Any change on the horizon in a post-Castro Cuba?

Neither the death of former President Fidel Castro in 2016 nor the expected transfer of state power this week from Raúl Castro to his successor will in and of themselves lead to much change in Cuba.

Despite the series of significant and indeed quite unprecedented economic reforms launched by Raúl Castro during his decade as president, there still remain many internal restrictions on the freedom and expansion of the island’s private sector.

At the same time, while the U.S. embargo was symbolically weakened by President Barack Obama in his many moves toward normalization with Cuba during his final two years in office, President Donald Trump has famously reversed course by hardening the embargo through the imposition of a series of new travel and trade restrictions.

These include the elimination of individual “people-to-people” travel, requiring future U.S. travelers to visit as members of organized group tours, and a ban on all future financial dealings with entities controlled by the Cuban military.

Announced with great fanfare by Trump in Miami’s Little Havana in June 2017, the measures were justified at the time as an effort to cut off funds for Cuba’s many state- and military-owned enterprises, while continuing to allow Americans patronize (and presumably empower) the island’s private sector.

In practice, however, the legal jeopardy once again associated with travel by Americans to the island by the Trump measures will surely hurt the very entrepreneurs they were supposedly designed to help.

While the measures may shift a portion of the flow of US visitors away from Cuban state- and military-run enterprises and into Cuba’s private sector, this comes at the price of a major reduction in the overall number of American travelers.

This aggressive “wedge” approach aimed at strategically separating the Cuban people from the Cuban government and turning “engagement” into a policy with explicitly Trojan Horse proportions is essentially a return to the twin Cold War policies of isolation and impoverishment enshrined in the embargo.

A State of Siege?

The antagonistic history of U.S.-Cuban relations suggests that any pressure on Cuba from Washington to reform its internal policies, either in the area of human rights and democracy or speed up its opening toward private enterprise, will backfire.

When under external threat – especially from the United States, the nation the Cuban government perceives to be its historical nemesis – Havana has always reacted by “circling the wagons” and restricting political and economic rights and civil liberties in a defensive crouch aimed at defending Cuban national sovereignty and preserving the Revolution.

It was just such logic that motivated the Obama administration to radically alter long-standing U.S. policy toward Cuba at the end of 2014, eschewing isolation and impoverishment aimed at regime change for a policy of engagement.

However, the pointedly defensive and arguably paranoid reaction of the Cuban government following Obama’s March 2016 state visit indicates that Havana’s still powerful old guard may need an enemy in Washington, more than its weak and mostly silent reformists need a friend.

Obama’s youthful charisma, approachable manner, mixed racial origins, and multicultural pedigree surely endeared him to the vast majority of the Cuban people. His unapologetic public advocacy for human rights – including the freedom to speak your mind without fear, and organize and to criticize your government – left the Cuban leadership profoundly spooked.

President Donald Trump can be counted on to consistently provoke and to directly attack the Cuban government, thereby making explicit the imperial intent to impose regime change on Cuba from Washington. Cuban leaders may be thankful to have once again a northern Goliath against whom they can rally the waning revolutionary ire of a tired populace while playing the role of an aggrieved Caribbean David.

Raúl Castro’s Legacy?

The major pause in the internal opening toward the private sector in Cuba is quite ironic given that it is coming to a head just as Raúl Castro – the driving political force behind the opening to micro-enterprise over the past eight years – prepares to step down as president.

In fact, while it is quite common to hear Cuban entrepreneurs privately complain that Raúl Castro’s entrepreneurial reforms have not gone far or been implemented fast enough, reports that a new, comprehensive set of restrictive measures on the private sector will soon be implemented indicate that at least some of the more powerful members of Cuba’s Communist Party fear that Raúl’s free market reforms have gone too far, too fast.

The economic logic of reform is running up against the political and ideological logic of the status quo. Party officials likely feel that the uncontrolled growth of the private sector directly threatens their bureaucratic and political power regardless of how much it contributes to the growth of the economy.

One wonders which side of this debate Castro’s heir-apparent Miguel Díaz-Canel is on.

Does leadership change mean policy change?

While we can expect that an aggressive Trump policy will be counterproductive, it does not follow that continuing or deepening Obama’s policy of engagement will necessarily increase economic freedoms on the island at least in the short term.

This is so because it is Havana’s own continued and myriad restrictions on the private sector (not to mention its ongoing suppression of fundamental political rights and civil liberties) that present the greatest obstacle to entrepreneurial success on the island.

“Self-imposed embargo”

These include high taxes that discourage private-sector job creation; lack of access to much-needed supplies at wholesale prices; artificial limitations on the size and profitability of private businesses based on a ban on private concentrations of wealth or property; an antiquated if not downright medieval list of permitted private sector occupations few of which are in the dynamic, productive, or modern sectors of the economy; and no established framework for the legal recognition and licensing of Cuba’s many already existing and quite prosperous small- and medium-sized enterprises.

This thicket of frustrating obstacles makes it virtually impossible for home-grown entrepreneurs to legally import supplies or export their products or services, sign contracts, open bank accounts, or receive investment or loans from abroad.

Cuban entrepreneurs bitterly refer to these 1,001 obstacles, regulations, and taboos as the “auto-bloqueo,” or internal, self-imposed embargo, in mocking reference to the better known and notoriously counter-productive embargo imposed from abroad by the United States.

Until both embargoes are ended there seems little likelihood of meaningful change.