Cuba’s glum economic forecast

That is my latest Bloomberg column, here is one excerpt:

One way to approach Cuba’s economic fate is to consider the Caribbean region as a whole. For the most part, it has seen mediocre results since the financial crisis of 2008. Economic problems have plagued Puerto Rico, Trinidad, Jamaica, Haiti and Barbados, with only Jamaica seeing a real turnaround.

The core problems of the region include high debt, weak commodity prices, lack of economies of scale and an inability to upgrade tourist facilities to compete with the U.S., Mexico and further-flung locales. Cuba cannot service its foreign debt, and losing most of its support from Venezuela has been a massive fiscal problem.

Perhaps the country most like Cuba in the Caribbean, in terms of history, heritage and ethnic composition, is the Dominican Republic. Currently, it has a nominal gross domestic product of somewhat over $6,000 per capita, depending which source you prefer. That’s far from the bottom tier of developing economies, but it’s hardly a shining star. And Cuba will take a long time to attract a comparable level of multinational investment, or to develop its tourist facilities to a comparable level of sophistication. Well-functioning electricity and air conditioning cannot be taken for granted in Cuba, especially after the major decline in energy supplies from Venezuela.

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.

If you are wondering, the World Bank measures Cuban GDP at over $6,000 per capita, but that is based on a planned economy and an unrealistic exchange rate. In reality, Cuba probably is richer than Nicaragua, where GDP per capital is approximately $2,000, but we don’t know by how much. Cuba does have relatively high levels of health care and education, but we’ve learned from post-Soviet reform experiences that it is easy for a nation to lose those advantages. There are already shortages of many basic health care items, including medical technology and antibiotics.

There is much more at the link.


Cuba's high levels of health care, despite the grave shortages of medical technology and antibiotics, is quite a feat. Like it or note, and I'm sure many will posit a knee-jerk reaction to my saying so, but there is much to learn from the Cuban health care model:

Poor countries simply cannot afford such a health system. Well over 100 countries are looking to the example of Cuba, which has the same 78-year life expectancy of the US while spending 4% per person annually of what the US does.*

The most revolutionary idea of the Cuban system is doctors living in the neighborhoods they serve. A doctor-nurse team are part of the community and know their patients well because they live at (or near) the consultorio (doctor's office) where they work. Consultorios are backed up by policlínicos which provide services during off-hours and offer a wide variety of specialists. Policlínicos coordinate community health delivery and link nationally-designed health initiatives with their local implementation.

Cubans call their system medicina general integral (MGI, comprehensive general medicine). Its programs focus on preventing people from getting diseases and treating them as rapidly as possible.

This has made Cuba extremely effective in control of everyday health issues. Having doctors' offices in every neighborhood has brought the Cuban infant mortality rate below that of the US and less than half that of US Blacks. Cuba has a record unmatched in dealing with chronic and infectious diseases with amazingly limited resources. These include (with date eradicated): polio (1962), malaria (1967), neonatal tetanus (1972), diphtheria (1979), congenital rubella syndrome (1989), post-mumps meningitis (1989), measles (1993), rubella (1995), and TB meningitis (1997).

*Lee T. Dresang, Laurie Brebrick, Danielle Murray, Ann Shallue, and Lisa Sullivan-Vedder, "Family Medicine in Cuba: Community-Oriented Primary Care and Complementary and Alternative Medicine," Journal of the American Board of Family Medicine 18.4 (July-August 2005): 297-303.

The above is from a good overview: "Why Is Cuba's Health Care System the Best Model for Poor Countries?" by Don Fitz

Cuba also exports doctors under service contracts to Venezuela in exchange for oil.

That is a potential problem for Cuba given the instability of Venezuela.

Also, some Venezuelan politicians have proposed offering citizenship to Cuban doctors, putting at risk the Cuban medical service exchange program for oil.

The economic collapse of Venezuela will precipitate big changes in Cuba.


Also there is a proposed reduction of Cuban doctors in Brazil, as more recently trained Brazilians doctors come onto the market.

Venezuela still has oil and Cuba needs it. The collapse in the price of oil will favor trading the oil to Cuba for the services of the doctors, rather than sell it on world markets. The terrible conditions in Venezuela will reduce the incentive for Cuban doctors to defect.

The price of oil has already collapsed. Of course Cuba needs the oil, but that is not to say that a Cuban doctor would not accept Venezuelan citizenship, undercutting the exchange. This is not a hypothetical problem for Cuba, and in fact, this worry was expressed by a Cuban. Right wing members of the Venezuelan legislature have made this proposal to grant citizenship.

"Cuba also exports doctors under service contracts to Venezuela in exchange for oil."
But Brazil paid more for the Cuban doctors.

Angola, importer of Cuban doctors, is struggling to pay the service due to oil price drop, but they still do the same with relatively richer and more stable nations like Brazil or even Portugal (but I think the numbers are still small).

