Cuban economy – dwkcommentaries

More on Cuba’s Desperate Economic Situation

According to Mary Anastasia O’Grady, a Wall Street Journal columnist, Cuba’s “legendary repression continues while medicine, housing and fuel are in short supply. Inflation is galloping. Parents find it hard to feed their children. In September the government cut back bread rations to 60 grams a day from 80 grams. In December, after more than six decades, it finally said it will eliminate the ration book, admitting that it cannot provide even a skimpy list of staples.”

“Reuters reported last month that “transportation by ground, sea and air in Cuba” fell by 19% in 2024, reaching a level not seen in 20 years, according to American University economist Ricardo Torres. The infrastructure, from roads to electricity, has collapsed. One demographer estimates 18% of the population emigrated between 2022 and 2023. Those left behind stare into an abyss of hopelessness. Beneath the surface, there’s hunger for change. The island is a powder keg.”

In addition, there was “a U.K. court ruling in December that the National Bank of Cuba and the Cuban state are liable for two 1984 loan agreements, governed by U.K. law, in the amount of about $75 million. Cayman Islands investment fund CRF bought the debt in the secondary market and took the bank and Havana to court for nonpayment. Earlier this month the U.K. Supreme Court refused to hear Cuba’s appeal.”

“The unfavorable decision for Cuba scratches the surface of its liabilities. Over the lifetime of the Cuban revolution the regime has borrowed an estimated $50 billion to $100 billion. It’s hard to calculate the total because Havana’s reckless sovereign lending has been forgiven so many times. The Soviet Union and later Venezuela propped up the regime, but countries like China, Japan, France, Canada, Italy, Brazil and Mexico also extended credit to Havana. Outstanding debt is now about $40 billion, according to the Miami-based Havana Consulting Group.”

“Foreign companies, invited into the country beginning in the mid-1990s, also have helped the regime stay alive by making direct investments on the island. But capitalism doesn’t work in an economy run by totalitarian gangsters, which is why 30 years after the ‘opening,’ the country’s foreign direct investment remains paltry. Havana wants to blame its poverty on the U.S. embargo. But Cuba’s dismal track record with sovereign lenders and the private sector goes a lot further in explaining why capital steers clear of the island.”

“Earlier this month the news broke that Cuban officials have quietly told some foreign companies operating on the island that they could no longer take their profits out of the country. It’s impossible to know how many investors are affected because there has been no official proclamation. Companies seem to be getting the news in private ‘interviews,’ as the regime reportedly calls the struggle sessions.”

“Foreign investment in Cuba is heavily Spanish and there were rumors circulating last week that Madrid’s Socialist government has tried to keep a lid on the story by pressuring Spanish media not to cover it. Still the news has leaked out. An April 10 headline in the Spanish outlet EFE read, ‘Cuba blocks the repatriation of foreign currency to foreign companies based in the country.’”

“Investors don’t seem to want to complain publicly. But they’re talking. ‘We completely disagree. It’s not the [Cuban] government’s money, but rather the companies’ money,’ one unidentified businessman who claimed his assets had been ‘frozen’ told EFE. He said he was informed his money could be used only inside Cuba. EFE also reported that ‘in some cases’ companies ‘have complained to their respective governments, according to business and diplomatic sources familiar with the situation who requested anonymity.’”

“These arbitrary expropriations send a message that what entrepreneurs earn in Cuba, they don’t own. Still, money losers might take comfort in knowing things could be worse. In 2011-12 English architect Stephen Purvis spent 18 months in Cuban dungeons after Raul Castro decided he wanted to take over the British expat’s business on the island. Mr. Purvis told his chilling tale in a 2017 memoir titled ‘Close but No Cigar.’”

“Cuba still receives hard-currency remittances and payments from governments that engage with the regime’s human trafficking of doctors and nurses. But it isn’t enough. Draining foreign businesses won’t be either. If the dictatorship hopes to survive it needs a new ideological sugar daddy willing to burn money.”

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O’Grady, Cuba Is Running on Empty, W.S.J. (April 20, 2025).

Cuba’s Crisis Is Result of Cuban Socialism

Rafaela Cruz, a Cuban journalist and economist, asserts that Cuba’s current economic crisis is a result of its socialist system that concentrates “political power in an elite, keeping the civilian population atomized and economically dependent on the State.”

“We are living through the result of six decades of a system – socialism, statism – that has caused more havoc wherever it has been implemented than the hordes of Attila the Hun. There is not a single historical example of a successful socialist economy in relation to its capitalist counterparts.”

