Cuba, Transition and Pressure: Goodbye to the Revolution?

In this episode of Sustainable LatAm, presenters Andrew Thompson, Alberto Souviron, and Julian Seydoux explored the highly complex crisis currently unfolding in Cuba. They are joined by special guest Emily Morris, a development economist from University College London, to unpack the harsh realities of the island's economic landscape. 

The discussion questions whether the traditional Cuban model of revolutionary socialism has finally come to an end. Emily breaks down the Cuban government's recent package of measures, detailing the unprecedented "transformation" from physical to financial planning and the move to privatize state assets. The panel also discusses the severe impact of U.S. sanctions, the surprising resilience and physical exhaustion of the Cuban public, and the growing ecosystem of domestic entrepreneurs stepping into the gaps left by the state. Finally, the presenters and their guest broaden the lens to examine how U.S. pressure is inadvertently pushing Cuba closer to China and Russia, and what role European investors might play moving forward. 

Production: Sustainable LatAm

Presenters 

• Andrew Thompson - International journalist & political-risk analyst with deep LatAm coverage (OBG, EIU, Latin News; ex-Head BBC Learning English).
• Alberto Souviron - International journalist and digital comms leader for EM investors; ex BBC/Newsweek/Lloyd’s Register. 
• Julian Seydoux - AI-driven finance entrepreneur (FirmView AI, Fast Audit AI); ex-Moody’s/Consilium; cross-border EM & LatAm focus. 

Transcript

Introduction and the Scale of Cuba's Crisis

Emily Morris 0:00

It's interesting over the years they've had conceptualization, they've had guidelines, they've had plans and the and so on. This time they actually call them transformation. And I think that this is actually a very big moment in Cuba.

Andrew Thompson 0:34

Hello everybody. Here is another episode of Sustainable Latam, and we are looking at a massively interesting and complicated issue today, which is Cuba. With me I've got Alberto Suvidon, a Bolivian journalist, Latin American specialist, and digital analyst. And our main guest, I should have started with her, is Emily Morris, a development economist from the University College London, UCL, who will be helping us trying to answer some of the questions about Cuba. And we will be joined in a little while by Julian Saydou, economic analyst, who is also looking at um Latin American capital markets in some detail. So having very briefly introduced us in this manner, I think we should jump straight in. And I have an initial question for Emily, which is simply how big is the crisis and the government's response in Cuba? And by how big I sort of kind of go a little bit behind that, uh, there's this notion that there was a Cuban model of revolutionary socialism that has fascinated the Latin American left for more than 60 years. And my blunt question to Every, perhaps, is has it ended? Is it over?

Emily Morris 1:58

Okay, well, that's some very big questions to start with. Thank you very much for inviting me. Yeah, I mean, first of all, just the first half of your question. The crisis is huge. We know it's huge, that the power's been cut off, there's very little transport, a lot of you know economic activity has come to a halt. It's it's it's just about as big as it could be, the crisis. Um, the uh the measures, the cutting off of the oil combined with the measures, the other measures that the US has taken to try to you know discourage or prevent other organizations, other businesses from doing and dealing with Cuba is creating a huge problem. And people are suffering, and um, we know that the vulnerable people are particularly suffering. Hello, Julian. So the second part of your question was how big is the latest announcement of a package of measures that the Cuban government is taking?

The End of the Old Model and New "Transformations"

Emily Morris 2:59

It's interesting. Over the years they've had conceptualization, they've had guidelines, they've had plans and so on. This time they actually call them transformation. And I think that this is actually a very big moment in Cuba. Um, there is, I mean, the government has said three-quarters of the measures listed are uh were already on the on the cards. And I do think this is, to a large extent, a continuation of a process of reform that was in the pipeline. But there's a big difference here. There's one is a vocabulary used because they're talking now about changing their system of economic management. They actually say they're changing from a system of physical planning to financial planning, and the state is withdrawing from management of businesses that can't make a profit or continue to make losses will be closed. They can make their own decisions, and it's become very clear, and it's spelt out in this um in this document. So I think that this is a very big moment. The other thing that's happening is this very clear move towards privatizing a lot of state assets. So there's evaluation of the state assets going on, foreign investors, Cuban investors, Cuban Americans will be able to buy shares or buy companies in Cuba. All of that is laid out here. And so then the second, the third part of your question, to very briefly, we could discuss this. Um, is this the end of the Cuban model? It is the end of the model that they developed when they were working, when they were part of the Soviet bloc. It's the end of that model. Is that the end of the Cuban model altogether? I'd say that there's a process of, as they say, transformation. It is a transition, actually, uh, to a market economy, to a mixed economy. But what they're trying to do is trying to retain control of the process so that their government still controls the strategic industries, it still aims to collect sufficient tax revenue to have free education, free health, the welfare system, and so on. So they're trying to rescue their model by transforming it. I mean if you see what I mean, it starts from the Cuban side. I think from the other side, I mean the way that the the transformation document has been received from the US side, they say it's no change. I don't think that's true. I think this is a real real change that you know the Cuban government has essentially declared that it is now opening, radically opening to foreign investors. The big question is how much of this is actually going to happen, because this is a statement of intent. We have some initial indications. So the institution that's going to do the valuation of state assets ready for sale is has is has been constituted. People who have registered to start their own businesses, there was a big long waiting list. And now the government's issuing approvals at a colossal rate. So there's been, you know, there has been a step up in the pace and depth of implementation. But you know, they do state that they reserve the right to, you know, to monitor the process, to review. It's always that's what they've been doing ever since, you know, 1990, this kind of process of review and monitoring, which, in a sense, is what's been holding it up. Interesting that the older generation has really withdrawn now. So Raul Castro wasn't even in the discussions at the National Assembly. He's kind of withdrawn, he signed off on it, he gave his approval, but it wasn't his in any way. This is a project that's been led by Diaz Canel with his generation of uh economic managers and economists and so on. So yeah, I think it's big, but yeah.

