Can Cuba become the bread basket of North America?

Can Cuba become the bread basket of North America?
By Kieron Monks
December 23, 2014 -- Updated 1819 GMT (0219 HKT)

Cuba has new opportunities following historic deal with U.S.
Economic liberalization already occurring with 500,000 privately employed
Biotech, tourism, and agriculture could boom, Internet should be
dramatically improved
The new alliance will not remove mutual suspicion
(CNN) -- From the buzzing message boards on local social networking site
Red Social de Cuba, to the hip campus of the University of Havana, young
residents of the island are riding a wave of optimism following the
historic announcement of a new deal with the U.S. on December 17.
"I hope for new investments in different areas of our economy," says
Pepe Nieto, a young, privately-employed graphic designer in Havana.
"That means more work, more advertising. Everybody who is ready to work
hard will benefit."
Across social media, mooted upgrades to Internet infrastructure are
causing as much excitement among young Cubans as a new iPhone launch
would among their counterparts across the Florida Straits.
Grab your bags, get ready for Cuba!
A beleaguered workforce needs some good news. Public sector wages are at
around a quarter of 1989 levels at roughly $22 a month, national growth
has slowed to 1.2%, and traditional allies such as Venezuela and Russia
have their own economic problems, limiting the value of their support.
The agreement between Presidents Obama and Castro offers a timely boost,
although reforms are piecemeal. Restrictions on business dealings and
banking have been eased, while the remittance limit to Cuba has
quadrupled. But lifting the U.S. embargo -- in place since 1961 -- would
still need Congressional approval.
Cuba's economy Minister Marino Murillo has already revised growth
estimates up for 2015 up to 4%. Part of this will come through
traditional industries such as tobacco and rum, which should perform
better as the new rules allow U.S. visitors to import limited amounts.
But private business can yield greater dividends. Even before the U.S.
deal, the amount of privately employed people -- cuentapropistas -- had
risen to around 500,000, from just 150,000 in 2006. This growth had been
matched with lay-offs in the state sector.
"I think the Cuban government concluded that outlawing small business
was just pushing it underground, forcing people to buy goods and
services illegally," says professor Arch Ritter, a specialist in the
Cuban economy at Canada's University of Carleton. "For the convenience
of everyday life (private business) was necessary, and it has been
remarkably dynamic."
Ritter expects tourism to offer major opportunities:
"When travel for Americans becomes regular, there could be a tourism
tsunami. In anticipation those in the hotel business are renovating old
hotels, building new hotels and retirement homes, and low-cost
apartments. This could see a big construction boom around tourism that
spreads to areas like food and car rentals."
To fully grasp these opportunities, the Cuban government would likely be
forced into greater commercial liberalization.
With fewer restrictions and greater investment, agriculture could expand
its capacity and serve international markets. Through its favorable
climate, Cuba can become "a winter garden for North America," Ritter
believes.
The island also boasts an advanced biotech industry that is vital to the
nation's economic strategy, as well as its own high standards of
healthcare. But to build its exports the government must consent to
international testing and standardization.
Although President Raul Castro has shown greater flexibility on private
business than his predecessor -- brother Fidel -- a more fundamental
shift in approach would help the new generation of entrepreneurs.
"The Cuban government should provide a stronger legal basis for private
businesses, giving them the same rights and duties as for the
non-private companies", says graphic designer Nieto. "Without that, I
think there will not be any serious economic growth."
Evidence of such a fundamental shift can be seen in the port town of
Mariel, site of the Cuban Missile Crisis. A "special economic zone" has
been created, with the backing of Brazil, allowing tax-free foreign
investment in industries such as mining and manufacturing.
"There are major real estate projects that the government would like to
see, there could be billions of dollars of investment," says Johannes
Werner, editor of the Cuba Standard, the island's only dedicated
financial media. "But there has been a lot of insecurity around foreign
investment -- the greatest being the U.S. embargo."
"The Obama announcement sends the signal to investors that it's OK to
move ahead, as well as telling them that U.S. investors may be here soon
so be ready before their competition arrives."
Improved Internet infrastructure is a deal-breaker for this new vision
of the Cuban economy. Grand-scale projects will not be sustained by a
connection on the strength of satellite signals and a single fiber-optic
cable from Venezuela.
The U.S. has made a priority of co-operation on this issue, although
these plans are viewed with skepticism, based on previous American
efforts to subvert the government through social networks as well as
open suggestions that the liberalization of the economy could help
overthrow Castro's regime.
"The problem is that the Obama proposal prioritizes private enterprise
over the state economy with the idea being to strengthen capitalism on
the island," says Rosa Miriam Elizalde, editor of the loyalist Cuba
Debate news site. "This contradicts our society that has tried to defend
and protect social access to our resources... If American intentions is
to impose capitalism here through seduction it will not be successful."
While the leaders of both nations have declared a commitment to
co-operation with respect for ideological differences, it remains to be
seen whether the decades-old phoney war will continue by other means.
An isolated pariah, or bread basket of North America? Cuba's path is open.

Source: Can Cuba become the bread basket of North America? - CNN.com -
http://edition.cnn.com/2014/12/23/business/cuba-bread-basket/