Small Economy of Cuba Holds Great Potential

By JAMES FLANIGAN

April 30, 2000 12 AM PT

An unplanned but beneficial outcome of the endless Elian Gonzalez saga may be a reopening of U.S. trade and economic relations with Cuba.

Legislation to allow exports of food and medicines to Cuba is now moving through the U.S. Congress, with a decent chance for passage in the next six weeks.

U.S. agriculture is eager to ship grain, poultry, rice and other commodities to the island nation. Rep. Charles Stenholm (D-Texas) said in a news conference in Havana last week that Cuba would buy $1 billion worth of grain and rice if the 38-year U.S. embargo on trade with Cuba were lifted.

That $1-billion number is a bit high. Cuba’s economy, which last year imported only $3.7 billion in goods of all kinds, couldn’t afford to buy so much U.S. grain at this point.

But the congressman’s enthusiasm, as he led a Texas Farm Bureau delegation to Havana, reflects high expectations among U.S. farmers and businesspeople about renewed commerce with the Caribbean nation.

U.S. business contacts with Cuba, still ruled by the Communist government of Fidel Castro, have grown in recent years. In January, 97 U.S. medical and pharmaceutical companies attended a health-care trade fair in Cuba. In June, scores of U.S. executives will confer with Cuban industrial and government organizations at a conference in Cancun, Mexico, with a side trip to Havana.

Why such interest in a small country of 11 million people with economic output that last year totaled $16.5 billion--a fraction of the economies of most U.S. cities, not to mention other nations?

Because Cuba’s potential is greater than that of other small countries in the Caribbean area and of many developing countries in the world. It has an educated population and an infrastructure of universities and medical institutions--even biomedical research institutes--that is unique in the developing world. For decades, Cuban doctors provided skilled medical care in the Soviet bloc and developing countries in Africa.

The thinking of businesspeople, including many in the Cuban American community, is that Cuba’s economy could achieve output several times its current shrunken level. The nation has the potential to serve as a base for ventures throughout Latin America, as it once served colonial Spain as headquarters for missions to Mexico and South America. It is a place with a tradition of intellectual and social primacy.

In addition there is concern, among church and humanitarian groups, for the plight of the Cuban people and a growing belief that sending more dollars into Cuba, through trade and tourism, will help them more than it will help Castro.

A look at the island’s economy today supports that belief. The Cuban people continue to demonstrate initiative beneath the bleak overlay of a totalitarian state. Since 1994, when farmers were first allowed to keep some proceeds from their crops, supplies of fruit, vegetables and pork have been abundant in private farmers markets. Cuba still imports rice from China and Vietnam, poultry and wheat from France and cooking oil from Spain.

Desperate to restart the economy after the collapse of the Soviet bloc in ‘90s, the Castro government allowed a limited number of independent businesses. Hundreds of thousands of informal shops, restaurants in apartments and other enterprises sprang up.

Attracted by such promise, foreign business investment totaling roughly $1.8 billion has come to Cuba in recent years from Canada, Mexico, Italy, Spain and some 20 other countries.

But the investment picture has a darker side. The Cuban government collects hard currency from the investing companies but pays the Cuban workers in pesos with far less purchasing power.

Offsetting widespread Cuban poverty have been remittances from Cuban nationals and Cuban Americans in the United States. Last year these totaled roughly $350 million, according to the U.S.-Cuban Trade and Economic Council, a New York-based private research firm that keeps accurate tabs on Cuba.

Cubans who receive dollars from their U.S. relatives spend them in “dollar” stores set up by the state and stocked with foodstuffs and clothing imported from all the countries that trade with Cuba--which is to say all countries except the U.S., which retains an embargo on Cuba even as it increases economic ties with Communist-led Vietnam and China.

So the embargo makes less sense than ever. It doesn’t appear to be hurting Castro or his government. It is helping businesses from other countries benefit while denying opportunity to U.S. firms. And it is limiting the opportunities for the Cuban people to gain some economic self-sufficiency.

“If travel restrictions were lifted, 1 million American tourists would go to Cuba in the first year, spending lots of money,” says Kirby Jones, whose Washington-based Alamar Associates represents U.S. and foreign business interests in Cuba.

There is also support for lifting the embargo among many Cuban Americans who believe their relatives on the island would benefit from a more prosperous economy.

Cuban American businesspeople are preparing to invest heavily in Cuba. “They have plans to invest in building telecommunications systems and other infrastructure--but not while Castro is still there,” says Jose Villa, president of TuRumbo.com, a Santa Monica-based on-line guide to Latino night life and culture in U.S. cities.

In Cuba, the younger leaders of state-owned holding companies that today handle the country’s trade and investment activities are also thinking about the future. “The young leaders want to maintain a Cuban economy sheltered from the storms of the global economy, an economy with some of the present socialist policies,” says scholar Julia Sweig of the Council on Foreign Relations.

All of which means that Cuba is ripe for economic and political change and development after years of stagnation. Open contact with the dynamic U.S. economy could very well kick-start such development.

Ironically, the case of Elian Gonzalez has reawakened the broader American public’s interest in Cuba. And polls show majorities favoring an end to the U.S. embargo.

So Washington is moving. The government’s International Trade Commission has launched an inquiry to determine whether trade sanctions on Cuba serve U.S. interests. And the Clinton administration reportedly wants to end the embargo before it leaves office as a “legacy.”

Maybe Elian can inherit a better Cuba.

James Flanigan can be reached at jim.flanigan@latimes.com.

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Cuba: Poor but Smart

Cuba’s economy is comparable only to those of such poor countries as the Dominican Republic and Guatemala, among the non-Mexican nations around the Caribbean. But because of its educated population and still-functioning university and medical research system, Cuba attracts foreign investment from prominent countries worldwide.

Annual gross domestic products:

Cuba: $16.5 billion

Mexico: $383.5 billion

Guatemala: $18.2 billion

Jamaica: $3.9 billion

Haiti: $2.6 billion

El Salvador: $11.7 billion

Honduras: $4.8 billion

Nicaragua: $2.2 billion

Dominican Republic: $15.7 billion

Costa Rica: $9.9 billion

Panama: $9.5 billion