Cuba has no choice but open up and live some boom years induced by influx of American tourists and investments.

" These include (with date eradicated): polio (1962)"

Wow, it only took Guevara and the Castro brothers three years to eliminate polio from the island. Evidently a Spanish-speaking totalitarian society is all that's needed to produce positive health outcomes. It's actually never been difficult for North Americans to travel to Cuba. In view of their superior health care system why haven't Americans chosen to go to Havana for open heart surgery and vasectomies instead of the Mayo Clinic?

I don't think most Americans go to the Mayo Clinic to get open heart surgeires or vasectomies... Unless the Obamacare is really being a bigger success than I would have dared to expect.

Phony propaganda on the glorious Cuban health & education systems has been gushing forth for over half a century. Reliable statistics and info on the actual overall Cuban healthcare system are IMPOSSIBLE to get... due to tight controls by the Communist government and its efforts to heavily exaggerate its government successes.

But there are plenty of eyewitness reports from former Cuban residents and refugees.
Google -- myths of the Cuban health system for mountains of information.

Cuban medical system is 3 tiered-- Party Elite system, Tourist/Export system, and that for the Cuban masses. First 2 tiers are fairly good, the 3rd tier is wretched, with horrible decaying and unsanitary hospitals and medical facilities. Guess which facilities the Cuban government shows to foreign visitors and health researchers.

So the Cuban regime cheats on their living expectancy statistics? Enough to make up the difference? More than, say, the Soviet Union or the Maoist China did? I find it a little hard to believe.

...guess you trust the North Korea government statistics too ?
small totalitarian states are much easier to control than big ones
what is the exact source of that Cuban life expectancy stat, that you automatically trust?

So the Castros had more control of the country than Mao in 1966? A few tens of million dead Chinese would and all his enemies inside the Party will be glad to know that. It is not about size, it is about the political model. Cambodia was small and Pol Pot not only did the usual Communist repression but he also liquidated a fifth of his people. Mongolia was big, China was bigger and the Communist terrorized more people than their Eastern European counterparts. North Korea is repressive even for post-Stalin Soviet standards. There is reason it is the at the bottom of the Reporters without Borders index. Comparing the Cuban dictatrship is so stupid as comparing America with Saudi Arabia or the kate 80's refrmist Hungary with Pol Pot's Cambodia.
Again, which proof we have that Castro cheats more than "normal".Communist leaders do? Soviet healthcare data was so honest (or at least less adulterated than economic data -- all those plans with their goals always fulfilled) that Emmanuel Todd called the stagnation in life expectancy and pointed it was another example of the rotting of the Soviet Communist system. I see no reason to think Castro is less honest than, say, Leonid Brezhnev.

Open heart surgeries and vasectomies are precisely the areas where you would expect the Cuban Health System to be poor, even if you believe the statistics. Cuba has been trying to provide the best possible healh care outcomes given very limited resources, i.e. focusing on prevention and basic care. The US spends a lot of money and resources on luxuries (like vasectomies and cosmetic surgery) and efforts to prolong the lives of the economically non-productive, i.e. the aged and chronically ill, but also a lot of money on innovation. But the US can afford it. The Cuban health care system is an excellent model for any country that has decided it will remain desperately poor for the foreseeable future.

The Cuban basic health system works well in a poor country because doctors are paid below market rates. This is a typical problem in state-run health care (doctor strikes in UK, US doctors unwilling to take new Medicaid patients, etc.). However no other country pays its doctors as little as Cuba.

Medical care contributes very little to aggregate life expectancy. For example in the US, the difference between the top and bottom decile of medical spending is approximately 6 weeks of total additional life expectancy.

That was a bivariate analysis, wasn't it?

Many people in the top decile of medical spending are in the top decile mostly because of health problems, more so than the fact of having lots of money.

And in the bottom decile, you'll get lots of healthy people who spent little money on health services, whether or not they had lots of money to spend on it if they had needed to.

The relevance being that it's a really bad indicator for what you suggest to use it for, even if that is the only single confounding factor.

That's a good point, but it doesn't affect the evidence that I'm referring to. For example, the RAND experiment randomized groups of people and the Oregon study used a discontinuity in medicaid funding.

This comment has been bothering me for a couple of days, although Chuck seems to have covered it.

That Fidel managed to eradicate those diseases while having open borders in the early 60s is amazing!

The children were also trained to put AK-47s together blindfolded, but that's not something I would recommend.

Health outcomes improved during the Cuban famine (i.e. after the collapse of the Soviet Union and the end of economic support) because people ate less food, especially meat, and had to do a lot more exercise. Once the economic situation improved the health gains disappeared.

The British NHS is moving to preventive care- but unless it can effectively penalize bad behavior it is unlikely to have much impact. However, falling real income could improve health outcomes.