“The people must be deprived of any hope for real, sustainable and growing improvement within socialism, by demonstrating to them in historical and economic terms that, as a parasitic system, it will always take more than it can give; but we must also eliminate all desire —through ignorance or short-termism— for improvement within this system, and stop rejoicing when the economic situation improves slightly —out of humanity, they say— when the only way out of this eternal crisis is to reach a situation so bad that the parasite’s own survival is impossible. And yes, for that we must suffer. Has any people ever achieved freedom and prosperity without paying a toll in suffering?

“The path to [Cuban] prosperity, to the dignity that only being free can bring, does not lie in improving socialism, but in killing it; and to do that we will probably have to suffer more hunger, more blackouts, more of all those deprivations that we have been suffering for decades — sometimes more, sometimes less — and that we will only completely overcome when socialism disappears . We have to reach our darkest moment if we ever want to see the light.”

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Cruz, Crisis and socialism in Cuba: the road to the end, Diario de Cuba (Jan. 22, 2025) Here are references to other blog posts about Cruz. . And here is a list of articles by Cruz in Diario de Cuba.

Diario de Cuba’s Editorial on Its 15th Anniversary

On December 4 , Diario de Cuba, a daily Internet Cuban diary (in Spanish and English) published in Madrid, Spain, celebrated its 15th anniversary with the following editorial.[1]

“Exactly 15 years ago, the first news and articles from this newspaper appeared on the screens of some readers. Over the course of this decade and a half, changes have taken place in Cuba, but not those necessary for the country’s democratization.”

“Fidel Castro died—which for many seemed not only unimaginable, but impossible—and something else happened that had seemed impossible: the people took to the streets to protest their living conditions. The regime in Havana opened an embassy in Washington, Washington opened an embassy in Havana, and the rapprochement between the two countries, arranged by President Obama, was ultimately sabotaged by the Cuban regime.”

“With Miguel Díaz-Canel chosen by Raúl Castro, the first revolutionary leader who did not participate in the armed struggle rose to the presidency of the country and the secretariat of its sole party. Almost the country’s entire productive economy passed into the hands of the military conglomerate GAESA , which has set about building hotels while ignoring the downturn in tourism and ruling out investments much needed for the Cuban population.”

“The country became even more indebted and, in a vicious circle, persisted in its tradition of shirking its financial obligations. The authorities implemented the most ill-advised monetary policies possible, so inflation runs rampant in Cuba. Medical professionals and technicians have been, and continue to be, exploited by means of contracts lucrative for the regime but exploitive for them.”

“In response to the popular protests, the regime ratcheted up its repression against dissidents, activists and independent journalists, as the Justice system was turned into an ever stronger mechanism of repression , and the number of political prisoners grew. Censorship of thought and the arts intensified, and those young artists who protested ended up in prison or having to go into exile.”

“The migratory wave in the history of the country began, and the emigration of the youngest Cubans, along with low birth rates, has contributed to a largest acute aging of the population . Every day it is more and more difficult to have children in Cuba. Elderly Cubans are more vulnerable than ever. The regime used to have a “monopoly” on violence, but now cities and towns are no longer safe. Public insecurity is on the rise, gangs of young people are forming, and VAW is claiming more and more victims.”

“Each new state measure manages to render agriculture and livestock even more unproductive. Cuba, once the world’s largest exporter of sugar, has been fallen apart, with the country now importing sugar for several years. The only plant that grows in Cuba is marabou, and farmers determined to make the land produce are hampered by new restrictions. Meanwhile, no less onerous burdens weigh on entrepreneurs, who have been allowed, reluctantly, to start MSMEs.”

“Health and education, which for decades were the regime’s showpieces, have collapsed, their decline evident in the unhealthy state of hospital facilities and students’ poor results. Sports, another point of pride for socialism, are suffering a similar fate. Not even baseball is spared. Just as Cuba ceased to be a sugar powerhouse, it has now ceased to be a baseball power too.”

“In the last 15 years the regime has been dismantling the welfare system with which it had mitigated social inequalities, to the point that it no longer addresses the fate of the most disadvantaged . Today we can talk about the end of the grocery store book and rationing card. With blackout after blackout, the island has been sunk in darkness, and the national electrical system can no longer hold up. The last hurricanes to hit the island have highlighted the ineffectiveness of its on-effective civil defense system.”

“Old, dilapidated buildings continue, inexorably, to collapse, and the construction of new homes is an unresolved problem in every government plan. Vagrants, homeless people, and children who work, or beg, are becoming more common on Cuban streets. Meanwhile, his heirs of the regime’s elite boast on social media about what their parents have stolen, and continue to steal.”

