Cuba has undertaken progressive reforms nearly three decades ago in 1994 with liberalising commodity markets, and providing support to the farmers so that they can sell their surplus yield in local markets. Given the fact that Cuban economy is mixed economy with formation of cooperatives to regulate labour market and promotes self employment therefore any transition to market economy has its challenges. Following the restoration of US-Cuba diplomatic relations in July 20, 2015, it was expected that there would be progressive changes in the relations between Cuba and the West.
Cuba has been proactively engaged by countries such as Venezuela, Russia, Vietnam and China to name few and these countries have been providing support to the Cuban economy in the past. Venezuela had been providing regular supply of crude oil, Russia waived off the debt of nearly US $32 billion, China investing in a big way in the island economy while Vietnam also sending its high level delegations to the country for promoting trade and investment. The Cuban government also has been trying to liberalised trade through authorisation of more than 200 categories of activities which can promote self employment. A number of Cuban citizens have also migrated to other countries in search of better avenues but has always looked upon their motherland as a emotional connect. One of the important aspects of mixed economy has been the fact that nearly 90 percent Cubans have their own homes and the Cuban economy is well known for its export of cigars and rum.
Within the US there has been increased support for normalisation of relationship between United States and Cuba given the possibility of cheap labour, and potential for growth through structured investment. One of those website (coracle.com)have projected that the GDP growth of the country which was 1.3 per cent in 2021 is expected to grow at the rate of 4.6 per cent this year. Even the inflation is also getting moderated and the fiscal balancing is also going to happen in the long run. Cuba has a huge potential for tourism and mining and is one of the leaders in the production of sugar and tobacco. The opening of agricultural sector would offset the increasing commodity prices because of the Russia Ukraine war and the improvement in real estate and development of individual and cooperative sectors will bring about change in the Cuban economy. There is also huge potential of development of medical, health, and educational sectors and with relatively good social indicators and pro active approach with regard to anti corruption is seen as precursor to structural reforms in the country. The relationship between Cuba and many European Union countries have improved over the last seven years, and is expected to grow further.
Following the liberalisation measures which have been undertaken in the year 2018, it is expected that Cuban economy is going to improve following its recovery from the post pandemic phase and it successfully vaccinated its population against COVID-19. Cuban economy is also dependent on remittances and with growing demand for nickel and cobalt which are essential commodities for electronic vehicles particularly in the context of electronic cars and other kinds of gadgets, the Cuban economy is going to benefit from that.
One of the important elements has been the rise in agricultural exports particularly sugar and tobacco and even tourism has been showing signs of growth. Tourism which accounts for nearly 10 per cent of the country’s GDP and increased imports of health and medical devices is also going to support the economy. Despite efforts to normalise relations between Cuba and the US, the present Biden administration has not completely lifted the American sanctions and which showcases cautionary approach by the US government. At the global level almost all developing countries have been facing increasing commodity prices and inflation but Cuba has been showing signs of recovery and even the political establishment have implemented gradual policy adjustments to assimilate the country’s economy into the larger globalised world.
President Obama showed commitment to normalising relations with Cuba but his successor president Donald Trump reimposed new sanctions and even imposed restrictions on remittances which was sent by the Cuban expatriates to the country. Few of the restrictions have been eased under the present government, and it is expected that with the positive approach shown by many countries, the process of liberalisation and increasing investment in Cuba is going to return soon. In the services sector , Cuba has been sending its healthcare professionals to the countries in Latin America and is benefiting from its services exports. Cuba has its own challenges in the form of natural disasters which have impacted its infrastructure and even its power supply. For a economy with limited natural resources and much dependence on agriculture, it became difficult to offset the losses which were suffered because of hurricane Ian.
Cuba has been looking forward for investment in private companies and opened the economy for collaboration with foreign investors, both institutional and private, and also looking forward for implementing equal commercial rights for private companies, at par with those of state enterprises. The support which Cuba has extended to Russia against Ukraine has also brought about U.S. sanctions but one must understand that many other countries such as India and China have also supported Russia in this war. In international media much has been written with regard to Cuba but one must understand that with decades of sanctions and limited economic resources, the country has been still making progress and showing signs of recovery.It always takes some time for any economy to make a switch from mixed to market economy.