It's Time for a Policy Change on Cuba

Doug Bandow

Where are you from?” asked the 20-something as he passed me on the street in Havana. America, I replied. “I love America” he declared, before turning into one of the many restaurants near the Malecon, or waterfront. He likely was on staff, a member of Cuba’s growing private workforce.

However, opportunities for young Cubans are still too few. Many are responding, noted the Economist, “not by agitating against the system but by plotting to escape it.” Communist rule is changing, but not enough. Despite leadership shifts and constitutional revisions, state controls continue to stifle the economy.

Ironically, among the biggest barriers to reform are President Donald Trump, Sen. Marco Rubio, and old-line Cuban-American leaders, who seem determined to preserve the fading Castroite dictatorship. They remain committed to isolating the regime, despite the failure of half a century of economic warfare. Vicki Huddleston, who once headed the U.S. interest section in Havana, reported that the embargo “has not influenced the country’s leadership to change its communist government or to improve human rights on the island.” To the contrary, she explained: “we are harming Cuba’s people much more than we are the Cuban government.”

Increased economic ties to the United States are the best, and perhaps only effective means for Americans to undermine the regime. Yet the Trump administration partially reversed President Barack Obama’s opening to Cuba. This switch hurt the island’s many private businessmen and women, who complained to me on a recent visit that they cannot even get a hearing from the administration.

American involvement in Cuba goes back to the Spanish-American War, after which Washington turned the “liberated” island into a de facto U.S. protectorate. In 1959, Fidel Castro and his revolutionaries swept the corrupt Fulgencio Batista from power. Alas, they proved to be far better at tyrannizing opponents than uplifting citizens. They impoverished the island economically, politically and spiritually.

Fidel & co. turned to the Soviet Union, while Washington imposed an economic embargo and attempted to oust the regime. Any claim that Cuba posed a security threat died with the Soviet Union. The consequent end of Moscow’s subsidies sparked a rapid economic contraction known as the “Special Period.” But Florida’s politically active Cuban-American community blocked any change in policy. Even as the case for the embargo faded, restrictions were tightened.

One counterproductive impact of the embargo was to turn Cuba’s nearby market over to other nations. For instance, Europeans invested and traded even after America’s departure. Now Russians are back and Chinese are arriving. Moscow is promoting defense cooperation, supplying oil, investing in infrastructure projects including the rail system and forgiving the bulk of Havana’s old debt to the Soviet Union. China has become Cuba’s largest trading partner, is restructuring debt, advising Cuba’s military, and is supplying cars, telecommunications equipment and additional products. One of my tour guides observed that two Chinese hotels were being built: “In five years we all will be speaking Chinese.”

President Barack Obama broke precedent and relaxed federal controls—many cannot be repealed except by Congress—allowing more travel and business. He also re-established full diplomatic relations. When he visited the island in 2014, people treated him like a rock star. Years later Cubans told me how he gave them hope for a better future. Cars still sport stickers with his photo.

U.S. companies entered the Cuban market and U.S. tourists visited the island. Caroline Anderson of the American Security Project argued: “Airbnb’s advancements offer proof for the success of business expansion into Cuba. Airbnb increases the amount of money distributed directly to Cuban citizens, raises tourist levels, and helps build U.S.-Cuba ‘person-to-person’ relations.” I stayed in a retired lady’s Airbnb apartment on my most recent trip. The private sector grew to account for an estimated one-fifth of the economy.

Trump broke with precedent to engage North Korea. Why not do the same with Cuba?

However, candidate Trump played to the most extreme, and older, Cuban-American activists. “They want revenge. This is vendetta politics,” observed Cuban university professor Ricardo Torres Perez. Taking a similar position is Sen. Marco Rubio, who, Cubans point out, has never visited the island and refused to meet entrepreneurs who visited America. Restaurateur Niruys Higueras told me she wished “to make him understand how much damage he is causing the private sector.”

