Cuba, largely known for cigars, salsa dancing, its communist alignment and contentious relationship with the United States, was the focus of discussion with Dr. Joseph L. Scarpaci, the Executive Director of the Center for Cuban Culture and Economy and frequent visitor to the island, on November 21st. Dr. Scarpaci shared his insights and the results from his investigations with members and guests of the World Affairs Council of Charlotte and the Charlotte Economics Club. He presented his extensive knowledge on the Cuban economy, employment on the island and the possibilities for its future.
The Cuban Economy
The Cuban economy is largely driven by remittances. The number one source of hard currency in Cuba is wired directly from the Cuban community living in the United States. Since January of 2010, approximately $2 billion has been wired annually to Cubans from their families living abroad and the wiring of cash remittances continued despite the 2008 economic downturn and subsequent recession. The combined value of cash remittances and in-kind remittances (items shipped or brought in suitcases) totaled more than revenue from tourism, nickel exports, pharmaceutical exports or sugar in 2012. The extensive amount of remittances from the United States has led to a split currency system on the island between the Cuban peso and the U.S. dollar (24 pesos = $1). Due to its lack of in-house capabilities, Cuba contracts Israel to print its currency despite not maintain diplomatic relations.
Cuba had high hopes when they opened bidding on deep water sites in the Caribbean. Unfortunately due to unsuccessful drilling attempts, energy companies such as Brazil’s Petrobras and Venezuela’s PdVSA have abandoned their attempts. Although Cuba did not prove a fruitful location for oil, it is home to nine UNESCO World Heritage sites and could hold great potential for revenue as a tourist destination. As it stands, only nine percent of visitors return to the island. At one time, sugar provided the cornerstone to the Cuban economy. The disappearance of the Soviet market and a drop in the price of sugar on the world market lead to the closure of half of the island’s sugar mills, eliminating thousands of jobs almost overnights. Recently, Cuba has re-opened several mills and sugar production was up twenty percent over last year.
Around 5.1 million workers are employed by the state. Out of all state positions, Police officers are the highest paid workers. Those few who do not work for the state are called ‘non-state’ workers and it wasn’t until 1993 that self-employment was legalized. There are 201 authorized private sector jobs which include job titles such as baby-sitter, fruit vendor, and knife sharpener. Small retail owners are not granted wholesale prices for their wares and must purchase their products from the state. The average Cuban worker earns around $23 a month and one gallon of gasoline is roughly the equivalent of a week’s wages. Despite the absence of any sanctioned advertising on the island, Cubans are very consumer savvy, recognizing brands from product placement in television and movies. Currently, only three percent of the island has access to the internet. Secretary of State John Kerry has noted that if changes do not occur soon, the twenty-first century will leave Cubans behind. In a small movement towards technological progress, there has been an upsurge of business in the instillation of clandestine satellite systems with international calling and internet capabilities.
After The Castro Regime
In 2008, Fidel Castro resigned as President of Cuba, transferring power to his brother, Raúl Castro. Fidel Castro outlived 11 presidents during his tenure and is now the ripe age of 87. Raúl Castro, 82, has vowed to leave office in 2018 after a five year term. Cuba is a part of the Bolivarian Alliance for the Americas (ALBA) which is an alliance between Cuba, Venezuela, Nicaragua, Bolivia, Ecuador, St. Vincent and the Grenadines, Dominica, St. Lucia and Antigua and Barbuda. The alliance was formed as an alternative to the Free Trade Area of the Americas proposed by the United States. It was intended to promote international cooperation and integration of Latin American and Caribbean nations under ideals touted by Simon Bolivar. Cuba has maintained a long standing political and ideological partnership with Alliance member nation, Venezuela. Cuba relies heavily on oil trade and economic assistance from Venezuela but Mr. Scarpaci hazards that the Venezuelan economy would not be able to sustain the continued benefits of the relationship. Mr. Scarpaci speculated that a new Cuban regime might bring changes, but at a slow pace; bringing lip service to communist ideals so as not to aggravate the army but bringing economic reform to Cuba through the back door. He noted that the biggest pushing for change is coming from the artist community. Mr. Scarpaci concluded that any change will be a slow change but that it is indeed inevitable as we move towards the end of the Castro government.
The World Affairs Council of Charlotte will be hosting a trip to Cuba with Joseph Scarpaci in the May of 2014. For those interested in joining the Council on this uniquely crafted trip, please contact LJ Stambuk, President & CEO of the World Affairs Council of Charlotte at email@example.com.
Blog post by: Stephanie Phipps, Assistant Director of Programs and Development at the World Affairs of Charlotte