It is pointless to compare countries with very different political and socio-economic systems.The entire Human Development approach is misconceived. It assumes health outcomes are positively correlated to real income. The reverse may be the case.

Health outcomes improved in Cuba during the famine but worsened as people got more food, especially meat to eat. (
The British NHS is now trying to move to prevention- penalising those who don't change their behavior- and falling real income post Brexit may help.
However, the real scandal here is that a lot of economists, like Amartya Sen, continue to compare countries with very different political regimes and to assume that real income is linked to positive health outcomes. In fact, it makes no sense to compare a totalitarian regime to a mixed or free market one.

2 things: How much does Cuba spend on medical research compared to the US, or any other country? And, does whatever system Cuba has, which I am guessing the doc and nurse team-up in the barios is a part of, necessarily need to be provided by the state? I ask because of the existence of the fraternal societies in the US at around the turn of the 20th century, which provided healthcare for its members that had very good mortality rates, provided excellent welfare benefits, even started schools and orphanages...they too had doctors on retainer. No government though. And I also ask because most people who laud a foreign government's healthcare like the aspects of their health care and only think it can be provided by the state.

I read somewhere, "Philosophy is what happens inside a man's head when he's not thinking about sex."

I also cannot help but notice that Tyler is at least ten times as productive as the typical human. What is going on in Tyler's head?

Wrong. Cubans are the Jews of the Caribbean. They will easily outperform DR and other less industrious nations.

I don't think so.

I don't think so

We are planning a trip to Cuba next year, and in preparation for the trip, I have been reaching out to some academics (USAID contracted ag economists, persons who have done academic exchange programs in Cuba) for their observations, which are:

1. An inverted human capital pyramid: a waiter may make more than a doctor, and the doctor or engineer is likely to work part time as a waiter, making more than they do as their regular occupation. That said, Tyler's observation about per capita income comparison with Dominican Republic is somewhat misleading in that income distributions are different in both countries: Cuba has a fairly equal income distribution whereas DR does not.

2. Cuba is a third world country under a communist collective agriculture system, and, depending on how it is decollectivized, will experience success or failure depending on the models it follows. Cuba's greatest potential is for small farms, given that its cost of labor is low, and given that it is basically organic agriculture, there are opportunities for human intensive agriculture (strawberries, fruits, tomatoes, etc.). But, the risk is that they (or large land consolidators) will go for American style big agriculture which involves more capital and fewer laborers, putting pressure on the urban population as farmers from collectivized agriculture move to the city. The ag economist was very insightful, having worked in eastern Europe after the fall of communism, working in SE Asian, and Latin and Central America. Ag can go one of two ways, and either is consequential. If they move to small, intensive agriculture, they will also need persons to teach them how to do it, since the current way they raise food is collectively: say, on a pig farm, one person is in charge of delivering a baby pig, another is in charge of feeding baby pigs, another is in charge of doing something else, where no one knows or is trained in the entire process.

3. What model will Cuba use to move out of the collective system: is it the model after the fall of communism in eastern europe (shock therapy; sale of assets to managers financed by state banks); is it the Chinese model; or, as one commentator who was a visiting prof from Cuba, will it be more like a Vietnamese model. Or, it could be the Venezuelan model, with collapse, and everyone fleeing to Florida where they will ultimately be granted immediate US citizenship thanks to our crazy immigration law exceptions for Cubans.

One other observation from the folks I consulted: the pace of transformation will be dependent on cleaning up land title issues. Right now, the state owns the land. They could sell land, but then there are folks abroad who will also assert claims. People don't invest in what they do not have clear title to.

I went there last year, met several people working at low paying jobs in the service sector who had professional degrees, but the government only allows x number if doctors to be hired, or engineers....met an industrial engineer working at a gift shop who almost cried when I stupidly asked her why she had been working at the same crap hole for 15 years...she has no choice.

You can buy land but you have to do it with a native Cuban, who obviously has to have money, which also obviously means they are probably politically connected. The government still owns 51% though, but they offer tax breaks. Good luck renovating any of the thousands of mansions in Havana though, ain't no Lowe's down the road and the multiple concrete plants I saw never seemed to be running...good luck hiring workers too. Even if you can get some decent ones, through the government's bullcrap employment commisario of course, I'd bet money that, when the official mandated knock off time rolled around, they'd drop those tools where they happen to be working and leave that 100 dollar bucket of perishable building material open to spoil.

I'm always skeptical of advice which includes "your best bet is small farms".

But, if there are already lots of small farms, then surely that is a good locus of seeking improved productivity, etc.

He's not talking garden plots, but rather small scale farming. He travels all over the world and is very practical. For example, he works with data on so many man hours per ton of strawberries, tomatoes, etc., works on local consumption markets (the model would probably be supplying hotels in country and export).

The other model that he also mentioned that could be disastrous would be Chinese canning operations.

