Estimated Agricultural Economic Impacts of Expanded U.S. Tourism to Cuba

 

Prepared for the Cuba Policy Foundation by

Parr Rosson, Department of Agricultural Economics, Texas A&M University

 

February 2003

 

For more information, please contact Brian Alexander of the Cuba Policy Foundation at: Telephone: 202-321-CUBA (2822) or email: alexander@cubafoundation.org.

 

U.S. food and agricultural exports to Cuba have rapidly expanded with the passage of the Trade Sanctions Reform and Export Enhancement Act of 2000.  In 2001, U.S. agricultural exports were valued at $6 million.  During the first 10 months of 2002, U.S. agricultural exports reached $110.8 million.  The Cuban market for foods is estimated to exceed $800 million annually.

 

Part of Cuban food demand growth is being met by U.S. food exports to service a growing foreign tourist trade.  A recent study at the University of Colorado estimates that if the U.S. travel ban on Cuba were lifted, approximately 1.5 million U.S. tourists would travel to Cuba annually during the first several years.  Building on this work, the purpose of this analysis is to estimate the U.S. economic impacts of increased tourism using input/output analysis.  U.S. agricultural exports to support U.S. tourism are estimated, followed by the economic impacts of these exports on U.S. business sales, U.S. household income, U.S. GDP, and U.S. employment.

 

Three scenarios are analyzed based upon assumptions about the level of U.S. tourist food expenditures while visiting Cuba.  These assumptions are necessary because it is not certain what amount of money will be spent on U.S. foods. It is estimated that U.S. tourists would spend between $30 and $60 per day on food, excluding beverages.  Average menu prices in Cuba were analyzed to determine the possible range of meal prices on a daily basis.  An intermediate food expenditure of $45 per day was also analyzed.  The average length of stay was assumed to be 7 days.  Additional foreign tourists and the secondary economic impacts of increased U.S. tourism on the Cuban economy are not estimated due to data limitations.  It is also assumed that 40 percent of total food expenditures by U.S. tourists is met by U.S. agricultural exports.

 

Exactly when U.S. visits to Cuba for seven-day stays would reach 1.5 million annually is difficult to precisely estimate.  Some forecasts project annual U.S. travel to Cuba would be as high as 4 million in the first year, but more conservative estimates suggest that 1.5 million on seven day stays would be reached by year three after lifting the ban. 

 

Food expenditures of $30 per day by U.S. tourists $30 per day would require $126 million in U.S. agricultural exports to meet the increased food demand in Cuba.  These U.S. agricultural exports would generate an additional $295 million in U.S. business sales, $86 million in U.S. household income, another $160 million in gross domestic product, and an additional 3,490 jobs throughout the U.S. economy.

 

Food expenditures of $45 per day by U.S. tourists would require U.S. agricultural exports of $189 million.  This level of exports would generate another $443 million in U.S. business sales, an additional $129 million in U.S. household income, $241 million in gross domestic product, and 5,235 new jobs.

 

U.S. tourist food expenditures of $60 per day would be met with U.S. agricultural exports of $252 million.  These U.S. exports would result in $591 million in added U.S. business sales, $173 million in U.S. household income, another $321 million in U.S. gross domestic product, and an additional 6,980 jobs.

 

Estimated Economic Impacts of Expanded U.S. Tourism to Cuba
Assumptions
						U.S. Exports
Additional Tourists	Average Daily		Average Length		Additional Food	(Final Demand
Per Year	Food Expense		of Stay		Expenditures	for U.S. Food)
(Million)	($ Per Day)		(Days)		($Million/Year)	(40% of Expend, $Mil.)
1.5	$30.0		7.0		$315.00	$126.00
1.5	$45.0		7.0		$472.50	$189.00
1.5	$60.0		7.0		$630.00	$252.00
U.S. Economic Multipliers
(Business Sales, Household Income, Gross Domestic Product to Support $1 of Demand, Employees per $1 Million in Demand from IMPLAN Model)
	U.S. Business Sales		U.S. Household Income		U.S. Gross Domestic Product	Employment
	2.345		0.685		1.273	27.698
Estimated Economic Impacts
Final Demand	U.S. Business Sales		U.S. Household Income		U.S. Gross Domestic Product	U.S. Employment
	Million Dollars		Million Dollars		Million Dollars	Jobs
$126.00	$295		$86		$160	3,490
$189.00	$443		$129		$241	5,235
$252.00	$591		$173		$321	6,980

 

 

Contact: Brian Alexander, Executive Director, Cuba Policy Foundation, Washington, DC.  Telephone: 202-321-CUBA (2822) or email: alexander@cubafoundation.org.  Parr Rosson, Department of Agricultural Economics, Texas A&M University, College Station, TX 77843-2124.  Telephone: 979-845-3070 or e-mail: prosson@tamu.edu