“The Cuban regime cultivates alliances with nations like Russia, China, Iran and North Korea, and continues to meddle in Venezuela’s politics. It no longer operates based on any ideology, but rather on the exercise of brute force, and continues to mutate towards a dictatorship shamelessly open to benefiting a fortunate few.”

“Over the course of this last decade and a half, DIARIO DE CUBA has been there, studying and covering the scenarios briefly summarized above. In celebration of its birthday, last October the “For the Cuba of Tomorrow” DDC Forum was held in Madrid. Through it, and its day-to-day work, DDC demonstrates its commitment to the Cuba of the future.”

“On this anniversary, all that remains is to thank all our contributors and readers, and to renew this publication’s commitment to Cuba and to Cuban democracy.”

Reactions

As a U.S. citizen with some connections with Cuba, including three visits to the island at the start of this century, conversations with Cubans who have visited the U.S. and carefully following the published news about Cuba, especially those in Diario de Cuba, and writing blog posts about same,[2] I concur in most of this editorial’s observations.

However, although agreeing that U.S. President Obama had taken steps for “rapprochement between the two countries,” I think it is overstatement to claim that this effort was “ultimately sabotaged by the Cuban regime.” Obama’s successor (President Donald Trump) reversed some of those steps and the whole psychology of improving the relationship and even President Biden has not returned to the Obama effort.[3]

Recently a group of 15 U.S. Congress Representatives wrote a letter to President Biden urgently requesting “immediate action to stabilize Cuba’s energy infrastructure and provide critical humanitarian assistance. The Cuban people are currently facing widespread blackouts and an escalating energy crisis, exacerbated by the impact of Hurricane Rafael. The situation is not only causing immense suffering for the Cuban people but also poses serious risks to U.S. national security interests. If left unaddressed, the crisis will almost certainly fuel increased migration, strain U.S. border management systems, and fully destabilize the already-strained Caribbean region.”[4]

Therefore, these Congressmen “strongly” recommended “removing Cuba from the State Sponsors of Terrorism (SSOT) list” and suspending “sanctions that hinder the flow of humanitarian assistance, including restoring the EAR license exception to allow donations to Cuban health and humanitarian relief entities.” This blogger endorsed those recommendations plus asking President Biden to “eliminate the U.S. embargo of Cuba. . . .“

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[1] Editorial: DIARIO DE CUBA Turns 15, Diario de Cuba (Dec. 4, 2024)..

[2] See List of Posts to dwkcommentaries—Topical: CUBA [as of 5/4/20}.The labor of manually preparing updates to this list has discouraged the blogger from creating similar subsequent lists.

[3] See the posts listed in these sections (U.S. (Obama) & Cuba Relations (Normalization), 2014; U.S. (Obama) & Cuba Relations (Normalization), 2015); U.S. (Obama) & Cuba Relations (Normalization), 2016);and U.S. (Obama) & Cuba Relations (Normalization), 2017; U.S. (Trump) & Cuba Relations, 2016-17) of List of Posts to dwkcommentaries– Topical: CUBA [as of 5/4/20}.

[4] U.S. Congressmen Ask President Biden To Provide Sanctions Relief and Other Aid to Cuba, dwkcommentaries.com (Nov. 20, 2024).

Cuba’s Unstoppable Spiral of Misery

Rafaela Cruz, a journalist for Diario de Cuba who lives in Havana, offers the following dire analysis of Cuba’s current circumstances. [1] Here is what she says.

“This year we’ve received only 48% of the fuel that was planned,” and “of the 43 million planned for the purchase of raw materials, spare parts, bread production, maintenance, and the repair of the boilers at the dairy factory , only seven million, 9% of the total slated, have been issued.”

“Food Industry Minister Alberto López recently acknowledged that “last year, out of 22 selected productions, there was a decrease in 20, and none of the goals set have been achieved this year.” However, what the minister is really recognizing is the bleak tomorrow that awaits a country not only incapable of improving, but one unable to even maintain its existing capital, which is what its current and future standard of living depends on.”

“Ministries, companies and other state conglomerates are unable to keep means of production (many stolen in 1959) in sound condition, so they are becoming ever less efficient and more unproductive, prone to more frequent and prolonged breakdowns, such that Cuba’s machinery’s productivity is less and less productive than what its manufacturers had projected, all while growing progressively more expensive, which is why Cuba is no longer competitive in anything but producing tobacco and fermenting rum… and the latter thanks to a French company.”

