Cuba looks to China for inspiration

Cuba's President Raul Castro (L) shakes hands with Chinese Premier Wen Jiabao Mr Castro's four-day visit is his first to China since taking over the leadership of Cuba in 2008

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Cubans didn't know their President was going to China and Vietnam until after he left Havana. The visit was announced with a few lines in the Communist Party paper Granma, with no details.

But Raul Castro doesn't travel much, so his decision to spend almost a week abroad is a sign of the significance he places on Cuba's relationship with its communist allies.

The timing of his visit is no accident.

Cuba has begun introducing measures intended to kick-start its inefficient, unproductive planned economy.

It is a tentative start: The word "reform" is never used, nor "private enterprise" - instead, Cuba says it is "updating" its economic model.

Like China and Vietnam before it, the island's aim is to protect and prolong its socialist political system by introducing elements of market economics.

So it seems Raul Castro is in Asia looking for inspiration.

"The visits are very important for the President to really feel the advances there. Unlike Eastern Europe, these countries have undergone deep reform whilst maintaining their socialist characteristics," explains Omar Everleny, director of the Centre for the Study of the Cuban Economy.

Things to learn

He points out that the Chinese and Vietnamese economies are both growing at a rate of about 10%; Cuba's growth rate is less than 3%.

"I think they did it through great pragmatism, and by using more and more market instruments. Through gradual advances, not shock therapy.

"We should not copy them, but there are things to learn from both models," Mr Everleny believes.

There is also, as Cuba has just discovered, more immediate economic gain from the visit: China has announced it will extend funds in an interest-free loan and a credit line to the island. Neither side has given details.

Both China and Vietnam began their reforms in agriculture, in the latter case transforming the country from a rice importer into a major exporter and key supplier for Cuba.

Cuba national flag in front of the Monument to the People's Heroes, at Tiananmen Square in Beijing Cuba hopes to increase its growth rate

Here, the state has begun allowing farmers to lease land and to sell produce directly to the market but harvests - like this year's potato crop - still underperform and Cuba is forced to import most of its food.

And in the field of foreign investment - something encouraged in China and Vietnam - Cuba still lags well behind. A number of projects that have been planned for some time - including high-end tourist developments - remain on hold and tough terms mean the overall number of foreign joint ventures is falling.

Economist Omar Everleny suggests a lesson Cuba might learn from its Asian allies is the potential for investment from its own diaspora.

"Today some 70% of investment in China is by Hong Kong Chinese," he points out. "The diaspora contributed to the reconstruction in both countries. I think that's something to study."

Key support

More than a million Cubans currently live in the United States. Once condemned as "traitors" they are not permitted to invest openly in the island.

But since Cuba began opening up its economy - allowing citizens to buy and sell cars and houses, and open larger, privately run restaurants - much of the money to fund that has been sent to Cubans from relatives abroad.

Most of the economic ties between Cuba, China and Vietnam are in trade.

China is the island's second biggest trade partner after Venezuela. Bilateral trade rose to $1.9bn (£1.2bn) in 2010 from $996m in 2005; trade with Vietnam totals $269m.

Today, the streets of Havana are full of Chinese "Yutong" buses; some government ministries have traded in decrepit Russian Ladas for Chinese Geely cars and most of the domestic appliances in hard-currency stores are made in China.

After the Soviet Union collapsed, plunging Cuba into crisis as vast subsidies disappeared, China was a key support for the island.

Now there are new challenges.

Immense task

Cuba is being forced to consider a possible future without the economic prop of Venezuela, a vital supply of cheap oil, as Socialist President and close Castro-ally Hugo Chavez fights for re-election after two rounds of treatment for cancer.

Foreign firms exploring off Cuba's north coast have so far failed to strike the fuel that would hand the island's government an economic lifeline.

The task for Cuba is immense, and many complain the changes so far are too hesitant and too piecemeal.

There is clearly resistance within the Communist Party and the vast bureaucracy.

And there is no declared overall vision for a future Cuba, indicating how far the reforms will ultimately go.

But the "guidelines", as they are known, were only approved at the Sixth Party Congress last April. Vietnam began its reform in the 1980s.

The process here is in its infancy.

So as he visits two countries that succeeded in transforming their cumbersome command economies into success stories, Raul Castro will have a lot to see and consider.

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