Monday, March 2, 2009

Small Change in Cuban Cabinet...

. Monday, March 2, 2009

Cuban President Raul Castro moved today to consolidate his power and control over the island nation by reassigning cabinet ministers left over from his older brother's reign, and replacing them with new ministers he believes are more in line with his vision for the future of Cuba. Raul is no stranger to experimentation and is well known to be more sympathetic to capitalist reforms of the beleaguered Cuban economy than Fidel. 

With the Cuban economy hamstrung by the world economy, Raul Castro may have decided it is time for him to make reforms of his own without worrying about second-guessing by his brother or his brother's allies, she said.

Vicki Huddleston, who led the Interests Section during the administrations of Presidents Bill Clinton and George W. Bush, and is a visiting scholar at the Brookings Institution in Washington, speculated that the changes could portend the government once again allowing private enterprise to flourish in Cuba.
Raul made these changes:
Felipe Perez Roque, the 43-year-old foreign minister, was replaced by his deputy, Bruno Rodriguez Aprilla.

Carlos Lage Davila, an economist, lost his job as Cabinet secretary, but no mention was made of removing him from his other post as vice president of the Council of State.

Lage, who helped guide the nation through its "special period" of dire economic times in the aftermath of the dissolution of the Soviet Union and the loss of billions in subsidies, was replaced by Brig. Gen. Jose Amado Ricardo Guerra.
Last year, Raul legalized the purchase of cellular phones, home computers, DVD players, and other technological goods as well as lifted the bans on renting hotel rooms in Cuban resorts. He did this even though Cubans themselves can not afford these goods on their own, but that's another story. 

Cuba relies heavily on imports of Venezuelan oil, food and other goods to keep their economy somewhat alive. However, with the steep drop in oil prices over the last 8 months, Venezuelan aid has begun to dry up as Hugo Chavez has faced budget shortfalls and a myriad of other domestic problems at home. His ability to financially support Cuba may be fading, and seeing this happen before his eyes, it seems that Raul Castro has decided that something must be done to get the Cuban economy moving or face the possibility of domestic turmoil in the near future. 

So what new reforms could he be considering? Here are a few that I think are on the table: 

1) Liberalize certain portions of the Cuban housing sector, especially in major cities. An underground market in apartment trading has sprouted over the last decade or so in Havana and by liberalizing the housing market, the government could seek to extract resources from housing transactions rather than allowing the trades and transactions to take place under the table. If you want to read more about the underground market for housing in Havana, this is a terrific article
2) Increase the fee on currency exchanges within the country. The government takes 10% out of each exchange of American dollars for Cuban dollars at this point in time. Increasing this to 15-20% and simultaneously hoping that the US raises the ceiling on remittances would be another way to extract resources.
3) Open up certain sectors such as oil and natural gas exploration, agriculture and manufacturing up to partnerships with foreign firms. Cuba has already done some of this, teaming up with German and Norwegian oil exploration companies, to explore a relatively large underwater oil field that was found off of the island's northern coast. This was mainly done because Cuba does not have the technology nor the capacity to do it by herself. Allowing certain public/private partnerships in carefully selected industries would increase government revenues and spur some economic development.

Notice that I have focused mostly on areas where the Cuban government can extract more revenue for their projects. Don't expect massive overhauls of the economic system, the establishment of private property,  or the sudden appearance of small businesses anytime soon. Raul's main goal is to consolidate his power. He will only implement those policies that enhance this goal, rather than seek to increase Cuba's growth and prosperity for the benefit of the populace. He is weary that the growth of a middle class and wealth among the citizenry would be a threat to the Communist experiment that has consumed the island for the last fifty years. 

P.S. Cuban VP Carlos Lage also just so happens to be one of my great-uncles. Interesting connection I know. At least he is still VP and didn't get completely canned, so if I fail my regression and game theory mid-terms this week, hopefully he knows who the hell I am and can offer me a job because I know I won't be able to find one in the US!


Small Change in Cuban Cabinet...
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