Cuba changing little, for the worse

Patricio Navia

Buenos Aires Herald, June 2, 2017


Many people hoped that the liberalising reforms that the Raúl Castro administration introduced in Cuba would help the country transition from its state-centred economy to a market-friendly one where individual entrepreneurship could foster economic development. Unfortunately, the few reforms implemented in the nine years Raúl Castro has been in power have fostered the development of the worst form of crony capitalism, a situation in which a powerful state — rather than fostering market competition — hands out favours to foreign private companies that come to the island attracted by the special access they enjoy.


When Fidel Castro retired from the presidency in Cuba in 2008, the new government began to announce a series of liberalising reforms to allow for private-sector participation in economic activity. Some measures allowed Cuban citizens to set up their own small businesses while other initiatives sought to attract foreign investment to develop the tourism industry and invest in other productive sectors. Today, many construction cranes can be seen in Havana. New hotels have been built and the old town is being rapidly renovated. Fancy stores that cater to wealthy tourists are the new attraction in town. Small shops and restaurants are easy to find and reflect the strong entrepreneurial spirit of many Cubans.


Yet, the state has retained its overwhelming control of the national economy. In the tourism industry, the country is far from developing a customer-oriented mentality. The bureaucratic attitude of public-sector workers and most government-hired workers in privately owned companies makes it difficult for tourists who visit the country to relax and enjoy themselves. Long waiting-lines at the airport to collect bags or to exchange foreign currency into CUC (Dollar-Denominated Currency for foreigners) can only be shortened if you give a couple of bucks to a taxi-driver that takes you to a tourism agency office to exchange dollars (though you still pay an additional 13-percent tax if you bring dollars rather than Euros).


It is true that Havana is a safe city and people are very friendly, but not having Internet access in the streets in 2017 — and having slow and unreliable Internet access in hotels — does not go well with the social-network-intensive modern vacationer. In Havana, life is still in the pre-Internet era. You can’t find your way around using Google Maps or check the reviews on the next restaurant you think of visiting. Granted, unrestricted online access 24/7 is a recent phenomenon, but without being on a par with international standards, Cuba will not be able to expand its tourism base to less sophisticated travellers. Though it is undeniable that Cuba has changed, the world has changed much faster and, thus, the island keeps on falling further behind.


Time is not money

The Cuban government has embraced capitalism, but in its worst form. Rather than promoting competition, the government has sought to team up with the private sector to provide services or to regulate the provision of services. For example, since booking for hotels must be done through a state-owned travel agency, there is little competition between hotels to attract tourists. As there is no culture of customer satisfaction, tourists must rely on the good intentions of Cubans in order to expect good service. To attract foreign investment, the government has signed deals with private companies that will undermine competition and unlevel the playing-field for other companies that might want to consider entering the country in the future.


After almost 60 years of revolutionary government, Cubans value time differently. In the island, time is not money. For relaxed tourists, that might be a welcome experience. But when you are used to efficiency in service in airports, hotels, restaurants and shops, the easy-going and overly relaxed attitude can be a bit frustrating.


The reforms championed by Raúl Castro have sought to generate opportunities for Cubans to make some money and provide services that the government has proven inefficient in providing. Yet, rather than embracing capitalist values, the government has simply learned to coexist with some capitalism. Since the authoritarian government suspects that, if left uncontrolled, capitalism will take over the country, private initiative is curtailed, restricted and overregulated. As a result, Cubans end up getting the worst form of capitalism, crony capitalism. Either because private companies enter the country due to their good standing with the authorities or because small entrepreneurs are able to keep their business if they can convince, or bribe, government regulators, there is no level playing-field in Cuba where markets can promote efficiency and lower prices, while at the same time improving the quality of service.


Cuba has certainly changed since Fidel Castro stepped down in 2008 and since Raúl Castro and Barack Obama moved to normalise relations between the US and Cuba in 2016, but the country has changed far less than what is necessary in order to trigger real and sustained economic growth. In addition to experiencing little progress in bringing about democracy and the respect for the rule of law, the consolidation of state-dependent crony capitalism confirms that the little change the country has experienced has been in the wrong direction.