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When Cuba turns the Castro era back on, economic reform becomes imperative | Economic and Economic News

Raul Castro was official handing over the power of the Communist Party of Cuba after decades as first secretary, resigned on Friday on the first day of the eighth party congress.

The changing guard in the most powerful body of the country represents a shift from the Castro revolutionary leader to a new generation. It also comes at a time when the country’s economy is in trouble and in urgent need of reform.

According to government data, Cuba’s economy fell 11% during the COVID-19 pandemic, and travel restrictions affected the island’s tourism sector – and the foreign currency it brought in. – especially difficult.

But the pandemic is just the latest challenge facing the Cuban economy. The country’s leadership has been slow to enact many of the incremental economic reforms laid out during the sixth congress in 2011. The ongoing US embargo on the island, is tightened. by former US President Donald Trump, continued in effect. Meanwhile, shortages of essential goods including food and medicine – a problem before COVID-19 – only got worse.

Castro, 89, is expected to support the current leader of Cuba, President Miguel Diaz-Canel, 60, as the next party secretary.

Some analysts say it is a move that could add a new sense of urgency to address the island nation’s strained economic problems.

“Raul Castro is handing over power to the next generation of leaders and this is important because the next generation of leaders relies on performance – not historical legacy – to exercise power and as an legal source, ”Arturo Lopez-Levy, author of the new Raul Castro and Cuba: A close-up perspective on change and an assistant professor at Holy Names University, told Al Jazeera.

Some experts argue that the handover of power could bring new thinking and new priorities into the leadership mix.

“Theoretically sure, Diaz-Canel can now grab the reins and surround herself with her own team, and that’s not going to happen, as far as we can see,” said Richard Feinberg, professor at the University of California San Diego and author of Open for Business: Building a New Cuban Economy, told Al Jazeera. “In general, economic policymaking is in the hands of people who have worked there for 20 years or more.”

Cuban investors, analysts and citizens will all keep a close eye on this weekend’s convention – and see how many more of the country’s so-called “historical generations” have actually left, like Castro did. According to experts, it will be crucial to know whether economic change is really in the cards or whether business will continue as usual.

Slow reform

Back in 2011, then President Raul Castro announced reforms aimed at bringing more market-oriented policies into the historic state-run socialist economy in Cuba, including permitting. people set up small businesses and eliminate some of the notorious government bureaucracy.

Castro said at the time: “Let’s clean up our heads about all that nonsense.

Cubans have had to wait for long lines and shortages when it comes to food. Some, like Yuliet Colon, center, have turned to Facebook to share recipes designed around foods they can actually find at the market or with government diets. [File: Ramon Espinosa/AP Photo]

But 10 years later, the failure to implement the announced reforms could be “a combination of inertia, lethargy, vested interests, self-interest and cowardice,” Feinberg said, simultaneously saving The idea that inaction left “the Cuban people and the Cuban economy completely devoid of resources: no foreign exchange, no international investment, little or no domestic investment”.

One of the most pressing economic problems that need to be addressed is to make sure everyone can make a living.

The government seemed to acknowledge the urgency of the crisis after Prime Minister Manuel Marrero said this month: “People are not implementing the plan.”

Earlier this week, the Cuban government announced 63 measures to increase food production domestically, “30 of them are considered priority and some are taken immediately”, state newspaper Granma reported.

But people in Cuba, already accustomed to doing more with less due to the crippling US embargo, are frustrated with the pace of reform.

To show that he is serious about tackling the country’s economic problems, what Diaz-Canel “needs to do is assemble a coherent, young, new group of economic decision-makers. more, ”said Feinberg.

Currency conversion

Whoever it is, the country’s economic team has taken hard actions to solve the problem, especially during the pandemic.

“They are reforming at the worst possible time. They don’t have money, ”said Feinberg, adding that the country has no capacity to join the International Monetary Fund or the World Bank, which can help with resources.

Faced with the cash crisis, the Cuban government allowed “dollar stores” Last year allowed people to buy goods such as food, toiletries and electronics with a bank card loaded in US dollars or other foreign currencies. In turn, let the government collect those dollars to help cope with its liquidity crisis. Experts say that if Cuba succeeds in developing the COVID-19 vaccine, it could also demonstrate a valuable source of foreign currency.

Currently, the country is in stage major currency converter, announced in December that it had devalued its peso for the first time since the 1959 revolution.