“With old and damaged machinery, industrial exploitation ratios become negative. Production in Cuba would yield losses instead of profits if the Government were not offsetting its capital costs by skimping on workers’ remuneration. Socialism always starts out with the state subsidizing the people, but it always ends with the people subsidizing the government.”

“How is the rest of the economy destined to fare when a high-priority agency like the Food Industry receives less than half of the fuel scheduled, and only seven of the 43 million that the plan estimated as necessary for its needs?”

“Every ‘planned’ economy tends to fail in its own planning, because the very act of ‘planning’ by centralized bodies prevents the plasticity essential for any ecosystem to realize its potential.”

“Paradoxically, planning, far from organizing, disorganizes the allocation of resources that, in a decentralized manner, a free market coordinates and allocates much more effectively, whenever prices are not interfered with.”

“The result of socialist planning (in capitalism there is planning, but it is decentralized) is that next year Cuba will have less of everything necessary to produce, so it will have even less revenue, so, in turn, it will be able to afford fewer imports. It is a spiral in which each productive cycle is more inefficient and less profitable than the previous one; a downward spiral until total collapse, and we are almost there.”

“Cubana de Aviación, Ferrocarriles de Cuba (Railways), Antilana de Acero (Steel), the sugar industry, and the enormous Flota Cubana de Pesca (Fishing Fleet) are just some examples of the many industries that have already gone belly up. Electricity generation, although going down the same path, cannot be left to die because the country would shut down and their game would be up. It is not known how long they will be able to weather this decline. Now they want to avert collapse using solar panels… which, after being installed, are bound to be breaking down in six months, because socialism itself is corrosive.”

“Without access to international loans, given its criminal record of defaults and its ongoing standoff with the United States, Castroism sustains itself by borrowing internally; first, through monetary devaluation (inflation), lowering workers’ real wages and spreading misery and dependence on remittances to survive; and, second, by not covering the costs of maintaining physical capital (machinery, buildings, roads, etc.) thus freeing up short-term resources for consumption that should have been earmarked for investment (maintenance, spare parts, new technology), a suicidal stopgap decision spawning a progressive reduction in productive capacity.”

“Even Tourism is suffering from the leprosy of decapitalization. It is more ‘eye-catching’ and efficient in the short term – both from a GDP and money laundering perspective – to open new hotels than to pay for the proper maintenance of old ones. Meanwhile, complaints from tourists about the poor state of Cuba’s hotel infrastructure, even at ones that are practically new, abound on social media.”

“To reverse this spiral of misery, Castroism would have to adopt a truly liberal economic policy, or find a new USSR or Venezuela to ‘adopt’ it. As none of these possibilities seem feasible, socialism in Cuba will continue, from victory to victory, until its final defeat, which will come in the form of economic collapse.”

“This collapse will probably be accompanied by a struggle between those in the Communist Party of Cuba, who are only relevant as long as this totalitarian system of confrontation with the United States lasts, and the military, which has money and could benefit from a corrupt form of capitalism, like Russia’s. The thread is pulled tight… time will tell where it breaks.”

This Blogger’s Comments

As this blogger already stated, “Regardless of your opinion on the Trading with the Enemy Act or on the initial or subsequent U.S. impositions of the embargo, it is utterly stupid now for the U.S. to extend it another year for at least the following reasons:

“The Cuban economy now is in catastrophic condition and is not posing any threat by itself to the U.S.
Ceasing the U.S. embargo now would provide some desperately needed economic and political relief to Cuba.
Cuba’s current condition has encouraged it to expand relations with the Soviet Union and China, which are threats to the U.S. in many ways, and ending the embargo now would be one way to counter the threats posed by these two powers and possibly lead to weakening, if not ultimately eliminating, Cuba’s relationships with those powers.
Given that the U.N. General Assembly now for many years overwhelmingly has approved resolutions condemning the embargo, ending the embargo now would gain support for the U.S. in the U.N.”[2]

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[1] Cruz, Cuba’s unstoppable spiral of misery, Diario de Cuba (Dec. 2, 2024).

[2] Another Granma Article Against the U.S. Embargo (Blockade), dwkcommentaries.com (Sept. 26, 2024).

