Cuba Takes a Step Towards a Market Economy: Can the China-Vietnam Model of Openness Save the Crisis?

The socialist state of Cuba in the Caribbean is at a significant turning point in its economic management.

President Miguel Díaz-Canel has announced plans to review the heavily state-controlled planned economy and advance economic reforms to further expand the participation of the private sector. An article by dpa-AFX, reported by a German financial information site, positions this direction as emulating the "socialist market economy model of China and Vietnam."

Of course, this announcement alone does not mean that Cuba will suddenly transform into a capitalist state. The one-party rule of the Communist Party, which is the core of the political system, is expected to be maintained, and the reform proposals require approval from the Communist Party Politburo and the National Assembly. However, the significance of Cuba, which has long held state control as absolute, indicating reforms that delve into private enterprises, foreign capital, foreign exchange markets, agricultural production, tourism, real estate, and digital commerce is not small.

The announcement is noteworthy because it appears to be a pragmatic shift aimed at the survival of the regime, rather than merely a revision of economic policy.

Crisis Drives Reform

For years, the Cuban economy has suffered from U.S. sanctions, inefficient state sectors, foreign currency shortages, energy shortages, a decline in tourism revenue, inflation, and shortages of food and medicine. In recent years, power outages due to fuel shortages and disruptions in logistics have worsened, further pressuring citizens' lives.

President Díaz-Canel explained that the reform aims to "resolve the long-standing contradictions between central planning and incentives." This indicates a recognition that merely planning everything by the state and managing prices and resource allocation does not enhance production motivation or investment on the ground.

The Cuban government has previously partially recognized small private businesses. Individually-run restaurants, homestays, repair services, beauty services, and transportation services have become essential in supporting tourism and urban consumption. Furthermore, in 2021, the incorporation of small and medium-sized enterprises was permitted, increasing the presence of the private sector compared to before.

Nevertheless, the overall Cuban economy still retains a structure centered on state-owned enterprises. State intermediary agencies are involved in imports and exports, access to foreign currency is limited, and agricultural producers face many restrictions in freely accessing land, materials, and markets. The current reform proposal aims to ease such bottlenecks.

The Pillars of Reform: "Private Sector," "Foreign Currency," "Agriculture," "Overseas Cubans"

According to information from local state newspapers, the pillars of the reform are quite broad.

Firstly, the expansion of activities allowed in the private sector is noteworthy. There is a possibility that some economic activities previously prohibited will be legalized, and restrictions on business content are expected to be relaxed. The approval process for small and medium-sized enterprises will also be simplified, with a plan to transfer authority to the municipal level.

Next is agricultural reform. In Cuba, food shortages have become chronic, and how to utilize unused land and low-productivity farmland has been a major issue. The government has indicated a policy of allowing productive individuals to use the land and making it easier for agricultural producers to access material markets and foreign exchange markets. Improving food self-sufficiency will likely be the most straightforward indicator of the reform's success.

Changes are also expected in the foreign currency and trade sectors. A concept has been proposed to allow state-owned enterprises and private businesses to hold foreign currency accounts and participate more easily in the foreign exchange market. Additionally, the requirement to go through state intermediary agencies for imports and exports may be reviewed. If realized, importing raw materials and equipment and launching export businesses will become more agile than before.

Another important aspect is the investment participation of Cubans living abroad. Cuban residents abroad, such as those in the United States, have supported the island's economy through remittances and material support. If the government formally incorporates them as investment entities, it will open up avenues to bring funds, know-how, and international networks into the domestic economy.

However, there are also political challenges here. Among the Cuban diaspora, there are many who strongly oppose the current regime. For them, whether investment becomes an "act of helping Cuban citizens" or "cooperation in extending the regime" is not a simple issue to resolve.

Is the China-Vietnam Model Suitable for Cuba?

The current reform is being discussed in the context of China's and Vietnam's experiences.

Since 1978, China has gradually marketized agriculture, industry, foreign capital introduction, and export industries through its reform and opening-up policy, growing into a massive manufacturing nation while maintaining Communist Party control. Vietnam, too, has increased its presence as an export hub by utilizing market mechanisms and foreign capital introduction since the Đổi Mới policy in 1986.

