There were no surprises in Cuba on February 24 when the National Assembly of People’s Power decided that Raúl Castro, brother of Fidel, will be the country’s new president. It is a post Raúl has occupied on an interim basis for the last 19 months, ever since Fidel had to cede power to him because of health reasons. After 49 years and 55 days in power, 81-year-old Fidel now gives way to Raúl, who headed the   only list of candidates presented to the National Assembly for the position of the President of the Council of State, a five-year post. Fidel will continue to be the first secretary of the Communist Party, the only legal party on the island.

General Raúl Castro, 76, is hardly an unknown: He has been at the forefront of the Revolution from the very moment on January 1, 1959, when he and his brother toppled dictator Fulgencio Batista. Ever since, Raúl has been second in command behind brother Fidel in every respect, including political, military and institutional affairs. Until now, he was the first vice-president of the councils of State and Ministers; second secretary of the Communist Party and Minister of the Armed Forces.

Carlos Malamud, head Latin American researcher at the Real Instituto Elcano, says that Raúl, unlike Fidel, “is a pragmatic fellow who likes to work in a team. He likes to organize things and he leaves nothing to improvisation.” Malamud adds that when the Cuban Revolution triumphed, Raúl played a very active role consolidating it. “He was always eclipsed by the strong leadership and personality of his brother [Fidel].”

According to Agustín Ulied, economics professor at ESADE, Raúl Castro cultivates “consensus among his subordinates as well as intense loyalty among his followers, as we’ve been able to see with his nominations for the members of the Council of State. However, Raúl’s most defining characteristic is his efficiency.” Ulied explains that Raúl has played the leading role in the Revolutionary Armed Forces, the [country’s] most successful and prestigious institution. The Armed Forces, which have never used repression against the public, is the institution that manages two thirds of the Cuban economy.


Hugo Macias, head of the research center for economics, accounting and administration at the University of Medellín (CIECA) in Colombia, describes the new President’s personality: “He is someone who knows every detail of local politics and how they all relate to international affairs. He is the military officer who has been the key to Cuba’s self-determination process, which faces pressure from the world’s most powerful and interventionist countries.”


Rafael Pampillón, professor at the IE [business school], emphasizes that Raúl dominates the apparatus of the party, its military and its security services. “He works a little bit below the surface, in the shadows. He will know how to manage things so they work out.” Cubans, he adds, “are aware that a change in their economic system is needed.”


No Change in Policy


Experts agree that there is virtually no chance the political system will be opened up in the short run, but it looks like some changes may be in store in the economic realm. “There will be no sort of political liberalization,” says Malamud. “All indications are that there will be none of that.” For Macias, political reform “will be very gradual; it will take several years before a system for direct voting is set up.” For his part, Ulied emphasizes that “Raúl and Fidel have always been very complementary. Ceding power from one to the other is a sign that there is change but within continuity.”


Pampillón believes that the media are insisting too firmly that there won’t be any political transition until after Fidel dies. “I agree,” Pampillón says, “but I don’t believe this is the moment to emphasize that fact. You have to talk and write about the need for an economic transition so, at least, conditions improve for the Cuban people, who are living through a period of great shortages. The situation is disastrous from the viewpoint of their economy and standard of living.”


On other hand, Ulied notes how economic reforms could wind up leading to political change. “In the most successful transitions of some totalitarian countries, economic reforms have preceded political reforms. However, the speed of the change in this area is generally unpredictable and hard to control.”


Economic Transition?


Ulied believes that so long as Fidel is alive and he presides over Cuba’s Communist Party, there won’t be any significant changes in the Cuban economy. Given the precarious state in which the Cuban people live, they may dare to reestablish the reforms of 1993-96, and even deepen them to bring growth back to the economy. This period of opening, which involved stimulating private property and foreign investment, was brought to a halt (rather than suspended), only shortly after it was set in motion.


Ulied says that the earlier reform initiative came to an end because of political factors. Going ahead with the reforms would have endangered the transition after Fidel left the scene. “What they wanted was to guarantee that the transition was controlled by the Party. Decentralization of economic decision-making in companies, and the emergence of a dynamic private sector, implied that people might act autonomously and resist control by the Party.” The government also recentralized the economy, a measure that was much more temporary. “It was necessary to control the currency and there was an urgency to increase the money supply in order to deal with obligations stemming from the growing volume of imports.”


At the time, there was a widespread perception that Cuba was moving away from class equality, one of its key revolutionary principles. Cubans with access to the dollar were enjoying higher incomes and becoming a class of consumers. That generated misgivings among those workers who did not have access to the U.S. dollar. “This is something unacceptable from a revolutionary point of view,” says Ulied.


According to Ulied, Raúl was the first person to criticize the market reforms, in March 1996. “He has a reputation for being the hardliner in the system, although we can see some past indications of his favorable position concerning reform; there are some signs that contradict Raúl’s pragmatism.” Nevertheless, notes Ulied, the Cuban people are undergoing hard times, and the new President appears to be inclined toward the faction in the debate that favors urgent economic and social reforms. Raúl announced some measures during the speech he made after taking power.


Macias believes that the multiple controls the State imposes on the Cuban economy will continue to diminish gradually. With the change in leadership, “foreign investment will continue to expand, although with a little less regulation by the government. At the same time, they will continue to develop tourism initiatives, and will substantially increase the number of workers in that sector.” Following a process that began 15 years ago, Cuba will slowly continue to build up its labor market and create a much broader market for goods and services, which it will use to manage the slow transition to a capitalist economy. Macias adds that this transformation won’t happen right away. “It will require at least one more generation. Cuba’s young people are the ones who will promote this process of economic and cultural opening.”


