With President Barack Obama?s recent visit to Cuba, the media is ablaze with hopes that the U.S. embargo on the country will be lifted. There are dreams of cheap rum and Cuban cigars flooding the shelves of U.S. shops.
Although the embargo on Cuba seems to be mired in Congress, Obama recently stated that the U.S. would lessen restrictions on trade and travel. With that in mind, many Americans wonder what they can hope to buy from Cuba, and how this could impact prices on existing goods and services.
The U.S. can now import some Cuban goods, and American companies can also hire Cuban workers if they fall within Cuba?s guidelines. From there, the basic tenets of supply and demand will drive the impact that Cuban imports to the U.S. will have on prices. Here?s a look at how prices on certain goods and services could be impacted if the U.S. lifts its embargo of Cuba.
Currently, several spirit distributors are prepared for the embargo to be lifted so that delicious Cuban rum can flow into the U.S. However, the company that imports it must comply with Alcohol and Tobacco Tax and Trade Bureau regulations, obtain the necessary permits and pay the required taxes and tariffs.
Once that happens, it?s possible that the price of rum might drop somewhat as more of the liquor enters the marketplace. The increase in supply, with a steady demand for rum, would tend to drive rum prices down.
For now, Americans who visit Cuba can bring home up to $100 worth of tobacco and alcohol. A one-liter bottle of Havana Club rum purchased in Cuba starts at $5, according to Esquire.com.
Cuban cigars are considered to be among the best in the world. Currently, Americans can bring $100 worth of tobacco products into the U.S. A box of Cuban cigars purchased in Cuba can run between $150 and $775 plus currency exchange fees, according to Fortune.com.
But if further Cuban cigar restrictions are lifted, and more of these delectable treats for smoking aficionados come into the market, their prices might fall. Yet, if greater availability causes the demand for Cuban cigars to grow and outpace supply, prices might remain high. In fact, some experts predict prices will go up, according to Fortune.com. Only time will tell how the availability of Cuban cigars will impact the price.
CUBAN COMPUTER PROGRAMMERS
Cuba has relaxed requirements on its service-oriented entrepreneurs. This Cuban policy change, combined with the opening of trade with the U.S., is opening the door for many Cuban services imports. Because computer programmers often can work from anywhere, this could make Cuba an option for U.S. companies who are hiring remote workers.
To figure out how additional computer programming work imported into the U.S. might impact prices, take a look at the cost of living in Cuba. Rent is 67 percent lower than in the U.S.; excluding rent, the cost of living is 27 percent lower than in the U.S. The U.S. median computer programmer is paid $38.24 hourly, according to the most recent pay scale data from the Bureau of Labor Statistics.
Additionally, the BLS predicts an 8 percent decline in demand for U.S. computer programmers between 2014 and 2024, exactly because their work can be easily performed by workers in lower cost-of-living countries such as Cuba. Therefore, the entrance of Cuban programmers in the U.S. market might further depress the price of computer programming services.
CUBAN BOOKKEEPING SERVICES
Similar to computer programmers, bookkeepers can work from anywhere. Importing bookkeeping services ? but not accounting services ? from Cuba can be beneficial as it brings more work to Cubans.
This could also have a ripple effect in the U.S. If bookkeeping service pricing declines, the hiring firm can either lower prices on its products or keep them the same, which would benefit U.S. consumers.
Cuba?s roads are filled with what people in the U.S. consider ?vintage cars.? This means that Cuban demand for newer vehicles might impact prices on used cars in the southeast regions of the U.S.
Mike Arman previously exported U.S. cars to St. Maarten. Arman, who is currently in another line of work, said that with the pent-up Cuban demand for newer cars on the tiny island, it?s likely that the prices on later-model, good condition used cars in southern Florida and the surrounding states will skyrocket. As the demand by Cubans for U.S. cars grows, the existing prices of these vehicles, already on the upswing, would trend upward unless more used cars come on the market.
At $38,000 per year, Spanish translator salaries are currently lower than 34 percent of job postings nationwide, according to job search website Indeed.com. If the U.S. relaxes its embargo on Cuba, those salaries are likely to fall.
Cuban entrepreneurs are allowed to offer document translation services by their government. Thus, with Cuba?s lower cost of living and relaxed trade barriers, companies can hire lower-priced Cuban-English speaking translators to cut costs. Should this trend grow, it would place further downward pressure on the already low-salaried translator jobs.
Americans are already drifting into Cuba via Canada, Mexico, Europe and other countries. If it were easier to visit Cuba from the U.S. via cruise ships, airline flights and travel packages, this tourism opportunity might afford adventurous U.S. citizens with greater low-cost vacation options.
Cuba is only 90 miles off the coast of Florida, a short boat or plane ride. With Cuba?s low prices and beautiful scenery, U.S. tour companies could profit handsomely by marketing visits to the island. Closer to the U.S. than the expensive island of Hawaii, U.S. tourists stand to benefit from lower-priced exotic vacation opportunities to visit Cuba.
Anyone who?s tuned in to watch HGTV network?s ?Caribbean Life? or ?Beachfront Bargain Hunts? understands there is demand for a vacation home in an exotic location. If buyers who ordinarily would have sprung for a lower-cost beachfront home on the Texas panhandle or Florida coast choose a lower-priced option in Cuba, that could cost a sale on U.S. beachfront property.
Although not technically an import, the additional supply of beachfront homes in Cuba might put downward pressure on comparable U.S. beachfront vacation homes.
Today, raw sugar is one of Cuba?s largest exports. However, if Cuban sugar is imported by the U.S., consumers might not see much price benefit.
Sugar prices have been falling for years and are currently as low as they were in the 1980s. As of January 2016, U.S. producers receive 25.76 cents per pound for unrefined sugar. From 2010 to 2013, U.S. raw sugar prices fell 50 percent due to the influx of sugar imports from Mexico flooding the marketplace. This led to a surplus ratio of 20 percent.
Should Cuban sugar enter the U.S. marketplace, this will hurt the U.S. sugar producers who will be forced to compete with additional cheaper sugar imports. Although U.S. sugar producers would experience declining profits if the trend continues, U.S. consumers likely won?t feel the benefit of the lower sugar prices, as grocers and food manufacturers rarely pass along their price savings.
Currently, Cuba imports approximately 80 percent of its food. With the lifting of the U.S. embargo on Cuba, U.S. food sellers will have access to a new market. Increased exporting of U.S. food to Cuba could have a financial impact on U.S. consumers.
In fact, in 2013, American companies sold $348 million worth of agricultural products to Cuba. The top products were frozen chicken, soybean meal and corn.
Farmers in the southeastern U.S. have the most to gain from the looser trade restrictions. This change could increase demand for U.S. products and potentially encourage greater production. Time will tell how these exports will have an impact on consumer prices of the related exported foods.