Economic Development, Government, and Travel & Tourism

Official holds out little hope for trade with Cuba

Cuban Congress this month will decide the direction of the nation’s economy.

April 1, 2016
| By Pat Evans |
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Charles Shapiro

According to Charles Shapiro, Cuba is atop a high dive with a decision to make.

The island nation can either climb back down the ladder to the inefficient economy it has had since 1959, or jump in and follow China’s capitalist economy, said Shapiro, former coordinator for Cuban Affairs for the U.S. Department of State, former ambassador to Venezuela, and current president of the World Affairs Council of Atlanta.

Shapiro spoke to the World Affairs Council of Western Michigan about Cuba last week, a week after President Barack Obama’s historic visit to the communist nation — the first by a U.S. president since Calvin Coolidge in 1928 — to help open up diplomatic relations.

Shapiro said it helps that Obama is an African-American, which strikes a chord with the Afro-Cuban majority population. All the Cuban leadership is white, including President Raul Castro and his older brother Fidel Castro.

“I was skeptical he would be able to reset relations, and he did,” Shapiro said. “I think he hit the ball out of the park getting our message out to the people of Cuba.”

Since Shapiro’s first visit to Cuba in 1999, government officials there have told him they’re studying China’s economic model, but the Caribbean nation is steadfast in its communist ideology, even as Cuban-U.S. relations begin to open up.

“Thus far, what they say is, ‘The Chinese and Vietnamese are sellouts,’” Shapiro said.

Those two communist states might have “sold out” in terms of the true communist model, but the two nations are experiencing an economic resurgence — in China’s case, emerging as a world superpower — while Cuba is sinking rapidly.

A nation of 11 million people, Cuba has the approximate equivalent gross domestic product of Hartford, Connecticut. The city of Grand Rapids has about two-thirds the GDP of Cuba. The U.S. exports $299 million in goods annually to Cuba — the same amount it sends to Canada every nine hours.

Based on decisions made by the 7th Congress of the Communist Party of Cuba, it could open up its economy to be where the Dominican Republic’s economy is, with just over 10 million people, a GDP twice that of Cuba and U.S. imports of more than $7.4 billion. That’s the best-case scenario, however, Shapiro said.

A trio of factors — the U.S. trade embargo since 1963, the state-run economy, and an infrastructure that hasn’t been updated since 1959 — are at the root of the country’s economic struggles, Shapiro said.

The major successes of the Cuban communist government, free graduate-level education and free health care also are major drawbacks, Shapiro said. Those benefits cost money — which then can’t be used for much-needed infrastructure updates.

“Someone is making a decision to allow people to study something like the folklore of Bolivia for free as opposed to filling potholes,” Shapiro said.

A declining population also hinders the economy.

Shapiro said he spoke to one of the 500,000 “cuentapropristas,” self-employed workers who essentially are entrepreneurs in an economy that doesn’t allow for them. The woman had attended the best high school in Cuba, Vladimir Ilyich Lenin High School, and said that 70 percent of its graduates no longer live in Cuba.

The cuentapropistas are a result of the major economic depression in Cuba — worse than America’s Great Depression — that followed the collapse of the Soviet Union. The self-employed workers still pay taxes to the Communist government but run their own businesses, such as shoe shiners, barbers, restaurateurs and event planners. There are massive limitations, however, such as having to run the business out of their home and not being able to start a second location.

That segment of the population is the most promising for Cuba’s future, Shapiro said.

In the immediate future, the best bet for foreign investment in Cuba is expected in tourism and telecommunications, he said. Otherwise, the investment partner is the Cuban state — not an ideal business partner.

“It’s not like it’s a choice of investing in Cuba or not investing at all,” Shapiro said. “There’s a very small amount of economic activity, and there’s 11 million very poor people.”

Despite an almost “euphoric vision of gold on the streets in Havana,” there’s a steep hill to climb: The embargo is law until the U.S. Congress votes to abolish it. Shapiro isn’t confident that will happen in the near future, especially while Obama is still in office.

Ultimately, he’s not sure the U.S. has much influence over the future of the Cuban economy. Shapiro puts a lot of stock in the Cuban Congress this month, which will lay out plans for the next five years and decide how much the economy opens up and what opens up, along with conditions for foreign investment.

If and when the economy opens up, the government then must decide to allow the nation to commercialize like many U.S. cities.

“Our ability to influence it is limited. The future is decided by the Cubans, not the people of Grand Rapids,” he said. “In April, in Cuban terms, it’s more important than Obama or Mick Jagger.”

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