Cuba’s experiment with capitalism may be short-lived. So what else is new? | Opinion

Cuba’s latest toe-in-the-water experiment with capitalism “lite” seems to have hit a significant snag: no cash flow.

Surprise, surprise, some long-time Cuban government watchers in South Florida are saying. They believed the latest reforms by Cuba were a scheme by the Cuban government to bring much-needed cash onto the island. Maybe they were right.

Disappointed are those who had been encouraged by the highly unusual move the government took in allowing private businesses to spring up. They saw it as an opportunity for political change brought on by necessity.

But Cuba seldom wavers from its communist leanings. Leaders know that capitalism is kryptonite to their repressive form of government.

Still, in recent weeks, Cuba’s apparent concession to allow free enterprise made international news.

But the government unexpectedly derailed its own idea by cutting off money flow to those fledgling entrepreneurs.

In a surprising reversal, Cuba’s Central Bank announced this month that it is restricting the amount of cash in local currency that private businesses can withdraw from their Cuban bank accounts.

Limited cash flow

They will only be allowed to withdraw a minimal amount of cash, 5,000 Cuban pesos — equivalent to about $22 on the island’s informal market — for payments related to contracted goods and services between all “economic actors,” including state and small private enterprises, cooperatives and self-employed workers. That also includes salaries and other employee benefits payments, as Miami Herald Cuba reporter Nora Gamez Torres explained in an article.

Needless to say, such monetary restrictions make it all but impossible to run any type of private business.

The private businesses were mainly food suppliers on the island who bought and stored food and goods from the world market, then delivered them to Cubans whose relatives, largely in South Florida, paid for the service via the internet. Currently, the government is faced with severe shortages of food and gas, and this packages are filling a gap in the economy.

Food deliveries

While many of Cuba’s private businesses rely on complex financial schemes, entrepreneurs need access to dollars in Cuba’s informal market to make their businesses work, Gamez Torres reported. The new banking measures have left many small business owners out on a limb.

Last month, the Miami Herald Editorial Board met with four Cuban entrepreneurs who said infrastructure was already in place, allowing them to make money separate from the government. In the United States, among other things, they seek to purchase vehicles for their booming delivery services.

Here’s how it works: Someone in Miami could pay $59 on the internet to have chicken, rice and beans delivered to their family in Havana. A private business in Cuba fills the order with their own supply and sends a driver to deliver the food to a Cuban home. Demand and supply. In other words, capitalism at work.

But at a recent meeting of the Cuban National Assembly, some leaders expressed discomfort with the private enterprise idea.

The business owners to whom the Editorial Board spoke told us the government allowed them to exist, but they were aware of the perils. “We know the government one day can say: ‘No more,’ “one businessman told the Board.

Has the day arrived?

Among those still hoping the glimmer of capitalism will flourish and not disappear is Joe Garcia, a former Democratic U.S. congressman and Cuba expert who brought the business owners before the Board. He is disappointed Cuba has tapped the brakes.

“I think the Cuban government is making a mistake. I don’t know if they can put the genie back in the bottle, but these banking restrictions will create profound problems for the Cuban economy,” Garcia said.

Among the skeptics was Cuba expert Jaime Suchlicki, head of the Cuba Studies Institute in Coral Gables. He recently told the Editorial Board this newfangled “Cuban capitalism” was an old trick.

“Capitalism is not taking hold in Cuba. In the past, during difficult economic conditions, the party and the government advocated minor changes to deal with the economic crisis. As soon as things improve, they will revert to Marxist orthodoxy.”

But is Cuba’s economy improving? Indications are that the Cuban people are living through one of the country’s harshest economic times not seen since the mid-1990s, after the fall of the Soviet Union. There are severe food and gas shortages.

The private businesses also create a currency-flow problem for Cuba because none of that money goes through Cuban banks. Due largely to the U.S. embargo of the island, the deals are made through international banking.

“The so-called economic reforms implemented by the Cuban regime have resulted in tremendous inflation on the island, and they lack the ability to print the national currency,” John Suarez, executive director of Center for a Free Cuba in Washington told the Board. “This is the most common pretext for the recent restrictions on cash transactions and ATM access,”

And the country’s infrastructure is in such shambles that Cuba, once one of the world’s biggest sugar producers, now has to import it for its people. Unbelievable.

Cuban people the big losers

Of course, as always, the big losers are the Cuban people, who have to endure and make do with less and less, while being told the embargo is to blame.

Currently, shortages of everything from gasoline to food are rampant on the island, whose tourism industry has not fully recovered from the pandemic.

Such deprivation can lead to civic unrest, as happened two years ago when Cubans took to the streets to demonstrate against the government’s human-rights abuses and restrictions, all endured on empty stomachs.

The key now is to watch how strictly Diaz-Canel’s government will enforce its banking restrictions on the private sector — and how long the Cuban people will continue to endure them.