Another Granma Article Against the U.S. Embargo (Blockade)

Granma, the official newspaper for Cuba’s Communist Party, already has published an editorial against the U.S. recent extension of its embargo (blockade) against Cuba.[1] Here is the text of another Granma article voicing similar views.[2]

“[It} is not news that the U.S. Government has extended, for one more year, the validity of the law that establishes the basis of the economic, commercial and financial blockade against Cuba. It would be news if it did not, because that is already on the agenda of the president-elect, regardless of the winning party. There is only one political base against the largest of the Antilles: the imperial one.”

“Last week, Joe Biden played the same role as his predecessors, in a ridiculous and archaic scene, in the middle of the 21st century, by keeping alive the Trading with the Enemy Act, passed by the Federal Congress on October 6, 1917. This gives the head of the White House the power to restrict trade with countries ‘hostile’ to the United States, and the possibility of applying economic sanctions in time of war or any other period of national emergency, and prohibits trade with the enemy or allies of the enemy during armed conflicts.”

“It is under the protection of this legislative text, the oldest of its kind, that the regulations for the Control of Cuban Assets were put into practice in 1963, after the blockade against Cuba was imposed in 1962 by then President John F. Kennedy. He acted under the umbrella of that regulation.

The Trading with the Enemy Act is the cushion of that murderous policy against the people of Cuba, which aims at killing through hunger, unrest and chaos. This regulation is supposed to be applied when Washington considers a nation a national security problem, and so far it has not issued any document against Cuba in this regard, or when there is a war conflict, which does not exist, because the bombs are dropped far away, in the Middle East, but never near its walls.”

“However, the Caribbean island is the only country to which the U.S. government applies the old legislation. Previously, China, the Democratic People’s Republic of Korea and Vietnam were also subject to it.”

“That text is part of the legal framework of the blockade, which includes others such as the Foreign Assistance Act (1961), the Export Administration Act (1979), the Torricelli Act (1992), the Helms-Burton Act (1996) and the Export Administration Regulations (1979).”

“According to the report presented by the Cuban Foreign Ministry, between March 1, 2023 and February 29, 2024, such a monstrosity caused Cuba damages and material losses estimated in the order of 5,056.8 million dollars, which represents an approximate loss of more than 575,683 dollars for each hour of the blockade.”

“The governments of the United States have filled themselves with laws against a small country that has made it undergo the worldwide embarrassment of not surrendering to its feet. This was stated on the social network X, by the member of the Political Bureau and Minister of Foreign Affairs, Bruno Rodríguez Parrilla, who expressed that, ‘despite the serious damage caused, they continue to fail in the objective of destroying the Revolution.’”

Comment

Regardless of your opinion on the Trading with the Enemy Act or on the initial or subsequent U.S. impositions of the embargo, it is utterly stupid now for the U.S. to extend it another year for at least the following reasons:

The Cuban economy now is in catastrophic condition and is not posing any threat by itself to the U.S.
Ceasing the U.S. embargo now would provide some desperately needed economic and political relief to Cuba.
Cuba’s current condition has encouraged it to expand relations with the Soviet Union and China, which are threats to the U.S. in many ways, and ending the embargo now would be one way to counter the threats posed by these two powers and possibly lead to weakening, if not ultimately eliminating, Cuba’s relationships with those powers.
Given that the U.N. General Assembly now for many years overwhelmingly has approved resolutions condemning the embargo, ending the embargo now would gain support for the U.S. in the U.N.

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[1] U.S. Extends Cuba Embargo for Another Year, dwkcommentaries.com (Sept. 19, 2024);Comment: Granma Editorial: The blockade is a global embarrassment for the United States (Sept. 23, 2024).

[2] The blockade is a worldwide embarrassment for the United States, Granma (Sep.23, 3034).

Another Indictment of the Cuban Economy

Cuba Siglo 21 has published a new dossier by economist Emilio Morales that provides a statistical x-ray of the collapse of the regime’s system on the island. [1]

“The Cuban economy is in a critical phase due to the drastic fall of more than 50% of its main sources of income: export of medical services, remittances and tourism. This financial collapse has accelerated the countdown of the governance regime.”

