Cuba Banks on Exporting Services
By Eileen Sosin (Progreso Weekly)
HAVANA TIMES — In the past 25 years, the profile of Cuban exports has gone from a strong specialization in goods (nickel, sugar, citrus fruit) to a marked increase in services, especially tourism and health related services.
In 2012, services accounted for 12.6 billion CUC (just over 13 billion USD); today, it represents approximately two-thirds of the country’s foreign sales.
This year, the projected revenue provided by the export of assistance services exceeds 8.2 billion CUCs, or 64 percent of all export sales, as reported in March by Marino Murillo, vice president of the Council of Ministers.
A new group of 200 doctors left in August for Ecuador. The More Doctors program in Brazil is in its first year and involves 11,000 Cuban doctors.
The signing of the Integral Agreement of Cooperation with Venezuela (2000) launched this line of paid services, which between 2004-2005 replaced tourism as Cuba’s main source of revenue. More than 50,000 professionals work abroad at present and a considerable share of them are doctors.
However, several experts point out that, since the late 2000s, the model of growth based on the provision of hiring out personnel begins to show signs of exhaustion.
Although this phenomenon does not rule out the export of services as a valid strategy, it does imply reappraising the manner in which it has been developed so far.
Wide variety of services
There is a consensus about the educational level of the Cuban labor force. To many, professional services are the country’s basic asset, beyond its natural resources and geographic location. And that competitive advantage has been key towards the advancement of this field.
Taking into account the wide stock of professionals in Cuba, the Integral Strategy of Exportation of Services (EIES), approved by the government in 2011, points to four potential groups: health, tourism, information electronics, and telecommunications. The category “Others” includes sports, charters, education and insurance.
The document also identifies experiences and demand in industrial, farm and environmental projects, the control of vectors, epidemiology, disaster response and civil defense, and urban and suburban agriculture.
Although the possibilities are diverse and the foreign sales involve more than 135 countries, the results show a high concentration on health services, specifically in the Venezuelan market. This situation, sustained over a long period, introduces a high-risk system factor, says Ricardo Torres, professor and researcher at the Center of Studies of the Cuban Economy (CEEC).
“Perhaps at some point there was not enough foresight to aggressively seek new markets, to explore other ways to contribute, to see how we could link together more health sectors to incorporate equipment and medicine,” Torres says.
The EIES proposes to sell packages of integral solutions that could include goods, thus giving a greater added value to the sales. While some action has been taken in that regard, especially with biotechnological products, we are still taking timid steps. South Africa, Angola, Namibia and Algeria are emerging as relevant markets and talks are ongoing with Qatar and Saudi Arabia.
Meanwhile, the Brazilian program More Medics employs more than 11,000 Cuban doctors. The Ecuadoran government has asked for 1,000 doctors.
Because of the place that services occupy in the formation of the GNP and exports, it is often said that Cuba has “a service economy.” Though not altogether wrong, that statement omits the fact that the growth of this sector appears more pronounced because of the abrupt reduction in other sectors, such as industry and agriculture.
Torres stresses that the change in the structure of national exports is related not only to the significant increase in the services themselves but also to the slowdown in the sale of goods.
“In many cases, there have been outright losses,” he says. “The example of the sugar industry is a paradigm. If one part is restricted, the other occupies a greater space, even if it grows very little.”
Another weak side of this pattern of growth is the limited connection it makes with the domestic economy, because the predominant modality has been to send professionals abroad.
“When you talk of development, one hopes that the dynamic sectors will couple with the others,” he says. “That’s why they’re called ‘engines.’ They advance and pull the others along. When it comes to Cuba’s professional-service exports, this has been very poor, so far.”
In turn, tourism does show a greater impact in terms of infrastructure, jobs and stimulus to national products. However, tourism has remained on a plateau for years.
To catalyze the development of tourism, plans are under way for the construction of marinas, golf courses and associated facilities, with which Cuba can attract visitors with higher purchasing power.
The EIES is trying to promote the means of supply so the client may come to the island to receive a service and gain access to other services, thus multiplying the total revenues.
Lázaro Peña, director of the Research Center for International Economy, believes it can be said that the strategies implemented in Cuba’s key sectors (sugar, tourism, biotechnology and specialized services) have prioritized the quest for foreign currency.
