How much economic potential does Cuba have?

I’m not one of those who thinks Cuba is the next Singapore or even the next Puerto Rico.  Why not?

I’m willing to assume that the end of the American embargo will mean some kind of economic liberalization over the next ten years.  But how much good will that bring?

We could start by looking for relevant comparisons.  We could ask how well have non-British-ruled, non-Dutch-ruled, non-American-ruled Spanish-speaking Caribbean islands done?  There is a fairly clear example of such a country with some ethnic, cultural, historic, and linguistic similarities to Cuba, namely the Dominican Republic.  For non-PPP-adjusted gdp per capita, the D.R. clocks in at about $5800 per year.  And that is about where I think Cuba will end up, after a good bit of turmoil.

Now various official sources put Cuban per capita gdp (again, non-PPP-adjusted) at about that same level.  That is highly misleading, and yes I have been to both countries.  (Other countries at that level don’t have so many hungry people or so many women selling their bodies to tourists.)  In any case I expect Cuban reforms, along with a good bit of additional deindustrialization from U.S. competition, to bring a short-run gdp dip, with an eventual climb into a D.R.-like economy, albeit with big bumps along the way.

Here are a few additional points:

1. The Caribbean in general has done very poorly since the economic crisis of 2008.  Most of it does not show signs of bouncing back.

2. The short-run trends for foodstuffs are not so great.  The major agricultural exports are sugar, citrus, fish, cigars, and coffee.  Sugar is by far the most important of those, and right now the sugar price is well below half of its 2011 level.

3. Cuban industrial production is below half of its 1989 level (pdf, p.8).

4. National savings and investment rates are at about ten percent, well below Latin American averages (pdf, p.8).

5. I don’t in general buy “brain drain” arguments, but they do sometimes apply to islands and for historical reasons they are especially likely to apply to Cuba.  Many of the most talented Cubans were encouraged to leave, or managed to leave, and staying in Miami will be better than going back for a long time to come.

6. Cuba has some of the best beaches in the Caribbean, but I expect most of those returns to accrue to land and capital, not labor.

7. Cuba already imports 30% of its food from America.  Note that sum has been falling lately, as Cuba seeks cheaper alternatives, such as food from Vietnam.  Post-liberalization, trade with America will go up a good deal but we are not starting from zero under the status quo.

8. Cuba is inheriting some very serious problems with institutions, and that is assuming they manage to move away from communism.  In my admittedly limited experience, a fair number of Cubans still believe in communism, while also thinking the revolution somehow went astray.  Emmanuel Todd has argued that Cuban family structures make the country susceptible to authoritarian rule.  I consider that speculative, but still communism has had a long shelf life there, well past the fall of the Soviet Union, so let’s not dismiss it out of hand.  The country also had a notable history of instability well before the Castro revolution.  It is hard to be optimistic on this front.

9. Cuba seems to depend a good deal upon…Venezuela.  Is that an asset you wish to hold in your portfolio?

10. Foreign investors can hire Cuban labor only through a state employment agency, and no this has not led to a form of efficient offsetting power, rather it has kept productivity low.  More generally, this long Brookings study of FDI in Cuba (pdf) shows how difficult the environment is for foreign capital.

11. Costa Rica has far, far better institutions than Cuba and still it is relying on agriculture and tourism.

On the bright side:

12. The island has significant reserves of nickel and cobalt, top five in the world for nickel by many estimates.

13. Literacy is high, probably higher than in the United States, and there is a functioning social health infrastructure which reaches a high percentage of Cubans.

14. Circa 1959, the book value of U.S. capital in Cuba was three times higher than in the rest of Latin America combined (pdf).

15. The Cuban diaspora may nonetheless kick in as a source of talent and investment.

I’m not a super pessimist on Cuba, I just think they will need a long time to get to the point the Dominican Republic is at today.  Being “the next Costa Rica” seems for them impossibly far off.

Comments

I beat you, Sr. Lopez!

@Viking--but I will reply to you Viking, and get my post read that way! Check and mate!

