In Cuba, there is nothing permanent except change,Cuba
Richard Feinberg | January 12, 2016 2:35pm
In Cuba, there is nothing permanent except change
Change is a complicated thing in Cuba. On the one hand, many Cubans
remain frustrated with limits on economic and political opportunity, and
millennials are emigrating in ever rising numbers. On the other, there
is more space for entrepreneurship, and Havana is full of energy and
The island’s emerging private sector is growing—and along with it,
start-up investment costs. Three years ago, Yamina Vicente opened her
events planning firm, Decorazón, with a mere $500 in cash. Today she
estimates she would need $5,000 to compete. New upscale restaurants are
opening: Mery Cabrera returned from Ecuador to invest her savings in
Café Presidente, a sleek bistro located on the busy Avenue of the
Presidents. And lively bars at establishments like 304 O’Reilly feature
bright mixologists doing brisk business.
Havana’s hotels are fully booked through the current high season. The
overflow of tourists is welcome news for the thousands of
bed-and-breakfasts flowering throughout the city (many of which are now
networked through AirBnB). While most bed-and-breakfasts used to be one
or two rooms rented out of people’s homes, Cubans today are renovating
entire buildings to rent out. These are the green shoots of what will
become boutique hotels, and Cubans are quitting their low-paying jobs in
the public sector to become managers of their family’s rental offerings.
Another new sign: real estate agencies! Most Cubans own their own
homes—really own them, mortgage-free. But only recently did President
Raúl Castro authorize the sales of homes, suddenly giving Cubans a
valuable financial asset. Many sell them to get cash to open a new
business. Others, to immigrate to Miami.
WiFi hot spots are also growing in number. Rejecting an offer from
Google to provide Internet access to the entire island, the Cuban
government instead set up some 700 public access locations. This
includes 65 WiFi hot spots in parks, hotels, or major thoroughfares,
where mostly young Cubans gather to message friends or chat with
2015 was a good year for the Cuban economy, relatively speaking. Growth
rose from the disappointing 2 percent in recent years to (by official
measures) 4 percent. The Brazilian joint venture cigarette company,
Brascuba, reported a 17 percent jump in sales, and announced a new $120
million investment in the Mariel Economic Development Zone. Shoppers
crowded state-run malls over the holiday season, too.
Consumers still report chronic shortages in many commodities, ranging
from beer to soap, and complain of inflation in food prices. Alarmed by
the chronic crisis of low productivity in agriculture, the government
announced tax breaks for farmers in 2016. The government is already
forecasting a slower growth rate for 2016, attributed to lower commodity
prices and a faltering Venezuelan economy. It’s likely to fall back to
the average 2 percent rate that has characterized the past decade.
Pick up the pace
Cuban officials are looking forward to the 7th Conference of the Cuban
Communist Party (CCP) in mid-April. There is little public discussion of
the agenda, however. Potential initiatives include a new electoral law
permitting direct election of members of the national assembly (who are
currently chosen indirectly by regional assemblies or by CCP-related
mass organizations); a timetable for unification of the currency (Cubans
today must deal with two forms of money); some measures to empower
provincial governments; and the development of a more coherent,
forward-looking economic development strategy.
[T]here are now two brain drains: an internal brain drain, as government
officials abandon the public sector for higher incomes in the growing
private sector; and emigration overseas.
But for many younger Cubans, the pace of change is way too slow. The
talk of the town remains the exit option. Converse with any
well-educated millennial and they’ll tell you that half or more of their
classmates are now living abroad. Indeed, there are now two brain
drains: an internal brain drain, as government officials abandon the
public sector for higher incomes in the growing private sector; and
emigration overseas to the United States, but also to Spain, Canada, Mexico.
The challenge for the governing CCP is to give young people hope in the
future. The White House has signaled that President Obama may visit Cuba
this year. Such a visit by Obama—who is immensely popular on the
island—could help. But the main task is essentially a Cuban one.
Richard Feinberg’s forthcoming book, “Open for Business: Building the
New Cuban Economy,” will be published by Brookings Press later this year.
Source: In Cuba, there is nothing permanent except change | Brookings