130
Integrative Case 1.2
The Future of Cuba!
Mike W. Peng (University of Texas at Dallas)
As Cuba gradually opens up its economy to market competi
tion, private sector, and foreign investment, what does its
wture hold?
uba is the only practitioner of communism in the
estern Hemisphere. Five decades of communism
e delivered some accomplishments. Life expectancy
79 vears) is on par with that of the United States,
Cuba has more doctors per 100,000 persons than
in and France. Social benefits cover everyone
cradle to grave, providing free world-class health
nd education in addition to free pensions and
Is. However, people are poor and income is low.
erage monthly wage is only $19. Food is often
age, forcing the government to ration supply.
1 million people enjoy only 600,000 cars, with
e age of 15 years. Half of them belong to the
ny 1950s vintage cars are still workhorses in
opened Cuba for foreign direct investment (FDI)
and the use of the US dollar. He also found a new bene
mass tourism, and legalized small family businesses
factor, Venezucla president Hugo Chávez, who
exchange, Fidel sent 20,000 doctors and profession
to his death in 2013) provided Cuba with cheap oil. In
als to work in Venezuela. Thus, the regime's widel
predicted demise did not materialize. After survivin
the emergency, Fidel went back to the old ways. Man
and the US dollar ceased to be legal tender in 2004.
family businesses and foreign ventures were shut down
This time, Raúl has proclaimed that chang
are here to stay. While Fidel has a massive ego and
famously ideological, Raúl is more modest and me
is
terri
astro, the younger brother of the 88-year-
Fidel Castro, took over as Cuba's president
as first secretary of the Communist Party
r compositional simplicity, this case will
Castro brother by his first name.) Raúl
transferring a substantial chunk of the
terprises (SOEs) to private hands, free-
isoners, and signing the UN Convention
hts, something that Fidel had refused
ange seems to be in the air, there are
Raúl is also a Castro. Neither "reform"
is allowed to be mentioned. These
ly bring back the painful memory
the Soviet Union, which overnight
and traumatized Cuba's leaders.
es are labeled “updating," in which
d "cooperatives” will be tolerated.
omist, "whatever the language
pragmatic
. Raúl seems to realize that Cuban com
nism lives on borrowed time. The economy
unproductive. Cuba has a legendary agricultural pas
think of its world-famous cigars and sugar. Howe
state ownership of farms has been disastrous, Out
per head of sugar in 2012 has dropped to an eight
its level in 1958. State farms control 75% of arable la
but 45% of this lies idle. Raúl has allowed private fa
ers and co-ops to lease idle state land. Yet, private fa
ers have a hard time scraping a living off land. Th
not because the land is not fertile; it is. It is bec
of the grip of Acopio, the state-owned monopoly
plier of seeds, fertilizer, and equipment as well as
monopoly purchaser of farm produce. There is ha
a market to motivate farmers to try harder,
In manufacturing and services, SOEs are also
rious for shoddy quality and low pay, But there is
advantage in working for SOEs: plenty of opportur
to pilfer (steal) supplies from the workplace, Emplo
thi
state, which
justification goes like this TV
As Cuba gradually opens up its economy to market competi-
tion, private sector, and foreign investment, what does its
future hold?
desperati
opened
mass tot
and the
factor,
to his de
exchan
als to
predict
the em
family
and th
Th
are hd
famou
prag
nism
Cuba is the only practitioner of cornmunism in the
Western Hemisphere. Five decades of communism
have delivered some accomplishments. Life expectancy
(at 79 years) is on par with that of the United States,
and Cuba has more doctors per 100,000 persons than
Britain and France. Social benefits cover everyone
from cradle to grave, providing free world-class health
care and education in addition to free pensions and
funerals. However, people are poor and income is low.
The average monthly wage is only $19. Food is often
in shortage, forcing the government to ration supply.
Cuba's 11 million people enjoy only 600,000 cars, with
an average age of 15 years. Half of them belong to the
state. Many 1950s vintage cars are still workhorses in
the streets.
