The Caribbean’s economies are expected to improve this year on the back of growth in tourism, but the economic climate remains frail with the drop in oil prices proving a mixed bag for countries in the region.
CUBA: Beyond Cigars And Tourism
Cuba may be on the verge of something big. In the thawing of its diplomatic and economic relations with the United States, there is the promise of an expansion of its private sector that goes well beyond the process started since Raul Castro took power. But do not ask Cubans whether they consider it likely that their economy—the largest in the Caribbean region—will become richer as a result of its new-found accord with the United States. They learned skepticism the hard way during years of twists and turns in the country’s economic policies, said Ted Henken and Archibald Ritter during a presentation of their book, Enterpreneurial Cuba: The Changing Policy Landscape, in New York in April.
These days, almost 25% of Cuba’s labor force works in the private sector, including small businesses, farms and cooperatives. Like Raul Castro, Ritter, a research professor at Carleton University in Ottawa, believes that there is no going back now for Cuba in the wake of its new entente cordiale with the US. A temporary legal reform of cooperatives is expected to become permanent as the state is transforming some small state business sectors—from transportation to hairdressing—into cooperatives. “The policy will be stable for a period of time until Raul leaves the scene, states Ritter.
But what will happen in 2018 when Raul Castro’s second term ends? Expectations that it could mark the end of the Castro era in Cuban politics are uncertain. Since US president Barack Obama restored diplomatic relations with Cuba last December, some chartered flights have commenced between the island and its largest neighbor. However, mass tourism still appears to be a distant prospect, as only qualified travelers, including journalists, members of humanitarian missions and people with family ties in Cuba, are allowed into the country until Congress approve a US-Cuba accord—a tricky step, given that Congress is at odds with the president over this rapprochement. [As Global Finance went to press, president Obama announced plans to remove Cuba from the list of states that sponsor terrorism.]
Anticipating a boom in tourist demand though, Airbnb, the home and room rental company, listed in April more than 1,000 accommodation alternatives in Cuba, ranging from colonial homes near the Malecón, a broad esplanade, roadway and seawall which stretches for 8 km in Havana, to villas with private swimming pools in Santa Maria del Mar, a sandy beach situated 12 miles east of Havana.
Economists expect that interest from the United States will encourage growth in tourism and the economy. Marla Dukharan, group economist for Royal Bank of Canada’s Caribbean operations in Trinidad and Tobago, sees an expansion of up to 3.5% in Cuba’s GDP for this year, from estimated growth of 2.8% in 2014. There is, however, the risk of a slowdown in Cuba’s major political ally, Venezuela.
But the real question for Cuba is whether it will be able to expand beyond tourism into an emerging economy that can attract interest from abroad. Good options, according to Ritter and Henken, are Internet coding and programming. “It is ironic,” said Henken, “because Cuba has the worst Internet connection in the world but a very good coding school.”