Slow Train, Late Hour
Some Preliminary Thoughts on Cuba's most important Reforms since 1968
Late last week, the slow train of market reforms appeared to have finally arrived at the station. Amid the nigh total crisis of the country, the government has finally enacted sweeping market reforms that promise to mark an end to the current halfway stop between socialism and capitalism; with the vices of both worlds and the virtues of neither.
Among the many important areas of reform are
End to state monopoly on imports/exports in agriculture and other ag reforms that have been pending since end of the Cold War
Foreign investment possible even in hitherto state monopoly sectors like energy
End of state imposition of itself as middleman between foreign companies and Cuban employees, which hitherto allowed it to select who would be hired and to take a large cut (sometimes larger than what employee was paid) for its role
Taking an axe to a lot of the ‘gratuidades indebidas’ (undue gratuities); basically, state subsidies that were purely based on paternalistic redistribution but which didn’t necessarily make sense economically.
Note here that supposedly those who actually need state assistance will continue to receive help, though given collapse of basic services and lack of money and goods to redistribute, it’s unclear when the state will be in a position to do this.
Massive simplification of state bureaucracy and organizations; fused where it makes sense, closed or liquidated where not.
Liberalization of salaries to reflect company capacity to pay rather than top-down imposed salary levels across the board (relevant for state sector presumably)
Facilitating foreign investment in private sectors, including allowing and even encouraging Cubans abroad to invest in the island.
Cubans can now finally open multiple private businesses at once and cap of 100 employees in a given private business has been removed
Permitting purchasing/sale of shares in even state sector
This one is going to be particularly important to watch given Russian precedent for how this played out in a way that helped to create post-Soviet Russian oligarchs
Private banks allowed once again, for first time since 1960s
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Honestly, there are way too many reforms to even explain them all coherently. Even if you were to copy and paste just the summary of the announced reforms published in Granma three days ago into a word document, at single space Times New Roman with 12 point size, you get a full 18 pages of announced changes.
In light of this, and given the fairly technical background required to fully appreciate the limits and promises of the reforms, I heartily recommend following scholars of Cuba with actual economic backgrounds. In particular, Cuban economists Pedro Monreal and Ricardo Torres have generously provided their expertise to the public for years on this type of issue and continue to provide important context for those of us who lack econ backgrounds. If you’re a journalist reading this who wants to understand technical aspects of this question, I recommend starting with them rather than historians (like me) or political scientists.
These changes are quite welcome and indeed reflect many of the things that reformers and everyday Cubans have asked for over the course of decades. It is even something the Chinese have been pleading for in private. I have also spent years saying this was kind of reform was necessary, though the weight of my comments is likely null in Cuban government circles, so I have something of a dog in this fight, even if it’s just that I think this is the right solution. So, in light of this good news, the question you’re probably thinking by this point is, ‘ok, this is what you wanted, why the tone of ambivalence?’
I’m not ambivalent about the changes themselves, but I am about the timing. Late is better than never, but by deferring these changes to the 11th hour, as the whole economy comes to a screeching halt, also diminishes how much they can achieve as well as how fast they can improve things.
Let’s start with one of the most important crises that the country faces; demographic collapse. Since reaching a peak population north of 11 million in the 2000s and 2010s, Cuba has since collapsed to 8 million people or fewer. Admittedly, not all of this is going to be outmigration; Cuba has an increasingly aged population, meaning that part of this is the slow but steady grind of an aging population in a country where births have been below replacement rate since the middle of the Cold War. Still, in the past few years we have seen 1-2 million leave the country, most for the US but many for anywhere they can. Cuba has long been described as a place with the aging population problems of a first world country but the economy of a third world one; the exodus of the past half decade has turned this from a major problem on the horizon to an acute crisis in the present. Cuba desperately needs young, able bodied, healthy people to do hard work, from agriculture to services, and (hopefully) industry too, for the economy to not just stabilize but recover.
This could conceivably be partly addressed through the return migration of large numbers of Cubans eager to take advantage of the opportunities opened up by the reforms. However, how many will be drawn back after so much expense leaving? This leap of faith back to their homelands will be a risk some will take, but who does this make sense for, precisely? If I were a cubano de a pié, this is not a gamble that I personally would make. If anything it makes the most sense for people for whom the emigration experience has been so abysmal that returning to Cuba somehow does not seem as bad or paradoxically for those for whom things are going well enough that a high risk investment in Cuba, to get in on the ground floor of market reforms, is an acceptable gamble. Given the possibility to invest from abroad, promised in the reform package, I expect that many will prefer that limited risk to uprooting themselves to move back, but then who is going to do the labor (especially more complex technical tasks) given the exodus of so much qualified younger talent?
