Me and my fiancé recently got back from our first all-inclusive vacation in Cuba. This was a change from my usual style of traveling since I always avoided popular tourist destinations but circumstance led me to experience what I would label as “light” travelling. It turned out to be a great time and it was certainly different from my past travelling experiences. The Cubans are great hardworking people. With Cuba fresh in my mind, I wanted to share my thoughts on the region with you.
“In Cuba we got everything we need, but nothing we want.” – Cuban worker
Now that toppling governments is the viral thing to do, one has to wonder how come Cuba hasn’t taken the street for Revolution 2.0. Most revolutions are usually sparked by a highly young demographic that is not content with the current state of affairs, a department that Cuba doesn’t lack in. The young Cubans probably find it hard to believe that a pair of crusty 80 year old brothers is the solution to a better future. It seems that it would be a matter of time before the Cubans join the trend and chase the Castro brothers off of the island. But it won’t happen anytime soon for reasons I will explain below. Or Castro simply removed any “Square” required to start a revolution. Ukraine has the Maidan Nezalezhnosti Square, Libya has the Green Square, Egypt has the Tahir Square, Tunisia has the November 7 Square, and Turkey has the Taksim Square. Maybe Cuba doesn’t have a “Square”.
At the heart of the Cuban revolution were poverty, corruption and social injustice (and Batista was a terrible leader). However, more than fifty years after the revolution, the results of the socialist experiment are in plain sight. Cuba is an impoverish nation with a highly educated workforce. I believe Fidel had the best interest of his people in mind but his ideology and economic reforms were a setback for the island. Cuba is a victim of terrible capital allocation, the same problem the Soviet-Union was suffering from. The old Soviet-Union was producing a lot of genius people, but because of terrible capital allocation skills those geniuses never lived up to their potential and ended up being a waste of talent. Cuba is in the same boat. The island is full of highly educated doctors and chemical engineers. Unfortunately these smart individuals have no incentive, or simply can’t, apply their talent to the greater good.
At the resort where I was vacationing at, those same chemical engineers and doctors were mixing drinks for me. Why? Because they are rewarded for their hard work in tips and therefore could provide for their family. The sad reality is that a bartender at a resort can earn more in one day of work than in a whole month as a doctor.
Revolution 2.0 Will Wait
There are two main reasons for the delay.
First Cuba hasn’t reached their “rock bottom” of pain. The ordinary Cuban might not be comfortable, but he’s also not suffering. They are in a state of “rut”, the state where you are not suffering enough to make it a catalyst for change. The Cuban citizen has his basic “needs” covered. Food, housing/shelter, electricity, water, free education, and free healthcare are provided. If the Cubans decide to overthrow Castro, there will be suffering and danger, at least in the short-term. It’s a gamble. Fear, uncertainty, and the risk of losing their basic “needs” privilege are part of the cost-benefits analysis. There’s also a possibility that it does not materialize into a better world.
An analogy is the 9-5 worker stuck in his miserable job. He’s not particularly happy with his job but it pays the bills and feeds his family. He knows with some effort and courage he can find something better, but changing career brings short-term suffering and uncertainty. After all, why jeopardize the next mortgage payment, it’s not guaranteed he will be happier and have more money. So in the end the 9-5 worker stays in the same position because it’s sort of comfortable. That’s the state the Cubans are in. After your health, education, hunger, electricity and shelter is looked after, it’s hard to pull the trigger.
The other reason the Cubans are not over throwing the government is the lack of communication. The ordinary Cuban doesn’t have access to the Internet (although available on the black market and it can be expensive). In most revolutions you can fill up a “Square” with thousands of people in minutes with just a Tweet. In comparison, it took Castro 6 years to topple the Batista government with his guerrilla warfare tactics. So if a Cuban starts a fire, there’s good chance it would be extinguish before it gets a chance of spreading. Without modern communication, it will take a long time to get the message across.
Keeping its population in isolation and semi brainwashed seems to be contributing to its stability. North Korea is the master of that art, by keeping the Koreans off the grid, the state managed to convince a starving population that it’s on the top of the world. Because I was vacationing, I didn’t get the chance to have in-depth conversations with the population, I did manage to have a few exchanges. In overall they seem to believe that only Cuba has the unique benefits of universal healthcare, free education and pensions. Now I understand why the government is restricting Internet access.
While on the topic of communication, USAID recently made headlines with their fake Cuban Twitter program aimed at creating an Arab Spring in Cuba. USAID decided they wanted to overthrow Castro through a Caribbean Spring via text messages but they blew their budget. Click here to read the NYT coverage. Obama now officially joins the list of Presidents that failed to take Castro out.
For change to happen you need a strong emotional response. You will get an emotional response the day Cuba can’t get the money to support their generous social programs. If that happens, Cubans could be on the street. To put that in perspective, imagine the reaction in the U.S. if the social security check came in late, madness would hit the street.
