Castro Remark on Cuba Model Not Working May Signal Change

Fidel Castro’s comment to a visiting U.S. journalist that Cuba’s economic system doesn’t work is the strongest signal yet that the communist island is looking to private enterprise and foreign investment to bolster growth.

“The Cuban model doesn’t even work for us anymore,” Castro told journalist Jeffrey Goldberg after being asked if he believed it was something still worth exporting, according to a post yesterday on The Atlantic magazine’s website. Castro didn’t elaborate on his comment, Goldberg said.

Since re-entering the public sphere in July following an illness that almost killed him, statements by the 84-year-old former president have focused on international affairs. His silence on domestic issues signals he is willing to allow his brother Raul to reduce state control of the economy, said Tomas Bilbao, executive director of the Washington-based Cuba Study Group, which promotes free-market overhaul of the Cuban economy.

“These are pragmatic admissions from an idealist,” Bilbao said. “Ever since he came back he has stayed away from talking about domestic issues which in itself is the best thing he can do to support his brother’s running of the country.”

Raul Castro, 79, has initiated measures to open the economy since being handed power by his brother in 2006. The moves come as the economy suffers its worst slide since the former Soviet Union ended its support in the 1990s, Bilbao said.

Photographer: Adalberto Roque/AFP/Getty Images

Former Cuban President Fidel Castro speaks during a special session of the Cuban Parliament in Havana. Close

Former Cuban President Fidel Castro speaks during a special session of the Cuban Parliament in Havana.

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Photographer: Adalberto Roque/AFP/Getty Images

Former Cuban President Fidel Castro speaks during a special session of the Cuban Parliament in Havana.

In a speech to the National Assembly on Aug. 1, Raul said that the government will allow more citizens to work for themselves rather than for the state. He warned that some government workers will lose their jobs to reduce inefficiency.

Property Laws

That month, the government loosened controls that prohibited Cubans from selling their own fruit and vegetables. It also eased property laws, extending lease periods to 99 years from 50 years for foreign investors in an effort to build up a tourism infrastructure and draw more visitors to the Caribbean island of 11.4 million people.

Cubans can now run private taxi companies, own mobile phones and operate their own barbershops. The state still controls 90 percent of the economy, paying workers salaries of about $20 a month in addition to free rationed food staples and health care, and nearly free housing and transportation.

The island’s economy is suffering after prices for exports such as sugar and seafood fell. Cuba, the world’s seventh- biggest nickel exporter, has seen the price of that metal tumble 59 percent this year.

Nickel Exports

The decline in export revenues comes after hurricanes Ike, Gustav and Paloma caused damages equal to a fifth of gross domestic product, Raul Castro said in a December 2008 speech.

Despite a global economic rebound that will strengthen prices for the metal and buoy tourist demand, GDP will expand a modest 2 percent this year, according to a report this month by The Economist Intelligence Unit. If Castro’s productivity- boosting measures succeed, growth will accelerate to 3.7 percent in 2011, which is still less than half the average annual rate from 2004 to 2008, the report said.

Raul said in July that one in five state workers may not be needed to keep the government running. The Cuban government employs 95 percent of the country’s workforce.

Cuba now receives about 100,000 barrels of oil a day from Venezuela, which Cuba pays for by sending medical staff to work in the South American country’s community clinics. Venezuela has suffered five consecutive quarters of economic contraction and Cuba is looking to diversify its trade partners, Bilbao said.

President Barack Obama, in an April 2009 memorandum lifting travel restrictions to Cuba for Cuban-Americans, also directed the U.S. government to allow companies to provide communications services to the island, saying it would “decrease dependency of the Cuban people on the Castro regime.”

Rapprochement With U.S.

U.S. phone companies are urging Obama to ease rules that keep them from operating in Cuba.

Still, the U.S. government’s rhetoric under Obama has remained the same as under George W. Bush, which discourages Cuba from opening the economy faster, said Larry Birns, director of the Washington-based Council on Hemispheric Affairs, a research group.

“Taken all together, we are witnessing what could be the most transformative moment in Cuba’s relationship with the outside world,” Birns said. “The Obama administration would be foolish not to engage in an effort at rapprochement between the U.S. and Cuba.”

To contact the reporter on this story: Charlie Devereux in Caracas at cdevereux3@bloomberg.net; Bob Willis in Washington at bwillis@bloomberg.net

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