Cuba "updates" its economic model: perspectives for cooperation with the European Union

Abstract

Following the thawing of relations with the United States under Obama, Cuba is now seeking closer integration into the global economy through a programme of "guidelines" for updating the country’s economic model adopted in 2011. The central goals are increasing exports, substituting imports and encouraging foreign direct investment in order to improve the country’s hard currency situation, increase domestic value creation and reduce dependency on Venezuela. The guidelines also expand the space for private business activity, for example legalising "self-employment". In this context, Cuba also wants to strengthen economic relations and political dialogue with the EU - its most important trading partner after Venezuela - on the basis of the EU-Cuba Dialogue and Cooperation Agreement of 2016. But the broader perspective for cooperation will depend heavily on whether Cuba succeeds in advancing and consolidating its economic reforms. The economy remains tightly state-managed, creating disincentives for internal actors and external investors alike. The restrictions arise from the political/military elite’s wish to retain control over the development course and secure its own power base. As such, great tensions exist between the political situation and the government's external economic objectives. Cuba's agreements with international partners will only bear fruit if the internal framework can be improved. The EU and Germany should use the political dialogue to encourage Havana to pursue the requisite reforms. (author's abstract)