“En-Amigos”: The Opportunities and Perils of a Cuban-U.S. Thaw

A Cuban Conundrum

On a sunny day in early February 2014, my partner and I stood at the end of a stone walkway at the entrance of Havana’s Castillo de los tres reyes magos del morro, or “El Morro” for short. We were on a two-week vacation in Cuba, and wrapping up a satisfying afternoon visit of the 16th-century castle. For the past three hours, we walked around the sleepy fortress’s stoned walls and rusted iron cannons, overlooking the Havana Bay. More significantly, we had the pleasure of chatting with a personal tour guide – I’ll call her “Rosie” for this post – who had been summoned by the tourism staff to come show us around when we arrived at the visitor’s entrance, evidently the first and only tourists that day.

Of the handful of local people with whom we had a discussion that extended beyond typical tourist banter, I found Rosie to be the most interesting personality. With an ever-present smile and upbeat attitude, she guided us through the fortress’s remnants while detailing its place in Cuban history, ranging from a British siege during the Seven Years’ War in the 1700s to the nearby Soviet missiles that played a central role in the Cuban Missile Crisis of 1962.

View from outside “El Morro” fort overlooking Havana Bay, with Old Havana in the background. (Author’s photo)

While we walked between sites of historical interest, we also learned a little about Rosie herself. A young mother, Rosie had studied computer programming in school, and spoke fluent Spanish, French, and English (indeed, she switched effortlessly between the three languages during our visit).  As we got to know each other a bit more, I gingerly asked her how she had become a tour guide, given her computer skills and obvious abilities in a wide range of areas. For the first time that afternoon, her smile momentarily disappeared, as she muttered softly, “To be honest, life here is very hard. Working in tourism is the one way to make a viable living, even more so than working in computers.”

A couple hours later, as we were standing on the walkway and getting ready to say goodbye to Rosie, my partner and I quietly discussed how to tip Rosie. We were still in our first days in the country and unsure of tipping customs – legal or otherwise – in the country. Still, in kindly sharing her encyclopedic knowledge with us for the past three hours, Rosie had made the difference between aimlessly walking around a crumbling old fort, and one of the more memorable experiences of our trip. We ultimately settled on offering her a 20-dollar “CUC” bill (equivalent to $20 U.S. dollars), which we felt was a small acknowledgment of her efforts that afternoon.

Soviet missiles on display near the “El Morro” fort, allegedly part of the 1962 shipment that sparked the Cuban Missile Crisis. (Author’s photo)

As we offered her the bill, Rosie’s smile disappeared momentarily for a second time as tears started streaming down her face. After we emphasized how much we had appreciated  our time with her, she reluctantly accepted the bill. Smiling through her tears, she explained her reaction: “This bill represents twice my monthly salary.”

Cuba and the United States: Best Amigos or Predator-Prey?

Our two weeks travelling around Cuba in 2014 gave me a very limited view of how the country works, but as President Obama made a historic visit to the island earlier this month, I kept thinking back to this moment with Rosie. In some ways, I think it provides a small illustration of the upcoming opportunities – and potential pitfalls – as the United States and Cuba begin to open up to each other.

On the one hand, widespread poverty is very tangible in Cuba, despite its relatively high levels of education and social services. While it’s true that Cubans can generally take advantage of free education through university and access healthcare and food rations, an average monthly salary of $20 US per month offers little in the way of insurance when food rations aren’t properly managed, or if someone in the family needs a little extra money to start a business or pursue education outside the island, or even to buy a pair of shoes.

Oxen-drawn carts are still a common sight in rural Cuba, and farms are still quite small, despite recent attempts to liberalize the industry. (Author’s photo)

Much of Cuba’s basic necessities – including food, energy, and medicine – must be imported due to the low productivity of its domestic systems. Furthermore, much of those imports (approximately 30 percent in recent years) come from Venezuela, which is itself on the verge of collapse. An end to the U.S. embargo of Cuba would add a large, close, and stable source of goods for the country; allowing for more foreign investment could provide needed capital to increase the productivity of the Cuban agricultural and industrial sectors. Similar to how a relatively small, $20 tip could provide an individual like Rosie a quick boost, opening the tap to U.S. trade and investment could make a quick, significant difference to Cuban living standards.

On the other hand, a sudden influx of U.S. investment and businesses could quickly overwhelm Cuba’s relatively small economy, and even be counterproductive over the long term. Our $20 tip seemed to make Rosie happy that day, and hopefully helped her family over a few weeks. But it also represents one reason why a well-educated computer programmer chooses to work as a tour guide, rather than start up her own tech company (along with many other reasons, including little to no internet access across most of the country).

