Fueled in particular by thriving exports of medical and other professional services under a comprehensive deal with Venezuela (involving large supplies of Venezuelan oil to Cuba) and, to a lesser degree, sizable revenues from nickel exports and international tourism activities, Cubas GDP grew 11.2% in 2005, 12.1% in 2006, and 7.3% in 2007. Above all, Cuba continues to suffer from all the inefficiencies, red tape, and distortions of its state-dominated and overly centralized economy. The ratio of gross capital formation to GDP, remarkably, was 25.6% in 1989, but since then it has never surpassed 15% and actually averaged only 10.4% between 2000 and 2019. All agreed that barriers to trade between Cuba and the United States specifically need to be broken down in order to create opportunities for increased agricultural production. One attempt to address this is the Foreign Investment Act No. Figure 3 provides annual data for the 2014-2020 period on Cubas hard currency revenues from key sources like exports of professional services, remittances, merchandise exports, and international tourism. 2019. It represents a departure for Khan, and also for his voter base. The government should employ new strategies to utilize those assets more productively and efficiently. Havana: ONEI. If Cuba is able to engage in knowledge sharing, employ new technologies, and then roll them out to the population with similar speed, the country could make great leaps in its energy sector over a very short period. Needless to say, the adverse economic consequences of the new coronavirus (Covid-19) pandemic have added another major problem. Meanwhile, Cubas revenues from the services of its professional workers in Venezuela also declined. But as one expert noted, vegetables are frequently seen as just garnish, which reduces their demand and profitability. Access to land is not the problem; the Cuban government began encouraging sustainable agriculture during the Special Period of the 1990s to increase production and Cubas land tenure laws are very advanced. Recommendations. 2020. Cuba also has a well-educated population, strong civic culture, well-designed laws and regulations, and a government work force that is capable of executing polices once the government has approved them. Exports of goods and services jumped from $5.6 billion in 2004 to $18.6 billion in 2013, but they have decreased considerably since then to $12.6 billion in 2019. Main takeaways were the need to show respect and patience for the Cuban way of doing business in order to establish a working relationship before projects can be approved. To do so, the country will have to emerge from its current state of economic stagnation, heavy reliance on imports, unsustainably low state wages, and ongoing brain drain. 2020. They identified three key facets of sustainability (social, economic, and environmental), which should be considered in relationship to each other when developing policy. As a result, many small Cuban private entrepreneurs went out of business for lack of customers and earnings. Moreover, Cubas external environment has deteriorated markedly due to the economic (and political) crisis in Venezuela and because of President Donald Trumps efforts to roll back the U.S. policy of engagement toward Havana initiated by Barack Obama. One expert pointed out that there is no success story for investors to look to when considering Cuba, and for the U.S. in particular, investors are unlikely to invest in a project that they are unable to visit. In sum, Trumps punitive measures reduced visitor flows and remittances to Cuba, hindered oil shipments to Havana, and hampered Cubas ability to obtain external credit and attract foreign investment (Mesa-Lago and Svejnar 2020). Remittances, an Investment Route for Cubans? The Havana Consulting Group, September 27, http://www.thehavanaconsultinggroup.com/en-us/Articles/Article/69. Paolo Spadoni is an Associate Professor in the Department of Social Sciences at Augusta University. 2017. One expert argued that if Congress wont lift the full embargo, focus should be placed on lifting restrictions to agricultural financing and tourism. In 1993, the government restructured half of state-owned land into private cooperatives called Basic Units of Cooperative Production, which are member-owned and member-managed under usufruct rights. Havana: ONEI. Cubas National Development Plan has already established a goal to increase renewable energy sources to 24 percent of the islands energy production by 2030. He received his PhD from the Department of Political Science at the University of Florida.  Mercy and Money; Cuban Doctors, The Economist, April 4, 2020. The Cuban economy indeed suffers primarily from severe structural problems. Even the long-awaited monetary and exchange rate unification, albeit needed, is a complex process that carries the risks of generating high inflation and hurting many Cubans. Internally, the government has now granted licenses to over 500,000 self-employed entrepreneurs (cuenta propistas) and nearly 500 cooperatives, providing opportunities for increased individual income as well as government savings due to the decrease in state employment. Cubas annual trade balance in goods and services regularly ran deficits between 1990 and 2004 as rapidly expanding tourism revenues failed to offset a rising merchandise trade deficit. Moreover, investors should not expect to speak with the highest-ranking official right way (requesting a meeting with a specific person can spell disaster for a project). This is not to say Cuba hasnt made some progress. On April 6, 2017, the Brookings Institution and RISDoC co-hosted an experts seminar titled Sustainable Development: The Path to Economic Growth in Cuba, which focused on Cubas long-term sustainability planning, building on the discussions that took place during Brookingss May 2016 conference Opportunities for Sustainable Development in Cuba. The discussion focused on three main themes: Cubas economic response to changing regional and global contexts (including normalization with the United States), sustainable agriculture, and renewable energy.
