President new generational change for the government and

President Raul Castro is the very public head of government (pictured at left). He is the successor and nephew of the widely known Fidel Castro. Much like the President of the United States, he is also the chief of state and commander-in-chief of armed forces. Unlike the government of the U.S., Castro has more than one vice president; Miguel Diaz-Canel is the most noted, first vice president, but there are also 5 other vice presidents. Diaz-Canel is a very important man to pay attention to because he was the start of a new generational change for the government and is slated to become the next president of Cuba very soon (Cuba’s Government). Although these men are in the public eye very frequently, the people that hold the most power, over the executive committee, are the National Assembly of People’s Power (Asamblea Nacional de Poder Popular or ANPP) and the Council of State. These are the powers who ultimately decide laws and who will become the next president (Cuba’s Government).One aspect that I kept stumbling upon, was whether Cuba is considered a socialist state or a communist state. These terms are often used interchangeably, but do they really mean the same thing? No; in fact, they have certain similarities, but they are different. Socialism aims to narrow the gap between the rich or the poor through government owned agencies; it does not advocate that all property ownership be eliminated, but rather the income from all agencies should be shared equally between citizens. Communism is seen as more extreme, where the government wants to own and control everything and individual capitalism is severely illegal or looked down upon heavily (Seth). Cuba shows a lot of socialist tendencies, but since Fidel Castro openly stated that he was a communist, people are hard pressed to believe that Cuba is still a communist state. On the other hand, in their constitution it states that anyone who is openly against the “decision of the Cuban people to build socialism” can be jailed or detained (Cuba’s Government). So right now, I think even Cuban citizens and the government are confused whether they are a communist society or a socialist society. In my opinion, since Fidel Castro is no longer living, and his relative is going to be passing on the presidency soon, socialism is on the rise in Cuba, but communism will always be lingering right behind some invisible line. Most of Cuba’s citizens, about 80%, work for government owned facilities (Seth). What this means for businesses, is that individual capitalism is still welcome by people, as long as they still follow the guidelines set by the government, if they are not in some way owned by the government.The key issues that the government faces include massive corruption, common and accounting theft, people speaking out against the government, and implementation of policies in governmental agencies. Because the state has a hand in basically every business and resource, bribery and theft alongside misuse of funds and resources are at an all time high. Police officers and governmental officials are often bribed to help things process quicker, such as housing applications, passports and permits and visas, rations, etc. This also happens because people are being paid close to nothing when they work. Since salaries are low, people don’t want to work, therefore lots of goods are stolen in order for these people to live. Bribes are common not only with money, but with goods and services, since these are easier to steal or learn, and then barter with. In accounting situations, it is easy to fabricate receipts and make up inventories and sales, since the Cuban Peso is measured as the Cuban Convertible Peso, even though the exchange rate is a whopping 26 to 1 (Cuba – Corruption). The Cuban Police have rules and regulations in place in order to catch these people and detain them, but fail to follow these processes because they are being cut into the deal. Most arrests made by the Cuban police are to detain or jail people speaking out against the government. The Cuban Commission on Human Rights and Reconciliation (CCDHRN) reported an increase in detentions from 2015 to 9,940 in 2016, along with a few other agencies reporting almost the same amount of incline (Cuba – Politics). The government has not been very successful in dealing with these issues because, in most instances, government officials are also included in these deals. They probably think, why would they enforce rules when they can get goods and services provided to them for free? I think if the accounting system was more rigorously tracked, more people would earn a feasible living wage, so that they wouldn’t have to turn to stealing and bribery to get what they want (Cuba – Politics). Although, this way of life could be normal for them and part of their culture at this point, since it seems this has been an ongoing problem in Cuba. Elections are the biggest indication that the Cuban people are ruled by a semi-socialist leader. A little more than 90% of Cubans vote, but only one party is usually represented in the elections: the communist party. Each candidate is prescreened and pre-approved by the government, given money for election expenses from the government, and usually the independent parties are refused to run; so the communist party runs uncontested from any other party (Cuba – Politics). Essentially, the elections are not free elections, just a facade for the people to believe that they have the power to vote in someone – when in fact, already the winning candidates are most likely predetermined. The most recent presidential election was set for early October 2017, but Hurricane Irma hit Cuba in early September and wreaked havoc on the whole island. As a side note, the government didn’t seem to help much with relief efforts (Torres). Since the election was pushed back, the date for Castro to get out of office was also set back from February to April. It is being rumored that Diaz-Canel will be