Alberto Souviron 7:21

Go ahead, Albert.

US Docrtine and the Push for Regime Change

Alberto Souviron 7:23

Sorry, Andrew, yeah. That's okay. It's really interesting what we're saying, especially yes, where we are seeing perhaps uh a big change. But it's really interesting that uh as well what you were saying a little bit earlier, that it says the Americans especially has replied to this with a lot of doubts, in a way, putting in doubt that anything is going to happen. Which in yeah in a way you you have to ask yourself what are looking really the US government in that area. We have to understand the new doctrine of the US regarding Latin America and the way they are doing, and what they are really trying to obtain from Cuba. We know what happened in Venezuela, but the oil was a clear asset there for the Americans that that were behind this last time. A little bit to say is what is coming. I think from what I read is a real regime change probably is still on a plate. They already say that by the end of the year. I don't think uh military intervention is something that is going to happen uh as strong as with the uh uh uh as can happen as uh as a Venezuelan style. I think they are prefer to continue with the economic pressure that has been more effective on Cuba. But the big question here is what what are really the US government is trying to achieve in Cuba? What are the benefits for the US just making with this regime change and all these uh changes that now apparently DS Canal is trying to put in line with the transformation?

Emily Morris 8:55

Yeah, I think I mean that's a critical question because actually a lot of the things that the Cubans have said that they can do are not actually possible with the US legislation and listing of Cuba as a state sponsored terrorism and so on at the moment. They just they won't be able to do a lot of the things that they say they want to do. So yeah, it does all depend on the US. It depends on the US, I think, more than it depends even on Cuban art. Um yes, what do the US want? I'm a specialist on Cuba rather than the US, but it seems to me what they want is two things. They want the Cuban economy to be opened up to them, and they want regime change. Marco Rubio is more committed to regime change, and I think, you know, to simplify it, I think Donald Trump um could be more persuaded by the economic possibilities of Cuba. So there you have an issue. Regime change would be, whichever way you do it, will be not easy. They've already been surprised that Cuba's lasted so long without people overthrowing their government or the government surrendering or some kind of regime change, some kind of commitment towards you know changing their political system. I mean, that's been you know, that's not actually what had been hoped for on the US side. And so Cuba's system, the resilience of the Cuban system has been a bit of a setback for the US, I believe, and maybe has precipitated some kind of rethink. But I don't know. Maybe you people who follow the US more closely than I do would be able to uh to uh shed light on that. But it seems to me that um, as you say, I agree with you, the military option seems to have been kind of slightly shifted off the table. You know, there was a build-up and a build-up and a lot of very belligerent words, and now even Michael Rubio is talking about, you know, we have to negotiate, he still wants regime change, but there's no way to do regime change without a heavy cost, one way or the other, it seems to me, and a lot of risk. So I leave it to you, to answer that question.

Societal Resilience and Public Exhaustion

Andrew Thompson 11:15

Before trying to answer such a difficult question, uh I just wanted to ask you one thing about resilience. Um looking from the outside, um, there are reasons to believe there'd be a lot more protests than there's actually been, because you have half the country without electricity on a rotating basis, you have very high unemployment, uh queues for everything, uh, and it's very hard to live in Cuba today, and we know that what is it, more than 20% of the population has actually left. It's an aging population. You might say in other societies there would have been a lot more protest than there has actually been. Uh how come it's so resilient?