Yeah. What Cuba really needs is subsistence agriculture. It works so well for Congo. Both of them.

Having people move to the cities is a good thing. Not a bad thing. Small scale agriculture might have been useful 200 years ago. It is not going to help now. For one thing, how are you going to keep the peasants on the land?

We're not talking subsistence agriculture. Small farming is not subsistence agriculture, neither here, nor in Poland. You really have a problem with your imagination. But maybe you get that way by adding the word "subsistance agriculture" when the term was never used in what I said. I said small farms. Go put your imagination to better use if you are not prepared to engage in a adult conversation.

I did a little google research on small farm proposals in Cuba, and came up with the following which supports what my ag economist friend said.

Here are some links: Here is another:

The risk my ag economist friend says is that Cuba gravitates to large scale commodity industries (cocoa, sugar) and neglects small farms having had their agriculture collectivized or cooperated over the years. Climate is ideal for strawberries, fruits, tomatoes, off season (for the US) vegetables. He noted that farm labor in Cuba and Central America costs $3/day, and some of the products are human hour intensive, giving them a competitive advantage.

Here is another article on the same subject:

Sorry but aren't we talking about subsistence agriculture? You and your friend are claiming the danger is that the Cubans might grow something some other people want! On a big scale!

If they are not growing what people actually want, that is something they can sell, and they are not doing so efficiently, what do you think they should be doing?

Do you think there is the slightest chance that the Communists have not been pouring chemicals all over their fields for the last 60 years? Do you know what happened to Uzbekistan? Organic certification might be granted as a political act, but it won't be any other way.

So Much, So Much for claiming we are talking about subsistance agriculture when we are not. I'm not bothering to continue the discussion with you . People can read the articles I cited or go to persons they know who have more information. So long, So Much.

"Having people move to the cities is a good thing. Not a bad thing."
If slums are your thing.

Well, Congo actually has a lot of land that could be agriculturally viable but which is not presently exploited. But the heavy weight of oil in the economy makes agricultural production relatively uncompetitive there. So maybe pick a different country for the example ...

He's talking about growing expensive strawberries for export from small farms, not having massive sugar plantations.

What's the difference between a US roofing worker's wages being destroyed by Mexican immigrants and a US truck farmer's strawberry sales being wrecked by Cuban growers?

Bill November 26, 2016 at 9:45 pm

So Much for claiming we are talking about subsistance agriculture when we are not.

You can give a pile of horse manure a nice name, but it is, in the end, still a pile of horse manure. And while Western hipsters might like peasants hoeing weeds in the field, the peasants tend to feel otherwise. So what are you talking about? Not efficient agriculture. Small scale agriculture. Not agriculture aimed at producing products in high demand for export. What is that except subsistence agriculture?

There is an extremely limited market for fair trade, organically-grown, cruelty-free, quasi-Communist vegetables.

31 Thiago Ribeiro November 26, 2016 at 9:47 pm

If slums are your thing.

Yesterday's slums are a gentrifier's delight. Extremely valuable real estate. Not that rural slums are better than urban ones. At least the children of the urban slums become doctors and accountants.

32 Troll me November 26, 2016 at 10:37 pm

Well, Congo actually has a lot of land that could be agriculturally viable but which is not presently exploited. But the heavy weight of oil in the economy makes agricultural production relatively uncompetitive there. So maybe pick a different country for the example …

You are thinking of the formerly French Republic of Congo and not the formerly Belgian Democratic Republic of Congo. So I don't need to, do I? The agricultural sector of the economy wasn't doing great before oil in either country.

33 Harun November 26, 2016 at 11:10 pm

He’s talking about growing expensive strawberries for export from small farms, not having massive sugar plantations.

Sure. Hipsters love Cuba. They love the retro cars. The retro buildings. They want to keep the coolies in the fields doing retro agriculture too. How exactly does subsistence agriculture help? We can image a world where suddenly people will pay $15 for a small container of free-trade organic Cuban strawberries, but we don't live in it. We never will. It is could work for Cuba, it would have worked for Nicaragua or Haiti or some other place.

If the peasants don't want lives of back breaking labor, Bill and his Ag Economist friend suggest violent enforcement, just like how every other dumbass command economic state responds to S & D.

"esterday’s slums are a gentrifier’s delight. Extremely valuable real estate. Not that rural slums are better than urban ones. At least the children of the urban slums become doctors and accountants"
Hahahaha. And I hearing all those years American debates about how Black students being good for nothing and the real cause of the education gap...

We aren't paying for the strawberry worker's health care and retirement.

SMFS - you appear to be unaware that the question of whether agriculture benefits from economies of scale as a general matter remains debated.

Just to introduce one counterargument, there's the fact that a poor person with a small plot of land has strong interest to maximize value of every square inch.

Alternative uses of labour in the economy and access to agricultural technologies will clearly shape the calculus.

