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Cuba: A Country in Transition

Martin Samson recounts the Go Abroad Economics trip to Cuba in February 2017.

The Go Abroad Economics trip in February took thirteen students and three members of staff to Cuba for eight days. Our many weeks of research, planning and meetings leading up to the trip gave us insight into Cuba’s culture, economy and legal system. Yet many questions remained unanswered. What do Cuban shops sell? What do Cubans think about tourists? What is the future of the U.S. trade embargo? We were excited to find answers to such questions first-hand.
Seeing Havana for the first time was surreal. Driving through the city in American cars from before Cuba’s 1959 revolution, we saw dilapidated and colourful buildings spanning further than the eye could see. Instead of advertisements, we saw billboards condemning the U.S. trade embargo and posters of Che Guevara and other revolutionary leaders promoting continued support for their cause.

The upbeat rhythms of Cuban music frequently filled the air. At salsa clubs, we joined locals in a variety of dances combining Spanish and West African traditions. Taking part in a weekly religious festivity, we experienced a popular religion in the country called Santería. It came about in the early 1500s, when the religions of West African slaves fused with the Roman Catholicism of the Spaniards. Speaking with a panel of researchers from the University of Havana, we were surprised to hear that Santería has expanded internationally, and spawned a multi-million dollar religious tourism industry in Cuba.

The people we met were more open than we had imagined. The local families we stayed with were warm and caring. During our trip, locals were very friendly and assisted us where possible. Speaking to the local population, tourists are seen as an excellent avenue for economic growth, rather than a threat to income equality. While images of the revolution still dominate the city landscape from schools to cigar factories, a strong American influence is evident through posters of Hollywood celebrities, and the U.S. sports jerseys that we frequently saw Cubans wearing.
Challenges and Opportunities

During our visit to the U.S. Embassy in Havana, the Deputy Ambassador predicted that the Trump administration will continue the path for greater cooperation with Cuba. He also highlighted some major transitions and challenges facing the country. First, Cuba has a growing elderly population and a low fertility rate. This, when combined with the high migration among the younger generation, challenges the ability of the country to finance its current welfare system. Second, many in the country’s political leadership, including Raúl Castro, will retire within a couple of years, allowing the younger generation to exert greater political influence. This generation is less attached to the ideals of the revolution, and is more open to privatisation and foreign direct investment. The challenge for the Cuban government is to form political consensus on how to balance these growth opportunities with their desire to maintain egalitarianism and state control.

Meeting with economics professors from the University of Havana, other challenges became apparent. Despite its fertile soil and agreeable climate, more than 80% of food consumed in Cuba is imported. A proposed solution for decreasing the country’s import dependence is to increase domestic food production by forming cooperatives; farms that are run on a communal basis by farmers who pool their resources. We visited an organic cooperative called Organiponico Vivero Alamar, a short drive from Havana. In just twenty years, the cooperative has grown from a small vegetable garden to supplying produce to 50,000 people annually. The cooperative has created incentives, such as dividend payouts and a generous employee benefits package, for attracting and retaining highly motivated individuals. The cooperative’s 160 members are committed to the mission of feeding the local community, and have been very successful in doing so. However, they face hurdles on a daily basis, such as limited access to equipment and capital. On a broader level, there is also a challenge of scaling and expanding the cooperative model across the country. One member of the cooperative mentioned that she would like to see changes to the country’s strong social security system, as it creates little incentive for people to strive for more.

The university professors also highlighted tourism as another great opportunity for the country. We experienced this first hand in the ecovillage village Las Terrazas, an hour’s drive from Havana. For much of the twentieth century, the village was dominated by unsustainable forestry. Within the span of a few years, Las Terrazas was transformed to an attractive tourist destination, with luxury hotels, coffee production, and art shops. Tourism now generates almost all of the village’s revenues.

Currently, the country operates a dual currency system, with tourists paying in CUC, which is pegged to the U.S. dollar, and locals receiving wages in the local currency, CUP. This benefits the government when paying workers locally because they fix the exchange rate at an artificially low level. The downside of this strategy is a distortion in salaries, which contributes to an enormous waste of human capital. Our tour guide, whose monthly wage as a doctor is US$40, earns several times this amount in the tourism industry, where wages are paid in CUC. One of the researchers argued that currency unification would help to resolve this issue.

Cuban Life (La Vida Cubana)
We also experienced more mundane aspects of life in Cuba, such as frequent queuing and a lack of variety in goods, indicating a lack of market forces. In the supermarket near our accommodation, many shelves were empty and an entire aisle was filled with a single brand of Cuban mayonnaise. At a beach café near exclusive hotels in the touristy Varadero, most of the menu was unavailable and they ran out of standard items like ketchup.

We were, however, impressed with how well many aspects of society function. The healthcare system seems outstanding, with low waiting times and highly qualified staff at hospitals. Buses run frequently, and roads are generally well-paved. Despite poverty in rural areas, children are well fed, wear clean uniforms and attend schools. Attendance is strictly enforced, with police officers visiting parents whose children fail to attend school. For each missed attendance, parents receive increasingly severe fines according to their household income. Security is high, with guards posted at regular intervals throughout the city, and violent crime rates are exceptionally low.

Given the relative isolation of Cuba from the international community, and the prevalence of communism, we were surprised to find many parallels between the life in Havana and Edinburgh. The economics curriculum at the University of Havana and the University of Edinburgh are very similar. Cubans watch American TV shows from HBO, listen to music on their phones, and go for drinks with friends. Many openly discussed the failures of the government, and spoke candidly about the economy.

The opportunity to travel to Cuba with the School of Economics to learn more about the country’s economy was an incredible experience. It was also a pleasure for our group to spend time together, whether at a Cuban hip-hop concert, or swimming by the beach. Cuba is a truly fascinating country, the uniqueness of which has to be seen for oneself to be understood. It is now up to the younger generation to balance the country’s many positive qualities with the new growth opportunities and transitions it faces.

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