1. Impact of U.S. – Cuba Relationship on
Trade
Amit Kumar - 043008
Prashanth Prerepa - 191157
2. Comparison
Cuba USA
Capital Havana Washington DC
Official Language Spanish None at Federal Level
65.1% Whites, 10.1% Africans & 64.7% Whites, 16% Hispanic, 12.2%
Ethnic groups 24.8% Mulatto & Mestizo Africans & 5% Asians
President Raul Castro Barack Obama
Population 11,241,894 (2010 census) 312,946,000(2010 Census)
GDP(PPP) $114.1 bn (2010) (Ranked 63rd) $14.82 tn (2010)
GDP(Growth Rate) 1.5% (2010) 3% (2010)
Unemployment
Rate 1.6% (2010) 9.6% (2010)
Currency Cuban Peso US Dollar
HDI 0.776 (High) (51st) 0.910 (High) (4th)
3. Introduction
• Before 1959, US-Cuba had extremely good
relations: Politically and economically.
• Plans for purchase of Cuba from the Spanish
Empire were put forward at various times by
the United States.
• After 1959, Following the Cuban Revolution :
The relations between both were marked by
tension and confrontation.
• The United States does not have
formal diplomatic relations with Cuba and has
maintained an EMBARGO which makes it illegal
for U.S. corporations to do business with Cuba.
4. Embargo
• No Cuban products or raw materials may enter the US.
• US companies and foreign subsidiaries banned from trade with
Cuba.
• Cuba must pay cash up front when importing US food.
• Ships which dock in Cuba may not dock in the US for six
months.
• US citizens banned from spending money or receiving gifts in
Cuba without special permission, in effect a travel ban.
• Americans with family on the island limited to one visit every
three years.
5. Cuban Economic History
• Before 1959, U.S. was Cuba’s main trading
partner.
• Florida was Cuba’s largest U.S. State trade
partner.
• 40 percent of all cargo being routed through
Miami’s customs district was transported to
Cuba.
• 85 percent of Cuba’s exports were transported to
the United tates.
6. Cuban Economic History
• In the late 50s, U.S. had
a strong influence on
Cuba.
• In 1960, all U.S.
businesses in Cuba
were nationalised
without compensation.
• The U.S. retaliated by
putting an embargo
against Cuba.
Cuba then turned to Soviet Union & its Eastern Europe Allies
7. Soviet Union Collapse
• Cuban output fell 1/3rd .
• Cuba lost 80% of its trading partners.
• It looked towards other countries and slowly started trading with a number of
them like Canada, Spain, Brazil, Argentina, New Zealand, France & China.
8. Trade Valuation
According to U.S. - Cuba Trade and Economic Council
• $17 bn in 1997
US – China Trade • $460 bn in 2011
27 times
• $3bn - $7 bn in 1997
US – Cuba Trade* 4 times*
• $12bn - $28bn in 2011
70% of this would have been exports out of U.S.
Ranging between US$8 bn – US$20 bn
9. Benefits
• According to US department of commerce, US$1 bn exports out
of US generate 20,000 new jobs in the country.
• Thus, US – Cuba trade could have generated perhaps more
than 250,000 jobs in US.
• Cuba has an untapped Human Resource (with lowest pay in the
West) & can act as a cost effective investment destination for the
American firms.
• On the other hand, Cuba will receive investments and workers
will get better wages.
• Cuba will get a market for its agricultural products like
Sugar, which on the other hand will get cheaper in US along with
other commodities.
10. Relationship & Trade
In 2001, US exported food to Cuba for the first time in more than 40
years after a request from the Cuban government to help it cope with
the aftermath of Hurricane Michelle.
This event started trade between the two countries, only in limited
number of products and the trade stood at US$ 328 bn in 2011(all US
exports)
In April 2009, President Obama lifts restrictions on family travel and
remittances to Cuba.
Thus Trade will bring people closer and dependence on each other
will make sure that there is no room for further animosity, in turn
benefitting both the nations.
11. Observations
1) Geopolitical variables play an important role in conditioning the
international business environment.
2) Any specific change in a Countries Government at a particular point of
time may influence the operations of international business within, as
well as, with other Countries. It is important, therefore, for other
Countries to monitor these changes and to respond to them accordingly
and in a timely manner. [Cuban revolution changed its relation with US].
3) Economic benefits due to trade in the long run bring improves the
relationship between the Countries by bringing them closer.
4) A non resolved conflict/confrontation between two countries mostly
benefits other countries, which take the trade advantage.
