In 2018, Cuba’s economy was slowly increasing at a GDP growth rate of 2.2%, recovering from the economic instability the country was experiencing at the time. Since the COVID-19 pandemic, however, Cuba’s economy regressed significantly as its industries, such as the service industry (which composes 75% of the national GDP), were drastically affected. The effects of the pandemic were further exacerbated as Cuba’s currency was changed to the Cuban Peso in 2021, leading to hyperinflation at an estimated 500%. The outcomes of these events have drawn attention to Cuba’s growing economy and its effects on poverty.
Despite its economic regression, Cuba’s economy has been revitalized ever since 2021. Inflation has reduced from 500% to 39.07% in 2022 and public debt decreased from 151.1% of Cuban GDP in 2021 to 118.9% of Cuban GDP in 2022. This is largely in part due to the Cuban government opening its economy to private businesses, many of which originate from the U.S. As Cuba welcomes private business, the people of Cuba, especially those in poverty, have significantly benefited.
US Companies Entering Cuba
One example of how Cuban industries have been impacted by U.S. companies is the Cuban tourism industry. In January 2021, Cuba had 84,000 tourists, down 80% from January 2020. In January of 2023, however, Cuba recorded 246,000 tourists. This surge is mainly due to companies that have sped up Cuban tourism’s economic recovery. One such company is Airbnb.
A popular characteristic of Cuba for tourists is the Casas Particulares, which are homes of Cuban residents that are shared with tourists. Airbnb rose to prominence in Cuba because it promotes these casas and makes it easier for tourists to locate them. In Airbnb’s first year in Cuba (2015), the company generated business for more than 4,000 Casas Particulares. Airbnb also significantly increased jobs within Cuba’s tourism industry.
One case study involves Manuel Fortún Manzano, a 29-year-old employed in a construction company at the time of Airbnb’s entry into Cuba. Through Airbnb, Manuel began to offer a tourist experience (known as the “Havana Whisper”) which allowed Manuel to become a full-time tour guide. Manuel represents one of the thousands of people who have benefitted from a job as a result of Airbnb.
Besides Airbnb, other American corporations, such as Netflix and American Express, have recently entered Cuba and greatly improved various industries. In doing so, the economic improvements have also benefited much of Cuba’s poor. As such, U.S. companies have contributed to Cuba’s growing economy and its effects on poverty reduction.
How Cuba’s Growing Economy is Decreasing Poverty
- Lower Unemployment Rate: In January 2021, Cuba’s unemployment rate reached 3.87%, jumping 2.8% from the previous year. However, since the conclusion of the COVID-19 pandemic and the start of Cuba’s initiative to open its economy, unemployment rates have declined again. As of 2022, Cuba’s unemployment rate decreased by 1.07%. As the unemployment rate continues to decrease, more people will be able to obtain jobs and a stable source of income, thereby decreasing the number of people in poverty.
- Hunger & Nutrition: One of the most influential ways Cuba has reduced poverty levels has been through addressing hunger and malnutrition. The Global Hunger Index (GHI) measures the percentage of a country’s population that suffers from hunger on a 0 (best) to 100 scale (worst). Since 2000, Cuba has not had any GHI score surpassing the “very low” threshold, which is a score of 5 or less. Despite a low GHI score, Cuba has had struggles with agricultural production, mainly due to COVID-19. While the Cuban government continues to invest in its weak agricultural output, Cuba has effectively prevented hunger and, therefore, poverty.
- GDP Growth: In 2020, at the height of the COVID-19 pandemic, Cuba’s GDP growth rate hit rock bottom at -10.9%. As Cuba began to open its economy to privatization, however, Cuba’s economy rebounded. A year later, in 2021, Cuba’s GDP grew by 1.3%. This trend is very promising because a higher GDP is known to have a direct correlation with lower poverty rates.
These three trends represent the importance of Cuba’s growing economy and its effects on poverty reduction.
The Future of Cuba
As Cuba embraces privatization, more businesses will seek to enter the market and stimulate Cuba’s declining economy. As the economy rebounds, Cuba’s poverty rates will continue to fall as people are open to more opportunities. As a result, Cuba’s growing economy and its effects on poverty offer a positive glimpse into the country’s future.
– Manav Yarlagadda