Troll me November 27, 2016 at 11:31 am

you appear to be unaware that the question of whether agriculture benefits from economies of scale as a general matter remains debated.

Nathan, with all due respect, you are a grad student who corrects Chinese students' English for a living. You should not be commenting on things you do not understand. There is no debate here at all. If there was, it would still be irrelevant to what I said. Would it be too much to ask that you understand what you are replying to?

Just to introduce one counterargument, there’s the fact that a poor person with a small plot of land has strong interest to maximize value of every square inch.

You can look out of your window and see Chinese peasants who are notorious for doing just that. How is that working out for China? How rich is a country where peasants have to intensively cultivate every square inch? That is not a counter-argument. It is support for me. Cuba does not want this sort of grinding poverty.

Alternative uses of labour in the economy and access to agricultural technologies will clearly shape the calculus.

Bill is calling for no alternative uses of labor in the economy - no peasants moving to towns and becoming accountants. Nor does he want any new agricultural technology - stoop labor and hoes only. It is so picturesque when peasants do that!


1) The question of scale economies in agriculture is not settled across diverse settings. This question remains debated, not settled.

2) I did not suggest that a wealthy nation would have undercapitalized poor peasants attending to missing square inches at the side of a plot. The context was one where you thought Congo was a good point of comparison, if you recall.

3) Bill said nothing about alternative uses of labour in the economy. Correct. He mainly said that low labour costs imply that small farms can make money, and something or other about how agronomic knowledge could be applied for improved productivity and raising concerns about whatever effects rural-urban population movements might have (regardless of the presumed positive impact on the economy in the long run, it is obviously disruptive and shouldn't be ignored).

Now if you could find a way to multiply average income in Cuba tenfold or twentyfold overnight in addition to building all the required infrastructure for highly capitalized agriculture and also pull some thousands of combine tractors, etc., out of thin air overnight, then I would start to think that what is "common sense" to someone with some passing knowledge of farming in the USA might have relevance within planning timeframes actually relevant to the farmers who would be making those decisions in a liberalized setting.

P.S. - I am defending the claim that the issue is debated, not a specific position among the alternatives which are most commonly discussed or found for different types of situations.

> An inverted human capital pyramid: a waiter may make more than a doctor, and the doctor or engineer is likely to work part time as a waiter, making more than they do as their regular occupation.

This makes me curious about the quantity, quality, prestige, and barriers to entry for engineers and (especially) doctors in Cuba. Any quick summary or pointer to where I should read more?

The barriers are not low. The problem is that when cleaning rooms or tending bar in a tourist hotel is much more lucrative than being an engineer young people tend to try to get those jobs rather than study engineering. It's a system that does not encourage the development of human capital.

TC: "In reality, Cuba probably is richer than Nicaragua, where GDP per capital is approximately $2,000, but we don’t know by how much."

The World Bank puts Nicaragua's GDP/capita PPP at $5,000 and Cuba at $20,000.

I don't understand why Cowen refuses to compare countries' GDP/capita correctly with Purchasing Power Parity.

The World Bank refused for decades to offer estimates of Cuban living standards. I'd wager that one is fictional.

Trading Economics has a graph of GDP/capita (PPP) since at least 1990:

1990 $14,000; [then the Soviet Union breaks up];
1995 $9,000; 2000 $11,500; 2005 $14,000; 2010 $18,000; 2015 $20,000

They say the above is from the World Bank.

Does PPP even mean anything in a command economy like Cuba's where so many prices are set by the government? Is that PPP based on the black market rate for a big mac?

Likely not, no, which is why that figure seems so cockeyed. That's what you'd expect of one of the more affluent East European countries and the very most affluent Latin and Caribbean economies. This, in a country which was hideously overspecialized in cash cropping into the 1980s and in which the physical plant is falling apart all over the place.

Of course PPP still matters with a command economy. Russia's was estimated to be $12,000 in 1990 (in 2000 dollars, though) and as with Cuba there is likely more error in part because of the percentage of GDP that was in the black market.

Why are the figures cockeyed? Because it doesn't square with your prior impression? I admit I was surprised and would have guessed half that and am not confident it is really $20,000 though Id bet $15,000 to $20,000 unless economists at the World Bank simply didnt know what they were doing from 1990 with respect to Cuba.

Todd Kreider November 26, 2016 at 7:48 pm

Why are the figures cockeyed? Because it doesn’t square with your prior impression?

It appears Cuba's main export is now prostitution. Young men who are earning $20,000 a year don't blow tourists for chump change.

If health outcomes are valued at the same dollar amount as their implicit market value in the USA (however that's calculated), you're already at higher GDP per capita from health outcomes alone that the total sum of GDP at market exchange rate.

One of a million ways to demonstrate the inadequacy of market exchange GDP as an indicator of wellbeing. It's a pretty handy point of reference a lot of the time though ...

The government price is X, the supply at X is zero. PPP is useless here.

