The Impact of the Pandemic Will be Devastating for Cuba, Economists Warn

Shortages may continue to worsen with worsening macroeconomic figures. (EFE)

14ymedio bigger14ymedio, Havana, 4 May 2020 —  With the arrival of the coronavirus, Cuba has entered a phase of great difficulties that affect the tourist industry, imports and families’ standard of living. Experts agree on this, trying to predict the impact of the pandemic on an economy weakened over many years.

“One internal factor and three external factors have combined in Cuba in 2020 to produce the ’perfect storm’, writes the economist Carmelo Mesa-Lago in the magazine Convivencia (Coexistence).” The internal factor is the continuation of the central planning model (…) The three external factors are the crisis in Venezuela and the consequent cut in its advantageous economic relations with Cuba, the sanctions imposed by Donald Trump that have reinforced the US embargo and the Covid-19 pandemic. “

According to Mesa-Lago’s analysis, “the drops in tourism and projected remittances for 2020 alone are equivalent to 5% of GDP in 2019.”

The economist recalled how between 2011 and 2018 imports on the Island decreased by 18% and exports fell by 60%. It is also estimated that the prices of Cuba’s main exports — nickel, sugar and tobacco — falling due to the crisis in the world economy.

Mesa-Lago acknowledged that in a previous analysis he was projecting a crisis that would be less than that of the 1990s, but “Trump’s increasing measures and Covid-19 are diminishing those favorable differences.” The expert quoted the Minister of Foreign Trade and Foreign Investment, Rodrigo Malmierca, who said that the country is studying measures “similar to those of the Special Period.”

The economist highlighted in his analysis that Cuba has been able to export medical services to other markets again, taking advantage of the pandemic. However, he recalled that these figures do not compensate for the loss of markets such as Brazil, Ecuador and Bolivia, where the Island had more than 9,000 doctors deployed in the last two years.

Unlike other countries in the region, Cuba cannot expect a rescue package from international financial organizations, to which it does not belong, such as the World Bank and the International Monetary Fund.

Nor is there any good news for the island’s tourism industry. Analysts predict that its recovery will be slow if immediate measures are not taken, according to Cuban economist Emilio Morales, director of The Havana Consulting Group, specialized in market analysis on the island.

“The Island’s main markets were already in decline before the arrival of the coronavirus but the impact of the pandemic will be devastating,” added the expert, who said that, although other Caribbean countries also face the lack of tourists, in the Cuban case the crisis “could be more complicated.”

Morales says that an “optimistic” forecast places a gradual recovery of the tourist industry in June and a total of arrivals as of January of roughly 1.7 million travelers, “which would represent a sharp drop of 59.5% compared to the figure reached in 2019.”

“In the case of the Cuban economy, the tourism industry is one of the sources that generates the most jobs and contributes the most income to the country’s battered economy. Therefore, the impact caused by the Covid-19 it will be devastating,” he added.

According to official data, more than 80% of hotels in Cuba are closed and the employees have been sent home. Before the arrival of the pandemic, the tourism industry had revenues of more than 2.184 billion dollars, according to the Government.

Morales believes that the state monopoly on hotels and the tourism industry in general does not allow the Island to compete with the main destinations in the Caribbean region, especially Mexico, the Dominican Republic and the Bahamas.

“Problems with the quality of the service, the lack of maintenance of the hotel infrastructure, the value for money of the tourist products on offer, difficulties with food, and strong competition in the region, are all some of the causes of the decline in the Cuban tourism industry,” he explains.

Before the arrival of Covid-19, a sharp drop was reported in the number of visitors from the five main European countries whose nationals visit Cuba. The number of visitors from Germany, Italy, England, Spain and France between 2017-2019 declined by 29.20%.

Morales emphasizes that Canadian tourism — for decades the largest supplier of tourists to Cuba — has also declined. “The Canadian market had its first drop in 2016, of 6.93%. Subsequently, in 2017, it declined again by 5.93%. In 2018 the decline continued with an additional 2.16%. In 2019 it had a slight growth of 0.9% compared to 2018.”

Finally, tourism from the United States grew strongly after the thaw led by former President Barack Obama, but then sank after measures taken by President Donald Trump in retaliation for Cuban support for the Venezuelan regime of Nicolás Maduro.

“The boom in the U.S. market began in 2015, when visitors from the United States including both segments jumped to 453,925 travelers, which meant a growth of 20.7% compared to 2014 (350,091 visitors),” according to Morales.

However, as of the end of 2017, the number of North American tourists arriving by air decreased and the number of cruise passengers began to increase. Several Florida companies added Cuba to their itineraries, and the number of Americans arriving by ship rose to more than 341,000 in 2018.

“In 2020 we will see a substantial decline in terms of tourism from the United States. Already this year Cuba has experienced a decline in January (-19.58%), February (-13.17%) and March (-32.54%). And since then the arrival of tourists has been almost nil.”

In 2019, as a result of the worsening of tensions with Venezuela, Trump prohibited cruise ship travel to Cuba and, later, suspended flights to all airports on the Island except Havana. This last measure is particularly affecting Cuban-Americans, who are the second largest source of tourism on the Island and contribute to the economy of their country of origin with foreign exchange and merchandise. Those who have family on other parts of the Island prefer to fly direct, rather than make their way from Havana.

Cuba initially tried to take advantage of the Covid-19 crisis in Europe to attract tourists, arguing that the heat killed the virus. However, it had to suspend that campaign and close its borders when the first cases appeared on the Island. According to Morales, with the loss of this source of income, the liquidity crisis will worsen and will translate into an increase in scarcity of basic products and an impoverishment of the country.


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