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Cuba protests: The economic woes driving discontent | Business and Economy News

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Cuba protests: The economic woes driving discontent | Business and Economy News

Cubans have taken to the streets in cities across the country over the last week, in a wave of rare public protests to express their frustration with rising prices, falling wages and the failings of the island’s long-standing communist government to address these economic challenges.
Cuba’s coronavirus pandemic-ravaged economy shrank by 11 percent in 2020, the island’s economy minister said, the sharpest contraction since the collapse of the Soviet Union in the early 1990s.
Soaring global food prices this year and the island’s devalued currency — coupled with shortages of basic goods that predate the pandemic — have fuelled discontent. Both pro- and anti-government demonstrators have taken to the streets since Sunday.
Cuban President Miguel Diaz-Canel has blamed the protests on United States sanctions, accusing Washington of  “economic asphyxiation”. But he also is acknowledging — notably for the first time — that the Cuban government’s policies have also played a role.
So what are the economic forces behind Cuba’s latest protests? Here’s what you need to know.
Anti-government protesters march in Havana, Cuba on Sunday, when hundreds of demonstrators took to the streets in several Cuban cities to protest against ongoing food shortages and high prices of foodstuffs [File: Eliana Aponte/AP Photo]
Start from the beginning. What kind of economy does Cuba have?
Cuba has what’s known as a command economy, where the government — not market forces of supply and demand — largely determine the production, availability and value of goods.
Command economies are central features of communist societies, and Cuba has been ruled by its communist party since forces led by Fidel Castro overthrew dictator Fulgencio Batista during the Cuban Revolution in 1959.
What does a command economy look like?
In command economies (also called planned economies), the government controls many of the means of production, while private ownership of industries, property and other resources is significantly limited.
Before the Cuban Revolution, a small elite owned much of the island’s land, industries and wealth. The revolution was designed to make Cuba a more equal society, and in many ways, it succeeded in that goal.
So if it tackled inequality, why is the economy such a mess?
Part of the problem is that government control of the majority of industries can lead to inefficiency, bureaucracy and mismanagement. That, in turn, can translate into shortages of goods, higher prices and frustration for citizens.
But the US embargo against Cuba has certainly done the island’s economy no favours.
Tell me about the US embargo.
Since 1960, the US — Cuba’s neighbour 145km (90 miles) to the north and once major trading partner — has maintained a trade embargo against the island in an effort to force its communist leaders from power.
The embargo, a form of severe economic sanctions, hasn’t achieved its goal, but it has made life for ordinary Cubans harder. Medicine, food and all sorts of other goods are in chronically short supply.
The embargo has also provided the island’s government with ammunition for its claims that its economic woes are the fault of the US.
Is the government blaming the embargo for its current economic problems?
Partly. In a speech Wednesday, Diaz-Canel slammed the embargo, which Cubans refer to as a “blockade”, as “cruel” and “genocidal”. But he also acknowledged for the first time that the Cuban government’s actions have played a role in people’s discontent.
“We have to gain experience from the disturbances,” Diaz-Canel said. “We also have to carry out a critical analysis of our problems in order to act and overcome, and avoid their repetition.”
In a tweet Thursday, Diaz-Canel said the embargo has made overcoming the island’s problems harder, tweeting that “the blockade surpasses any desire, it delays us, it does not allow us to advance at the speed we need”.
Has the Cuban government tried to fix the problems its policies have created?
On paper. Back in 2011, then-President Raul Castro announced reforms aimed at bringing more market-oriented policies into Cuba’s state-run economy, including allowing people to set up small businesses and eliminating some of the government’s notorious bureaucracy.
But 10 years later, the country’s leadership has been slow to enact many of those incremental economic reforms, leading to frustration — especially given the urgent conditions Cubans are facing right now.
What are some of those conditions?
