1. NS4540 Winter Term 2018 Cuba: Economic Woes Before Succession
Oxford Analytica,Cuba: Economic Woes to Mark Succession Preparation December 13, 2017

2. Overview I
As of early 2018
Cuba’s economy is in decline, and
The reform process has stalled
In addition to its structural problems, the economy is suffering from shocks, both political and natural that are beyond its control
Cuba’s principal ally, Venezuela, continues to supply oil despite its own crisis, but shipments have been declining
The result has been
Energy shortages and
Need to import oil from Russia

3. Overview II
President Trump has imposed restrictions on US travel to Cuba
Impedes most individual tourism, hitting a key sector of the economy
Hurricane Irma has heavily damaged tourist resorts, infrastructure and agriculture along Cuba’s northern coast
Bookings are way down as a result
18 months of drought have hit the sugar industry hard – output this year will be much below last year
Agreement with China commits 400,000 tons annually leaving little to be exported on the open market to generate much- needed foreign exchange.
These factors compound effects of virtual standstill of domestic economic reform process, resulting in another year of negative or near negative growth.

4. Private Sector Struggles I
Cuba’s emergent private sector taking hits both domestically and internationally
Domestically while many Cuban economists argue that Cuba’s economic crisis could be countered by new economic reforms, opposite is happening
Some of the country’s most successful private businesses and cooperatives have been shut down
In July 2017 a decree was passed suspending issuing of new licenses for many sectors opened to small private enterprises such as restraints and guesthouses
By putting the brakes on private-sector activity the government seeking to regain credibility with large sectors of the population who were left out of the boom.

5. Private Sector Struggles II
The lesson Cuba’s hardliners draw from regime’s survival after the Soviet Union’s collapse is that even the steepest fall in living conditions will not bring down the government
-- as long as the leadership remains steadfast and united
In politics as in economics, the government seems to be preparing for hardships to come
Not by pursuing reform, but
By further retrenchment and self-preservation.

6. Private Sector Struggles III
The private sector’s success was divisive and increased inequality
However price of restricting market forces is the curtailing the economic dynamism that had started to unfold
The government has chosen to
Attack rising inequality by restraining the newly well-to-do rather than by
increasing the purchasing power of state employees.

7. Private Sector Struggles IV
Foreign investment provides some hope
According to officials
Cuba signed a record 2 billion dollars’ worth of foreign investment in the first 10 months of 2017 – more than double that of previous years.
Of the 16 signed ventures, eleven involve 100% foreign ownership. Around 80 projects are said to be under negotiation
These announcements come as new US sanctions announced by Trump in November target foreign investment
Specifically they bar US companies from any deals involving assets owned or controlled by Cuba’s military
Given the military’s strong role in the economy will be substantial
Dealings with more than 80 hotels and a large number of businesses have been banned

8. Domestic Tensions
Standstill on economic reforms goes hand in hand with a more restrictive political climate
After the Communist Party Congress in April 2016
Castro shelved his reform agenda
Emphasis shifted from modernization of the economy to safeguarding elite cohesion and
Efforts to guarantee a generational change of guard without ruptures in the party and state apparatus
Diaz-Canal, Castro’s successor, advocated heavy handed approach towards dissidents and independent media

9. Assessment
The return of Cold War rhetoric and confrontation with Washington is politically easier for the government to handle than Obama’s policy of embrace
However Cuba’s economy has difficult times ahead
Likely developments
The economic downturn will strain society but an outburst of social unrest remains unlikely for now
Trump’s confrontational politics force the government to seek foreign investment elsewhere and to maintain good relations with the EU and Canada
The government will maintain full control of the electoral process, not allowing opposition figures on the ballot.