Jan 22, 2017 | 14:00 GMT

8 mins read

Cuba at a Crossroads

Senior Analyst, Global Economy
Mark Fleming-Williams
Senior Analyst, Global Economy
Cuba at a Crossroads
(Mark Fleming-Williams)

It's been more than a month since the death of Cuban leader Fidel Castro, and the mood in Cuba is somber. Messages of remembrance are daubed on walls, and banners reading "Hasta Siempre, Comandante" hang in the streets. Official New Year's celebrations in Havana — celebrations that coincide with the anniversary of the Cuban Revolution's victory in 1959 — were canceled this year out of respect for the departed leader. But among the banners and the nostalgia there are also signs of modernity beginning to emerge that could transform Cuba.

From a Westerner's perspective, Cuba feels immediately dysfunctional. The Communist mentality still clearly dominates, and there are queues for everything, particularly for important functions such as banking and exchanging currency. With few personal incentives to provide good service, attendants often focus on finishing conversations with colleagues before serving customers. When a system fails — for example, if a bank card fails to withdraw money or if a bus is already fully booked — the news is delivered to the hyperventilating customer with a disinterested shrug. From the outside looking in, it's clear that the Cuban system was constructed for the benefit of the residents, who appear to have plenty of time on their hands, rather than for the benefit hassled foreigners.

Perhaps that should be expected considering the island's history, during which outsiders have been more of a curse than a blessing. When Cuba was a Spanish colony, English and French pirates regularly raided it, and when it became more profitable in the 19th century, those profits were quickly appropriated by Spanish colonial masters, giving rise to a substantial separatist movement on the island. But liberation from Spain in 1898 did not afford Cuba the independence it desired. The United States, having assisted the Cuban rebels in the Spanish-American War, inserted itself into Cuban politics, giving it the constitutional right to intervention.

During the decades after independence, the U.S. military intervened in Cuban affairs regularly, fostering resentment and discontent. But U.S. influence was not constrained to military action. Havana became a favored destination for freewheeling American tourists, a Las Vegas of its day, which was highly distasteful to Cuban traditionalists, including a young Castro, who eventually seized control after waging an ascetic guerrilla campaign in the southeastern mountains. Castro's initial policy toward the United States was ambiguous, but it soon became profoundly adversarial. Cuba turned away from the United States and is today in its 59th year of true autonomy, the longest stretch since it was first settled by Spain in 1511.

Such autonomy may appeal to Cubans' pride, but it does not do so much for their stomachs. Cuban cuisine is notoriously limited, at least partly because of the U.S. embargo that has been in place since 1962. (Food is actually permitted by the embargo, but it gets through only in limited quantities.) Any island would struggle to subsist on its own resources: Cuba's initial solution was to cultivate a relationship with the world's other superpower at the time — the Soviet Union — leading it to undertake communist policies and to join the Council for Mutual Economic Assistance. Soviet resources helped Cuba maintain a reasonable lifestyle on the island and an outsize influence off it: Cuban forces made decisive foreign interventions during the Cold War, particularly in Africa.

When the Soviet Union collapsed in the early 1990s, Cubans suffered tremendously. Gasoline shortages forced people to turn to horse and cart. Food shortages for huge swathes of the population led to severe medical problems. Wages collapsed to lows that have hardly recovered since. For Cubans, the lesson was that outsiders are a necessary evil that are missed when they're gone.

Turning to Tourism

The Cuban solution to the end of Soviet support has been a gradual opening to tourism. The process has been halting, with developments often reversed when other forms of support emerge. For example, when Cuba's cozy relationship with Venezuela led to an influx of cheap energy, the island lost focus on tourism. But when the Venezuelan economy collapsed, Cuba again began promoting tourism. Yet, the strategy is not a magic bullet.