“But it would seem that all of them have pushed back — or at least have not sufficiently grasped — another objective that’s also essential to the economic activity of any country: the balanced fostering of domestic savings and investment,” he wrote. (1)
Haste and pause
“The job is hard, because there is no structured health system; you have to create everything from the start,” says pediatrician María Antonia Campos, who worked in Venezuela for four years. She would go back if asked, but not everyone feels the way she does.
Sending professionals to other countries takes a physical toll, due to the need for a specific number of professionals to remain in Cuba and because of the human exhaustion caused by extended and/or repeated missions abroad. We’re talking about people who often leave their families and their lifetime projects behind.
“There is a real barrier, which Cuba may already be encountering,” Torres says. “We have to make a greater effort to bring patients to Cuba and foster health tourism on the island. It has a more important effect on growth and development, because it allows more spillovers to the rest of the economy.”
This opinion coincides with a statement made two years ago by Antonio Luis Carricarte, vice minister of Foreign Trade and Investment (MINCEX).
“An exportation of that type does not necessarily mean sending Cubans to other countries,” he said. “It can be done on the island, taking care of foreigners who need different treatments.”
On the other hand, several domestic issues hold back the potential drive of the service sector. On an international level, countries that are strong in the exportation of services — generally, First World countries — enjoy a very advanced technological structure, especially in terms of information technology and telecommunications. Connectivity and online work become basic conditions.
Torres, the CEEC researcher, points to Cuba’s limited participation in the global circuits of commerce, investment and finances. Also, related services such as Customs, transportation, financial, legal and technical services are not at the right level for worldwide requirements.
“Another factor that impacts our model strongly is the philosophy behind the productive activity in Cuba,” he says. “Unfortunately, what predominates is a top-to-bottom vertical vision of the economic processes, in bureaucratic and administrative terms. And that extends to exports.”
Therefore, a more proactive relation vis-à-vis the market remains an unfinished task.
“There are many fields whose services we could export,” says Osvaldo López, chief of the Exploration Department of the Petroleum Research Center (CEINPET). “However, the promotion and the marketing are not what they should be.”
“We have certain disciplines where we are competent on a global level but we don’t have a service-exportation facility, an entity devoted entirely to that end.”
Recently, Vivian Herrera, director of Exports for the MINCEX, graded the EIES’ progress as “discreet.” In this case, a functional institutional and regulatory structure could be part of the answer.
“There must be a radical change in the regulatory framework that establishes incentives, penalties, and compensations for production, specifically for exporters,” Torres says. “There will be no economic future for Cuba if the country doesn’t become a successful exporter.”
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Reference:
(1) “The model of global accumulation and external insertion: Experiences for Cuba,” by Lázaro Peña Castellanos. “About the International Economy,” Vol. 2, by various authors. Published by the Demographic Studies Center. University of Havana, 2012.
“Why should Cuba turn to the “enemy” for support when it has allies like Xi and Putin?”
Why? Because America has assured Cuba through the enforcement of the embargo and the Helms-Burton act that they are indeed the enemy. Xi and Putin have a different approach for alignment and influence with Cuba, and they are making America look stupid in the process. For over 50 years, America has been like that kid who has a spoiled hissy fit because he can’t have his way….picking up his ball and going home. Meanwhile, the others laugh behind his back.
It was also Ike who imposed the first embargo on Cuba in 1958 when Batista was in power. This was an aid to Fidel Castro Ruz, but demonstrates ambiguity in US policy. As one opposed to continuation of the US embargo as it has obviously failed, I dislike the Helms-Burton Amendment and consider it a form of towards allied countries neo-colonialism.
But Fidel Castro Ruz having hidden his true motivation behind the revolution until in power and then declaring it to be communist chose Cuba’s alignment long ago. The US folly over sugar only assisted the USSR o recruit Cuba as a satellite within the western hemisphere. Cuba thought it was an ally of the USSR but its true relationship was revealed when Kruschev didn’t even bother to find out Fidel’s view when he did the cdeal with Kennedy over the nuclear weapons.
Cuba has been aligned with China and with practising “Socialismo” for many years – look at the debt due to purchases on credit from China. Nothing changes the fact that Cuba is ruled by the Castro family regime which leads and controls the Communist Party of Cuba.
