Raúl Castro has business to do before he retires

Adrian H. Hearn is an Australian Research Council (ARC) Future Fellow at the University of Sydney China Studies Centre, and Chair of the Latin American Studies Association (LASA) Section for Asia and the Americas.

 Raúl Castro’s decision to retire as Cuba’s leader in 2018 comes as internal pressure mounts on the island’s Communist government to ensure a viable path for business development.  The controlled opening of the Cuban economy constitutes Raúl’s most prominent achievement since he replaced Fidel Castro six years ago.  This week Cuba’s former Minister of Education, 52-year old Miguel Díaz-Canel, has been named as the successor to safeguard this legacy.

According to a report presented to the Cuban National Assembly, 365,000 jobs were cut from the state payroll in 2011 and2012, and the number of non-state workers grew by 23 percent.  “Self-employed” workers now number around 400,000, but their commercial viability is far from secure.  There are two reasons for this: one ideologicaland one practical, and the Castro/ Díaz team will need to deal with both.

First, the government’s 2011 Social and Economic Policy Guidelines offer the following caution to budding entrepreneurs: “in the non-state system, the concentration of property will not be permitted.”  This commitment to egalitarianism will probably diminish over time.  Political bureau member Esteban Lazo Hernández predicts that by 2017 the growth of the private sector will see the state’s share of GDP fall from 95 percent to around 40 percent.  

A more practical obstacle to small business development is Cuba’s incoherent wholesale supply chain.  New entrepreneurs must rely on finances and inputs acquired either from family overseas or illegally from socios (well-placed business partners) in state factories.  Legalization of a wider range of private occupations—a move often advocated by foreign commentators—will only deepen the black market if the supply problem is not dealt with first.  Establishing robust supply chains to support small business development, diminish the black market, and reduce corruption will be critical both to the health of the Cuban economy and the credibility of the state over the next five years.

It is worth noting that across the Pacific, on a grander scale, China faces comparable challenges.  Like Díaz-Canel, Xi Jinping has recently been selected by the internal mechanisms of his nation’s Communist Party as the new President.  His acceptance speech may just as well have been delivered in Havana, calling for “reform and opening up,” the reduction of “undue emphasis on formality and bureaucracy,” and the eradication of “corruption and bribe-taking.”  That China has become Cuba’s second-largest trade partner and recognizes the island as a “fraternal brother” is a telling recognition of shared heritage, and perhaps a common future.

Please Note: an earlier version of this piece appeared on


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