Cuban Exports of Human Capital: Salvation or Misery?

Since the onset of the XXI century Cuba has received billions of dollar in payments for its exports of professional workers—mainly doctors and medical personnel, but also teachers, soldiers and security experts. These professionals were shipped to Venezuela and to some of its satellites, at Venezuela’s expense. I estimate the payments at just over $7 billion in 2012, and recently there have been indications of significant exports to other countries, notably Algeria and Brazil. These transactions have helped to avoid what otherwise would have been a serious balance of payments crisis for Cuba. Understandably, several authors have expressed concern about these developments, and particularly about the possible implications for the Cuban economy of a sharp decline in payments, as Venezuela’s economic situation worsened. Analysts equipped with statistical tools agree that the consequences of such a decline is likely to be considerably less severe than the catastrophic contraction caused by the end of Soviet assistance in 1989-90 (Vidal-Alejandro, 2013; Hernández-Catá, 2013; and Luis, 2014). Nevertheless, concern about the possibility of a significant recession and, in the longer term, about dependence on politically inspired arrangements beyond Cuba’s control, remain valid. Other authors have taken a somewhat different view, condemning these arrangements as morally wrong (for example, Montaner, 2013). Some have gone farther, accusing the United States and Cuba of collusion in a conspiracy to foster the flight of human capital from the Island (Canler, 2013). These judgments are hasty and unhelpful.  By making general statements against any form of migration by Cuban workers, they provide support for the chauvinistic attitudes which, on this day and age, are threatening to severely restrict free international labor mobility. It should be stated clearly and emphatically. There is nothing wrong per se with Cubans going to work abroad. Philippinos, Indonesians, Mexicans, Salvadorians, and many others do that all the time. And in the process they improve their standards of living and that of their families and help to strengthen their country’s balance of payments. For different reasons, Cuban Americans also have done that in large numbers for six decades. Even the French have crossed the border to work in Switzerland—until, that is, the recent chauvinistic referendum put an end to this mutually beneficial arrangement, bringing relations between the two countries to their lowest point since the battle of Marignan in 1513. There are, however, two things that are very wrong with the present arrangement between Cuba and Venezuela.  First the whole operation is organized by two authoritarian governments and imposed upon the workers. Second, the Cuban government receives payments from the Venezuelan government, pays a miserable fraction to the Cuban workers as compensation, and pockets the rest—a practice already in place in other sectors of the economy like tourism. This confiscatory practice is unjust, contrary to international labor agreements, and probably unnecessary. If the operation were truly profitable (more on that below), it could be organized on a strictly voluntary basis by private companies that would negotiate with entities in the receiving countries, compete for the services of Cuban doctors, nurses and educators, and remunerate them directly. The workers would be better off and the government would still benefit from an inflow of foreign exchange and even receive some revenue by taxing the companies and the workers. Of course if tax rates were reasonable, the government would raise far less revenue than it does now because it would lose its monopsonistic position in the labor market. But then the tax system of a civilized country should not be based on the exploitation of workers that are prevented from making their own decisions and forbidden from organizing freely. But could the operation be profitable? Perhaps, although probably not to the point of paying for Cuba’s fuel imports from Venezuela, currently running at about $6 billion a year including re-exports. Some Cuban economists defend the operation by noting that there is an excess supply of doctors and teachers in Cuba and therefore the operation is an efficient way to obtain valuable resources (oil) in exchange for workers that have a low (or zero) marginal product in Cuba. The argument has some merit, although it should be remembered that the current excess supply of medical and educational personnel is strictly the fault of the Cuban government and its’ long standing-policy of systematically favoring these occupations in academic curricula and hiring practices. The answer to that might be: let bygones be bygones. Given Cuba’s current endowment of professionals (coupled with its overriding need for large-scale imports of fuel and food), the arrangement with Venezuela is a reasonable way to deal with the problem. Perhaps, but there are other and better ways of proceeding. I mentioned the possibility of privatizing the operation. Another way would be to allow doctors and teachers to join the ranks of the self-employed or to open clinics and private schools in Cuba. This would improve the earnings of professionals in these categories and improve the quality of services, particularly in education where the marxist bias still poisons the minds of students and reduces the economic value of human capital. The United States could make a valuable contribution in this area by arranging programs for Cuban students in U.S. universities, as it is doing now in cooperation with the Mexican government. Those programs would emphasize fields that have received insufficient attention so far, like engineering, business administration, computer sciences, economics and accounting, Some of these ideas could be extended to other sectors. For example professional athletes should be allowed to emigrate freely without having to take evasive action. Many would play in the major leagues, multiplying their income by a large coefficient and increasing remittances to their families in Cuba. Even better, the winter league should be resuscitated, and American, Cuban-American, Dominican, Puerto-Rican and other players allowed to join-in. This would increase revenue and investment in a sector in dire need of repairs and refurbishing, raise the incomes of athletes, and delight the population. Tony Oliva would throw the first pitch, Gio Gonzales would open for Marianao, and the Lions would defeat Havana in the opening game of the series.  What a dream!

References Canler, Ed (2014). “An Ironic Collaboration”.  Ascecuba.org//blog. (May). Hernández-Catá, Ernesto (2013). “Cuba, the Soviet Union, and Venezuela: A Tale of Dependence and Shock”. In Cuba in Transition. Association for the Study of the Cuban Economy, Miami FL.Luis, Luis R. (2014). “Cuba’s Growth Strategy: Human Capital and Foreign Investment”. Paper to be presented at the Annual Meeting of the Association for the Study of the Cuban Economy, in Miami FL, August 2014 Montaner, Carlos Alberto (2014). “Cuba. The Selling of a Nation”. Cuba Transition Project. Institute for Cuban and Cuban-American Studies, University of Miami. (February). Vidal Alejandro, Pavel (2013). “Proyecciones macroeconómicas de una Cuba sin Venezuela”. Desde la Isla, Cuba Study Group. 20 de febrero de 2014. Two Cuban doctors who recently "defected" in Brazil argue that they only received US$1245 monthly of the US$4255 monthly that the Brazilian government paid for their services to the Cuban government.  Therefore from this point of view it is misery for the Cuban doctors and salvation for the Cuban government.