“The export of medical services, the country’s main source of income, has suffered a 78.12% dropsince its peak in 2013, when it reached 10.42 billion dollars.”
“Remittances, the second largest source of income, have also declined significantly. In 2023, remittances totaled $1,972.56 million, a drop of 3.31% compared to 2022 and 46.93% compared to 2019, before the pandemic. Morales attributes the decline to mass emigration that began after the crackdown on protests on July 11, 2021, which ‘has not only reduced remittances but has also resulted in a significant flight of human capital.’”
“Tourism, one of Cuba’s most promising industries, has failed to recover post-pandemic. Morales recalls that in 2023 Cuba received 2,436,979 tourists, a figure comparable to that of 2009, well below the expected levels. The economist points out that ‘the situation is aggravated by the decrease in Cuban tourists living abroad, a key segment for the Cuban tourism economy.’”
“The regime’s commitment to attracting Russian tourists has not compensated for the loss of European tourism, affected by the Cuban government’s support for Russia in the war against Ukraine. The arrival of tourists from the five main European issuers (Italy, France, Germany, Spain and England) has decreased by 67.45% in the last five years.”
“The Cuban regime has proven incapable of implementing effective mechanisms to transform the economy and overcome the current multi-systemic crisis. The fall of the three main sources of income by more than 50% reflects the total dysfunctionality of the governance regime.”

“Even the regime’s allied governments are not willing to carry out a large-scale economic rescue. The governance models of Russia, China or Vietnam have not been adopted, and the power elite in Cuba continues to resist any change.”

“Mass emigration has decapitalized the country financially and in terms of human resources, and the metamorphosis of Castroism into a mafia state, with GAESA as the center of true power, has led to the destruction of industries and the loss of political capital.”

“The Cuban Communist Party (PCC) has no retraining pool, with many members who no longer believe in the party or its ideology.”

“The economic crisis has had devastating effects on all sectors of society.There is an alarming shortage of teachers, health personnel , workers in the sugar industry, tourism and the energy system. Even the justice system is affected, with the Supreme Court of Justice operating at only 69% of its capacity.”

“With the celebration of the 71st anniversary of the attack on the Moncada barracks, Cuba finds itself in a deep humanitarian crisis, with 89% of the population living in poverty and 1.79 million citizens having left the country in recent years.”

Morales concludes, “the Cuban system has collapsed. The Cuban state is dysfunctional and bankrupt. The Cuban government is mediocre and lacks leadership. The Cuban power elite is impervious to criticism. Without some kind of radical transformation to prevent or postpone it, the final collapse, by one route or another, is inevitable.”[2]

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[1] 71 years after July 26: ‘The Cuban Economy has collapsed,’ Diario de Cuba (July 25, 2024). Cuba Siglo 21 is “a nongovernmental think tank based in Madrid, Spain that serves the forces that promote change in Cuba towards an open, democratic and prosperous society supported by the rule of law and a free market. ” (About Cuba Siglo 21.)

[2] See also ‘Distortion’ of employment in Cuba: army of inspectors, thousands less farmers, teachers and doctors, Diario de Cuba (July 25, 2024); The regime is forced to stop falsifying data on Cuba’s demographic crisis, Diario de Cuba (July 24, 2024); Industrial devastation in Cuba is worse than the agricultural catastrophe, Diario de Cuba (July 23, 2024).

Cuban Government Official Admits That Its Inefficient Political-Economic Model Is Responsible for Cuba’s Economic Problems

Manuel Marrero, Cuba’s Prime Minister, has admitted that many of the consumer prices at its state-owned Foreign Currency Collection Stores (TRDs) are more expensive for the same products sold in the privately owned stores (MSMEs).[1]

Nevertheless, Marrero asserted, “It is unfair to make that analysis. Our TRDs are faced with a complex scenario, they do not buy those resources, chicken, oil, in the same markets where private companies do; they do not work with the illegal currency market, but rather they value the dollar at 120 pesos, therefore, the analysis is different. The TRDs have to buy in more distant markets at more expensive prices.”

That assertion is faulty. “Container terminals, warehouses in ports, means of transport, dry and refrigerated warehouses located throughout the country, thousands of retail outlets and banks to finance the process, all of that is owned by the State and none of it by the private sector.”

Moreover, the State enterprises have “Tens of thousands of workers earning miserable wages, more than 60 years of experience in the business, discounts for purchase and freight volumes, decades of relationships with suppliers around the world, beneficial agreements with allied governments such as China, Vietnam, Venezuela or Mexico, subsidies and billions in forgiven debts.” And “the private sector has none of” those benefits.

In other words, Marrero has implicitly acknowledged that the Cuban “Government knows – as the entire universe knows – that the private sector is infinitely more efficient than the state sector and, therefore, this miserable Cuba is the product of the stubbornness of maintaining socialism as a policy , a system that has demonstrably failed to generate wealth, although extremely efficient to sustain dictatorships, which is what matters to Marrero and his gang.”

