RAYMOND, Maine – The United States’ embargo on Cuban trade has cost the island nation “$ 130 billion over six decades.” The effects of the embargo have worsened over time, but Cubans are finding ways to circumvent the United States embargo and rebuild the country’s economy through the development of cryptocurrencies.
The history of the US embargo
In 1962, President John Kennedy instituted an economic embargo on Cuban companies trading or working with US-supported and operated companies. President Kennedy’s administration drafted the embargo to punish the Castro administration for overthrowing the previous US-allied Cuban government and to express its dissatisfaction with the Castro administration’s apparent conformity with communist beliefs and powers. The embargo cut Cuban-US trade, increased taxes on US imports, and restricted travel.
During his tenure, President Barack Obama worked directly with the Cuban government to ease tension and ease the restrictions on the embargo. His government allowed increased travel between the United States and Cuba and greater US participation in trade with Cuba.
In 2017, President Donald Trump tightened the embargo by further restricting trade and travel and undoing much of President Obama’s work. President Trump’s administration tightened the embargo so much that the restrictions imposed looked very similar to when the embargo was first imposed by the Kennedy administration. The tightened embargo inspired Cubans to be creative in order to circumvent the economic effects of the embargo.
The impact of the embargo on the Cuban economy and economy
The exact percentage of Cubans living in poverty is not verified or available to the public, and precise poverty figures have not been available for several years. In 2002, the number of people living in poverty in Havana, Cuba increased by more than 200%. Poverty in the region was 20%, down from 6% two decades ago.
In 2014, the restrictions were relaxed. The following year, Cuban’s gross domestic product (GDP) saw its highest increase in decades, at more than $ 7 billion. With fewer restrictions on Cuban companies, foreign investment in Cuba increased. In 2017, investments were made in five golf resorts and many other businesses that create jobs for the country and increase tourism’s contribution to GDP.
In 2018, a year after Trump imposed a tougher embargo, the poverty rate was estimated by some Cuban economists at 40-51%. In 2018 and 2019, foreign investment did not grow or expand. Foreign investment has stayed at the same level, but Cuban’s GDP has grown steadily, but not as fast as it was before 2017.
Between 2017 and 2020, Cuban’s GDP grew by an average of $ 3 billion in US currency annually. Prior to 2017, GDP grew by an average of $ 6 billion annually in US currency from 2011 onwards.
How the embargo will affect the Cuban currency
As the value of the Cuban peso has fallen dramatically, the effects of the embargo have worsened. The Cuban peso depreciated significantly in 2021. For more than a decade, the Cuban government had two pesos, one convertible for online use and a plain paper peso. The original two currencies were unequal in value as one online convertible peso was equivalent to 24 paper pesos.
The Cuban government intended to abolish the online peso as it offered no value to trade and did not economically support Cubans who wanted to work internationally. With the elimination of the “e-peso”, the remaining peso will be devalued significantly. One dollar was equivalent to about 24 Cuban pesos in early September 2021.
The Cuban government did this because Cuba depends on imports for its daily needs. The embargo has also made it difficult for Cubans to trade in international markets. With just one peso, the remaining paper peso should improve Cuban independence in everyday life. The paper peso alone was aimed at improving the economy and the value of the Cuban currency. Still, the value has yet to improve and the economy is not forecast to improve immediately. However, to improve the economy, the Cubans introduced cryptocurrencies.
How Cubans deal with the cryptocurrency embargo
In 2021, the Cubans introduced cryptocurrencies to the nation and the government has begun regulating the cryptocurrency to circumvent the embargo, revitalize the economy and reduce the impact of the embargo on Cuban poverty. Cryptocurrencies are forms of digital money that can only be traded online or with the help of technology and are verified with a decentralized system instead of being monitored by an overarching central power. Cryptocurrencies cannot be counterfeited either. Cuba introduced cryptocurrencies to the island in order to build its economy in currencies that were unaffected by the embargo. The embargo has no control over e-money.
The remaining peso will not be available for foreign trade due to the impact of the embargo on Cuba’s economy, and the cryptocurrency has grown in popularity since the peso’s devaluation. No centralized bank controls cryptocurrencies and the US embargo does not affect such institutions. Therefore, international trade and exports are possible with the use of cryptocurrency.
The Cuban government has introduced a resolution that will regulate the use of cryptocurrencies in Cuba. It states that cryptocurrency must be used “for reasons of socio-economic interest” and must not be involved in criminal activities of any kind. With the implementation of the resolution, Cubans can legally and regulated circumvent the embargo with crypto currency.
The use of cryptocurrencies in Cuba reintroduces the potential for foreign trade and makes it easier to pay for imports that Cuba depends on. Unlike the peso, cryptocurrencies are excluded from the US embargo and offer opportunities to increase trade, appreciate Cuban currencies and reduce Cuban poverty.
– Clara Mulvihill