The Chinese Model


Pampillón is more optimistic about the speed at which these changes will take place. The new President, he says, “is about to dismantle the system of Socialist planning and the way the country’s economy is currently controlled.” According to Pampillón, Raúl has already said as much on several occasions, and “he has done so with a great deal of courage, challenging the traditional doctrine of the Communist regime a bit.”


Pampillón believes that Cuba will follow the example of China and Vietnam, two one-party Communist countries where there have been no important political changes but where significant economic changes have taken place. “Raúl Castro has visited China, and he knows the country well,” Pampillón says. A number of conditions have to be present to produce the same sort of economic transformation that has taken place in Asia. First, the people who run the country need to have clear goals. “They have to know where they want to go.”   Raúl clearly wants to commit to a market economy. On the other hand, Pampillón doesn’t believe that the dictator has to die before the system changes. “In the case of Spain, Franco had to die before a transition could take place, but that wasn’t necessary in Chile. It doesn’t have to happen in every case.”


You also have to meet another pre-condition, Pampillón adds: Foreign companies that operate in Cuba need to feel that any changes that take place will be permanent, which has been the case of China. “They have to be sure that their legal contractual rights are going to be respected when they do business with the [Cuban] government, and that their property rights are respected.” Two other conditions are required for such a change to take place, and they already exist: popular discontent with the economic situation and a favorable international environment.


Ulied doesn’t know which model Cuba will choose for carrying out this transformation. “It is hard to think that Cuba’s current government will start an economic transition like the one carried out by formerly Socialist countries because that would mean discarding 50 years of Socialist revolution over night. Medium term, a viable alternative would be to apply the Socialist model of China and Vietnam. Nevertheless, Fidel Castro never took a positive view of that approach, and those countries [China and Vietnam] differ greatly from Cuba from a structural viewpoint.” Macias agrees that China is not the best example for Cuba to follow. China adopted a market model for its Socialism back in 1989, a decision clearly taken by the Chinese Community Party. “The best example for Cuba to follow is not the strange arrangement that only China has been able to carry out. Cuba will make the transition toward an orthodox market economy in a slow way. It will take [Cuba] a generation to complete.”


The Challenges of the Cuban Economy


It is not easy to make the transition from socialist economy to market economy. Cuba will have to overcome a lot of obstacles. According to Ulied, Cuba’s socialist economy is significantly different from the socialist economies that characterized several countries in Central and Eastern Europe. Cuba’s economic system has been described as a system “that has an extraordinary ability to manage poverty but which fails to generate wealth.” The key challenge of the Cuban economy is to create wealth and economic productivity. “Cuba urgently needs to decentralize the system and create capital, especially domestic capital. It also needs to promote the participation of its people in jump-starting the economy, by transforming its people into active participants in the country’s economic progress.”


The fundamental transformation of the economic system, Ulied adds, “must come from microeconomic reforms. Among other things, these reforms must eliminate current limitations on setting up companies; must enable companies to hire employees; and must begin to deregulate the financial system. They must facilitate the process of buying and selling property; maintain property registries and title guarantees, and develop an effective tax system.”


Pampillón says Fidel’s successor will have to resolve a broad range of problems. These include “the disastrous transportation system; the food supply system; the backward and unproductive agricultural system; the need to incorporate technology and knowledge when creating goods and services; the obsolete industrial sector; unemployment; and inequality between those Cubans who enjoy access to the convertible peso, and those who only have access to the sort of Cuban currency that enables them to buy only a very limited range of products.”


Relations with Latin America and China


With Fidel out of the political scene, how will Cuban relations with the rest of Latin America evolve? Ulied notes that Latin American history of the last 50 years has been dominated by the figure of Castro. The victory of the Cuban revolution had an impact on the entire continent. But at the moment, only Hugo Chávez of Venezuela, Evo Morales of Bolivia and Daniel Ortega of Nicaragua claim Castro as their heritage.


The first thing Raúl did after being named president was to contact Chávez, notes Malamud. “This showed that it is very important [for Cuba] to be concerned about the energy situation. Cuba depends on Chávez for its supply of energy but relations between Cuba and Venezuela might become less friendly. This is something we’ll have to wait and see.” Pampillón also believes that Raúl’s ties with Chávez aren’t as strong as Fidel’s. Although the two presidents are close, they won’t be able to recreate the same level of intensity. Nevertheless, it is very possible that Venezuela’s economic support for Cuba will not change after Fidel Castro’s retirement, says Ulied.


Brazil is the other key player to consider in the relationship between Cuba and Latin America. According to Malamud, Brazilian president Lula visited Cuba only a short while ago. “Apparently, relations are moving along well [between Cuba and Brazil]. The Brazilian president could play a role as a moderator [of Cuba].” Apart from Brazil, other countries — such as Argentina and Chile — could facilitate the transition by opening up space for dialogue between the Cuban population and some sectors of the [Cuban political] opposition, Ulied adds.


Officials from China, a country whose support has been essential for Cuba in recent years, have made it clear that despite Fidel’s departure, Beijing “will continue to strengthen its relations and cultivate friendship and cooperation” with Havana. China is Cuba’s second-largest economic partner after only Venezuela, according to the Chinese government. In 2006, bilateral trade between the two countries amounted to $2 billion. “This enormous country has built a bridge to Cuba by authorizing soft loans that breathed life into the island in these hard times,” says Macias.

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