Benefits to the US-Cuba Opening

Sunday, December 21, 2014 - 11:00

The surprise opening to Cuba will not necessarily have dramatic effects on either country, though there will be tangible and intangible changes for both.1 For Cuba, the opening brings the prospect for a strong influx of dollars and tourists.  The diplomatic opening does not allow unfettered travel, but it reduces the barriers significantly.  Pitt's Study Abroad program to Cuba had to be canceled last year due to banking restrictions.  That type of problem will surely disappear.  Perhaps, shadowing the new policy with regards to undocumented immigrants, Obama will reduce enforcement of the prohibition of traveling to Cuba through third countries.  The influx of money and foreigners into Cuba will create tangible changes, by creating greater opportunities for employment as markets expand.  The Cuban government is in the process of sharply reducing government employment, and to do this they need to create more private sector jobs. The increase in cash is necessary for that change, but it is insufficient. 

Those who argue that only market economies can bring prosperity will argue that Cuba will require substantial reforms to realize the potential benefits of better relations with the United States.   The Cubans have already made substantial changes, allowing, for example, more opportunities for private businesses and investments in agriculture.  But as Mesa-Lago and Pérez Lopéz (2013) argue in their book on reforms under Raul's regime, these types of changes are half-measures. In spite of the country's high levels of education, the reforms allow private sector employment in areas such as water carriers, car attendants and clowns, but prohibit it in most professional careers.

The influx of foreign money could also re-fund a model of state-oriented growth, which worries critics of the policy change while exciting supporters. Support from the Soviet Union buoyed Cuba during the Cold War, and thus if the government can capture the new funds, they could rebuild their state-led economy. This worries opponents of the opening, because it reduces pressure on the Castro regime. Those who are more critical of free market capitalism and less critical of Cuba's regime, however, see the economic blockade as the reason for Cuba's continual economic crisis since the fall of the Soviet Union.  These two extremes, however, ignore the range of possible directions.  Countries as diverse as China, Brazil, and Bolivia employ some sort of "state-led capitalism" and thus Cuba's new economy has many models to emulate.

For the United States, there are tangible effects for economic interests who want to invest in Cuba's tourism industry, mining, shipping, and their potential oil industry.  Agricultural exporters sold products worth $350 million to Cuba in 2013 (and much more prior to Cuba's economic crisis), and the opening suggests new opportunities.  There will also be opportunities for investment in infrastructure and technology (though especially the latter will require action to remove Cuba from the US list of countries that sponsor terrorism).  That said, Cuba has only 11 million people, most of whom have limited buying powers.  Thus while some companies will gain from a new market, the overall impacts on the US economy will be limited. 

Perhaps the bigger impacts on the United States are less tangible.  Foremost, the change removes Cuba, a country on the US doorstep, from its enemies list. This suggests new opportunities for cooperation on hemispheric affairs, ranging from oil production in the Gulf, drug trafficking, economic development, and human rights.  It eliminates the clumsy dance that revolves around every regional meeting, thus allowing more focus on issues rather than whether or not Cuba can participate or shake the president's hand.  Cuba's work on ebola, for example, could be praised and supported, instead of turning the attention from this health crisis to geopolitics.

In sum, the new opening to Cuba offers direct opportunities to US businesses and tourists, and to the Cuban government and its citizens.  In global terms, however, even the optimistic views suggest limited benefits, and who will benefit, and to what extent, are dependent on further reforms both in Cuba and the United States.  Regardless of the reform process and economic changes, converting an enemy into a partner will yield important, if less direct, benefits.  Political alignments, however, revolve around tangible costs and benefits and thus the indirect but clear benefits will likely have less weight in the reform process than they deserve.


References: 

1 I also expressed my opinion recently on Essential Pittsburgh. Available at: http://wesa.fm/post/local-voices-react-announcement-new-relationship-cuba

2 Mesa-Lago, Carmelo, and Jorge Pérez-López (2013). "Cuba Under Raúl Castro; Assesing the Reforms." Lynne Rienner Publishers. 

About Author(s)

Scott Morgenstern
Scott Morgenstern is director of the Center for Latin American Studies and a faculty member of the University of Pittsburgh's Political Science Department. His research focuses on political parties, electoral systems, and legislatures, with a specialization in Latin America. Among his publications are Patterns of Legislative Politics: Roll Call Voting in the United States and Latin America’s Southern Cone (Cambridge Univ Press, 2004), Legislative Politics in Latin America, (Cambridge Univ. Press, 2002), and Pathways to Power (Pennsylvania State University Press, 2008).