Question

In 250 words explain the repercussions of the trade embargo against Cuba since February 1962, who they impacted and if the embargo has been beneficial in 2019.

Answer 1

In essence, the embargo is a multi-national agreement to refrain from economic intercourse. The original embargo covered all U.S. exports to Cuba except for medicine and some foods. President John F. Kennedy expanded the embargo to cover U.S. imports from Cuba and made it permanent on Feb. 7, 1962. Cuba's hard currency earnings were dealt a severe body blow by the loss of the American market. The nature of international sugar (of which Cuba is a major producer) marketing arrangements prevented sizable sales to other hard currency purchasers. Throughout most of the 1960s, (1963-1964 being the major exception) prices on the world market were generally low. Because the Western European nations already had sugar suppliers, sales of Cuba's relatively large crops on the world market would have significantly further depressed prices, thus netting Cuba minimal hard currency earnings. On the supply side, Cuban production was dealt another major blow, this one caused by the internal production dislocations resulting from the embargo. Without meaningful hard currency reserves, significant import expansions from non-boycotting Western nations were virtually precluded. The growth of output was also seriously retarded by boycott-induced unemployment of all factors of production; however, quantitative estimates of these losses were deemed impossible to make. With rapidly declining export revenues, imports would have had to be drastically curtailed. Cuba's ability to survive despite sanctions also clearly indicates the limits to the use of American economic power for coercive purposes.

In 2019, The Trump administration is preparing to tighten the six-decade trade embargo on Cuba by allowing some lawsuits against foreign companies using properties confiscated by the Cuban government after its 1959 revolution. Allowing a limited number of lawsuits could make an investment in Cuba more burdensome for companies thinking of entering the market, who will now have to do additional research into their legal liability, but it is unlikely to be a major blow against the Cuban economy. The Cuban economy is now in a period of consistently low growth of about 1 per cent a year, with foreign investment at roughly $2 billion, far below what it needs to spur more prosperity. But tourism, remittances and subsidized oil from Venezuela have allowed the government to maintain basic services and a degree of stability that appears unshaken by the Trump administration’s recent moves against Cuba and its major remaining allies in Latin America — Venezuela and Nicaragua.