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Analysis-Street protests could pressure Cuba to speed up economic reforms

·4-min read
FILE PHOTO: People shout slogans against the government during a protest in Havana

By Marc Frank

HAVANA (Reuters) - The anti-government protests https://www.reuters.com/world/americas/street-protests-break-out-cuba-2021-07-11 that broke out in Cuba last month are expected to damage the Communist-run island's struggling economy as relations with the United States deteriorate further, but they may quicken the pace of reform, experts said.

Thousands took to the streets of the capital Havana and other cities on July 11 to vent anger over widespread shortages of food, medicine and other basic goods, frequent power outages and a lack of civil liberties.

While President Miguel Diaz-Canel's government quickly snuffed out the unrest, U.S. President Joseph Biden responded by branding Cuba a "failed state" and sanctioned https://www.reuters.com/world/americas/biden-meet-cuban-american-leaders-amid-calls-tougher-action-havana-2021-07-30 the Cuban military and police, slamming the door on hopes of a return to the era of detente begun under former U.S. President Barack Obama.

"The negative result of the protests on July 11 is that hopes the Biden administration would lift at least the Trump-era sanctions are dashed," said Omar Everleny, a Cuban economist and former University of Havana professor.

"The positive is that it signals we have to do what we have to do in terms of improving the economy without waiting for the United States," he added.

Since the protests, which were the first of their kind in Cuba since the 1990s, the government has promised to fast track approval of long-awaited regulations giving legal status to existing and future small and medium-sized businesses.

It also has announced several tweaks to the state-dominated and centralized economy, including allowing travelers to bring in unlimited amounts of food and medicine on a duty-free basis and permitting residents to sell new and used goods.

Foreign executives, however, worry that last month's protests will make it even more difficult to work with Cuba, which has been almost totally excluded from the international financial system by sanctions imposed by the United States.

"Now, always-conservative compliance officers have one more reason and new sanctions to make even simple banking nearly impossible," a European businessman with years of experience on the island said on condition of anonymity.

Ricardo Torres, an economist and professor at the University of Havana, said Cuba's reputation as a stable country had been tarnished by the July 11 demonstrations, "perhaps putting off foreign investors and even local entrepreneurs."

'SO MANY RULES'

Cuba's import-dependent economy, already under a nearly six-decade U.S. trade embargo, has been squeezed further by sanctions imposed by former U.S. President Donald Trump's administration. The fallout from the coronavirus pandemic has added to the woes. The island's tourism sector, a key source of foreign revenue, has been shuttered for much of the past 18 months.

The Cuban economy contracted 10.8% in 2020, according to official figures. It fell another 2% in the first six months of 2021 when compared to the same period last year. Imports have fallen around 40% over the last 18 months.

Diaz-Canel, who took over from Raul Castro in 2018, blamed last month's protests on the United States, accusing Washington of attempting a soft coup, but he also signaled he was open to reforms and a reevaluation of Cuba's policies.

The government has admitted it is in dire need of help as a COVID-19 surge driven by the Delta variant threatens to overwhelm the health system and undermine what little economic activity exists. The crisis has prompted China, Russia, Mexico, Vietnam and other countries to send aid to Cuba.

The Cuban government declared a state of emergency a year ago and said it would prioritize development of COVID-19 vaccines, food production, decentralization of state companies and growth of the private sector.

But the reforms are taking too long to implement and the entire economy is over-regulated and bureaucratic, said a European investor who also spoke on condition of anonymity.

"They need to get things done quickly. There are so many rules, and everyone is terrified of breaking the rules," said the investor, who pointed to a state-run pig farm where the animals were dying because permission was needed to buy feed as an example of the system's failures.

"They need to issue some sort of decree that not only allows managers to act and seek permission later, if at all, but punishes them if they don't," he said.

Everleny, like many other local economists, said he supported the reforms, but added that the government needed to do more.

"They need to remove all obstacles hampering private businesses and allow anyone to grow and sell food now without endless bureaucracy and permissions," he said.

(Reporting by Marc Frank; Editing by Paul Simao)

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