In the USA, a very high volume and dollar value of health care inputs are required to obtain the same health outcome that is obtained in Cuba for a vastly lower volume and dollar value of inputs.

If that doesn't reflect as a positively impacting the PPP output of Cuba in your mind, then I'm not sure that you quite understand the concept.

Let's say that there is only one product in the economy: health care services which obtain life expectancy of 75 years.

To obtain this "product" in the USA, $10,000 a year per person are needed. In Cuba, $500 a year are needed per person.

By purchasing power parity, in this highly simplistic economy, the PPP GDP of Cuba is 10,000 US dollars, because no matter what pieces of paper are exchanged, the actual output that could be obtained by that $500 was the same what could be obtained by the 10,000 US dollars in the other economy.

So, not all of these transactions are market transactions. So, it's a little more debatable.

$20,000 is like Taiwan, dude.

You're right dude, $20,000 is Taiwan, back in 2000. Taiwan is $45,000 today.

Holy cow! How much is USA now?

Holy cow! Why does google show 22000 fir 2015 then

LOL. Have any of you ever been to Cuba, anywhere away from the main tourist strips?

$20,000 would buy a lifetime supply for a family of 4 in Cuba of all the rotten plantain, corned beef, spam, tilapia and other goodies that they feed the general population on the ration card.

Talk about fake stats.

Cuba in 1959 had GDP levels comparative to Italy. Well above the rest of the Caribbean.

The core problems of the region include high debt, weak commodity prices, lack of economies of scale and an inability to upgrade tourist facilities to compete with the U.S., Mexico and further-flung locales.

I'll wager the real problem most of the Anglo-Caribbean has in getting repeat tourist business would be the wretched levels of street crime. It's not nearly as bad in Barbados as it is in Jamaica or St. Thomas, but it's troublesome everywhere. The hispanophone Caribbean is hopeless in this regard.

Hmmm, really?

& how many times have you visited Jamaica, Barbados, Trinidad, DR, PR?

I lived in the Caribbean for 9 years until 2006, and AD is exactly right. Crime rates mean that anyone with money or aspiration to do well, leave the country. Many business people keep their families in Miami for protection, or live in heavily guarded compounds. This is not an environment that encourages investment.

I don't think there is any quick fix to this problem unfortunately.

I do wonder how the proliferation of private surveillance cameras will impact law enforcement. Perhaps there is hope.

If -- and it's a big if -- Cuba liberalized it's economy, I do think it would do quite well.

As Tyler mentioned, education is a big advantage over its Caribbean peers, and I don't think there's a direct parallel in the economies of the east. I've lived in DR for 4 years, and visited Cuba twice: in terms of education, it's third world vs. first world.

But also, ironically, communism has prepared them well for capitalism. Incomes are so low that for Cubans to make ends meet, they need to become entrepreneurs. Everyone has a sideline. When unleashed, this habit would bring vitality to the economy.

Another effect of socialism: low unemployment levels have created a potential workforce that is used to going to work -- not so in the D.R., where unemployment has been in the teens for a long time.

Also, I suspect that much of the Cuban emigre community might be willing to return with investment.

In terms of Tourism, I would be more optimistic than Tyler. Even with its natural source of visitors blocked, Cuba has still managed to attract more tourists than Jamaica. That's because of its natural beauty and a uniquely vibrant musical culture. With the US opening its doors, Cuba will probably eventually lead the Caribbean tourism industry.

But as I began, the biggest obstacle is still the politics. The optimistic case is that Cuba becomes an Argentina of the Caribbean: dysfunctional, but better educated and somewhat better off than its peers.

"The optimistic case is that Cuba becomes an Argentina of the Caribbean:.."

FYI, GDP/capita (PPP) Cuba $20,000; Argentina $22,800.

I bet Cuba can catch Argentina...

I bet half of Cuba's repoted GPD/per capita (PPP) are Che Guevara posters.

The numbers Tyler cites, and what I can find in Google, is about $6,000/GDP/capital for Cuba.

Google is a big place

If the US Government set the price of yachts to $1, US PPP would be in the billions!! I want to be a billionaire Todd, let's do it!

The only way you could come up anywhere close to those GDP estimates for Cuba is if you counted all the state/army enterprises like tourism and health tourism, doctors/teachers barter system and coca supply chain royalties.

If you wanted to legitimise it all and be able to count all that aggregated value as PPP you would need to add to it the prostitution services and the value of the internal dollar black market in all sorts of goods and services.

Even after all this, only a small tiny fraction of the resulting value translates directly into real wealth for the general population. Instead most of it ends up in Panama and Swiss accounts while the rest gets thrown away and/or consumed by the 0.1%


Another person I talked to spoke of a vibrant arts community. He mentioned that the Soviet style education system created persons trained in classical music, who then combine it with local rhythms. Same for art, which is cheap and good.