It is natural for Cuba to be conscious of this route. By flexibly adjusting only the economy without significantly changing the political system, and regaining growth using the private sector and foreign capital, it is the most acceptable reform model from the perspective of the regime.

However, Cuba faces constraints different from those of China and Vietnam.

Firstly, the domestic market is small. With limited population size and industrial base, becoming the world's factory with a massive labor force and market like China is not realistic.

Secondly, relations with the United States are extremely complex. Geographically close to the U.S., Cuba should ideally benefit greatly in terms of tourism, remittances, trade, and investment. However, political conflict and sanctions have long obstructed this. The U.S. government continues to strengthen sanctions related to Cuba even into 2026, and sanctions on state-owned oil companies could exacerbate the energy crisis.

Thirdly, trust in the system is not sufficient. Investors and entrepreneurs need more than just permission. They require stable rules, protection of property rights, predictability of contracts, transparency in taxation, free price formation, and certainty in remittances and payments. Even if the government advocates "openness," if regulations change midway, profits cannot be freely used, or businesses are halted due to political decisions, investment will remain limited.

On Social Media, Doubts Prevail Over Expectations

Looking at public comments on social media, message boards, and local reports, reactions are divided.

The most prominent voice is that "the reform is too late." Cuba's economic crisis did not start suddenly, but has accumulated over years of structural problems. There are doubts about how effective marketization will be after facing power outages, food shortages, fuel shortages, medicine shortages, and youth emigration.

Especially among anti-regime Cuban residents and the Cuban community in the United States, there is a strong view that "true reform requires political freedom as well." Reports on reactions from South Florida also introduce harsh opinions that economic involvement will create jobs and opportunities, but it is meaningless unless the regime changes.

On the other hand, from a practical perspective, there is a realistic reaction that "if goods come in, jobs increase, and power outages decrease in any form, it would be welcome." On social media, there is more interest in daily issues such as food, fuel, transportation, healthcare, and electricity than in ideological debates. Posts from travelers who visited Cuba or users interested in the country also frequently mention power outages and material shortages, and the evaluation of the reform depends on "whether life actually improves."

In pro-government reactions, there are voices that see U.S. sanctions as the main cause of the crisis, and the reform as "a means to protect the country under siege." In the comment sections of state newspapers, there are short supportive comments showing support for the government and the revolution. These reactions perceive the reform not as liberalization but as an adjustment to protect socialism.

On overseas message boards, there are cooler discussions. Some emphasize the impact of U.S. sanctions on the Cuban crisis, while others criticize the government's inefficient governance and restrictions on the private sector. In tourism-related posts, while certain services are maintained in resort areas, there are firsthand accounts that the general public's life is harsh, and expectations for reform are cautious.

In summary, the reaction on social media can be encapsulated as "doubt" rather than "expectation," and "real-life experience" rather than "ideology" is at the forefront.

Does U.S. Pressure Encourage Reform or Restrict It?

The recent reform announcement is inseparable from U.S. pressure.

The U.S. government has intensified sanctions against the Cuban government and related agencies, increasing pressure on military and intelligence-related organizations, state-owned oil companies, and regime officials. The U.S. positions these measures as a means to encourage political and economic reform.

On the other hand, the Cuban government describes the sanctions as a "blockade" or "economic war," blaming them as the main cause of the crisis. Indeed, if fuel imports are delayed, it affects power generation, transportation, agriculture, healthcare, and logistics. If citizens' lives become even more difficult, the very capacity to advance reforms may be lost.

There is a significant contradiction here.

If the U.S. increases pressure on the Cuban government, the regime may be forced to make concessions. However, at the same time, for Cuba, which wants to attract foreign capital and trade, the risk of sanctions becomes a factor that deters investors. The pressure intended to encourage reform could also hinder the funds and transactions necessary for reform.

Especially in Cuba, where the boundary between state-owned and private sectors is ambiguous, it is difficult for foreign companies to determine "which partner to deal with to avoid sanction risks." Even if the U.S. promotes support for the private sector, if logistics, fuel, finance, and import systems on the island are tied to state agencies, the practicalities are not simple.

The Biggest Focus: "How Seriously Will They Entrust It?"

The success of Cuba's reform hinges on how seriously the private sector is trusted and entrusted.

