For all of my adult life I have been hearing that Cuba will blossom economically when Fidel Castro passes away. Now that time has come, and it seems Cuba will continue to struggle.
At a superficial glance, the case for Cuban optimism is obvious. So many Cuban-Americans have impressed the world with their business skills and entrepreneurial drive. If comparable talents were let loose in Cuba itself, one might expect similar results, just as China, after dismantling the most inefficient parts of its communism, began to catch up to the overseas Chinese.
One way to approach Cuba’s economic fate is to consider the Caribbean region as a whole. For the most part, it has seen mediocre results since the financial crisis of 2008. Economic problems have plagued Puerto Rico, Trinidad, Jamaica, Haiti and Barbados, with only Jamaica seeing a real turnaround.
The core problems of the region include high debt, weak commodity prices, lack of economies of scale and an inability to upgrade tourist facilities to compete with the U.S., Mexico and further-flung locales. Cuba cannot service its foreign debt, and losing most of its support from Venezuela has been a massive fiscal problem.
Perhaps the country most like Cuba in the Caribbean, in terms of history, heritage and ethnic composition, is the Dominican Republic. Currently, it has a nominal gross domestic product of somewhat over $6,000 per capita, depending which source you prefer. That’s far from the bottom tier of developing economies, but it’s hardly a shining star. And Cuba will take a long time to attract a comparable level of multinational investment, or to develop its tourist facilities to a comparable level of sophistication. Well-functioning electricity and air conditioning cannot be taken for granted in Cuba, especially after the major decline in energy supplies from Venezuela.
The most optimistic forecast for Cuba is that, after a few decades of struggle and reorientation, it will end up at the income level of the Dominican Republic.
If you are wondering, the World Bank measures Cuban GDP at over $6,000 per capita, but that is based on a planned economy and an unrealistic exchange rate. In reality, Cuba probably is richer than Nicaragua, where GDP per capital is approximately $2,000, but we don’t know by how much. Cuba does have relatively high levels of health care and education, but we’ve learned from post-Soviet reform experiences that it is easy for a nation to lose those advantages. There are already shortages of many basic health care items, including medical technology and antibiotics.