By Arturo Lopez-Levy and Jonathan Benjamin-Alvarado

Scarabeo 9, the semi-submersible oil rig contracted by the Spanish company Repsol completed its journey from Singapore to Cuba. Repsol’s rig will explore Cuba’s exclusive economic zone, an area in the Gulf of Mexico of about 112000 square kilometers. Oil exploration in the zone is being contracted to several foreign companies such as Venezuela’s PDVSA, Malaysia’s Petronas, and Vietnamese PetroVietnam.  Cuba’s Ministry of Basic Industry estimates the oil reserves in the zone are between 5 billion to 9 billion barrels of oil. CNN GPS host Fareed Zakaria referred to Cuba’s total oil potential as between 5 billion and 20 billion barrels of oil. 

The start of the oil exploration will not derail Raul Castro’s reform program. At a minimum, oil will not come from the offshore wells soon enough, while the reforms are needed immediately. The Cuban government needs to create jobs for the million and half workers that are supposed to leave the government sector in the next two years as part of the reforms program proclaimed last April by the Cuban Communist Party in its VI Congress. It must also alleviate critical situations of poverty in the five most eastern provinces, where unrest has been rising. With or without oil, the Cuban economy sorely needs to develop an environment in which businesses and individuals feel confident to invest.

Brazilian president Dilma Rousseff's visit to Cuba has generated considerable debate. Some question the appropriateness of the presidential visit after the death of Wilmar Villar while others go further by criticizing what they identify as appeasement and under emphasis of human rights in Brasilia's relationship with Havana. It is obvious that Brazil's policy is not as effective as could be and that new initiatives could increase Brazil’s impact on Cuba's reform process. That said, it is important to recognize the merits of the policy designed by the Itamaraty in light of Cuba's political liberalization, rather than democratization, and the inherent synergy between a transition to a mixed economy and the expansion of rights and freedoms.

Brazilian policy toward Cuba is not one-dimensional. It implies a convergence of economic interests and strategic regional leadership with values ​​from a Brazilian left committed to democratic governance. The Brazilian Foreign Ministry also employs a combination of principles of international law. As emphasized by then-President Cardoso during the democratic crisis in Peru 2000 and Venezuela in April 2002, state sovereignty is not a shield to violate human rights but as a principle should be respected. That position is reflected in the critical distance that Brazil, since its own transition to democracy, has taken toward the U.S. policy of confrontation aimed at forcing a regime change in Cuba.

I’ve just finished reading a new report by Professor Richard Feinberg, a former Clinton administration official and non-resident fellow at the Brookings Institution.  “Reaching Out: Cuba’s New Economy and the International Response,” clocked in at a daunting 101 pages but should nonetheless be required reading for anyone following the island nation’s long-awaited economic restructuring. 

Cuba’s economic transformation is a hot topic, to be sure; another excellent report, Cuba’s New Resolve: Economic Reform and Its Implications for U.S. Policy, written by Cuba expert Collin Laverty for the Center for Democracy in the Americas, offers a detailed look at Cuba’s economic reforms to date, and in so doing, lays to rest any question of whether these reforms are just a temporary fix or irreversible.  If Cuba’s New Resolve argues that Cuba is serious about its economic reforms, Reaching Out offers what the international community should do about it with an 800 pound gorilla - the U.S. embargo - in the room.

I’ll admit that after reading Feinberg’s introduction, I next skipped to the middle for both a history lesson and a pragmatic, creative vision for Raul Castro’s Cuba to reconnect with the International Financial Institutions (IFIs), the World Bank and the International Monetary Fund, as well as with regional development banks, in spite of opposition from the United States.  

