Heinz Dieterich guataquea a Raul

CUBA AFTER CASTRO. Legacies, Challenges, and Impediments/ Edward Gonzalez, Kevin F. McCarthy- Rand Corp.

Gracias a Penultimos Dias.

Executive Summary

Monografia completa: http://www.rand.org/pubs/monographs/MG111/

Cuba’s economy is in trouble. Social tensions are rising. Fidel Castro
is aging. Now 77 (as of this writing), the end is thus looming for the
linchpin who has held the political system together for more than 44 years. Once this caudillo, or strongman, departs, his successors will be
saddled with a weak state, along with daunting political, economic,
and demographic problems—in short, a vast array of dysfunctional
legacies from the fidelista past.
A post-Castro regime that tries to remain communist may soon
find itself in a cul-de-sac where old policies and instruments no
longer work. If or when such a regime falters, there is a remote possibility
that a democracy-oriented government could replace it. But
Cuba’s civil-society and market actors look too embryonic, and democratic
political opposition forces too decimated, for a prodemocracy
upheaval to take hold naturally. A more likely scenario is
that the military, arguably Cuba’s most important institution, will
take control of the government (perhaps much as General Wojciech
Jaruzelski did in Poland from 1981 to 1989).

Cuba’s Weakening, Distorted State
The conditions that enabled the Castro regime to function well
for so many decades have deteriorated sharply since 1989. Three of
the four pillars—Soviet support, the Revolution, and the totalitarian
state apparatus—that long sustained the regime have collapsed or
xii Cuba After Castro: Legacies, Challenges, and Impediments
weakened. The fourth—Fidel Castro himself—will cease to exist with
the caudillo’s passing, leaving his successors to face a far more precarious
future than what would have been the case 15 or 20 years ago.
The Regime’s Eroding Pillars of Support
The first pillar to give way was the Soviet Union. The economic
support that contributed 21 percent to Cuba’s gross national product
(GNP) in the 1980s disappeared after 1991 following the collapse of
the Soviet Union, and the island’s GDP soon plummeted by onethird.
Although the economic free fall was subsequently checked,
growth rates fell in 2002 and 2003, with the 2003 sugar harvest being
the worst harvest in 70 years. The result is that Cubans no longer can
expect to regain their 1989 living standards by 2009, as was once the
case.
The loss of Soviet (and Council of Mutual Economic Assistance
[CMEA]) trade, aid, and subsidies undermined a second pillar: the
“Revolution” and the social compact it represented for ordinary Cubans.
Soviet largesse had enabled the Cuban government to provide
citizens with an array of free or subsidized goods and benefits, which
helped maintain Cubans’ allegiance. But following the demise of Soviet
assistance, Havana had to enact a “Special Period” of heightened
austerity, a period that started in 1990 and continues to this day. The
oft-heralded system of free health care deteriorated badly as basic
medicines became unavailable. Employment in the state sector had to
be cut. Subsidized monthly food rations were slashed to ten days’
worth, and shortages in consumer goods spread—all of which forced
Cubans to turn increasingly to the black market and other illicit activities
in order to “resolver” (make do). Meanwhile, income inequalities
grew exponentially between those with pesos, who were losing
their purchasing power, and those with dollars. And even those Cubans
with dollars found themselves barred from stores, restaurants,
hotels, and resorts reserved exclusively for tourists. Hence, as popular
disillusionment has deepened, Cuba’s “failed revolution” is unlikely
to provide Castro’s heirs with a legitimizing mystique.
The regime’s third pillar, the totalitarian state apparatus, had
been in place since the 1960s. It had long enabled the regime to peneExecutive
Summary xiii
trate, control, and mobilize the population until the collapse of the
Soviet pillar undermined its power and reach. It then mutated into a
less penetrative, less controlling post-totalitarian state, which had to
cede some economic and social—but not political—space to society
in the early 1990s. A small private sector was thus legalized so that
consumer shortages and unemployment could be eased. The Roman
Catholic Church, Protestant denominations, and Afro-Cuban sects
became more active. Political dissidents, human-rights activists, and
independent journalists and librarians came forward, challenging the
regime’s grip on all power and information. And in 2002, the Varela
Project collected more than 11,000 signatures for a petition calling
for political and economic reforms. Faced with these challenges, and
wary of the growing prospects of unrest, the regime rounded up and
imprisoned 75 dissidents and independent journalists and librarians
in spring 2003, which decimated the opposition and emerging civilsociety
actors. But if Castro’s successors try to compensate for the
state’s weakness by continuing to use open, heavy-handed repression,
they will further risk delegitimizing the new regime.
The fourth and final pillar of support has been Fidel Castro
himself. Despite age, illness, and growing irascibility, the líder
máximo still casts an aura of legitimacy over Cuba’s government,
state, and Party institutions. He also gives the regime a sense of direction
and cohesion. His passing will leave a leadership void that is unlikely
to be filled by his designated successor, Raúl Castro, or by any
other government or Communist Party leader. Regime divisions are
certain to erupt in the absence of el comandante.