I've been to Cuba several times and what Tyler says is 100% true. Another factor not mentioned by TC: demographics. Due to a stagnant economy, compared to Mexico, the birth rates in Cuba for the last two generations have been low, and Cuba is demographically a very old country (a country for old men, unlike their neighbors, Mexico, which is no country for old men). Cuba is about the same demographically as in the USA. Look at the crucial age 14 and under age population ratio at the CIA World Factbook--I always look at this number when I consider where I will settle and live, that's why I choose the Philippines (PH). BTW for me an alternative to the PH would have been Guatemala (too violent) or Africa (could not quite find a decent country in that vast continent, though I actually considered Zimbabwe since I know some people there).

Ray Lopez,

In Africa I'd advise: Botswana. Good institutions, not violent but very high HIV prevalence rate.

Alternative: If have money to invest in tourism and have no problem with living in a small archipelago, go to Cape Verde. South Africa is a great place too but a bit violent. However, Cape Town is one of the most beautiful cities I've been to and if you like wild life, Southern Africa is the place to be because South Africa, Namibia and Botswana have the best parks, IMHO, much better than East African ones (Kenya and Tanzania).

@JC-thanks. Right now I'm good here in the PH, found a girlfriend and will try my luck here, but visiting Africa and Antarctica are two dreams of mine.

I'd take a look at Sri Lanka, I've had a number of friends go there for holidays, honeymoons etc. and they rave about it.

Tell us more--what kind of girlfriend?

How old is your girlfriend? Is she older than you?

From the 14 and under demographic.

Damn you, msg

Actually IMO ol' Ray here isn't a pedophile, he just likes 18-21 year old hookers. And it's really more of a paid mistress situation I'm sure he pays her enough to not have to share her.

Cape Verde strikes me as good: relatively stable and peaceful, developing, institutions in decent (for Africa) shape, good weather. But I am Brazilian, so I am partial to her, we share the Portuguese Colonization legacy.

Cuba has a sizable coastline relative to its area. Tropical interior lands typically aren't worth much, tropical coastlines cooled by sea breezes and relatively close to New York, Atlanta, and Houston ought to be worth something.

My impression is that Cuba was the jewel in the crown of the Spanish Empire and tended to get better quality settlers than Dominican Republic or Puerto Rico. For example, Cuba had one of the most famous chess players of all time. (What fraction of their descendants are already in Miami is a question I can't answer yet.)

@SS - yes, when I was in Cuba I noticed houses had two portraits hanging on the wall: one was of Che Guevara, and the other was of Jose Capablanca, the famous chess grandmaster of the turn of the last century. Today GM Dominguez of Cuba is in the Top 30 in the world. However, I did not see chess players on every street corner in Cuba, unlike here in the Philippines. Mostly they played baseball, swam, and played cards, and drank rum.

tended to get better quality settlers than Dominican Republic or Puerto Rico.

Per the World Bank, Puerto Rico is more affluent than Cuba, the Dominican Republic, or Spain, Jose Capablanca notwithstanding. The problem in Puerto Rico is not poverty, but street crime.

PR's success has nothing to do with the quality of its settlers and everything to do with the outcome of the Spanish-American war. Even just being on American Social Security Disability yields a per capita income far in excess of Cuba and the DR and not much below Spain. PR's prosperity is due largely, if not entirely, to Washington.

PR’s prosperity is due largely, if not entirely, to Washington.

North of 40% of the value-added in Puerto Rico is in the manufacturing sector. The gross domestic product exceeds the gross national income. While we're at it, American Samoa and the Marshall Islands are dirt poor, Washington affiliation or no.

"North of 40% of the value-added in Puerto Rico is in the manufacturing sector."

How much of that is tax evasion on the part of American corporations? For example, Microsoft has set itself up to look to the IRS like a manufacturing goliath that stamps out highly valuable software DVDs in Puerto Rico, Ireland, and Singapore with a money-losing R&D division in Redmond.

A major concern ought to be that Cuba will turn into a gangster economy like Russia in the 1990s.

I think there's probably a lot of cartels and bad guys of every description targeting Cuba for future business and domination.

I could see Cuba becoming a bigger headache for us in the future than it has been in the recent past.

I wish their future looked brighter. These "out of the frying pan into the fire" scenarios are depressing and discouraging. Plus I don't want half the island up here in another 20 years.

Cuba already has a gangster economy. If Cuba's mass murdering ruling criminal gang is replaced by a mafia that hands out murder retail, it will be an improvement.