The president originally threatened to “cancel” the Obama opening, but instead banned business with any of 180 enterprises allegedly tied to the military. He claimed doing so would “channel economic activity away from the Cuban military and to encourage the government to move toward greater political and economic freedom for the Cuban people.” This was play-acting. Money is fungible and payments to any state enterprise go back to the government.

More significantly, the administration prohibited individual “people-to-people” trips. Groups are still allowed to organize such travel. Individuals may visit for specific educational, humanitarian and professional purposes. Unfortunately, the new rules, complained the Engage Cuba Coalition, create a “more convoluted, confusing and counterproductive approach,” which scares off potential tourists. To be safe, tourists can use groups familiar with the regulations such as Cuba Educational Travel (CET), which handled my trip. However, many Americans simply choose to go elsewhere.

Unfortunately, the new restrictions have hit the nascent private sector hard. William LeoGrande and Richard Newfarmer of the Brookings Institution noted that “although President Trump’s policy purports to boost Cuba’s private sector, the prohibition on individualized people-to-people travel will likely hit the private sector hardest.” LeoGrande and Newfarmer figure that “some 60 percent to 70 percent of this spending goes to Cuban workers for wages, to local suppliers, and maintenance and utility expenditures largely unaffiliated with the military.” By stifling private sector growth, the president forced Cubans to continue relying on the state.

I found this to be the reality on the ground. “A lot of private business feels crushed,” complained CET’s Collin Laverty. “So many people opened businesses for American tourists,” said Julia de la Rosa, who owns an Airbnb with her husband, Silvio Ortega. “Now there is little demand.” American tourists are well-liked—they generally tip well and behave responsibly, I was told more than once. They also are more likely to stay at Airbnbs and bed and breakfasts, use taxies, patronize private restaurants, hire individual tour guides, and the like. In contrast, official tour operations, which are better acquainted with federal regulations, are more likely to deal with larger state enterprises, including tourist agencies and hotels. “We don’t have the American market anymore. Everything is going down,” one tour guide told me.

Many entrepreneurs invested in expectation of more tourists. A tour guide complained “some people sold all they had to open a business, restaurant or bar.” For instance, the Airbnb owned by de la Rosa and Ortega began with just a couple of rooms. They have since equipped the entire house for business. Alas, bookings have dropped significantly. So, too, demand for Ortega’s taxis. Other businessmen and women I met complained that the new rules triggered a rash of cancellations and pushed down future bookings. The impact was particularly hard on enterprises, such as Airbnb, which catered to Americans.

Yamina Vincente, an interior designer whose clients are mostly Cuban, said she also is suffering since “Cuban people don’t have the money.” She added: “Many people are scared about the future, so they don’t organize a party.” Also hurt are “all the people you are going to hire for the restaurant, to make the beds, etc.,” said Ortega, whose Airbnb employs twenty-three people. Vincente said she no longer hires as many musicians, make-up artists and clowns for events, including birthday parties. Higueras complained of Washington: “you should know what you are doing before you implement regulations.”

Of course, socialism failed because it always fails. Revolutionary Cuba provided little reward for entrepreneurship, enterprise and hard work. Still, with Moscow’s help it once “looked like socialism worked,” commented a retired government official who believes economic reform to be necessary. Then came the end of Soviet subsidies, when the island’s real economy shrank by more than a third. Today the regime is unable to feed, pay or otherwise care for its people.

When I first visited the island in 2003, Cubans showed me their ration books and complained that some goods, such as milk and eggs, generally weren’t available. Today is more of the same. Richard Feinberg of the University of San Diego observed “persistent shortages of consumer staples, energy rationing, and price inflation are features of daily life. Take-home pay in many public sector jobs fails to cover basic household needs (even taking into account various government consumption subsidies).”