Dysfunctional Political Legacies
A post-Castro government, whether communist or noncommunist,
will find itself burdened by two troublesome legacies from the Castro
era: caudilloism, and totalitarianism/post-totalitarianism. The first
legacy will hobble the new government; the second legacy will leave
society deformed.
The culture of caudilloism (rule by a strongman) will exacerbate
the sense of a leadership void and hamper a new regime’s ability to
govern and embark on policy shifts. Rule by Castro led to the stuntxiv
Cuba After Castro: Legacies, Challenges, and Impediments
ing of autonomous institutions after 1959, serving to ensure his own
power and that of his brother and other ruling elites. In addition,
Castro pursued populist policies that a successor government may
find difficult to deviate from, even if they are known to be not in
Cuba’s best interest. A case in point is Castro’s ultra-defiant posture
toward the United States; continuation of that posture by a new government
is certain to deprive Cuba of needed economic and technical
assistance. Another is Castro’s pursuit of a “moral” economy—
essentially an egalitarian, classless, nonmaterialist, socialist system.
This stance has kept him from accepting market-type reforms, and it
may limit a successor government’s ability to change course for fear of
a fidelista backlash.
The legacy of totalitarianism/post-totalitarianism will leave post-
Castro Cuba without the rule of law and other legal requisites that
can help restrain the power of the state, promote a market-based
economy, and enable civil-society organizations to act vigorously in
support of a democratic transition. This legacy is bound to exacerbate
polarization between committed fidelistas and those “outside the
Revolution” who have suffered directly from not only state repression
but also betrayal and condemnation by their neighbors, fellow workers,
and even family members.
Pervasive societal mistrust and politicization have left a growing
number of Cubans, both old and young, politically exhausted, disenchanted,
and disengaged. This condition does not bode a smooth
democratic transition or even continuance of post-totalitarianism, because
sectors of the population already are resisting the kinds of mass
mobilizations that were once routine during the Castro era.

A People at Odds: Generational, Racial, and Demographic Divisions
The specter of a people united by Castro and the Revolution conceals
a different social reality. Cuban society exhibits three major and potentially
divisive cleavages that involve youth, race, and an aging
population.

