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UC San Diego Professor Examines The Cuban Economy

A poster features portraits of Cuba's President Raul Castro, left, and U.S. President Barack Obama and reads in Spanish "Welcome to Cuba" outside a restaurant in Havana, Cuba, March 17, 2016.
Associated Press
A poster features portraits of Cuba's President Raul Castro, left, and U.S. President Barack Obama and reads in Spanish "Welcome to Cuba" outside a restaurant in Havana, Cuba, March 17, 2016.

UC San Diego Professor Examines The Cuban Economy
UC San Diego Professor Examines The Cuban Economy GUEST:Richard Feinberg, professor of international political economy, UC San Diego

It has been five months since President Obama made his visit to Cuba. It emphasized the new expanded relationship opening up between the US and socialist Cuba. The US embargo remains. This leaves many American investors in limbo when it comes to doing business with the island nation. A new book by a professor examines where the Cuban economy is today and could be in the future. I spoke with Richard Feinberg, professor of international political economy at UC San Diego, and author of the new book "Open for Business: Rebuilding The New Cuban Economy." welcome. It is so nice to be here. Thank you very much. On the day, December 17, 2014 when the US announced the beginning of a renewed relations with Cuba, you were in Cuba. What was that like? It was quite a moment in history. We did not expect such a dramatic announcement. We thought it might be a swap. When suddenly, simultaneously, two presidents announced on TV in both countries a decision to move had to normalize relations. I was sitting in a room with 200 Cubans and I can tell you that they stood up, they saying their national anthem, they embraced each other and they started to cry. It was such a moment. Many of them said to me, finally we feel that this black cloud is removed from our shoulders. We can now see light in our future. Since many of the US restrictions on travel and commerce have been lifted, talk about some of the most visible effects in Cuba. The biggest change in US relations has been making it easy for Americans to travel. There are hundreds of thousands of Americans visiting. Cuban-Americans can send remittances for assistance to Cubans on the island. That combination of tourists and money flowing and has created a new vibrant private sector in the largely socialist economy. This private sector consists of many bed and breakfast, some of which are linked to Airbnb. A lot of private restaurants and private construction companies. There is a private tourism sector that is expanding in Cuba today as a result of the opening so far in US Cuban relations. There is a question among the general public among what the US embargo still bands. Can you tell us what kind of business US companies can do in Cuba now and what is still forbidden? American firms are not yet allowed to invest or take equity or ownership in companies on the island. What US companies are allowed to do on the US side is to trade with this newly emerging private sector and in some cases the Cuban government has blocked most of such potential transactions. This is quite ironic. It is an effect a self-imposed blockade today. The Cubans were so used to the enemy imposing restrictions that suddenly it is the Cuban government itself imposing restrictions. It has undermined the strategic rationale in Cuba that everything can be controlled and contained because of this external threat which is now managing. Critics are lifting -- critics of lifting the embargo say the Cuban regime is politically repressive and it violates human rights. In Cuba, do you then see links between more economic freedom and more political freedom? First, the US threat has created an atmosphere in which people are freer to express their opinions. Today in Cuba, people are willing to tell themselves as well as visitors that they are unhappy with the economic situation. Wages are low. You have to work for private sector companies. Your ability to move into the private -- public sector -- private sector is there in certain types of employment. There is a lot of complaining going on. That is new. That is a form of freedom of expression. You say that Cuban millennials will define the new Cuba. As part of this book, you interviewed a dozen young people. What did they tell you? I did have the opportunity to talk to young people. I made a point of that. People often say to me, why did I write this book? To answer the question of Cuba's future. What does it look like? I thought rather than try to answer that myself, I would ask Cubans what they thought. What they said optimistically that they expect a more normal Cuba in the medium to long run. They mean they can pursue their professions and interest. They can travel freely if they want. They can go to LA to work on a project there. They could do that for a few months and then return to Cuba and work there with their families. That is their definition of a more normal Cuba. In your book, you layout three possible scenarios for Cuba's future. Can you tell us about what you see as the most likely scenario? I have a scenario in which things don't change very much and a lot of young Cubans decide to leave the island. I have a more optimistic sunny scenario in which there is gradual change at the top after all the Castro's are well into their 80s. The younger generation takes power and decides that Cuba definitively has to become part of the rest of the world. That means opening international investment, foreign trade and a greater normality and a decent -- decentralization of power on the island. They will be more -- efficient. -- They will be more efficient. Cuba has a lot of assets, a lot going for it. It could have a good agriculture. It could be self sufficient. It could be self sufficient in alternative energies. It has biotechnology. It has telecom potential, well-educated young computer technologists. Tourism is already growing and will blossom undoubtedly. They could have a diversified, well integrated economy going forward with the right public policies. I have been speaking with UC San Diego Professor Richard Feinberg. His book is called "Open for Business: Rebuilding The New Cuban Economy." thank you so much. Thank you. My pleasure.

The book cover of "Open for Business: Building the new Cuban Economy" by Richard Feinberg.
Richard Feinberg
The book cover of "Open for Business: Building the new Cuban Economy" by Richard Feinberg.

Since the U.S. and Cuba renewed relations nearly two years ago, tourism on the island is flourishing, and there appears to be a small yet vibrant private business sector.

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"Hundreds and thousands of Americans are visiting (Cuba)," said Richard Feinberg, UC San Diego professor and author of the new book, "Open for Business: Rebuilding The New Cuban Economy." "This private sector consists of many bed and breakfasts, some of which are linked to Airbnb, a lot of them are private restaurants, private construction companies, private taxi firms."

But the future of Cuba’s economy is still uncertain, Feinberg said.

"They could have a diversified well-integrated economy going forward with the right public policies." he said.

President Obama’s visit to Cuba 5 months ago emphasized the new expanded relationship between the U.S. and socialist Cuba. But the U.S. embargo remains, leaving many American investors in limbo when it comes to doing business with the island nation.

"American firms are not yet allowed to invest in companies on the island," Feinberg said. "What U.S. companies are allowed to do on the U.S. side is to trade with the newly emerging private sector and in some cases also to trade with the still dominant state owned enterprises in Cuba. But so far, the Cuban government has blocked most of such potential transactions."

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Feinberg, a nonresident senior fellow in the Latin America Initiative at Brookings Institution, discusses what's in store for the Cuban economy and the role Cuban millennials may play on KPBS Midday Edition on Tuesday.