India-Cuba economic relations: Cuban economy has the potential for growth

The year 2023 marked an important milestone in the history of bilateral relations between India and Cuba. India and Cuba celebrated the 50th year of Fidel Castro’s visit to India in 1973. In 1983, he again came to India and handed over the NAM Chairman’s gavel to Mrs. Indira Gandhi. He is remembered for fostering closer relations between India and Cuba. This year witnessed several high-level exchanges of delegations. 

India and Cuba have excellent relations. India was among the first countries to extend recognition to the new Cuban government following the Cuban Revolution in 1959. The visit of Che Guevera to India in 1959 consolidated diplomatic ties. 

In international affairs, both countries have a similar approach. Both countries have maintained close contacts with each other in various international fora, such as the UN, NAM, WTO, etc. Both have supported each other’s candidature to various UN bodies. India and Cuba are on one page on the issue of democratisation of the UN. Cuba supports India’s inclusion as a permanent member in the restructured UN Security Council.   

India has been consistently voting in favour of Cuban-sponsored resolutions in the UN General Assembly calling for a lifting of US sanctions against Cuba. India has also been supporting Cuba for removal of its name from the blacklist of the Financial Action Task Force (FATF) and ultimately Cuba was removed from the blacklist.  

Foreign office consultations are taking place frequently. In June 2022, the Indian delegation was led by the Secretary (East) to attend the 2nd Round of Foreign Office consultation. In April this year, India-Cuba consultations on multilateral affairs were held in Havana. In September, initially External Affairs Minister Jaishankar was to attend the G77 meet which was chaired by Cuba but as he had to attend the special session of the Parliament, the Secretary (East) attended the summit. At the UN, Jaishankar met his counterpart from Cuba on the sidelines of UNGA. 

Importantly, India-Cuba economic relations are steadily increasing. Smt. Meenakshi Lekhi, Minister of State, External Affairs, visited Cuba in January 2023 and discussed ways with several top leaders including the commerce and trade minister to expand cooperation by setting up joint ventures. This was followed by the visit of the Cuban Foreign Trade and Investment Minister in March to participate in the Partnership Summit 2023. In August, the Cuban Dy Foreign Trade and Investment Minister came to attend the 9th CII India-Latin American Countries Conclave.  

Though the bilateral trade is moderate, the total trade increased more than two times between 2018-19 and 2022-2023 from USD 38.81 million to USD 83.91 million. The main items of Indian export to Cuba are pharmaceutical products, organic chemicals, plastic products, medical equipment, engineering goods, textile products, metal products, mineral oil products, and tools. Imports from Cuba are mainly pharmaceutical and tobacco products. 

Cuban potential for economic growth is reflected in the Havana International Trade Fair (FIHAV), which it organises regularly. Indian companies participate in these fairs. Six priority areas for cooperation have been identified: pharmaceuticals, tourism, renewable energy, sugar, biotechnology, and infrastructure development. Energy cooperation between the two countries is on the increase. Cuba is a member country and the Vice-President of the Latin America and Caribbean region at the India-led International Solar Alliance. The Government of India has extended Lines of Credit for 3 projects in Cuba related to the field viz. Power Cogeneration Project at 30 November Sugar Mill, 51 MW Wind Energy Farm project at Rio Seco, and 75 MW solar power projects.    

Cuba’s GDP has been growing slowly but steadily since 2021. It was USD 107.4 bn in 2020 and it rose to USD 545,22 billion in 2021. In 2022, it was about USD 550 billion and it is expected to reach 561.58 USD Billion by the end of 2023, according to Trading Economics global macro models and analysts’ expectations.  

Liberalising reforms are being introduced in phases in Cuba. The Communist Party of Cuba is allowing private businesses to spring up on the island. Since 2021, Cubans have been able to incorporate small and medium-sized businesses which can employ up to 100 people. More than 8,000 have already been registered. Raúl Castro, president from 2006 to 2018, pushed hard to introduce changes. Canal has further encouraged the private sector through the 2019 constitution. Cuba’s private sector is allowed to operate in most sectors of the economy. As of mid-2023, public-sector employment was 65%, and private-sector employment was 35%, compared to the 2000 ratio of 76% to 23% and the 1981 ratio of 91% to 8%.  

The Canal government is encouraging food production to meet the requirements of its citizens. However, the shortage is acute. This is because of several reasons. The Covid, continued US sanctions, and natural calamities have not allowed the situation to improve. Cuba has resorted to increased price controls to slow inflation with little success to date, primarily because of low productivity. The migration is causing serious problems. There are push and pull factors working in this sphere. 

While the gradual recovery of the Cuban economy has not reached the necessary pace, the Canal government is determined to achieve sustainable economic growth in the coming period. There are some positive indicators. First, the Canal government is seriously making efforts to address the root causes. In early August 2022, Cuba returned to a dual exchange rate system, differentiated according to economic sector. The goal is to formalise foreign exchange flows, stabilise the exchange rate, and move towards convertibility of the national currency. The government has also revised wages and pensions to compensate for price rises. Second, Russia is considering to assist. Russia has pledged to deliver 32,000 barrels of oil and oil products per day to Cuba. Its foreign policy is on the right lines. Besides India, it has inter-alia close relations with Russia, China, and Vietnam. Third, there is growing international pressure on the Biden administration to lift sanctions, which could further aid Cuba’s economic recovery.     

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