An Alienated Youth
Following a common pattern in Cuban history, the Revolution was
made by a new leadership generation: Fidel Castro was 32 years old
when he seized power; his brother and others in the victorious Rebel
Army were younger still. Almost at once, the new government set out
to ensure the permanency of the Revolution by creating, in Castro’s
words, “a more perfect generation” among the young. To this end, it
employed education, the mass media, and membership in the Young
Pioneers and the Union of Young Communists, aiming to mold
Cuban youth (the 16-to-30-year-old age group) in the image of Che
Guevara’s “new communist man.”
However, relations between the state and Cuba’s youth began to
deteriorate in the late 1970s, when exiles returning to the island gave
young Cubans a new view of life in the United States. Further strains
developed in the 1980s, when, contrary to Castro’s anti-liberalization
stance, the advent of glasnost and perestroika in the Soviet Union garnered
enthusiastic support among Cuban youth. Tensions intensified
after 1989, when the young faced heightened austerity, few opportunities
for upward mobility, and unfulfilled aspirations––not only material,
but also creative and spiritual. As a result, more and more
youths turned away from official dogma and prescribed norms and
began embracing Western pop music and other fads, dropping out,
hustling, and engaging in prostitution. Cuban youth became increasingly
disaffected and disconnected from politics as the 1990s
wore on.
The regime tried to win back their support by, among other
things, giving young “loyalists” positions in the Party, in state and
military structures, and in enterprises in the new-dollar sectors of the
economy. Although the bulk of Cuban youth remain disaffected, they
have split into two remaining camps. On the one hand, the “inbetweens”
are alienated because their personal expectations have been
dashed, but they might still support a socialist state if it provides
greater personal freedom and authentic political participation than
the current regime. The “opponents,” on the other hand, reject socialism,
attend religious services, adopt Western mores, and are generally
more self-absorbed. The challenge facing the present rexvi
Cuba After Castro: Legacies, Challenges, and Impediments
gime––and a successor––is to win over the “in-between” group or at
least prevent it from moving into the opposition camp, both of which
actions may become impossible to achieve if heightened repression
continues and the economy worsens.
The retreat from politics among Cuban youth may pose problems
for not only a successor communist regime but also a democratically
oriented one, because each would lack support from this pivotal,
alienated sector of the population. Democratic institutions, norms,
and practices cannot take root without active acceptance and participation.
Mass emigration by disaffected young, in turn, could prove
devastating to the island’s future economic prospects.

A Growing Racial Divide
Castro’s government made great strides in promoting racial equality
after 1959. Afro-Cubans benefited from the outlawing of overt racial
discrimination and from the government’s commitment to improving
the lot of the poor, a disproportionate percentage of whom were
blacks and mulattos. When white middle-class flight opened up job
opportunities and housing stock for blacks and mulattos in the
1960s, Afro-Cubans became the most enthusiastic supporters of the
new regime and of the persona of “Fidel” in particular.
Despite Afro-Cubans’ obtaining near-equality with whites in
terms of longevity, education, and occupation, many racial inequalities
persisted in the 1980s. Blacks and mulattos make up nearly half
the population, but they continue to represent a disproportionate
share of the prison population, and they still live in the most dilapidated
areas of Havana and other cities. Blacks and mulattos remain
heavily concentrated in the poorest, easternmost provinces, which
formerly formed the province of Oriente.
In the 1990s, racial inequality and discrimination rose sharply
during the Special Period. While most Cubans suffered from the Special
Period’s austerity, the plight of Afro-Cubans—especially
blacks—was made even worse by the dollarization of the economy in
1993, which has divided society into those with access to dollars and
those without access to dollars. Afro-Cubans find themselves in the
latter camp. For one thing, they receive far fewer dollar remittances
from the mostly white Cuban-American exile community. Second,
they are less likely to be small peasant farmers, who can sell surplus
produce for dollars in the farmers’ markets. Third, they (particularly
blacks) have been largely excluded from employment in the tourist
sector due to discrimination. Internal migration from the lessdeveloped
eastern provinces by so-called darker-skinned palestinos has
also been blamed for rising crime rates in Havana, which has increased
racial tensions and prompted Afro-Cubans to complain of
discrimination and police harassment. In the meantime, blacks and
mulattos remain quite underrepresented in the leadership ranks of the
regime’s key institutions.
Such racial issues spell trouble for any future government in
Cuba. Not even a successor communist regime may be able to attract
the fervent support that Afro-Cubans once offered to the Castro regime,
and to Fidel above all. Any type of post-Castro government will
have to better the lot of Afro-Cubans substantially if it is to win their
support. But a new government, communist or not, will likely find its
policy options for expanding the economy constrained because so
many Afro-Cubans, along with other skeptical sectors of the population,
may oppose liberal economic reforms and increased foreign investments
as a result of their already-negative experiences with the
new economy. Meanwhile, a new government will need to develop
the eastern half of the island if it is to improve employment for Afro-
Cubans and stem internal migration. However, such a development
will require allocating scarce resources away from other regions and
constituencies, a move that could intensify Cuba’s looming racial and
regional divide.
In short, race is likely to compound divisiveness in the new
Cuba because it overlaps and reinforces other divisions between Afro-
Cubans and whites. Race is a factor in Cubans’ religious affiliation
(Santería and other syncretic Afro-Cuban sects versus Catholicism
and Protestantism), preferences for the economic system (socialist
versus market-driven), and competing notions about political power
(race-based representation, versus continued white control of the
government).

An Aging Population
Cuba’s prospects for economic recovery and sustained growth will be
further hampered by its overall demographic structure, which resembles
that of a developed country more than the demographic structures
of its Caribbean and Latin American neighbors. Cuba’s population
has been growing at less than 1.0 percent per year since 1980,
with an even slower growth (0.2 percent) projected for the
2003–2025 period. Its aged population (65 years and older) will become
the most rapidly growing segment over the next two decades.
As its population grows older, the size of younger cohorts entering
the workforce will decrease.
As a consequence of these demographic changes, demand for social
services for the older population––retirement pensions, health
care, etc.––will increase at the very time that the working population
needed to support such services will itself be aging and decreasing.
This demographic conundrum will be compounded by the depressed
state of the economy, because Cuba will lack the financial resources
to continue providing early retirement with a state pension for its elderly,
starting at age 55 for women and 60 for men.
Hence, any new government will face difficult public policy
choices with respect to (a) supporting Cuba’s aging population, (b)
allocating scarce resources among competing social programs, and (c)
developing a labor force to pay for future increases in social expenditures.
Finding solutions to these problems will entail political risks
that a future, presumably weaker, government may prefer to avoid
and that, in any case, may be unrealistic in the Cuban context. Details
of each problem are discussed briefly below.
Revising the pension system by raising the retirement age, for
example, is likely to produce a sharp reaction from future retirees.
Requiring workers to contribute to their own retirement could also
provoke strong opposition from younger workers, especially if the real
value of their wages remains low and the economy depressed. Moreover,
shifting pension responsibility from the state to private employers
hardly seems feasible in the Cuban context, because the state has
played the overwhelmingly dominant role in the economy and social
sector for the past 44-plus years. Even if a market-based system were
adopted, saddling the nascent private sector with paying for pensions
would place an enormous burden on it.
A new government will have to decide how much of Cuba’s
gross domestic product (GDP) should be devoted to social services
and how to allocate that amount between the young and the old. Reducing
current consumption levels, including those for social services,
in order to invest in future growth should, in theory, yield higher incomes
and resources for future consumption. But such a cutback
would be painful, if not impossible, given the island’s low levels of income
and economic development. However, devoting a larger share
of GDP to social services would increase the burden on workers who
have already absorbed cutbacks in real wages and would further increase
political disaffection among the young.
As to allocating social spending between the young and the old,
a new government will find it difficult to find the resources to satisfy
both sectors. An expected decline in the school-age population should
result in a decline in total government expenditures for the young,
especially for education. But that reduction will surely be insufficient
to fund a significant increase in expenditures for Cuba’s aging population.
It may make more sense to allocate greater resources to improving
education, particularly at the university level, given Cuba’s
critical need for economic growth and global competitiveness.1
Finally, post-Castro Cuba will face not only a shortage of capital
and natural resources, but also a shrinking labor pool. To expand the
size of its workforce, it could raise retirement ages and/or increase labor
force participation among prime-age workers. However, both options
would require major departures from the policies of the Castro
era: Wages would have to be tied to productivity, thereby reversing
the Revolution’s commitment to reducing income inequalities.
_____________
1 We recognize that increasing the resources Cuba devotes to its higher education system
runs counter to World Bank and Inter-American Development Bank (IDB) experience in
the less-developed countries, where investment in basic skills appears to have a higher development
payoff. However, we believe that our approach is better suited to Cuba’s economic
situation. Cubans’ basic educational levels are already high by most developing-country standards,
and Cuba’s long-term economic growth will likely hinge on the availability of highly
skilled and professional labor.
Moreover, an emphasis would have to be placed on promoting economic
efficiency, thereby reversing the Revolution’s old commitment
to full employment. Thus far, the Castro regime has refused to take
either step. Whether a weaker, successor government can reverse
course remains to be seen.

Cuba’s Ever-Failing Economy
Cuba’s economy, never in good shape, is now approaching a critical
juncture. To stem the economic free fall after 1989, the Castro government
opened the economy to foreign investors and rebuilt the
tourist industry in order to recapture hard currency. For a while,
these and other modest reforms helped stop the hemorrhaging, but
by 2002 new signs indicated that the economy was slowing again.
Indeed, unless Castro defies all expectations by further altering
course, he will displace onto his heirs the task of making the systemic
changes Cuba needs before it can achieve the sustained economic
growth that can help legitimize a post-Castro government. It will thus
be left to a new government to raise labor productivity and stem corruption
in both the state and society. And the new government will
be faced with the equally formidable tasks of overturning the command
economy, ceding a measure of control to a revitalized private
sector, and transforming the island’s distorted industrial structure.

An Unproductive Labor Force
Among the key factors affecting the prospects for revitalizing the
economy is Cuba’s highly educated but low-productivity labor force.
The low productivity has been exacerbated by the declining state of
Cuba’s capital stock, its shortage of investment capital, and its lack of
raw materials. But the Castro regime’s policies regarding full employment
and wages have also played a role. The commitment to full
employment transformed open unemployment into rampant underemployment
prior to 1989, when Soviet economic support was available,
and then worsened it during the Special Period, when the economy
was at its lowest ebb. Thus, despite the closure of 45 percent of
the island’s most inefficient sugar mills in 2002, the Castro regime
has kept the displaced workers on the state payroll. Setting wages according
to a national pay schedule has further compounded the
problem of low productivity by divorcing workers’ wages from their
productivity—a policy that has motivated poor work habits and created
disincentives for maximizing production among the labor force.
The new regime will thus be faced with a long-term task of motivating
workers anew through market incentives.

A Repressed and Deformed Private Sector
Another impediment is the weakness of the small, deformed private
sector that will be left from the Castro era. The regime has resisted
the development of a healthy private sector, mainly because of Fidel’s
ideological commitment to socialism and his obsession with his place
in history, but also because of other political calculations. His regime
is determined to prevent the rise of a middle class that may challenge
its power, and to constrain the growth of income equalities that may
undermine regime support among state employees, Party workers,
military and security personnel, and pensioners, many of whom must
subsist on peso-denominated incomes.
Bowing to necessity in 1993, the regime legalized selfemployment
in micro-enterprises to generate trades, crafts, and services
that the state was no longer able to supply and to provide new
employment opportunities. By 1997, the number of microenterprises
had grown to more than 200,000. But when the economy
showed signs of recovery, and the self-employed showed that they
were enjoying substantial dollar incomes, the regime actively discouraged
further growth of the fledgling private sector by erecting new
obstacles. By 2001, the number of micro-enterprises dropped to an
estimated 150,000. In addition, the private sector has become increasingly
deformed. The absence of a private distribution system has
led to the widespread pilfering of state stores and to the buying of
stolen supplies on the black market. Moreover, as a result of 40-plus
years of communism, the labor force lacks the kinds of trained managers,
accountants, auditors, bankers, insurers, etc., that a robust
market economy requires.

A Corrupt Society and State
Yet another obstacle to revitalizing the economy is the prevalence of
corruption and favoritism. Most materials on the black market are
stolen or misappropriated from state enterprises and warehouses. Inside
deals are commonplace between individuals and their government
contacts. Privileges are accorded to the nomenklatura (known in
Cuba as pinchos grandes). And the government selectively privatizes
state enterprises and creates new joint enterprises for the benefit of
trusted civilian and military loyalists assigned to run them.

A Postponed Imperative: Restructuring the Economy
If it wants to promote the island’s integration into the global economy,
a new government will also have to transform the distorted industrial
structure that developed as a result of Cuba’s close economic
ties to the Soviet Union. The intertwining of the Cuban economy
with that of the U.S.S.R. not only insulated it from the international
market but also distorted it as a result of the extremely high prices the
Soviets paid for Cuban sugar exports and the low prices that Cuba
paid for Soviet oil imports (which Cuba could re-export to the world
market) and for other raw-material and industrial inputs. As a result,
the Castro government long concentrated its resources on increasing
sugar production, which reached levels of 7 to 8 million metric tons
in the 1980s, at the expense of diversifying the rest of agricultural and
non-agrarian sectors of the economy. The sugar industry itself became
distorted under the artificially favorable conditions it enjoyed as
inefficient sugar mills and unproductive sugar fields were kept in
operation.
Absent Soviet support, sugar production thus began to drop
steadily beginning in 1992–1993. Moreover, the high cost of sugar
production in Cuba limited its export options, because the cost of
Cuban sugar exceeded the declining world-market price for sugar.
Despite the restructuring of the industry that began in 2002, including
the permanent closure of 71 of the most inefficient mills, production
has now plummeted to a reported 2 million tons in 2003. A new
government will therefore be faced with the difficult challenge of further
scaling down the industry and introducing other efficiency
measures––including laying off workers––to make it more competitive
on the world market.
Additional economic distortions will have to be overcome,
which will be no less daunting for the new government. Obsolete industrial
plants and equipment, much of it acquired from the former
Soviet Union and Eastern bloc, will have to be replaced. Domestic
linkages, virtually non-existent at present, will need to be promoted
in order to bolster the small private sector and ease the economy’s
heavy reliance on imported manufacturing inputs. If a market economy
is to take hold and thrive, the rule of law, required to protect
property rights and provide predictable and enforceable contract laws
and a secure environment for investors, will have to be observed by
both government officials and the public alike. These and other undertakings
are likely to take years, possibly generations, to accomplish.

Policy Implications for the United States
The policies that the United States follows after Castro leaves the
scene could have a major effect on whether Cuba remains under
hard-line or reformist communist rule, falls under military governance,
begins a democratic transition, or is gripped by instability and
strife. To help foster a stable, prosperous, democratic Cuba, the
United States should observe the following policy guidelines:
• Use the prospect of lifting the embargo (if still in effect) as leverage
to move a successor communist regime toward a democratic
transition. Lift the embargo if a democratically oriented regime
comes to power.
• Work in concert with Canada and the United Kingdom, Spain,
and other countries in the European Union in trying to influence
events in a post-Castro Cuba along the lines of a democratic
outcome.
• Avoid public postures that incite Cuban nationalism and work
to the advantage of hard-liners. Cultivate informal military-to military contacts and use public diplomacy to make clear the United States’ willingness to respect Cuba’s independence, sovereignty, and dignity. But also make clear that Havana needs to
reciprocate by respecting human rights and evolving toward a
market-based democracy.
• Restore full diplomatic and trade relations once the Cuban government
is committed to a democratic transition and offer economic
and technical assistance to jump-start the economy.
• Encourage the private sector, the academy, nongovernment organizations
(NGOs), and especially the Cuban-American community
to become engaged and assist Cuba in embarking on a
democratic transition.
• Offer to renegotiate the status of the Guantanamo Naval Base
once the transition is under way.
Cuba will be at a critical crossroads when the Castro era comes
to an end. Cuba could become a “failed state,” in which case the
United States would be faced with internal disorder and a humanitarian
crisis on the island, and with uncontrolled drug flows and mass
migration to the United States. Hence, the United States needs to offer
the Cuban people a new deal along the above lines, with the aim
of not only avoiding a worst-case scenario on the island but also
helping Cuba to move toward a more stable, prosperous, and democratic
outcome.