Since 1960, the U.S. embargo on Cuba has crippled the island nation in more ways than one. However, the embargo is not the only reason for Cuba’s economic tribulations. Internal politics and economic barriers have led to significant challenges for the country.
The modernization of Cuban socialism has included elements of market economies. This includes downsizing the state workforce, lifting the restrictions on property use, and decentralizing powers. Cubans are now allowed to travel abroad and have access to electronics. Subsidies and freebies were eliminated, and the credit policy was eased to support and encourage private activity. In fact, some 450,000 Cubans now work as self-employed entrepreneurs, according to The Financial Times.
However, the transformation that Cuba is trying to achieve and the new market incentives that are being offered to foreign investors do not seem to be working. “No additional company has invested in Cuba as a result of these reforms,” says Christopher Sabatini, senior director of policy at the Americas Society and Council of the Americas. The country faces internal barriers that go beyond the embargo and threaten the viability of the government and its financial sustainability.
Among this list of challenges, the government oversees hiring and firing of employees, eliminating meritocracy and replacing it with old school cronyism. This consequently negatively impacts the overall productivity of the country. “This is a way the government keeps control of its population,” added Sabatini....