When I commented during my latest trip on a gas station which sported an “open 24 hours” sign, I was told that “most of the time stations don’t have oil or gas.” A tour guide complained that one has “to struggle to eat.” Former CIA intelligence officer Kevin Hulbert notes that the official food supply typically lasts just a couple weeks, after which Cubans must “resolviendo,” or resolve the problem. “So they pilfer food from work, fill up extra jugs of gasoline when they fill up the company car, work illegally running taxis, restaurants, unregistered commerce of whatever type, selling cigars they stole from the factory, and too many other scams and efforts to mention.” Cubans also take side jobs: I met an anesthesiologist washing dishes at a private restaurant, which paid more than medicine.

Overall, Cuba has lost ground compared to the rest of Latin America. A recent study by economist Pavel Vidal found that Havana vastly overstated national income. Cuba’s GDP is down more than a third since 1985; investment is among the lowest in Latin America. Vincente observed: “years ago in Cuba young people only thought of leaving Cuba to get [a] better lifestyle. After 2011, people thought of staying if they could stay and have a good lifestyle. Now we are moving backwards. People are thinking of leaving Cuba. It is very sad.”

After Raúl Castro took over, observed one Cuban, “the people thought within a couple years things would change.” But his minimal reforms fell far short. Feinberg cited the “frustratingly slow bureaucratic approval process” resulting from “ideology, senior personnel and incentives.” Several entrepreneurs name economic controls and confiscatory taxes when noting how hard it is to comply with the law and prosper.

Havana has “been too timid to bring about meaningful change to the Cuban economy, and the regime is now backtracking on some of them,” complained Antonio Rodiles and Erik Jennische, of the Forum for Rights and Liberties and Civil Rights Defenders, respectively. Last year the government suspended issuance of new licenses after Raoul criticized firms for conducting unlicensed activities and evading taxes. Said one tour guide, “it’s never easy in Cuba.”

Even now needed reforms languish. Last year Raúl Castro declared that currency reform, merging the convertible peso and Cuban peso, “cannot be delayed any longer.” Despite its insistence that the revolution is irreversible, the Cuban government wants foreign investment, which the minister for foreign trade and investment, Rodrigo Malmierca, said “has become an essential issue for the country.” However, the country remains economically inhospitable.

Unfortunately, much-touted constitutional reform will largely reinforce the status quo. The revised document legalizes private business and employment and limits public expropriation, but the new rules also increase public exactions and limit private growth, for instance, barring entrepreneurs from holding more than one license. The Communist leadership wants to loosen restrictions just enough to grow the economy while confiscating most of the gains.

The ongoing leadership transition—Raúl Castro yielded the presidency to Miguel Diaz-Canel, who was born after the revolution—so far has had limited impact. Still, many Cubans, including some younger Communist Party members, hope that the passing of the Castros will open the island’s politics. “The days of one person making decisions are over,” argued Laverty. A journalist told me that “people who come later won’t be able to rule like Fidel and Raúl. They know they have to do this differently. It won’t work if they don’t.” An American living on the island was more optimistic, telling me Raúl’s retirement had created “a completely new scene.”

Unfortunately, U.S. sanctions continue to provide the regime with an excuse for failure. Opposition activists complained to me on my first trip that communist apparatchiks blamed America for their failure. Today the regime hides behind President Trump’s policy.

America could have a huge positive impact. LeoGrande noted that “among ordinary Cubans, the desire for a better relationship with the United States is almost universal.” I saw a young man wearing a t-shirt emblazoned with an American flag and another man driving a car with an American flag on the dashboard. Yet Washington stands in the way. Cuban entrepreneurs blame the Trump administration for punishing them, damaging their businesses and destroying their investments.

Private investment also has a significant political impact. A desperate communist government has been forced by necessity to allow emergence of a growing private sector which provides up to 40 percent of the island’s jobs. People shifting from safe government employment to more remunerative but less certain private work are unlikely to be docile communist drones. Moreover, as people grow more prosperous, people tend to make more political demands. “If you want to create more space for debate, expanding the entrepreneurial class is one way,” argued Laverty. The fact that working privately, even at seemingly menial labor, pays substantially more than government bureaucracies has unsettled those who labor for the Communist machine.

