April 18, 2018 / 5:25 PM / 3 months ago

Breakingviews - Cuba rings changes while trying to stay the same

NEW YORK (Reuters Breakingviews) - Raul Castro’s scheduled handover of Cuba’s presidency this week is an effort to prolong the communist revolution he built with his late brother Fidel. Trying to modernize the creaking, incompetent bureaucracy could also destroy their lives’ work. Yet with ally Venezuela getting less able to provide cheap oil, economic reform can’t wait long.

Cuba's President Raul Castro (L) chats with Cuba's Vice President Miguel Diaz-Canel react during the National Assembly in Havana, Cuba, July 8, 2016. Ismael Francisco/Courtesy of Cubadebate/Handout via Reuters.

A session of the 11 million-strong Caribbean country’s national assembly on Wednesday and Thursday will see Castro, 86, hand over the presidency to Miguel Diaz-Canel, a low-key, 57-year-old engineer who currently serves as first vice president. Officials formally put forward Diaz-Canel’s name on Wednesday.

Castro’s successor faces a conundrum. Robust reforms could spark unrest and threaten political control. Doing nothing risks economic malaise. Cubans’ relative prosperity, measured against other regional countries of similar population and allowing for purchasing power, has slid significantly since 1970, according to a study by economist Pavel Vidal. By the same measure, Cuban GDP per person was a third smaller in 2014 than in 1985, just before the Soviet Union pulled the plug on its revolutionary support.

Cuba’s trade with Venezuela, which has also helped prop up the economy for years with subsidized oil, fell to $2.2 billion in 2016 from $7.3 billion in 2014 as low oil prices and falling crude production crimped the ability of President Nicolas Maduro’s government to help as much as in the past. Castro said in 2016 the economy had shrunk in consequence, though much-delayed official data later showed meager growth of 0.5 percent. Official figures for last year showed growth of 1.6 percent, surprising some economists.

Cuba must import between 60 and 70 percent of the food it consumes, while agriculture is largely stagnant. This year’s sugar harvest will fall 30 percent to its lowest in more than a century, Reuters estimates. Multiple exchange rates distort the economy. The number of people the government categorizes as self-employed has tripled since 2010 to about 580,000, while the private sector as a whole, including cooperatives, employs almost a third of the workforce, according to a U.S. Government Accountability Office analysis of Cuban data. That roughly compares to 85 percent of nonfarm payrolls in the United States. Cuba’s official suspicion of the private sector keeps it small.

Castro himself has backed limited pro-market reforms, though only as a means of making the revolution more efficient. He will remain head of the Communist Party, and enough fellow revolutionary octogenarians will hang around to ensure Diaz-Canel doesn’t have too much latitude. That means the new boss, at least initially, could prove to be much the same as the old boss.

Breakingviews

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