Emily Morris 12:02

That that's also a big question, but I would say that sometimes the way that Cuba has been described or conceived outside Cuba fails to take on board the extent to which one, the Cubans feel dependent on the state during crisis, because it's a state that's providing minimal food supplies, you know, but it's keeping the education system, the doctors are still there, some of them. A lot of them have left. And so actually, dependence on the state has increased. The government's reaction has been very much one of, you know, we need to protect the vulnerable and so on. It's barely able to do that. But so there's that side of it, as well as the side, you know, people in the US, when I talk to them, they say it's because there's such repression and you know they can't squeak without somebody coming down on them or arresting them. I don't think that's the case. I think um so there's not so much protest. There's a whole lot of people, and I do academic collaboration, and so I work with people who work in the universities, which is not completely representative. But what I see is people who are continuing to work, continuing to continue with projects. Municipal representatives are continuing to try to identify the most vulnerable people in their, in their uh, in their areas in order to get food to them. So there's a kind of a sense of dealing with it. I would say that there's also a sense of complete exhaustion. You know, people are exhausted, physically exhausted, you know, queuing, getting up in the middle of the night to use the electricity when it comes on, walking everywhere because there's no transport. Uh, I what I feel is that people are very exhausted, and maybe that's actually why, you know, you know, a mute muted protest, because people are just too tired. Which is a different thing from other countries. This kind of cutting off of the electricity and transport and so on, it's very difficult to do anything. So I think that that's actually also

Foreign Exodus, Entrepreneurship, and the Diaspora

Emily Morris 14:13

an element.

Andrew Thompson 14:13

I wanted to ask if Julian wants to put a question about um entrepreneurship in Cuba or about the way companies may or may not invest, because I noticed that quite a lot a significant number have left recently, including Sherry, the Canadian multinational and a number of hotel chains, including Meliar from Spain. Is that a question for Julian? It is a question for Julian, but he may be on mute. Julian, can we can you hear us?

Julian Seydoux 14:46

Yeah, no, I can't I can't I can hear you.

Andrew Thompson 14:54

Well, I'm happy with either or both of you answering.

Emily Morris 14:58

Well, I I first want yes, it's I mean, what the US has done is frightened foreign businesses, and there probably will be more withdrawing. And these are, I mean, both of those things are a huge blow to the Cuban economy. Um they, you know, whether Meliar has is kind of keeping its options open for later, um, share it seems to be have been approached by somebody who wants to take over their share. But that's so there's entrepreneurship when it comes from the foreign investors, certainly, there's a lot of discouragement there from fear of US sanctions. Uh in terms of domestically, a lot of the young entrepreneurs have left, but they're still, and in fact, you know, as the state salaries are so low, people are still looking for business ideas and they're still registering businesses. And if you actually go to the areas of Havana where people have money from one source or another from doing business or from um friends abroad or from black market activity, there's a lot of private sector activity. In fact, you know, the retail sector is probably richer and you know, more well developed than it's ever been, partly because the state can't provide anything. But there's so there's a kind of a really interesting development in pockets. There's an increase in inequality, clearly, that everybody knows about. But some people are not living badly, and there's a whole consumer market developing there and services. Um, and that, as I said, people who are applying to set up their own businesses, there's a rapid acceleration in approvals. So the intention, and I think it it's likely to actually happen, is that domestic savings will now be brought into investment, which it hasn't happened before. They're talking about developing a financial system. And the financial institutions can be private. I mean, that took me aback. So you're not just state banks, people, foreign investors can go in there and set up a private bank, financial institution. And so, you know, that will animate the economy in the part of it which was most problematic previously, the part of it which was really not moving, the complete absence of any kind of model of accumulation is gonna be quite a process because a lot of people don't understand how business works at all. You know, there's a hell of a lot of learning got to happen. But those people who are in private business, I mean, I know of a few, you know, setting up consultancies to help other businesses, teaching them how to do accounts, how to do their tax returns, how to do their investment plans and their business plans for the future. All of that is going on. There's a whole ecosystem which is emerging now. Um, again, you know, underacknowledged from the outside, but it does exist and it's got potential to kind of fill a space, I mean it's a complete vacuum at the moment, where kind of entrepreneurship needs to be. So I think it's really one to watch.

Alberto Souviron 18:26

Yeah. And maybe sorry, I do I can't keep it interrupting you.

Andrew Thompson 18:31

Yeah, your interruptions are totally welcome.

Alberto Souviron 18:34

Thank you. No, it it's really interesting what you're saying uh this trying to move the probably small business inside Cuba and and all the savings that the local population. But that jumps also me an idea. Again, playing a little bit if this move in the way that we're saying, because there's still a lot to see if this is going to happen or not. But what role can play now the diaspora? There is a huge diaspora in Miami, obviously, but all around. And I'm pretty sure they are interesting to well at least invests or do some kind of business inside Cuba as well.