Feinberg unravels the conventional wisdom that says Cuba and the IFIs would make unhappy bedfellows – Cuba withdrew from the World Bank and the International Monetary Fund more than 40 years ago – by pointing to successful IFI engagement with nonmembers like Kosovo and South Sudan, and with proud and strong states like Ortega's Nicaragua and Vietnam, with which Cuba shares key similarities.  The IFIs are more interested in “the long game,” Feinberg argues, and their willingness to take things step by step would fit nicely with Cuba’s (urgent) need for gradual changes.  He talks to both sides and a senior Cuban diplomat tells him that “Cuba has no principled position against” engagement with the IFIs  - a statement Feinberg believes signals a real shift in Cuban policy (hopefully a Cuban official will field that question publicly in the not too distant future).  

Meanwhile, IFI experts are more than ready to engage Cuba, and Feinberg argues that U.S. opposition to IFI assistance isn’t as insurmountable as it might seem.  In particular, IFIs can work through trust funds and other donors can administer programs.  Feinberg also sees a role for regional development banks such as the Inter-American Development Bank and the Andean Development Corporation, as the U.S. isn’t a member.

At a time when the United States is noticeable absent and seemingly oblivious to the critical moment at hand in Cuba, Feinberg offers immediate, actionable recommendations for the international development community to engage Cuba now, when it can clearly have a tremendous impact on the breadth, depth and success of the reforms.  His recommendations for the IFIs, Cuban policymakers and the United States include:

There is much political continuity in Raul Castro’s government, but the recent announcement that Cubans will be able to sell and buy houses and their used cars represents an important change. These are visible economic reforms with direct impacts on Cuban lives. The marketization of these assets unleashes Cuban entrepreneurial spirit and might increase the remittances received from relatives and friends abroad.

For decades, rigid communist regulation of real estate and car sales created major resentment in Cuba, but the government didn’t respond to the public's criticism. After a brief interregnum from 1984 to 1988, when Cubans could sell their houses, Fidel Castro cancelled this right arguing that it was fomenting inequalities, creating a class of intermediaries who were capitalizing on transactions, and rewarding the nouveau riche.  His characteristic aversion to market mechanisms also exerted a virtual veto against the sale of automobiles acquired after 1959.

There's reasonably good news on the horizon for Cubans hoping to legally buy and sell homes.  In a report on the subject, BBC profiled a divorced couple - we've all heard similar stories - forced to live in the same home together for lack of an alternative.  But Granma reports that regulations should be out by the end of the year that will not only allow Cubans to buy and sell their homes, but that the transfer will be allowed to be recorded by a licensed notary, presumably cutting out the dreaded (and often opportunistic) government bureaucrats.  And that should be music to many Cubans' ears.

Speaking of music, U2's Bono mentioned former Cuban political prisoner Oscar Elias Biscet (he was one of the last prisoners released as part of an agreement with Cuba's Catholic Church) at a recent concert in Miami, following a meeting he had with Rep. Mario Diaz-Balart.   Cuban American filmmaker Joe Cardona appreciated the mention and penned an op-ed offering something for everyone to agree and disagree on in The Miami Herald, on Cuban exiles, dissidents and U.S. policy:

"For the better part of my life, Cubans’ struggle against tyranny on and off the island has been unfairly undermined and dismissed by the international community as an appendage of the Cold War battle between Washington and Havana.

Given this association, it has been a struggle to get pop culture icons to back the fight for liberty in Cuba. It was a pleasant surprise, then, to hear that Bono mentioned Cuban opposition leader Dr. Oscar Elias Biscet at the U2 concert recently at Sun Life Stadium."

There are Cuban individuals both on and off the island who are disgusted by the Castro regime and who do not want to see any reforms in Cuba, but rather hope that the deteriorating situation will galvanize discontent and provoke a rebellion. There are others in Cuba, enjoying the privileges of the Communist system, who do not want any reforms so that they can go on enjoying the status granted them due to family ties, loyalty or simply ideological opportunism. Still, there are many others who would like to see Cuba initiate orderly reforms that gradually lead to a political and economic system consistent with all human rights-- civil and political, economic, cultural and social-- enshrined in the Universal Declaration.

