Prospects for Cuba don't look good

Andres Oppenheimer: Prospects for Cuba don't look good

Now that Fidel Castro is gone and the leaders of Canada, Mexico and
other countries have made fools of themselves by praising the alleged
accomplishments of a dictator who destroyed his country's economy and
executed thousands of people, it's time to take a look at Cuba's future.
It doesn't look good.

In theory, things should get better. President Raúl Castro, 86, has
proved to be more pragmatic than his older brother. He could have an
easier time implementing the much-needed economic reforms that he
announced at the VI Congress of the Communist Party in 2011 and that he
vowed to speed up at the VII Congress this year.

Raúl Castro's small steps toward a Vietnam-styled, state-run form of
capitalism were slowed down because of resistance from Fidel, who
remained a powerful figure behind the throne. Without Fidel, the
hard-line "Fidelistas" would have less power to stop the reforms, the
theory went.

But most economists now agree that Raúl Castro faces a perfect storm of
bad news that will make it difficult for Cuba's economy to get back on
its feet.

"Cuba suffers today its worst economic crisis since the nineties," says
economist Carmelo Mesa Lago, a professor emeritus of the University of
Pittsburgh. "The projections are that the economy will stagnate or
decline in 2016, and that the situation will worsen in 2017."

First, Venezuela's subsidized oil shipments to Cubafell by about 40
percent during the first six months this year, according to a Reuters
news agency report. Venezuela's economy is in a shambles because of the
decline in world oil prices and disastrous economic policies, and its
oil subsidies to Cuba are likely to continue falling, experts say.
Second, Cuba's exports of medical services — a kind of modern-day slave
trade through which the Cuban regime sends tens of thousands of
physicians to Venezuela, Brazil and Angola— may be endangered. Venezuela
has a hard time paying for these services, and Brazil's new center-right
government may not renew these government-to-government contracts.

Third, Cuba's production of nickel and sugar is depressed because of low
commodity prices and the destruction of the country's industries over
the past 60 years. And, thanks to Fidel Castro's revolution, Cuba today
imports more than 70 percent of its food.

Fourth, tourism — the island's biggest hope since President Obama's
opening to Cuba in 2014 — may decline if U.S. President-elect Donald
Trump follows through with his Nov. 28 threat to "terminate" Obama's
deal with the island. The return of U.S. airlines and cruise ships
filled with American tourists to Cuba over the past year had helped
drive uptourism.

"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," wrote George Mason University economics professor
Tyler Cowen in the Miami Herald.

He added that while the World Bank estimates Cuba's GDP at $6,000 per
capita, that measure is based on an unrealistic exchange rate. Cuba's
real GDP is more likely not much higher than Nicaragua's $2,000 per
capita, he said.

"Had Cuba not had a communist revolution is 1959, it could have been one
of the most successful Latin American economies," Cowen wrote.

Instead of praising a dictator who didn't have the courage to compete in
a free election in nearly six decades, the leaders of Mexico, Canada and
other countries should have cited Cuba's revolution as an example of a
failed economic model, which is going from bad to worse.

If Trump plays his cards well he will leave Cuba alone. Raúl Castro is
scheduled to step down in early 2018, and his successors may have to
concede what the vast majority of Cubans have already concluded: that
communism is the longest — and bloodiest — road between capitalism and
capitalism.

Andres Oppenheimer is a columnist for the Miami Herald.

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