* By Jaime Suchlicki
Cuba combines the worst features of underdeveloped and communist societies. It is probably the most inefficient among the former socialist nations. By far, it is also the poorest in terms of per capita income.
Moreover, Cuba’s economic decline in the last five years has reached catastrophic proportions, with no end in sight for the deflationary spiral.
The entropy of the Cuban economy as it keeps on contracting has no parallel in recent history, perhaps with the exception of the Cambodian experience under the Khmer Rouge.
Cuba’s extreme dependence on foreign trade and the adaptation of its economy for nearly three decades to an unnatural and immense Soviet subsidy inflow, which created an artificial economy that has now disappeared, paradoxically has proved to be its own nemesis. Cuba does not have a viable economy of its own. As nearly every category of inputs keeps on decreasing, so the spiraling vicious circle of pauperization keeps on descending unremittingly.
In Cuba there is no internal market to speak of. Consumption is limited by a strict and severe rationing regime. Whatever transactions take place outside it are in the illegal black market, which operates with scarce dollars and stolen merchandise. Meanwhile, the Cuban peso continues to depreciate as its purchasing power becomes nil and its function as a means of exchange approximates the vanishing point. This process is being accelerated by a huge and persistent governmental budgetary deficit and the virtual absence of any stabilizing fiscal and monetary policies. Under such extreme conditions and with no foreign exchange reserves, convertibility is totally out of the question.
Sugar production, Cuba’s mainstay export, has reached levels comparable to that of the Great Depression period, while the prices of other supplementary primary commodities continue their downward trend in the international market.
Efforts at diversifying production both for domestic and export purposes have proved to be notorious failures, despite enormous amounts of misplaced investment. Furthermore, the economic and social infrastructures of the nation are not only in a state of disrepair but are actually collapsing. The outdated electric grid cannot supply the meager needs of consumers and industry, transportation services have almost vanished, communication facilities are totally obsolete, and sanitary and medical services have deteriorated so badly that contagious diseases of epidemic proportions constitute a real menace to the population.
Under these present conditions it would be risky, if not foolhardy, to invest in Cuba. Even the export sectors, like tourism, which seem to be relatively prosperous and immune to the economy’s malady, will eventually fall victim to the general poverty of the country. It is impossible for isolated sectors of enclaves of economic activity to survive indefinitely under such cataclysmic conditions.
There is also a veritable maze of legal problems posed by the issue of the legality of foreign investments and the validity of property rights acquired during the Castro era. Obviously, both Cuban nationals and foreigners whose properties were confiscated during the early years of the revolution will reclaim them as soon as this becomes feasible. The United States, as well as other countries whose citizens’ assets were seized without adequate compensation, stand ready to support their nationals’ claims. Additionally, Cubans living in different parts of the world eagerly await the opportunity of exercising their legal rights before the Cuban courts in a post-Castro situation. Again, the East European example is a good indication of the complexities, delays, and uncertainties accompanying the reclamation process.
A different kind of problem is that posed by the legality of investments and the legitimacy of property rights relating to assets and facilities that did not exist before the Castro regime acceded to power. This, indeed, is an extremely sensitive and technically convoluted issue. It should be noted that exaggerated popular sentiments and a politically incendiary rhetoric will certainly await those who are now investing in Cuba. At the very least, they should expect to deal with a conflicted social climate and an adverse business environment. That is, at this time investors will invariably encounter an ambience in Cuba that is not conductive to productive operations.
None of the above addresses a fundamental issue of extraordinary moral impact: lending assistance to a totalitarian regime that cruelly and callously has systematically violated the most elementary human rights of the Cuban population. The Cuban regime stands condemned by the United Nations and the Organization of American States as one among the few throughout the world that share that notoriety.
If investment and trade embargoes imposed in the past on those political systems that have been convicted of heinous crimes and abominable deeds against their populations have any sense and can claim to be morally justified, the case of Cuba must be among the most salient ones, symbolizing a country whose population has been uninterruptedly governed by a totalitarian regime for sixty-four years.
It is to be hoped that investors and entrepreneurs, cognizant of the drama of the Cuban people, will realize their ethical and moral obligations and abstain from lending success to a regime that will be harshly judged by history as well as by those who have been victimized by it.
(This report was previously published by the Latin America Advisor,
Inter-American Dialogue, on April 18, 2023)
*Jaime Suchlicki is Director of the Cuban Studies Institute, CSI, a non-profit research group in Coral Gables, FL. He is the author of Cuba: From Columbus to Castro & Beyond, now in its 5th edition; Mexico: From Montezuma to the Rise of the PAN, 2nd edition, and Breve Historia de Cuba.
