How has globalization affected Cuba’s economy? Well to understand this better we have to know what set the stage for the current state of Cuba. We have to ask questions like. before 1959 who controlled the Cuba economy? After 59 how did Cuba outlast the embargo? What is the Cuban way of heath and education? After 89 how did Cuba deal with the loss of assistance form the soviet bloc? When we know all this then we can ask ourselves, how has globalization affected Cuba in current times? What did the September 11 attacks mean for Cuba? What is the Cubans economy geared towards? And what does overseas investment mean to Cuba?
Before Castro come to power in 1959 Cuba was owned by the U.S.A 60% of the country including the rail network, telecommunication and also 51% of the sugar cane owned by the united fruit company and the Rockefeller family. There was also a great amount of tourism 300,000 a year from the U.S.A meaning that the economic gap between Havana and the surrounding areas was great.
After 1959 a socialist government took power. They emplaced strategies such as nationalizing big business and then small business this meaning that all goods and services where run and provided by the government. With the U.S. embargo in place Cuba lost its strongest trading partner. Leading Cuba to find help else were. This help came from the soviet bloc which gave assistance to the value of 6 billon a year half of the totally given by the Soviet Union. The bloc helped in other ways supplying Cuba with oil and light machinery and buying there sugar at an inflated price.
Another strategy adopted by the Castro government was starting universal education and health care. One of the first steps to becoming a developed country is having a high Literacy rate, Cuba having 97% of the total population over 15 being able to read. This literacy rate is the highest in Latin America. Also with the universal health care this keeps the people fit and in good shape for the labour force.
After the reduction of assistance in 1989 from the U.S.S.R. and then there fall in 1991. The country suffered greatly. This change leads Cuba on a decline because of its size it doesn’t have the population to be self sufficient unlike china, they only number 11 million. This decline went from 1990 till 1995 and now is on the path of slow regrowth. To combat this lost of income they started to Promote tourism on a large scale with joint projects with overseas company’s to build or improve resorts around Havana. Also trying to diversify there exports and put them through a value chain.
The current state of Cuba? Unemployment rate is 4.1% and Life expectancy at birth
total population: 76.8 years, also Cuba has a slow growing G.D.P. growing around 1.0 a year this peaked in 1996 at 7.8% which is quite good seeing that the world average is 2% per year. Cuba has a GDP of $17.3 billion meaning that it relies on foreign investment. The three main ways this happens is joint ventures with overseas companies, tourism, and money being sent in by overseas families to there relatives this alone accounts for 1 billion a year.
What did the September 11 attacks mean for Cuba? Well Cuba relies heavily on tourism providing overseas currencies. When the September 11 attacks happened consumer conference in travel declined because of the fear of terrorism. This trend of low consumer conference in travel meant a decline of economic activity because of a domino affect with meant there was a reduction of capital that otherwise would have circulated generating business activity which is state sector 76%, non-state sector 24%. This is a reason why overseas investment is needed to increase circulation of capital stimulating the economy. This is a dilemma or catch 22 for Castro because none will invest if they have no interest or returns meaning that the government will have to free up enterprise for foreign companies.
What is the Cuban economy geared towards? Well I can say without much argument that Fidel is not an economist, the country is still geared towards one crop sugar with is subject to radical price change because of its availability and nature as a raw product with no added value. When most developed or high income economies focus on services and/or secondary industries. This means that Cuba is in a state of transition between developing to becoming a newly developed economy.
What does overseas investment mean for Cuba? Foreign investment is very important to Cuba because in disperses capital into the economy. Thus increasing economic activity, the government’s strategies are trying to attracted investment and tourism. One of the main problems with this is overseas companies have to pay Cuban workers $250 per month (the workers only receive 250 Paso works out to $10 per month), this would be quite small for a developed country but in standing with other underdeveloped country puts them at a disadvantage. At this moment the government is working with a Spanish company on a resort. Putting it’s self in the position, that when the embargo is dropped they will be able to take the influxes of tourism. There are more problems facing Cuba with there current account or balance of payments being in the red because Imports are $3 billion and Exports are $1.4 billion.
Over all there strategies of health and education are greatly helping the human development in Cuba. With attracting foreign investment and tourism this a good strategy to make up the shortfall left by the soviet removing aid. But the main problem they face is distributing surpluses wealth/ capital so they don’t have the say problem with people in Havana wealthy and in the rest of the country poorer. This is to keep in with there morals or beliefs. My advice to Cuba would be to develop there service sector and secondary industries so they can participate in the global economy at a greater rate.
So what are you're comments, how should Fidel face these problems of attracting overseas investment but also distributing surpluses wealth? (to prevent what was happening before 1959)
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