replacing him as president. The people of Cuba only vote for the candidates who will represent them in the National Assembly, which then elects the people in the Council of State, who then decide on who the next president will be (Cuba’s Government).Referencing the previous information, I can infer that the country is not considered to be “free” like the United States. According to the 2018 Freedom House “Freedom Status,” Cuba is “Not Free” (Cuba). Not surprisingly, the freedom rating, political rights rating, and civil liberties were all higher, indicating not free. The aggregate score really surprised me at 14/100, where 0 is least free and 100 being most free. That’s not even half free! Or a quarter free! To give you some context, in 2017, the U.S. was 89/100 free. Cuba’s net freedom status and press freedom status are also not free, contributing to the overall “Not Free” score of Cuba.In conclusion, people are not very impressed with the government at this point in time. On paper, the government might work, but with the constant corruption and currency mishaps, there is no way that the government is working for the people at its full potential. This was very apparent when no relief systems were in place when Hurricane Irma hit the island (Torres). Lots will be determined depending on the new president’s political views. I would recommend not moving or starting a business the new president is in office, and until there is a general rapport with the people and government. There is no telling what can or will happen concerning business matters with a new president, so it would be wise to wait a little bit and see what his actions indicate. It’s hard to say what the government should or shouldn’t do because on paper they might have solid policies, but in reality, will they actually follow new and existing rules and enforce them properly, especially under a new president? ReferencesCuba. (2018, January 16). Retrieved January, 2018, from https://freedomhouse.org/report/freedom-world/2018/cubaCuba – Corruption. (n.d.). Retrieved January, 2018, from https://www.globalsecurity.org/military/world/cuba/corruption.htmCuba’s Government. (n.d.). Retrieved January, 2018, from https://www.globalsecurity.org/military/world/cuba/government.htmCuba – Politics. (n.d.). Retrieved January, 2018, from https://www.globalsecurity.org/military/world/cuba/politics.htmRaul Castro. (n.d.). Retrieved January, 2018, from http://scd.france24.com/en/files/imagecache/france24_large_652_338/article/image/raul_castro.jpgSeth, S. (2014, August 15). Socialist Economies: How China, Cuba And North Korea Work. Retrieved January, 2018, from https://www.investopedia.com/articles/investing/081514/socialist-economies-how-china-cuba-and-north-korea-work.aspTorres, N. G. (2017, September 13). In Cuba, many Hurricane Irma victims are asking themselves, where is the government? Retrieved January, 2018, from http://www.miamiherald.com/news/nation-world/world/americas/cuba/article173200841.htmlEconomic AssessmentThe current economic state of Cuba is mostly undetermined. Much of the data sets that I could find are not current, meaning that they are not from 2016 or 2017, but rather from previous years, no longer applicable to current times. The most up-to-date information I found on Cuba’s current economic levels were from the Heritage Foundation, as shown below. The World Bank had limited data and didn’t include the “Ease of Doing Business” assessment at all, and I couldn’t find anything about Cuba on the World Economic Forum’s website. Here are some of the key quantitative indicators of Cuba’s economics performance and potential:IndicatorSourceYearPerformance LevelIndex of Economic FreedomHeritage Foundation201733.9%GDP (PPP)Heritage Foundation2017$141.5 BillionGDP per CapitaHeritage Foundation2017$12,580Inflation (CPI) Heritage Foundation20174.6%GDPWorld Bank2015$87.133 BillionHuman Development IndexUNDP2015.775GNI per CapitaUNDP2015$7,455The Heritage Foundation’s Index of Economic Freedom percentage takes into account the rule of law, government size, regulatory efficiency, and open markets. The percentage is derived equally as an average from 12 separate categories, as listed below. This ultimately measures how free a society is to own their own business and property and is a great predictor of how the country is growing; usually the higher the amount of economic freedom, the less constrained, and the more these countries are able to develop and thrive within the world market. As for Cuba, this is not a good indicator of growth (About). If I were thinking of doing business in a market, I would hope that the overall score is above a 50% and look at specifically why it is still that low. The highest percentage at the moment goes to Hong Kong at a high of 89.9%, where the U.S. is at 75.1%, with Cuba being a lowly 33.9%. Cuba is ranked at 178, almost last out of 180 countries, and is considered “Repressed” (Cuba). In recent years, the overall percentage has been slowly increasing and is at the highest its been in the last 10 years. Here are the rankings that contribute to their overall index ranking:Rule of LawProperty Rights                  32.4Government Integrity         41.8Judicial Effectiveness        10.0Government SizeGovernment Spending   0.0Tax Burden                   51.3Fiscal Health                81.2Regulatory EfficiencyBusiness Freedom             20.0Labor Freedom                  20.0Monetary Freedom            66.0Open MarketsTrade Freedom            64.5Investment Freedom    10.0Financial Freedom       10.0Gross Domestic Product (GDP) or Purchasing Power Parity (PPP) measures the amount of money a country has to purchase goods or services and takes into account the cost of living and inflation. Many countries express this amount in dollars, since it is a common currency, used all around the world for trading and assessing an accurate exchange rate. The GDP for Cuba in 2017 was $141.5 billion, compared to $87.133 billion in 2015 (Cuba). This means that their economy has gained