So what to make of the Cuban economy?
Back in the 50’s Cuba was a major trader with the world – exporting molasses, cane sugar, tobacco and coffee. $2.2Bn to the USA alone, at today’s prices.
But the 55-year US embargo have taken its toll.
These days Cuba depends on subsidised oil imports (half of its oil) from Venezuela, imports 60% of its food because it doesn’t produce enough of its own, and has a shortage of foreign exchange.
Sovereign debt is unclear although it looks as though it is between $20-$26Bn, which is frankly a lot less than other nations. But remember, these debts are being restructured: Putin recently wrote off 90% of Soviet era debt, and the Paris Club have just done a deal on $15Bn owed.
The government has embarked on a programme of economic reforms to ‘update’ the economy. These promise to open up the private sector, and to encourage investment.
So next year will be a big year, with a new economic plan from the government expected in April 2016.
But here’s some food for thought.
Cuba’s public debt to GDP is 35%. In the UK we owe 90% of GDP and it’s nearly 100% in the USA! A legacy of the financial crisis, Cuba by and large avoided because it was not directly exposed. There is no corporate debt – global banks have rarely been allowed to transact with Cuba.
And there’s no household debt because Cuba’s by and large a cash economy. No credit cards, so no nasty personal debt hangovers.
And although Cubans appear less well off than their neighbours with $6K average annual income per person, they get free education, significantly subsidised medical care, housing, and some subsidised food.
But the most important thing is that Cuba has a very well educated workforce, this country’s coming in from the cold, and it’s pretty obvious to me that Cubans have massive entrepreneurial instincts.
With the government steadfastly set on economic reform, and starting from a low base, I’m confident there’s every reason to be bullish about Cuba.