With Fidel Castro stepping down and his brother, Raúl, officially assuming the reigns of power in Cuba it is important that we look at two factors which will influence the immediate future of the island: Raúl Castro himself and the United States. Raúl has long been an enigma to many Cuba watchers. Many characterise him as a hard-line ideologue, an ardent defender of the revolution and of the Cuban army. Yet he played a primary role in the pragmatic and capitalist-oriented economic reforms initiated after the collapse of the Soviet Union and its subsidies to the island. These reforms included the legalisation of the dollar, allowing foreign investment and joint economic ventures, the creation of free trade zones, the development of the tourist industry, allowing the return of farmers’ markets, and allowing self-employment in areas such as auto-repair and restaurants.

It is important to point out that Raúl’s close ties to the military and these economic reforms are inextricably linked: it came as no surprise that many of those selected to the Council of State last month were from the military. The internationalist mission of the Cuban army closed with the end of the Cold War and Cuba faced a problem: what to do with the soldiers coming home.

The solution was to put them to work in the economic sector – not unprecedented in Cuban history. The military or "Raúlistas" came to control or manage a vast business enterprise of agricultural companies in sugar and citrus, retail shops, computers and electronics, and tourism. They introduced capitalist business and accounting practices and sent military officers to Europe and Canada to study business and earn MBAs. Military leaders were also sent to Spain to learn hotel management. Perhaps more importantly, Raúl travelled several times to China to study economic policy and in 2003 Zhu Rongii—the architect of the capitalist boom in China—was invited to Cuba to give a lecture on economic policy.

When Fidel ceded temporary power in July 2006, Raúl moved carefully but steadily in the area of economic reform. Citing agriculture as the immediate economic priority, prices paid to farmers by the state were raised. Idle land formerly owned by the state was made available to private farmers and cooperatives. Farmers’ markets have become increasingly important. Just recently the more than 650 foreign companies in Cuba were allowed to pay their Cuban employees in hard currency.

With Raúl now enjoying full authority as President and with rising expectations of change among the people, it is imperative that he deliver the economic goods. Many believe that the Chinese model of economic liberalisation without political liberalisation could very well be the immediate future of Cuba. China has become the island’s second largest trading partner next to Venezuela and is the top importer of Cuban sugar and nickel. The Cuban economy grew by 7.5 per cent last year – the third straight year of rapid expansion based on nickel and premium cigar exports, tourism, and deep-water oil contacts. Cuba currently provides 36 per cent of its own oil needs, with Venezuela providing the remainder. China and several other countries have entered into agreements with Cuba to develop the North Cuban Basin – a significant deep-water oil and natural gas field in the Florida Straits just north of Havana. Although development of these fields will be several years away, should Cuba become self-sufficient or a net exporter of oil, the US and its embargo could become economically irrelevant.

It is clear that US policy toward the island will not change under President George Bush; but the institutional basis for a policy reevaluation or change is already in place. Both Hillary Clinton and Barack Obama have indicated a willingness to talk with Cuba under certain conditions. The debate over the US embargo is no longer dominated by the hard line anti-Castro members of Congress. Many conservative Republicans from western states are being lobbied by farmers and agricultural interests to find new markets for their products. These conservative Republicans have formed an alliance with liberal, northeastern members of Congress to bring an end to the embargo.

The group gained initial success with the passage of the Trade Sanctions Reform and Export Enhancement Act in October of 2000 which allows food and medicine trade with Cuba on a cash-only basis. Companies in more than 38 US states and the Navajo Nation have traded with Cuba since then. Large multinational corporations, such as Archer Daniels Midland, Time Warner and Caterpillar, and the US-Cuba Trade Economic Council are lobbying to end the embargo. The closest allies of the US—Canada and the EU—routinely trade, invest, and vacation in Cuba. Canadian and European tourists make up the largest number of visitors to the island each year. The tourist industry in the United States is literally “missing the boat” and has joined the agribusiness industry in lobbying the Congress to change the policy.

The once monolithic Cuban-American community in Florida is witnessing a generational divide concerning US policy. The younger generation is much more open to dialogue and ending the isolation of the island. As some of my Miami friends tell me: “The embargo is my father’s politics, not mine.” This split is even evident within the Cuban American National Foundation where the younger Jorge Mas Santos appears to be pursuing a somewhat more moderate course than his father did for the powerful lobby group.

Many pragmatists are also beginning to question the effectiveness of the embargo. The embargo is a blunt tool of US foreign policy that has failed to bring about regime change in Cuba. There are none of the US's governmental, business, social and cultural organizations on the island that historically provided the US not only with more ways to exercise its power but also the ability to exercise its power in more subtle and longer-lasting ways. In fact, one could argue that the use of “soft power” is precisely how the US dominated the island for nearly a century prior to Castro’s revolution. In sum, it is very possible that a change in US policy toward Cuba could occur should the next President come from the Democratic Party. This, coupled with the Raúlistas looking favourably toward a Chinese model of development, could bring economic liberalisation to the island.