However, the 300 permitted categories for cuenta propistas are still limited. Havana: ONEI. Cubans want to get to know the people they are working with having coffee or drinks with new partners is a key element of establishing trust. In the case of cooperatives, the majority are located in Havana (limiting this source of economic growth in other cities), and many have been converted from state-owned businesses rather than creating new enterprises. On April 6, 2017, the Brookings Institution and the Research Initiative for the Sustainable Development of Cuba (RISDoC) co-hosted "Sustainable Development: The Path to Economic Growth in Cuba," a daylong, experts seminar, which focused on Cuba's long-term sustainability planning. Opportunities. Annual results similar to that of 1989 are required to reverse the decapitalization of key sectors and spur adequate rates of economic growth (Prez Villanueva 2017). It was only after 2004, when exports of professional services rose steeply, that the overall trade balance began to post surpluses, though not every year. Experts are increasingly convinced that peer-to-peer relationships between Cubans and Americans are a more effective route to expanding bilateral relations for increased development on the island. In closing, one expert pointed to the success of Cubas earlier citrus industry as an example of how agricultural production can be scaled up to provide for domestic consumption and imports. Finally, the third panel discussed the Cuban governments goal to substantially increase renewable energy sources on the island by 2030 and pointed to Cubas existing energy infrastructure and an abundance of potential knowledge sharing as key assets that should be utilized to achieve that goal without reinventing the wheel.
In need of deep structural changes, the islands socialist system can serve neither as an effective tool to unleash productive forces nor as a model to foster actual development. Primarily due to the negative effects of the coronavirus global pandemic, Cubas GDP is estimated to have shrunk by around 11% in 2020, which is noticeably worse than the average result (-7.7%) in Latin America and the Caribbean (MEP 2020; CEPAL 2020). Confidence building is key to this process as well. Recent reports of food shortages caused, at least in part, by increased tourist demand have renewed attention to agricultural production in Cuba. Havana: MEP. CEPAL (Comisin Econmica para Amrica Latina y el Caribe). Yet, since the end of 2019, as cash shortages intensified due to toughened U.S. sanctions as well as declining foreign exchange earnings and international reserves, Cuba has once again struggled to pay its debt to overseas companies and creditor countries. 2017. They were later denied Cuban government authorization to proceed. Business in Cuba can still get bogged down because a single piece of the supply chain is unavailable; efforts at sustainable development need to address this problem. Experts agreed that the Cuban government should prioritize sustainability to provide long-term solutions to its current growth problems. Venezuelas merchandise bilateral trade with Cuba was around $2 billion in 2019, less than one-fourth its level of 2012. Experts pointed to collaboration and idea exchange as key factors in promoting sustainable growth, specifically creating space for collaboration between the Cuban government, academia, businesses, and NGOS to share their experiences of development. These include a large merchandise trade deficit, excessive trade concentration in terms of both products and markets, vulnerability to external trade shocks (particularly to international price swings), and overreliance on export activities with low cross-sector spillover effects. As the Cuban economy develops, will it be able to leap-frog industrialization and move straight to more sustainable models of development, or will it follow a more traditional path? [Mr. Khanascended the political ranks with the support of the countrys powerful military so] his anti-establishment stance, in particular, is notable. It also generated hidden subsidies and produced distortions in almost all economic measurements to the point that it was virtually impossible to gauge the true profitability of enterprises. Additional recommendations included: 1) increasing government transparency as a first step toward a relationship with the IFIs; 2) attracting increased investment (particularly FDI); 3) diversifying exports; 4) producing exports at globally competitive prices; 5) decentralizing the management of state-owned enterprises; 6) investigating opportunities for microcredit through the IFIs; and 7) promoting urban cooperatives. Get foreign policy updates from Brookings, Security and Strategy, Foreign Policy, The Brookings Institution, Strobe Talbott Center for Security, Strategy, and Technology, The COVID-19 travel shock hit tourism-dependent economies hard, Cubas economy after Ral Castro: A tale of three worlds, The Obama Administration and the Americas, An American perspective on the role of Taiwan in US-China relations.