Compañeros, We Shrunk The Economy: Cuban Contraction First In More Than 20 Years

Dec 28, 2016

Cuba’s communist leadership remains reluctant to open the island to more free market reforms and foreign investment. But Cuba’s latest economic data for 2016 might make those hardliners reconsider.

Just a few months ago, Cuba’s economy was forecast to grow 1 percent this year. It wasn’t much; but at least it was growth. This week, President Raúl Castro has admitted even that was an illusion: Cuba’s GDP, he said, will actually shrink 1 percent in 2016 - the first economic contraction in more than 20 years.

In reality, it’s not that big a surprise; the Cuban economy has been in crisis all year. That’s due largely to the collapse of its oil-rich socialist buddy, Venezuela. Cuba in recent months has had to cut fuel consumption by a third.

But Venezuela’s economic catastrophe isn’t the whole story. Experts say Cuba’s economy is sinking also because its leaders are keeping a stubborn lid on the expansion of free enterprise and foreign investment.

They’re mostly afraid that normalized relations with the U.S. will bring an invasion of capitalism. But consider that between 2011 and 2015, Cuba’s economy grew 3 percent a year. During that period Castro opened the door more widely to private businesses.

This year saw the Cuban government shut that door again. But there may be hope: Castro also warned Cuba’s parliament this week that while the island won’t adopt capitalism it shouldn’t “put up obstacles to what can help us, either.”