The principal report to the VI Congress of the Communist Party, presented by Raul Castro, points to a Cuba in which none of the three groups may be satisfied. The proposed reform program inserts economic change into single-party political continuity. This formulation implies that it is possible to advance in terms of legitimacy, freedom and welfare in some areas, while in other areas there is no progress, or even reinforcement of authoritarianism. It envisages a Cuba that might combine prosperity and joyful consumption of market-oriented economic growth with the permanence of reprehensible acts of repudiation against political dissidents.

The dilemmas of economic reform

The Central Report to the PCC Congress reflects a set of proposals generally associated with unorthodox propositions by government supporters. Positions in favor of term limits, decentralization, revaluation of the market as a development tool, separation of party and state functions, increasing the representation of women, blacks, mestizos and youth in government leadership and in favor of checks and balances between the branches of government and the Communist Party of Cuba (PCC) have been present in Cuba's internal debates since the 80's.

In practice, the transition to a mixed economy model with a decentralized state and a major non-state sector, considered in the past as antithetical to the official communist ideology, has already begun. President Raul Castro has taken (some would say stolen) agendas promoted in the past by reformist groups or even opponents and has set out to implement them under the leadership of the PCC. It will be a challenge for a bureaucracy, steeped in hostility toward these very concepts, to do so.

Market oriented reforms and a reduction of the State's distributive role had already been decided. The questions put to the PCC concerned the speed, methods, sequence, scope and progression of the reforms. The report lacks clear answers. It insinuates a gradual approach by ruling out IMF-style shock therapy and sudden removal of the ration card. But there is still no overall vision or alternative economic model put forward and no discussion of the political risks that the PCC will face in implementing changes.

If, as the report states, contracts will be the "regulatory tool of interrelationships between economic actors," the government is way behind on legislation to accommodate this. There are no viable bankruptcy laws, credible legal mechanisms for dispute resolution between creditors and borrowers, or adequate consumer protection or antitrust laws.

Has the PCC adopted an economic model in which State, cooperative or private enterprises can go bust? How will the government respond when a borrower does not repay a loan? What are the rules for restructuring debt in the shortest time possible or accessing seized assets? What assets will be used as collateral when seeking credit?

At roughly this time last year the headline of a Reuters article proclaimed, “U.S-Cuba relations under Obama fall to lowest point.” The article chronicled a number of prickly moments between Washington and Havana, but largely attributed the backslide to the arrest of U.S. contractor Alan Gross in late 2009 and  the unfortunate death of Cuban prisoner, Orlando Zapata Tamayo which occurred just a few months later.

Given President Obama’s remarks about Cuba to Univision last week, one might conclude U.S.-Cuba relations have reached a sort of second nadir. In response to a question about the reforms currently underway in Cuba, the president said,

“For us to have the kind of normal relations we have with other countries, we've got to see significant changes from the Cuban government and we just have not seen that yet.”

While senior Obama Administration officials have been following those same talking points for months, (see Cuba Central’s helpful chronology here), to hear them again, precisely as Cuba begins to implement some of the wide-ranging policy reforms recently endorsed by its political leadership, is a troubling signal of where this Administration is on Cuba policy. Despite the past year being one in which Cuba began an historic process of reform and agreed to a major prisoner release brokered by the Cuban Catholic Church, Obama’s comments have the ring of an all-too-familiar refrain that is increasingly incompatible with the facts on the ground in Cuba.   

Oh, the glories of being a tourist. The long plane rides spent squished in a middle seat; the demeaning airport security checks, the exorbitant baggage fees and bad food. But then there is, of course, the redemption that comes with being reunited with friends and family living abroad, or simply becoming acquainted with new places and sights that provide us with that injection of wonder we seek from time to time to rejuvenate the soul.

