Squeezed by sanctions, pandemic, Cuba finally opens up economy

HAVANA (AFP) – Cuba is undergoing a paradigm shift: after decades of tight, centralised control, the communist government is opening up the bulk of its economy to the private sector.

While economic decline and spiralling unemployment are the main drivers, analysts say the liberalisation measures can also be seen as an overture to a new United States (US) president.

“It is definitely a strong signal at a crucial moment when the US administration has said it is revising the policies of (Donald) Trump towards Cuba,” said Ricardo Torres, an economist at the University of Habana.

Six decades of US sanctions, toughened during Trump’s term in office, have claimed a heavy toll on Cuba’s economy, worsened by the coronavirus crisis and a steep drop in tourism, a critical sector.

Last month, Havana said Trump’s sanctions cost the country some USD20 billion, adding that “the damage to the bilateral relationship during this time has been considerable”.

The Cuban economy shrank 11 per cent in 2020, and exports declined by 40 per cent.

Workers of a private taxi company disinfect old American cars in Havana. PHOTO: AFP

At the weekend, the government in Havana announced it would authorise private enterprise in a bid to boost its economy and create jobs, though limited to individual entrepreneurs for now, not businesses.

The number of authorised private activities would grow from 127 to over 2,000, but excludes 124 sectors including the press, health and education, which remain in government hands.

The reform represents a major ideological shift in a country where the government and its affiliate companies have monopolised most of the economy since 1961.

Cuba began timidly opening up to private capital in the 1990s before fuller authorisation in 2010, followed by a boom after the historic warming of ties with Cold War rival the US in 2014 under then-president Barack Obama.

Today, about 600,000 Cubans – some 13 per cent of the workforce – are employed in the private sector.

Most work in hotels, restaurants, transportation and tourist accommodation.

Millions of people work for the government, but the exact number is not known.

Trump reversed many of Obama’s moves to ease tensions with Cuba.

He banned American cruise ships stopping over on the island, blacklisted a range of Cuban companies and bosses, prosecuted foreign companies doing business there, and made it difficult for Cubans working abroad to send money home.

The new US President, Joe Biden, has promised to bring back some of Obama’s policies to normalise ties, while also paying attention to human rights concerns in the country of some 11.2 million people.

Some in the US have welcomed Cuba’s policy shift, which will for the first time see private salary earners in sectors such as agriculture, construction and IT.