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Posted March 07, 2005 by mattlawrence in US Embargo

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Cuba is gradually returning to tight state control of its whole economy. Some analysts say it’s preparing for a day when Fidel Castro no longer rules.

Posted on Mon, Mar. 07, 2005

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As Cuban leader Fidel Castro put it recently, the revolution will no longer allow any blandenguería—wimpiness—at home to go unpunished.

More and more, the Cuban government is tightening its political and economic controls—from ordering tourism workers to spy on clients to canceling foreign companies’ checkbooks—in what analysts believe is a campaign largely designed to prepare the island for Castro’s eventual death.

‘‘This is a very well thought-out policy. In the long term, it sets up the state for succession,’’ said Hans de Salas del Valle, a researcher at the University of Miami’s Institute for Cuban and Cuban-American Studies.

‘‘It works like this: They tighten the screws politically, improve the economic situation slightly and, thereby, ensure control’’ when Castro passes on, de Salas added. The 78-year-old Castro, who has ruled Cuba for 46 years, has suffered a couple of fainting spells in recent years and a fall in which he shattered a kneecap and broke an arm.

The new restrictions hark back to the Cuba of the 1960s, ‘70s and ‘80s, when the central government controlled virtually everything, took a dim view of foreign tourists and investors and outlawed the holding of U.S. dollars.

The end of the Soviet Union’s massive subsidies forced Havana to open its economy somewhat in the early 1990s, legalizing the dollar, encouraging foreigners to visit and invest and giving managers of state enterprises more leeway to grow profits.


But now Castro is bent on regaining control of a population and government agencies that grew accustomed to a measure of independence—and on cracking down on the widespread corruption and black-market activities that the economic reforms fueled.

Castro emphasized those points in a recent six-hour speech to economists in which he asserted that the Cuban economy had finally come out of its post-Soviet abyss—in essence arguing that the 1990s reforms were no longer needed.

The U.S. dollar had been recently ‘‘dishonorably discharged’’ from circulation—shops no longer accept them from Cubans—and control of the economy was shifting back to the the hands of central government planners where it belongs, Castro said.

Cuba’s economic ‘‘motor,’’ he added, would be revved up not by open-market reforms but by deals with China and Venezuela—the former ruled by the Communist Party, the latter by President Hugo Chávez, Castro’s top ally and a regional economic powerhouse while oil prices remain high.

In a separate speech to health workers three days later, Castro angrily complained about an increase in the street availability of medicines—at dollar prices—that are difficult to find at government-subsidized peso prices.

‘‘Don’t let anyone believe that la blandengueria can continue without repercussions,’’ Castro said, according to a report by the news agency EFE. ``We will not stay with our arms crossed.’‘

Indeed, Castro has been busy in recent weeks and months putting more controls on his people and his economy.

Effective in mid-February, the Tourism Ministry ordered all workers in the industry to report to state security agents any critical words or actions by their clients, to reject all tips and to avoid personal interaction with foreign visitors—all to protect the purity of Cuba’s socialist values.

At the same time, the Central Bank began requiring prior approval for most foreign exchange transactions. Cuba analysts saw the move as an attempt to increase the government’s control of foreign currencies and attack corruption, but predicted it would also slow Cuba’s already sluggish international business relations.

A few weeks earlier, all state enterprises were ordered to deposit all the U.S. dollars they obtain—usually through exports—into a single government bank account, then request bank permission to withdraw dollars when needed for imports.

Controls on the dollar accounts of foreigners in Cuba were also tightened and some of the checkbooks were withdrawn, apparently to force the foreigners to physically go into the banks to do their business.


Insiders say some economic tightening adopted in 2003, and other factors, had led foreigners to shut down many of their companies in Cuba—all joint investments with the government—even before the latest round of controls. One report issued in 2004 said the number of active joint ventures had fallen from a high of 585 to 342, but analysts say the number today is now even lower.

In November, U.S. dollars in circulation were replaced with government-created ‘‘convertible pesos’’—pegged at one-to-one but worthless off the island. The government also slapped a 10 percent fee on converting dollars to pesos.

And in October, the Labor Ministry strengthened its controls over the labor market by halting the issuance of new licenses for about 40 categories of self-employment—from magician to used-book vendor and funeral wreath maker.

Cubans’ ability to work for themselves and not the state, legalized in 1993, at one point allowed up to 209,000 people to earn a living outside some government controls. The number was down to 150,000 last year.

Cuba analysts say the governments is putting aside the sort of small-scale economic reforms that helped it through the 1990s in the belief that the island will be better off if it makes larger deals with the likes of China and Venezuela.

‘‘The investors that Cuba wants now are those that can bolster the state sufficiently in order to sustain political stability,’’ said UM’s de Salas. ``They won’t sacrifice the political system for the sake of economic growth. . . . The political system is not negotiable.’‘

Paolo Spadoni, a University of Florida professor who closely follows Cuba’s economy, agreed that Castro is now betting that he can improve the economy by recentralizing the government’s controls rather than adopting new reforms.

‘‘The path is clear: recentralization,’’ Spadoni said. ``It’s been incremental with more restrictions and more control.’‘

But analysts say the new regulations are short-sighted and risk even tougher times ahead for the already struggling nation.

‘‘What they are doing does not make economic sense,’’ said St. Thomas University economist María Dolores Espino. ``They have decided that what is important is [domestic] efficiency and not the [foreign] markets. The problem is you can’t be efficient without the markets.’‘

‘‘The bottom line is that it looks very bad in the long term,’’ Espino added.

But not if Castro cares only about a peaceful assumption of power by his successors once he dies, de Salas said. ‘‘I think where it’s all headed is a likely authoritarian succession modeled after China and Vietnam,’’ he said. ``Time is on the regime’s side. All they have to do is stay afloat.’‘

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