World Economy

Tourism Spearheads Second Economy in Cuba

Tourism Spearheads Second Economy in Cuba Tourism Spearheads Second Economy in Cuba

Santiago de Cuba suffers from two types of drought this summer. Lacking rainfall and assaulted with record-breaking heat, the region surrounding the southeastern coastal is facing the driest year in a decade, according to state media. Lack of water will hurt harvests and foil reforesting efforts.

But there’s another drought that’s hurting the local economy: an ongoing lack of foreign tourists, AP reported.

Santiago is Cuba’s second-largest city, but it receives less than one tenth of tourism that Havana does, according to sources cited by AP.  Santiago gets less tourists because it has less infrastructure: fewer hotel rooms, poorer internet access and weaker transportation. As a result, there is less private money to invest in restaurants, Airbnb lodging, as the other entrepreneurial projects that are driving economies outward along the northern seaboard: Havana, the capital, and Varadero, a highly developed resort town.

Changes in how tourists reach the island could further the touristic divide. In May, Cuban tourism was up 15%, according to Stratfor, due in part to an uptick in American visitors. Those increases happened even with ongoing travel restrictions and high prices to reach the island. Flights from the US to Cuba are still chartered, making them expensive. Ferries are not yet allowed. The US has already approved ferry services from South Florida cities, but Cuba is yet to give them the go-ahead. Once it becomes as affordable to reach Havana, Cuba as it is to reach Cancun, Mexico, then an even more significant Americans might begin to precipitate.

A literal hurricane, Sandy, ripped the city apart in 2012. It has barely recovered. In Cuba’s two-tiered economic system, an imbalance in growth could have the same effect: too much storm in one place. This is already happening at a societal level.

Tourism has spearheaded a second economy, where investment is allowed and growth in employment and wages are possible. The combination of the two systems has led to some strange outcomes. Waiters make more than doctors. Food is rationed in the official market and sold in the black market.

The fear is that Cuba could grow unevenly as well, with Santiago become a sort of post-Soviet eastern Germany that everyone leaves for jobs in the “West.” Such a transition can be done okay but comes at a cost.

By contrast, tourism is an unpredictable market for developing countries. There’s a high season and a low season and vacations are the first to get cut when the economy of developing economies is tight. There’s also the possibility of total collapse.

If the tourism industry becomes the main driver of growth in Cuba, the inequality currently emerging among professions in the dual system could be seen at a regional level. At best, it could lead to a net gain in prosperity for the average Cuban. At worst, uneven development could lead to disruption of existing cities like Santiago de Cuba through urban decay and outmigration.