I don't think they have enough valuable natural resources coupled with the massive privatization that drove that kind gangsterism in Russia.

Nickel isn't oil, but with 11 million people it doesn't have to be

Cuba already has a gangster economy. The concern instead is, I think, that the gangster economy will suddenly become more brazen, but that nobody will care much because the influx of remittances will also increase. This will have the effect of keeping the Castro regime around for much longer than anticipated.

If you look at the countries that left the communist system through a sudden shock, most notably Russia, the result tended to be a general collapse of state institutions and their replacement with a the kind of mafia power structure you're talking about. On the other hand, if you look at countries that left the communist system at a slower place, most notably China, the result tended to be that a strong state survived and wealth increased dramatically. The Cubans are quite self-consciously trying to follow the Chinese example, rather than the Russian one.

I think Tyler's analysis rather overlooks the importance of strong state institutions for economic development. Places that are held up as models of free-market capitalism - like Hong-Kong or Singapore - tend to have very strong state institutions underpinning them, while places that have a genuinely minimalist state - like Somalia or Lebanon - tend not to be put forward as models that other countries should emulate.

The real difference between Cuba and the Dominican Republic is one of state capacity. The state in the Dominican Republic too weak, while in Cuba it's probably too strong.

'or even the next Puerto Rico'

I am fairly certain that Cubans have absolutely no desire to be become the next Puerto Rico. After all, the 1903 Cuban–American Treaty was sufficient to demonstrate how the U.S. does business with its immediate neighbor.

('Guantanamo Bay Naval Base (also called GTMO and pronounced gitmo by the US Military personnel stationed there[1]) is located on 45 square miles (120 km2) of land and water at Guantánamo Bay, Cuba, which the United States leased for use as a coaling and naval station in the Cuban–American Treaty of 1903 (for $2,000 until 1934, for $4,085 since 1938 until now). The base is on the shore of Guantánamo Bay at the southeastern end of Cuba. It is the oldest overseas U.S. Naval Base, and the only U.S. military installation in a country with whom the United States has no diplomatic relations.[2] Since 1959 the Cuban government has consistently protested against the US presence on Cuban soil and called it illegal under modern international law, since the military base was imposed on Cuba by force.' http://en.wikipedia.org/wiki/Guantanamo_Bay_Naval_Base , http://en.wikipedia.org/wiki/Cuban%E2%80%93American_Treaty )

I'm sure the extremely well informed commenters to this web site can name any number of Latin American nations that have no more interest in becoming the next Puerto Rico than Cuba does.

Makes me wonder out of curiosity, if there is a list of worldwide military installations that are operated within countries who don't have diplomatic relations with the operating country.

Arguably Diego Garcia qualifies, as it is technically a UK territory used by the USA as a military base, but Mauritius disputes the territory with the UK, see more here: http://en.wikipedia.org/wiki/Diego_Garcia

Thanks Ray!

I am fairly certain that Cubans have absolutely no desire to be become the next Puerto Rico.

And yet again p_a confuses his obsessions with everyone else's interests.

If America offered it, I expect a free vote in Cuba would produce roughly 90% support for being the next Puerto Rico. Now maybe I'm doing a p_a and assuming Cubans think like me. But there is a simple way to prove it one way or another - allow the Cuban people a free vote.

The fact that the Castros refuse to do so suggests they agree with me and not with p_a.

Why would a free vote for Cuba to join the US make any sense? Do you support all countries holding a free vote on whether to become part of the USA?

But for the record, I think 42% or maybe 43% of Cubans would vote for this.

You think 90% of Cubans want to be estadounidenses? Get real! Dictatorships like Cuba do not operate based on terror per se, but on the tacit consent of sufficient numbers of people who prefer the stability of the despotism to freedom. One may as well ask why Chinese do not want to be part of prosperous, democratic Japan.

Dictatorships like Cuba do not operate based on terror per se, but on the tacit consent of sufficient numbers of people who prefer the stability of the despotism to freedom.

No, they do not operate based on 'consent'. They operate based on the impediments to collective action. The list of eastern European countries where the machine was the plurality choice in 1989/91 was pretty well limited to Bulgaria and Serbia/Montenegro. See also the electoral performance of Nazi derivatives in Germany and Austria (1947-55), Fascists in Italy (same period), Falangists in Spain (1977), and Integralists in Portugal (1976).

