With the restoration of U.S. and Cuban diplomatic relations, there has been a substantial change in the Cuban economy.
Removal of Cuba’s name from the U.S. State sponsors of terrorism list, and the reopening of embassies between the two countries, many changes have happened in the Cuban economy. On the surface, we might think that the Cuban economy has changed completely, but to understand the real situation, we need to understand where people, the market, and the economy have been.
The domestic product per capita has been static for more than three-decade
The growth of Cuba’s domestic per capita income is almost the same as in 1985. During the first part of the 90s, Cuba reduces to more than one-third of its economy. But when Venezuela began to provide petroleum to Cuba at high discounts, there was a spike in the economy. But they again fell with the financial crisis of 2008-09. And after 2009, they didn’t recover much.
Cuban government offers low government wages
Even thorough the estimated gross national per capita income is over $5,500, the salary for the average Cuban is about $20 per month. This said, more than 40 percent of the Cuban labor force belongs to the middle class. But as the government wages are low, consumption remains small.
Only about five percent of Cubans have access to the internet
Owning to the fact that the internet is very expensive in Cuba, only about five percent of Cubans have access to it. Moreover, considering the low average income of Cuban people, they will have to spend more than half their income on Netflix. But demand for telecommunication products and companies like Netflix and Google is rising rapidly, and they are finding ways to enter the Cuban economy.
Many of the people in Florida are migrating to the U.S.
Another feature is the massive migration of Cuban people to the U.A. and claiming green cards. This is evident in the fact that more than two-thirds of the two million Cuban population resides in Florida. And more than 18 percent of people living in Miami identify as Cuban. Today, a visa lottery system enables up to 20,000 Cubans to migrate to the U.S. every year. Also, reports of people trying to cross the border by sea are increasing.
Increase in the dependency ratio
One of the main factors that are hindering the growth of the Cuban economy is the rapid increase in the dependency ratio. Cuba’s population is nearly 11.2 million, which is reducing and rapidly aging. This is a bad situation for economic growth because the growth of any economy will need people who are in the prime of the workforce. Due to this scenario, they are closing their schools instead of opening elderly homes and retirement communities. This factor is making the growth of the Cuban economy challenging.
But if the political leaders can lift the limitation of investments, change the tax codes, and introduce the right incentives, the country has the potential to boom in the future. But without such changes, this island nation will always be stuck in time.