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It has been about eight years since Cuba began a series of economic reforms aimed at modernizing and jumpstarting the communist economy. But while Cuba has taken some positive steps in recent years, the progress has been slow and there’s still a long way to go.
The U.S. first placed an embargo on Cuba back in 1962 in an attempt to place economic pressure on Fidel Castro. The Cuban government estimates that U.S. sanctions cost the nation $1.12 trillion over the next 50 years.
Castro stayed in power in Cuba until 2008 when he announced he was turning over control to his brother Raul. A year later, President Barack Obama eased travel restrictions to and from Cuba. Five years later, the U.S. and Cuba announced they would be restoring full diplomatic ties and reopening embassies that had been closed since 1961.
Fidel died Nov. 25, 2016.
In June 2017, the U.S.-Cuban relationship took a step backward when President Donald Trump restored certain travel restrictions. Trump also said economic sanctions on Cuba will not be lifted “until Cuba frees all of its political prisoners, respects freedoms of assembly and expression, legalizes opposition parties and schedules free and fair elections.”
Impact Of Economic Reforms
Starting in May 2011, Cuba announced a string of major reforms aimed at improving economic conditions on the island. Bans on citizens buying residential real estate and automobiles were lifted. Cuba also took measures to increase bank lending and expand self-employment opportunities.
The good news for Cuban residents is that the measures have clearly made significant improvements for Cuban workers. From 2009 to 2013, the average monthly wage in Cuba ranged between 429CUP to 471CUP. Wages jumped to 584CUP in 2014 and continued on an upward trajectory to hit 767CUP by 2017.
Unfortunately, Cuba’s economic growth hit a bump in the road in 2018. After reporting 1.8-percent GDP growth in 2017, Cuba’s economy expanded by just 1.2 percent in 2018, missing the government’s 2-percent growth target by a wide margin.
Falling export revenues and ongoing austerity measures weighed on Cuban growth numbers last year.
One-time factors, including the residual impact of 2017’s Hurricane Irma and seasonably heavy rainfall, also negatively impacted Cuba’s economy in 2018. The government is hoping better weather conditions this year will help out the agriculture and tourism business. The government plans to expand certain social programs like free health care.
Experts anticipate 1.5-percent GDP growth from Cuba in 2019.
Cuba’s economic struggles in 2018 have been reflected in the performance of the Herzfeld Caribbean Basin Fund, Inc. (NASDAQ: CUBA), which is down 17.4 percent in the past year.
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