The US Cuba embargo's effects on the Cuban economy

(February 3)The US first imposed an arms embargo on Cuba on March 14, 1958. On October 19, 1960 almost two years after Batista was overthrown the embargo was extended to other imports except for food and medicine after Cuba took over US-owned oil refineries.

On February 7, 1962 the embargo was extended to include almost all exports. The embargo does not prohibit the trade of food and humanitarian supplies. The US can use it economic power to enforce US sanctions on other countries but it is not always possible. The European Union is Cuba's largest trading partner. Even the US is the sixth largest exporter to the US. 6.6 percent of Cuba's imports come from the US no doubt all food and humanitarian supplies. However, Cuba must pay cash for everything a factor that also limits its imports.

While some of Cuba's economic problems may be traced to poor management, the role of the US embargo also remains an important factor.

Cuba plagued by electricity shortages caused by US embargo

As noted, in 1962 the US imposed an embargo on Cuba. As a result Cuba often does not have enough fuel to run all of its power plants causing electricity blackouts. Just last year, the Trump administration sanctioned Cypriot and Panamanian tankers that were bringing oil to Cuba's power plants. US thinks nothing of enforcing its own sanctions on other countries which it can do to some extent because of its economic power especially on weaker countries.

Cuban economic problems

Many of Cuba's economic problems can be traced back to the collapse of the USSR in 1991. Having lost its main trading partner along with large Soviet subsidies, the Cuban GDP shrunk by a whopping 35 percent between 1989-1993. As a result Cuba decided to reduce some of its government owned projects that were inefficient and introduce more market capitalist features into its economy. However, the government retained control of major industries and kept a free health care and education system as well as subsidizing many cultural events.

At the same time, Cuba encouraged small businesses especially in the restaurant area and tourist bed and breakfast lodging. At present the government still controls 68 percent of jobs but the private sector controls the other 32 percent.

The Obama boom

In 2015 then president Barack Obama reinstated diplomatic relations with Cuba although he did not rescind the blockade. However, US travelers were able to flood into Cuba including many Cubans who had fled to the US but still had relatives in Cuba. The influx of US tourists gave a big boost to hotels, restaurants and the entire tourist industry. The relaxation of the terms of the embargo had even led to US Cuba cooperation on the development of drugs. However just as trade and other relations between Cuba were improving, Donald Trump came into power in the US.

The Trump reversal

Last year Trump revoked many of Obama's changes. Among other changes he banned US residents from staying in Cuban government hotels, eating in state restaurants, or using government tourism agencies. In other words, he wants the US to use only private enterprise facilities in Cuba as far as possible. Even with the new restrictions in the first four months of last year, 257,000 people visited Cuba from the US and this excludes passengers on cruise ships. Perhaps the new restrictions will result in a rise of prices in private restaurants, hotels and tourist agencies and discounts in government facilities to attract more customers from other countries.

The drop in US tourism since the imposition of new Trump restrictions has meant Cuba has less foreign currency to buy foreign goods the require cash payment. US pressure against third country tankers has reduced oil shipments increasing fuel prices and even shortage of fuel to deliver goods from place to place.

Cuban president Miguel Diaz-Canal has announced plans to increase state workers salaries. He wants to encourage self-sufficiency in food production. The president also pledges to get rid of the dual currency system which has one peso that is equivalent in value to the US dollar and another national peso that is worth at present just 1/24 of the convertible peso.

One thing is certain the US embargo hurts ordinary Cubans but has failed to change the regime. In fact Cuba can always blame its economic woes on the US that may help strengthen support for the government.

Trump recently reduced flights to Cuba

In January the US reduced flights allowed to fly to Cuba quite significantly. The announcement of the reduction clearly shows it was meant to reduce hard currency revenue going to the Cuban government, currency it needs to purchase goods it needs overseas. Charter flights will now only be allowed to fly to Havana and no other airports a step already taken with respect to commercial flights.

Pompeo said that the restrictions would further restrict Cuba to obtain financing that he termed was used for the ongoing repression of the Cuban people and also to support what he terms the dictator Maduro in Venezuela. Pompeo boasted that the suspension of public charter flights to nine other Cuban airports the US further impeded Cuba from gaining access to hard currency from US tourists.

The Trump attempts to increase pressure on Cuba has resulted in Cuba developing closer relations with Russia as shown in the appended video from October of last year.

Previously published in the Digital Journal

Even if Guantanamo prison closes US will not return Guantanamo to Cuba

In a recent speech, U.S. Secretary of Defense Ash Carter said the U.S. intends to keep Guantanamo Bay Naval Base in Cuba whether or not the prison closes down.

