Cuba’s economy already was not doing well when Hurricane
Irma hit recently. With a high government budget deficit, the government has a
shortage of money to pay for the damage. The economy will lose tourism and
other revenues including because of power outages from the hurricane, which
will reduce growth of GDP and may even cause GDP to shrink.
What makes it even worse for people living there is that the
socialist economy of Cuba makes it difficult for business people to obtain the
supplies and other inputs they need from overseas by importing them. Yet the
economy has to import 80% of its food.
Cuba’s transport—roads, railroads, etc.—don’t work well and are in a bad
state, so it’s hard to ship the food that is grown in Cuba around the country.
And the government has decided to crack down even further on capitalism.
It’s hard to attract foreign investment to try get the
economy to grow because of the bureaucracy from socialism and the slowness
foreign investors face in getting their business projects approved and started.
In the past few years, Cuba has only been able to attract one-fourth of the
investment it needs from foreigners, according to The Economist.
This magazine article believes the Cuban currency is very overvalued
and it recommends a devaluation of Cuba’s currency to help make exporters
prices more competitive. This growth in exports that could result would help
increase GDP. But a devaluation could also increase inflation and make it much
more expensive for Cuba’s businesses that rely on imports. Making all of this
uncertainty even worse is the fact that the Cubans will have to choose a new
leader early next year when President Castro leaves office. These are difficult
times for many Americans in Texas and Florida affected by hurricanes, but it is
even more difficult for the hurricane-hit Cubans.
https://www.economist.com/news/americas/21729803-communist-regime-can-no-longer-rely-generosity-its-allies-it-has-no-idea-what
Seems like many other countries are also suffering because of the hurricane. Even Puerto Rico is having lots of difficulties. This will definitely affect the trade and the economy of countries nearby the Atlantic ocean.
ReplyDeleteI think Cuba would benefit from importing less.
ReplyDeleteBeing an island they are scarce on resources right now, so importing seems to be the best option. But imports in places like this can be relatively expensive. So if they could produce some of their own goods for less than shipping+production costs, they would be more well off.
Even with the high amount of imports their GDP per capita has been rising since the early 2000s, now being around $6445, but they are still relatively poor. And an increase in production would certainly help their standard of living.
For Cuba's sake hopefully the stars align and Cubans pick a leader that the rest of the world finds acceptable to have trade and investment agreements with.
ReplyDelete