Even if business permits increase, if price controls, import restrictions, foreign exchange regulations, tax burdens, and administrative procedures are heavy, entrepreneurs cannot grow. Even if land is allowed to be used, production will not increase without access to fertilizers, fuel, and markets. Even if overseas residents' investments are recognized, funds will not come in if profit recovery and property rights protection are unclear.

From the experiences of China and Vietnam, the power of marketization does not arise from "permission" alone. It is necessary to give discretion to the field, leave profits, recognize competition, and incorporate failures and successes into the system.

What is difficult for the Cuban government is the caution that economic liberalization could lead to a loosening of political control. If private companies grow, connect with foreign capital, and citizens gain income sources other than the state, the dynamics of society will change. The government wants to utilize this but does not want it to become uncontrollable. This tension will influence the speed and depth of the reform.

Nevertheless, Change is Inevitable

The recent reform announcement indicates that Cuba has entered a stage where the question is not "whether to change" but "how to change."

As in the past, it is difficult to break the economic stagnation by having the state manage everything and merely asking citizens for patience. Young people seek opportunities abroad, skilled personnel leave, and domestic industries suffer from a lack of investment. A model relying solely on tourism is also susceptible to international circumstances, sanctions, and infrastructure shortages.

On the other hand, Cuba has potential. It has a highly educated workforce, accumulated expertise in the medical and biotech fields, tourism resources, potential for agricultural revitalization, diaspora funds and networks, and geographical advantages. If the system is established, there is potential for growth in small private businesses, food processing, renewable energy, tourism services, and digital commerce.

However, reform is evaluated not by announcements but by execution. What activities will be deregulated? Will company approvals truly become faster? Can foreign currency accounts be used freely? How far will the obligation to mediate imports and exports be removed? To what extent can overseas Cubans invest? How deeply will inefficiencies in state-owned enterprises be addressed? Without seeing these specifics, the recent announcement may end up leaving only expectations, just like past reforms.

Cuba aims for "marketization under Communist Party control" like China and Vietnam. However, this path cannot be pursued through mere imitation. Under unique conditions such as U.S. sanctions, island economy, population outflow, foreign currency shortages, and political distrust, Cuba must create its own reform model.

As reactions on social media indicate, people are looking at tomorrow's meals, electricity, transportation, jobs, and medicine rather than grand slogans. Whether the reform is genuine will be judged not by international conferences or speeches, but by whether food appears in Havana's markets, rural farmland becomes active, and young people find reasons to stay on the island.

Does Cuba's economic opening signify the end of the regime? Or is it a realistic adjustment to prolong the regime? The answer is not yet clear.

What is certain is that the island of revolution can no longer ignore the power of the market.

Source URL

・Aktiencheck / dpa-AFX: "Nach Vorbild Chinas: Kuba kündigt Wirtschaftsöffnung an". An article reporting Cuba's aim for economic openness in the style of China and Vietnam, advancing the expansion of the private sector and agricultural reform.
https://www.aktiencheck.de/news/Artikel-Vorbild_Chinas_Kuba_kuendigt_Wirtschaftsoeffnung-19847237

・Granma: Used to confirm the details of President Díaz-Canel's reform explanation, including agriculture, foreign currency accounts, trade, private sector, foreign investment, and subsidy review.
https://www.granma.cu/cuba/2026-06-12/explica-diaz-canel-prioridades-disenadas-para-superar-las-dificultades-del-momento-actual

・AP News: Used to confirm President Díaz-Canel's announcement of reforms including investment promotion, involvement of Cubans living abroad, and administrative decentralization.
https://apnews.com/article/cbffe7cf4f435569e1a6d7e42a2bb5fd

・Reuters: Used to confirm the background of U.S. sanctions on Cuba's state-owned oil company CUPET and their impact on fuel shortages and power outage issues.
https://www.reuters.com/business/energy/us-sanctions-cuban-state-oil-company-adding-obstacles-fuel-imports-2026-06-12/

・CBS Miami: Used to confirm the mixed reactions among Cuban residents in South Florida, where expectations for economic involvement coexist with distrust of the regime.
https://www.cbsnews.com/miami/news/south-florida-reactions-remain-mixed-as-cuba-announces-new-economic-reforms/

・U.S. Department of State: Used to confirm the announcement of Cuba