Cuba's Economic Reforms: Progress or Survival Tactic?

New regulations guiding the sale of private property go into effect in Cuba today.  The laws were announced on November 3, and mark the first time Cubans can buy or sell property since the 1959 Revolution. The new regulations fit into a larger scheme of reforms undertaken by President Raúl Castro since assuming power from his brother Fidel in 2008. These reforms aim to shore up the Cuban economy, which is highly dependent on Venezuela (whose government provides nearly $5 billion a year in aid), and which has experienced sluggish growth since the 2008 economic crisis in comparison to the rest of Latin America and the Caribbean. Since taking office, Castro instituted reforms that include easing restrictions on purchasing luxury goods, supporting small businesses and entrepreneurship, and allowing the private sale of cars and homes. While the reforms are changing Cuban society, undoing decades of state-control and interventionist economic policy, many question their effectiveness.

Some of the most significant reforms undertaken by Raúl Castro include the following:

•Cell phones and electronics. In 2008, the government eased restrictions on the purchase of luxury goods such as DVD players and cellular phones. By 2010, Cubans registered nearly one million cell phones on the island.

•Agriculture. In a bid to improve agricultural productivity and to achieve food self-sufficiency, the government agreed to lease government land to private farmers in 2008. The government currently leases around 3.2 million acres to small farmers. Farmers must set aside a certain amount of their production to the government based on the size of their plot, but are permitted to keep the surplus to sell on their own. However, the industry still suffers from lack of easy access to necessities like seeds, fertilizer and modern machinery.

•Self-employment. Since assuming office, Castro repeatedly expressed the need to reduce the state workforce, proposing to fire as many as half a million people. To that end, the state has eased restrictions on self-employment, and the self-employed, or what Cubans call cuentapropistas. In 2011, the government expanded the number of permitted professions, which now includes things like event planning, street vending, and taxi driving. Small businesses may also now hire employees outside their family. Restrictions were also eased on the number of guests that could be hosted at small restaurants, called paladares, and the tax burden was reduced on Cuba’s casas particulares, or small hotels. The number of self-employed Cubans more than doubled in the past year, now numbering 330,000—far surpassing government expectations. 

•Cars and private property. In October, the government legalized the buying and selling of cars, and it legalized the buying and selling of private property in November. The government’s rationale for both was to eliminate the middleman in interactions between Cubans, as the transactions previously required complicated government-run trade or bartering systems. Both reforms give average Cubans access to collateral for small loans, which could potentially be used to start small businesses. 

However, while the reforms are expansive, many question their validity. Some criticized the reforms for contributing to class divisions in the Communist country, since cell phones, small businesses, cars, and homes are prohibitively expensive in a country where the average monthly wage is $20. This makes capital available only to those with family abroad. A recent survey by Freedom House found that 41 percent of Cubans are happy about the reforms undertaken by the government, and believed their country was making progress, compared with only 15 percent previously. But Arturo Lopez-Levy, a former political analyst in the Cuban Interior Ministry, questions the wisdom of financial liberalization without political reform: “They are trying to let the economic genie out of the bottle while keeping the political genie in. That’s not going to work.” AS/COA’s Christopher Sabatini tells The Globe and Mail the heart of the reforms are really about staying alive, more so than politics or economics: “Cuba’s future will boil down to whatever it needs for political and economic survival, rather than any principled commitment to the revolution.”.

Learn More:
 

• AS/COA Cuba Working Group
• Center for Democracy in the Americas Report, "Cuba’s New Resolve: Economic Reform and its Implications for U.S. Policy"
• Gaceta Oficial de la República de Cuba, where government announcements are published.
• Freedom House report on Cuban perceptions about reforms.