Cuban Communism Is at Its Reform-or-Die Moment

It has been nearly 60 years since Cuba was ruled by anyone but a Castro. As an expected historic leadership transition to Miguel Díaz-Canel takes place this week, the country is reckoning with the costs of decades of delayed development — and wondering whether a new leader will be able to offer new economic hope.

In his decade as president, Raúl Castro rolled out modest adjustments to the economy, with momentum culminating during the country’s re-engagement with the United States and the wave of American tourists that followed. By the time U.S. President Barack Obama visited in 2016, every young Cuban I met during my own visit that year had a side hustle or was hatching plans for one. In those dizzying days, they acted like kids let loose after being grounded, and this moment was freedom, and this time — unlike all the other times over the years when the government had relaxed the economy only to retrench — it would be different.

But it wasn’t. Cubans today feel the pain of economic potential deferred once again, a result of the Trump administration’s policy reversals and the Castro government’s hesitations. Díaz-Canel will not have the luxury of being so cautious. Without the revolutionary credentials of the Castros, his only chance of maintaining the goodwill of both Communist Party elites and ordinary Cubans is to improve the stagnant economy.

There’s a tendency in the United States to view Cuba through the lens of high politics, emphasizing issues like the opening of the embassy and debates over democratization. But for most ordinary Cubans, bread-and-butter issues have been their daily struggle, and the main vehicle for understanding their northern neighbor — especially the effects of the decades-long embargo. Economic migration has long displaced political migration, driving Cubans in recent years to flee by boat but also by foot via the deadly Mexican border. It’s why baseball players defect. And it’s why people welcomed Obama’s visit — far less for his political message, but for the economic opening it signaled.

“Cubans have a reputation for fantastic singing and dancing. But do you know why we sing and dance so much here?” a University of Havana student I befriended posited one afternoon during my first visit in 2001. “Because there’s nothing else to do!”

For him, the punchline was a bitter joke, alluding to his generation’s lack of prospects. Graduating into a state-controlled economy, many young Cubans made the equivalent of about $20 U.S. dollars a month in dead-end government jobs. Those with any ambition had no outlet. They could only clock in and out — and in the evenings after work, perhaps indeed sing and dance. It was Raúl Castro who eventually tried to stir Cuba from years of inactivity. Taking over the leadership as his brother’s health declined, he was less ideological than Fidel. Critically, he allowed people to exit the state system and set up their own businesses. Hundreds of thousands of Cubans jumped at the chance. As many as four out of 10 Cubans in the labor market today work in the private economy.

But the payoff didn’t arrive. The country has slipped in and out of recession, barely recovering last year with a feeble 1.6 percent growth in GDP. The government wants to see 5 percent growth, but the economy can’t grow without vibrant industries, and there are none. A special economic zone modeled after successful Chinese ones was established for manufacturing but has attracted little attention. Longtime ally Venezuela, whose catastrophe now exceeds Cuba’s, has reduced much-needed and subsidized oil shipments. Cuba’s agricultural sector is a mess. Once a powerhouse exporter of sugar, tobacco, and citrus, these days the island imports as much as 80 percent of its food.

In part, Cuba’s failures have had to do with Raúl Castro not being revolutionary enough. He has had to account for a bureaucracy determined to maintain the status quo. Cuban elites view reform as a dangerous endeavor in their survival calculus. They have not seen it as a chance for personal enrichment the way Chinese or Vietnamese elites did. Instead, the lesson learned came from the collapse of the Soviet Union, when the island lost a third of its GDP. As a result, they have opted to manage political risk over creating economic gains.

This is evidenced in the way the country’s leaders flip-flop on private enterprise. After an explosion of growth — one that widened the income gap — a nervous government put applications to become entrepreneurs on hold last summer, even as economists called for less regulation.

Raúl Castro was scarred by the Soviet transition and the subsequent rise of the Russian oligarchs, according to James Williams of Engage Cuba, a lobbying group that supports trade with the island. “He was determined not to let that happen in Cuba,” he says. “But it’s sort of like they overlearned their lesson, and they are too anxious, conservative, and cautious.”

The country remains deeply centralized. Local officials have little agency, and as Richard Feinberg of the Brookings Institution has written, “They are neither accustomed to taking initiative nor sufficiently rewarded for doing so.”

Díaz-Canel will face the same ossified bureaucracy. His views on the economy remain murky, and it’s unclear how much he would oppose an influential hard-line faction if he isn’t part of that faction himself. But Cuba faces a shortage of cash. The country has more than $1 billion in unpaid commercial debts stretching back decades. Díaz-Canel will have to attract more foreign investment to the country if he wants to break it free from its malaise.

“It’s been a difficult place for foreign companies to remain invested in over the long term,” says Daniel Erikson, a former Obama administration official now with Blue Star Strategies, a consulting firm. “The political vicissitudes of the Cuban government often changes investment policy on a whim.”

The only promising sector has been tourism, but on my most recent trip to Havana this year, Americans, just two years ago swarming in the streets, have mostly disappeared. The Trump administration has limited how visitors can spend their dollars and complicated travel to the island. In the latest curveball, mystery illnesses — possibly attacks — on U.S. intelligence and diplomatic officers at the embassy there have not only soured political relations, but also further slowed the flow of tourists. It was probably too much to have expected that one of the most dysfunctional relationships in the world would easily normalize.

“There is so much uncertainty now,” says Danna Pascual, who manages a bed and breakfast in Havana. “It’s crazy. The U.S. is geographically so close to Cuba. But Americans are near, yet so far. It’s been a big loss for rentals, restaurants, bars, and drivers.”

Restaurant owner Niuris Ysobel Higueras Martínez, whom I met during the re-engagement period running a kitchen that couldn’t cook lobsters fast enough for her customers, also feels the current downturn.

“This not only affects those who work directly in tourism but also other businesses that provide services for us,” she says. “All private enterprises in Cuba have been impacted by the decrease.”

In some cases, businesses have lost as much as 80 percent of their customers, according to Benito Albisa Novo, who started a tour company in the early days of the Obama and Castro spring.

“Americans want to travel to Cuba, and they want to learn about Cuba,” he says. “Maybe the next American president will change the policy again.”

For now, the Trump administration’s policy is affecting many Cubans — including my former landlady. Fifteen years ago, I was her first customer, taking room and board at her place for $350 U.S. dollars over the entire summer. She used that money to buy a can of paint to spruce up the apartment, among other things. Over the years, she had converted the entire floor to a bed and breakfast, and even bought out her neighbors’ units, one by one — a slow and steady capitalist. Last November, following the State Department’s travel advisories in September, her reservations plummeted, with her place sitting entirely empty during a few weeks. Hers is just one of the many stories of Cuban tenacity and thwarted enterprise.

Meanwhile, Cubans continue to flee their beloved island any chance they can, though the end of Washington’s preferential treatment for Cuban arrivals has slowed their numbers. Their exodus peaked in 2016, when more than 55,000 Cubans left for the United States; nearly every young Cuban I met in 2001 is gone. But for those left behind now, there is no option but to place one’s hope on the new leadership.

“The younger generation hasn’t known any kind of socialism that works,” says Carlos Alzugaray, a former Cuban diplomat. “Díaz-Canel is going to be judged on his performance, and the people are going to ask, ‘Where is the prosperous and sustainable socialism that’s been promised over the last few years?’ Because it hasn’t happened.”

Additional reporting for this piece was done by Hannah Berkeley Cohen.