more money in the last few years. I would bet that this large change was the result of the trade and tourism embargo being lessened. “Per capita” just means per person. So the GDP per capita for Cuba is $12,580, meaning that the GDP divided by the amount of people in Cuba, which is close to 11.2 million from Heritage Bank’s measurement (Cuba).Inflation is a good indicator of how prices are doing overall in a country. If the percentage is zero, products cost the same as they did at the beginning of the year, if there is any percentage of inflation, costs are higher than before. Inflation is configured with the Consumer Price Index in mind, which are the prices paid by consumers for goods. If inflation is higher, this also means that the same currency may have declined in purchasing power across the globe. In any country, inflation will most likely never be zero, but always teetering right below or above that net zero line. The U.S. inflation rate has been around 2%, which isn’t bad. In 2008, around the time of the market crash and the housing bubble, inflation was around 5%, which is right where Cuba is at right now at 4.6% (Cuba). Oddly enough, Cuba’s inflation rate was closest to zero in 2008, at the same time as the U.S. inflation rate surged upwards (Cuba Inflation). The Human Development Index by the United Nations Development Programme goes completely opposite the direction of the Index of Economic Freedom. The HDI takes into account the wellbeing of a country’s people based on how healthy they are, how long they are expected to live, academia and knowledge growth, standard of living, and includes the gross national income as well. UNDP figured that looking at how a country’s people are doing, is a great indicator of where their economy will go in the future. It is a good tool for policy makers and economists to use when comparing two similar countries; seeing the strengths and weaknesses in each category and how they affect the domestic and world markets can affect positive change. The closer to 1, the better off the people in a country are doing. Cuba rests at a .775, which doesn’t seem awful considering this score is out of 1.000. Even the rank of Cuba on this scale is only at 66 out of 188 countries. To give some perspective, the U.S. ranks #10 and sits at a .92 index. So in this case, Cuba isn’t doing so bad! There are many factors that go into this score, so it could be due to a number of big things that Cuban’s have going right for them, like life expectancy or expected years of schooling, or even their low homicide rate (Human).GNI stands for Gross National Income, which is a smart term for income claimed by businesses from both foreign and local money sources; it’s what money the economy has brought in this year. Per person, this number is $7,455 in Cuba. The GNI and GDP of a country are similar, but do not represent the same income. GDP does not take into account money coming in from other places, where GNI can be higher than GDP if they are getting a lot of foreign aid. I believe this is the case in Africa because people like donating a lot of money to Africa, for a reason unknown to me. Since travel to and from Cuba is still very difficult, not much money is coming into the country from foreign people. If Cuba were to allow more people to come and go or allow more exports without tariffs, this number would definitely be higher.Based on the economic data for Cuba, I believe that the economy is growing positively, but very slowly. I do think if tourism were more of a main focus, that they would get more money flowing to and through the country. On the other hand, I think if Cuban people paid more care and time and attention to what’s happening to the money they already have, they would be better off also. It is still rumored that accountants and managers deal with accounts by pencil and paper, and mix up the Cuban currencies in bookkeeping. It makes me wonder, if Cuba could just decide on one currency to use, would that solve any struggles they have relating to money? Maybe. As for now, market goods and services are inflated to high levels and a lot of money is going to the government, through communism/socialism means or by corruption of foreign officials with relations to Cuban mafias. One thing is for sure, Cubans are not spending or tracking their spending wisely, and that has a large impact on how the economy seems to be doing. Simple policy changes that lead to rules being actually followed might have a positive impact for the growth of the Cuban economy.ReferencesAbout The Index. (n.d.). Retrieved January, 2018, from https://www.heritage.org/index/aboutCuba. (n.d.). Retrieved January, 2018, from https://www.heritage.org/index/country/cubaCuba Inflation Rate 2005-2018 . (n.d.). Retrieved January, 2018, from https://tradingeconomics.com/cuba/inflation-cpiHuman Development Report Cuba. (n.d.). Retrieved January, 2018, from http://hdr.undp.org/en/countries/profiles/CUBHuman Development Report USA. (n.d.). Retrieved January, 2018, from http://hdr.undp.org/en/countries/profiles/USAPolitical and Economic ConclusionTaking into account both political and economic analyses, I would say that the business potential of Cuba is slowly growing to fruition. Cuba is still very close to being a strictly communist totalitarian state, but the people, or more specifically the government, believe they are moving toward a more socialist agenda, which is good for businesses looking to enter the market. At this point, I would establish rapport with important people in the government and I would get to know people that own businesses outside of governmental and mafia control. Looking at both the independent and governmental controlled businesses first hand, from people that actually deal with business processes daily, will be a good indicator of when to move in and do more business in Cuba. This area is largely untapped by U.S. businesses and could be a huge opportunity for growth. Like they say, if you risk big, your reward might be huge in the future.