Economic Reforms Herald Cuba's New Resolve By Michael Shank Politico[WEBSITE VERSION] November 12, 2011
Things are changing quickly in Cuba. This week, on Nov. 10, the Cuban government, under President Raul Castro’s leadership launched its most progressive economic reform initiative yet by legalizing the sale and purchase of private property. For Cuba watchers and Castro critics, this is noteworthy given that Cubans have not been allowed to trade real estate since the 1959 revolution.
Having traveled myself to Cuba last year, as part of a congressional staff delegation, this comes as little surprise; the winds of economic change were already blowing. But for those in the U.S. Congress critical of Cuba’s economic policies – e.g. U.S, Sen. Bob Menendez and U,S, Congresswoman Ileana Ros-Lehtinen – this may confound. Why the about-face and will it last? It turns out, as illuminated in a 98-page report published this month by the Center for Democracy in the Americas, Cuba’s recent economic reforms are indicative of a new resolve. Bolstering this claim, the authors found that “Cuba’s reform process is here to stay and the changes are most likely irreversible.”
The report, titled “Cuba’s New Resolve: Economic Reform and its Implications for U.S. Policy,” shows that the economic policy trends in Cuba parallel the very conversations in Congress and throughout U.S. state legislatures, whether it’s reducing the numbers of employees on the state payroll, reducing government spending for social safety nets, or supporting small businesses.
In fact, President Castro is spurring new private sector enterprise, enabling Cubans to open small businesses, hire workers, and create farming and manufacturing cooperatives that will function as small businesses. Tea party types in the U.S., and proponents of smaller government, should like what Castro is doing. He’s cutting one million workers on the state payroll, reducing ration card allocations, and ending some state subsidies entirely. Castro is also decentralizing government by handing over state responsibilities to provincial and municipal leaderships with the aim to build capacity and implement decisions locally.
All of this should make Washington happy. Yet while President Barack Obama is on board the U.S.-Cuba relationship transformation train, doing more to improve U.S.-Cuba relations than recent predecessors, there are still ample roadblocks in Congress keeping our two countries from increased economic cooperation. Don’t forget that Cuba, until recently, was the United States's largest rice export market and the fifth largest export market in Latin America for U.S. farm exports. Furthermore, Cuba holds the potential for $20 billion in trade with America over a three-year term. Our economy could clearly benefit from better relations.
The longer we wait the more ground we lose. Brazil's former President Lula da Silva capitalized on Cuba's appetite for growth, proposed investments in industrial, agriculture and infrastructure projects, including ports and hotels, and an agreement with Brazil's oil company. Venezuela and China are already investing in Cuba’s oil industry, and Spain is weighing in with millions in microcredit to boost Cuba’s small business industry.
Even our agricultural relationship is not secure. Yes, Cuba continues to be reliant on U.S. agriculture. Since 2002, we have been Cuba's largest supplier of food and agricultural products, with Cuba purchasing several billion dollars worth of US products in the last decade. This agricultural reliance is in jeopardy, however, which puts American farmers at risk. In 2010, U.S. food exports to Cuba dropped to $344.3 million, down from $486.7 million in 2009 (which was down from over $700 million in 2008), according to figures released by the U.S.-Cuba Trade and Economic Council.
This is a sign of the times. Cuba, having witnessed strong economic growth in the early 2000s at 11 and 13 percent, is now struggling to make ends meet, slipping below 2 percent in 2010. This month, however, the Cuban Minister for Foreign Trade and Foreign Investment, Rodrigo Malmierca, announced that Cuba is expected to show a 2.9% increase of its Gross Domestic Product by year-end.
All the more reason, then, for the US to pursue potential partnerships with Cuba. The potential is not merely on the natural resources front, but on the human one too. US and Cuba are already cautiously coordinating on areas of mutual interest, like migration, counter-narcotics and disaster preparedness. Other low hanging fruit? Expand cooperation on education, medicine, science and sports through nonpolitical, people-to-people exchanges. This is how we rebuild relations.
“Cuba’s New Resolve” concludes by saying that the US can make some important contributions to Cuba’s economic reform process by acknowledging that Cuba’s reforms are real and by ensuring that Cubans are getting the cash and credit they need to make use of the newfound freedom to start small businesses. Easing the flow of financing, travel and remittances wouldn’t hurt either, so too the removal from the list of state sponsors of terrorism. Cuba is clearly on the rise. It is time for the U.S. to rise with it.
Michael Shank is US Vice President at the Institute for Economics and Peace.