Executive Briefings

Cuba's Manufacturing Challenges Won't Be Solved Simply by Re-establishing Ties with U.S.

The picture for Cuban manufacturing is mixed. On the positive side, the government’s decision to give private firms more autonomy to retain earnings and make investment decisions may spur a much-needed market for capital equipment, a crucial source of demand for a developing economy factory sector.

And Cuba has a competitive pharmaceutical industry, demonstrating, along with a strong public investment in education, its capacity to succeed in an innovation-driven area.

There are, however, considerable roadblocks to overall industrial dynamism. The island nation’s population is rapidly aging, with a share in the crucial younger age cohorts that is below the average of the Latin America and Caribbean region. Further, investment demand has become almost structurally weak since the mid-1990s, demonstrating the need for banking and capital market reform to translate potential business demand into a self-sustaining market. And manufacturing success is going to require a challenging reengagement in trade. These are not insurmountable difficulties. But they require aggressive policy programs.

At this moment of promise, thoughtful and cautious optimism is required for Cuba and its potential trading partners around the world. The U.S. must lift a trade embargo that no longer serves a purpose. The Cuban government must accelerate economic as well as social and human rights reforms. With the appropriate policies and investments, a developed and fully engaged Cuba can play a constructive and even innovative role in the global economy in general and global manufacturing in particular.

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And Cuba has a competitive pharmaceutical industry, demonstrating, along with a strong public investment in education, its capacity to succeed in an innovation-driven area.

There are, however, considerable roadblocks to overall industrial dynamism. The island nation’s population is rapidly aging, with a share in the crucial younger age cohorts that is below the average of the Latin America and Caribbean region. Further, investment demand has become almost structurally weak since the mid-1990s, demonstrating the need for banking and capital market reform to translate potential business demand into a self-sustaining market. And manufacturing success is going to require a challenging reengagement in trade. These are not insurmountable difficulties. But they require aggressive policy programs.

At this moment of promise, thoughtful and cautious optimism is required for Cuba and its potential trading partners around the world. The U.S. must lift a trade embargo that no longer serves a purpose. The Cuban government must accelerate economic as well as social and human rights reforms. With the appropriate policies and investments, a developed and fully engaged Cuba can play a constructive and even innovative role in the global economy in general and global manufacturing in particular.

Read Full Article