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Cuba’s Growing Economy and its Effects on Poverty

Cuba’s Growing Economy and its Effects on Poverty
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

  1. 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.
  2. 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.
  3. 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
Photo: Unsplash

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How Tourism in Tanzania Alleviates Poverty

Tourism in TanzaniaTourism involves traveling to locations other than one’s usual environment to participate in activities of interest. Tanzania contains many tourist destinations, including Mount Kilimanjaro, Serengeti National Park and Zanzibar beaches. As such, tourism in Tanzania remains essential to the economy of the nation and has a significant impact in more ways than one.

Tanzania’s Poverty Statistics

With a population of approximately 55.6 million people, Tanzania has one of the world’s most impoverished economies despite its previously high rates of growth and remarkable tourism industry. Tanzania’s GDP growth rate decreased from 5.8% in 2019 to 2% in 2020, meaning that Tanzania’s growth per capita became unprecedentedly negative. Furthermore, the Tanzanian poverty rate was 25.7% in 2020, which means that almost 15 million Tanzanians could not afford some or all of their basic necessities.

The Impacts of COVID-19 in Tanzania

Due to the COVID-19 pandemic, more than 140,000 people in Tanzania lost their formal jobs in June 2020. Additionally, more than two million people with informal, non-farming jobs experienced a decrease in income. Because of these pandemic job losses, more than half a million people could be pushed below Tanzania’s poverty line.

Furthermore, Tanzania’s rapid population explosion during the pandemic has resulted in an increase in the number of citizens living under the poverty line. Tanzania’s poverty rate increased to nearly 2% in the past year, meaning hundreds of thousands of people have been pushed below the poverty line since the pandemic began. According to the World Bank, “[b]ecause a large share of Tanzania’s population is close to the poverty line, even a mild economic shock can push numerous households into poverty.”

Moreover, the pandemic has halted many businesses, especially in the tourism and manufacturing sectors. However, with the new development of the COVID-19 vaccine, many people are starting to travel again, which may indicate that an economic turn-around could be in Tanzania’s near future.

Tourism in Tanzania

According to University of Dar Es Salaam students Nathanael Luvanga and Joseph Shitundu, Tanzania’s tourism industry contributes to the alleviation of poverty. In their study, they examined three popular tourist attractions in Tanzania and how the qualities of those three locations helped alleviate poverty.

The students found that tourism in Tanzania creates employment for those who live in poverty, including jobs operating hotels, providing tours, working at stores and handcrafting goods to sell to tourists. Job creation in the tourism industry is decreasing poverty rates because the skills needed to obtain employment are not specialized. This means that with proper training, anyone can excel as a tourism industry employee.

The Benefits of Tourism

As a result of positive tourism in Tanzania, the country has observed an increase in the number of people acquiring income from tourism-related jobs. With tourism and travel rates beginning to increase again, many are hopeful that more job opportunities in the tourism industry will arise.

Moreover, tourism strongly correlates with national and even international capital, which opens many opportunities to benefit impoverished citizens and further reduce poverty rates. Tourism was Tanzania’s “largest foreign exchange earner,” the second-largest GDP contributor and the third-largest employment creator, per a World Bank report. With access to numerous foreign markets, Tanzania is able to create employment opportunities for the impoverished, preserve cultural traditions through tourism, expand efforts to further develop the country and decrease poverty rates.

Tourism Alleviates Poverty

More than two million people have visited Tanzania each year to view its exquisite scenery and learn about Tanzanian culture, but tourists are unaware of just how important their visits are to alleviating poverty. Tourism creates jobs for those living in poverty, allowing many impoverished Tanzanian people to provide for their families, and therefore, lift themselves above the poverty line. Additionally, tourism allows Tanzania to use foreign capital to boost its economy, contributing to a rise in its GDP. National and international funding gained from tourism allow an expansion in efforts to eliminate poverty in Tanzania and generates more unique opportunities to benefit the impoverished.

– Lauren Spiers
Photo: Flickr