A ‘No CUC’ sign relating to the Cuban convertible peso hangs on the wall of a store in Havana, Cuba on December 11, 2020 [File: Ramon Espinosa/AP Photo]

The island has used both the Cuban Peso (CUP) and the Cuban Convertible Peso (CUC) for many years, with the latter being used for state business and buying goods from abroad. Meanwhile, CUP is still used for daily domestic transactions and many Cubans are paid in that currency.

Cubans have until the end of June to trade in CUCs for CUP at the government-regulated exchange rate from 24 Cuban pesos to 1 dollar, meaning Cubans saving with CUC will lose a good amount. since the transition of workers in the tourism sector is particularly difficult.

It has been a tough year for these workers, as the coronavirus wreaked havoc on the country’s tourism-related businesses, which got stuck after the Trump administration reapplied travel restrictions. was loosened by US President Barack Obama.

The Cuban government has said it will publish the daily exchange rate of the Cuban peso on the Central Bank of Cuba website, signaling that it is likely to be volatile instead of keeping it at a fixed level previously – it could also make Cuba vulnerable to inflation.

Inflation could make the existing daily shortages – exacerbated by the US embargo – even worse. The devaluation also comes at a time when one of the country’s main backers, Venezuela, cannot afford to help when the country is faced with its own sanctions and hyperinflation, has hit a whopping 2,665 percent annual rate.

The embargo is in progress

US sanctions on Cuba have been in place since President John F Kennedy imposed a trade embargo in 1962 in the hope of forcing the Castro brothers – including Fidel, who was once a prime minister. Cuban general from 1959 to 1976 followed by its president until 2008; Raul, who replaced Fidel as president; and their eldest brother Ramon, who was active in the 1959 revolution – from power.

Republican and Democratic administrations maintained policy, with Trump tightening restrictions and redesigning Cuba. “State sponsors terrorism” the day before he left office.

Cuban flag bearers walk along Malecon during a protest against the US trade embargo on March 28 in Havana [File: Alexandre Meneghini/Reuters]

The embargo apparently did not reach its target, but it has contributed to the normal economic pain of the Cuban people over the decades, and this week, people taking to the streets outside the US embassy in Havana to call on the Biden administration to end it.

Mark Brennan, associate professor of business ethics at New York University’s Stern School of Business, said the Cuban government blamed the embargo for its too many economic problems.

“Since the Castro era, the regime has used the US embargo, which they call a blockade, as a simple explanation for all problems on the island,” Brennan told Al Jazeera, arguing the model The country’s economy has “perished from going away.” “

However, Brennan believes that lifting the embargo and pursuing “total and complete openness” will bring more results to the United States.

But in the end, Lopez-Levy says, how and when economic reforms happen depends on Cuba, not on the wishes of foreign countries.

The way forward

An important part of the 1959 revolution was disobedience to the wishes of the United States or other mighty countries, and the Cuban people wanted to see reform work their way and to meet their own needs.

In this March 14, 1957 photo, Fidel Castro, in the middle, stands with his brother Raul Castro, left and Camilo Cienfuegos, on the right, while fighting against the Bautista government that they eventually knocked down on. year 1959 [File: Andrew St. George/AP Photo]

“The Cuban revolution was not something imposed from outside,” Lopez-Levy said. “There is a feeling in a large portion of the Cuban people that their country does not belong to them, and that their country is to some extent dependent on the United States as a great power 90 miles to the north. That disappointment was behind the revolution so dramatically, [and] In my opinion, it is more important than the communist ideology ”.

While working in the context of that legacy, the next generation of leaders must show Cubans that they can make a real change in the areas of “food security, energy security. [and] transportation, ”explained Lopez-Levy, noting that the speed of such changes will depend on the communist party’s ability to” break the backbone of inner groups to oppose necessary reforms. necessary ”.

Feinberg said it is possible the island will move towards a market-oriented socialist economy, with a strong state-owned sector and strong regulators coexisting with a substantial and growing private sector. developing and expanding out small businesses operating from houses that Diaz-Canel has legalized.

But the current congress needs to meet the urgency of the present moment, and show it is serious about creating a legal framework for small and medium private enterprises, allowing money to be transferred from abroad and remove the red ribbon around foreign investment, including from Cuba. diaspora.

However, whether those major changes will be announced at the party’s eighth congress, remains to be seen.



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