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With the “176 economic and social changes” adopted on 18 June 2026, Cuba has initiated the most far-reaching overhaul of its socialist economic model since the 1959 revolution. What is remarkable is not so much the novelty of the individual measures as the radical nature with which a package of long-delayed reforms is rapidly being enshrined in law: announced on 12 June by President Miguel Díaz-Canel, unanimously approved by the National Assembly the day after the PCC plenary session, and accompanied by a letter of endorsement from Raúl Castro.
For decades, Cuba’s policy followed the Chinese model of cautious experimentation – Deng Xiaoping’s “crossing the river by feeling the stones” – albeit at a snail’s pace. From the reform measures set out in the Lineamientos in 2011, through the 2021 currency reform and the 2023 stabilisation programme, a series of gradual steps were taken, each of which failed due to its half-heartedness. As Díaz-Canel conceded, most of the current measures are not new ideas: “The mistake was not in proposing them, but in postponing them – and this phase of postponement must come to an end.” It was no coincidence that, shortly before, he had appointed three critical economists from the reform debates of the 1990s to a new advisory panel: Julio Carranza, Omar Everleny Pérez and Juan Triana.
Crisis Forces Cuba's Hand
The current crisis has been the catalyst of the reforms. The economy has shrunk by at least twelve per cent since 2019, and over 1.5 million Cubans have left the country. Since the US imposed an energy blockade in January 2026 and oil supplies from Caracas dried up following the abduction of Venezuelan President Maduro, the country’s utilities have collapsed: there are daily power cuts lasting for hours, water shortages, and runaway inflation. Massive secondary sanctions have effectively cut the island off from the international financial system. This crisis is the reason why Havana is now slaughtering several sacred cows – including the state monopoly on foreign trade, which Raúl Castro had once declared a red line. A remark by Juan Triana, newly appointed as a government adviser, on the 2021 currency reform now seems programmatic: “We were waiting so long for the perfect moment that we ultimately had to implement it at the worst possible time.” Or, to quote the saying attributed to General Máximo Gómez: “Los cubanos no llegan o se pasan” – Cubans either stop halfway or go too far.
In the private sector, SMEs will be allowed to grow beyond 100 employees and will then be classified as “private enterprises”; entrepreneurs will be permitted to run multiple businesses, the list of prohibited activities will be reduced from 125 to 55, and public limited companies will also be authorised. State-owned enterprises can be converted into public limited companies, with the state retaining a majority stake in strategic sectors. The foreign trade monopoly is being abolished, and all market participants will gain direct market access; foreign investors will be permitted to hire staff directly and acquire stakes in private companies. The minimum wage is rising from 2,100 to 3,110 pesos (around four Euros); the general subsidy by means of the Libreta benefit booklet is being gradually replaced by targeted transfers. The financial package is particularly dense: it allows for private banks under central bank supervision, a digital foreign exchange market with private currency exchanges, crypto regulation and – as the most drastic measure – the gradual devaluation of the overvalued peso, with the document stipulating that companies “that will not survive the devaluation will be liquidated”.
We were waiting so long for the perfect moment that we ultimately had to implement reforms at the worst possible time.
The fastest effects are expected from the opening up of the private sector – and implementation is already underway. Since 2021, around 12,700 SMEs have been authorised, though thousands of applications were still pending. Following the decentralisation of the authorisation process, over 3,000 new SMEs had been approved by the start of July; the total number rose by a good fifth to more than 15,200, and the procedure has been shortened to around 20 days. A decision has also been taken to introduce the new legal entity of the empresa privada with no size restrictions and allowing multiple ownership; a decree has been announced that will remove or mitigate restrictions on over 62 per cent of previously prohibited activities.
However, these new freedoms do not mean that opportunities are distributed equally: Management consultant and analyst Oniel Díaz Castellanos warns that the opening of previously restricted sectors such as energy, finance and tourism is attracting players with greater capital and those who do not already have capital, contacts, and management capacity risk being pushed out. Furthermore, the US embargo remains in place, and none of the 176 measures can lift it on its own.
Shaking Up Cuba's State-Owned Enterprises
The centrepiece and most radical part of the reform is the restructuring of the state sector. Cuba has around 2,800 state-owned enterprises employing 1.1 million people; many are at a standstill due to a lack of materials and are heavily in debt – as early as 2023, 278 state-owned enterprises were incurring permanent losses, while 80 per cent of all profits were generated by just 56 enterprises. The response to this dire situation is new and historically unprecedented: state-owned enterprises can be converted into public limited companies in which businesses, individuals, and foreign and Cuban-in-exile investors can acquire shares; the state retains a majority stake in strategic sectors.
The National Institute for State-Owned Enterprise Assets (INAEE) is responsible for oversight; it is clearly modelled on the Chinese SASAC (State-owned Assets Supervision and Administration Commission of the State Council) and reports to the Council of Ministers. It has now begun its work: President Roberto Ricardo presented 17 reforms – state-owned enterprises will set their own prices, wages and investment levels; a supervisory board (junta de gobierno) will reserve 20 percent of its seats for elected staff representatives; and the transformation is to be carried out via the Soberanía e-governance platform.
For the first time, there is an incentive for Cubans in exile to bring in capital as investment rather than merely as a transfer for consumption.
