Viewpoints

Economic prospects for Cuba don’t look promising

KRT

Now that Fidel Castro is gone and the leaders of Canada, Mexico and other countries have made fools of themselves by praising the alleged accomplishments of a dictator who destroyed his country’s economy and executed thousands of people, it’s time to take a look at Cuba’s future. It doesn’t look good.

In theory, things should get better. President Raul Castro, 86, has proved to be more pragmatic than his older brother. He could have an easier time implementing the much-needed economic reforms that he announced at the VI Congress of the Communist Party in 2011 and that he vowed to speed up at the VII Congress earlier this year.

Raul Castro’s small steps toward a Vietnam-styled, state-run form of capitalism were slowed down because of resistance from Fidel, who remained a powerful figure behind the throne. Without Fidel, the hard-line “Fidelistas” would have less power to stop the reforms, the theory went.

But most economists now agree that Raul Castro faces a perfect storm of bad news that will make it difficult for Cuba’s economy to get back on its feet.

“Cuba suffers today its worst economic crisis since the nineties,” says economist Carmelo Mesa Lago, a professor emeritus of the University of Pittsburgh who is one of the world’s leading analysts of the Cuban economy. “The projections are that the economy will stagnate or decline in 2016, and that the situation will worsen in 2017.”

First, Venezuela’s subsidized oil shipments to Cuba, which kept the island’s economy alive in recent years, fell by about 40 percent during the first six months this year, according to a Reuters news agency report. Venezuela’s economy is in a shambles because of the decline in world oil prices and disastrous economic policies, and its oil subsidies to Cuba are likely to continue falling, experts say.

Second, Cuba’s exports of medical services – a kind of modern-day slave trade through which the Cuban regime sends tens of thousands of physicians to Venezuela, Brazil and Angola and pockets the bulk of their salaries – may be endangered. Venezuela has a hard time paying for these services, and Brazil’s new center-right government may not renew these government-to-government contracts.

Third, Cuba’s production of nickel and sugar is depressed because of low commodity prices and the destruction of the country’s industries over the past 60 years. And, thanks to Fidel Castro’s revolution, Cuba today imports more than 70 percent of its food.

Fourth, tourism – the island’s biggest hope since President Barack Obama’s opening to Cuba in 2014 – may decline if U.S. President-elect Donald Trump follows through with his Nov. 28 threat to “terminate” Obama’s deal with the island. The return of U.S. airlines and cruise ships filled with American tourists to Cuba over the past year had helped drive up foreign tourism.

“The most optimistic forecast for Cuba is that after a few decades of struggle and reorientation, it will end up at the income level of the Dominican Republic,” wrote George Mason University economics professor Tyler Cowen in the Miami Herald.

He added that while the World Bank estimates Cuba’s GDP at $6,000 per capita, that measure is based on an unrealistic exchange rate. Cuba’s real GDP is more likely not much higher than Nicaragua’s $2,000 per capita, he said.

“Had Cuba not had a communist revolution is 1959, it could have been one of the most successful Latin American economies,” Cowen wrote.

My opinion: Instead of praising a dictator who didn’t have the courage to compete in a free election in nearly six decades, the leaders of Mexico, Canada and other countries should have cited Cuba’s revolution as an example of a failed economic model, which is going from bad to worse.

If Trump plays his cards well – a big if – he will leave Cuba alone and not do anything that will give the Cuban dictatorship an excuse to roll back its timid reforms. Raul Castro is scheduled to step down in early 2018, and his successors may have to concede what the vast majority of Cubans have already concluded: that communism is the longest – and bloodiest – road between capitalism and capitalism.

Andres Oppenheimer can be reached at aoppenheimer@miamiherald.com.

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