Emily Morris 19:15

Yeah, they're specifically referred to in the document. They keep saying Cubans in Cuba and Cubans outside Cuba and foreigners. They're listed separately. But very often when they refer to Cubans in Cuba and Cubans outside Cuba, they keep saying that. So they're definitely, this is a pitch for the Cuban Americans. So the Cuban Americans, some of them know what's in Cuba. There are properties, there are all sorts of there are factories lying empty, there are hotels which are underused, you know, all of the there is a lot of a lot of real estate, and the real estate laws have been changed to allow more investment in that area. So, you know, people say, what's Cuba got to offer? Because Venezuela's got oil, what's Cuba got? I think real estate, the land itself officially still belongs to the state. They will keep insisting. But if you can lease off the land on a hundred-year leas, you know, it's as close to privatization as you can get. And they're talking about, you know, having setting up mortgage finance, you know, share finance, businesses, and so on. So what they're talking about is something deliberately, I think, to attract the attention of Cuban Americans. And in that way, I suppose they're hoping that they might split the community into those who would never go to Cuba unless there's regime change and those who would take the business opportunity that might be there. Of course, there's a huge risk, because, you know, I mean, what's been a what's been the deterrent all these years has actually been the risk that US legislation, US sanctions might, you know, even if they're opened up, even if you get a license, the government might change its mind in the US and turn around and start to prosecute. And that's what happened to Airbnb, happened to cruise companies, is that they thought they had a license under the Obama administration, and now they're being prosecuted. So you can imagine, you know, what business is going to invest under those circumstances. But if you've got close family there and, you know, and you want to work with them on building a business, it seems like uh, you know, it's something that you'd be watching.

Andrew Thompson 21:41

I had a question also about risk. I I understand what you're saying about perhaps an entrepreneurial opportunity in Cuba, but can you make it work when you don't have electric power half of the day and you can't plan ahead? Uh is it that Kind of gap between where they'd like to be and where they actually are. Is that surmountable?

Infrastructure Challenges and Energy Solutions

Emily Morris 22:07

Well, it's not just electric power, it's the infrastructure generally in a terrible state, but electric power certainly. I mean, I think the answer to that question is, you know, watch what's happening with the import of solar power systems. There's such a huge surge. I don't know if you've seen the figures of the imports from not only from China, even from the US. You know, people are sending over um panels and batteries, power systems to keep businesses going, to keep households going, but to keep businesses going as well. So, yeah, this is it's a very interesting moment. So that this year they were planning to have 15% of their total electricity from renewables. It looks like that's going to be exceeded because of the input of, well, additional humanitarian assistance, which has brought a whole lot more as well, but also the private sector. You can buy your uh photovoltaic system and which is already imported. You can buy it and you can get somebody to fix it, and your business can still run. So, yes, I you know, the railway needs rebuilding. Um, you know, the roads, most of the roads, yeah, a lot of roads are in terrible state. Um, you know, and the electricity infrastructure, the network itself needs a large amount of investment. So we'll see. I mean, the government is going to maintain control of what they call strategic industries, which I imagine will be the electricity sector, but they look like they're inviting foreign investors, you know, to take on contracts for some of that work. And what's happened is I did a seminar in Cuba a couple of years ago on ending fossil fuel subsidies. They had the almost the cheapest fuel for cars in the world, if you translated it into dollars. It was ridiculous. So for anybody who had dollars, you know, there's absolutely no incentive to economize on your electricity or on your petrol. Suddenly, the sales in Cuban pesos have disappeared because of the US blockade on oil. They've disappeared, and so all purchases of petrol or gasoline, what the US calls it, and diesel have to be at world market prices. So they've ended fossil fuel subsidies, which in many countries causes riots and revolutions and military coups. They've ended it de facto. And so the question is if they do get a restoration of oil deliveries, will they go back to that previous system? I don't think so. You know, they can make it a little bit cheaper than it is now, but the subsidy is gone. Now that the subsidy is gone, if the oil comes back and if electricity adjustments are made and they said that they're going to withdraw subsidies from households, then the electricity company will have money to contract out its services. So that's a that's that's several stages because they can't increase the price of domestic electricity at the moment because they haven't adjusted wages. So there's the price wage adjustment that needs to happen in order for state subsidies for consumers to disappear. But the state subsidies for businesses is disappearing. And the businesses will shut. I think you pointed out something very important, which is there will be people laid off. There'll be people who are out of work involuntarily. That figure is very low, and you think, why is it so low? And that's because people don't declare themselves willing and able to work. That's what you have to do in order to be registered on the unemployment register, because they just go into the private sector. If you say you're willing to work, then you have to get a state job and they pay so low that nobody wants to register. But so the number of people without formal employment will increase. So what the government has done as one of the little items hidden away there is that they've introduced minimum wages for people retraining. So you if you do if you do retraining, and the retraining places will be made available by the enterprises, apparently, then you get a minimum wage. And with the minimum wage also goes entitlements to childcare and pensions and other things that you get from being a waged worker. So they're anticipating uh, I think, a shedding of labour from the state sector. They've actually stated that state administration will shed, I think it's 10% of their workers compared to the end of 2025. They've already lost, I'd imagine, a third of their workforce, you know, as people moving out anyway. So they're talking about continuing the process of rationalization of the state administration and of state enterprises. So as you say, Andrew, how quick can they do this? It's a massive, and so you will see a break put on some of the processes. You know, some companies which they said would they'll close down won't close down. You know, the process of making redundancies will hit against the um trade unions within those entities. So, yeah, a difficult process of adjustment from the from the point of view of employment and wages. They're finally talking about link indexing wages and social security, um which hasn't been done in the last few years, which is, you know, we've seen a huge reduction in the real value of wages and social assistance. So then that would bring up the whole question of how their official inflation index is flattered by the weighting of goods and services within it. But that's another issue that they've got to tackle.

