The effect of the u.s. embargo on cubans trade and economy

University of Applied Science Düsseldorf

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Course of study: International Management B.A. Winter Term 08/09

Instructor: OStR. i.H. Jane Maier-Fairclough
Business English 2 (Course Nr. 8)

The Effect of the U.S. Embargo on
Cubans Trade and Economy

December 14, 2008
Table of contents

1 Introduction 1
2 Cuba’s History 1
2.1 Fidel Castro’s regime 1
2.2 U.S. Embargoagainst Cuba 2
3 Economy and Trade 4
3.1 Developement and future perspective 4
3.2 Foreign Investment in Cuba 5
4 Conclusion 6
5 Bibliography 8
1. Introduction
The U.S. embargo against Cuba has been in existence for more than 40 years and it has influenced Cuba’s economy, trade and people. Hereafter, I will point out the development Cuba has been gone through economically and give anoutline about the political history of Cuba since Fidel Castro. My objectives are to point out the effects of the embargo on Cuba’s economy and to find out which other factors have brought Cuba to where it stands today. I will also elaborate on Cuba’s future perspective concerning foreign investment, discuss if a lift of the embargo is going to happen in the near future and theorize in which waythis could possibly change Cuba’s isolated economy.

2. Cuba’s History

1 Fidel Castro’s regime

In 1958 when attacks against the prevailing dictatorship rose, president Batista fled Cuba and 800 of Castro’s guerillas marched into Havanna after defeating Batista’s army of 30.000 men[1]. Then, on January 1st, 1959 Castro and his revolutionary group, the 26th of July movement, took over power.In July 1959 Castro became president and premier at the same time. Cuba is now the first communist western country. Its new leader replaced the capitalist system by establishing a planned economy and by nationalizing U.S. property and private businesses[2]. In January 1961, provoked by this expropriation, the U.S. government broke off diplomatic relations with Cuba and arranged an unsuccessfulattack by Cuban exiles at the Bay of Pigs in April. On February 3rd of 1962, the diplomatic sanctions of the U.S. government were extended by a total trade embargo against Cuba (which will be deepen in paragraph 2.2)[3].

Cuban’s new supporter and trade partner since 1960, the Soviet Union, almost aroused a nuclear war in 1962 when it started to station ballistic missiles in Cuba that were aimed atU.S. cities. The Soviet Union ended the Missile Crisis by withdrawing the missiles in exchange for the promise of the United States to withdraw their stationed missiles from Turkey[4]. After the ties to the Soviet Union became stronger, Castro created a one-party government shifting toward socialism and full control. As a result, many high skilled Cuban’s of the middle and upper class emigratedto the United States, in spite of the fact that Castro made social, educational and health services available for everyone on an equal basis. And even with the assurance of employment for everybody the economic stagnated and remained strongly dependent from export of sugar cane to and subsidies from the Soviet Union[5].

The topic of Emigration from Cuba to the United States was brought toattention again when in 1980 Castro allowed 125.000 Cubans to cross the border to Florida, called the “Mariel boatlift”[6]. In the late 1980s the Soviet Union began to liberalize their policies and economy toward democracy, while Cuba refused to change its socialist course. Hence, the relationship between the two nations worsened until in 1991, when the Soviet Union dissolved and economic supportvanished. Without the Soviet Union’s encouragement, Cuba’s economy suffered financial and material shortages, unemployment and a growing dissatisfaction. In 1993 the government reacted to the bad economic situation and eased some of its policies, Castro legalized small businesses, private employment and the U.S. dollar as a second currency[7]. But the next year was the first time since the revolution...