Home Politics Expect Party Continuity in a Castro-less Cuba

Expect Party Continuity in a Castro-less Cuba

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Written By: Pedro Santiago – Forex Focus

February 24, 2018: that will be the day that will make history because a Castro will no longer sit in the Cuban presidency seat. Upon beginning his second five-year term as president in 2013, Raúl Castro announced that it would be his last. The younger 86-year-old Castro succeeded his brother, Fidel, after he stepped down in 2008. It will be the first time a Castro is not in office since 1959.

Of all the Latin American economies headed to the polls in 2018, Cuba is the largest question mark on the map. The election is a monumental development in the island nation’s political environment—especially for the millions of displaced Cubans living abroad.

The heir apparent to the Castro throne, Vice President Miguel Díaz Canel, has been speculated about for some time now. Canel was a child of the Cuban Revolution. Born and raised in the wake of Castro’s revolution, he rose through the ranks of the Communist Party, careful to avoid the pitfalls made by his predecessors that saw them fall out of favor with the Castro regime. First Deputy in 2013, the 57-year old Díaz Canel was an engineering student who became minster of higher education. His adherence to party doctrine, low public profile and patently younger image—Díaz Canel is substantially younger than most of his governmental cohorts—seems to placate both party insiders and modernizers looking to see new blood in the Cuban government.

The one-party state has been historically secretive about its internal goings-on, and there are some who view Díaz Canel’s long-telegraphed ascension as a cause for concern. Many wonder how democratic the future of a Castro-less Cuba can be, with a single party maintaining power over the country. Couple the party’s secretive nature with its robust intelligence and military doctrines—Cuba possesses by far the most capable intelligence service in Latin America—and many speculate that there may be more behind the public appearances than many outsiders see. But the mild modernizations that Díaz Canel wishes to introduce could be a signal that he will be more than a state puppet. The vice president has made clear that he intends to modernize Cuba’s state-run media as well as the country’s lagging Internet access.

While not a particularly potent shot in the arm, these modernizations could breathe new life into the faltering Cuban economy—which has been in crisis for at least two years. Various factors contribute to the worsening situation, but much is tied to the decline of its most recent patron state, Venezuela. Through the Petrocaribe instrument, Venezuela has supplied Cuba with oil supplies at a discounted rate for years. With Venezuela currently in full-blown political crisis, it has been unable to maintain this program—lowering the amount of cheap oil received by Cuba. This further hurts the Cuban economy as one of its exports is refined petroleum. Its various exports, which include sugar, tobacco, petroleum, liquor and nickel mattes, have paled in the sheer quantity of its imports—US$1.4 billion compared to $6.2 billion in 2015 —which has resulted in a protracted negative trade balance. A weak industrial sector provides no respite from the faltering economy as the manufacturing sector has consecutively dropped since 2012.

Much has to do with the complicated currency situation that further complicates trade with Cuba. The country operates with two currencies: one Cuban peso for use by citizens, and a convertible peso valued at 24 times the price for foreign trade, tourism and the private sector. This creates a logistical nightmare for foreign firms looking to invest in the newly opened country.

The country’s approach to entrepreneurship also complicates conditions. The Cuban government allows only 201 types of activity for Cubans to register as “self-employed”. On the other end, American importers can do business only with independent Cuban entrepreneurs. This creates an enormous bureaucratic barrier for the swathes of Cubans who are now self-employed—especially since Cuba’s largest exports come from the service economy in the form of healthcare and doctors. In fact, the Harvard Business Review suggests that the level of Cuban investment in human capital through education and training rivals that of much of the Western world. This is an untapped source of public revenue for a government clearly struggling for cash and credit

All of these areas are in desperate need of reform. However, the Cuban single-party system will likely not allow for sweeping modernizations from the new president. The fact that Castro will remain in government under a different capacity suggests that he may run some aspects from behind the scenes, which paints a picture reminiscent of the Ayatollah in post-revolutionary Iran. Nonetheless, investors and analysts should not expect too drastic a change from the new Cuban president. With US President Donald Trump reversing much of the rapprochement made between his predecessor, Barack Obama, and Raúl Castro, the impetus for change has begun to wane. The future looks like a small step in the right direction—if only slightly.

 

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