Thoughts on the economic benefits of renewed US-Cuba relations

As everyone is reading the morning paper or the news the last week, one of the most tense diplomatic relations in the history of the United States has finally been resolved. The United States has announced that they are moving to normalize relations with the island nation of Cuba after over 53 years after the implementation of diplomatic severance and economic embargo. This means that trade relations will be repaired between the two nations, which will help to reshape the Cuban economy. The Cuban economy has already been reshaped in the previous years by certain reforms implemented with varying results of success. There are certain activities that need to dealt with in more depth, such as good reform policies, smooth monetary conversion and reform of social institutions. Through the diplomatic restart and the economic benefits it will create, I believe these changes will create enormous economic benefits, despite the qualms that Senator Marco Rubio and others have towards the decision.

It is quite understandable that many, like Senator Rubio, would have problems with the current administration's policy towards the normalization of trade relations with Cuba, but the potential economic benefits are too enormous to ignore. A recent series of papers published by the Brookings Institution talked about the particular challenges in Cuba's shift away from a Stalinist-style central planned economy to a market socialist economy much like the one we see in mainland China or Vietnam. These six papers talk about the current conditions and the changes that are possible in the coming years to make this transformation happen. I think the articles are very informative of the particular situation, both long term and short term, that Cuba will face in the upcoming decade. Organized by the Brooking Institution's Latin American Initiative and the University of Havana's Center for the Study of the Cuban Economy, the six parts talk about important issues that concern this massive leap forward for the Cuban economy. There are several important points that I derived after quick glances at each other of the papers and I have listed them in the subsequent paragraphs.

1. Introduction and Overview - In this introductory section, Richard Feinberg summarized the six papers and provided the readers with the key points of the papers. These points are as follows:

• Cuba's new growth model vs the old growth model
• Building New economic institutions to sustain necessary market reforms
• The State and the Market -> How current political institutions interact with the newly created market economy
• Comparative Experiences in Asia and Latin America -> How Cuba compares to similar reform processes and utilizes Costa Rica as a comparison. 
• Tough Choices: Monetary Reforms and Exchange Rate Regimes -> Ideas and Reforming Cuba's dual-currency regime

2. Policies for Economic Growth: Cuba's New Era - This paper comes out with some particularly interesting ideas about policy ideas that Cuba could possibly implement in the coming decade. The paper focuses mostly on the structure of the Cuban economy and brings up interesting policy recommendations for the Cuban economy. Overall, I think Dr. Cordovi and Dr. Perez bring up interesting points on the need for both macroeconomic re-adjustment of planning policies, coupled with certain challenges in "microeconomic bottlenecks". I think it's special great that the two economists contend it's necessary for there to be an open discussion among economic decision-makers and policy theorists in Cuba.

3. Economic Transformation and Institutional Change in Cuba - Antonio Romero organizes this article into four main sections, which include the current economic transformation and possible steps to achieve maintain the economic change will clearly be implemented smoothly. By protecting these non-state economic enterprises with appropriate social enterprises and with clear established economic and administration decentralization, Dr. Romero makes great points in developing Cuba's economic transformation.

4. Institutional Changes of Cuba's Economic Social Reforms - Carmelo Mesa-Lago clearly articulates that there could be negative consequences to the institutional changes that Cuba has undergone, along with the many obvious positive consequences. While the institutional reforms have managed to develop the early beginnings of key economic institutions that are similar to those that are seen in the market socialist economies of China and Vietnam, there could be more enormous downside during the restructuring process. Dr. Mesa-Lago makes an important point about certain elements of the Cuban regime that might want to prevent the reforms from taking smoothly, especially in their deeply entrenched economic interests. He makes a good point in stating that these reforms should preferably happen under the current political leadership of Raul Castro, just in case the next leader decides to abort the process.

5. Economic Growth and Restructuring Through Trade and FDI - Costa Rican Experiences of Interest to Cuba - Alberto Trejos puts forward a solid case for the the applicability of the economic plan due to similarities between pre-reform Costa Rica and the current situation in Cuba. I think there are some merits to his argument, but it might not be the most feasible solution due to the enormous differences in political and social institutions between the two countries.

6. Monetary Reform in Cuba Leading Up to 2016 - Between Gradualism and the the "Big Bang" - Pavel Vidal Alejandro and Omar Everleny Perez Villanueva compare and contrast the two approaches to monetary reform in Cuba. Cuba currently has a dual-currency regime, between the Cuban Peso and the Convertible Cuban Peso, ever since its implementation in 1994. This has created enormous tensions between sections of the Cuban population due to the creation of a two-tier class system and the Cuban authorities see this as a key step to their economic reforms towards a market socialist system. I believe that a gradual monetary reform will benefit Cuba, but it cannot be put off for too long.

7. Exchange Rate Unification: The Cuban Case - Augusto de la Torre and Alain Ize talk about Cuba's drive to unify the currency system, which was a topic explored in the fifth paper of this paper series. They talk about the possible ways to unify the Cuban currency, along with certain methods in keeping each of the particular Cuban industries in mind. The most interesting aspect of this paper was the three particular choices they had in implementing the new exchange rate unification regime, which regrettably

Overall, I find this particular paper series by the Brookings Institution an enlightening and thoughtful read. It is evident that Cuba's road towards becoming an economic success story will be long and hard, but there are obvious benefits to the Cuban people. The ideas that are provided in these articles might not be implemented, but they showcase the beginning of an economy that will move from relative autarky to integration with the global economic system.

There are naysayers like Senator Marco Rubio, who has berated the resumption of diplomatic activities as a concession towards the dictatorial Cuban communist regime. Despite the obvious concerns that Mr. Rubio has brought attention to, there are other possible complications that might interfere at the speed of which the current developments are coming into fruition. A New York Times article, written by Neil Irwin, describes the possible complications that could come from America's renewed economic relationship with Cuba. The article brings up the thoughts of a recently published book written by Gary Hufbauer and Barbara Kotschwar, which would interest those that are concerned about the process of American economic normalization with Cuba. Gary Hufbauer, who formerly worked in the Nixon Administration during its normalization process with the People's Republic of China, talked about how it was of utmost importance that Cuba moves along with critical reforms. It is highlighted that they want it to be done correctly according to what they think would be beneficial for Cuba. It's highly unlikely that they would be able to implement such changes, but integrating Cuba into the global economic benefits would bring enormous benefits for the general Cuban population. If they could taste the outside world, then their situation could perhaps improve immensely.

By reviewing the information that I have gathered here, it should be evident that the benefits that United States could gain from the restoration of economic relations with the Cuba outweigh the detriments of such decisions. I believe that these changes will have a profound impact on the Cuban population in improving the economic well-being of the average Cuban, which will enable the average Cuban to be a lot freer than before. It will also open the door to American businesses in sectors like agriculture and it could prove to be a boon for established American companies, not just cigar importers.