This takes us to another key problem; the uncertain future of the regime itself. Cuba is currently under an actual blockade, specifically an oil blockade. Yes, one Russian fuel ship was let in, but the second one was stopped and redirected, and no third one has been sent. There are loopholes, like private businesses importing small amounts for themselves, but this is nowhere near enough to satisfy the demands of a national economy and private companies like this aren’t really equipped to store and handle large amounts of oil. The blockade is part of a broader maximum pressure strategy by Washington to overthrow the government once and for all, spearheaded by Marco Rubio (for whom it is partly personal). It also seems to have buy-in from Trump, who wants easy foreign policy wins akin to his ‘success’ case of Venezuela, especially with the embarrassment of the Iran deal that he is struggling to sell to his base. Now that the Iran War is, seemingly, over, at least for now, kind of, Washington’s attention passes like the Eye of Sauron back to Cuba. Trump’s term in office ends in two more years and the Cuban economy is in a state of paralysis and collapse already. The US also has additional measures of pressure that it can bring to bear if it wishes, including military strikes against the island, though as with Iran it is unclear whether these would do what Trump might hope they would.
In this context, with mass discontent domestically and the US breathing down their necks, how does the Cuban government convince people to invest in Cuba? I can see people who have a significant amount of money already investing as a gamble in an attempt to get in on the ground floor of a post-socialist economy, but what trust is there that the current government will survive in power? What guarantee is there that the government won’t simply stop or reverse reforms or kill new ventures by a thousand cuts through administrative measures? How does Cuba convince people to reinvest in a country where protests now rock the streets regularly even in daylight and basic infrastructure, like water and electricity, cannot be counted on? Again, this is not to say Cuba’s approach won’t attract investors at all, just that this diminishes the pool of people whose economic position and psychology makes them both willing and able to gamble their capital at a time of maximum uncertainty; a big problem with uncertainty is that even when not an absolute barrier it imposes a premium on everything else.
The total crisis is not just one of basic economic infrastructure like electricity and water but also social institutions like healthcare and education. Both are essentially in freefall, caught between staffing issues (especially as educated doctors flee for more opportunity abroad) and a lack of basic supplies/inputs needed to do their jobs. The exodus of so many Cubans, especially younger, healthy, and well educated ones, has meant a loss of Cuba’s last main resource; human capital. This is arguably the key sector that helped it to survive the post-Soviet crisis. After 1991, Cuba shifted from exporting sugar to exporting services; doctors, teachers, technical experts, etc. Many of these went to Venezuela as part of the ‘doctors for oil’ agreements of the 2000s but others went to other countries where those governments paid doctors a small part of their wages and the Cuban state the rest. The Trump administration has been working ceaselessly to end such programs in Latin America, especially medical programs abroad, which it and other international organizations have referred to as a form of modern slavery.
Finally, there’s another factor, and it’s one that’s kind of intangible but no less important; despair. I was in Cuba during the key years of the early reforms (2008-2013) under Raúl and visited regularly since. I also lived there for most of 2024, as the wheels really started to come off, since until then Havana had been (mostly) insulated from how bad things were getting in the provinces. I cannot really describe how massive of a shift there was between 2008 and 2024, much less now. From cautious optimism in the early Raul era, after so many failed and reversed openings under Fidel, to hope and growth of the mid-2010s, at the high water mark of Raul’s reforms and amid thaw with the US, there is now widespread distrust of the government’s promises combined with despair that things will get any better. Many reforms were deferred with no explanation, others (like monetary unification) done incompetently and at the worst possible moment, and all while the state remained the monopoly of the Party.
Add to all this that Raul is now 95 years old and there is no real unifying figure left in the party with the same authority once he passes. Admittedly, many already hate the party anyway, but this is relevant vis-a-vis government coalition unity. With Raul gone, who is there to restrain the ultras, push for the continuation of institutional mechanisms for rule rather than gruff power politics, or sign off on unpalatable solutions with the US?
Perhaps we are at a turning point in Cuban history, where things start to become better. I hope so, I really do, with all my heart. These reforms are, on their face anyway, positive and very welcome. They don’t fix the underlying problem of the undemocratic nature of the political system, to which so many problems of policy are tied, nor to the asphyxiating limits to free speech, which also negatively impact policy since they limit the transition of clear information on problems and solutions. It also doesn’t get all the political prisoners rotting in cells out, nor those who have become de facto stateless persons. But, for now anyway I will continue to watch the island’s development with caution. Better late than never, sure, but hopefully not so late as to not make a difference.