When incomes are so low, even small influxes of outside investment could lead to significant economic and societal distortions. This could occur if a small subset of Cubans, e.g. those who already receive remittances from relatives in the United States, are better positioned than other Cubans to access U.S. investment opportunities, rapidly accelerating inequality and the societal tensions that accompany it. Indeed, some estimates claim that Cuba’s GINI coefficient – an inequality index where 1 represents the most extreme inequality – rose from 0.24 in the 1980s to 0.5 in the 2000s, fuelled by tourism dollars, remittances, and other business opportunities with foreigners. (As one vivid example, one bed and breakfast we stayed at had been recently renovated with granite countertops and finishing that would rival upscale condos in a North American country.) A mass influx of U.S. dollars would likely supercharge even that rate of growing inequality.

Additionally, upcoming U.S. and other foreign investment into the country has the potential to squash Cuba’s budding entrepreneurship culture. It surprised me during our travels through Cuba, but in some ways, Cubans seems to have embraced entrepreneurship even more so than Americans or Canadians. As the government has opened up specific sectors for private businesses, it seems like every other household – approximately 40 percent of the workforce, by one estimate – operates a small business, e.g. a bed and breakfast or a small restaurant with four or five tables. But one issue is that these businesses haven’t yet been allowed to scale, and would face an almost insurmountable task in surviving against large American companies that could put down millions of dollars of upfront investment.

So, in my mind at least, the important question is not so much whether normalization between the United States and Cuba represents a much-needed lifeline to the country, or whether it would ruin a mythical socialist utopia that doesn’t really exist anyway (just like it seems silly to ask whether tourism as a whole is “good” or “bad” for Cuba). Rather, we should be talking about how normalization between the two countries can be done in such a way that allows Cubans to be in the driver’s seat of their own transformation.

A Cuban Transition on Its Own Terms

With that in mind, here are three basic ideas that I think could help hand the levers of change to the Cuban people during a potential rapprochement with the United States:

• Encourage independent Cuban media through cultural exchanges with neighbouring countries. One of the most striking realizations I had of our trip was the relative paucity of any Cuban media, at least in the public spaces we frequented. In fact, even state-sponsored Cuban media was relatively scarce; most of the newspapers and television stations I was able to see came from Venezuela. While a number of dissident Cuban bloggers persevere in telling their stories to the outside world, establishing a stable, independent media would be an important step in gradually giving Cuban people more power to understand and determine their future. The joint press conference between Presidents Obama and Raul Castro illustrated what kind of power this could have – for the first time, the Cuban leader faced questions from an independent media in front of the entire nation. Clearly, the Castro regime would oppose opening the media to this type of questioning on a regular basis, but perhaps one way to begin building a foundation would be to invite Cuban journalists to cover stories in other neighbouring countries, including the United States. This might pose less of a direct threat to the Castro regime, while still building up a cohort of independent journalists who could practice their skills in a safe(r) space. It also plays on widespread Cuban pride in the country’s tradition of sending their skilled doctors and nurses to lend their expertise to countries around the world.

• Create an international fund for building and leasing basic infrastructure, especially Internet access. Foreign journalists visiting Cuba often report that the most commonly-cited desire among the Cuban people is wifi, and for good reason. Internet access is still incredibly difficult to find, even in large population centres e.g. Havana, contributing to the sense that the island is stuck in time. It also makes it nearly impossible for emerging entrepreneurs to grow their businesses by reaching potential customers or suppliers – as tourists who were actively seeking out bed and breakfasts ahead of our trip, we had a difficult time securing a reservation and paying a deposit until we visited the businesses in person. This and other important public goods could be provided through some sort of model that included foreign investment to build out the infrastructure, and gradually leased to a Cuban state-owned company or local cooperatives over time. The international investors could make a small return through the lease payments, while local cooperatives and entrepreneurs could start using the services right away, and gradually take ownership of the services over time.

• Impose a small tax on foreign investment to help fund small-scale entrepreneurs. While most Cubans would likely agree that they need some foreign investment to kick-start the economy, local entrepreneurs also need support to scale up and compete in an increasingly open economy. One way to achieve both aims might be to impose a modest tax on any foreign private sector investments into the country, which in turn could create a fund that local entrepreneurs could apply to for loans and grants. In a sense, this idea would represent a democratization of the current remittance system, where Cubans who happen to have relatives overseas often collect small-scale grants, while those who don’t have international connections typically can’t access those types of funds. Clearly, who has control over such a fund would be an important question to resolve, as it would be ripe for corruption if handled by the Cuban government, and mistrusted if handled by the American government. One neutral option may be the Organization of American States (OAS), a multi-national institution consisting of most Western Hemisphere countries; decision-making power on how the fund is spent could rest with a small sub-committee of member states, including Cuba.

If you have any other takes on the evolving U.S.-Cuba relationship, please share in the comments below!