Andrew Thompson 28:18

How much this time go ahead, Andrew. Please. Yeah. How much of this is in, if you like, in public debate? How much is acknowledged? What are the politics of it inside Cuba? You mentioned that Raul Castro had blessed the changes, but are there different groups arguing different hypotheses?

Emily Morris 28:41

Well, certainly the ones that I'm closest to are the economists, and you know, generally among the economists, they're liberalisers, uh, as you can imagine. For years they've bemoaned the fact that they're kind of um nobody's listening to them. They seem to have been brought in in the current uh discussions. The debates in the National Assembly seem to have resulted in a whole host of uh amendments. Um there's also been discussions in the trade union. There's debates, and there will be people, there will certainly be people who say, you know, what's this got to do with the Marxism that I understood that we had? Um and and there's a lot of the way that it's presented, this is a question of survival. And survival is the most important thing. So yeah, I when they say that, you think, to what extent will they roll back? But given that these things, in my view, have been on the cards, they've been buried in previous versions of their reforms using different vocabulary. And I think this is to a large extent, to a large extent, a continuation of that process of accepting. I mean, essentially, when they lost the their the Soviet bloc, they had to reinsert the economy into the global market. What they did is a series of enclaves, tourism, nickel, um medical services and so on. Just, you know, some small bits of the economy, which were still state controlled or very tightly managed, which didn't have sufficient uh multiplier effects throughout the rest of the economy. But over the last 10 years, there's been you know a definite move towards the expansion of the private sector. And even in the you know, worst time of COVID, the middle of COVID, you know, the time when you know they just had the demonstrations, riots, or whatever you call them, in July 2021. In August 2021, they approved the creation of small businesses, which was a big move because previously you've you're just self-employed. People were employing other people kind of informally, but then suddenly, you know, businesses were have been set up. Then there were a maximum of 100 people, now the limit has been taken off. So you're talking about a real shift, but a shift that started quite a while ago, but it's accelerated now.

Alberto Souviron 31:17

If, as I say, if the speed of acceleration will depend on the US,

Geopolitical Dynamics: Europe, China, and Russia

Alberto Souviron 31:22

clearly the US is probably the main player here that is moving all the lines. But and probably this is a question not only for you, Emily, but also for Julian and Andrew, because I'm thinking more in geopolitical terms in that area. But what role can play Europe in that area? And uh, what can expect, for example, the current Cuban government to try to reach some kind of attraction from European investment? And can Europe do that? Will the Americans allow something like that? Some kind of competition, or just like like Trump has been saying, this is American TARF, so everything's got to be American and it's our game, basically.

Emily Morris 32:05

Gillian, I'm gonna let you start.

