The Economic Impact of Obama’s Measures / 14ymedio, Luis R. Luis
Posted on February 10, 2015
14ymedio, LUIS R. LUIS, Washington, 13 January, 2015 — The measures
announced by President Barack Obama will have a moderately positive
effect on the economy of Cuba. Preliminary estimates of additional
revenue to be generated by these measures place it between 400 and 500
million dollars within a period of one year, and a bit more in the
second year. This represents between 0.5 and 0.6 percent of Cuba’s gross
national product (GNP). This figure, while modest in absolute terms, is
important in relation to the slow growth of 1.3 percent in the Cuban GNP
estimated for 2014.
The most important line in the new measures is the expanded limit for
remittances to family members. Available figures indicate that
remittances are limited by current regulations in the United States.
Raising the personal limit to $2,000 per quarter would boost these
transactions, as would the availability of credit cards as vehicles for
payments. Thus, following the recent sluggishness in these transactions,
remittances could increase by 12 percent, or $350,000,000 in one year.
These estimates do not take into consideration changes in deliveries
brought in by travelers or sent via transport companies.
The increase in non-Cuban-American, US visitors, is a lesser factor,
although an important one. This number could double above the 2013 level
of 93,000 individuals. The expenditures on the Island of these
travelers, not counting transportation, are estimated near $100,000,000
in 2014, according to expenditures allowed under current regulations.
Obama’s measures will benefit US exporters of items such as
telecommunications equipment, medicines and agricultural equipment. It
is difficult to calculate the impact. The resumption of banking
relations between the two countries does not include extending credit to
the Cuban importer, but it will facilitate the financial transaction.
One conservative estimate is that exports could increase by 40 percent
although from a reduced base of $315,000,000 estimated in 2014,
according to statistics from the US Department of Commerce. Cuban
exports to the US are restricted by current North American legislation
that is not affected by Obama’s measures.
As is well known, long-range projections for commerce, tourism and
investment will depend on changes in US legal restrictions. They will
also depend on the operating climate and the projects available in Cuba
for foreign enterprises. It is early to evaluate this without knowing
the course that these initiatives by President Obama will take in the US
Dr. Luis R. Luis is an economist in Massachusetts and has served as
Chief Economist of the Organization of American States, and Director of
the Institute of International Finance, both in Washington, DC. He is a
member of the Association for the Study of the Cuban Economy and editor
Translated by Alicia Barraqué Ellison
13 January 2015
Source: The Economic Impact of Obama’s Measures / 14ymedio, Luis R. Luis
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