As Havana Celebrates Historic Shift, Economic and Political Hopes Rise – New York Times

In Havana, watching President Raul Castro speak on Wednesday about normalizing relations with the United States.
By DAMIEN CAVE, RANDAL C. ARCHIBOLD and VICTORIA BURNETT
December 17, 2014

HAVANA — They crowded around old, battered televisions in Havana and erupted in tears and applause at a spectacle they could scarcely imagine, let alone believe: President Raúl Castro, followed by President Obama, heralding a new era of relations between Cuba and the United States.

But for Armando Gutiérrez, who operates a small inn in Havana, what it really comes down to is beds. He needs better ones, and the usual scramble to find them and other supplies often comes up empty.

Now, Mr. Gutiérrez hopes the salvation of his business is at hand.

“It will be step by step for sure, but we are super happy, all of us without words really to express this history,” Mr. Gutiérrez said by phone — a phone he plans to replace with a better one if the United States makes good on its pledge to send more telecommunications equipment.

Slide Show | A Decades-Long Thaw in U.S.-Cuba Relations A look at Cuba’s fraught relationship with the United States since its 1959 revolution.

As politically charged as Mr. Obama’s new stance may be in the United States, the sweeping changes he outlined on Wednesday will have a much more profound impact on Cuba — where isolation by the United States has fundamentally shaped the island’s economy, its politics and even its sense of national identity.

For decades, the American embargo of Cuba has been the political sword and shield of the Castros, held responsible for stifling their nation’s development, depriving their people of the most basic needs, and justifying their tight control over all aspects of society.

Now their powerful rival is promising significant expansions in travel, exports and remittances to Cuba, the biggest erosion of the embargo since it was imposed more than 50 years ago.

Experts say it will bring a flood of new money to the island, potentially injecting new life into the economy and, coupled with restored diplomatic ties, transforming relations between the two countries in ways not seen since a bearded rebel named Fidel came down from the Cuban mountains.

Graphic | How America’s Relationship With Cuba Will ChangeWhich travel and trade restrictions will be eased or eliminated.

“This changes it all,” Carlos Alzugaray, a former Cuban diplomat who is close to the Castros, said from the island.

The question is whether the increased exchange will simply prop up Cuba’s moribund economy and government, or breed truly democratic change on the island, something current American policy has not achieved.

“For Cuba, this is an opportunity to speed up the processes of economic reform, political liberalization and openness,” said Arturo Lopez-Levy, a former Cuban intelligence analyst now at New York University.

Others were more skeptical, having seen previous thaws that did not produce dramatic change. They noted the 1996 American law known as Helms-Burton that prevents widespread commerce, and questioned Cuba’s willingness to open up as well.

“The regime will do everything in its power to have maximum control over foreign investment, forms of employment, high taxes, which have always been a great obstacle for economic and social development,” said José Daniel Ferrer, who coordinates dissident groups in Cuba. “Most of these resources will still be used to maintain a repressive apparatus.”

For many Cubans living through the incremental steps toward private enterprise that Mr. Castro set in motion, the changes announced by Washington and Havana are welcomed as much for their practical worth as for the historic sea change between governments.

The Cuban economy is wobbly, and it may only worsen as its chief patron, Venezuela, slides further into economic and political difficulties. Cuba’s economy grew only 1.4 percent this year, by the government’s own generally rosy statistics, despite significant changes, including allowing the buying and selling of property and cars.

More than 300,000 people have gone into business, and private farming has grown. The government recently said it would convert state-owned restaurants into private cooperatives, and it announced a plan last year to do away with a dual currency system that makes tourism and other goods expensive.

The hope among Cubans is that the new easing of tension with the United States will accelerate the halting steps toward a market economy, while still maintaining the social ideals of free education and health care embedded in what Mr. Castro described on Wednesday as a “prosperous and sustainable socialism.”

But in order for the changes Mr. Obama envisions to work, Cuba will have to loosen up in significant ways. The island’s vows to allow more private enterprise and foreign investment have been far more limited than many Cuban and international entrepreneurs have hoped for, with many saying it is almost impossible for them to participate.

“We have incredible problems,” said Nidialys Acosta, who set up a classic car services business with about 20 associates. “We have to jump through so many hoops.”

The survival of her business depends on two American exports: spare parts for her cars and visitors to ride in them. From now on, she hopes that both will be easier to come by. “I am jumping up and down for joy,” said Ms. Acosta from her home in El Cerro, a Havana neighborhood. “This is my Christmas gift.”

But while the Cuban government has called the expansion of private enterprise essential to reducing the inflated public sector that is burdening the economy, it does not recognize Ms. Acosta’s business or many others. Getting parts like headlamps, mirrors and tires for a 1959 Chevrolet Impala and paying for them is extremely difficult and expensive because they cannot be ordered from the United States, but have to be brought in person by people traveling between Miami and Cuba, she said. Doing financial transactions in Cuba is difficult, she said, because her business does not officially exist.

“The regulations make it almost impossible to thrive,” she said, adding that the government needed “to be more flexible.”

Mr. Obama’s potential willingness to remove Cuba from the State Department list of states that sponsor terrorism could have a big impact, according to Phil Peters, director of the Cuba Research Center in Alexandria, Va. He said the designation has severely complicated Cuba’s ability to do business with international banks, and Mr. Obama said Wednesday that the designation would be reviewed.

“It dramatically raises the cost of doing business” for Cuba, Mr. Peters said. “When Cuba does business internationally, they have to use banks and payment channels that have nothing to do with the United States.”

The Cuban economy has a long list of ailments, including a shortage of cash, brain drain, anemic foreign investment and a scarcity of food production, with nearly 80 percent of its food imported, said Ted Henken, a professor of Latin American studies at Baruch College in New York.

“Without the U.S. to blame,” he said, “the shortcomings of the Cuban government will be much more transparent. The Cuban government will no longer be able to blame the United States for the obstacles that entrepreneurs face. The government will have to be able to explain why it’s so hard to get a loan from a bank, get a cellphone, get access to broadband.”

“That’s going to be revealed for what it is,” he added. “This thing is going to cause rising expectations both outside and inside of Cuba.”

Many Cuban entrepreneurs said they welcomed the change, regardless of the bumps ahead. Niuris Higueras Martínez, founder and owner of popular Atelier, one of the private restaurants known as paladars, said “this news will bring what we need the most, market stability, affordable goods.”

The ability of Americans to use credit cards and debit cards — a specific point Mr. Obama made on Wednesday — would be a big boost, she said, though it would require some adjustment in a country where cash is king.

“All small-business owners like myself would need to learn a banking and credit culture that does not exist yet,” she said. “We will evolve, little by little. I don’t expect all of this to happen quickly, but we are definitely all ready to integrate ourselves in a new market economy.”

Damien Cave reported from Havana, and Randal C. Archibold and Victoria Burnett from Mexico City. Elisabeth Malkin and Paulina Villegas contributed reporting from Mexico City.

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