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June 1992

Unclassified

Editors Note:

Cuba's attempts to halt the decline of its economy in the absence of Soviet aid show little hope for success. Yet President Castro appears convinced that, despite his economic woes, his own personal popularity will carry him through the next crucial 18 months. If he's wrong, what are the options?

Charles Svoboda joined CSIS in August 1991 as Director General, Requirements, Analysis and Production, after an extensive career with Canada's foreign service. His first posting abroad was in Cuba. He explores three possibilities for the future of that country.

Disclaimer: Publication of an article in the COMMENTARY series does not imply CSIS authentication of the information nor CSIS endorsement of the author's views.

Cuba is in crisis. Throughout the last 500 years it has depended in one way or another on a major power: for the first 400 years it was Spain; for the next 60, the United States; for the last 30 or so, the Soviet Union. Now, alone, it is forced to make its own way in the world using an economic and political system which has been discredited and discarded almost everywhere else.

For Cuba the figures are depressing. Soviet trade concessions and outright aid according to a recent article amounted to some $4 billion a year, which would represent approximately 20% of Cuba's GDP. The loss of this support has doubtless caused not only serious supply problems but a major contraction in the Cuban economy and will likely continue to do so for the year ahead. As three-quarters of Cuba's trade was with its former partners in COMECON, it must now try to find additional markets and suppliers for its needs.

As if Cuba's shrinking economy were not bad enough, the shoe is pinching very badly in two key areas—oil and sugar. Cuba is intensifying oil exploration efforts in its own territory and seeking ways in which its excess refining capacity can be put to use in co-operation with new partners. However, these ventures are unlikely to produce tangible results in the near future. In past years Cuba, which depends on oil imports for the vast majority of its energy requirements, was able to bring in, through arrangements with the Soviet Union, a great deal of its fuel needs—some 13 million tons, according to a recent Economist article—at a heavily subsidized price. By contrast, in 1992 Cuba's oil imports are expected to be severely limited to no more than 6 million tons, purchased from a variety of sources in addition to its traditional supplier. In recent months, Cuba's oil shortages have been so acute that, according to President Castro himself, supplies on hand at times would have lasted only three days. To pay for the oil, Cuba must export ever greater quantities of sugar—by far its biggest export earner. Yet this year, prices of raw sugar on the spot market are not only down by one-third from 1990, but the estimates for the 1992 Cuban sugar crop itself are believed to be only 5.0–7.0 million tons—significantly down from recent production figures and, according to public sources, the lowest in 20 years. The combined effect of lower prices and supply will doubtless cost Cuba much of its expected hard currency earnings alone, with no immediate relief to come. Although Cuba is notoriously reluctant to share its economic statistics with the outside world, it is speculated that in recent times its foreign exchange holdings at any given moment hover at a mere $30 million. Estimates vary, but some observers calculate the collapses of the CMEA and the economies of Eastern Europe have led to a drop in Cuba's overall imports by nearly two-thirds, which would mean a decrease of somewhere between one-quarter and one-fifth of GDP. Since most of the suspended imports are raw materials and intermediate goods, there will be an adverse effect on production and, in turn, employment.

The government is obviously attempting to find solutions for its economic and financial difficulties. It has some hopes for tourism, with ambitions to increase five-fold over the next 10 years the 360,000 tourists it received in 1991. Over the last two years it has had some success: the number of Canadian tourists, for example, has recently increased by about one-third. Continued expansion at this rate may not prove easy, given Cuba's economic deterioration and the tourist industry's sensitivity to problems of infrastructure, security, supply and service.

In a measure which represents a certain amount of ideological compromise, Cuba wants to attract foreign capital in the form of joint ventures with investors from abroad. It has had legislation in this area for many years, but has increased its efforts to persuade foreign companies of the opportunities that await them, particularly in the tourist industry. Even though several projects are underway, including the construction of new facilities and the refurbishing of pre-revolutionary landmarks such as the Hotel Nacional in Havana, it remains to be seen whether Cuba has acted promptly enough to do much good.

Some Spanish commercial interests have invested in hotels and other tourist facilities. The Cuban authorities claim they have entered into "associations" with 50 other foreign companies, including those in the biotechnology, pharmaceutical and petroleum industries, but this could mean arrangements which do not involve much capital entering the country. Although some money may indeed be coming in, potential investors may still hesitate about the long-term legal and political safety of their capital and the somewhat measured public support for the idea from Castro himself.

The government to date has not otherwise been willing to make any serious changes in its domestic economic policies. Here the scope would have been extensive but, aside from sanctioning moonlighting, the government continues to forbid private enterprise. Instead, to deal with a shrinking economy and the need to increase its food production, Cuba has resorted to the traditional powers and approach of a communist dictatorship and is attempting to re-deploy some of its workforce to the countryside. Amongst other measures, 70,000 government workers have been released from their jobs and told that if they do not accept work outside Havana they will lose their pay. With no private sector available as an alternative employer, individuals have few options. On the vast state farms they have to cope with machinery that does not function for lack of spare parts or fuel, and horses and oxen in lieu of trucks and tractors. To all of this is added a system of agricultural production which under the best of conditions works very inefficiently.

Looking abroad, Cuba has not found the prospects very encouraging. Following its disappointment over the failure of the August coup in the Soviet Union and the unwelcome announcement that the Soviet military presence in Cuba would be withdrawn, the Cuban government set about to deal with the members of the CIS, and signed trade agreements with most of them. The parties concerned still need one another's markets, but the trade is now all calculated in dollars, even if barter—or something akin to it—exists. Further afield, Cuba may have had hopes of greater support and sympathy from China, but even if Beijing were prepared to sell Cuba half a million bicycles, it is not willing to take up any portion of the burden the Soviet Union had carried. Besides, whatever the remaining ideological ties, many Chinese officials evidently think that Cuba represents the past, not the future.

Europe offers still less hope. Indeed, Cuba's relations with Spain over the last year or more have been marked by sharp differences over human rights and other issues. Former communist allies in Eastern Europe have recently supported resolutions in UN forums condemning human rights violations in Cuba.

On the surface it would appear that Latin America might offer a more encouraging picture. Last July President Castro was invited to the summit meeting in Guadalajara of the Heads of State of Latin America, Spain and Portugal, where he was received with courtesy and treated as a participant with a complete right to be at such a "family" gathering. However, it is unlikely that Latin American countries engaged in their own domestic reforms will do much more to help Cuba out of its difficulties, unless Havana itself engages in a program of fundamental reform. Further, they are unwilling to imperil their own bilateral priorities with Washington by going to bat on Cuba's behalf. Latin America would likely help if there were widespread misery and deprivation in Cuba, but given the limits on available resources, short of this there is little likelihood of large-scale aid and assistance.

Compared to Latin America, Canada does not in all probability loom large in Castro's thinking, but he appears to view relations with Ottawa as very satisfactory. They may be far less intense than the halcyon days of the 1970s, but Canada still supports Cuba's right to determine its own destiny and remains as opposed to the United States' boycott as ever, even if Cuba does not welcome Canadian criticism of its human rights record. Still, on the bright side, Cuban exports to Canada have surged ahead over the last year with increased sales of sugar and an important new item, nickel ore.

There will be little possibility for improvement in Cuba's relations with the United States unless and until Fidel Castro introduces radical constitutional and democratic reforms, including the holding of free, multi-party elections. Lisando Otero, author and former Cuban diplomat, recently stated that such changes would not come unless the United States relaxed its pressures on Cuba. But this is unlikely while Castro remains in charge. Instead, to please its own conservative wing and the Cuban exiles, the American administration will continue to maintain, and tighten if it can, the trade boycott in the hope of hastening the end of the régime. It would not want to see widespread instability in Cuba, as it does not wish to encourage a further exodus of Cubans (which nearly quintupled in 1991, to some 2400, over 1990) to an over-burdened Florida. The United States is most unlikely to attempt an invasion of Cuba, even if Fidel Castro continues to claim the contrary for his own political reasons.

While an evolutionary change involving the emergence of democratic electoral practices and the introduction of new market mechanisms cannot be ruled out, the chance of fundamental reform in Cuba, which so many countries would like to see, does not seem promising. The reasons are various, but they are largely linked to the character and outlook of the President. Castro is the father of his own revolution. A charismatic figure, he is a man of very determined views who can look back on issues or events when he carried the day against great odds. He can point to some real achievements in education and health. Because of the American blockade he can appeal to nationalist sentiment and claim that Washington is the source of Cuba's difficulties. He is the First Secretary of the Communist Party of Cuba and controls the armed forces and the police; his own brother, Raul, is in charge of both. Over the years he has allowed, even prompted, the departure abroad of about a million Cubans who might otherwise have formed a large opposition at home. What is left are a few hundred repressed dissidents, sadly divided into several groups with differing agendas.

Thus, Fidel Castro seems to have concluded that on balance, these advantages can overcome the considerable difficulties facing his present policies and that he can maintain the governmental structure and ideology intact. For him it is "socialismo o muerte" as the official slogans around Havana still defiantly proclaim. Yet for those with a more detached perspective, it seems evident that without fundamental change, Cuba's decline will continue to deepen ever more rapidly.

Although there could be some minor adjustments, politically the status quo will remain as long as Castro stays in office. Still, there are obviously other possibilities. Although unlikely, the President could resign and take up offers to live abroad; or he could become seriously ill or die in office, even if at 65 he does seem robust and healthy. In these circumstances his brother would succeed him. With the support of the armed forces and his many protégés scattered throughout the Cuban power structure, the younger Castro would attempt to govern Cuba. There is well placed speculation that such a successor government would be more open to economic reforms, but major political reforms would seem unlikely. It would be difficult, for example, to see Raul Castro holding an open election. Economic reforms could buy additional time for a successor régime if their effect were felt reasonably rapidly, but there would be a great hunger for change. Veteran Cuba watchers have long been of the view that Raul Castro, who does not have his brother's charisma and presence, would be unable to hold power for any lengthy period.

The third possibility would be an attempted coup against Fidel Castro. The Cuban government is obviously alive to such a prospect and that the most likely time for it to occur would be during the next 18 months, when the economy will remain at a very low ebb. The leadership presumably calculates that if Cuba can survive this period and if the population sees some hope of an improvement, the threat to the régime will diminish. If there is an attempt to remove the President from office, it will not be led by the small human rights movement, but rather, many observers believe that, faute de mieux, a coup would be mounted from within the armed forces. The military may appear totally loyal, and the senior officers at least have a considerable stake in the current system, but there could well be an officer, perhaps relatively junior and therefore more aware of the hardships suffered by the population, who might conclude that there would be no improvement unless the President were forced from power. Such an individual would likely have at least a small number of troops at his disposal and possibly the support of well-placed officials and members of the intelligentsia. An attempt could be made unexpectedly and in isolation from other events, or it could come in the wake of public demonstrations, with the organizers taking advantage of the climate of the moment to make their move.

While such prospects remain speculative, were this sort of change to be effected successfully and quickly, a successor régime would no doubt rapidly dismantle the communist government structure and the economic system that goes with it, if its leaders wanted to be fully accepted back into the inter-American system. They would be under great pressure from Washington and their own population to hold free and fair elections and presumably would do so after about a year. The new régime could include Cuban exiles, but it is unlikely that they would be allowed to dominate it. In any changes that it made in economic and fiscal policies, a new government would likely draw heavily from the experience of those countries which formerly had communist régimes. It would only be too aware how difficult the transition period can be. It could count heavily on United States and European financial support, with Spain very much in the lead as a donor and investor.

If a coup were not immediately successful, greater repression, a protracted insurrection and even civil war could result. Fidel Castro still enjoys a substantial measure of personal popularity in Cuba, and many would resist an attempt to oust him. Any protracted instability would clearly cause still further hardships, damage the tourist industry, considerably reduce Cuba's sugar exports and possibly encourage another mass exodus of Cubans. Humanitarian assistance might have to be extended by international organizations and various countries. Conceivably, the US would consider military intervention under certain conditions but, given the size of the country and the extreme political sensitivity of such a venture, it is very unlikely that it would do so without, as a minimum, involving the OAS.

In short, the Cuban government has been too slow in responding to the changes in the world and too lacking in imagination and flexibility to deal with the major problems confronting it. It is forcing its population to live under an ideology which most of the world regards as an anachronism. While no one can accurately forecast how long the present leadership will last, in the post-Soviet world the pressures for dramatic change may well become irresistible. When it occurs, policy makers of the hemisphere, not least of all in Ottawa, will be faced with the formidable task of reintegrating Cuba into the family of American nations with which its relations have been so difficult for over three decades.

The views expressed herein are those of the author, who may be contacted by writing to :

CSIS 
P.O.Box 9732
Postal Station T 
Ottawa, Ontario K1G 4G4 
FAX: (613) 842-1312

ISSN 1192-277X
Catalogue JS73-1/23

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