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GUEST COMMENTARY: Cuba: An Economic Tiger in the Caribbean?

Posted by kinchendavid on September 25, 2006

By Sir Ronald Sanders

US President George W Bush and UN Secretary-General, Kofi Annan, talked on Tuesday, Sept. 19, 2006 about the possibility that Cuba “could once again be an economic tiger in the Caribbean”.

This information was revealed to news reporters at the Algonquin Hotel in New York by Mike Kozak, Senior Director for Democracy Human Rights, and International Organizations in the National Security Council.

According to Mr. Kozak, “This was not a long, deep, analytical thing… But just that one of these days, if Cubans are able to make the kind of changes that they need to make, that it could once again be an economic tiger in the Caribbean”.

What are the kinds of changes that Cuba would have to make to become an economic tiger in the region? Crucial among these would be a move toward a market economy, trade expansion, increased productivity through better wages and salaries for workers, access by Cubans to capital which they can use to invest in businesses, and more foreign direct investment.

And, a very important element in expanding trade and increasing foreign investment would be the lifting of the 45-year old US trade embargo, and normalisation of relations between Cuba and the US.

Against this background, Cuba is not likely to become an economic tiger in the region anytime soon, unless there is a massive collapse of the governmental system and a swift kiss and make up period between Washington and Havana.

For the time being, the Cuban government can afford to continue its present economic and foreign policies, but as pressure increases in a post-Castro era, a re-think of these policies, including in its relationship with the US, is bound to come.

At the moment, increased investment and aid from Venezuela is helping to bolster the Cuban economy. So too, is investment from France, Spain, Canada and more recently China and India.

China is now Cuba’s third largest trading partner with a trade exchange of US$985 million in 2005. China has invested US$1 billion in Cuba’s nickel industry as well as tourism, transportation and telecommunications, and it intends to explore for oil. And, India’s state-owned ONGC Videsh has signed a production sharing agreement with Cuba’s state oil company Cupet.

According to the Economy and Planning Minister, Jose Luis Rodriguez, the Cuban economy grew by 12.5% in the first half of 2006 and he expects annual growth to exceed 10% for the second successive year.

He is adamant that Cuba’s policy towards market opening will not change. But, there is pressure for change in Cuba now both within the country and from external forces. Cuba’s trading partners, Canada and the European Union (EU), have been urging greater respect for human rights, more room for dissent within the society and more individual freedom.

Meanwhile the US Commission for Assistance to a Free Cuba, which is chaired by US Secretary of State Condoleezza Rice, has called for US$80 million to be spent over two years to “increase support for Cuban civil society, expand international awareness, break the regime’s information blockade and continue developing assistance initiatives to help Cuban civil society realise a democratic transition”.

All these factors will play a part in determining the policies of a Cuban government in the not too distant future.

One of the scenarios that could play out is a normalisation of relations between Cuba and the US in the post-Castro era.

Should this happen, there will be ramifications for the rest of the Caribbean.

For example, the Caribbean’s quota of sugar exports to the US would have to be reduced to accommodate Cuban sugar, and this would adversely impact an industry that is already reeling from the reduction in prices being paid by the EU for sugar from the countries of the Caribbean Community and Common Market (CARICOM).

Some trade experts in the Caribbean also fear that there could be a displacement of CARICOM products such as rum, and they ponder what kind of favourable bilateral free trade agreement the US might work out with Cuba to gain influence on the economy. Equally, they are concerned about whether US assistance to Cuba would reduce aid to the rest of the Caribbean.

There is little doubt that if Cuba’s relationship with the US is normalised, Washington’s interest in the smaller Caribbean countries, which is already limited, will diminish even further. Apart from drug trafficking and illegal immigration, the CARICOM countries would command little attention or resources from the US.

Therefore, that brief conversation between Kofi Annan and George W Bush about Cuba once again becoming an economic tiger in the region should not simply be dismissed. The implications for other Caribbean countries are worthy of careful study.

* * *

Sir Ronald Sanders is a business executive and former Caribbean Ambassador to the World Trade Organisation who publishes widely on Small States in the global community. Responses to: ronaldsanders29@hotmail.com

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