For the past several decades there has been a relatively consistent tone in the political and business world regarding Cuba. However, due to recent actions by the Obama administration, the economic potential for the once heavily secluded country has risen into the spotlight. Of the possible impacts, one of the most important is the effect it has on the Cuban tourism industry. As the most viable option for sustainable access to hard currency, the tourism industry in Cuba has become a major focus for its potential role in the country’s economic advancement. With a decade of focus and determination and about a quarter of all investments in Cuba, the tourism industry has become the strongest sector of the Cuban economy. (3).
With the pervasive governmental overreach present throughout the Cuban economy, access to hard currency offers the Cuban people an opportunity to diminish their reliance on the government. As a communist country, the government has a history of oppression and dominance that can be seen through their dismal 29.8 rating on the Freedom Index by the Heritage Foundation. (5). The decades of oppression were a primary driver behind the decision to ease restrictions, since nothing else seemed to be working.
This lack of progression and subsequent regulatory easing has been considered by some as a reward for terrible behavior. The subsequent backlash and comments by some politicians have put the life expectancy of this new direction into question, especially as new concerns have risen due to lack of clarity regarding President-Elect Trump’s stance on the matter. However, despite some of Trump’s inflammatory comments regarding backtracking on regulatory easing, as recently as six months ago he was looking at potential hotel acquisitions in Cuba. (1). This fuels the likely possibility that the regulatory easing may in fact be reorganized and accelerated.
With the death of Fidel Castro on November 25th of 2016, Raul Castro’s next actions are being analyzed for any shifts. When Raul assumed power in 2008, he took a significantly different approach than his brother, Fidel. Raul instituted a relatively more progressive agenda including releasing political prisoners, easing travel restrictions and reinvigorating diplomatic ties with the United States. Given the dramatic shift between Rual’s and Fidel’s approach, Fidel’s death is likely to invoke more of an emotional effect than a tangible diplomatic or progressive effect. (2).
How the Trump administration will act towards Cuba following his inauguration will be pivotal to Cuba’s economic outlook. However, certain aspects of their economy are less contingent on the U.S. and can be analyzed in a more independent light. Their exports of medical services which comprises nearly 40% of their total exports is expecting a drop in demand by their primary buyers. Along with the impact of commodity prices on the Cuban economy, the outlook as a whole is unideal at best. (4). That being said, the economic focus on all Cubans’ minds and the potential windfall from a revitalized tourism sector will be a boom to the sector. The country’s seclusion and the level of interest by American’s to visit has helped spur the 17.4% growth in visitors relative to 2014. (6). With that level of growth not expected to slow down any time soon, the Cuban tourism sector has clarified its position as the Cuban people’s best bet.
(1) Baker, Stephanie, and Sharon Smyth. "Trump Considered Buying Hotels in Cuba, Iberostar Chief Says." Bloomberg.com. Bloomberg, 2 Dec. 2016. Web. 03 Dec. 2016.
(2) Carroll, Rory. "Raúl Castro: Where Will Fidel's Brother and Successor Take Cuba Next?" The Guardian. Guardian News and Media, 28 Nov. 2016. Web. 03 Dec. 2016.
(3) Castillo, Ornaldo Gutiérrez, and Nélida Gancedo Gaspar. "Tourism Development for the Cuban Economy (English Version)." ReVista. Harvard University, n.d. Web. 03 Dec. 2016.
(4) Cowen, Tyler. "Cuba's Glum Economic Forecast." Bloomberg.com. Bloomberg, 26 Nov. 2016. Web. 03 Dec. 2016.
(5) "Cuba." Cuba Economy: Population, GDP, Inflation, Business, Trade, FDI, Corruption. The Heritage Foundation, 2016. Web. 03 Dec. 2016.
(6) Hamre, Jaime. "Surge of Americans Tests Limits of Cuba's Tourism Industry." Reuters. Thomson Reuters, 26 Jan. 2016. Web. 03 Dec. 2016.
Image: © Kmiragaya | Dreamstime.com - Touristic sightseeing bus in Old Havana