Julian Seydoux 32:07

No, sorry, there was so I'm going to judge the different different sorts, but uh it's been really interesting. I don't know if we mentioned it, but the economy skewer is actually pretty big. It's while fairly small population of GDP per capita, it's pretty strong versus the rest of the world or Latin America, Latin American world. I think we forget about that to some extent. When I look at some macro data for Cuba itself, it doesn't feel like a country in huge danger again relative to other Latin American countries or other parts of the world. And when I hear about all the means that the US is making at the moment, I it's been going on for a long time, these restrictions and so and and again, I'm just I'm just questioning to some extent to what extent the current government or the current party in charge in Cuba is going to move in anyway towards the Americans. I take an example which I going back to geopolitics Alberto was that many years ago, if you remember, I had uh I had a factory, an ice cream factory in China, and we were trying to sell to uh to we are selling in China on some stage I was approached to sell to Cuba. And selling ice cream to Cuba meant dealing at the at the highest level for the entire country, expecting it to be allowed to sell to export the ice cream or more producer. And so it was uh it was it was supposed to be a country level agreement that would be done on things a moment it's a long time ago, although delivery of a quarter basis of a huge amount of ice cream, which of course was not possible because my factory was very small. And then the payment terms were just not uh agreeable to what to what I could do as a small business. But I just remember that we were very few countries where this happened on so you had Cuba one, and then you had North Korea in the same in the in the same vein of giving the top level and for country-wide distribution of the product. And the only reason that we presume asked about this was simply because they try, which once enabled some you know, some of these discussions to start. And then going back to it, so that means that presumably you you still have very strong Chinese presence in Cuba, I would assume. Maybe perhaps to some extent replacing what the Russian had. And then I go back to my to the point I was making, which you know that's in in comparison terms, you know, so I compare to also Bologna, which is a 40 billion 40 billion GDP economy more or less, give or take. About 11 to 12 million people, versus Cuba, which is a hundred billion plus, and about the same amount of people living in a country which is presumably smaller than Bolivia, actually having within but much closer to the US. And the the differences for me is is is huge. But it also means it also talks in depth potentially of the economy or the potential of Cuba itself. To what extent you know, how come they were able to, despite all the all the restrictions and all the everything, so you have such a large economy altogether, and you know, when you look at some of the data, which is cannot be trusted to some extent, of course, but if we talk about GDP per capita around ten thousand dollars, some estimates actually are double that. Some you know there are some sources that mention actually GDP per capita is closer to 20,000, which in itself is a bit strange. Because we because all the things that we hear about the center, we understand the export of medics to other countries was big. You know, it was mentioned throughout the entire Latin America, or you would hear from pretty much every country that's Cuba exporting the medics to other countries possible. So you know, there's a lot of grey zone areas that come to mind when I think about Cuba in itself. I do not understand this numbers that I mentioned, the steps. I don't understand also why is there so much pressure today compared to some other times where you had literally some economic in terms of GDP collapse and 1993 was a big falling GDP constance closer tonight, also now, of course, the during COVID years and so on. So, yes, you can have an accumulation through time or you know on algans in this problem, but actually, even today when I look at some of the forecast of GDP growth, you know, it's still higher than you can or European countries. And so and so this doing, you know, this idea that suddenly the country collapses doesn't this something doesn't feel doesn't sit right here. And then I go back to the two points that you're making, some statement is listening to Planner Sang, which is about which is about the tension of the Trump administration when you can you possibly have two current. And we've seen one example of what happens um recently with Iwan or the Yuan wave in Venezuela, which is one that's about for me from a financial standpoint, it's about to capture value by the US of value being generated by the country in much resources, whatever resources that the country wants to give. And then and then that's completely independent of who's in power, which seemed in Venezuela. Someone replaced it, and the US is quite happy to make some deals to end that. And Iran to some extent a similar similar idea where you had something happened, you know, there was many you can talk about spending entire speaking on Iran again, but uh similar things, you know. Now you have deals being made, old Iranian's regime is still there. Maybe it's more uh my or my humble opinion, it's more potential to shift the capture of value away from China's all the way around or system yes and controlling Iran. We need to you need to deal with the lost and think about us before you would just think about China. That's the way I perceive the actual movement. And then now we have Cuba, which is high in agenda, and of course you have this entire shift shift or of reforms that I were described, and which are quite significant, you know, when you have 80% of your public sector GDP and more coming from the private sector, and suddenly opening up and getting functional banks being being becoming private and national investors. Significant moves here. And then within the current administration, we have Libya, which is probably once a regime change altogether, versus the more value capture quit trunk ideas about well, actually, we don't care who's there, as long as they open up the economy and we can do business there. And I think that's for me that's really that's really important to keep in mind about how this gets forward.

