Cuba’s Reforms in 2026: Breaking Point or Adjustment?
By Tamarys L. Bahamonde
Tamarys L. Bahamonde is an economist and public policy expert that studies Cuba’s bureaucratic structure and decision-making during reforms. Dr. Bahamonde is Assistant Professor at the City University of New York (CUNY) and a Research Fellow at the Center for Latin America and Latino Studies (CLALS) at American University.
The Cuban government recently announced a new reform¹ that includes 176 proposals and policy goals covering essential areas of the economy, finances, and society. The reform comes at a time of systemic crisis that has resulted in increased precarity and poverty, worsening energy and food scarcity, and infrastructure collapse. In addition to the already existing crisis, the U.S. government has hardened its policy toward Cuba since January 2026, including an oil blockade on the country. The hostile external conditions have compromised the Cuban government’s ability to cope with the already dire situation. The current situation, a combination of the Cuban government's administrative and governance shortcomings and the increased pressure exerted by the Trump administration since January, threatens the survival of Cubans. Since the US conditioned the lifting of sanctions on the Cuban government's willingness to introduce meaningful economic and political changes, it is not far-fetched to assume that the latter had been a catalyst for reforms.
The package is organized around twenty-three pillars covering areas such as modifications to state and non-state enterprises, finance and banking, agriculture, public administration, and labor. Many of these issues are not new. Previous reform efforts have addressed most of them to varying degrees, and several proposals represent either long-discussed policies or incremental expansions of existing measures. The collapse of the socialist bloc in the 1990s triggered one of the deepest crises in Cuba’s modern history and gave rise to a recurring pattern of crisis-reform-counter-reform that has shaped policymaking for more than three decades. In general, decision-makers introduce reforms when economic, financial, and social conditions become so dire as to trigger a political crisis. Then, as soon as the economy shows signs of bouncing back, policymakers often reverse course or slow the implementation of those changes. This history helps explain the skepticism of experts, investors, and citizens who remain cautious about the current reform process because there is no indication or guarantee that this time will be different.
Yet the current package may differ from previous reform cycles in both scope and ambition. It introduces significant changes to the financial and banking systems, as well as greater flexibility in foreign investment and trade. For example, some measures authorize the creation and operation of non-banking financial institutions on the island. Another proposal eliminates intermediaries in labor contracts involving foreign investors, a long-standing demand of experts and citizens alike. The package also seeks to streamline foreign investment and trade by reducing approval and application procedures. In addition, it de-concentrate certain administrative and fiscal functions to municipalities, with the stated goal of increasing local autonomy and improving efficiency.
However, although extremely needed, the reform comes at a time when its success will be hindered by several domestic and external obstacles. On the domestic front, the demographic crisis caused by low birth rates, an aging population, and mass migration among younger generations in recent years has led to a scarcity of human capital needed to push for a transformative reform. Additionally, collapsed infrastructure and distrust in institutions and the government have increased the risk of investing in Cuba.
In addition, there are no announced political reforms to accompany the process. For instance, Cuba needs competitive elections in local governments, changes to the system for nominating provincial governors by the President of the Republic, and a transformation of the Parliament into a more democratic structure, for example, by removing the Candidature Commission that decides who is and who is not in the race for deputies. Some intermediate administrative structures remain intact within state-owned enterprises, such as Higher Organizations of Enterprises’ Management (OSDEs)², which implies that there will be no changes to GAESA, the military consortium that controls a significant portion of Cuba's financial and economic assets with little to no oversight or transparency.
At a critical moment of persistent decline in living standards and increased poverty, social policies do not seem to be a priority in the announced program, especially compared with other sectors such as banking and finance, where the government has made more concrete proposals. In social policy terms, the measures are closer to policy goals than policy alternatives. Social policies require clear goals, funding sources, and allocation strategies. Rather than offering a transformative proposal that improves the effectiveness of social policies, Pillar 8 of the proposed reforms mostly expands the private sector's participation in social areas, such as tax breaks for contributions to social programs or hiring people with disabilities. Those are good complementary policies, but Cuba also needs policies that center the attention on the people in need. What is the plan for Cubans in extreme poverty, children suffering from food scarcity, labor displaced as a result of state-sector downsizing, and all other vulnerable populations: the elderly, women, and people of color? Will the government allow unions to detach themselves from government control? Will the right to strike be legally approved in a context of growing private investment and labor violations?
Policymaking requires following a series of steps that begin with identifying the problem(s) to address, the target populations, and the criteria for evaluating the policy. Cuba’s program lacks a clear roadmap to identify policy priorities, goals, and timeframes.
Externally, the reform would require a drastic change in U.S. policy toward Cuba, specifically dramatic amendments to Titles I and II of the Helms-Burton Act, which codify the U.S. embargo on Cuba, as well as the removal of secondary sanctions on foreign entities doing business in Cuba. Current restrictions prohibit access to U.S. markets, making many of the proposed changes, including investment by the Cuban American diaspora, challenging to implement under current law. For economic reforms to be effective, the US would also need to modify Title III, which allows U.S. nationals to sue companies that bring in property confiscated after the Cuban revolution. This practice greatly increases the risk for foreign investors, deterring them from investing in sectors that Cuba urgently needs to overhaul. These major changes are also impossible without a massive amount of capital, which the Cuban government lacks.
The country also requires the willingness of foreign investors and Cubans living abroad to actually move their capital investments into the island. Finally, the reform package places unprecedented expectations on the Cuban diaspora. Several measures seek to attract capital, entrepreneurship, and investment from Cubans living abroad. However, mobilizing diaspora resources will depend not only on regulatory changes but also on credibility, legal certainty, and confidence that reforms will be sustained over time.
The history of fragmented, inconsistent reforms in Cuba has taught us that a reform, to be effective, should be systemic. It means being rounded and broad, and working on as many fronts as possible, even if they are introduced step by step in the reforming process. It also means identifying clear priority areas and being transparent as to what constitutes an emergency and why. In 2024, I suggested that any successful reform should also include political changes.³ Cuba’s current proposal, like others in the past, lacks a holistic and integrated approach, and its success will depend on the already mentioned external factors, beyond the control of the Cuban government.
On the other hand, the focus on economic and financial aspects excludes essential areas that also need urgent attention: labor rights, social protections, and political transformations, to mention just a few. To finish my analysis in that direction, I want to cite the final words of my dissertation on government decision-making in Cuba: “Our societies are, ultimately, built over the decisions we make, and often too, over the ones we continuously avoid making. This dissertation provides a cautionary tale for future and current policymakers in Cuba: we either learn from our past behavior to correct the future, or we might find ourselves repeating, like in a vicious policymaking cycle, the eternal loop of crises, reforms, and counter-reforms.”⁴
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¹For the sake of the argument, we will call these new measures “reform” but their true reformative nature will be understood better with time and policy implementation.
²Higher Organizations of Enterprises’ Management (Organización Superior de Dirección Empresarial in Spanish)
³Tamarys L Bahamonde, “The Cuban State Decision-Making Process during Reforms (1990-2018)” (Doctoral Dissertation, University of Delaware, 2024), 423, https://doi.org/10.58088/q8qy-br02.
⁴Ibid., 424–25.