The COVID-19 crisis has gutted tourism, cutting off a major source of income for Cubans who work in the industry and a major source of US dollars for the Cuban government. That’s especially bad news right now when surging commodity prices mean the government needs to spend more to import food.
Remittances, a lifeline for struggling Cuban families estimated at $2bn to $3bn per year, plunged after former US President Donald Trump tightened restrictions on Cuban Americans sending money back to the island. The pandemic has only served to further stifle the flow of remittances.
And a shortage of foreign currency and the US embargo have also hit Cuban sugar production hard, with the state’s sugar monopoly reporting that this year’s harvest stood at just 68 percent of the country’s planned 1.2 million tonnes, the lowest level since 1908, Reuters news agency reported.
What role does the island’s weakened currency play in the protests?
A big one. At the beginning of this year, the Cuban government formally ended its dual currency system, devaluing its peso for the first time since the 1959 revolution.
The Cuban peso, known as the CUP, was created as the island’s currency by the first president of the country’s post-revolution Central Bank, Ernesto “Che” Guevara. The CUP has always been used for everyday domestic transactions, and many Cubans are paid their wages in CUPs.
But thanks to the US embargo and some of the island’s state-run economic policies, the value of Cuba’s currency evolved to become a tricky issue. Following the collapse of the Soviet Union — Cuba’s major ally — the island allowed people to use the US dollar alongside the CUP starting in 1993.
Customers wait in line to enter a grocery store in Havana, Cuba near portraits of the late revolutionary Ernesto ‘Che’ Guevara (right) and the late Venezuelan President Hugo Chavez (left) [File: Natalia Favre/Bloomberg]
So do Cubans still use the peso and the dollar?
Yes, sometimes. Faced with a cash crunch, the Cuban government reallowed “dollar stores” last year that let people buy goods like food, toiletries and electronics with bank cards loaded with US dollars or other foreign currency.
That, in turn, let the government snap up those dollars to help deal with its liquidity crisis.
But the Cuban government phased out a third currency — the Cuban convertible peso, known as the CUC — earlier this year, leading to problems.
What’s the deal with CUCs?
The Cuban government created the CUC in 2004 for conducting state business and buying goods from abroad after it banned US dollars. It pegged the CUC 1:1 to the greenback and stipulated it couldn’t be taken out of the country.
Until this year, those working in the tourism sector, for example, were still paid in CUCs, leading to disparities with Cubans paid in CUPs. That’s partly why Cuba’s government scrapped the CUC.
Cubans who worked in the tourism sector have been particularly hard-hit by the pandemic and the move to a single currency, as they had been paid in the convertible pesos the government chose to phase out [File: Natalia Favre/Bloomberg]
So what happened to all of the CUCs?
Cubans had through June to trade in their CUCs for CUPs. But the devaluation of the currency means they lost a significant amount of money in doing so, something that hit private-sector workers who have been paid in CUCs for years — workers like those in the tourism sector — particularly hard.
It has already been a tough year for those workers, as the coronavirus pandemic significantly curbed tourism and as former US President Donald Trump tightened the US embargo against the island.
The US trade embargo has made life more difficult for the Cuban people [File: Natalia Favre/Bloomberg]
What does the rest of the world say about the embargo?
Resoundingly: end it. For years, the United Nations General Assembly has taken a vote, and the results are overwhelming.
The UN’s resolution calling for an end to the embargo was adopted for the 29th time on June 23, with 184 countries in favour of ending it, three abstaining and just two voting to continue it: the US and Israel.
The vote is symbolic, however, since only the US Congress can actually end the economic sanctions against Cuba. So far, the administration of US President Joe Biden — and the US’s narrowly Democratically-controlled Congress — have not made a move to do so.
A woman shouts pro-government slogans as anti-government protesters march in Havana, Cuba on July 11, 2021 [File: Ismael Francisco/AP Photo]
What have the protests achieved so far?
The Cuban government announced it would ease customs restrictions on food, medicine and hygiene products brought into the country by travellers, but it’s unclear how much of a difference that will make since tourism remains down as the pandemic continues.
More broadly, the protests have served to draw attention to Cubans’ plight and spotlighted long-standing issues that need to be addressed with new urgency.

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