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The Cuban Economy: Selected Venezuelan Interactions

Paper Session

Friday, Jan. 3, 2020 8:00 AM - 10:00 AM (PST)

Manchester Grand Hyatt, Pier
Hosted By: Association for the Study of the Cuban Economy
  • Chair: Roger R. Betancourt, University of Maryland

Swapping Petroleum for Doctors and the Impact on the Cuban Economy of Cutbacks in Venezuelan Oil Deliveries

Ernesto Hernandez-Cata
,
International Monetary Fund (Retired)

Abstract

This article reviews official statistics on Cuba’s oil-related transactions, trying to fill the gaps that affect the published data and to present a complete and consistent set of numbers for these transactions. On that basis, it examines the recent behavior of Cuba’s oil imports (mostly Venezuelan crude) and exports (mostly refined and blended oil products). It then seeks to quantify the effects on the Cuban economy of recent cutbacks in Venezuela’s oil shipments to the island, the possible impact of a complete elimination of transactions between the two countries. and the recent expulsion of Cuban doctors from Brazil,. Ecuador and Bolivia.

The article develops estimates of Cuban exports of professional service and the GDP of Cuba’s health sector. It finds that the two series are statistically correlated, suggesting that the surge in exports of services (and of GDP) since the turn of the century can be largely explained by growing exports of Cuban doctors and is not the result of data manipulation.

The article concludes with an evaluation of the hypothetical effects on Cuba’s balance of payments of eliminating the Accord with Venezuela. It considers two possibilities. In the first the fall in oil imports from Venezuela (and the corresponding reduction of medical exports) leads to severe energy shortages accompanied increased subsidies to state enterprises. The second possibility is for Cuba to buy oil in the world market, but this would require a large increase in the availability of foreign exchange.

Cuba's Macroeconomic Vulnerabilities to Venezuelan Shocks

Rodolfo Mendez
,
BBVA Research
Jose Pineda
,
University of British Columbia
Rafael Romeu
,
Devtech Systems, Inc

Abstract

Venezuelan resources going to Cuban are declining and becoming less sustainable given its economic collapse, which significantly affects Cuba’s economic growth. This paper decomposes changes in Cuba’s GDP for the period 1970 to 2017 to illustrate the effects of external factors. We rely on a battery of time series econometrics techniques, namely: structural change tests, linear regression models, and linear regression in state-space-form with time varying coefficients, to get an estimate of the fraction of the Cuban GDP annual growth rate explained by external factors. In particular, we explore the role of macroeconomics shocks coming from Cuba’s main trading partners (Venezuela, Russia, China and Europe). Results show that the two economies with the largest influence on Cuba are Russia, and more recently Venezuela. This paper performs two counterfactuals to analyse how the Venezuelan economy has contributed to the growth of the Cuban economy over the last decades. Our first counterfactual exercise shows that Cuba’s GDP in 2017 would be 0.3 percent higher in the counterfactual scenario in which Cuba did not increase its exposition to Venezuela. Higher exposition to Venezuela since 1999 allowed Cuba to experience a higher average rate of growth from 1999 to 2013 (4.65 percent vs. 4.49 percent). However, that higher exposition to Venezuela also led Cuba to experience a significantly lower average annual GDP growth since 2014 (1.76 percent vs. 2.40 percent). Our second counterfactual focuses on the implications of the Venezuelan economic collapse after 2013 for the Cuban economy. Results show that due to Venezuela’s significant output decline Cuba experienced a lower average rate of growth from 2014 to 2017 (1.49 percent vs. 2.68 percent), with a total accumulated impact for 2017 of a lower GDP by 4.5 percent.

Parallel Stories? The Case of Cuban and Venezuelan Migration after Political Regime Changes

Monica Garcia-Perez
,
St. Cloud State University

Abstract

This investigation aims to compare the migration waves of Cubans and Venezuelans to the United States. First, the comparison intends to evaluate the political and economic pull and push factors that determine the migration at the time of each wave. The goal is to evaluate the similarities and differences across these factors in both countries. For instance, both countries have migration events that were consequences of strong political measures such as the Mariel Boatlift in Cuba and the massive layoffs and persecution of PDVSA employees in Venezuela. Second, the comparison would intend to delineate the characteristics of the migrants, the migration policies particular to the USA that affected the migrations across the waves, and possible local impacts. Contrasting these two different migration patterns offers a window to researchers that may yield implications and policies useful to ameliorate the current regional crisis.
Discussant(s)
Carlos Seiglie
,
Rutgers University-Newark
John Devereux
,
City University of New York-Queen's College and CGC
Roger R. Betancourt
,
University of Maryland
JEL Classifications
  • P2 - Socialist Systems and Transitional Economies
  • O5 - Economywide Country Studies