Cuba was recently torn apart by what the BBC referred as “the biggest protests in decades”. What appears to be largely spontaneous outbursts of anger at the hardships many people face is blamed on a severe downturn in the economy, which contracted by 11% last year and continued to collapse in 2021. The protests reflect popular frustration resulting from worsening shortages, increasing queues and recent power cuts.
Like other tourism-dependent economies, Cuba has suffered a severe shock following the border closures due to COVID-19. In 2019, tourism accounted for 20% of all foreign exchange earnings and the border closure in March 2020 resulted in a 75% drop international arrivals for the year.
But Cuba’s current economic difficulties are not just the result of the pandemic: they are also the result of American policy.
Thanks to American hostility, Cuba remain forbidden access to emergency international financing from multilateral financial institutions (including the IMF, the World Bank and the Inter-American Development Bank) which help cushion the shock for its Caribbean neighbors. The country also suffers from a series of measures introduced under the administration of Donald Trump to toughen US sanctions.
Starting in 2017 and accelerating towards the end of his term, these had reduced the number of international visitors and reduced the flow of remittances. They also halted deliveries of oil imports, hampered (and added significant costs) international trade, and deterred foreign investment.
Perhaps the most damaging measure, heralded as a coup by Trump just ten days before he left office in January 2021, has been the decision to return to Cuba to the list of âsponsor states of terrorismâ established by the US State Department. At the time, that had received little attention. American allies, such as Canada, the EU or the UK, who see the US allegations as baseless, continue their official engagement and fruitful collaboration with the Cuban government.
But, for international companies, including financial institutions, the inclusion of Cuba on the list has set off red flags in compliance departments, which have a responsibility to minimize the risk of falling under international sanctions. . As part of the ârisk reductionâ process that has intensified in recent years with the increasing ability of regulators to identify suspicious transactions, most companies have refused to engage in transactions involving Cuba.
As a result, since January, it has become increasingly difficult for Cuban entities (including those sourcing medical supplies and food) to trade, and nearly impossible to organize funding.
The paralyzed by COVID
In 2020, Cuba’s performance in containing the spread of COVID-19 was exceptionally positive. But the economic contraction, disease prevention measures and the diversion of government money into this effort were already creating serious difficulties, with queues growing for commodities and prices rising.
Then in January, Cuba experienced a second wave, with daily cases averaging around 1,000 through June. And finally, they soared alarmingly in July, to about 6,000. As of July 14, the cumulative death rate of 14.2 per 100,000 remains well below that of the United States (now at 182), but the daily number of deaths has reached 50.
One of Cuba home-made vaccines has been shown to be over 90% effective in phase 3 trials and vaccine rollout has started to lower the number of cases in the capital, Havana, but the rate of production is hampered by US sanctions and the spread of the virus nationwide remains exponential.
The combination of renewed COVID restrictions and dwindling resources have made people’s hardships worse. In addition, the inflationary effect of a great monetary reform, which aimed to eliminate the dual currency system on January 1, 2021, added to the feeling of insecurity. On top of all this came power cuts caused by fuel shortages and technical problems.
The suffering has been particularly acute for those who depend on private sector activity. Between 2011 and 2017, around 1 million people – 15% of the working-age population – entered the non-state sector, registered either as self-employed or as informal workers.
Public sector workers have benefited from substantial wage increases in 2020 and have continued to receive a salary (albeit reduced) during the pandemic. But many of those who worked in the private sector, which depended mainly on spending by foreign visitors, saw their incomes decline due to the tightening of US sanctions, then disappear altogether due to the pandemic, leaving them only social security. minimal.
The government has tried to protect vulnerable people and ensure that the basic needs of all Cubans are met, but its ability to do so has eroded. He tried to control the prices of essential items, but growing shortages and rising prices in black markets added to the atmosphere of fear and despair. At the same time, attempts by local authorities to respond to complaints about profiteers by suppressing black markets have sparked conflict. Resentments among Cubans have grown and moods are unraveling.
The protests in Cuba were born out of real economic suffering, frustration and daily resentment. Since July 11, the government has introduced new measures in an attempt to appease protesters and signaled a willingness to listen to complaints, although with his limited resources he could not do much to improve conditions in the short term.
But the US government could do it, simply by reversing Trump’s measures: a policy that was promised during the election campaign but has not yet been delivered.
Emily Morris is Research Associate, Institute of the Americas, UCL