I personally don’t think that opportunity is knocking for the US. The two political beliefs of freedom and democracy by one and control and power by a regime over its people by the other make them incompatible. Oil and water don’t mix.
My belief is that which terminated the USSR. containment and let he system rot from within. To that end I would like to see more tourists visiting Cuba – with a marked increase from the US – to enable more contact between free peoples from the democratic world and Cubans confined as they are by poverty and state limited knowledge.
Improvement of life for Cubans would make little difference to the residents of the US. The Castro family regime will not voluntarily change. The regime could choose if it wished, to open Cuba to freedom of speech and comply with human rights. It won’t because doing so is contrary to Castro family interests.
Carlyle, every minute that the US delays in dissolving Helms-Burton is an opportunity missed and lost. I hope America doesn’t continue to let history repeat itself. It was Ike who first shunned Fidel and refused to help him post revolution. It was America that drove him into the arms of the Soviets for their aid that America refused to provide to Fidel. Once in the Soviet camp, that spurred Fidel’s adoption of the Soviet economic and political model out of necessity…leading to the Cuban sugar boycott in America, and Fidel answering in turn with the nationalization of all American companies in Cuba. It also led to the missle crisis too…all beginning with America shunning Fidel post revolution and casting him aside. The big question is will America now continue to shun Raul instead of trying to embrace Cuba, pull them into their camp of influence for aid and economic development, and right a 50 year wrong? Or will they let history repeat itself and let Cuba slip away again to align themselves with China this time? Opportunity is indeed knocking. America doesn’t have long to answer, and will have no one to blame but themselves if they don’t act for the greater good of both nations. Look at it this way…what chance would America have of helping to influence American style democracy in Cuba, influence the promotion of human rights, and influence freedom of speach if they allow Cuba to align with China? The lesser of two evils is sometimes one’s only choice…if indeed America is sincere in its determination to uphold and forward the promotion of those principals for Cuba.
Why should Cuba turn to the “enemy” for support when it has allies like Xi and Putin? There’s the opportunity!
Why should Cuba export to the “enemy” as a market when it has allies like Asad, Maduro, Correa, Putin and Xi? Another opportunity!
Cuba can export any finished goods and services to all those allies and save the USA from subsequently being accused of exploitation.
Prosperity and socialism are contradictory terms.
Copying the Chinese model is exactly what’s required for Cuba…and just like China, Cuba’s inexpensive work-force can be it’s claim to fame when attracting investment and building prosperity for the island. Ironically, pacific rim investment by America when tapping into cheap labor resources has never been called “exploitation”…it’s been heralded as “opportunity”.
Cuba and America both face that same potential opportunity today. However the embargo needs to go first, allowing Cuba access to American investment and to export their future finished goods and services directly to the US. Having access to the largest consumer market on earth is a prerequisite to success. China has certainly proved this to be true.
Cuba “banks” – to the extent of 5 to 6 billion dollars – on the export of “services” – slave labor – so that the regime can survive.
Cuba has very little to export except the “indentured” labor of its citizens.
Its traditional “workhorse” – sugar – never recuperated from Fidel Castro’s megalomaniac “10 million tons” zafra.
Tobacco is at its limits. Nickel is dependent on international prices. Tourism is plagued by quality issues.
Behind the “banking” operation of the Castro regime hides a system of exploitation and repression.
Cubans face terrible shortages of all goods – food, medicines,hygiene products, .
.. – and services – medical especially – as a result of the massive “drive for survival” of the Castro regime.
Doctors are treated like cattle and exploited while their families are hostages in Cuba.
The Castro regime sees the Cuban people as no more than a pool of people to exploit while being very happy to see those that suffer – pensioners, … – to leave or live on the remittances.
Professor Ricardo Torres obviously tries very hard to stay within the confines of Castro family regime thinking. There is one simple answer to the economic plight of Cuba. Copy the Chinese and allow capitalism to work its magic.
I can already imagine the splutterings that will emerge from the socialist thinkers and supporters who contribute to these pages upon reading the above. Fifty five years of application of their type of preachings and beliefs have led to Cuba’s current plight – is that not enough to demonstrate its failure?