An example of a country failing to cover the basic needs of its citizens is Venezuela. Venezuela, under Chavez and now Maduro, had their own socialist experiment and now some Venezuelans are falling through the cracks. The reforms are hurting the population it’s trying to help. Now the population is in the street protesting for change, and that’s a hard genie to put back in a bottle.
Cold Hard Cash
Aside from remittances, estimated at $2.6 billion in 2012, which is one of Cuba’s biggest revenue sources, tourists are a huge source of hard cash, exactly what Cuba needs to survive. Tourists, mostly Canadians, Europeans and some Argentinians, love the warm Cuban weather, clear blue skies and beautiful perfect beaches. These vacationing resorts are mushrooming everywhere competing for tourist’s money. As I mentioned above, a lot of highly educated Cubans want that dream job of working on a resort to get some of that tourist money. The average Cuban monthly salary ranges between $15-$25 depending on the trade. Of course they love when they receive tips, but money is not everything.
There’s a chronic shortage of goods in Cuba. Bringing basic goods into the country sometimes triumphs giving money because it’s impossible to shop until you drop in Cuba (A box of 25 Cohibas is pretty light). The stores are government owned, so the supply of goods is very limited. On the other hand, I notice that there never seems to be a shortage of cigars. I found out that the cigar markers have a production quota and if they surpass it they get a bonus. I also recommend you get the handmade cigars and not the machine made one, there’s a huge difference in quality and price.
Cuba’s biggest exports are not cigars but doctors. Because of its great educational system, Cuba mass produces doctors and uses it as a currency. Cuba recently sent 30,000 doctors to Venezuela in exchange for 3,000,000 barrel of oils. Using that metric, one doctor is equivalent to 100 barrel of oil. At $100 a barrel, one doctor is worth $10,000.
I remember when I was attending high school in the U.S. Fidel Castro was portrayed as the devil, right up there with Saddam Hussein. We were constantly told that Fidel was a bad bad man. When I came back to Canada the attitude towards Fidel was quite different. In Canada Fidel isn’t depicted as an “evil” person, but just another dreamer with failed economic policies. I subscribe to that school of thought. (But then again, if I had nuclear weapons pointed at me I’d probably feel differently.)
Cuba is also strong at playing the anti-U.S.A. propaganda game. While visiting gift shops there’s plenty of books portraying the U.S. as the great Satan. I don’t even want to know what they say in schools. Since the Cubans are not exposed to any other views because of the restriction of information flow, that’s the only view they know. Psychology 101, if you repeat the same thing over and over you will end up believing it.
The country is filled with Che Guevara pictures and paintings, portraying him as a hero. Here’s a little known fact: The rights to the famous iconic image of Che that you see on every hipster’s T-shirt and posters, is owned by an Atlanta based firm. Is Che rolling over in his grave knowing that an American company is raking millions by filling the malls with his image…?
The solution to Cuba’s misery might be in the new plan Raul brought forward. In 2011 Cuba’s communist government has enacted a 300-point economic plan that will overhaul its domestic economy to encourage more private enterprise. I understand Cuba’s desire to take it slowly, probably based on a blueprint that Vietnam and China used to liberate their economy. After all, instant liberation would bring a lot of instability. Cuba’s neighbors, the Caribbean and LATAM region, are not exactly a success story.
Part of the plan is attracting foreign investments. Cuba has a new foreign investment law in place that provides incentives for companies to invest in Cuba, such as an 8 year tax exempt, investment security to foreigners and expropriation ban. The plan will also guarantee transfer of profits or dividends outside Cuba. The plan also extended the term for leases of land to foreign firms to 99 years from 50. Major foreign companies doing business in Cuba include Canada’s publicly traded Sherritt International and Spain’s Melia Hotels International. The State also plans to shift a large portion of the workforce from the public sector to the private sector. There’s also housing reforms where Cubans could finally own private property.
Cuba’s biggest assets are its people. Cuba, to a much lesser extent, could pull a South-Korea or Japan, where natural resources are scarce but is human capital rich. With more economic reforms and liberation, Cuba should use its human capital to get itself out of poverty and raise the standard of living. Cuba can achieve that by letting the Cuban people free to pursue their own destiny and improvement, and not take everything the labor has earned.
The Cuban government is starving for capital to support its generous social programs, which is also the government’s lifeline. The current regime knows that it can’t support across-the-board subsidies. With the 300-point plan in place it’s steering the island away from a command economy to a mixed economy with market mechanism. It’s certainly a step in the right direction. While I’m cautiously optimistic, attracting foreign investors will certainly shape up the island. Opportunities exist for the foreign investor, but the risk is extremely high. If successful, it will reap rewards.
Raul Castro’s son is being groomed to take over the “throne” once Raul steps down in 2018. But the younger Castro is not the solution. If Cuba wants a better future, it will need to come from its citizens but as long their basic needs are covered, Cubans are not going go for a regime change. Cuba is human capital rich with its prized doctors and professionals. Cuba needs to liberalize its economy, politics and free its people to prosper and pursue their destiny. In the end everyone will benefit.