5 September 2016
U.S. Airlines Fly High In Cuba, But The Island's Economy Is Badly Grounded
By Tim Padgett
There was a lot of celebration – and not a little hype – last week when JetBlue took the first U.S. commercial flight into Cuba in more than 50 years.
It was another big step in the normalization of U.S.-Cuba relations. But beneath all the airborne cheering is the grim reality that Cuba’s economic wings have been all but clipped.
Thanks largely to the collapse of its oil-rich ally Venezuela, Cuba’s economy is in big trouble – forecast to grow just 1 percent this year if at all.
And if you think Cuba’s distress means it will open up to more free-market reforms, think again. It could mean instead that its socialist leadership will dig in its heels.
Few know that better than John Kavulich, president of the U.S.-Cuba Trade and Economic Council in New York. Kavulich has been watching Cuba for more than a quarter century, and he sat down with WLRN to discuss Cuba’s crisis – and how it’s affecting the new U.S.-Cuba relationship.
The Cuban government has had to cut the island’s fuel consumption by a third. You’ve been to Cuba this year; you’re going back this month – how badly is the economy getting hit?
Not to the extent of the so-called “special period” of the 1990s, when Cuba lost all its aid from the former Soviet Union. But the issues with Venezuela are irreversible. Venezuela’s economy has imploded; providing discounted oil to Cuba is simply no longer sustainable for the Venezuelan government. And further, export markets for Cuban services of people – doctors and others – now they’re having issues.
So a billion-plus dollars of revenue the Cuba government depended on from the export of services is now in jeopardy. For the Cuban citizenry, workdays are getting shorter; ground transportation less frequent; initiatives the government said they were going to push through that help individuals wanting businesses – that is impacted too. Maybe most important: Cuba publicly has said they are having trouble paying their bills.
Why is that so important?
For the Cuban government there's a worse dynamic now, because the U.S. is no longer a bystanding actor. It is an active actor. We are invading Cuba again, with dollars this time instead of bullets.
Generally, they’re not transparent about that. So we have a sort of truth serum, which is I think good for the Cubans.
Would things be even worse if President Raúl Castro hadn’t introduced at least limited free-enterprise reforms so that half a million Cubans could now run their own businesses?
Yes, it would certainly have been harder now if he hadn’t.
So Cuba’s leaders ought to reason that the best way out of their troubles now is more free enterprise, right?
Yeah. But that’s not how the Cuban government operates. When they feel threatened, they’re generally going to retrench even more. And for them there’s a worse dynamic now, because the United States is no longer a bystanding actor. It is now an active actor. We are doing everything possible to resurrect a middle class in Cuba that the Cuban Revolution sought to extinguish.
President Obama’s initiatives for the last 600-plus days – the five rounds of regulatory changes – put into Cuba more than a billion dollars. And remittances have gone up as well, from people of Cuban descent in South Florida and northern New Jersey. So the Cuban government’s situation has been made less worse because of what President Obama has done – but at the same time, they know what President Obama is trying to do.
Which is: Use visitors as an army; commercial airplanes as an air force; cruise ship lines as they navy, and businesses as the marines. We are invading Cuba again. But this time, instead of using bullets we’re using dollars.
ASPIRATION VS. REALITY
Is this soft invasion perhaps more alarming to the Cuban leadership than a hard invasion like the Bay of Pigs?
Oh, absolutely. Because the more money that’s in the system that they didn’t create, the more it shows that their system doesn’t work.
But didn’t Raúl Castro and the Cuban leadership know this would be the case?
Yes, but they also thought they could control it. So, because of President Obama’s initiatives, U.S. companies can now export almost anything to an independently operated Cuban business. But instead of opening things up, the Cuban government has said no to that. You’ve had a thousand U.S. business people going down there in the last 600 days – and they’ve come back with nothing. And we continue this year to have a 27 percent decline in food and agricultural exports from the U.S. to Cuba.
So why do U.S. companies keep wanting in to Cuba?
There’s a lot of aspiration chasing very little reality. It’s like trying to get into a club. They don’t necessarily know what’s in the club, but they don’t want to be on the other side of that rope. What they see is what they want to see – not necessarily what’s there.