Raúl Castro, the younger brother of the 88-year-
old leader Fidel Castro, took over as Cuba's president
in 2008 and as first secretary of the Communist Party
in 2011. (For compositional simplicity, this case will
refer to each Castro brother by his first name.) Raúl
has been busy, transferring a substantial chunk of the
state-owned enterprises (SOEs) to private hands, free-
ing political prisoners, and signing the UN Convention
on Human Rights, something that Fidel had refused
to do. While change seems to be in the air, there are
limits-after all, Raúl is also a Castro. Neither "reform"
nor "transition” is allowed to be mentioned. These
unpr
thin
state
per
its le
but
ers:
ers
not
of
pli
mc
an
state-owned enterprises (SOEs) to private
ing political prisoners, and signing the UN Convention
plier
mon
a ma
I
riou
ady
to
on Human Rights, something that Fidel had refused
to do. While change seems to be in the air, there are
limits-after all, Raúl is also a Castro. Neither “reform"
nor "transition" is allowed to be mentioned. These
words immediately bring back the painful memory
of the collapse of the Soviet Union, which overnight
withdrew subsidies and traumatized Cuba's leaders.
Instead, the changes are labeled “updating," in which
"nonstate actors” and “cooperatives” will be tolerated.
" noted the Economist, “whatever the language, this
means an emerging private sector.'
Thanks to the Soviet collapse, the Cuban economy
shrank by a painful 35% between 1989 and 1993. In
jus
sta
“But,
ou
th
n
E
1
1) This research was supported by the Jindal Chair at the Jindal School of
Management, University of Texas at Dallas. All views and errors are those of
the author. © Mike W. Peng. Reprinted with permission.
:
at
e Future of Cul
accoun
$23 per mon
vised craft shop
ng (University of Texas at Dallas)
Slowly but sure
While (until reces
in Cuba, multina
and Spain have
mpeti
ons in
2013. 2.7 million
While the US em
a new bene
Miami, eight fli
regularly sched
the
In 2014, the F
desperation, Fidel declared a national
opened Cuba for foreign direct investment (FDI)
and the use of the US dollar. He also found
factor, Venezuela president Hugo Chávez, who prie
to his death in 2013) provided Cuba with cheap online
exchange, Fidel sent 20,000 doctors and profession
als to work in Venezuela. Thus, the regime's widely
predicted demise did not materialize. After surviving
the emergency, Fidel went back to the old ways. Man
and the US dollar ceased to be legal tender in 2004.
family businesses and foreign ventures were shut down
This time, Raúl has proclaimed that changes
are here to stay. While Fidel has a massive ego and is
famously ideological, Raúl is more modest and more
pragmatic. Raúl seems to realize that Cuban commu-
ment Law, wh
ing abroad
CT
ian
One
Ith
nd
the foreign
rorist mafia
can commu
from profi
of paying
Havana R
on
T.
n
Altho
inescapa
referrin
the day
clearly
nism lives on borrowed time. The economy is terribly
unproductive. Cuba has a legendary agricultural past-
think of its world-famous cigars and sugar. However,
state ownership of farms has been disastrous. Output
per head of sugar in 2012 has dropped to an eighth of
its level in 1958. State farms control 75% of arable land,
but 45% of this lies idle. Raúl has allowed private farm-
ers and co-ops to lease idle state land. Yet, private farm-
ers have a hard time scraping a living off land. This is
not because the land is not fertile; it is. It is because
of the grip of Acopio, the state-owned monopoly sup
plier of seeds, fertilizer, and
monopoly purchaser of farm produce. There is hardly
a market to
crs and a
crs have a hard time
aúl
the
as the
on
d
of the grip of Acopio, the state-owned monopoly
not because the land is not fertile; it is. It is because
plier of seeds, fertilizer, and equipment as well
a market to motivate farmers to try harder.
monopoly purchaser of farm produce. There is hardly
In manufacturing and services, SOEs are also
advantage in working for SOEs: plenty
rious for shoddy quality and low pay. But there is one
opportunities
to pilfer (steal) supplies from the workplace. Employees
justification goes like this: The SOE belongs to the
e
not
of
state, which belongs to the people—that is, us. Since
our wages are so low, we should feel free to take home
the stuff that, after all, belongs to us anyway (!). Experi-
menting on a limited scale, Raúl has allowed private
entrepreneurs to own and operate small shops, such as
barber shops, beauty parlors, and restaurants, as well
as private taxis. Although by global standards these
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