The idea that 90% of Cubans are not only opposed to the current regime, but disloyal to the idea of Cuba as an independent state, is so remarkable that it deserves no support from anyone. Of course, dictatorships tend not to enjoy majority support in subsequent elections - but neither do most democratic governments!

If you have a response to my point, let's hear it. If you wish to respond to someone else, put it elsewhere.

I'm thinking with the retirement of the baby boomers, Cuba would be a great place to put them. Cuba is the fourth closest country to the U.S. (third, if we only count the continental U.S.), so it's convenient to get to. It could be like Florida, but much, much cheaper. Retirees don't pollute much or extract resources, they just collect checks and spend them. It'd be the perfect industry for Cuba. And, it would be in the retirees' best interests to support an oppressive dictatorship to keep crime down.

Right.

My parents looked at the American retirement colony in Lake Chapala in Mexico in 1967, but Mexico has not evolved in a fashion terribly attractive to American retirees less tough than, say, Fred Reed.

Uruguay has crime rates near American means. A dyspeptic review here:

http://www.retirementdetectives.com/uruguay/118-fast-facts/500-a-negative-review-of-uruguay.html

It is hard to know where to start with such a naive response. For a start in a totalitarian society, terror and consent are not polar opposites. They are two sides of the same coin. Castro requires terror to reduce people's options. They do not know of any alternatives because Castro has had them all shot. He also requires terror to raise the cost of opposition - if someone complains too much, they will die. If someone is suspected of complaining too much they may well die. Which means most people pretend they love the regime. Even if they don't.

Sufficient numbers? Sure. Maybe 10 percent. And they are not people who prefer stability - the Castros have not had a lot of that to offer lately. They are people who know what they have to do if they want a career in the Communist system.

The fact remains that the people who run Communist systems are not stupid and know what people think of them. That is why they do not allow free votes.

The Chinese manifestly do want to be part of a prosperous, democratic Japan. That is why they try to flee there in large numbers.

I’m sure the extremely well informed commenters to this web site can name any number of Latin American nations that have no more interest in becoming the next Puerto Rico than Cuba does.

Yes I am also sure that no one in Latin America wants to become part of the USA by emigration to the USA.

prior_approval, you are cherry-picking your information. The 1903 Cuban-American Treaty was superseded by the 1934 Treaty of Relations which negated almost all of the 1903 provisions. What force was imposed in 1934 during FDR's good neighbor policy? And why are you supporting Cuba's muddled claims when ignoring the billions of dollars worth of assets that were stolen by the Castros? Here is a good primer:
http://talkingpointsmemo.com/dc/us-businesses-cuba-foreign-claims-settlements
And what about what Communism steals from the people?

Lastly, an anecdote. My wife once shared a flight with a Cuban government administrator that was tasked to survey the people of Cuba to see what they thought of their country and government. He did as he was told, and the results were so negative that he feared reporting them. Unable to fake so many paper responses in time to show his managers, and despondent at all that he had heard, he decided to leave Cuba. He was not a man of means, and didn't have much time so he had to figure his own way out. Boats are not common in Cuba by law so he constructed a float out of a wooden door and crates and made it to Florida. True story. Being the next Puerto Rico is a loaded phrase, but if so many have chosen Florida over Cuba, what makes you think the remaining people wouldn't want Puerto Rico? No one knows, and I don't really care what their choices are but they deserve the right to vote for their future.

I've a brief post up at Demography Matters (http://demographymatters.blogspot.ca/2014/12/notes-on-demographic-future-of-cuba.html), linking to earlier posts I've made about Cuba's demographic issues. I've argued that this is probably Cuba's last chance at growing rich before it grows old. A Bulgaria in the Caribbean is not impossible otherwise.

That's very optimistic of you. Bulgaria has a $7300 gdp per capita.

Also a unique and ancient history of which to be proud.

Every country's history is unique.

This is a damn interesting post. Thanks!

Presumably nationalized US Cuban assets will be returned. Well the Cuban can learn from China on how to run socialist casinos. The best beaches are supposed to be around Gitmo Bay which could be turned into special economic zone like Macao. With plenty of US tourists around there and easy access by the journalists, the unique reason why some other things are there might no longer be true. Obama's secret Xmas wishes might even come true.

Ah, I was looking for someone to mention casinos and Macao. If I were running the show in Cuba, I would carve out (and isolate) a chunk of those abundant beaches to be a designated resort/casino zone. There's an endless supply of fools in the US and UK to be separated from their money.

T"""here’s an endless supply of fools in the US and UK to be separated from their money. """

It can be argued that there are too many casinos in the US already, go ask Atlantic City. Same applies in other places in the US, a lot of casinos have been opened, not all will survive.

Cuban demography is very different compared to the demography of the Dominican Republic.
Cuba 1960 ca 7m, DR ca 3m, now Cuba ca 11m with no growth, DR ca 10m with ca 1m growth per decade.
DR economic model is based on exports of ores, manufacturing in free zones, tourism and remittances. Sugar is minor business.
The dynamic of remittances depends on the population growth, Standard case: Children send money to the parents more or less as a substitute for a pension. Few children = few remittances. Export of nickel etc is part of the present Cuban economy. Manufacturing in free zones & tourism need young people with low salaries.
Thus, the DR approach applied to Cuba may hit some constraints.

IMHO, the worst sign of rapprochement came from Raul Castro saying they do not intend to scrap socialism, I understand it’s a matter of price and may be purely rhetoric but Cuban politics is very likely to become the real “bloqueo” because the economy will failed to achieve its potential because the Castros are two worried with losing their ability to strictly control the life of Cubans.

Cuban Diaspora can be the fuel of investments to give the economy a modern and capitalist flair, but how do you match capitalism with Castros pride and (no) will to forgive a sizable number of exiles who have been hostile to their rule for so long? Most Cubans living in foreign nations under state contracts are not rich (I know a few here in Angola) so those “friendly” to Castro living abroad do not represent the source of capital Cuba needs…

Cubans are well trained and despite decades of socialism still show impressive entrepreneurial spirit but this will not translate into thriving start-ups if the Castros refuse to properly reform Cuban institutions and redirect their economy and society to democracy and free markets.

[FIXING TYPOS]

IMHO, the worst sign of rapprochement came from Raul Castro saying they do not intend to scrap socialism, I understand it’s a matter of pride and may be purely rhetoric but Cuban politics is very likely to become the real “bloqueo” because the economy will fail to achieve its potential because the Castros are too worried with losing their ability to strictly control the life of Cubans.

Cuban Diaspora can be the fuel of investments to give the economy a modern and capitalist flair, but how do you match capitalism with Castros pride and (no) will to forgive a sizable number of exiles who have been hostile to their rule for so long? Most Cubans living in foreign nations under state contracts are not rich (I know a few here in Angola) so those “friendly” to Castro living abroad do not represent the source of capital Cuba needs…

Cubans are well trained and despite decades of socialism still show impressive entrepreneurial spirit but this will not translate into thriving start-ups if the Castros refuse to properly reform Cuban institutions and redirect their economy and society to democracy and free markets

All this speculation is useless if the American embargo doesn't end. Only congress cal lift it. Right now it looks very unlikely that it will. I don't see the embargo ending for at least another decade.

@affenkopf - and, needless to say, having an American embargo plays into the hands of Fidel Castro and his cronies, who point to it (and they did so while I was there) as the reason why they are not further ahead economically. When you visit the museums of the revolution, for example the one in Santiago de Cuba, they make references to the US embargo.

I don't know the details about the embargo. Does it somehow prevent Cuba trading with the rest of the world? If not, then doesn't anyone else see a gaping hole in the argument?

@Keith- perhaps they do. Canada and Mexico both trade with Cuba. But the argument by Castro et al is that the US embargo drives up costs of imports. Given that people don't really understand much about economics I guess some of them are fooled by this argument.

They can buy things from China like everyone else. The problem is that they have no money to buy from China and have nothing to trade with China that China wants.

Maybe the Cubans can start a huge advertising campaign in China for Cigars? But they don’t have the money for that either.

Well, first of all prevents American products to be delivered directly, which means anyone wishing them (and who could afford it) has to triangulate and that increases costs.