Emily Morris 40:49

Yeah, I mean, I agree. The only thing is I think I mean, I've had a lot of discussion about the size of the Cuban economy. Of course, you know, when they had a one-to-one exchange rate, it was valued at such and such, and then when they changed the exchange rate, it's valued at another amount. And uh I think 10,000 is a bit high, you know. But there is enormous potential. They're a very well-educated population, they have a lot of scientific capacity. And, you know, although the infrastructure is in a ropey state, it's actually quite well developed. You know, they do actually have the roads there, they have the railways there, and so on. So and they have the telecommunications as well. Um, so yeah, there's a big question about the actual value of the economy. It's nine million people now down from 11 million and maybe even more. And I completely agree, there's lots of grey zones. I remember when uh when there was a discussion years ago about you know what would be the effect of the US tightening its sanctions against Cuba. And the first thing, the obvious thing, is that Cuba will have to move towards China and Russia, because it won't have any choice. If you introduce, you know, the state sponsors of terrorism law and Western banks won't touch Cuba, the only way that Cuba can do trade is to move east, you know, to move towards those countries. So that's the kind of you know self-harm that the US has done is by shifting Cuba towards China and Russia. And I remember even before all of that, even I think during the opening, I put it to uh to a Cuban that, you know, he was saying, because I'm English, they say, you know, we'd love to do more business with you, you know, with the British. And I said, well, why not? Because, you know, we do produce some things still, you know. And he said, Well, it's the terms. It's the terms of uh, you know, the amount that you charge for short-term credits and so on, because the risk adjustment is so big that it just costs too much to buy anything from the United Kingdom, even then. So, and they said the Chinese are the only ones who offer us reasonable terms. And so even then they were going towards China. That was at least a decade ago. So China's been bitten because Cuba owes China a lot of money, so they kind of cooled off. But nonetheless, you know, they're still they're still doing trade. Well, they're doing very good trade in photovoltaic systems and so on, and they're still giving donations. And, you know, so and Cuba, because of that, because of that dependency, and the dependency also in Russia, apparently at the time during COVID when Cuba couldn't get any oxygen from anywhere for people in hospitals, it was Russia that came forward. And the Cuban said to me, we don't forget that, you know. Um nobody else would sell us the oxygen, but Russia did. So there's a kind of, even though Russia and Cuba have nothing in common in terms of the current political system or even the economic system, really, there is a kind of historical, you know, quite a few Cubans speak Russian from the past. You know, there A bit of an affinity there at certain levels. And so, yeah, so the question that you asked was, you know, what can Europe do? How can Europe get into this market? And my concern, as you know, from London, is that the way that if the US does open, if they get a deal for Cuban Americans to buy into Cuban assets on a large scale, if they do it by issuing licenses, you know, on a one out uh the basis of approvals for each contract, if they do it like that and leave the state sponsors of terrorism legislation in place and leave the Helms Burton provisions in place, other countries will be locked out. So, and I don't think that that's unlikely, if you see what I mean. I think if there's a deal, that will be the plan. And and so far, of course, you know, when Helms Burton Title III was introduced in 1996, there were quite loud objections from the European Union, from the UK and from Canada. And they introduced countervailing measures. This time there's been not a squeak, not any protest now that because Title III was suspended until this current Trump administration. And that was the most extraterritorial part of it, they would prosecute uh companies from outside of the United States. So Yeah, so you think, well, if Trump were to get a deal that he could sell to his US constituency, and in particular to those Cuban Americans who would be prepared to accept a deal without regime change, without victory as such, then that's that could be an issue. And it seems to me that he could get away with that quite easily under current circumstances, because of the method that is being used now, it seems, from the US side in diplomacy is to use whatever economic and political pressure they can do to achieve, well, economic pressure to achieve their political ends. And this is one of their objectives is to what's he say, take Cuba. Well, this is a form of taking Cuba in a sense, and it would benefit Cuba for sure, because they'd get the finance, but it would also make Cuba shift the dependency to the extent that there is, I mean, the dependency on China isn't anything like what it was on Soviet Union, uh, but yeah, shift the dependency back to the United States where it was before 1959. So, yeah, it's one to watch. I mean, from the point of view of non-US potential investors, it's a very important issue because at the moment the deterrent effect of the state sponsors of terrorism is pretty complete. I mean, there's very, very little that gets through that. Um so, and even in the field that I do, which is academic collaboration, even that is very difficult with all of the US measures that have been taken. You know, academics don't want to go and do research collaboration with Cuba because they won't be able to get an Ester Visa waiver. And for academics, going to US conferences is important. The universities, when they look at the funding bid, they go through the compliance process, which means contacting the bank and saying, you know, is this okay? Are there any compliance issues? And the bank has red flagged Cuba because it's got sanctions against it. So the bank will just simply say, no, we can't do that, we can't process any payments that go to Cuba. So, you know, that's academic collaboration, which actually is easier from the United States than it is from the UK because of those issues. In the US, you can get a license. In the UK, you're outside of the licensing remit. Although I do understand that one could apply for a US Treasury Department license, but you know, that's very difficult for a small entity, it's very risky, it has to be renewed every two years. You know, this is so the level of risk is uh is the prohibitive thing. We took call it uh overcompliance, and overcompliance is complete. So it would be interesting to see. Yeah.

The Reality of Regime Change and Final Thoughts

Julian Seydoux 48:44

I think it must be constantly changed. Do you see a regime change a bit?

Emily Morris 48:51

Well, that's I mean, I think maybe before you came on, I the regime change is extremely risky. There's no such thing as peaceful regime change in the case of Cuba. So you remove a few top people, it wouldn't really make any difference because it's very institutionalized, it's not about individuals. So, how do you achieve that? You force them to surrender explicitly? Surrender? Well, first of all, it's very unlikely, and secondly, there would be quite a lot of people who would object very strongly to that in Cuba.

Julian Seydoux 49:25

So just thinking through this on as you were asking about Trump and the US, you know, it seems that for the midterms, mainplays it's not something that would be happening. It's just the opening up of the economies of your big one.

Emily Morris 49:44

Yeah, and I mean, I was talking to a US journalist, and they talked about the best case scenario where you know there's a surrender, and then there's you know, democracy, a multi-party democracy, and then there's capitalism, and that's the best case scenario. And I'm thinking, does anybody think that's a possibility? You know, but it does seem that in the US that's how the conversation is going. And that's I mean, that's the intractable problem, is that what the US thinks it's entitled to do and what is possible to achieve is not doesn't match what the Cuban side would ever do. And so then you're talking about a conflict situation. And you know, I don't think the US really wants uh civil war in Cuba because of the migration issue.

Alberto Souviron 50:42

Exactly. You just mentioned that I was thinking in this at this moment. Migration is one of the main worries, not just in the US, but in general for Latin America. I was just reading that uh Uruguay, for example, has received a big flood of Cuban migration recently, and this is because of the crisis that Cuba is receiving. But it's happening as well in in Central America, the countries. So it could be a problem not just for the US, but for the rest of Latin America in that way. And on the other side, one thing that I'm thinking loud on this is a regime change that probably Marco Ruby is what they want, and the more hawkish elements in the in the US government is trying to do is complicated but also expensive in a way. Very expensive. And I think the most pragmatic element of the US and apparently that's a little bit the line of strategy that I haven't seen is economic pressure is much cheaper. And in a way, I think they have force at the moment to the current Cuban government a transition period. And maybe that's what we're going to see. I think we have to wait until the end of the year, what is going to happen, because that's the deadline that the US government has put to the to the Cuban government to go. But uh regime change could be very difficult. And I think you can correct me. I think the migr the migratory crisis is going to get worse unless they try to find some kind of transition around that for from Cuba.

