Caribbean Challenge : U.S. Is About to Acquire Cuban, Haitian Economies

Whether it wants to or not, the United States is about to take over responsibility for the economies of Haiti and Cuba as an unremarked consequence of Washington’s latest involvement with those Caribbean nations.

The result could be some bitter lessons in economics and politics, although America might also pick up pointers on helping its own inner cities. For sure, it will be a challenge.

Both countries are dreadfully poor, in part because of trade embargoes imposed by the United Nations or the United States and backed by the U.S. Navy.

The trick will be to find a way to bring Haiti and Cuba into the same U.S. system that has brought at least some improvement to other Caribbean economies. And success is imperative because both countries are close enough to U.S. shores to send their people in makeshift boats and rafts.

It won’t be easy. Haiti’s economy is all but gone. In 1991, when the Organization of American States imposed trade sanctions after the military coup that overthrew President Jean Bertrand Aristide, the economy’s annual output was $370 per person, or $2.27 billion.

It is much lower now; U.S. food aid is responsible for feeding 1 million of Haiti’s 7 million people, says Ernest Preeg, a former U.S. ambassador to Haiti.

Rebuilding will be difficult. Haiti’s infrastructure has decayed and there could be political opposition to needed foreign investment. Before 1991, Haiti benefited from the Caribbean Basin Initiative, which lowered U.S. tariffs on goods made in neighboring nations. Haiti at that time had more than 200 mostly U.S. companies manufacturing electronics, apparel and sporting goods.

But all departed when the embargo was imposed. In any case, Aristide--the elected president whom U.S. troops may shortly restore to office--bitterly denounced U.S. business people as “bloodsuckers” for paying $3 a day. Sure, that sounds like starvation wages, but it was three times the economy’s overall income per person.

Cuba, after 35 years of totalitarian rule and the collapse of the Soviet Union, is also in wretched shape--output at roughly 45% of what it was in 1989, when the Berlin Wall fell. It is difficult to accurately assess the economy because the Cuban peso no longer has real purchasing power, and most goods are available only for U.S. dollars in special shops.

The dollars come from Cuban exile relatives in Florida, but money from relatives may start coming in by way of Spain or Mexico now that the United States has imposed a ban on dollar transfers.

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In contrast to the Haitian situation, U.S. and foreign companies are clamoring to get into Cuba. A British trade delegation is in Havana this week. Businesses are attracted by the educational levels of the Cuban population--”everybody has nine grades of schooling,” says Andrew Zimbalist, an economist and Cuba expert at Smith College. Thus, foreign investors see Cuba as a kind of skilled East European nation 90 miles from Key West, Fla.

But business people may be overlooking explosive political dangers, says Edward Gonzalez, a Cuba expert at Rand Corp. Transition won’t be easy. There is no leadership group--no Lech Walesa as in Poland--to easily succeed Fidel Castro and his regime, Gonzalez notes. He fears civil war will erupt.

Yet Gonzalez argues against lifting the U.S. embargo now. Easier commerce would only help Castro and his hard-line henchmen, he says. It is the same argument that has persuaded the United States to tighten the embargo on Haiti in hopes of driving Gen. Raoul Cedras and his military regime from power.

But in both Haiti and Cuba, embargoes have only reinforced the strongmen. In Haiti, the black market is flourishing, with the military taking a cut and enjoying the contraband. In Cuba, as was the case in the old Soviet Union, the government runs a type of black-market racket in stores that sell only for dollars. Castro and his henchmen remain well fed; only the boat people look skinny.

The solution is to open the economies as much as possible, lift embargoes and let the commerce develop, as U.S. policy has recently done in Vietnam. In fact, U.S. policy from Russia to China to North Korea--everywhere except Haiti and Cuba--holds that economic change improves lives and fosters democracy. But in the Caribbean, we favor embargoes, and that has left us, in effect, taking responsibility for the staggering economies of Cuba and Haiti. It’s time to change. The United States would still have to help the Haitian and Cuban economies by buying their goods on a favorable basis, as it has done for years with other Caribbean nations.

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But then, the United States will have to help on trade even if it occupies Haiti--as now seems likely. Occupation could turn out badly, as it did before when the U.S. military ran Haiti from 1915 to 1934. Also, the United States ran the affairs of Cuba for more than half this century--and made such a mess that Cuba turned to Castro and Soviet communism.

A far better outcome would be that Cedras and his gang take a payoff and go into exile from Haiti, says Robert Manning, a former State Department official. And it would be better also if Castro accepted what Rand’s Gonzalez calls the grand bargain: Castro leaves for exile with dignity, and the United States gives Cuba back the Guantanamo Bay naval base.

That may sound unlikely, but it’s no more extreme than the U.S. government trying to run the economies of Haiti and Cuba when it has trouble helping poor people in its own South Chicago, the South Bronx and South-Central Los Angeles.

Poor Islands in the Sun

The economies of Haiti and Cuba, racked by political oppression and trade embargos, have fallen below even these figures. Here’s a comparison of gross domestic product and GDP per capita:

Puerto Rico

1992 GDP in billions of dollars: $23.6

1992 GDP per capita in dollars: $6,597

Jamaica

1992 GDP in billions of dollars: $3.3

1992 GDP per capita in dollars: $1,374

Grenada

1992 GDP in millions of dollars: $0.215

1992 GDP per capita in dollars: $2,363

Haiti

1991 GDP in billions of dollars: $2.3

1991 GDP per capita in dollars: $370

Cuba

1993 GDP in billions of dollars: $16.0

1993 GDP per capita in dollars: $1,454

Sources: Wefa Group; Central Intelligence Agency; World Factbook 1993; Edward Gonzalez, RAND Corp.; Andrew Zimbalist, professor, Smith College