Yet for the vast majority of Cubans, leaving their country at all is virtually impossible. Under current regulations, Cubans must obtain a “tarjeta blanca” or exit visa, in order to leave. To get it, applicants must jump though a number of bureaucratic hoops and pay exorbitant fees: a de facto travel ban. Along with preventing ordinary Cubans from simply visiting family in the U.S. or elsewhere, the ban has been used as a political tool to prohibit opposition figures such as Yoani Sanchez or Dr. Oscar Biscet from traveling abroad to accept awards or other honors that confer international recognition and legitimacy on their anti-government positions.

So it is encouraging that the final version of the Lineamientos,  Cuba's set of policy reform guidelines, mentions the possibility that Cubans may one day be permitted to travel abroad as tourists. The actual language reads, “Study a policy that facilitates Cubans living in the country to travel abroad as tourists,” (Num. 265). But given the enormity of the injustice that is the de facto ban, this vague statement of intent is hardly satiating to advocates of greater freedom and human rights. 

While the Cuban government has for several years hinted it was entertaining such a policy change, ( President Raul Castro said as much back in 2008 shortly after his first formal inaugural address as president), it appears the idea hasn’t progressed much beyond that. Cuba’s incipient reform process has instead been defined by policy changes with comparatively lower political cost/higher economic returns. And if you are calling the shots in Cuba at this critical moment, it’s rather obvious why.

As Cuba watchers continue to digest the VI Party Congress, we wanted to share with you a newly-released New America Foundation (NAF) policy paper, “Change in Post-Fidel Cuba: Political Liberalization, Economic Reform, and Lessons for U.S. Policy”. In this new publication from NAF's U.S.-Cuba Policy Initiative, author Arturo Lopez-Levy explores the political context in which the VI Party Congress took place, the reform processes currently underway in Cuba, and the resulting implications for U.S. policy toward the island.

We previewed several excerpt of the paper a few weeks back, but are now pleased to be able to share it with you in its entirety.

Here are a few excerpts:

On the Cuban government and domestic opposition.

“Facing a more plural society, the government is being compelled to bargain in response to the emergence of citizen advocacy groups rather than simply rely on confrontation. Totalitarian practices have softened. There is undoubtedly a clear policy of confrontation employed against openly political opposition groups; however, in the last few years, a gray area has emerged where intellectuals and groups that promote citizen interests without directly challenging the state’s power are tolerated.”

For VI Congress-watchers, the weekend brought colorful images of Cuban school children cheerfully waving miniature Cuban flags, the appearance of a gleaming Granma, and the fiery sounds of salsa music blaring as Cubans marched toward the Plaza de la Revolución. While Saturday’s parade communicated a cheerful, confident, and orderly Cuba, the reality that prompted the VI Congress is a far different one.

At the core of the Congress is the Lineamientos document, a set of proposed reforms for which the government has been soliciting input since November 2010.  In his two-and-a-half hour address to Congress delegates on Saturday (the text of which can be found here), President Raul Castro made his case for the reforms “in order to secure the continuity and irreversibility of Socialism as well as the economic development of the country and the improvement of the living standard of our people combined with the indispensible formation of ethical and political values.”

In the weekend’s biggest news, Castro effectively proclaimed the end of Cuba’s Castro era when he announced the introduction of term limits for high-ranking party officials.  Two consecutive periods of five years and you’re out. If these new limits are applied retroactively, it could mean that Castro himself would be forced to vacate office as “soon” as 2018, leaving Cuba without a Castro at the helm for the first time in more than 50 years and definitely ushering in a new generation of political leadership in Cuba.  

As soon as Raul Castro took power in 2008, speculation commenced about who would succeed him. With the 2009 ousting of Felipe Perez Roque and Carlos Lage, who, until then, had been considered the most likely candidates, the scratching of heads only become more furious.  While we still lack clear indications about the identity of Castro’s successor, (new economic reform czar Marino Murillo and Secretary of the Communist Party in Santiago de Cuba, Lazaro Exposito have been mentioned as possibilities) we now have a timetable that will force these decisions to be made sooner rather than later.

Some other notable excerpts from Saturday’s speech: