Sunday, January 22, 2017

Cuba at a Crossroads

Cuba at a Crossroads
Analysis JANUARY 22, 2017 | 14:00 GMT
By Mark Fleming-Williams

It's been more than a month since the death of Cuban leader Fidel
Castro, and the mood in Cuba is somber. Messages of remembrance are
daubed on walls, and banners reading "Hasta Siempre, Comandante" hang in
the streets. Official New Year's celebrations in Havana — celebrations
that coincide with the anniversary of the Cuban Revolution's victory in
1959 — were canceled this year out of respect for the departed leader.
But among the banners and the nostalgia there are also signs of
modernity beginning to emerge that could transform Cuba.

From a Westerner's perspective, Cuba feels immediately dysfunctional.
The Communist mentality still clearly dominates, and there are queues
for everything, particularly for important functions such as banking and
exchanging currency. With few personal incentives to provide good
service, attendants often focus on finishing conversations with
colleagues before serving customers. When a system fails — for example,
if a bank card fails to withdraw money or if a bus is already fully
booked — the news is delivered to the hyperventilating customer with a
disinterested shrug. From the outside looking in, it's clear that the
Cuban system was constructed for the benefit of the residents, who
appear to have plenty of time on their hands, rather than for the
benefit hassled foreigners.

Perhaps that should be expected considering the island's history, during
which outsiders have been more of a curse than a blessing. When Cuba was
a Spanish colony, English and French pirates regularly raided it, and
when it became more profitable in the 19th century, those profits were
quickly appropriated by Spanish colonial masters, giving rise to a
substantial separatist movement on the island. But liberation from Spain
in 1898 did not afford Cuba the independence it desired. The United
States, having assisted the Cuban rebels in the Spanish-American War,
inserted itself into Cuban politics, giving it the constitutional right
to intervention.

During the decades after independence, the U.S. military intervened in
Cuban affairs regularly, fostering resentment and discontent. But U.S.
influence was not constrained to military action. Havana became a
favored destination for freewheeling American tourists, a Las Vegas of
its day, which was highly distasteful to Cuban traditionalists,
including a young Castro, who eventually seized control after waging an
ascetic guerrilla campaign in the southeastern mountains. Castro's
initial policy toward the United States was ambiguous, but it soon
became profoundly adversarial. Cuba turned away from the United States
and is today in its 59th year of true autonomy, the longest stretch
since it was first settled by Spain in 1511.

Such autonomy may appeal to Cubans' pride, but it does not do so much
for their stomachs. Cuban cuisine is notoriously limited, at least
partly because of the U.S. embargo that has been in place since 1962.
(Food is actually permitted by the embargo, but it gets through only in
limited quantities.) Any island would struggle to subsist on its own
resources: Cuba's initial solution was to cultivate a relationship with
the world's other superpower at the time — the Soviet Union — leading it
to undertake communist policies and to join the Council for Mutual
Economic Assistance. Soviet resources helped Cuba maintain a reasonable
lifestyle on the island and an outsize influence off it: Cuban forces
made decisive foreign interventions during the Cold War, particularly in

When the Soviet Union collapsed in the early 1990s, Cubans suffered
tremendously. Gasoline shortages forced people to turn to horse and
cart. Food shortages for huge swathes of the population led to severe
medical problems. Wages collapsed to lows that have hardly recovered
since. For Cubans, the lesson was that outsiders are a necessary evil
that are missed when they're gone.

Turning to Tourism
The Cuban solution to the end of Soviet support has been a gradual
opening to tourism. The process has been halting, with developments
often reversed when other forms of support emerge. For example, when
Cuba's cozy relationship with Venezuela led to an influx of cheap
energy, the island lost focus on tourism. But when the Venezuelan
economy collapsed, Cuba again began promoting tourism. Yet, the strategy
is not a magic bullet.

