Monday, 11th December, 2023
Monday, 11th December, 2023

Squeezed by sanctions, pandemic, Cuba finally opens up economy

Cuba is undergoing a paradigm shift: after
decades of tight, centralized control, the communist government is opening up
the bulk of its economy to the private sector.

While economic decline and spiralling unemployment are the main drivers,
analysts say the liberalization measures can also be seen as an overture to a
new US president.

“It is definitely a strong signal at a crucial moment when the US
administration has said it is revising the policies of (Donald) Trump towards
Cuba,” said Ricardo Torres, an economist at the University of Habana.

Six decades of US sanctions, toughened during Trump’s term in office, have
claimed a heavy toll on Cuba’s economy, worsened by the coronavirus crisis
and a steep drop in tourism, a critical sector.

Last month, Havana said Trump’s sanctions cost the country some $20
billion, adding that “the damage to the bilateral relationship during this
time has been considerable.”

The Cuban economy shrank 11 percent in 2020, and exports declined by 40

At the weekend, the government in Havana announced it would authorize
private enterprise in a bid to boost its economy and create jobs, though
limited to individual entrepreneurs for now, not businesses.

The number of authorized private activities would grow from 127 to over
2,000, but excludes 124 sectors including the press, health and education,
which remain in government hands.

The reform represents a major ideological shift in a country where the
government and its affiliate companies have monopolized most of the economy
since 1961.

– ‘Long overdue’ –

Cuba began timidly opening up to private capital in the 1990s before fuller
authorization in 2010, followed by a boom after the historic warming of ties
with Cold War rival the United States in 2014 under then-president Barack

Today, about 600,000 Cubans — some 13 percent of the workforce — are
employed in the private sector.

Most work in hotels, restaurants, transportation and tourist accommodation.

Millions of people work for the government, but the exact number is not

Trump reversed many of Obama’s moves to ease tensions with Cuba.

He banned American cruise ships stopping over on the island, blacklisted a
range of Cuban companies and bosses, prosecuted foreign companies doing
business there, and made it difficult for Cubans working abroad to send money

The new US President, Joe Biden, has promised to bring back some of Obama’s
policies to normalize ties, while also paying attention to human rights
concerns in the country of some 11.2 million people.

Some in the United States have welcomed Cuba’s policy shift, which will for
the first time see private salary earners in sectors such as agriculture,
construction and IT.

“This is long overdue, it’s welcome news. And the United States should
affirm that the embargo was never intended, and will not be used, to penalize
private enterprise in #Cuba,” US Senator Patrick Leahy said on Twitter.

Former Obama adviser Ben Rhodes tweeted the announcement was “a big step
forward for Cubans and a welcome signal. The Biden Administration can make
this more beneficial for the Cuban people by resuming the opening to Cuba as
soon as possible.”

– Skepticism –

For many of Cuba’s leaders, the change may be difficult to swallow.

“There is still a lot of skepticism regarding the word ‘private’,” which
many see “as people who can conspire against power,” said Cuban economist
Omar Everleny Perez.

But politicians appear to have read the writing on the wall just like in
Vietnam in the 1980s, where the Communist Party managed to stay in power by
heavily liberalizing the economy.

“We are still a little far from that, but (the Cuban leaders) have it in
mind,” said Perez of the Vietnam example.

The southeast Asian country, too, was under US sanctions, lifted in 1994
after rapprochement with Washington.

“So from a geopolitical point of view, there is a lesson that is important
to recognize,” said Perez.

For his part, Torres said Vietnam’s economy was smaller and the country
more rural, making change easier.

But there is a lesson to be learnt from the fellow Communist country’s
experience: “if you want to create jobs, you have no choice but to create a
framework for the private sector to grow”.

John Kavulich, president of the US-Cuba Trade and Economic Council, said
the Cuban government must now convince the Biden administration that it is
serious about restructuring the economy.

“If the Biden administration believes the (President Miguel) Diaz-Canel
administration is prepared to do what is difficult, maintain the processes
despite challenges, then far easier for Washington to create opportunities
for engagement,” he said.

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