Cuba: Will political change follow economic liberalization?


In response to crippling economic stagnation, Cuba has adopted regulations that point to a shift towards a more market-oriented economy. However, political control over key sectors, including education and the media, still largely rests with the state. The most striking policy, which allows thousands of professions to unfold outside the remit of the state, will change the nature of doing business in Cuba and could lead to increased innovation and interaction with international markets. Could Cuba’s economic liberalization lead to new political freedoms?

Change tips

In 2020, the number of tourists visiting Cuba decreased by 80% and its economy decreased by 11% as a result. Times are tough for Cubans, with queues stretching outside grocery stores and businesses forced to close. The economic slowdown has been lurking for many years. In particular, Cuba suffered from the Trump administration’s sanctions, imposed to appease the Republican electoral base by designating the Cuban government as “sponsor of terrorism”For his support for Venezuelan Maduro.

In response to economic difficulties and US sanctions, Cuba has indicated its intention to liberalize the economy. A strong signal of change to Castroist economic ideas is demonstrated by the Díaz-Canel government removal of the somewhat confusing dual currency system as of January 1, 2021, previously created in 1994 after the loss of Soviet subsidies. This major change, which led to soaring inflation and the devaluation of the peso, had costly implications for Cubans by exerting downward pressure on the purchasing power of wages and pensions.

A significant change in the privatization of companies

The currency change is only part of a series of major reforms. On February 6, Labor Minister Marta Elena Feito Cabrera said the government would allow private participation in more than 2000 professions; a stark contrast to the previous limit of 127 occupations. The expansion of private participation means that previously illegal businesses can now operate openly.

It is hoped that this will trigger a wave of innovation across a wide range of sectors. It could work in tandem with pandemic recovery. For example, there has been encouraging news regarding the clean Covid-19 “Soberana 2” vaccine: The government expects to be able to administer this vaccine to the entire Cuban population by the end of the year and to export the vaccine to Latin America as a source of income.

However, the new private business law comes with many caveats: Private companies lack some of the resources and access to supply chains that state-owned companies have. For example, the government retains control of all major industries and wholesale stores and monopolizes 124 professions, thus limiting supply possibilities. In the short term, the major restructuring of the economy will inevitably lead to painful effects with bankruptcies and rising unemployment. Yet in the long run, openness can bring positive benefits through increased opportunities for entrepreneurs. The sectors included in the 124 professions remaining under the supervision of the State (including law enforcement, defense, media, education) suggest that Cuba seeks to follow the model of China or Vietnam through the introduction of capitalist economic policies with the maintenance of strict political control.

Could improved relations with the United States spur political change in Cuba?

A follow-up effect of Cuba’s economic liberalization could be a strengthening of relations with the Biden administration. Indeed, the recent theme of economic policy changes would require more investment and foreign capital, for which improved relations with the United States would be important.

Stronger ties could have political liberalization effects in Cuba. The Obama administration’s relationship with Cuba was emblematic of this trend: approach to normalizing relations with Cuba, which aimed to “create economic opportunities for the Cuban people“, increased influence of the United States in other spheres of Cuban society. Citizens began to criticize the problems such as access to medical care, education, unemployment and national media sources, while religious leaders and artists began to express positions contrary to the official narrative. This suggested that civil society was for the first time open to verbally opposing the political system, although the government responded with detentions some dissidents and censorship blog posts. A similar phenomenon is possible if Havana’s new economic policies lead to stronger economic ties with the Biden administration.

Is a new Cuba realistic?

Cuba is ripe for change. The push and pull of reform efforts in recent years suggests differences between traditionalists and more progressive, younger factions. In April, Raúl Castro will step down as head of the Communist Party, which will see Castro’s name end in Cuban politics for the first time in over 60 years. This has major symbolic meaning: Fidel Castro established the political and economic systems that endure today, such as the characteristics of a one-party state with full control of the media. Combined with the election of Biden, who will likely take a more lenient approach to Cuba than Trump, and an array of free market policies amid an economic crisis, it seems realistic that Cuba could undergo a major structural change in coming years.

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