\n<\/p>\n
Unfortunately, Cuba<\/a> has fallen dramatically short of those expectations. In the last five years, well over a million people\u2014more than one in every ten Cubans\u2014have fled the country, mostly for the United States. Today, under President Miguel D\u00edaz-Canel, the island is enduring its worst economic crisis since the collapse of the Soviet Union. GDP has declined 11 percent since 2020. The electric grid is falling apart. Security forces harshly repress antigovernment protests. In October, Hurricane Melissa devastated the island\u2019s east, damaging or destroying some 90,000 homes and 250,000 acres of farmland. Now, an outbreak of dengue and other mosquito-borne viruses has reached epidemic proportions.<\/p>\n Cuba\u2019s unfolding tragedy is partly the result of external shocks, such as U.S. President Donald Trump\u2019s 2016 election. After taking office, Trump<\/a> reinstated many of the sanctions his predecessor had lifted. Between 2019 and 2020, for instance, he sharply restricted flights, remittances, and travel to the island, and in 2021, he redesignated Cuba as a state sponsor of terrorism, mainly for harboring a handful of fugitives from U.S. justice. U.S. President Joe Biden only partially loosened these restrictions, and Trump has reinstated some of them in his second term. Meanwhile, the COVID-19 pandemic shattered the island\u2019s tourism industry. And with the second Trump administration mounting an increasingly aggressive pressure campaign to oust Venezuelan President Nicol\u00e1s Maduro, an already sharp reduction in oil aid from Caracas to Havana in recent years threatens to get worse, and Cuba risks losing its most important economic and geopolitical partner.<\/p>\n But the current emergency is also a mess of the Cuban government\u2019s making. Despite Ra\u00fal\u2019s reforms, authorities have been unwilling to break decisively from the country\u2019s sclerotic central planning model. Additional private-sector expansions have been fitful, and bad monetary policy has contributed to severe inflation. The government has, likewise, been averse to any meaningful change to the island\u2019s one-party system. As a result, the island\u2019s economy remains fragile and unresponsive, and past excitement in Washington for greater engagement with Havana has been replaced by skepticism, hostility, or disinterest.<\/p>\n It is hard to be hopeful about Cuba\u2019s future. Ra\u00fal, who is 94 and still plays the role of \u00e9minence grise, will die soon, along with the last of the generation that forged the 1959 Cuban Revolution. But to get out of the current quagmire, a new generation of leaders would have to seriously commit, at a minimum, to deeper economic liberalization\u2014painful as it might be in the short term. To fully set the country on the right path, they would need to democratize as well. Sadly, after a decade of policy tinkering, Cuba\u2019s current leadership has given few signs that it is ready to tackle the island\u2019s challenges head on or cede control to those who could.<\/p>\n \u201cWe reform, or we sink,\u201d declared Ra\u00fal in 2010, four years after assuming power. Cuba\u2019s socialist system had survived the immediate post-Soviet period, when aid to the island plummeted and its GDP shrank by a third. But it had only partially recovered from the contraction. To put the economy on firmer footing, Ra\u00fal devised a straightforward plan: shrink a bloated state by laying off half a million workers while expanding a tiny private sector of \u201cself-employed\u201d workers running restaurants, homestays, and other small businesses. Authorities would allow foreign investors to hold majority stakes in ventures, and the state would turn over fallow public lands to private farmers to address the country\u2019s dependence on imports for 70 percent of the country\u2019s food.<\/p>\n Cuba\u2019s best economists quickly pointed out the plan\u2019s flaws. The list of 200-plus activities authorized for self-employment was comically micromanaged. Farming a plot of public land <\/strong>and selling most of the harvest in a price-controlled ration system, for example, is not the same as owning property and selling the resulting produce in a market. And state companies still maintained an unfair edge by being allowed to treat one Cuban peso as the equivalent of one dollar, thus artificially overvaluing their assets and lowering the cost of their imports. Private citizens, by contrast, could sell pesos to Cuban state banks for dollars at a rate of 24 to one. Still, many people remained optimistic. To visit Cuba in these years was to feel the winds of change as small businesses opened, tourists from Canada and Europe arrived in droves, and a zone of tolerance expanded for independent journalism, academic analysis, and civic debate.