Emily Morris 52:26

Yeah, I think there's a couple of yeah, can I just add a couple of things? Of course. Yeah, is migration is very important, but also security. This is a weird one. Is the security services in Cuba and the United States have been working closely together for a very long time. So, you know, against migration, but also against drug trafficking, against money laundering, Cuba is actually a very strong partner for the US security services, which is something they neither side talk about. But this is, you know, Cuba is the country within the region which the US has to worry least about in terms of drug trafficking and terrorism. I mean, it's just it's not a risk because the Cuban security services they work very closely. They extradite people, you know, criminals who come over to Cuba are extradited to the United States. Um, so I think that's an interesting one because it's something which neither side really talks about. Um I think that expression that used economic pressure is cheaper. Yeah. It's cheap for the United States to continue to not lift the sanctions that they've got. Um and I think this question about how expensive regime change would be is an interesting one because you can imagine you could win over the Cuban population if there was a huge, a huge amount of public money from the United States going to rebuild the entire infrastructure. But that's not going to happen. I mean, really, you know, very expensive. It wouldn't just be private investment that they'd need. They'd need, you know, they'd need development assistance. They'd need agreements on the uh compensation for nationalization as well. But in order to pay for that, Cubans can't pay. So, you know, there would have to be some kind of um concessionary finance or, you know, bailing out the Cubans. And then the other thing to remember is that Diaz Canel, the president of Cuba, is stepping down in 2028. He has two terms maximum. So I think that there's an interesting thing here. He could say, okay, you want political change. There will be political change in 2028, and then maybe package it as some kind of, you know, reform. Maybe they change the system for appointing the president. They could do something like that quietly, because it's quite possible he's appointed like the prime minister in this country by a vote in parliament, but it's not a contest, it's never been contested. In theory, it could be contested. So you could have a contested presidency, or you could have, you could even develop a system for direct elections for the presidency, because there's a separation now between the president and the prime minister. So, you know, you could have, and the prime minister is a different person from the president, who is again, you could have a separation between the president and the head of the communist party, which is it happened for a short term time in the interim between the shift between presidents. So Raul stepped down from the presidency, but not from the Communist Party. So the head of the state was not the head of the Communist Party. You know, so there's a precedent for that. It can happen. So there are things you can do within the constitution, I suppose. But again, nobody seems to be aware in the United States that the president has a maximum of two terms. They call it uh well, they actually call it a uh they think that the Castros are always in charge. There's a weird obsession with the Castros. I mean, it's not weird because Castros were in power a long time. But the fact that they were negotiating with a not very high-standing grandson, whose name, his second surname is Castro, was, you know, this is what the Cubans had to do to convince the US, or what that the US had to have was a kind of trophy Castro to negotiate with. That's not actually how the system works. It's not a system where power is passed down through members of the family. So I think, you know, there's a lot of kind of awareness building in the US. And I think that if the negotiations are going on and they're very secret, it must be a learning process for the US to kind of to understand the reality of Cuba is quite different from the myth that they've created. Anyway.

Andrew Thompson 56:46

So this has been this has been a fascinating discussion, but I'm conscious we've pretty much run out of time. So I wonder.

Emily Morris 56:54

I've got another meeting at five.

Andrew Thompson 56:56

Oh, right. We better be super fast then. I don't know if anyone wants to have short final comments in 60 seconds, and then we'll close it down with thanks to Emily.

Alberto Souviron 57:08

Well, I would sorry, Emily. I don't know. I keep interrupting today. Everybody for that. Me too. As Andrew says, that has been a fascinating conversation today, and I'm really pleased from all what I learned today about Cuba. But one of the things for me that comes as an ending is probably the big question is after the announcement of these reforms, how if it is going to be this transition in theory that is going to the Cuban government or not? And I probably this is the big question. Are we really at the end of one chapter going to another? Cuba is not anymore the country it was in the past. We were talking before there is this romanticism about Cuba. But the fact is that the influence of the island in the region is not as strong as it was. But there are elements that could be really interesting from an economic perspective. So the big question is let's wait until the end of the year to see where is going Cuba heading, uh actually. At this moment, the question is that is transition or what is dust?

Emily Morris 58:25

Yeah, I'd absolutely. I think that the next few months will be really telling. Uh and so, and I'd think well done for kind of convening this discussion because I think it's fun to watch, definitely. Yeah.

Andrew Thompson 58:37

Evelyn, thank you. Thank you very much. We seem to have lost Julian temporarily, but thank you so much for spending so much time with us. And I won't delay you any longer.

Emily Morris 58:48

I know, I'm gonna have to make my apologies. Okay, well, thank you very much. Lovely to meet you. Um yeah, if you've got more questions, just send them along.

Alberto Souviron 58:55

Okay, pleasure. Thank you.