Then the US keep an eye on major foreign businesses and sometimes make them know their displeasure about exporting to Cuba, forcing more rerouting and added costs.

Anyway, I've been to Cuba in march and the system can't last: when they allowed two currency systems in the country they created a situation where two neighbors in the same streets can be living with immensely different living standards depending if one has been allowed to run a casa particular for foreigners (who leave for a night staying the equivalent of a month salary and often leave the equivalent of a month salary as a tip) or not. Add that by law you still cannot buy or sell your house, so no matter your new condition you stay in the house where you grew up, with the people you grew up with and that see you turning "rich" overnight and able to afford western goods.

Now, a system where everyone is poor can survive, a system where your neighbor is (relatively) rich and you are not because some random decision can't.

I consider that speculative, but still communism has had a long shelf life there, well past the fall of the Soviet Union, so let’s not dismiss it out of hand.

But it hasn't had a longer shelf life. Communism survived until the last of the pre-Revolution generation died. As long as people who remembered how good life was under the Tsars was in power, they did not weaken. As soon as the Soviet Union got a ruler who had lived his entire life under Communism, it collapsed. As it did everywhere in Eastern Europe once they got a younger generation of leaders. The only place where it put up a fight was Romania where obviously, they had people who remembered how much better Romania was before the war.

The Castro brothers are not yet dead. But they will be.

It ain't just the Castro brothers. They have an entourage of like-minded disciples with a vested interest in maintaining the status quo. At the same time the Cuban diaspora that began even before 1959 is made up of people that have never been to Cuba and won't go there now, just as most of the Irishmen in Boston haven't been to Dublin and the average Philly Puerto Rican has never visited San Juan. If Atlantic City can't make the grade as a tourist destination how can Havana hope to do so, except for the odd leftist tourist with an anthropological bent? Even if the revolution had never occurred Cuba would be an economically unimpressive vestige of the decaying Spanish empire, like the Philippines, for instance. Which isn't to say that the country would be uninhabitable, it just wouldn't be dominated by the protestant work ethic so necessary for a booming capitalistic economy.

If you seriously believe that Atlantic City as a tourist destination is no better than Cuba, I will be more than happy to trade tickets with you.

Yeah, Atlantic City does not have emaciated street musicians singing "Guantanmara". Without that, it's just not worth the trip.

Cuba is an incredibly beautiful and diverse country with art, music, history, incredible natural spots, pretty good food (if you can afford it), incredible beaches and amazing people (if you don't go with organized tours, but you stay in private houses) and I'm not talking of the sex-worker kind, altho there's definitely that if you are into it (and apparently they are so good at making you feel it's not that that several dozens of my compatriots come back married from the island every year).

Atlantic city is actually a town, a mono thematic place where you go to spend your time locked in casinos, gamble and drink.

Right, same appeal.

with art, music, history, incredible natural spots, pretty good food

The architecture is crumbling because no one repairs it and the population are on K-rations.

That's pretty a narrow sighted view of the world, but alright, have a nice time in Atlantic City or places like that.

If Atlantic City can’t make the grade as a tourist destination how can Havana hope to do so,

To start with, Havana is actually an interesting place to visit. Then we have weather, beaches, on and on.

The links cited by TC on commodity prices are excellent, notice that Copper is trending down, oil is sharply down, rice is collapsing (http://www.nasdaq.com/markets/rice.aspx?timeframe=1y) hogs are down, sugar is down, lumber is holding, beef cattle is at record levels (only positive), milk off highs, coffee off highs, OJ steady, Natural Gas still dead, 33% of the 2008 highs, crude oil free-falling. All that money pouring into commodities the last few years did nothing.

Does this mean, if prices are falling, deflation will follow? Me thinks so. Time to crank up them printing presses! When will central bankers ever learn: deflation is not bad, let bankruptcy weed out the weak players.

Eggs $2.55/doz. @ Aldi yesterday.

Oh, right. I think you're being sarcastic but never know with you. Let's just encourage people and companies to keep sitting on that cash while simultaneously screwing debtors, like families with mortgages and whatnot.

help us out Jan... Please define screwed and then explain how the people and companies choosing not to spend their cash are screwing those that assumed debt. Thanks.

