On March 16th Oscar Pérez-Oliva Fraga, a great-nephew of Fidel Castro, appeared on “Mesa Redonda”, a state-television programme. He announced that Cubans living abroad would now be permitted to own businesses and invest in infrastructure on the island. (A nationwide power blackout during his appearance meant few Cubans heard what he had to say.) It was the second major concession from the regime in a matter of weeks. In February the government quietly began to allow private firms to import fuel, breaking the state’s long-held monopoly.
These reforms mark the most significant economic liberalisation since Fidel Castro first permitted limited private enterprise in Cuba in the 1990s. They have happened thanks to intense pressure from the United States. Cuba is not the flashiest target for gunboat diplomacy. It lacks Venezuela’s oil wealth, or Iran’s nuclear threat. But Donald Trump and Marco Rubio, his secretary of state, are focused on it nonetheless. Run by the same repressive regime since Fidel Castro seized power in 1959, Cuba is on America’s doorstep. The regime’s support for China and Russia, and the steady flow of Cuban migrants to Florida, have long posed a foreign-policy challenge. For Mr Rubio, a son of Cuban exiles, it is personal. Cuba, he has said repeatedly, must change.
In January American special forces snatched Nicolás Maduro from Venezuela and the Trump administration took control of the country’s oil output, which had previously been Cuba’s main source of energy. Since then the United States has besieged Cuba’s economy. It has blocked fuel shipments and coerced countries to expel Cuban medical missions, stanching the regime’s supply of foreign currency. The hope has been that the population will rise up and oust the regime from power, or that the regime will have no choice but to deal with the Americans on favourable terms.
Life in Cuba was already hard thanks to the regime’s disastrous economic ideology and the American trade embargo. Mr Trump’s new pressure campaign has made things harder still. In the deserted streets of Havana, the capital, residents must queue for hours each day to buy fuel. The shutters on empty state-run shops are closed. As the peso plunges on the black market, a typical monthly salary now buys barely a dozen eggs.
Before the blockade, Cuba consumed roughly 100,000 barrels of oil a day (b/d) and produced 40,000 itself. Half of the deficit, at about 30,000 b/d, was being shipped in from Venezuela at a steep discount. The rest, imported mainly from Mexico and Russia, stopped flowing in January after Mr Trump threatened tariffs on any country caught supplying the island. The last vessel to approach, a Russian ship carrying 200,000 barrels of diesel, turned away on February 28th.
The consequences have been dramatic. Airlines from Canada and Russia, which together send more tourists to Cuba than the rest of the world combined, have cancelled flights because there is no kerosene on the island for the return journey. Glitzy hotels along the coastline, built over the past decade by Gaesa, the military conglomerate that controls much of the economy, lie empty. Hospitals have cut services. At night much of the country lies in darkness. The consensus is that things are worse than during the “special period” in the early 1990s, when the collapse of the Soviet Union and the loss of its economic patronage plunged Cuba into recession.
Ordinary folk are suffering more than the regime. The number of protests documented by Cubalex, a human-rights group based in Washington, rose from 30 in January to 130 in the first half of March (see chart). On March 13th protesters ransacked a Communist Party building in Morón in central Cuba. But fears of reprisal like the mass arrests that followed protests in July 2021 keep many people quiet. Emigration is the preferred response. Since 2021 Cuba’s population has fallen from 11.2m to perhaps 8.6m. Some 80% of those who left were between 15 and 59 years old, leaving Cuba the oldest country in the Americas. A quarter of the population is over 60.
The regime is not an easy target. The Communist Party, the armed forces and the security services form a single interlocking system. It was built up over decades by Fidel’s brother, Raúl, during his long tenure as head of the armed forces. (He took over from Fidel as president in 2006.) Senior officers run the most lucrative parts of the economy through Gaesa. Intelligence operatives staff the foreign ministry’s North America desk, which manages relations with the United States. Power still resides with the Castro family: Miguel Díaz-Canel, the current president, publicly vowed at his inauguration in 2018 to defer to Raúl on all major decisions.
But America’s recent coercion has compelled the regime to talk, partly because of the loss of Cuba’s Venezuelan lifeline. Since the United States grabbed Mr Maduro, the Cuban regime for the first time in its history has had no patron left to turn to. On March 13th Mr Díaz-Canel went on television to acknowledge that his government was talking to the Trump administration. He looked strained, striking an uncharacteristically meek tone.
