Cuba Continues To Reform

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Cuba is set to announce new reforms in the coming weeks as part of the creation of its new constitution. Although all the details are unknown, the draft of the constitution is said to contain 224 articles, over 60% more than before. It represents the next step in the reform plan that kicked off in 2011, and should be positive for Cuba as it seeks to join the world economy.

We’ve traveled to and written about Cuba before, and are very bullish on its future and believe these developments are a step in the right direction.

What’s New?

Chief among the proposed reforms being reported is recognition for private property in the constitution. However, allowing private property is less revolutionary than what newspaper headlines have proclaimed. Private property reform began in 2011 when the purchase and sale of houses and vehicles was authorized, including the ability to rent out property.

So what can change? Enshrining private property in the constitution should give relief to property owners that the reforms are here to stay – some reforms have been rolled back after changes were too drastic or when the local economy could not sustain them. There could also be changes to the limits on private property ownership (eg. people can only own one primary residence and one vacation home). Additional forms of private property could also be included.

The “free market” was also said to be included in the new constitution. This should also reaffirm the move towards entrepreneurs and small business that Cuba started in 2010. While state companies still dominate and the government remains by far the largest employer in Cuba, almost 600,000 self-employment licenses have been taken up and the private sector has grown substantially.

Foreign investment could be further protected but given the need for increased investment as Cuba develops its infrastructure, and the $2 billion in investment it welcomed last year, this should not be a surprise.

What Stays The Same?

Politically, Cuba intends to remain a socialist state controlled by the Communist party, although reforms on presidential terms and power were already introduced earlier in the year. Cuba’s path to reform seems to mirror what China has done: focusing on opening up the economy while maintaining political control and the party. It’s a risky move – China was only able to pull it off through astonishing economic growth which helped people ignore the loss of freedoms. That means if Cuba’s economic reforms do not result in substantial gains in standard of living for the populace, there could be more call for change in the political system.

Another Much Needed Step, But The US Relationship Dominates

Cuba has been very progressive in terms of reform, but have been cautious in not opening everything all at once. The biggest cloud hanging over all this domestic reform is the renewal of tension with the US under Donald Trump. With the US starting trade wars with some of its largest allies and partners, the prospect of the US playing a large part in reform in Cuba is much grimmer now than it was under the Obama administration. The previous thawing in relations was a key catalyst for Cuba, and until this relationship is salvaged, Cuba will struggle to make the big leap it needs.

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