Wednesday, April 17, 2013

1040. Venezuela Forces Cuba's Pace of Change

By Marc Frank, Financial Times, April 16, 2013

Hugo Chávez’s death, the narrow election victory of Nicolás Maduro, his chosen successor, and Venezuela’s stuttering economy are forcing Cuba, the country’s closest regional ally, to pick up its reform heels.

In 2011, before Mr Chávez’s failing health potentially imperilled Caracas’ annual supply of $3.5bn of subsidised oil to Havana, Cuba’s Communist party adopted plans to “update” its stalled socialist model.

But two years later, Cuba remains only part way through that transformation process, as even Miguel Díaz-Canel, the new vice-president, admitted recently on state television.
“We’ve made progress on the issues that are easiest to solve, that require decisions and actions that are less complex,” said the 52-year old. “Now what’s left are the more important choices that will be more decisive in the development of our country.”

To date, measures under Raúl Castro, 81, the president, have bettered everyday life but failed to improve Cuba’s underlying performance, critics say. For the regime, it is a balancing act: change too fast and the regime could unravel; change too slow and the economy will deteriorate and undermine the Castro brothers’ legacy anyway.

Mr Castro, who was quick to congratulate Venezuela’s president-elect on his victory, which should ensure that Cuba has five more years of cheap oil, has three main goals, says Bert Hoffmann, a Cuba expert at the German Institute of Global and Area Studies: “Avoid splits in the elite, and also social unrest; organise a succession; and get gradual economic reforms started to secure the regime’s survival.”

At least one part of the juggling process, the organisation of a potential succession, has happened after Mr Díaz-Canal was appointed vice-president in February, putting him a heart beat away from the presidency.

The former electrical engineer and party official, known as more of a technocrat than a political firebrand, has already taken over some of Mr Castro’s ceremonial functions – such as travelling to Rome for the election of the Pope.

This has been accompanied by a slight softening towards some of the regime’s internal critics. Yoani Sánchez, the pro-democracy blogger who operates despite general government restrictions on internet access, and Berta Soler, leader of the Ladies in White, can travel abroad after new rules that allow all Cubans to leave and return.

The appearance of the economy is also changing. Often funded by exile remittances, which have doubled in two years to $2bn, once barren city streets are clogged with private taxis and small businesses that employ about 400,000 in total. Some 1,700 restaurants and 5,000 bed and breakfasts are operating, against a few hundred in 2010.

Sloppy Joe’s, a Havana haunt once famous among tourists in pre-US embargo days, even reopened last week – too late for Beyoncé and Jay-Z’s recent controversial trip but not for the growing stream of American visitors, over 90,000 last year, that have followed looser US restrictions.

Farmers are selling almost half of their produce directly, bypassing a state monopoly. Demand for paint, plaster and skilled tradesmen has mushroomed after Cubans were allowed to buy and sell their homes.

Nonetheless, those changes are only around the edges of what remains a centrally-planned economy that needs to attract foreign investment and grow by more than 5 per cent a year if it is to have any hope of rebuilding crumbling infrastructure and create sufficient jobs to absorb the bulk of Cubans who work for a state that barely pays a living wage. Since 2008, when Mr Castro became president, economic growth has averaged just 2 per cent.

“The macroeconomic trend does not support such gradual reform,” said Pavel Vidal, a Cuban economist teaching at Cali’s Pontificia Universidad Javeriana in Colombia.

Officials admit the most dramatic measures are still wanting: eliminate excessive subsidies; allow farmers to purchase inputs; make state enterprises autonomous and efficient; provide true incentives for foreign investment; and eliminate a dual currency system.

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