Cuban legislators approve sweeping reforms to socialist model amid US pressure

HAVANA, June 18 (Reuters) - Cuban legislators unanimously approved sweeping reforms backed by the Communist Party and former leader Raul Castro that would privatise a vast swath of the country’s socialist economy in a bid to survive punishing US sanctions.

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By Dave Sherwood and Ayose Naranjo

The measures, if implemented as passed, would represent the single largest change to Cuba’s socialist model since former leader Fidel Castro’s 1959 revolution and a major shift towards a market economy.

The reforms open the door to private real estate development on the Caribbean island, propose to transform state-owned businesses into private commercial ventures with shares and equity stakes and would allow private banks to enter Cuba’s once state-dominated finance sector.

They would also allow the “sale of state-owned properties to national and foreign legal entities and individuals, including Cubans residing abroad,” according to a televised presentation to legislators – a major change in a country where the state has long held control over land and industry.

Cuban President Miguel Diaz-Canel, in a speech just prior to Thursday’s vote, told lawmakers to keep the faith in Cuba’s socialist past.

“What is being debated here is the dilemma of how to continue the process of socialist construction, which has suffered the longest blockade in history from the world’s greatest power,” Diaz-Canel said in reference to U.S. sanctions.

“We are not renouncing socialism.”

Prime Minister Manuel Marrero told legislators the measures recognize the market as “an instrument for the efficient allocation of resources,” in a highly unusual concession from a Communist Party official in Cuba.

But he too cast the changes as true to Cuba’s socialist roots.

“The updating of the economic and social model has the essential purpose of improving the quality of life of our compatriots.”

The list of upwards of 175 measures, presented in a nearly two-hour-long speech to legislators by the prime minister, received a rubber stamp unanimous vote late on Thursday afternoon of the National Assembly.

It was not immediately clear how quickly - nor via what mechanisms - the vast array of new measures would be implemented, leaving many unanswered questions following the legislative vote.

US PRESSURE

Many of the measures to liberalise the Cuban economy have surfaced, both inside and outside Cuba, for years, but extreme pressure from the United States has once again pushed them to the fore.

Cuba’s state-run economy, bureaucratic and inefficient, has struggled to provide for its people since the collapse of the Soviet Union, which long helped underwrite Cuba’s brand of socialism.

But severe Trump administration sanctions - including a months-long oil blockade - have now left Cuba with little room to maneuver, devastating its already ailing economy, forcing an exodus of foreign businesses and decimating the all-important tourism industry.

Diaz-Canel told legislators that the decision to open Cuba’s economy was “not related to negotiations” between the two countries, which began earlier this year but appear to have stalled.

The U.S. State Department did not immediately respond to a request for comment.

Long-time Communist Party leader Raul Castro - indicted in May in the United States on murder charges - threw his weight behind the measures - which would roll back many of the socialist reforms implemented following the Castro brothers’ 1959 revolution.

In a written letter presented first to the politburo on Wednesday, and later to legislators on Thursday, he called them “beneficial” and urged their speedy implementation.

OPEN FOR BUSINESS

The transformational package would greatly scale back the prominence of state-run business in Cuba while unleashing private enterprise long limited by a bureaucratic state weary of private capital.

Businesses in Cuba would for the first time be permitted to hire more than 100 employees. Entrepreneurs, meanwhile, would also be allowed to hold multiple private businesses - another first.

Marrero said movements of private capital would be facilitated by a more limber, private banking system, overseen by the state, as well as a real-time digital foreign exchange market with authorized agents.

Cuba has long offered its citizens steeply subsidized public services, including free or low-cost education, medical care and transportation. Many of those services have in recent years collapsed amid government ineffciency and a failing economy.

The new measures would establish a new taxation system and make public and private sector businesses, both foreign and domestic - in part responsible for underwriting public services.

(Reporting by Dave Sherwood and Ayose Naranjo in Havana; Additional reporting by Michael Martina in Washington, Editing by Daniel Wallis and Stephen Coates)

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