The foreign exchange provided by tourists is by definition more valuable than the local pesos in which wages are paid. (The Cuban government has created two separate currencies, CUCs, which are used by tourists, and CUPs, which are used by Cubans.) This means that it is more lucrative to drive a taxi than to be a university professor. A recent one-hour car journey cost approximately $30. The driver was a full-time economics professor, who had been attracted by the opportunity to earn considerably more than his $24/month* university salary. Doctors are facing a similar dilemma. Cuba's highly trained medical professionals and the quality of care they provide residents have long been a point of pride for the Cuban Revolution, but many doctors are finding it hard to resist the call of Western cash. As doctors, they earn around $48/month*, a high wage for Cuba but one that is dwarfed by what a free-spending tourist can offer. Thus, the economic incentive in Cuba is moving away from the study of advanced subjects and toward the study of languages, particularly English, which is needed to compete for a lucrative position in tourism. This will undermine many of Cuba's traditional social strengths over time.

(*Salaries are self-reported)


The opening up process has been accelerating recently. Domestic reforms at the start of the decade created more opportunities for entrepreneurialism, while the 2014 U.S.-Cuba rapprochement has opened up the island to U.S. tourism. These developments have caused distortions as existing systems struggle to cope with increased demand. The effect is most clear in tourist haunts such as the beautiful Vinales, where newly printed guidebooks are already out of date. Tourists swarm through the small town, swamping the local resident population and consuming resources like locusts. Bicycle rental prices are double those listed in guidebooks, and the recommended restaurants have long waits.

This spike in demand is naturally also affecting the supply side, and parts of Vinales are reminiscent of a 19th century gold rush town. Walking the streets, it seems that every single carpenter, plumber, tobacco farmer and housewife has transformed their lives to serve the tourist industry. Most houses have been turned into identical bed and breakfasts, and guided walking tours through the countryside are run like factory lines, with seated tobacco farmers delivering the same spiel to each passing group, spaced 30 minutes apart. The fledgling tourist industry has yet to discover the merit of tactfully disguising its true purpose, and a visitor can emerge feeling well milked. With time, larger and more sophisticated businesses will undoubtedly come to dominate the Vinales tourism sector, but for the moment resourceful Cubans are indulging in a capitalist feeding frenzy.

There are other changes afoot in Cuba, most notably when it comes to internet access. In July 2015, the government began allowing wifi zones, both in public areas and around hotels, providing Cubans with more access to the outside world than they've had in decades. There are still huge barriers — the cost is prohibitive, particularly for locals, and internet access often requires standing in the street beside a hotel bashing at a phone in competition with one hundred others for limited bandwidth. Still, the information revolution has begun to arrive in Cuba, and as Cuba well knows, revolutions aren't easy to reverse.

The End of Communism

As its tourism sector develops and as its foreign patrons fall away, Cuba is moving away from Communism. Now, with Fidel Castro's death and current President Raul Castro's advanced age, it seems that the influence of the brothers has a natural time limit. Moreover, recent developments in Cuba's relationship with the United States have been positive: The United States followed its 2014 rapprochement with Cuba with an end to its "wet foot-dry foot" policy, which was designed to undermine the Cuban administration by encouraging emigration from the island. The arrival of the internet, too, will surely have a dramatic effect on Cubans' understanding of the world and of their place within it. Seeing a glimpse of what lies beyond their island will increase their desire to travel and to seize the opportunities available to others around the globe. Perhaps it will also encourage them to pressure their government to continue opening more.

However, despite the progress made, it should not be assumed that Cuba will unequivocally continue opening. Cuba made its most recent changes with the help of a relatively accommodating U.S. government, which did not make excessive demands of the island. But the United States is now transitioning to a new administration that may view U.S.-Cuba relations more traditionally. Because Cuba is so strategically positioned at the mouth of the Gulf of Mexico and near the all-important Mississippi river network, the new U.S. government may be tempted to try to bring it back under U.S. influence, similar to its position before the Revolution. But for Cuba, which has just experienced nearly 60 years of autonomy for the first time in its history, submitting so much to U.S. interests may be too great a price for normalization. Therefore, it is conceivable that Cuba could once again double down on its post-Revolution policies of austere isolation.

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