In short, Marrero recognizes that “Cuba’s problem is not the [U.S.] embargo, but the Castro regime’s insistence on maintaining an absolutely inefficient political-economic model that, on top of that, has limited its ability to negotiate in the closest and cheapest market [the U.S.] for Cuba. The prime minister has made it clear that the problem of this island is not the American embargo on the state sector, but the Castro blockade of the private sector.”

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[1] Cruz, Justifying the Cuban regime, Marrero buries it, Diario de Cuba (July 19, 2024).

Another Perspective on the Failure of the Cuban Economy

Emilio Morales, a Cuban-American and President & CEO of Havana Consulting Group, a Miami-based consulting firm specializing in market intelligence and strategy for U.S. and non-U.S. persons doing business in Cuba, offers a blistering appraisal of the current status of the Cuban economy.[1]

He begins his article with the following statement: “The Cuban government’s announcement that it is in a state of war economy is a public recognition of the failure of the Cuban model. In reality, the country has been in a state of war economy for more than six decades; it is not something that suddenly emerged at the last minute. The war economy is the very essence of the system, it is its genetic basis, it is the matrix of control that dictator Fidel Castro implemented since the triumph of the revolution in 1959 and that has lasted from then until today. It was the most effective way to achieve citizen control. Very simple: it was necessary to eliminate all sources of wealth creation in the hands of citizens, take control of them in their entirety and find someone to blame for the economic debacle that would follow.”

“Today, the macabre plan executed by Fidel Castro since January 1, 1959 has had a great result: the Cuban economy is a disaster, its industries are in ruins, its banks are bankrupt , the state enterprise is totally decapitalized, foreign investment is scarce – in the last five years it has been practically zero -, more than 80% of the population lives in poverty, the country practically does not export because it does not produce. The productive forces are gagged by the system, by a legal system that does not allow free enterprise and limits the generation of wealth by citizens. Today the country depends on imports of products and raw materials, but does not have the financing to maintain them, because it has lost its lines of credit for not paying its external debt with creditors. This, added to the debacle of agricultural production has led to a deep shortage of products that has generated the worst inflationary crisis in the history of the country.”

“As a result of this debacle, a multi-systemic crisis has been unleashed in the country unprecedented in history, which has given rise to massive citizen protests never seen in more than 60 years of tropical communism , such as those that occurred on July 11, 2021 (11J) and which, given the current circumstances, can be repeated at any time, since the country has become a true social powder keg, which can explode under any circumstance. As part of this crisis, the largest wave of migration in the country’s history has been unleashed, which has resulted in the emigration of more than 850,000 Cubans to the United States alone by various means in the last three years. According to a recent study, 1.79 million people have left the country between 2022 and 2023.”

Morales ends the article with the following conclusions:

“Once again, the Cuban regime is entangled in its clumsy strategies. The announcement that they are going to a war economy —when they have always been one— has a clear objective: to blame the embargo for the ills that afflict the Cuban economyand to try to influence the strategists who dictate the Biden Administration’s policy towards Cuba to somehow loosen the sanctions currently in force and the embargo.”
The U.S. “embargo has little weight in the collapse of the Cuban economy,since in practice the country that supposedly blocks them is one of their main suppliers, not only of food products, but also of financial capital (remittances) that Cuba acquires abroad. For example, the United States is the main supplier of chicken to the Island. 95% of the remittances that arrive in Cuba come from the United States.”
“It is obvious that the collapse of the Cuban economy and the multi-systemic crisis that is ravaging the country is a purely internal problem. The inflationary crisis that is ravaging the country, plus the rest of the crises that are occurring in the internal economy: the collapse of the transportation system, the collapse of the energy matrix, the collapse of the water supply, the collapse of the health system, the lack of food and medicine, the housing problems, the low agricultural production, the shortage of food products and other types of products, are the sole and exclusive responsibility of the Cuban regime. Its policy of coercion of citizens, based on terror, by limiting their rights to political and economic freedom, freedom of association, expression and movement.”
“The only way to stop the inflationary explosion and all the ills that plague the country’s economy is to get out of this parasitic and hegemonic system under which the Castro family has been exploiting Cubansand stealing the country’s wealth for 65 years.”

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[1] Morales, ‘War economy’: the Cuban regime’s psychological torture mechanism, Diario de Cuba (July 12, 2024).

Cuban Economist Says Cuba Today Is a Catastrophe

Carmelo Mesa-Lago, a Cuban economist and professor emeritus at the University of Pittsburgh, says tensions between economic and political power make Cuba today a catastrophe.[1]

Since 2019, Cuba’s own data shows average annual decline of 2% in its economy. And its industrial production in 2022 was less than half of what it was in 1989. And agricultural production has experienced an average annual drop of 7.3% between 2016 and 2022 while Cuba does not generate enough exports to pay for imports. This has resulted in Cuban inflation that is among the highest in the world. This requires Cuba to depend on another nation; first it was the Soviet Union, then Venezuela, but both of them had their own problems that interfered with such assistance to Cuba.

The economic and cultural reforms promoted by Raul Castro were well oriented, but they were very slow, loaded with obstacles, high taxes and inspections. Now the egalitarian society is over, but the Government does not talk about it. Instead it blames the private sector while refusing to delegate economic power which would require a delegation of political power.

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[1] Carmelo Mesa-Lago: ’anything you look at, housing, health, education, everything is finished,’ Diario de Cuha (June 11, 2024).

Other Reactions to New Treasury Department Regulations on Cuba Private Enterprise

A senior official of the Biden Administration said that it is “essential” for the Biden administration to make sure the private sector continues to expand on the island to encourage Cubans to become self-sufficient and more independent from the government. The official also said the policy would help to stem migration from the island and counter actions by other nations, hinting at Russia, which Cuban authorities tapped to help them manage the private sector on the island. ‘Providing support for Cuba’s private sector will help to stem irregular migration from the island by creating more economic opportunity,’ the official said. ‘We believe that engaging in support of Cuba’s independent private sector will ensure that these important continental actors are supported by the United States and make it more difficult for other state actors who wish to engage economically in Cuba only in support of the government and without supporting the private and entrepreneurial sector.’”

Now “Cuban software developers to have their apps available for download on the Apple or Google app stores.”

Another administration official observed, “In light of the ‘dire straits’ of the Cuban economy, it’s clear the communist experiment in Cuba has failed and the government is no longer able to provide for its citizens‘most basic needs in a country where there are no free elections.”

“The Cuban private sector has rapidly expanded since it was first allowed in 2021, and there are now more than 10,000 small and medium enterprises, employing a third of all Cuban workers. Because the government is almost bankrupt amid a severe economic crisis, the private sector has taken roles previously unthinkable in a communist island that once banned all private property. These enterprises, known by their acronym mipymes in Spanish, have become major importers of food and other necessities in the midst of the widespread scarcity. They have become significant suppliers of the flour that state-owned bakeries need to produce bread for the public.”

“’We can congratulate the Biden administration on its commitment to helping civil society,’ said former Congressman Joe García, who has pushed to step up U.S. support to private businesses on the island. ‘These new small independent players perhaps offer the only option for helping the Cuban people.’

Ric Herrero, the executive director of the Cuban Study Group, a Washington-based organization that provides training and support to Cuban independent entrepreneurs, said on X that the ‘excessive delay’ in publishing the regulations ‘due to congressional extortion tactics has caused undue harm to independent Cuban entrepreneurs and to efforts to expand internet access in Cuba.’

John Kavulich, the president of the U.S.-Cuba Trade and Economic Council, said ‘the measures are a step in the right direction but don’t go far enough in regularizing banking transactions. While Cuban entrepreneurs can operate their U.S. accounts, it will be difficult for them to transfer money from and to their accounts using Cuban banks because there are no direct banking relations between the two countries.”

Kavulich also said, “While useful for the Biden-Harris Administration to …authorize entrepreneurs to have bank accounts in the United States, there remains one glaring omission — the continuing prohibition upon direct correspondent banking. As long as financing, investment, and payments need to be routed through third countries, the Biden-Harris Administration will be constraining precisely the activity it professes to support.”

Pedro A. Freyre, a lawyer and chairman of international practice at a major law firm in Miami, said, “the new regulations will provide more clarity regarding the private sector.” Nevertheless, the U.S. continuation of the terrorism designation [for Cuba] “has a chilling effect and banks engage in overcompliance.”

Aldo Alvarez, a lawyer based in Havana who runs a private food wholesale business, said, “This announcement is very positive for the Cuban private sector, since it allows it to legally operate its payments collections in the U.S.”

Criticism of the new regulations came from U.S. Representatives Carlos Gimenez and Maria Elvira Salazar, both Republicans from Florida.\

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Adams, Biden Moves to Open U.S. Banks to Cuba’s Private Sector, N.Y. Times (May 28, 2024); DeYoung, Biden administration eases some economic restrictions on Cuba, Wash. Post (May 28, 2024); Torres, In a first, Cuba’s private business owners will be able to use U.S. banks, Treasury says, Miami Herald, (updated 3:15 pm, May 28, 2024).