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Carter said it "would be nice" if the U.S. can close the detention centre at Guantanamo and move the remaining detainees somewhere within the U.S., but even if the prison is closed the U.S. will keep the base in spite of objections by the Cubans.

According to Wikipedia Guantanamo Bay Naval Base:... is located on 45 square miles (120 km2) of land and water at Guantánamo Bay, Cuba, which the United States leased for use as a coaling and naval station in the Cuban–American Treaty of 1903 (for $2,000 until 1934, for $4,085 since 1938 until now).

The lease is in perpetuity and can only be cancelled by the agreement of both parties. The Cuban government has protested consistently against the U.S. presence at Guantanamo and claims it is illegal under international law and was originally imposed upon Cuba by force. In 2013 at the UN Human Rights Council Cuba demanded that the U.S. return the base and other "usurped territory" it took when the U.S. invaded Cuba during the Spanish-American war of 1898.

Guantanamo Bay is the oldest overseas US naval base, being occupied for over 110 years. It has been used as a detention center since 2002. Even with the recent establishment of diplomatic relations between the U.S. and Cuba, the U.S. has made no promises to return the base but has promised only to "discuss" the issue. Perhaps the U.S. might at the very least offer a more reasonable payment for the lease. The Cubans have refused to accept the checks that the U.S. faithfully sends each year.

Carter said that Guantanamo Bay base was "strategically located" : “We’ve been operating for a long time and that’s going to stay important. I don’t see us changing that.” Although Cuba insists that for complete normalization of U.S.-Cuba relations, the U.S. would need to return the base to Cuba, the Obama administration insists that currently the matter is not even being discussed. The return of the base to Cuba seems even more unlikely than the closing of the prison complex in the near future.

Despite thaw with Cuba, US will retain possession of Guantanamo Bay

A sure sign that Guantanamo Bay will remain in American hands for the foreseeable future is the continued investment in the facility. The most recent investment is a very expensive school.

Guantanamo Bay has the most expensive prison on the globe. Now it will have one of the most expensive schools as well. Although the cost of running the prison is huge it needs large continuing investments just to keep the facilities in decent shape as parts of the prison need repair in the worst way. An article from the New Republic sums up the situation: At a cost of $2.8 million per prisoner per year, Guantánamo is the most expensive prison in the world. (The costliest prison in the U.S., the Colorado Supermax, at $78,000 per prisoner per year.) And the costs will continue to rise as facilities that were built to be temporary, like the Camp America Dining Facility, deteriorate. In addition to the dining facility repairs, the 2015 defense budget also calls for $11.8 million to upgrade a medical clinic that was never built to serve an aging population of prisoners. Congress earmarked another $69 million to renovate Camp 7, the top-secret facility that holds the 15-high value detainees who were tortured in CIA black sites prior to their transfer to Guantánamo. In March, The Miami Herald reported that the ground below the facility had shifted, causing the floors and walls of the building to crack.

 The new school at the base will cost $65 million but will house at most 275 children from kindergarten to high school. The cost works out to around a quarter-million dollars per student. In Miami-Dade county in contrast a new school would cost around $30,000 a student. There are about 6,000 residents in Guantanamo Bay. In all, there are 243 students at Guantanamo at present. The prison is run by 2,000 plus temporary troops and private contractors. As part of expenditures meant to bring the base up to par with other government agencies the Pentagon announced that it would install a $40 million fiber optic cable between the U.S. mainland and Guantanamo.

 While legally Guantanamo Bay is still part of Cuba, it has been leased by the U.S. since 1903. The annual cost of the least is just over $4,000 a year but since the Castro revolution of 1959 the Cuban government refuses to cash any of the checks issued in payment by the US. The Cuban government does not recognize the legitimacy of the contract which is in perpetuity and can only be terminated by the agreement of both parties. One reason the prison was built at Guantanamo is that it is not US territory and hence U.S. laws regarding prisoners held in the US would not apply. 

 As part of the recent negotiations to establish diplomatic relations, Cuba apparently asked for the return of Guantanamo but the U.S. declined. According to McClatchy DC the White House said that the status of Guantanamo Bay will not be affected by re-engagement of the U.S. with Cuba.

 This year the pace of prisoner releases from Guantanamo has picked up with 28 being released so far this year, the largest number since 2009. More than half of the remaining prisoners are from Yemen but the U.S. refuses to release any there in spite of the demands of the Yemeni president who is a firm ally of the U.S. Six prisoners were recently released to Uruguay and even more recently five to Kazakhstan. However, given the investment that is being made both on the base and the prison, as well as the restrictions placed by Congress on the transfer of prisoners, it seems unlikely that either the prison let alone the base will be closed in the near future.