VZCZCXYZ0004
OO RUEHWEB

DE RUEHUB #0197/01 0901133
ZNR UUUUU ZZH
O 311133Z MAR 09
FM USINT HAVANA
TO SECSTATE WASHDC IMMEDIATE 4282

UNCLAS HAVANA 000197

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: OREP PGOV PREL PINR CU
SUBJECT: SCENESETTER FOR VISIT OF CODEL LEE/KILPATRICK

REF: HAVANA 195

CORRECTED COPY - CHANGES MADE TO PARA 5 BELOW. THIS MESSAGE
REPLACES REFTEL, WHICH SHOULD BE DESTROYED.

¶1. (SBU) SUMMARY: Codel Lee/Kilpatrick will be arriving in
Cuba at a time of slow motion and sometimes contradictory
change. Raul Castro has now consolidated his power. The
Cuban economy has many serious weaknesses that can only be
addressed through bold, innovative, and immediate action.
There is, however, no indication that the current government
intends to take such action. End Summary

CHANGES IN CUBA

¶2. (SBU) Following cabinet and other leadership changes in
early March of this year, the ruling inner circle is now made
up entirely of individuals who are known for their loyalty to
Raul Castro and/or their experience as military officers.
The result is a much older governing group, but one which is
likely to respond well to Raul Castro when he demands greater
discipline and efficiency within the government and society
alike. The reforms already announced by the Raul Castro
government, and any more that are expected in the short term,
will likely follow an already established pattern. They
will tend to decentralize activities and devolve decision
making tasks to the provincial and municipal levels. To the
extent possible they will reduce the number of steps that
need to be taken within the government to achieve a desired
goal. They will not, however, seek to change the fundamental
nature of the current Cuban system of state control over the
means of production and distribution. As such, they are
unlikely to be able to address the contradictions within the
system which tended to make it inefficient in the first
place. Execution of policy will be decentralized, but
development of policy will remain the sole purview of the
inner governing circle. Fidel Castro continues to wield
significant moral authority through his occasional
"Reflexiones" pieces in the official press. Many of these
pieces appear to be more of a hindrance to action by the GOC
under Raul than of any support. The true state of Fidel's
health is unknown. The next possibility for change in Cuba
may come with the Sixth Communist Party Congress which is
supposed to take place later in 2009. If Raul has any real
reforms up his sleeve, the PCC Congress may give him the
political legitimacy to carry them through.

ECONOMIC AND POLITICAL SITUATION

¶3. (SBU) Economically, Cuba is not being affected directly
by the world financial crisis since it does not participate
in the world financial network in any significant way.
However, the subsidiary effects of the financial crisis will
probably begin to be felt later in 2009, as revenues from the
sale of Cuba's principal export product--nickel--remain weak
as world demand for stainless steel and other products
requiring nickel declines. The world financial crisis will
also probably hit Cuba's tourism sector hard as Europeans in
particular have less to spend on foreign travel. Finally,
the steep decline in the price of petroleum will make it more
difficult for Cuba's primary patron state, Venezuela, to
continue to subsidize Cuban petroleum needs or provide other
financial support. Each one of these problems alone would
create a significant challenge for the GOC, but added to them
the effects of the three major hurricanes that struck Cuba in
late 2008 and caused damage estimated at almost 20 percent of
GDP must be considered. The GOC has not been able to do
anything significant to repair the damage done by the
hurricanes. Cuba's already poor credit history keeps it
from attracting the financing necessary to carry out
hurricane repair work and advance the economy at the same
time, especially in a world atmosphere of much tighter
credit. The GOC under Raul has shown no inclination to open
up the moribund political system in Cuba. Civil society
groups continue to try to organize, but effective GOC
repression of their activities keeps them on the margins.

FOREIGN POLICY

¶4. (SBU) GOC foreign policy has focused on a largely
successful effort to build support for its position vis a vis
the U.S. government among other countries in the world,
especially among the Europeans and Latin Americans.
Regarding the U.S. itself, at the moment the GOC appears to
be taking a wait and see attitude about the Obama
administration. The GOC may hope for some adjustments in
U.S. policy toward Cuba that will make its life easier, but
it should not be expected to initiate any positive steps in
that direction.

¶5. (SBU) We have taken several steps to broaden contacts
with the people of Cuba. In addition to the legislated
changes on travel signed into law by the President, Cuba is
being included for the first time in two scholarship programs
for study in the United States. We also have offered to
relax the travel restrictions on our respective interest
sections, and await a GOC response.
FARRAR