The New Cuba? Waiting for the Old Man to Go Back to the Sea

By: Scott MacDonald | Fri, Sep 15, 2006
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NEW YORK (KWR) -- In Ernest Hemmingway's The Old Man and the Sea an aging fisherman seeks to take one last trophy from the sea. Although he captures a giant marlin, he is unable to protect his prize from sharks drawn by the blood and eventually returns to land, old and beaten. The only thing left of his struggle is the marlin's skeleton. In many regards this is the dilemma facing Cuba's Fidel Castro, 80 years of age and recovering from intestinal surgery. Castro's ability to land one last trophy, a safe and secure socialist Cuba capable of outlasting its founder is likely to end up being a giant skeleton. At the same time, the process of change is likely to be more gradual than many hope, considering the existence of a cadre of loyalists who have the support of the island's armed forces and face little organized opposition.


Since 1959, Fidel has ruled Cuba, through counter-revolutionary challenges including the Bay of Pigs, a U.S. economic embargo, the ups and downs of the sugar market (Cuba's major export), and the fall of the Soviet Union in 1991. The last-mentioned brought harsh economic times as the once rich Cuban economy struggled to survive in a world where its main benefactor collapsed. Indeed, there were many analysts who expected the Castro regime to follow the Soviet Union into collapse. Writing in 1992, two academics, Eliana Cardoso and Ann Helwege, in Cuba After Communism stated: "In a few years at most, Cuba won't be Cuba - the sole socialist state in Latin America."

The two academics were hardly alone - veteran Miami Herald journalist Andres Oppenheimer penned his Castro's Final Hour the same year and former regime insider Maurice Halperin's Return to Havana: The Decline of Cuban Society Under Castro came out in 1994. Both Oppenheimer and Halperin did not expect Fidel Castro to survive much longer. Considering the rapid disintegration of the former Communist bloc in Eastern and Central Europe, this was not an unreasonable supposition.

Yet Castro refused to go away. With the support of the country's 50,000 strong armed forces, the Communist Party and the bureaucracy, the fidelista state managed to weather the storm, though the introduction of market-oriented reforms and the development of a tourist sector with outside support pushed along by his brother Raul was critical. In the early 2000's Cuba also benefited from the rise to power of Hugo Chavez as president of Venezuela. Chavez looked upon Fidel as his revolutionary mentor and has also guaranteed a steady supply of oil to energy-starved Cuba.

On July 31, 2006, Fidel officially passed power "temporarily" to his brother Raul. Raul is now first secretary of the Communist Part's central committee, commander-in-chief of the armed forces, president of the council of state and the government. He is also 75 years old and his tenure in power is not likely to be anything more than transitory.

Yet, behind the Castro brothers is a sizeable inner core of the regime that is keen to maintain its position at the top of Cuba's power pyramid. This inner court includes Politburo members Jose Ramon Balaguer, Jose Roman Machado, Esteban Lazo and Vice-President Carlos Lage (also the secretary of the executive committee of the council of ministers). Other members include central bank president Francisco Soberon, foreign minister Felipe Perez Roque and Ricardo Alarcon, the media savvy president of the national assembly. Of these, Perez Roque and Lage (with a background in economics) are viewed as potential successors, being regarded as both pragmatic and charismatic. Along these lines, the fidelista state has institutionalized succession. Moreover, the Communist Party of Cuba is the only legal party on the island. Although other political parties exist, they are harassed by the security apparatus and given little room to maneuver.

The Chinese Model

It is important to emphasize the fidelista elite, with its hands on the daily levers of power and backed by the military, has little interest to introduce any rapid changes that could force them from power. China is the model - the Chinese economy has enjoyed considerable growth and the creation of an expanding middle class while the Communist party has remained in control. Communist control over China functions as an iron hand in a velvet glove; its citizens are encouraged to make wealth, but not to partake in political plurality. The suppression of the democratic movement at Tiananmen Square in 1989 is a poignant reminder of the limits of political freedom. All the same, the Chinese leadership was willing to experiment in the economic field, make market-oriented changes and other measures to attract foreign investment. This was a move away from a bankrupt form of socialism, a radical change of direction from the course outlined by the revolution's great helmsmen, Mao Zedong.