To understand the regime’s predicament, look at the economy. Cuba’s has long been one of the world’s strangest and poorest. The originally centralised, Soviet-reliant system has gradually evolved into a hybrid. In the late 1990s amid a deep recession prompted by the collapse of the Soviet Union, the regime grudgingly permitted limited self-employment. Taxi drivers, barbers, entertainers and others could work for themselves. In 2021, as the covid-19 pandemic slashed revenue from tourism, the role of private businesses was expanded (though still small and heavily taxed). The state-run economy is heavily degraded. It now runs in parallel with the private sector. Sugar exports, once the state’s mainstay, fell by 90% in the two decades to 2010 as a million Cubans emigrated.
The government still sets prices and owns most firms. It commands nearly all economic resources, which it stubbornly misallocates towards struggling industries such as mining and smallholding agriculture. Harvests are virtually non-existent. Exports, in 2022 dollars, fell by at least 75% between 2000 and 2025. That was driven partly by agriculture’s collapse. It accounted for just 15% of exports in 2025, down from 52% in 2000. As state profits have vanished, the central bank has printed cash to inflate away domestic debt, reducing the peso and state salaries to near worthlessness. According to several Western officials, Cuba drew in a paltry $9bn in foreign income in 2025, about a quarter of what was earned by Honduras, a regional peer with a similar population.
Part of Mr Rubio’s strategy has been to methodically attack each remaining source of dollars. The largest part, roughly $4bn in 2025, came from exporting Cuba’s excellent doctors. Cuba had some 20,000 medical staff working in countries from Italy to Jamaica at the start of 2026. Foreign hospitals must pay the Cuban government directly, with a pittance returned to the doctors as a salary. At least half were in Venezuela and have now been sent back to Cuba at America’s instruction. Mr Rubio has pressed at least 15 other countries to expel their Cuban medical missions. He has labelled the practice human trafficking, threatening sanctions and revocation of visas. Italy and Qatar, where an entire hospital is staffed with Cubans, have so far resisted. Poorer places like Jamaica, Honduras and Guatemala have conceded.
The fuel blockade has crippled the rest of the economy. Tourism, mining and manufacturing, which last year provided another $2bn in foreign currency, have collapsed. Cobalt, nickel and zinc exports were worth at least $600m in 2025; now Sherritt, a Canadian company that is the sole Western mining firm on the island, has suspended operations for lack of fuel. The only source of foreign income left untouched is the $3bn sent to the island in remittances every year. In any case, state-owned exchanges, which offer the current official rate of 460 pesos per dollar, have long been undercut by the black market, which currently pays around 500 pesos per dollar.
Attention has also been focused on Gaesa, the armed-forces business empire that owns Cuba’s biggest bank, most tourist hotels and its biggest shops. It is rumoured to be fabulously wealthy, diverting tens of billions of dollars for the Castro family and other power-brokers. The reality, apparent from a review of its accounts and conversations with several Cuban officials, seems more modest. Before America tightened restrictions Gaesa had barely a billion dollars in reserves. That figure is now falling fast, as its posh hotels lie empty. The conglomerate had pumped more than 70% of its investments into tourism in the past decade, a bet that has spectacularly failed. Cuba’s total foreign reserves are a closely guarded secret. Several officials estimate the central bank holds no more than $3bn. The Economist Intelligence Unit, a sister company of The Economist, forecasts that GDP will shrink by 7.2% in 2026. Against that, letting exiles invest in Cuba barely registers.
Juan A. Triana, a Cuban economist, says the regime’s two great mistakes were failing to reduce Cuba’s dependence on foreign patrons and rejecting deep structural reform. The restructuring of state enterprises, the creation of a credible monetary system and a functioning tax regime might have preserved the socialist model many Cubans still value. Not everyone wants a McDonald’s on the Malecón, Havana’s seafront promenade, but they do want an economy that functions.
The question is whether a deal with the United States can achieve it. The Cubans involved in the talks certainly have the power to make changes. Mr Rubio has been talking to Raúl Guillermo Rodríguez Castro, Raúl Castro’s grandson. The 41-year-old holds no official position, but as a trusted former bodyguard for his grandfather he has a hot line to him. Two other more experienced figures are also involved: Colonel Alejandro Castro Espín, Raúl Castro’s son and Mr Rodríguez Castro’s uncle, a key figure in secret Obama-era talks; and Josefina Vidal, a veteran diplomat who once ran the foreign ministry’s North America desk.
