Hasta la victoria, quizás: Cuba’s broken economy
Economist Podcasts Podcast Recap
Published:
Duration: 23 min
Guests: Sarah Burke
Summary
The episode examines the economic crisis in Cuba following the end of oil subsidies from Venezuela, exacerbated by American sanctions. It explores the impacts on everyday life and potential future changes in governance and economic policy.
What Happened
In January, America's raid on Venezuela to capture Nicolas Maduro disrupted Cuba's oil supply, as Venezuela was a major oil provider to the island. This operation was part of a broader strategy by the Trump administration, particularly supported by Secretary of State Marco Rubio, aimed at crippling Cuba's economy by cutting off vital resources.
Cuba's economy has been severely impacted by American sanctions, which have intensified existing hardships. The island produces only about 40% of the oil it needs, with the rest previously supplied by Venezuela at a steep discount. The sanctions have led to severe fuel shortages, affecting everything from electricity to tourism, as flights from Canada and Russia have been canceled due to refueling issues in Havana.
The economic situation in Cuba has deteriorated to the point where it is worse than the early 1990s after the Soviet Union's collapse. Many state-run shops are empty, and the monthly salary, which was already insufficient, now buys even less. Despite some protests, fear of reprisal keeps many Cubans silent about their economic difficulties.
The episode highlights that while American sanctions have worsened Cuba's situation, the Cuban government also bears significant responsibility due to its mismanagement of the economy. The government has maintained control over economic planning, resulting in inefficient allocation of resources and a drop in exports, such as sugar, by 90% from 1990 to 2010.
The United States has targeted Cuba's remaining sources of foreign income, including the deployment of Cuban doctors abroad and tourism, further straining the government's finances. The American strategy appears to be working to some extent, as Cuba has shown willingness to negotiate, including talks involving Raul Castro.
The U.S. demands focus on restructuring Cuba's state enterprises and creating a more open economy that would allow American businesses to operate more freely. However, there is skepticism about whether these discussions will lead to meaningful change for ordinary Cubans or primarily benefit American interests.
Cuba has made some concessions, such as allowing private businesses to import oil and opening investment opportunities for Cuban exiles in Miami. Still, the potential for change remains uncertain, with the Cuban regime being notoriously resistant to reform.
The situation draws parallels with U.S. strategies in Iran and Venezuela, where economic pressure aims to incite regime change, though the effectiveness of such tactics remains debated. Cuba's aging population and the emigration of younger citizens further complicate prospects for significant political upheaval.
Key Insights
- America's economic blockade on Cuba intensified after Venezuela stopped its discounted oil supply due to U.S. intervention. This has caused severe fuel shortages affecting essential services and tourism.
- The Cuban economy has long been mismanaged, with a centralized system that poorly allocates resources. For instance, sugar exports fell by 90% between 1990 and 2010, highlighting systemic issues.
- Despite harsh sanctions, Cuba has started negotiating with the U.S., including talks involving Raul Castro. The focus of these talks is on economic liberalization, though outcomes remain uncertain.
- Cuba has allowed private businesses to import oil and opened investment to Cuban exiles. However, significant change in governance or economic policy is uncertain due to the regime's resistance to reform.