Also, tourists do more than spend money. Jorgensen pointed to a survey last year which found that U.S. visitors engaged owners about politics and culture. Indeed, Professor Perez observed that the island had changed markedly in recent decades. “Compared to twenty years ago you can see many enormous differences.” Particularly important, the regime no longer possesses an information monopoly.

Controls were tight on my earlier visit, but no longer. People have increased access to cell phones, wifi hotspots, flash drives, and a relatively free internet. The latter is expensive, and anti-Cuban websites backed by the U.S. government are unavailable, but otherwise “there is very little internet censorship” one regular user told me. The authorities complain about online news sources but has so far left them alone. Hardliners “want to control the Internet—but can’t,” noted Laverty. A staff member at a Communist publication told me that he was “not saying that people have free access to information, but they have more,” including through shared USBs. He figured that perhaps 80 percent of people received alternative news sources.

The regime treats opponents harshly. For instance, the Ladies in White, who demonstrate on behalf of husbands, fathers and brothers arrested by the regime, have been treated roughly by the police and state-organized mobs. Other targets, according to Cuba Study Group (CSG): “a prominent alternative ‘think tank,’ university professors writing for non-state publications, and even street purveyors of pirated foreign media and TV.” Advocating “changing the political system is a red line,” explained one well-connected Cuban. Such talk is “counter-revolutionary.”

Still, criticism of government is heard. The latter source said “you can talk about making the system better, improving efficiency, increasing growth.” Added a widely-traveled artist, “it should be possible to make the revolution more flexible, democratic.” This broader discourse, explained CSG, “occurred not by fiat, but because a variety of actors in a fraught middle ground forged space to engage in robust analysis and debate.”

The Obama opening helped. He “was very good for us,” said one Cuban. American University’s William M. LeoGrande observed that “the political space available not for dissidents, but for people that you might call independent critical voices calling—broadly, civil society—calling for reforms in the socialist system, and sometimes dramatic ones, but not calling for its replacement that political space for those people, in my judgment got wider after the normalization of relations.”

The regime felt threatened. Foreign Minister Bruno Rodriguez denounced Obama’s “deep attack on our ideas, our history, our culture and our symbols.” A Western journalist told me “Obama’s visit was tremendously challenging, like Kryptonite,” for the government. “They completely underestimated his popularity.”

The Communist Party turned to repression. Ted Henken and Armando Chaguaceda respectively of Baruch College, City University of New York, and the Universidad de Guanajuato noted that “Havana has responded by circling the wagons of the state and doubling down on political centralization,” but that “a variety of actors in Cuban society—including political dissidents, independent digital journalists and the island’s innovative entrepreneurs—have staked increasingly bold claims to the public spaces that have emerged in recent years as a result of Havana’s limited economic reforms.”

Also putting pressure on the regime is the flight of the young. A former government official said only one of his four grandchildren remains in Cuba. In Brazil, doctors sent to labor under contract by the Cuban government have filed lawsuits demanding their full salaries. Even younger communists with whom I spoke acknowledged the need for meaningful reform, while insisting that they were not dissidents.

Despite this ferment, President Trump’s approach forecloses any dialogue or interaction which might encourage Havana to loosen controls. He said: “we will not lift sanctions on the Cuban regime until all political prisoners are freed, freedoms of assembly and expression are respected, all political parties are legalized, and free and internationally supervised elections are scheduled.” Taking the president at his word, he expects the Communist regime to dismantle itself—something he has not demanded of even worse dictatorships he befriended.

