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A waiter serves customers at a private restaurant in Havana. A waiter serves customers at a private restaurant in Havana, Jan. 31, 2018 (AP photo by Ramon Espinosa). Economic reforms that allow some private enterprise could be jeopardized by worsening U.S.-Cuba relations.

Will Worsening U.S.-Cuba Relations Undermine Havana’s Economic Reforms?

Friday, Oct. 11, 2019

In April 2018, Cuba experienced a watershed moment when Miguel Diaz-Canel was inaugurated as president. That marked the first time in nearly six decades that a Castro had not led the country. And Diaz-Canel is slowly starting to put his stamp on the nation, beginning with the adoption of a new constitution in April 2019 that includes some structural reforms, including the creation of a prime ministerial position, and some attempts to embed market economics within a socialist state. But worsening U.S.-Cuba relations could jeopardize the effort.

It is unclear whether those reforms will be enough to jumpstart Cuba’s economy, which continues to sputter. The island enjoyed a surge in tourism when former U.S. President Barack Obama normalized relations between the two countries, but more systemic reforms were necessary even then to unleash the country’s younger generation of entrepreneurs. Since his election, President Donald Trump has reversed many of the steps Obama took to relax U.S. policy on Cuba, tightening restrictions on commerce with military-owned businesses, and more recently on remittances and travel to Cuba by U.S. citizens, meaning economic conditions on the island are likely to become even tougher.

Trump also reversed a long-standing U.S. policy toward Cuba by allowing Cuban Americans whose property was seized during the island’s revolution to sue not only the Cuban government, but also foreign companies operating on that property. The move came over the objection of European countries, who worry that their businesses might be sued, and also the Cuban government, which must now deal with the economic fallout from the decision. But Trump’s policies have delighted Cuba critics, who point to the regime’s ongoing human rights violations as justifying a harder line.

Meanwhile Venezuela’s ongoing disintegration has forced Cuba to seek new options for trade and investment, after having benefitted from long-standing financial support from Caracas since the beginning of Hugo Chavez’s Bolivarian revolution there.

WPR has covered Cuba in detail and continues to examine key questions about what will happen next. What impact will Trump’s reversal on U.S. policy toward Cuba have on the island? Will Cuba’s new constitution help it usher in an economic transformation? Can Cuba’s new leadership meet popular expectations for reform while maintaining their grip on power? Below are some of the highlights of WPR’s coverage.

Our Most Recent Coverage

An Energy Crisis Is Putting Cuba’s Post-Castro Leadership to Its First Test

Venezuela’s economic collapse and Washington’s new sanctions on companies shipping Venezuelan oil to Cuba have plunged the island nation into its most severe energy crisis since the collapse of the Soviet Union in the early 1990s. In response, Havana is looking to its old ally Russia to plug the hole in energy supplies left by the decline in Venezuelan shipments. But the crisis is hampering plans to implement economic reforms that Havana hopes will respond to popular demands for economic liberalization while retaining the Communist Party’s political dominance.
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Economy and Reforms

The Cuban economy continues to struggle, despite the efforts of Raul Castro, Diaz-Canel’s predecessor, to open the island to investment. Though there is evidence of a small, private economy developing, the broader macroeconomic situation has caused Cubans, particularly young, educated Cubans, to flee in search of opportunities elsewhere.

Politics and Human Rights

Though the arrest and detention of political opponents, activists and journalists has decreased lately, the number of incidents remains high, according to human rights groups. As that would indicate, there is very little room for political activity outside of the ruling Communist Party. Within the party, though, there is some room for reformers to push a more liberal agenda, including advances on rights for women and the LGBT community.

U.S.-Cuba Relations

The détente between the U.S. and Cuba under Obama has all but disappeared under Trump, whose administration has introduced new limits on remittances and non-family travel to the island from the United States. Trump appears to have fallen under the influence of Sen. Marco Rubio and other Cuba hardliners, who are determined to see the current regime in Havana collapse.

Regional Relations

Cuba’s relations with its regional neighbors had been warming over the past decade, so it came as no surprise that the region rallied behind Obama’s decision to normalize ties with Havana. But the country’s communist government is decidedly in the minority after the return to power of center-right governments across much of Latin America. And the crisis in Venezuela is only solidifying that division, with Cuba one of very few countries still supporting President Nicolas Maduro’s administration.

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Editor’s note: This article was originally published in June 2019 and is regularly updated.

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