The massive US$900m investment in a port and special commercial zone development at Mariel in Cuba, and of which we spoke in this space last week, is emblematic of a fundamental shift in the Cuban economic model.

While not relinquishing socialism, Cuba is creating a mixed economy, no doubt impressed by the unprecedented economic growth this model has generated in China.

The model has two notable features. First, it is Market Leninism, ie, a market-driven economy managed by a one-party political system. Second, it abandons the autarky of the old discredited Soviet model and integrates into the world economy, thereby seizing the opportunities afforded by globalisation, such as foreign investment.

In many ways, the new economic policy has potentially adverse implications for Jamaica. Cuba’s reintegration into the global economy will produce competition for Jamaica in a wide array of sectors, both present and future. Cuba has the edge in lower wages, a disciplined labour force, broad public education, excellent public health, a larger national market and economies of scale in production.

However, Cuba has and will continue to have in the next decade disadvantages, in particular poor infrastructure, the ingrained culture of bureaucracy, restricted access to imports from the US, absence of global standards and a shortage of modern capital goods, eg cars, trucks, manufacturing machinery.

The biggest impediment to Cuban development is the US embargo, but it is possible that this could be lifted because of pressure from US corporate interests anxious to re-enter the Cuban market, particularly the tourism sector. A US policy change could happen suddenly if Cuba’s ruling family was to retire or expire.

Tourism is the most obvious sector to face escalating Cuban competition. Cuba would be a less expensive destination and would have the allure of the forbidden fruit for Americans.

The disability of Cuba to service an increased demand to visit derives from inadequate hotel rooms, substandard quality of facilities and limited entertainment and sight-seeing attractions. However, cruise ships can dock at any port, even where the facilities are rudimentary and therefore could divert some vessels in the short term. The construction of hotels and the importation of modern transportation equipment would take several years.

The new Cuba would be very attractive to direct foreign investment, some of which might have chosen Jamaica instead. This could starve Jamaica of vital investment at a time when the economy desperately needs capital inflows. Once Cuba opens up there will be the proverbial giant sucking sound of US investors. Meanwhile, Cuba is attracting the attention of Canadian, European, Indian, Brazilian, Chinese, and Venezuelan investors.

Cuban exports could compete with Jamaican products in both export markets and the Jamaican market, for example sugar, rum, cigars, and light manufacturing. A potent example is Havana Club, which is already in 140 countries and salivating at the US market.

A dynamic, independent private sector is rapidly emerging in Cuba, despite the dominance of the state-run socialist system which is increasingly aided and abetted by foreign investors.

The coming competition from Cuba is not an unexpected event like an earthquake, but a predictable future event which means that Jamaica should plan how it will cope with this potentially adverse development.