The Economic Impact of Obama’s Measures
Washington/The measures announced by President Barack Obama will have a moderately positive effect on the economy of Cuba. Preliminary estimates of additional revenue to be generated by these measures place it between 400 and 500 million dollars within a period of one year, and a bit more in the second year. This represents between 0.5 and 0.6 percent of Cuba’s gross national product (GNP). This figure, while modest in absolute terms, is important in relation to the slow growth of 1.3 percent in the Cuban GNP estimated for 2014.
The most important line in the new measures is the expanded limit for remittances to family members. Available figures indicate that remittances are limited by current regulations in the United States. Raising the personal limit to $2,000 per quarter would boost these transactions, as would the availability of credit cardsas vehicles for payments. Thus, following the recent sluggishness in these transactions, remittances could increase by 12 percent, or $350,000,000 in one year. These estimates do not take into consideration changes in deliveries brought in by travelers or sent via transport companies.
The increase in non-Cuban-American, US visitors, is a lesser factor, although an important one. This number could double above the 2013 level of 93,000 individuals. The expenditures on the Island of these travelers, not counting transportation, are estimated near $100,000,000 in 2014, according to expenditures allowed under current regulations.
Obama’s measures will benefit US exporters of items such as telecommunications equipment, medicines and agricultural equipment. It is difficult to calculate the impact. The resumption of banking relations between the two countries does not include extending credit to the Cuban importer, but it will facilitate the financial transaction. One conservative estimate is that exports could increase by 40 percent although from a reduced base of $315,000,000 estimated in 2014, according to statistics from the US Department of Commerce. Cuban exports to the US are restricted by current North American legislation that is not affected by Obama’s measures.
As is well known, long-range projections for commerce, tourism and investment will depend on changes in US legal restrictions. They will also depend on the operating climate and the projects available in Cuba for foreign enterprises. It is early to evaluate this without knowing the course that these initiatives by President Obama will take in the US Congress.
Dr. Luis R. Luis is an economist in Massachusetts and has served as Chief Economist of the Organization of American States, and Director of the Institute of International Finance, both in Washington, DC. He is a member of the Association for the Study of the Cuban Economy and editor of asce.org/blog.
Translated by Alicia Barraqué Ellison