In the world of art subjectivity music and other arts will be cheap for Cuban creators but more lucrative for western middlemen and consumers, pretty much like it is everywhere else.

The US already has the best product of Cuban culture, Gloria Estefan:

Another advantage Cuba might have is the large Cuban-American community. Although many won't go back until the Communist government is overthrown, especially the old generation of refugees, I think there's quite a few that would go back permanently or for frequent long stays to help develop a liberalized Cuba. Some would have valuable skills that are now scarce in Cuba. Some would have knowledge of American markets and contacts with distributors of goods in America. A liberallized Cuba may be poised for an economic miracle like that in China, though likely faster because of these Cuban-Americans and Cuba's proximity to the large American economy.

Having been there a few times, my impressions are:

1. I see no reason for the claim that it cannot upgrade its tourist facilities. There are in fact US-luxury level hotels in Havana, and more seem to be being built. Elsewhere there are fewer, but I'm not sure what the obstacles are. Demand is high - every home in central Trinidad (the Cuban city, not the island) advertises bedrooms for rent, and the city is stuffed with tourists. Cuba is potentially a huge tourist destination, not comparable to much smaller Caribbean islands. I would not want to be an owner of hotel properties on any of the more common destinations.

2. My sense, only that, is that Cubans are in fact highly entrepreneurial, and that as the economy loosens, as it has done in recent years, this will produce considerable benefits. Is it possible that one advantage of living under the regime is that Cubans hd to learn to scramble for money all sorts of ways?

3. The inverted pyramid of income, described by Bill, above, is a fact. Getting rid of it would help a lot.

4. I heard little about street crime anywhere. Maybe I was blind to it, but it did not seem to be a problem.

4. I heard little about street crime anywhere. Maybe I was blind to it, but it did not seem to be a problem.

I've heard quite the contrary. Numerous cases of pickpockets, and purse snatchers. Nothing serious, but still an annoyance.

And isn't the food horrible? I've never met a single person who had good things to say about eating while in Cuba.

Better than the Latin American average, though.

I should have been more specific. I was referring to muggings, robbery, and the like.

The food is not horrible, but no one would go there for a culinary vacation. It's mostly plain, though there are some good restaurants starting to appear.

If anyone is making predictions about Cuba's future, I would like to point out a few pieces of information that should be considered. Cuba's fertility rate is 1.45. Their population peaked in around 2007 and has since very slightly declined. The average age is 38.6 which is a couple of years higher than in the US.

While an aging population has its own set of challenges, declining total population means less people to share tourism and agricultural revenue among. It will presumably also mean rising returns to labor, unless a right mess is made of the economy.

PS: I was going to point out that presenting a few basic facts about Cuba's demographics does not mean I support or supported Castro, but then I realized this is the internet and so it probably does. So in for a penny, in for a pound - Viva le Zombie Castro! May his rotting corpse rule for a thousand years!

Rotting? Are you telling me it won't be perfectly preserved and placed in a glass case for public viewing in Castro's Tomb?

With kids these days it's all about the rotting.

"The core problems of the region include high debt, weak commodity prices, lack of economies of scale and an inability to upgrade tourist facilities to compete with the U.S., Mexico and further-flung locales..."

The core problem is culture.

Perhaps most importantly, Cuba has not yet repudiated either communism or Fidelism. Cuba expert Richard E. Feinberg describes the stasis as such: “Bureaucratically, over 50 years the Cuban state has become so multilayered, so burdened with thick red tape and so risk-averse that the decision-making procedures are broken.” In other words, Castro was hardly the only problem, and it is not obvious that an ideological turnaround is in the offing.

I don't think this is so clear. It could be true, but it seems to me that a gradual turnaround is starting. Whether it will accelerate remains to be seen, and I suppose a lot will depend on who succeeds to power after Raul Castro. My own non-expert notion is that Cuba will seek structure not unlike China, with the party maintaining political power while letting private business grow. The party may not have a choice if it wants to maintain power.

For those looking to Cuban Americans for signs of potential in a liberated Cuba, the data are sobering.

Along with lower English proficiency and education attainment than other US immigrants, they also earn much less.

"Cuban immigrants had much lower incomes compared to the total foreign- and native-born populations. In 2013, the median income of households headed by a Cuban immigrant was $35,400, compared to $48,100 and $53,000 for overall immigrant and native-born households, respectively."

I wasn't referring to the recent immigrants. I was referring to the ones who came around the time of the Revolution and their children and grandchildren. There are lots of them, and even a small number could make a big difference.

A small number made a v big difference in Dallas on Nov. 22, 1963.

Funny how people tend to earn lower income when the arrive in a new country where the common language is not their mother tongue.

How far down the relative income scale do you think you would fall if you moved to a country where the common language was not your mother tongue?

