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The current Cuban economic crisis. External causes

Feb 6 , 2023

Despite frequent assertions made by the ideological extremes in Cuba regarding the political-economic situation of the island, the reasons for the country’s economic crisis should by no means be summarized simply as the damage caused by the U.S. “blockade” or, as suggested by others, by the “communist regime”. Instead, there has been a series of circumstances causing the gradual and progressive decline of the country’s economy, and this has turned into a deep economic crisis

To better understand this situation, Opapeleo briefly outlines the main reasons – which according to renowned Cuban economists – have caused this crisis, which finds traces in the worst times of the Special Period (in Spanish: Período especial) of Cuba, 30 years ago. This period was a turning point after 1959 for Cuba, and nowadays, conditions resemble the ones that triggered the mass exodus that followed in those years.

 

External conditions of the economic crisis

 

During the mandate of former President Donald Trump, the sanctions imposed on Cuba every year by the U.S. government significantly increased. During this term, therelationship between the two countries took a noticeable step backwards, at the expense of the advances achieved during the rapprochement of his predecessor, Barack Obama. Among other measures implemented by the previous president was the application of Title III of the Helms-Burton Act (Ley del Embargo), which was suspended every six months by the former presidents of the United States.

This law entails the possibility to sue foreign companies exchanging goods seized by the Cuban government. During his term in office, Mr. Trump also limited the number of flights from the United States to Cuba, the number of remittances sent from the U.S. and shut down Western Union, which was the agency by which Cubans received these remittances. It is important to highlight measures with an impact on both Cuba’s policy and foreign relations worldwide, including the toughening of sanctions on foreign banks that perform direct transactions with Cuba.

These measures marked a strong blow to foreign investment in the country, evidenced by the retreat of some international companies of strategic importance to the country. The current U.S. President, Joe Biden, has not removed or eased most of the sanctions, the only ones he has lifted during his term in office are those related to remittances and the regularization of flights to Cuba.

 

Post-pandemic economic crisis conditions

 

The Covid-19 pandemic caused an unprecedented short-term effect on international tourism. The stress caused by the fear of infection and the drastic health impact it had over most of the world caused an all-out shutdown of air travel in many countries. As a result, there was a decrease in tourism, and during the worst times of the pandemic tourism was non-existent, causing a multi-million dollar economic disaster for a country highly dependent on this industry. This also reduced the entry of remittances, food and other goods that Cuban passengers would regularly bring into the country, for both sale and for use by their families.

Because of the Russian invasion of Ukraine and the escalation of the conflict, prices of products which Cuba constantly needs to import, i.e., wheat and oil, have skyrocketed. In addition, Cuba’s endorsement to the Eurasian nation has led to the country’s further isolation from the European Union and may have unexpected consequences for the current talks with President Biden.

 

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