First, news rocketed around the Internet that Fidel Castro himself, in an interview with an American journalist, had denounced the merits of communism. Next, his brother and successor to power on the island nation announced that the state would lay off 500,000 workers by next March. If you are able to read this, then apparently the apocalypse is not upon us.
But what is clearly upon Cuba is the reality that they must embrace long-needed economic reforms. To wit, along with a raft of pink slips, the nation’s Communist party is rumored to be analyzing a revamped tax code and a framework for private cooperatives.
Despite the flurry of recent news, this did not happen overnight. Rather, the first cracks can be traced to Russia under Putin, who clearly broke the mold of the relationship between Cuba and Russia. Indeed, the Russian leader questioned the merits of the level of state investment in Cuba and ultimately opted to do away with the remaining vestiges — Russian military presence, closing the Lourdes intelligence facility — of the historical relationship, one predicated on the Cold Ward climate. This is not to say that there has been a complete break in the relationship. In recent years, Russia has taken a renewed commercial interest in Cuba, looking at oil and other direct investment opportunities.
But what else has occurred to expedite this economic debate in Cuba? Almost unmentioned, but perhaps just as important for the long-bankrupt island, is the economic malaise gripping Venezuela. Venezuela, unlike the rest of Latin America, is in the throes of a recession that will see the country’s economy contract by 3% this year; the nation also has skyrocketing inflation of over 30%.
Many years ago Venezuela replaced Russia as the principal economic and capital lifeline for Cuba, which allowed the Castro regime to roll back the reforms that were forced by the collapse of the Soviet Union, the disinterest of the FSU states and the interim period between Russian financial tutelage and that of Venezuela. But the go-go years for Venezuela are over, or as one regional economist said: “It spent its boom.”
This brings us back to the economic realities confronting Cuba. Indeed, it appears that in addition to an ailing Fidel, what Cuba needed to finally embrace the economic reforms that have been long expected from the more pragmatic Raul Castro was an economically weak Venezuela.
But Venezuelan investment in Cuba has always been about more for both nations than just propping up the latter. Indeed, in political terms the exchange of “oil for doctors” has paid off for both countries and is at base quite simple: Cuba has doctors, Venezuela has oil. The doctors, and an abundance of other community and health care providers, gave Venezuelan President Hugo Chavez an important boost in opinion polls and brought electoral success. Meanwhile, Cuba gained cheap oil that reduced its import bill and offered hard currency from the resale of the oil it did not use internally.
It does not seem coincidental that in conjunction with Venezuela’s economic train heading over a cliff comes the divulging of the economic policy rumination occurring in Cuba. Now that Venezuela is unable to continue subsidizing Cuba, we are treated to Fidel questioning the legacy of communism and, more importantly, Raul’s plans to lay off hundreds of thousands of government employees.
Some analysts have ascribed to Raul Castro an obsession to reshape Cuba into an “Asian Tiger.” They point to his fascination and avid attention as a student of reforms in China and Vietnam. That makes for good copy, but let’s assume that Cuba’s cash cow, Venezuela, continues to run dry — will the confluence of economic stresses on the nation really be dealt with by the proposals that have leaked?
It may only be a matter of time before ‘57 Chevy’s are cruising the streets of Havana with bumper stickers that say “El cambio en el que podemos creer” — that is, “Change we can believe in.”
Jeremy Martin is a frequent commentator and writer on Latin American and energy issues speaking at international conferences and appearing in both print and broadcast media. Roger Tissot, an economist, is an independent energy and political risk consultant.