These 5 Facts Explain the Economic Upsides of an Opened Cuba

These 5 Facts Explain the Economic Upsides of an Opened Cuba
Ian Bremmer @ianbremmer April 20, 2015

The Caribbean country could be the next frontier of global business

Taking Cuba off the list of nations that sponsor terrorism is the latest
development that will attract foreign companies to the island. So who
wants in? These five stats explain which industries present the most
opportunities as Cuba opens for business.

1. Money flowing home

One of the immediate benefits of renewed relations with Cuba is the
increase in permitted remittance flows. The most recent figures put
annual cash remittances to Cuba at approximately $5.1 billion, a level
greater than the four fastest growing sectors of the Cuban economy
combined. Now, permitted remittance levels from the U.S. will be raised
fourfold, from $2,000 to $8,000 per year. This will help drive an
increase in spending power in Cuba, which is expected to grow at a
compound annual rate of 4.6% through this decade. For global companies
seeking a foothold anywhere they can, more money in the pockets of
Cubans means more fuel for expansion. Take Coca-Cola. With an open Cuba,
Coke could be legally be sold in every country in the world save one:
North Korea.

(Fortune, The White House, Euromonitor, Wall Street Journal)

2. A lot more visitors

Just 110 miles off the coast of Florida, Cuba should be a natural magnet
for American travelers. Despite needing to meet special criteria to
receive a visa from the State Department—allowable categories include
educational and journalistic activities—170,000 Americans visited the
country last year. As the restrictions slacken, the sky is literally the
limit. JetBlue already charters flights to Cuba from the U.S., but the
budget airline wants to start running regular commercial flights.
American Airlines Group now flies to Cuba 20 times per week, a 33%
increase in flights compared to just a year ago. More flights—and more
competition—will make airfare more affordable, driving additional
tourist traffic.

3. Communication breakthroughs

Only one in ten Cubans regularly use mobile phones and only one in
twenty have uncensored access to the Internet. Even state-restricted
Internet penetration currently stands at just 23.2%. The telecom
infrastructure is so underdeveloped that an hour of regulated Internet
connectivity can cost up to 20% of the average Cuban's monthly salary.
There's serious demand for the major infrastructure investments needed
to improve these numbers. Some start-ups are making waves in spite of
shoddy internet. Airbnb, a website that lets people rent out lodging,
announced that it has started booking rooms in Cuba with over 1,000
hosts. It gets around the lack of Internet by teaming with middlemen who
have long worked to link tourists with bed and breakfasts.

(Wharton, Freedom House, Fast Company)

4. A cure for Cuba

Cuba has the third highest number of physicians per capita, behind only
Monaco and Qatar. They're even used as an export: Venezuela pays $5.5
billion a year for the almost 40,000 Cuban medical professionals who now
make up half of its health-care personnel. Cuban doctors lack access to
most American pharmaceutical products and, importantly, to
third-generation antibiotics. For its part, Cuba's surprisingly robust
biotech industry makes a number of vaccines not currently available in
the U.S. With the normalization of relations, Cuba can look to fully
capitalize on its medical strengths.

(Bloomberg, World Health Organization, Modern Healthcare, Brookings)

5. Foreign investment

Cuba currently attracts around $500 million in foreign direct investment
(FDI)—good for just 1% of GDP. Given its tumultuous political history
and underdeveloped economy, it is difficult to accurately predict how
quickly investors will flock once the embargo has been lifted. But a
good comparison might be the Dominican Republic, another Caribbean
nation with roughly the same size population as Cuba. The Peterson
Institute for International Economics estimates that Cuba could
potentially attract as much foreign capital as the Dominican Republic,
which currently receives $17 billion in FDI ($2 billion from the U.S).
But this won't happen overnight—in the Heritage Foundation's Index of
Economic Freedom, Cuba ranks 177th out of 178, ahead only of North Korea.

(Wharton, ASCE, Peterson Institute, Heritage Foundation)

Source: These 5 Facts Explain the Economic Upsides of an Opened Cuba |
TIME -
http://time.com/3828156/ian-bremmer-business-cuba-economy-embargo-lift/