On November 25th, Cuba’s revolutionary leader, Fidel Castro died at the age of 90. Fidel came to power in 1959 after overthrowing the despicable regime of dictator Fulgencio Batista, backed by the United States in a bid to thwart communism in its backyard. Although the liberators initially might have had laudable ideals, Fidel quickly built his own dictatorship on a Marxist footing, expropriating all private property, alienating any entrepreneurial minds (most of them fled to Florida) and infringing human rights.
Although Fidel destroyed everything that was left of Cuba’s economy (already suffering from widespread corruption under Batista), he developed good education and health care services but had to trade these with his allies, first the Soviet Union and then Venezuela, to provide basic needs to Cuba’s dispirited population.

El Comandante finally is expected to quit smoking…

With Fidel definitely gone (after being hospitalized, he handed over the reins to his brother Raúl in 2006 but always lurked in the background to ensure the revolution would not peter out), the question is whether Cuba now will convert to a market economy. Raúl already implemented modest reforms, for example, allowing Cubans to work in private small (tourist) businesses and farming. In 2015, diplomatic relations with Cuba’s archenemy, the United States, were restored (although the relationship remains rather timid). And the demise of Venezuela’s oil-fueled economy may also be a trigger for change as the Bolivarian republic may no longer be wealthy enough to remain Cuba’s benefactor (even Fidel introduced some economic reforms when the Soviet Union collapsed and Venezuela was not yet coming to the rescue).

Although we obviously welcome a transition to a democratic and market-based system, there are a couple of hurdles that may need to be overcome. First, vested interests run high in a country that is governed by the same clique for more than 50 years. We don’t think Cuba’s leaders (especially the military) will go quietly, bequeathing their perks and facing an uncertain future. Even if Cuba’s bureaucrats want to support economic reform, they will turn out to be not very helpful as they lack both expertise and experience. Furthermore, after so many years under Communist rule, Cubans have become an uninspiring lot. It will take many years (as we also witnessed in Eastern Europe) before they rediscover their entrepreneurial skills, required to improve productivity to boost the economy. Slow progress may have a high political cost. Finally, the new president of the United States, Donald Trump, may reverse the détente and reinstate the embargo. He said he wants a better deal for the U.S. as well as Cuba. Reversing (presently very modest) trade and diplomatic ties is popular with Republicans in Congress (note that progress was only possible when Obama used executive powers to open an embassy and allow some business activity; the embargo effectively is still in place) and Trump needs some friends to enact his (so far unclear) policies. Maybe the promise of his own Trump Tower in downtown Havana could sway Mr. Trump to give trade a chance. However, an invasion of U.S. businessmen, let alone Big Mac munching tourists, may create its own problem.

Change is in the air… Really?

Fidel Castro’s death may remove a main impediment to change in Cuba, but we are afraid that vested interests within the Cuban bureaucracy/army and an unpredictable new president in the U.S. may make the road to a Cuba Libre a rather long and uncertain one…