If Cuba opens up to U.S. investment, I expect rapid development, mostly tourist related at first but gradually expanding to natural resources and industry. What could alter this optimistic course would be a retreat in the U.S. to the politicalization of U.S.-Cuba relations that has dominated the past 60 years, a retreat that could be exacerbated if there is a floodgate of legal claims against Cuba to recover land and financial losses suffered by (former) Cubans whose property was confiscated by the Castro government. Indeed, so much of Florida politics is tied not to a reopened Cuba but the closed Cuba on which many south Florida politicians have built their careers. What will Trump do? It's possible he would support a reopened Cuba for the business opportunities for himself. That seems to be the overlap of self-interest/public interest that motivated Shiller to write this: On the other hand, Shiller may have been motivated by satire.

Another point about Cuban tourism:

It is much larger than other Caribbean countries - more than twice the size of DR with only about 10% greater population. As a tourist destination it can provide both urban attractions - music, art, cultural activities in general - and others - beaches, fishing, whatnot. I think that gives it a huge leg up on the tourism front.

Tourists from the US want to be able to experience an exotic locale in a very hygienic manner. That's what makes cruise ships so popular. Without hotels that offer the same amenities as US hotels there's zero chance that typical US vacationers will spend any time in Cuba. Sure, the pseudo-adventurous would love to tell the folks in the cul-de-sac back home about their expedition to the Commie island but not if it involves cockroaches, lumpy mattresses and tarnished restaurant utensils. Besides, one can sit in their living room on the cul-de-sac and listen to Celia Cruz, eat tortas Cubanos and gaze at copies of Roberto Fabelo works and face no threat of heat, humidity or grimy strangers that don't speak English.

Having just returned from a week in Hawaii I can clearly see how Cuba could become a booming economy overnight. So simple: Put a democratic government in place and allow the Cuban people freedom. Establish a modern and fair legal system. Look for investors who would like to get in on the ground floor to open up Cuba as a destination vacation spot. Begin to enjoy the benefits and vibrancy of having tens of thousands of vacationers enjoying the climate, the beaches, the casinos, the entertainment and of course spending money. They are just 90 miles from a very large and reasonably wealthy country who would love to spend their time and money in Cuba. Or they can continue to embrace the failed oppressive Marxist/socialist government with everything that brings to them.

I wonder if blocked access to the nearest large market (the US) could possibly explain something about their economic performance ...

I conclude that any small country which is near a big country will not do well if the big country is successful in blocking interactions of the small country with the rest of the world. Then, on the question of differences between capitalist- and socialist-leaning economies, look for more relevant types of information.

Anyways, it sort of made sense 50 years ago after nationalization and the loss of assets, but it's been pretty ridiculous for a generation or two already ...

According to most experts Cuba was able to get around the U.S. embargo with ease. The problem is that Castro and Marxism had a stranglehold on the economy by intent. Simply lifting those intentional restraints would improve their economy.

Sure, the embargo was not even remotely complete. It was a primarily American affair.

But when the nearest market and one-third of global demand at the same time are closed to trade, this will affect things. Imagine, for example, what would happen to Maine if there was a 100% embargo against trade with other US states (with strict bans against trans-shipments and re-exports entering into the USA), but it otherwise retained all aspects of the market system roughly as it is at present - what would happen to per capita GDP, both overnight and over decades?

Presumably excesses of planning and state control had the expected (negative) effects you speak of. But it's hard to know which to blame more. I'm inclined to think that Cuban GDP per capita (which is quite a different question from issues of human rights related to political freedoms) would have done fairly OK under that system if it had had access to the US market.

I fail to see your point. Cuba had the ability to trade and did so. What they lacked was something to trade, pretty much limited to sugar and cigars. What little trade they managed was confiscated by the government. You seem to be implying that if they somehow had more trade that the citizens would be better off but clearly that isn't true and the government would have taken that profit too. Cuba's problem was not the U.S. it was Castro and Marxist socialism. Cuba's solution is/will be democracy and freedom. If their leaders don't chose that path they will continue to suffer.

I don't understand how being excluded from 1/3 of global demand for traded goods can possibly affect anything.

I wonder ... what would happen to my workplace productivity if, tomorrow, 1/3 of all colleagues were instructed to never talk to me again, and to actively work to deter any other colleagues from working with me.

FYI, it was the stated and expected goal of the bloody policy.

" being excluded from 1/3 of global demand for traded goods".
Castro took the property and investments of American companies and individuals. He couldn't trade with us because he would have to at some point deposit funds which would then be subject to confiscation by the courts on behalf of the creditors. The "bloody policy" was put in place in the hopes that Castro would relent on his oppressive policies and treat his people and his international responsibilities fairly. If you are trying to say it didn't work, well yeah tens of thousands of murdered Cubans at Castro's hands proves your point. Why is that in anyway America's fault???

I might add that Castro proudly proclaimed that he was able to easily get around the embargo and get whatever he needed.

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