In the financial sector, hopes rest on the mobilisation of private capital and the formalisation of remittances from abroad; for the first time, there is an incentive for Cubans in exile to bring in capital as investment rather than merely as a transfer for consumption. Decree 153 has come into force for foreign investment: licenses will be granted after a review period of not more than seven working days, and soon direct recruitment without the involvement of a state agency will be legalised. But as long as US extraterritorial sanctions remain in force, private Cuban banks could also face prosecution.
The issue of agriculture is of vital importance, as Cuba imports around 80 per cent of its food; Former Central Bank economist Pavel Vidal told the BBC that he saw this as one of the areas with the greatest potential. Implementation is already underway: hectare limits and the 25-year time-limited usufruct co-use rights to land are being abolished; land use rights will be inheritable for the first time, including for Cubans who have emigrated but retained their citizenship; cooperatives will be permitted to import fuel and engage in foreign trade; and all stakeholders – the self-employed, SMEs, collective enterprises, foreign investors – will be able to apply for land use rights; processing requests is to be completed in just 15 to 20 days.
Economist Ileana Díaz remains reform-minded but sceptical: without a functioning energy supply, many agricultural measures would struggle to take effect – “the energy situation poses a real obstacle to implementation,” she writes in a Facebook post.
The retail sector illustrates just how much everyday life is already changing: four years after the legalisation of SMEs, over half of them are privately owned; in Havana, the “Mercado del Barrio” project is now trialling a public-private partnership to revitalise the ailing supply network using private capital and below-market prices.
Cuba's Role Models: China And Vietnam
For the first time, Díaz-Canel explicitly cited China and Vietnam as role models – yet the Cuban approach reveals a shift. From 1978 onwards, China adopted a gradualist course; major privatisations did not take place until later, and inflation remained under control. In 1986, Vietnam launched ‘Đổi Mới’, a ‘big-bang reform’ born out of crisis: famine, inflation of over 700 per cent and finding itself with its back against the wall forced swift action – a description that fits Cuba in 2026 with striking accuracy.
The clearest evidence lies at the heart of the reform: Vietnam’s “equitisation” – the conversion of state-owned enterprises into joint-stock companies – is virtually identical to the Cuban approach and even goes beyond the decidedly ‘Chinese’ reform blueprint that failed in 2023, in which there was no mention of share sales.
At the same time, the institutional vehicle, the INAEE, is inspired by the Chinese SASAC. A hybrid approach is emerging – Vietnamese pace and equitisation, combined with Chinese institutional architecture. Common to all these models is the retention of the one-party system: the reform is radical in economic terms, but not in political terms.
Regime Change And Other Threats
There is a remarkable consensus on the necessity of reform – from the media platform La Joven Cuba, which is socialist but still frequently criticises the Cuban government, to the heterodox economist Julio Carranza, most agree that years of inmovilismo have caused more damage than any reform could ever do. Success, however, is subject to three caveats.
The yardstick for the reforms' success will not lie solely in macroeconomic indicators, but in “how much dignity we manage to preserve and restore.
First, the sequencing: Carranza warns that Cuba is “facing a massive and very dangerous storm”; making a mistake in the order in which reforms are rolled out “could be irreversible”. Devaluations of the peso without prior stabilisation threaten to further fuel inflation. The reforms also require the amendment of over 100 legal provisions – which needs be done in the face of resistance from administrators fearful for their jobs.
Second,, external dependence: many reforms will only take effect once the US eases its sanctions or friendly states provide energy assistance. The pressure remains high – on the fifth anniversary of the anti-government protests of 11 July 2021, US Secretary of State Rubio threatened that Washington would “use all available means” to achieve its goals of regime change; on 10 July, the island once again experienced a nationwide blackout.
Third, oligarchisation: without transparency and effective oversight, the national wealth built up over generations risks falling into the hands of new networks of privilege.
On 16 July, the Council of State approved a decree-law on the state-owned enterprise system in which Parliamentary President Esteban Lazo reaffirmed the socialist state-owned enterprise as the “main actor” in the economy. After all, there is a great risk is oligarchisation: the non-transparent appropriation of public assets through insider trading. On this point, the verdict is unanimous across the political spectrum. Economist Julio Carranza warns that certain actors could use the reform to “enrich themselves unlawfully, as we have already seen in Eastern Europe”. Marxist analyst Michel E. Torres Corona considers the transformation of all state-owned enterprises to be “worrying”: “Anyone who abandons the state as the main owner is accepting the “minimal state” that has been fought against for decades.”
The government appears to be aware of the risk. Díaz-Canel announced that implementation would take place “in phases and on the basis of verifiable pilot projects”, and called on citizens to exercise oversight: “Trust us, but make demands. Join us, but keep us in check.” Whether this will be enough remains to be seen – especially as the most valuable assets remain outside the INAEE’s remit: the companies owned by the armed forces and the Ministry of the Interior will retain their “own characteristics”, and the military conglomerate GAESA has already relinquished key assets such as the Mariel container terminal following US sanctions.
Havana’s real strategic gamble extends beyond the economy: to drive a wedge between US economic interests and the hardliners around Rubio who are fixated on regime change. Anyone who is able to invest privately in Cuban property or markets in future will develop a tangible interest in an easing of tension – regardless of the rhetoric in Washington.
Whether this strategy will pay off remains to be seen. One thing is certain: the reform is a necessary, but not a sufficient condition for improving the precarious situation. To quote La Joven Cuba, the yardstick for the reforms' success will not lie solely in macroeconomic indicators, but in “how much dignity we manage to preserve and restore”. The water is already far too deep for any further cautious “feeling the stones” – Cuba must take the leap now.