The trick for the fidelista elite, like the Chinese, is to introduce change - enough to allow the ruling class to remain in power, but not enough to risk allowing any other centers of power to grow. This cannot be done while Fidel Castro remains on the stage, much as it could not be done in a meaningful fashion in China while Mao lived.

Indeed, the task of implementing meaningful change may well be beyond Castro's followers, especially the economic part. One must take into consideration the regime's track record of driving out the country's entrepreneurs, intellectuals and many of the best-trained professionals, its alienation of foreign capital by earlier expropriations of property, and default of external debt. In the case of the last, China was scrupulous in paying its external debt.

Living on Borrowed Time

Without change, the fidelista state is living on borrowed time. Despite the repetition of revolutionary slogans, a tinkering with Chinese-like reforms, and nice reports about the happy natives from various European press agencies, Cuba is hardly the workers' paradise its advocates would have one believe. While Cuba does not have the large mega-slums of much of Latin America and its level of education is regarded as advanced by regional standards, there is considerable poverty in the country. Many Cubans are still seeking to escape to the United States rather than remain where they are. Underemployment is a massive problem. The introduction of a tourist sector has created a two-tiered economy - one for the wealthy tourists and those connected to servicing it (with access to the U.S. dollar) and the rest.

Rounding out this picture, there is a younger generation of Cubans who are alienated from the government and disenfranchised. And the majority of the population is youthful, with no memory of the heady days of the revolution. Instead many of the young equate the "Revolution" with the tough economic times since the 1991, while Castro's revolutionary chic is old and thread-worn.

The major economic problems facing Cuba are a backward infrastructure, heavy external debt (a defaulted $40 billion stuck to Venezuela, Russia and Europe), and a politico-legal system geared more to socialism than a market-based economy and which functions as red tape. Despite the existence of around 300 European/Canadian joint ventures with Cuba in telecommunications, oil and energy, mining and port management, there is a pressing need to upgrade ports, airports, business facilities and power grid. As Cardoso and Helwege noted in 1992, but with equal significance for now: "Substantial private investment requires that Cuba play by the capitalist rules of the game: clear private property rights, enforcement of contracts, stable exchange changes, and a reliable physical infrastructure." The introduction of such measures will not occur as long as Fidel is alive and most likely will be slow in coming under any fidelista successor regime. For an increasingly restless young population that could have rising expectations of change, this could be playing with political dynamite.

Also looming in the post-Fidel Cuba is how to re-open relations with the United States, a development not likely in the dictator's lifetime, but complicated by claims for land and property nationalized by the Cuban government. For those living and working in what was taken from those who left or were forced to leave, the idea of surrendering to exiles is hardly appealing.

Ready to Shake Up Investing in the Region

All the same, a post-Fidel Cuba will shake up the investment world. Despite the existence in Cuba of European, Canadian, Japanese, and other Latin American companies, the potential capital flow from the United States, both in the form of Cuban exiles and U.S. companies could be considerable. The two countries traditionally were major trade partners - a little opening will push that development again. U.S. agricultural companies are keenly aware of the Cuban market, while mining and oil companies follow developments in those sectors closely.

A U.S.-Cuba normalization of relations also raises big questions for Cuba's two major trade partners, Venezuela (a major supplier of oil) and China (a big buyer of nickel). Indeed, there is an attraction to develop Cuba's potential oil and gas resources. According to the U.S. Geographical Survey Cuba has potential crude oil reserves of up to 9 billion barrels and substantial natural gas reserves. Currently, Cuba has signed lease agreements with China, India, Canada and Spain.

Cuba's return to the menu of destinations for U.S. citizens will also shake up the tourist sector throughout the Caribbean. Certainly Puerto Rico, the Dominican Republic and Jamaica will see their business reduced, especially in the early stages of any normalization of relations with the United States.


Cuba has an economy of considerable potential, but it is mired in the ideologically-driven past, shaped by the strong personal will of the Cuban Revolution's old man, Fidel Castro. Unlike the Hemmingway tale where the old man returns home to dream of the lions, it is time for Fidel to go back to the sea of lost ideological struggles and let the island move ahead. The same can be said for the fidelista elite. They are painfully aware that change is coming. They either can be part of the process or stand in its way. The latter path would certainly open the door to more rapid change, though in a more dangerous and potentially bloody fashion and that would be in no one's interest.



Scott MacDonald

Author: Scott MacDonald

Dr. Scott B. MacDonald,
KWR International, Inc.

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