Highlights
– President Raul Castro has lifted bans on specific consumer goods and begun to reform the agriculture and housing industry
– Support will be generated for Castro’s government in the short-term
– However, low purchasing power of the peso and a failure to address substantive issues will likely lead to class tensions in the long-term
When Raul Castro assumed power from his long-ruling brother, Fidel, on February 24, 2008, and instated numerous top communist ideologues from the old guard to high-ranking Council of the State positions, it appeared political reform would remain a long-term goal for Cuba (Previous Report). Five weeks after the succession of power, however, Raul has begun to implement small economic reforms that were fiercely opposed under his brother’s control. This lifting of certain restrictions in recent weeks has given hope that at least moderate economic change will continue in the near- to mid-term. However, the risk that new economic changes pose to class tensions may outweigh the benefits Raul is hoping will continue to generate support for his fledgling rule.
Bans Begin to Lift
Restrictions were first lifted on specific consumer goods. During the week of March 31, 2008, Cuban shops began to sell computers, motorbikes, flat-screen televisions, and a range of home appliances that had previously been banned under Fidel. The ban has also been lifted on the ownership of personal cellular phones, previously only available through foreigners who served as middlemen purchasers. Tourist-only hotels have also been opened, and a stream of Cuban visitors has been seen on private beaches once reserved only for foreign guests.
In addition to consumer products, restrictions have been lifted in the agriculture industry in hopes of stimulating falling production. New changes will allow private and cooperative farmers to utilize un-used state land for cash crops such as coffee and tobacco. The reform will also abolish state-established prices for crops, allowing farmers to sell their goods at prices determined by market demand. Currently, Cuba is forced to import more than 80 percent of its commodities delivered to citizens in monthly ration baskets, despite a year-round growing season, costing the nation up to US$1.6 billion a year. The new change will likely work to decrease food shortages in the long-term, but with little modern equipment available, the process of food production will need time for adequate development.
The housing industry has also seen a variety of changes. On April 11, 2008, in the first formal decree published since the beginning of his presidency, Raul announced the new ability of Cuban citizens to gain titles to state-owned homes they currently rent, a significant step forward as no housing market exists in Cuba. Prior to the new decree, people were only able to exchange homes through a legal process called a “permuta”, in which money was paid under the table to purchase a home. Now, Cubans will be able to gain a title to a property, allowing it to be passed on through inheritance to children or relatives. The government had begun the phasing of state-owned homes into privately owned deeds in late 2007, but the April 11, 2008 decree will simplify what had developed into a highly bureaucratic and lengthy process.
Citizen’s Response
The reforms have come under criticism by oppositionists, generating a rush of support for Raul’s government since the end of March 2008. However, the thrill may be short lived, for while previously illegal products are now available, Cubans are realizing the purchasing power of their currency, the peso, does not stretch to afford such luxuries as DVD players and laptops. The state controls nearly 90 percent of the country’s economic activity, and state salaries generally do not exceed US$25 per month for a majority of the population.
On April 11, 2008, Castro announced a change to the wage allowance system likely in an attempt to rectify this problem. Instead of monthly salaries being determined by the state, caps have now been lifted to allow employees to be compensated for productivity. According to Raul, this reform is meant to allow wages “to recover their role and everyone’s living standard corresponds directly with their legally earned incomes”. However, this may lead to an unanticipated backlash against the government, as greater class distinctions will likely develop between those whose wages allow them to afford new luxury items, and those whose do not.
Raul’s Motivation
As previously reported, we contend that moderate economic changes will continue in the near-term as Raul settles in to his presidency (Previous Report). By choosing to abolish visible bans, such as those on consumer products, Raul likely hopes to deflect pressure for deeper economic and political changes. While this may satisfy citizens clamoring for reform from the new government in the short-term, it may become a negative for Raul as expectations for change expand to more substantive issues, such as the opening of the market to allow increased opportunities for small business. The short-term rush of support will help to reinforce the fact that Raul can carry Cuba without his brother’s help, but economic change will fall in the long-term if deeper issues are not addressed.