America’s clearest aim is economic. The outline is vague but likely to include giving American firms access to energy, ports, tourism and telecoms. Mr Trump has coveted Cuba’s hospitality market for decades; the Trump Organisation registered its trademark in Havana in 2008 for hotels, casinos and golf courses, and sent executives to scout sites in 2013. Mr Pérez-Oliva Fraga told NBC, an American television channel, that Cuba is open to a “fluid commercial relationship” with American firms.
In return, the Trump administration expects liberalisation: the removal of restrictions on the size of private firms, the opening of the banking system, and eventually even the dismantling of Gaesa’s monopolies. All this would require the United States to change its own laws, including those governing correspondent banking. Yulieta Hernández Díaz, who owns a small private construction firm in Cuba, worries that the main beneficiaries would be large American corporations that curry favour with the regime, while leaving local businesses at a disadvantage.
On the political front, American policy increasingly looks like a version of the face-lift given to the regime in Venezuela. People familiar with the talks say American negotiators are gunning for Mr Díaz-Canel. But forcing him out would be no real victory, since he is widely and openly derided as a “singao”, a Cubanism meaning something between “motherfucker” and “fuckwit”. He was installed by the regime precisely because he would not make drastic changes (his second five-year term ends in April 2028). Cuba has also agreed to release political prisoners: on March 12th it said 51 would be freed. That leaves more than a thousand behind bars.
Notably, the United States does not appear to be demanding action against Castro family members, who remain Cuba’s powerbrokers. A deal whereby a Castro wields real power from behind the scenes while a new figurehead holds office would be a “through-the-looking-glass” outcome, says Ric Herrero of the Cuba Study Group in Washington, which advocates engagement with Cuba’s government. Mr Trump has said nothing about democracy or political liberalisation. Nor has Mr Rubio.
Whether the Trump administration can use the threat of economic and military coercion to steer Cuba as it wishes is unclear, even though its leverage is far greater than Barack Obama had when he negotiated an opening in 2014. Cuba’s regime is much weaker, its main patrons are gone, and the new blockade gives America the power to ruin the island. “They are over a barrel,” says a former American official close to the negotiations. “They are going to do what it takes to save their necks.” Federal prosecutors in Miami have been ordered to build criminal cases against Cuban leaders, providing yet another cudgel.
The Castros may think they can use dialogue to avoid a reckoning, wagering that Mr Trump’s power will wane after the American midterms in November. That would be a failure to understand how dire their situation is, says one regional diplomat, even if the current American pressure wanes. Mr Rubio, who has built his political career on his hard line against the regime, and who some betting markets now have as the most likely next president of the United States, seems willing to be patient. In February he laid out a vision of gradual transformation. “Cuba needs to change,” he said. “It doesn’t have to change all at once.” But he does not yet sound satisfied with the regime’s offerings. On March 17th he said the announcements a day earlier were “not dramatic enough…It’s not going to fix it,” he said.
Mr Rubio will have to keep an eye on the Cuban-Americans who helped him rise to power. Any route to the presidency probably runs through them. They are suspicious of any transitional deal. The prospect of being allowed to take part in Cuba is “tremendously exciting”, says Joe Garcia, a Miami-born Cuban-American former member of Congress. But he, like others, does not trust the regime to honour any promises. “It’d be crazy for anybody to go and invest their money” there, because the government could change the rules at any time, says Bryan Calvo, the Cuban-American mayor of Hialeah, Florida’s most Cuban city. When the regime feels strong it suffocates private business with new regulations or arbitrary audits.
Three Cuban-American members of Congress—Carlos Giménez, María Elvira Salazar and Mario Díaz-Balart—have staked out harder positions still, insisting that nothing short of regime change and an exit of the Castros would suffice. “We haven’t fought for 67 years, with prisoners and deaths, to earn the right to invest under the rules of a communist regime,” says Marcell Felipe of the Museum of the Cuban Diaspora in Miami.
In Miami, on the night Mr Trump began bombing Iran, a convoy of pickup trucks draped in Cuban flags and Trump 2024 banners blared “Iran now, Cuba next” from loudspeakers. In Havana, a woman born in 1959, the year of Fidel Castro’s revolution, says she will not let herself believe that change will come. “It is like the line on a dying patient’s screen,” she says. “Just gradually failing.” Mr Trump promised to strangle the regime. Now he is poised to make a deal that keeps it in place. He may keep a boot on the regime’s neck. But how likely is that to lead to a truly beneficial transformation? ■
Correction: This piece initially misstated the rate offered by state-owned exchanges. This has been fixed.
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