By / April 25, 2012

Cuba: a slow journey towards capitalism

Since Raúl Castro took power in Cuba in February 2008, there has been a slow but steady shift in Cuban…

Image copyright Gts. Used under licence from
Image copyright Gts. Used under licence from 2012
Image copyright Gts. Used under licence from, 2012

Since Raúl Castro took power in Cuba in February 2008, there has been a slow but steady shift in Cuban politics. The younger brother of Fidel is trying to slowly pursue reforms opposed by many in the Partido Comunista de Cuba (PCC), the only legal political party. At a closed party conference held early this year, Raúl Castro reiterated his calls for a separation between party and government. So far his aim is to fight the corruption that destabilises the country. Popular discontent is spreading due to the economic situation and ever growing social inequalities. Raúl Castro is trying to improve efficiency in many fields such as education and health. A few popular reforms have been implemented under his rule, such as letting Cubans buy mobile phones, computers, houses and cars. Moreover, a list of private commercial activities that are open to citizens has been drawn up.

Foreign relations

With the American embargo still in place (although travel restrictions have been eased by the Obama administration) Cuba has found another benefactor, after the withdrawal of Soviet subsidies in 1991: Hugo Chàvez of Venezuela. This country in fact provides Cuba with cheap oil in exchange for the services of some 20 000 Cuban doctors, sports instructors and security advisers. This deal might however lapse if Chàvez loses power. Furthermore Raúl Castro’s government signed the UN covenants on Human Rights and also announced a pardon for 2 920 prisoners, of which five political (although Amnesty International claims that some 58 “prisoners of conscience” are yet to be liberated). This is seen as a move to improve relations with the US and the EU as both link cooperation with Cuba to improvements in human rights and political freedom. From the BRIC’s side, Brazil is strengthening ties with Cuba by helping finance an $800 million renovation of the port of Mariel, near Havana, while China was the source of some 11.5% of Cuba’s total goods imports.

The economy

Cuba is a member of neither the IMF nor the World Bank, therefore its access to international credit is virtually zero. Raúl Castro is trying to revive the island’s sluggish economy through 313 “guidelines” approved by the PCC in April 2011. He is transferring chunks of the heavily state-controlled economy to private hands. The reforms however are progressing slowly since he faces opposition from inside the PCC. Cuba’s main source of foreign exchange is exports of Nickel, which leaves Cuba vulnerable to price fluctuations in the world market. The country has a dual currency system that was introduced after the collapse of the Soviet Union. One currency is at par with the US dollar, the “convertible peso” or CUC, used for international trade, and the second one, the Cuban peso (CUP) is used domestically. The CUP is pegged at a 24:1 rate to the CUC, with the average monthly wage being 454 pesos or $19. Monetary reform, namely unifying the two currencies, will be the toughest. Cuba will need to devalue the CUC and revalue the CUP, while providing enough stimulus for the economy, rather than just create soaring inflation.

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