not to mention the opportunities it would create for US trade and investment.

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