Havana Hopes, American Dreams, and Trade Policy

“Do you think these political changes signal greater changes to come?” I asked.

“This place is never going to change”, Jordani argued through a haze of lucky strikes and Cúba libres, “I’ve heard that for 35 years now”.

Jordani is a trained nurse who is a self-employed taxi driver in the informal economic sector of Havana, Cuba. Due to the small island’s enduring haphazard economic growth due to constraining state policies and the 51-year old U.S. trade embargo, generations of immense human capital is being lost in an economy not yet prepared to absorb it. Similar to most Cubans, Jordani works in the informal sector in order to sustain himself as well as his 2 year old daughter. Such is the tale of many of those growing up in what seems to be one of the last vestiges of an antiquated ideology that has been in a slow decay for decades.

For those who are unfamiliar with informal economy, consider the following familiar scenario: suppose that you hire an individual to fix your home plumbing system, but that individual works for him or herself and not under the banner of a legally registered firm. In this case, since his revenue is neither recognized nor taxed, he or she is likely to be working in the informal economy. In the case of Cuba, the main difference is the sheer size of the informal economy.

Some experts have approximated the size of informality to be roughly 40 percent of the Cuban economy. That is a significant amount of unrecognized economic activity as well as unregistered vulnerable laborers. There tends to also be a correlation between informality and poverty. In the case of Cuba, it is the U.S. embargo, a dual currency system, decades of poorly devised domestic regulation, along with exogenous economic events that have perpetuated this kind of economic apartheid. To be quite honest, for the underprivileged, people are just trying to survive.

As depicted in the graph below, Venezuela remains Cuba’s largest trading partner. However, trade largely resembles an asymmetric barter system in which Cuban healthcare professionals are traded for Venezuelan oil. Put frankly, Venezuela is Cuba’s lifeline despite the country’s political and economic instability under President Nicolas Maduro, the successor of the now deceased Hugo Chavez. The current U.S. trade stance of embargoing Cuban goods actually prevents the small island from prosperous long-term growth. Given Cuba’s 90 mile proximity to the southern state of Florida, the U.S. would be its largest trade partner under ideal circumstances. Instead, the repression of goods flowing between the two old adversaries has stratified the poor living conditions of Cuba’s inhabitants.

Generally, many who are employed within the formal sector with post-graduate degrees are not earning enough as they are paid in Cuban pesos rather than convertible pesos. The difference between the two currencies is 24-to-1, and the CUP is 1-to-1 with the U.S. dollar. In other words, if your monthly salary is equivalent to 400 CUCs, you have really earned roughly 17 dollars. Furthermore, many products are priced in a fashion that quite literally bars away Cuban citizens from everyday necessities. According to some sources, the cost of living is estimated to be 80 U.S. dollars per month. Moreover, the libreta, or monthly state rations, last for only a week. As a result, the poor do not ask for money, instead they plead for shampoo, books, pens, shoes, and feminine products.

Jordani had lived a privileged life while his father worked under General Ochoa, a major figurehead of the 1961 Revolution. However, when General Ochoa was controversially executed by the state in July of 1989, life changed. He remembers coming home to his father crying while watching the news of his death on television. Ultimately, Jordani’s family was written off from that moment on.

There exists a kind of limbo between a fear of being condemned to 25 years in prison for activism, and the need to make the best of what seems to be one of the last vestiges of an antiquated ideology that has been in slow decay. The Cubans I met were more concerned about seeking a way out of Cuba rather than seeking to stir up the current status quo.

This year will be marked by the 60th anniversary of the Cuban Revolution as well as the 51st anniversary of the U.S. embargo. In effect, the U.S.’s unwillingness to revisit its Cuban foreign policy has done more to support the destabilizing conditions of its next door neighbors than its intended purpose of driving constructive progress. Strategically, an end to the embargo may have the desired effect by giving the youth hope that the country is on a track towards constructive change.

“So what are you going to do?”

“I’m going to try to get the hell out of here with my daughter and find my brother in Vegas”.

CubanTrade_OmarEverleny

(Graph Source: Omar Everleny Perez Villanueva, Center of Economic Studies, Havana, Cuba)

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