I largely agree, but Cowen errs in several points. First, Cowen is incorrect in stating that the Dominican Republic is an island. In fact, its history has been very much contingent on the fact that it is not. Much of their inefficient national effort of repelling from eastern Hispaniola the even-more benighted Haitians can be avoided by Cuba.

Second, British/Dutch Caribbean islands look great on average because they facilitate massive tax evasion. That's a niche which is uncontestable, shrinking and lucrative, but furthermore it doesn't have much to do with development outcomes. Unlike Cowen, the ordinary people of Jamaica and Antigua probably don't shed tears when they think of the Palace of Westminster. Outcomes are bad here, too, and there is no need to throw self-regarding Anglophile palaver into this mix.

One Caribbean problem is a striking dependency on oil imports and food exports, whose prices are correlated.

Don't the British/Dutch islands also get big subsidies?

No. Belize, Guyana, and St. Vincent are dependent on agricultural exports. For the other Caribbean countries, the share of export revenue derived from agricultural goods is in the single-digits.

Single-digits are not exactly small. Most rich countries make far less than 10% of revenue from basic, unprocessed foodstuffs. But the point is really that when their exports rise in price, it tends to mean that their most important import, oil, rises too.

Keep on spinning.

Interesting. What about places like Trinidad and Tabago? Are they unique in being such a big exporter of natural gas? How does this help them overcome the problems of dependency on oil imports and food exports. For instance, if they used natural gas for electricity and transportation they could completely eliminate oil imports.

The main reason I support better relations with Cuba is the truly awesome, eccentric names that country produces.

THIS! Thank you for echoing a private obsession of mine. Almost every Cuban baseball player has a crazy first name: Yoenis, Yonder, Erisbel, Yuniesky, Francisley, Aroldis, Odrisamer....this is not even the complete list

Curacao's ballplayers have names like some weird Dutch legend about Kris Kringle's elves.

I think Little Cuba will continue growing. Little Cuba, Florida.

After all, Cubans who make it to the United States have amnesty and a path to citizenship by dint of a special law just for them. And, its a swing state.

So, even if Cuba doesn't grow, Cubans will have a special place in American politics, particularly if their economy doesn't grow.

Question: How much of the fierce opposition to opening relations with Cuba by American-cubans is linked to that law? Cubans are the only Hispanic group in the US that enjoys what is essentially automatic citizenship for any relative they can get to US soil (granted that isn't easy given the Coast Guard will send you back if htey intercept you at sea and many people die in the ocean trying to make the passage). If Cuban relations normalize how long will that law stand?

Oh, good point. I could see Congress lifting the embargo and completely normalizing relations, but with the Rs' price being that we have to continue offering amnesty to any Cuban in order to make sure Florida swings to the right. Ha, it would be ridiculous. I'm only half kidding.

It won't work. Cubans in Florida already swing right and they are not sufficient to keep the state reliably Red. If relations with Cuba are normalized it is going to get tougher and tougher to keep a policy of unlimited immigration alive (esp. since it will get a lot easier for Cubans to just travel to the US via normal means instead of taking to makeshift rafts) and it's going to be less likely, IMO, that new Cubans are going to be reliably Republican. What may come is a conflict between US-Cubans and Cubans since rhetorically many anti-Castro Cubans in the US talk as if the moment Castro dies, they can just walk back into Cuba and take over. Tyler has a point that it is by no means certain the average Cuban in Cuba shares the anti-communist ideology of US ex-pats.

Another thing that also bothers me, the travel restrictions on Cuba do not actually apply to US-Cubans. They are free to visit Cuba and bring US currency with them if they are visiting family and relatives (and the Cuban gov't appears to have no problem with them coming as it probably needs the hard currency more than it worries that their anti-Castro stance will cause internal dissent). This gives US Cubans a kind of monopoly of influence on Cuba since other Americans who may want to visit Cuba for non-family reasons have a lot more restrictions on them. Normalizing relations may mean there will be other ways Cubans of getting US currency than hosting their well off Uncles from Miami. If I were the Uncle I'd much rather be the only guy with a $50 bill than to be lost in hundreds or thousands of tourists dropping money at beaches and resorts.

What happens to Cuba after Castro really seems up in the air. I believe the next 50 years will be better than the last 50...but that's not saying much since there isn't much room for things in Cuba to get worse.

