[Mac Margolis] Cuba’s new constitution won’t fix economy

For anyone longing for the clarity of the Cold War, Cuba has been an enduring inspiration. Forget the gringo-sponsored Washington Consensus, messy electoral democracy or wishy-washy pink tide. The Caribbean island has remained a single-family regime serving straight-up 20th century communism.

Yet to gauge by the commotion among the leadership in Havana, those comforting assurances are gone. The Castros are out, private property is in, and the United States is no longer the enemy -- just a necessary evil. When Cuba’s new constitution is rolled out by November, the Western Hemisphere’s storied communist enclave will be rebranded merely as a socialist society.

Just what this new constitution portends is unclear. But spare a ration of pity for President Miguel Diaz-Canel. Since taking office in April, he has been tasked improbably with peddling change as continuity and, at the same time, continuity as a new revolution.

Yes, the reforms in the proposed 224-article charter nod to a changing world. Provincial governors will have more autonomy and a prime minster will share power with the president. Significantly, in a country famous for its gerontocracy, future leaders must be aged 60 or younger.

There are also sweeteners for ordinary citizens. On Aug. 14, Cubans were regaled with a day of free access to mobile internet services, a test run for wiring the hemisphere’s least connected country. And in a break with old revolutionary pieties, there’s even a clause sanctioning same-sex unions.

“The reforms are an important symbolic step,” said American University Cuba scholar William LeoGrande. “Legalization of private property puts the private sector on a firm legal foundation, which it hasn’t had. And by doing away with the old commitment to build a communist society, the new constitution underscores the recognition that a mixed economy is the future.”

But don’t wave your beret just yet. Driving the reforms is the existential imperative that Cuba must adapt or collapse. The economy has stagnated and employment is scarce: A million public-sector jobs were eliminated from 2009 to 2016. The emerging private sector has begun to take up the slack, but only timidly.

After surging through early 2017, the flow of foreign visitors dropped sharply by year’s end, partly due to Hurricane Irma and partly to tighter restrictions by the Trump administration, depriving Cuba of some $200 million in projected tourist receipts.

Internationally, Cuba’s options also have narrowed. The Soviet Union’s collapse left Cuba without its legacy benefactor, and the Venezuelan implosion has cut back deliveries of cut-rate Bolivarian oil. Meantime, discontent festers at home, especially among the young, to whom revolutionary glory was their grandparents’ thing. Something must give.

Encouraged perhaps by the wave of authoritarian capitalism that has swept the map from China to Hungary, Cuba’s leaders are betting on policies to relax government constraints on the market just enough to goose growth but not so much as to jeopardize the command economy.

They could follow the cues of like-minded foreign friends, who have managed to modernize without democratizing. In March, Vietnamese Communist Party General Secretary Nguyen Phu Trong led a delegation to the island and shared some advice. The market alone “cannot destroy socialism,” Trong told his hosts at Havana University. “But to build socialism with success it is necessary to develop a market economy in an adequate and correct way.”

That advice apparently has yet to sink in. “The reforms on the table bolster the Cuban model by making sure that the private sector is never that private and never that strong,” said Javier Corrales, a political analyst at Amherst College. “It’s like trying to fly a plane with one engine. You can do it, but it’s going to be a bumpy flight.”

The risk is a raft of half-measures that generate even more distortions. Recent guidelines on private business, which condone private property but not the accumulation of private wealth, represent what University of California, San Diego scholar Richard Feinberg has called “a great leap backward.”

“This is not some ruse by clever autocrats,” Carlos Saladrigas, chairman of the Cuba Study Group, a nonpartisan Miami-based research outfit, told me. “They are so afraid of change and of what the market forces are going to do that they can’t come to terms.”

Glossed over in the constitutional reset is an overhaul of the convoluted Cuban currency. While the Cuban people and private businesses have traded their pesos at around 24 to the dollar, the state companies that dominate the national economy still get the sweet and entirely fictional 1980s rate of one to one. As a consequence, Cuba suffers from distorted prices and lavish subsidies -- so “fostering the survival of enterprises that contribute nothing to the economy,” and wasting “enormous amounts of financial and human resources,” Vidal found. And yet unifying the exchange rate requires measures to offset the inevitable financial shock, such as inviting foreign investment and freeing up the private sector “to absorb the unemployment that would be produced from enterprises that go bankrupt,” writes Vidal.

Cuba’s civil society also seems underwhelmed. “A constitution that reaffirms the control of the Communist Party over society,” web activist Yoani Sanchez tweeted recently. “No, No, No, No.”

Misfiring on constitutional reform is a squandered opportunity that raises the risk of an enduring setback. “This is the constitution. It’s not something you pass and repeal and rewrite every few months,” said Saladrigas. “If you don’t make fundamental changes, why bother?”

Fair question, but perhaps for the next Cuban revolution.


Mac Margolis
Mac Margolis is a Bloomberg Opinion columnist covering Latin and South America. -- Ed.

(Bloomberg)