<\/p>\n U.S. President Barack Obama<\/a> took notice. Even before the normalization breakthrough in late 2014, his administration authorized Americans to travel in group tours to the island if they wished to \u201csupport the Cuban people.\u201d Members of the Cuban diaspora visited family and brought in millions of dollars in remittances, providing seed capital for small businesses. After the countries formally restored ties, airlines established direct commercial flights between them. There were cruises, self-guided visits, and new foreign investment exceptions to the long-standing embargo on U.S.-Cuban trade. In 2016, more than 580,000 U.S. and Cuban passport holders (in other words, Cuban Americans) boarded island-bound flights from Miami International Airport alone.<\/p>\n Yet for all the excitement, it quickly became clear that Havana was not prepared to seize the moment. U.S. investors found Cuban authorities wedded to preapproved projects, leading to few commercial deals of consequence. Hard-liners in the Cuban government bristled at Obama\u2019s hopeful rhetoric, decrying it as a Trojan horse that would bring unwelcome political change. Calls for deepening market reforms went unheeded as party leaders <\/strong>feared unleashing economic forces that they could not control.<\/p>\n As a result of Cuba\u2019s shortsightedness, after the 2016 U.S. election, there was little to stop the Trump administration from reversing course. And sure enough, six months into his first term, Trump declared that he was \u201ccanceling\u201d Obama\u2019s \u201cone-sided Cuba deal.\u201d Cruise ships carrying U.S. tour groups continued to land at Cuban docks, but the Trump administration barred Americans from taking self-guided trips or from staying in Cuba\u2019s many military-owned hotels. Soon after, news organizations began reporting on mysterious health incidents afflicting U.S. diplomats on the island, which was dubbed \u201cHavana syndrome.\u201d In response, Washington closed the U.S. consulate and effectively halted legal Cuban migration to the United States.<\/p>\n In 2019, U.S. policy took an even more punitive turn. That year, Trump eliminated the general license for \u201cpeople-to-people\u201d group travel that fueled the remaining American visits to the island and capped Cuban American remittances <\/strong>to $1,000 a quarter. His administration also activated the long-dormant Title III of the Helms-Burton Act of 1996, allowing U.S. citizens to sue American and non-American companies for \u201ctrafficking\u201d in property the Cuban government confiscated in the early 1960s, which had the effect of immediately chilling foreign investment to the island. In early 2020, the White House barred flights to or from Cuban cities other than Havana, and it blocked the U.S. financial services company Western Union from partnering with a financial entity owned by the Cuban military for remittance forwarding. Ignoring the humanitarian consequences, officials billed these measures as part of a \u201cmaximum pressure\u201d campaign on both Cuba and Venezuela<\/a>. That same campaign included sanctions on Venezuelan oil shipping\u2014which tightened crucial energy supplies to the island.<\/p>\n Then the pandemic hit. Tourism vanished, and Cuba\u2019s GDP plummeted ten percent. This was a trial by fire for Cuba\u2019s first non-Castro leader, D\u00edaz-Canel, whom Ra\u00fal tapped as his successor in 2018. But D\u00edaz-Canel responded to mounting economic difficulties by doubling down on state economic control, such as by freezing new self-employment licenses for over a year. As the state\u2019s hard-currency earnings dwindled, his government sought to capture more remittances by launching state-run stores selling imported goods in a new digital-only currency\u2014the \u201cFreely Convertible Currency\u201d (known by its Spanish abbreviation, MLC)\u2014pegged to the value of the U.S. dollar. It was not freely convertible at all. Dollars deposited in so-called MLC accounts could not be reclaimed, further segmenting Cuban currency markets.<\/p>\n Cuba\u2019s leadership has given few signs that it is ready to tackle the island\u2019s challenges or cede control.<\/span><\/p><\/blockquote>\n D\u00edaz-Canel and his inner circle did eventually realize that this approach was not working. And in the summer of 2020, they announced a new strategy to handle the escalating economic emergency. Rather than enforce a narrow list of approved activities for the private sector, authorities adopted a list of prohibited activities, allowing everything else. The government also committed to legalizing small and medium-size private enterprises, moving beyond the \u201cself-employment\u201d framework. Finally, authorities agreed to unify the island\u2019s multiple currencies and exchange rates. The separate exchange rates for private citizens and state companies had helped shield the state from the shock of the post-Soviet crisis, but they also introduced severe distortions into public companies\u2019 accounting, worsening import reliance over time.<\/p>\n Yet the execution and sequencing of these reforms proved disastrous. Instead of first expanding the private sector, authorities launched their \u201cmonetary reorganization\u201d plan on its own, unifying exchange rates across the economy at 24 pesos to the dollar in early 2021. For state-owned businesses used to operating at a one-to-one rate, this devaluation put upward pressure on prices for imported goods. A simultaneous increase in state salaries fueled further inflation, as too many pesos chased too few products. The printing of currency to finance soaring fiscal deficits made things even worse. The state also continued selling imports in its dollar-pegged digital currency, undermining the logic of currency unification and increasing demand for dollars, which the government did not have enough of. An informal currency market boomed, and by the end of 2021, the value of the Cuban peso had dropped by 75 percent, trading at 100 to the dollar even though the official rate remained 24 to one.<\/p>\n The result was a growing crisis in the state\u2019s political legitimacy. This was most apparent when Cuba\u2019s luck against COVID-19 ran out in the summer of 2021, and the delta variant of the virus tore through the country. Images of collapsing hospitals and dead bodies spread online. Fueled by the viral protest anthem \u201cPatria y Vida<\/em>\u201d (\u201cHomeland and Life\u201d) by popular hip-hop and reggaet\u00f3n artists and the power of livestreaming, Cubans in more than 50 cities and towns took to the streets on July 11, 2021, <\/strong>demanding food, medicine, and liberty. The government responded that very same day with repression that sent protesters to jail or back to their homes. More than a thousand were eventually arrested, and several hundred were sentenced to lengthy terms for crimes such as vandalism, public disorder, and sedition.<\/p>\n For the first seven months of its tenure, the Biden administration<\/a> ignored Cuba, leaving Trump\u2019s sanctions in place. But the protests and their aftermath forced Washington to take notice. Three months after the demonstrations, Cuba lifted its final COVID travel restrictions to restart tourism. Then Nicaragua, a close ally of Havana, allowed Cubans visa-free entry, providing a shorter, if still dangerous, route to the U.S.-Mexico border. Flights to Managua soon topped $2,000, but that did not stop Cubans from fleeing to the United States. Cuba appeared to be deliberately exporting dissent, thus giving Washington political headaches. The Biden administration responded by restoring remittance processing, resuming flights to Cuban provincial cities (which are largely used by the diaspora), and reopening preexisting legal avenues for migration and creating new ones\u2014all in a bid to restore a modicum of economic stability and slow the exodus. But these efforts were unsuccessful. By the fall of 2024, more than 850,000 Cubans had entered the United States, including through a new \u201cadvanced humanitarian parole\u201d program that the Biden administration created.<\/p>\n At the same time, Cuba\u2019s government was also making a new attempt to help the economy. In late 2021, authorities finally legalized private enterprises with up to 100 employees. Over three years, more than 10,000 such businesses were approved. And for the first time since the early years of the Cuban Revolution, they received permission to import goods from abroad, albeit through state intermediaries. Entrepreneurs who had built international and diaspora contacts during the Obama period opened private grocery stores. Others imported wholesale from <\/strong>Mexico, Panama, or even the United States. Supply chain companies such as Supermarket23 provided Cubans abroad with an Amazon-like online platform to purchase goods for their families from local importers, as well as warehouses and logistics on the ground, facilitating door-to-door delivery. All of this was once unthinkable. By <\/strong>the end of 2024, the private sector accounted for 23 percent of tax receipts, 31 percent of the labor force, and over half of retail sales, outstripping state-owned enterprises.<\/p>\n But several problems beset the sector. One was the lack of a stable exchange market or any other legal way to move foreign currency abroad. This forced private firms into the informal currency market, driving the peso to new lows: over 400 pesos to the dollar, at present. This exchange rate has put many goods out of reach for many Cubans who are still reliant on state pensions or salaries and have little access to remittances. As a result, although new private businesses have been crucial for providing Cuban families with basic necessities in the last few years, they have become the public face of rising inequality\u2014a political challenge for a still self-described socialist state.<\/p>\n And even this limited privatization has faced setbacks. Over the last two years, the government imposed new banking transaction limitations, removed tax incentives for new companies, and temporarily restricted wholesale operations. Company owners or partners must now reside in Cuba most of the year, limiting the legal involvement of the Cuban diaspora, a heretofore primary source of seed capital, knowhow, and access to non-sanctioned financial services. Observers widely interpret these moves as an attempt by the military\u2019s business conglomerate, the Grupo de Administraci\u00f3n Empresarial S.A. (GAESA), to gain market share in the selling of marked-up foreign products, which it had dominated before the pandemic. Authorities still insist that private firms should be \u201ccomplementary actors\u201d in the economy, not the motors, even as dozens of state companies are operating at a loss.<\/p>\n Cuba\u2019s cascading problems are now so severe that even a more dynamic private sector would be insufficient to fix them. A nationwide blackout in September was the fifth in a year. Overhauling the aging, oil-dependent power grid would cost billions that the government does not have and that no country is willing to lend. The productivity effects are devastating. Authorities recently acknowledged that output in agriculture, livestock, and mining has declined 53 percent since 2019. Yet over the last decade, more of the state\u2019s investment budget (38 percent) has gone to hotels and tourism facilities\u2014which are also dominated by GAESA\u2014than any other sector, despite the fact that visitor numbers are barely half what they were at the pre-pandemic peak. Tourists of all kinds are choosing Caribbean destinations that are less blackout prone. European tourists are choosing ones that won\u2019t jeopardize their normal 90-day visa waiver for the United States (a risk that stems from Cuba\u2019s placement on the list of state sponsors of terrorism).<\/p>\n Monetary policy also remains a pain point. In mid-December, Cuba\u2019s central bank launched a new floating exchange rate for the general public and the private sector at one dollar to 410 Cuban pesos, only slightly below the informal rate, in an attempt to bring more transactions back into the formal financial system, undermine the informal market, and recover dollar reserves. But it is unclear whether the scheme will work, as popular trust in banking institutions has cratered. Moreover, the exchange system remains tiered: certain state companies, such as those in the tourism industry, still receive a preferential rate, of 120 Cuban pesos for one dollar, while state enterprises providing crucial services to the population receive a rate of 24 Cuban pesos to the dollar. Authorities have started outright dollarizing much state-run retail, reviving a practice from the 1990s. In other words, the latest maneuvers further entrench the existing segmentation of currency markets; they do not eliminate the fundamental distortions that such an arrangement introduces into the Cuban economy.<\/p>\n To fix\u2014or elide\u2014these problems, some Cuban officials may be counting on better international relations. They are likely to be disappointed. Waiting for Washington to change course is a fool\u2019s errand: a battered Cuba, unlike oil-rich Venezuela, offers little of strategic interest to an increasingly transactional United States. But even Moscow and Beijing will be of limited help. Russian officials and business delegations have promised Cuba $1 billion in investment by 2030, and the Chinese have started building several dozen solar farms. But Havana can get only so much assistance from either country. How quickly these commitments materialize remains unclear, and both Moscow and Beijing have urged Cuba to lessen subsidies for unprofitable state companies and reduce restrictions on foreign investment and the private sector. Cuba, meanwhile, continues to run enormous trade deficits with both states and routinely asks to refinance its debts, which are thought to equal several billion dollars in the case of the Chinese. (Russia condoned most of the island\u2019s Soviet-era debt in 2014, but Cuba has reportedly accrued hundreds of millions in obligations since.) Geopolitical motives and security ties mean Moscow and Beijing are willing to provide periodic aid and help Cuba\u2019s government stay afloat, but neither is eager to completely bankroll an economic model they see as having failed.<\/p>\n Havana\u2019s relationships with Caracas are even more vulnerable. The Trump administration has deployed significant military assets off the coast of Venezuela, launched controversial strikes on alleged drug-trafficking vessels and at least one port facility, and ordered a naval blockade of sanctioned oil shipments, including those heading Cuba\u2019s way. If the Maduro regime falls\u2014still a huge if\u2014Cuba would lose what is left of a 25-year patronage relationship.<\/p>\n Cuba seems poised to slide further into economic decline.<\/span><\/p><\/blockquote>\n Cuba, then, has just one choice: <\/strong>liberalize its economy. This includes permitting private business to operate in more industries, opening the private sector to foreign investment, and letting these firms trade free of state intermediaries. It also means cutting fiscal deficits and actually unifying exchange rates for government-owned and private businesses at levels that reflect real economic conditions. Just as important, the state must increase legal guarantees and tax incentives for domestic and foreign companies that build productive capacity. Even with U.S. sanctions, such steps would at least give Cuba the chance to begin rebuilding its economy and attract greater foreign investment.<\/p>\n But it is doubtful whether Cuba has the leadership to implement or inspire consensus around such a plan. Many officials seem out of touch with reality. Over the summer, the minister of labor denied that homelessness and mendicancy had increased on the island. (After a social media fury, she was forced to resign in a rare instance of public accountability.) Policymakers also continue to send mixed signals. In late November, authorities rolled out new rules to make foreign investment more agile by allowing the payment of Cuban employees without using state intermediaries. But they simultaneously barred foreign businesses from repatriating earnings held in Cuban banks. Likewise, a new government framework to \u201ccorrect distortions and recharge the economy\u201d is full of production targets but few ideas for transforming production incentives. Cuba thus seems poised to slide further into economic decline, marked by unaccountable military enterprises, constrained private businesses, and a labor force drained of talent by migration.<\/p>\n Whether these challenges could eventually bring about the government\u2019s collapse is uncertain. Regime change is unlikely in the absence of a more unified opposition, and the opposition\u2019s top figures have been largely exiled or imprisoned. There are no open divisions between the security apparatus and other realms of the state. But worsening social problems\u2014crime, inequality, drug consumption, and corruption\u2014could accelerate interregime fissures, transnational criminal penetration, or direct foreign intervention, precisely the things loyalists of the Cuban system have long sought to avoid. Sporadic, leaderless protests are now endemic.<\/p>\n Today, the island seems to be sinking, just as Ra\u00fal warned it might 15 years earlier. It is doing so because he and others delayed true reform. Change will come with steep costs thanks to years of economic policy waffling and the state\u2019s refusal to give Cubans a meaningful political voice in shaping their future. But change is necessary. Each day of further delay prolongs the population\u2019s suffering.<\/p>\n Loading… In 2014, after the Obama administration and Cuba\u2019s government announced an agreement to restore diplomatic ties, the world descended on Havana. Everyone from the Rolling Stones to would-be investors rushed to claim a stake in the island\u2019s future. Ra\u00fal Castro, the long-serving minister of defense, had assumed power from his ailing elder brother Fidel several … Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":15603,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[],"class_list":["post-15602","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/www.jubi24.com\/wp-content\/uploads\/2026\/01\/Cuba-on-the-Brink-Foreign-Affairs.JPG","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.jubi24.com\/index.php?rest_route=\/wp\/v2\/posts\/15602","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.jubi24.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.jubi24.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.jubi24.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.jubi24.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15602"}],"version-history":[{"count":1,"href":"https:\/\/www.jubi24.com\/index.php?rest_route=\/wp\/v2\/posts\/15602\/revisions"}],"predecessor-version":[{"id":15604,"href":"https:\/\/www.jubi24.com\/index.php?rest_route=\/wp\/v2\/posts\/15602\/revisions\/15604"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.jubi24.com\/index.php?rest_route=\/wp\/v2\/media\/15603"}],"wp:attachment":[{"href":"https:\/\/www.jubi24.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15602"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.jubi24.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15602"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.jubi24.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15602"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}TOO LITTLE, TOO LATE<\/h3>\n
FROM BAD TO WORSE<\/h3>\n
ONE STEP FORWARD, TWO STEPS BACK<\/h3>\n
TERMINAL DECLINE?<\/h3>\n
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