Wednesday, April 17, 2013

Venezuela forces Cuba's pace of change

April 16, 2013 4:15 pm

Venezuela forces Cuba's pace of change
By Marc Frank in Havana

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

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.

"The reforms are afflicted by inner contradictions in their design: a
positive step is taken but then excessive controls and restrictions are
introduced, generating disincentives that conspire against their
success," said Carmelo Mesa-Lago, author of Cuba Under Raúl Castro:
Assessing the Reforms.

"This 'compromise' . . . results in a hybrid that does not bear the
expected fruits. More daring measures are needed."

Mr Castro begs to differ. "We are moving forward at a good pace," he
said this month. "We must resist the pressure of those who insist we
need to move more rapidly."

But Mr Castro may not really have a choice, especially if Venezuela,
which suffers a gaping fiscal deficit, finds it can no longer afford to
subsidise the island. Henrique Capriles, Venezuela's opposition leader,
has said he wants to cancel Caracas' oil subsidy and slammed
president-elect Mr Maduro as a Havana puppet.

"Havana has failed to find oil offshore and, in terms of financial
support, the new Maduro government in Venezuela only creates
uncertainty," a European diplomat in Cuba said. "It must pick up the
pace, like it or not."

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