Only older Cubans in Florida swing to the right. The younger people, generally born here, are not much different politically from their peers in the general population.

Young or old, the Cubans in Florida (and their descendants) tend to oppose lifting the embargo/normalizing relations (Senator Rubio, eg).

It's odd that Mr. Cowen speaks of "women selling their bodies to tourists." Cuba is widely known as a magnet for tourists (usually female) seeking male prostitutes.

Even if so, there's still plenty of the regular kind of prostitution too.

Sammler, is that a joke? Do you have any sources for this "widely known" fact?

"functioning social health infrastructure which reaches a high percentage of Cubans."

If this is true why does no one mention medical tourism as a possible source of income?

+1, isn't Cuba famous for being full of doctors driving cabs? And for paying for oil from Venezuela with medical services?

Does anyone knows why the World Bank gives Cuba an absurdly high GDP per capita (PPP) of 18,976 USD in 2011?

http://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD/countries/WZ?display=default

1. Wikipedia typo

2. Methodology inapposite for a command economy.

Must be the latter. I don't believe Cuba's PPP GDP per capita is anywhere near Chile's.
http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&met_y=ny_gdp_pcap_pp_kd#!ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_pp_kd&scale_y=lin&ind_y=false&rdim=region&idim=country:HTI:CUB:CHL:DOM&ifdim=region&hl=en_US&dl=en_US&ind=false

Almost all of these are good points, but frankly, it's too early to imagine any Cuban catch-up. All that's happening is a diplomatic thaw. That's likely to be followed by some liberalization of US-to-Cuba tourism rules, we'll see. There's not yet any sign of any important economic liberalization coming to Cuba. This is a diplomatic thaw, not a perestroika, much less a liberal revolution. The outlook for Cuba as far as the eye can see is to stay more or less as it is.

"7. Cuba already imports 30% of its food from America. Note that sum has been falling lately, as Cuba seeks cheaper alternatives, such as food from Vietnam. Post-liberalization, trade with America will go up a good deal but we are not starting from zero under the status quo."

If Comrade Cowen were not blinded by Koch Kash he would know that the revolutionaries will be fed from community-owned urban gardens. http://en.wikipedia.org/wiki/Organop%C3%B3nicos

Another niche market for Cuba is medical tourism. With the high medical cost in US and abandon of Cuban medical doctors it should be a sure thing.

Among other things, there is no major class of foreigners who would like to set up the island as a trade hub, as opposed to the cases of both Singapore and Hong Kong, where major foreign commercial interests have long flocked to these places of relatively predictable and easily satisfied red tape.

Probably the country could earn a lot of money selling medical services to Americans. It could become a major forex earner, but I'm not sure how they will prevent a brain drain.

"CUBA’S CEMENT INDUSTRY"
http://www.ascecuba.org/c/wp-content/uploads/2014/09/v07-Babun.pdf

Cuba used to export half of its cement production. With the Nicaragua Canal project going and there is only a cement plant there, the Chinese wont hesitate to invest and modernize the six cement plants in Cuba.

How much of that is tax evasion on the part of American corporations?
Steve, you are supposed to say tax avoidance....tax evasion is illegal.
Once Cuba is an American minion again it(actually the sugar companies)can join the Hawaii cane growers and the Colorado beet farmers(actually sugar companies)and get the American sugar price which is two or three times world price.
Taft was defeated by the Sugar Trust in the S.C. just as TR told him he would be.

But I thought the USA was a paragon of free trade, and that everyone had to learn from them?

I suspect proximity and cultural ties will have the same effect they're having on Mexico. Institutions change.

The unknowable factor is still what Castro will do, but Raul seems to understand the inevitability and benefits of reform. Best case, I would not be shocked if Cuban PPP GDP per capita rose to near-Mexican levels over the next 20 years, even with Mexico growing at a healthy clip over that period.

6. Cuba has some of the best beaches in the Caribbean, but I expect most of those returns to accrue to land and capital, not labor.

You say that like it's a bad thing. Cuba doesn't have a shortage of labor.

Here's a crazy idea btw -- given the resources and ties of the expat community, what if the more relevant analogy isn't other Caribbean countries since 2008, but E Germany since 1990?

Comments for this post are closed