The Peter Zeihan Podcast Series - Should Cuba Integrate with North America? || Peter Zeihan

Episode Date: August 27, 2024

Sure, the Cubans and the Americans have some history, but who doesn't? If both sides can let that water pass under the bridge, what will Cuba's role in the North American system look like moving forward? *This video was recorded during my backpacking trip through Yosemite in the end of July. Full Newsletter: https://mailchi.mp/zeihan/should-cuba-integrate-with-north-america

Hey, everybody. Hello from Yosemite's North Country. I'm just above Pute Canyon right now. And today we're going to talk about Cuba. Grabbing a question from the Ask Peter Forum about what the place of Cuba in the North American system is as globalization falls apart. Well, obviously, there's a little bit of drama between the United States and Cuba. The United States seized Cuba from the Spanish at the end of the Spanish-American War way back at the end of the 19th century. and then ran it as a colony until it broke away under the Castro Revolution of the 1960s and has generally been a pain in the ass ever since from the American point of view. The Cubans obviously, CS is the pain in the ass. However, the Cubans have never joined the globalized structures in a normal way.

They never got into manufacturing. The only thing they really produced for export is sugar. Instead, they have chosen to cozy up to who, whoever the dominant anti-American power happens to beat. And for most of their history, that has been the Soviet Union slash Russia. The problem they're going to be facing in the not too distant future is that Russia is occupied with things much closer to home and does not have a lot of cash to throw Cuba's way. While China, while the Cubans are flirting with the Chinese, the Chinese want a lot more, what's the word I'm looking for? Servile policy out of Cuba if they're going to invest any money.

and the Chinese are very well aware of the map, and that Cuba's just on the wrong side of the planet, and it would just be impossible to supply, unless the United States allows it. So sooner or later, probably within the next 10 years, we're going to have a situation where the available sponsors are no longer available, and their backup plan for the last,

geez, it's 2024, it's been 25 years now. Their backup plan has been Venezuela, which is basically paid for, Cuba to exist with oil transfers. Well, Venezuelan oil is going away. It's almost gone, actually. And so there's really not much left. So we're going to have a situation in the not too distant future where the Cubans are going to be forced to find a new way to operate if they want to, you know, feed themselves. And the only option on the table is the United States, because there's no one else in the world who's going to side with Cuba against the United States.

The question is when and the question is how. When is a little persnickety? Because that ultimately comes down to when the Cuban government decides it wants to open up a new chapter of its history. Now that the castros are gone, that is at least possible. And we did see under the Obama administration a proto deal. It was not a great one, as pretty much all of Obama era deals were. He wasn't really interested in negotiating it. So it was more of a like, let's just get this done and move on. Trump abrogated it. Anyway, the bare bones of that deal, forget the specifics, are just that, you know, The United States will allow tourists to go. The United States will allow food sales to Cuba.

And in exchange, you need to politically loosen up a little bit. Obviously, those three things would be part of any longer term pact. But there's really two other things you should think about. The first is not just agriculture, but the impact that Cuban agriculture will have on the United States is more than the other way around. I mean, yes, yes, yes. The United States is the world's largest producer and exporter food stuffs. And the Cubans need that food. because they're not capable of growing what they need to feed their own population.

What they can grow competitively is cane sugar. And if cane sugar was allowed in the United States, it would be at a lower price and a higher quality point than our existing sugar, which mostly comes from sugar peats in places like the Red River Valley of North Dakota and Minnesota, and then a little bit down in the sugar bowl of Louisiana. Very low quality sugar, very high prices, very heavily subsidized. So if you do bring Cuba into the fold, keep in mind that you're going to have a little fight in the agricultural lobby. Now, the agricultural lobby will ultimately go with Cuba because everybody else would be able to sell things to Cuba.

And only the most protected industry we have in the country would be the one that would suffer. It's just a question of the amount of time for phase-in. The second thing to keep in mind is that despite Cuba's many faults, and there's a list, they actually have a pretty good technical education system. I mean, remember, this is a country where the cars on the streets date back to the 50s and the 60s, so a lot of the nostalgic tourists like to go there. And they're still running. Not because they were ever good cars. I mean, a lot of these are Soviet models, but because this is a nation of doctors and mechanics.

Now, not certified in the way that Americans would define the term. Let's not get crazy. But for a developing country, their technical skill is actually pretty high, and their cost of labor is only like 10 to 15%. what it is in Canada, the United States. So, if you were to take a new deal and, like, expand NAFTA to another country, you got something pretty special here. Mexico, especially northern Mexico, has now advanced to the point that they don't do low-skilled labor, but Cuba could. In fact, Mexico is in a position where it needs, like, a 1980s Mexico in order to achieve economic efficiency. So you get an agricultural merger, you get some really interesting things happen in the manufacturing space.

and it's right off the coast of Miami. Oh, and I have no doubt that it'll turn into a tropical Vegas. So, you know, there's that too. Okay. All that takes is a change in mindset in Cuba that's really time to come on or move on. And a bit of a change in mindset in the United States and it's time to either negotiate a deal or force the issue. Either of those can take any number of forms. It doesn't have to involve shooting.

It can all happen around the negotiating. table. It's just an issue of choice on both sides. All right, that's it for me. Take care.