The foreign exchange provided by tourists is by definition more valuable
than the local pesos in which wages are paid. (The Cuban government has
created two separate currencies, CUCs, which are used by tourists, and
CUPs, which are used by Cubans.) This means that it is more lucrative to
drive a taxi than to be a university professor. A recent one-hour car
journey cost approximately $30. The driver was a full-time economics
professor, who had been attracted by the opportunity to earn
considerably more than his $24/month* university salary. Doctors are
facing a similar dilemma. Cuba's highly trained medical professionals
and the quality of care they provide residents have long been a point of
pride for the Cuban Revolution, but many doctors are finding it hard to
resist the call of Western cash. As doctors, they earn around
$48/month*, a high wage for Cuba but one that is dwarfed by what a
free-spending tourist can offer. Thus, the economic incentive in Cuba is
moving away from the study of advanced subjects and toward the study of
languages, particularly English, which is needed to compete for a
lucrative position in tourism. This will undermine many of Cuba's
traditional social strengths over time.

(*Salaries are self-reported)

The opening up process has been accelerating recently. Domestic reforms
at the start of the decade created more opportunities for
entrepreneurialism, while the 2014 U.S.-Cuba rapprochement has opened up
the island to U.S. tourism. These developments have caused distortions
as existing systems struggle to cope with increased demand. The effect
is most clear in tourist haunts such as the beautiful Vinales, where
newly printed guidebooks are already out of date. Tourists swarm through
the small town, swamping the local resident population and consuming
resources like locusts. Bicycle rental prices are double those listed in
guidebooks, and the recommended restaurants have long waits.

This spike in demand is naturally also affecting the supply side, and
parts of Vinales are reminiscent of a 19th century gold rush town.
Walking the streets, it seems that every single carpenter, plumber,
tobacco farmer and housewife has transformed their lives to serve the
tourist industry. Most houses have been turned into identical bed and
breakfasts, and guided walking tours through the countryside are run
like factory lines, with seated tobacco farmers delivering the same
spiel to each passing group, spaced 30 minutes apart. The fledgling
tourist industry has yet to discover the merit of tactfully disguising
its true purpose, and a visitor can emerge feeling well milked. With
time, larger and more sophisticated businesses will undoubtedly come to
dominate the Vinales tourism sector, but for the moment resourceful
Cubans are indulging in a capitalist feeding frenzy.

There are other changes afoot in Cuba, most notably when it comes to
internet access. In July 2015, the government began allowing wifi zones,
both in public areas and around hotels, providing Cubans with more
access to the outside world than they've had in decades. There are still
huge barriers — the cost is prohibitive, particularly for locals, and
internet access often requires standing in the street beside a hotel
bashing at a phone in competition with one hundred others for limited
bandwidth. Still, the information revolution has begun to arrive in
Cuba, and as Cuba well knows, revolutions aren't easy to reverse.

The End of Communism
As its tourism sector develops and as its foreign patrons fall away,
Cuba is moving away from Communism. Now, with Fidel Castro's death and
current President Raul Castro's advanced age, it seems that the
influence of the brothers has a natural time limit. Moreover, recent
developments in Cuba's relationship with the United States have been
positive: The United States followed its 2014 rapprochement with Cuba
with an end to its "wet foot-dry foot" policy, which was designed to
undermine the Cuban administration by encouraging emigration from the
island. The arrival of the internet, too, will surely have a dramatic
effect on Cubans' understanding of the world and of their place within
it. Seeing a glimpse of what lies beyond their island will increase
their desire to travel and to seize the opportunities available to
others around the globe. Perhaps it will also encourage them to pressure
their government to continue opening more.

However, despite the progress made, it should not be assumed that Cuba
will unequivocally continue opening. Cuba made its most recent changes
with the help of a relatively accommodating U.S. government, which did
not make excessive demands of the island. But the United States is now
transitioning to a new administration that may view U.S.-Cuba relations
more traditionally. Because Cuba is so strategically positioned at the
mouth of the Gulf of Mexico and near the all-important Mississippi river
network, the new U.S. government may be tempted to try to bring it back
under U.S. influence, similar to its position before the Revolution. But
for Cuba, which has just experienced nearly 60 years of autonomy for the
first time in its history, submitting so much to U.S. interests may be
too great a price for normalization. Therefore, it is conceivable that
Cuba could once again double down on its post-Revolution policies of
austere isolation.

Source: Cuba at a Crossroads | Stratfor -

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