Nor would any government comply. One Cuban reformer told me: “it is very naive to think that more pressure on the Cuban government will get it to do what the U.S. wants.” Indeed, administration policy makes positive change less likely. Demanding the regime’s surrender ensures hardliners will work harder to prevent the rise of a Cuban Gorbachev. One Cuban who wanted change said there were officials who desired to chart a more moderate course, but “when U.S. policy becomes more aggressive, it complicates the jobs of these people.” Similarly, argued Laverty, “U.S. hostility leads to an under-siege mentality in Cuba, limiting space for debate and calls for change.”

Mid-level government officials with whom I spoke were conciliatory but not obsequious. “We are very open to American companies,” said one, and recent history “shows that we have common ground and we should build on that.” But they denigrated U.S. policies made to satisfy Cuban-Americans and dismissed making political changes under pressure. Even a reform-minded journalist who belonged to the Communist Party said “let Cuba do it in its own way.” U.S. pressure is “colliding with national pride. If Washington says to do something, some people say no, because the U.S. says so,” he explained.

Perez argued that Cuba “won’t get dramatic change at once.” Instead, he predicted change “more as gradual evolution” with a “transition toward a different society.” The process “will necessarily take some time.” Washington’s policy should be “to nurture this process.”

Further complicating the U.S.-Cuban relationship is the possible sonic attack on American diplomats, which caused Washington to essentially empty its embassy and shift visa operations successively to Colombia and Guyana. U.S. intelligence figures the Cuban government was not to blame—which makes sense, since it negotiated the opening to America. Russia has been suspected, but Moscow would risk much launching such an operation in Cuba. Unfortunately, the administration appeared to treat the controversy as an opportunity to ratchet up pressure on Havana, again mostly hurting the Cuban people.

Of course, it will be best when the Cuban dictatorship disappears. But the president’s action is the triumph of ideological blindness over painful experience. If nearly sixty years of embargo and other sanctions won’t create democracy on the island, his arbitrary tightening won’t do so.

Far better to send more Americans, more money, more goods, and more opportunities to Cuba. More Western employment and contact would spread the virus of liberty. Amnesty International’s Marselha Goncolves Margerin argued that “increased political dialogue, travel, and trade between the United States and Cuba is fundamental to advancing human rights.” The embargo should be lifted entirely, though any relaxation would be a move in the right direction. Particularly useful would be allowing Americans to travel freely to Cuba.

That wouldn’t guarantee change, of course, but President Obama’s promise of a different future greatly unsettled the Cuban government. The latter’s repressive response demonstrated the regime’s weakness, not strength. Washington also should look for practical areas where the two governments can work together for mutual advantage. Geoff Thale and Marguerite Rose Jimenez of the Washington office on Latin America noted, “While cooperation has survived during periods of great hostility, it has thrived during periods of increased engagement.”

“Just about anything can go wrong in a country like Cuba,” one person told me. So true, but that is to be expected. As a serious governing philosophy, communism is dead in Cuba. Observed Feinberg: “Over six decades, the vanguard party has become the rearguard party.” Those leaders serious about the island’s future have begun to consider a freer way forward. Reformers looked to the U.S. and lauded Obama’s strategy. None had anything positive to say about his successor.

“We need the Americans back,” one businessman desperately exclaimed. De la Rosa asked me to let people in Washington “know they are hurting us. They are hurting common people.” And empowering opponents of change in Havana. Alas, the president continues to treat Cuba as a political issue, important only because of its impact on the next election. I found many Cubans enormously frustrated by the refusal of American policymakers to look beyond the exile community to those living on the island.

There may be no better test of a public policy than the more than half-century U.S. embargo on Cuba. A foreigner living in Cuba complained of “magical thinking in Miami” which contends that “this time we are almost there” in overthrowing the communist regime. But President Trump knows better. He broke with precedent to engage North Korea. He should offer Cuba the opportunity to join the rest of the world, making political gains as well as economic benefits likely.

Doug Bandow is a Senior Fellow at the Cato Institute. A former Special Assistant to President Ronald Reagan, he is author of Foreign Follies: America’s New Global Empire.