This article was written by Angus Harker a student at the University of Warwick. This article is part of his column 'The Other Side'.
Amidst the towering goliaths of the US and China bracing for a trade war, a very small Caribbean nation struggles for survival. Over the last week, Cuba has received a lot of correspondence in articles detailing their plight. The Economist ran with a story that sums up their problems quite succinctly: they have a deteriorating power grid fraught with blackouts, a symbol of outdated and unmaintained technology grunting under the strain of the 21st century; high inflation has struck the country ever since it dropped the convertible Cuban Peso (CUP), which led to an ill-fated competition against the dollar. The pandemic did not help with their exports, either. As the article notes, this problem has led to a mass exodus of Cuba’s population, most of them young: by the end of 2023, a tenth of the population had left in two years. The Spectator ran a more personal story, diving deep into the average citizen’s struggle; they are given roughly £5 per month to live on, and increasingly face food shortages, and soon enough, a lack of water. To call it a crisis understates the reality.
What You Read vs What You See
Certainly, the cracks in the country have been showing for quite a while, but I am amazed at how little true information there is surrounding Cuba. When I visited in February 2023, I was told that a pound would get you roughly 34 Cuban Pesos on the Internet - a statistic that still holds up when you google the conversion rates now. On the ground, it’s a different story - you would get 140 pesos to a pound on the streets, depending on who you went to (preferably your casa owner). It was robbery to go to the banks, who’d offer a paltry 125 or so pesos.
In fact, it was the little people that you went to in order to make the most impact, and to get the best deal. Cigars were too expensive in shops, due to a small harvest from catastrophic weather and increasing Chinese interest pushing up demand with less supply; it was far better to travel out to the countryside and haggle with what the farmers had left. Similarly, sleeping in Airbnbs, eating in small restaurants, and drinking the cheapest drinks were where you could get the best value for money. The bigger the restaurant, the more likely it was owned by the mafia, and hotels in Havana were mostly held by the government and subject to huge taxes.
What I’m trying to say here is that Cuba is unofficially one country with two systems: pure unadulterated capitalism on the street, and extreme authoritarian communism in the government. And judging by the recent reporting, that precarious deck of cards is beginning to topple, and will be a perilous problem for Cuba’s citizens. Their monthly food rations were awful: about a kilo of chicken, some beef, and a few “hot dogs” per person per month, according to my casa owner. Cuba’s population was in a malnourished state when I went; now, with more economic despair, less food and more blackouts, the ability to benefit from tourism dwindles away.
For as my elderly casa owner said, “We will get better when we embrace capitalism”. That capitalism relies on something to sell, but what does Cuba have to sell right now? As the Economist suggests, very little. One of the biggest things that they sell is tourism, but even that was underperforming when I travelled there. A Canadian couple I had met, who had holidayed there every year for nearly 10 years, said that they weren’t going to go the year after because of how scarce everything was: Varadero had little fish, and the streets of Havana weren’t as lively as they once were. Even the Cuban government is projecting a 16% drop in tourism this year; with the young population leaving the country to seek better lives, that means that their able-bodied workers are becoming even more scarce.
It’s important to underline just how impactful it is when what’s left of their population protests on the streets. The news reports that it was met with arrests. Another understatement. The owner of my room in Havana said that, if you so much as posted something anti-government on your social media, it was treated as treason. For a population to protest, despite state surveillance being inevitable, it takes a level of desperation unthinkable to the average Western mind. This flashpoint moment Cuba finds itself in will send the country into a famine if it doesn’t receive desperate help.
No Such Thing as a Free Lunch - What China and Russia’s Involvement Could Mean for Cuba
Cuba has garnered sympathy with its staunch communist stance ever since the 60s. It has been supported by the Soviet Union in the Cold War, and that has led to some long-lasting relationships with Russia and China since. It has been inducted into the BRICS, an international conglomeration of nations fighting against dollarisation. Recently it has received rice from China to bolster its food supplies, but this is merely a gesture of good will. It is nowhere near enough to help the citizens. To what extent will Cuba receive charity from its friends?
As I argued previously, a superpower never lets a crisis go to waste. However, China’s support to Cuba has been rather restrained, supporting only one percent of the rations it needs for survival. It seems to lead into an idea that China will not provide an investment unless it gets something in return - thinking which informs their Belt and Road Initiative. Similarly, Russia has provided merely paltry offers - it has supplied their energy in the midst of the blackouts, and sent the navy on an exercise to Havana, presumably attempting to echo the dangerous historical periods in the nation’s history. This seems to suggest that Cuba, in its current political and economical state, will not get bread on pleas of charity. So what could it do to make itself more appealing?
China has suggested leaning towards the sort of economic model that it operates, fusing a medley of communism and capitalism that has seen it become one of the fastest-rising economies in the world. By adopting this model, Cuba would ape China, and the potential economic growth would beckon investment from it and other economies. Given the current state of the world, it is truer than ever before that there is no such thing as a free lunch.
There is some evidence to suggest that China would free up cash for a long-term investment to thwart the US. Its recent stimulus package has been seen as lacklustre, and has been criticised for not doing enough to encourage growth and consumer spending. This move has been noted as potentially shoring up some reserves in the wake of the inevitable trade war with the USA. This seems to suggest that the country knows that the global economy will not be able to grow for the next four years as it has done in the past; growing protectionism will slow growth, and as a result, it seems likely that China is adapting its strategy to accommodate for a “brace for impact” model in the likely event of increasing tit-for-tat tariffs.
Where does Cuba fit into this? At its current state, it doesn’t fit at all. China may see the potential for its proximity to the US, with speculation as to China potentially using it as a base to spy. If Cuba could change its economy in deference to China, it would extend the latter’s influence over the region, potentially freeing up some funds to lever an advantage in the trade war with the US.
Crooning at the Malecón - Can Cuba Shift its Stalemate?
It’s a tall order, but the current dire economic situation in Cuba has the potential to completely overwhelm the government if it doesn’t change soon. The grumblings from its people are more telling as to the future of its nation; perhaps if they do embrace capitalism, they will find their way out of their struggles. Cuba knows it cannot rely on charity in a world where charity comes at a cost. To rescue the nation, it cannot risk becoming an anachronism anymore; it must change its politics, and its economy, immediately.
The biggest question is, will they do it? I am not so sure. Talking to the folks on the streets of Havana, their lack of optimism clearly showed. My casa owner pointed out how President Miguel Diaz-Canel’s son drives a Mercedes G-Wagon and parties in the city, whilst everyone else struggles along with 50’s Chevys with a million miles on the clock. Even under Castro, at the height of the Soviet Union, he was cynical; people were only better off back then because they were heavily supported by the USSR. That is, the pockets of government officials were engorged, and that eventually trickled down to its healthier citizens. Now that those wells have long run dry, I think it impossible for the incumbent communists to consider the reallocation of power. They will cling on to it wherever they can, either until the nation is slowly strangled, or it is overthrown by its people.
The views and opinions expressed in this article belong solely to the writer and do not necessarily reflect the views and opinions of the Warwick Economics Summit.
References:
The Economist-
The Spectator-
Financial Times-
Reuters-
The Guardian-
Travel and Tour-
Prensa Latina News
The BBC-
Havana Times
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