Trade Embargo: The affects on the Cuban Economy

Danielle DiBella

Blog Post #1

Fidel Castro began his takeover of Cuba in 1959 by seizing Havana and overthrowing the then leader of Cuba, Fulgencio Batista. It was at this time when the problems between Cuba and the U.S began because Castro increased trade with the Soviet Union, who were enemies of the U.S at the time. Cuba started to over-tax American imports and The United States retaliated by reducing sugar imports from Cuba, which eventually turned into a full on trade embargo, a prohibition of trade between two countries, and travel restrictions between the two countries. In 1992, the United States strengthened the embargo and according to the Helms-Burton Act of 1996 the embargo was not to be lifted until Cuba made some serious political adjustments. What did the trade embargo and travel restrictions do the economic growth of Cuba?  Well, according to the article, the Cuban government believes that over the past 50 years of restricted trade they have had an economic loss of $1.126 trillion. Due to some adjustments in the trade restrictions, the U.S has supplied agricultural products and medical supplies to Cuba but other goods and services are still not allowed. According to UN Comtrade, in 2006 Cuba imported more than $10 billion worth of goods meanwhile they only exported about $2 billion this results not only in a trade deficit but also in negative net exports. Negative net exports (NX) means they also have a capital inflow or they are buying more goods from foreigners than they are selling which results in negative net capital outflow (NCO) since NX=NCO the same negative amount net exports are is the same amount net capital outflow is. If net exports and net capital outflow are negative, the economic growth of the economy, if there is any, is most likely slow. Cuba, as an island, already has limited resources, their main exports are natural resources such as Tobacco and Nickel, so they need to import the majority of the goods they need. America, Mexico, and South America are their closest options but because the United States issued a trade embargo, goods that would usually be cheap from the U.S have to be imported from elsewhere, making it costly. Due to recent events such as Obama’s visit to Cuba and new travel and trade regulations, imports and exports should begin to rise as travelers and U.S businesses begin visiting and investing in Cuba and Cuban companies. As a result of the increase in exports, net exports should rise and Cuba’s economy should begin to show significant signs of growth, especially because they can now import goods from the U.S at a cheaper rate than before from a different foreign country.  However, as long as the Helms-Burton Act remains in place, Cuba’s economic growth is limited regardless of U.S investors and travellers.

"U.S-Cuba Relations." Council on Foreign Relations. Council on Foreign Relations, n.d. Web. 20 Apr. 2016. <http://www.cfr.org/cuba/us-cuba-relations/p11113>.

"UN Comtrade Demo | SAS® Visual Analytics." UN Comtrade Demo | SAS® Visual Analytics. SAS, n.d. Web. 20 Apr. 2016. <http://www.sas.com/software/visual-analytics/demos/un-comtrade-basic.html>.