Cuban economy will change, but slowly

By Marc Frank - Analysis

HAVANA (Reuters) - The resignation of Fidel Castro as Cuba's supreme leader means that changes in the socialist economy he guarded for nearly 50 years are inevitable -- but experts say no one should expect too much, too soon.

"Don't expect the floodgates to foreign investment to open, much less the appearance of Cuban millionaires. There will be carefully planned measures to make the economy more efficient, and small-scale initiative will be rewarded," said John Kirk, a Canadian historian and author on Cuba.

"The Golden Arches and Wal-Mart won't be arriving in Cuba any time soon".

Since taking power in a 1959 revolution, Castro has stuck to a strict state-controlled economy with little room for private enterprise and an aversion to the kind of reforms that brought rapid growth to other communist states like China and Vietnam.

The economy has been in perilous state at times, especially in the 1990s when the collapse of the Soviet Union meant an end to support from a Cold War superpower. Shortages of food and other basic goods have been a daily fact of life for Cubans.

But things have improved since 2004, bolstered by oil-rich ally Venezuela, soft Chinese credits and high nickel prices.

The mounting income has enabled the government to double imports, improve infrastructure, more or less balance its external finances despite a huge trade deficit, pay debts contracted since 1991 and register strong growth.

But gross industrial inefficiencies, low agricultural output and poor quality of goods and services persist.

Castro's younger brother, 76-year-old Raul Castro, is likely to be named Cuba's new president when the National Assembly elects a new Council of State on Sunday, and he is widely expected to make changes to the economy.

As acting president since Fidel Castro fell ill more than 18 months ago, Raul Castro encouraged debate on the country's economic problems and raised the expectations of many Cubans.

But there have been no major reforms so far, and experts say changes will be slow and steady.

"We need time and there is time for transforming the economy, but it must be based on addressing first distortions such as pricing policy and sectors that directly impact the population such as agriculture," Cuban economist Juan Triana recently told a class of university students.

FIDEL STILL IN THE WAY

Another Cuban economist, who requested anonymity, said Raul Castro would have to fight both Fidel Castro and entrenched bureaucratic interests who oppose change.

"I expect we will see some new measures in the coming months to improve our lives a bit, but they will be populist more than structural in nature," he said.