President Barack Obama’s announcement renewing diplomatic relationships between the U.S. and Cuba has, as should be expected, resulted in a storm of controversy.
The nature of the controversy suggests the plans a done deal. Lost in the excitement is the fact that representatives of the U.S. and Cuban government still have to work out the details for the new arrangement, including plans for the establishment of a new U.S. embassy in Havana. More importantly, the fulfillment of several of these arrangements involves the Cuban government adhering to U.S. requests.
In his announcement Obama stated “the U.S. is calling on Cuba to unleash the potential of 11 million Cubans by ending necessary restrictions on their political, social, and economic activities.”
One significant factor may motivate Cuba to apply a less restrictive policy on its people, and cooperate with the U.S.’s requests. This issue is oil–more specifically the current market’s lower oil prices.
With world oil prices falling to its lowest levels for oil producing countries like Venezuela, their economies could begin to falter. Already, there is concern that Venezuela will not be able to maintain the PetroCaribe agreement–where Venezuelan oil is sold to Caribbean nations including Cuba at a significant discount and easy repayment terms–if this low price is sustained. Not only does Venezuela play a major role in providing Cuba with cheap oil, but also supports the Cuban economy by other means. If this support wanes, the Cuban economy will be in dire straits.
With this real possibility, it behooves the Cuban government to build not only a diplomatic, but also an economic bridge with the U.S. One strategy in building this bridge is for the government to relax its restrictive policy on its people. This in turn could lead to more economic benefits from the U.S.
One area of economic activity that could definitely benefit Cuba is tourism. The U.S. easing of travel restrictions to Cuba could revive Havana to its heydays as the mecca of Caribbean tourism before 1961. This would of course have serious implications for the existing Caribbean tourism sector, which have benefited largely because the U.S. trade embargo removed major market competition from Cuba.
However, there may be no need for too much concern. For one, although the Cuban government may be willing to open its hotels, clubs and beaches to American tourists, likely there would be stringent controls, so as not to dilute the principles of the communist state with undue capitalistic influence. So while some tourists would be diverted to Cuba, the diversion should not be enough to negatively impact the general Caribbean tourism sector.
Secondly, the renewed U.S./Cuba diplomatic arrangements will likely make Cuba a full member of the Caribbean Community (CARICOM), and the Caribbean Tourism Organization (CTO). Instead of the possibility of Cuba domineering the Caribbean tourism market, there could be a co-sharing policy involving, for example cruise liners sailing to multiple Caribbean destinations including Cuba. Moreover, with the likelihood of Cuban tourism being back on stream one day, many Caribbean tourist destinations have been proactive in preparing for this competition.
Certainly, the new diplomatic ties between the U.S. and Cuba have created exciting and challenging times for the entire Caribbean. The unfolding of these arrangements, including the planned talks between the U.S. and Cuban governments in January, should make next April’s Summit of the Americas, to be attended by Obama and Castro, extremely relevant.
