Ties with Cuba spark excitement, but economic realities remain

Cars are parked in downtown Havana, Cuba on Thursday. [YONHAP]

With Cuba finally establishing diplomatic ties with Korea, anticipation is rising for wider economic collaboration with the Latin American nation, which has some of the world's largest mineral reserves for critical EV battery materials.

However, no significant change in trade relations is on the horizon yet, as Cuba has been largely closed to the wider world for decades.

Therefore, Korea needs to take a long-term approach to expanding economic ties in the region, experts suggest.

“Cuba has rarely engaged in trading activities with not only Korea but any other countries in the world so far,” said Korea’s Trade Minister Cheong In-kyo during a press conference held at the government complex in Sejong on Thursday.

“As we have overcome the issue of politics with the new diplomatic relationship established, it is possible to consider signing a new agreement to facilitate trade investments while monitoring the global community’s restrictive measures put on Cuba,” said Cheong.

Cuba was the only Latin American country with no diplomatic relationship with Korea for the past 65 years.

The island country has long been isolated not only geographically but also economically, particularly since the collapse of the communist bloc in the late 1980s and the subsequent end of Soviet aid.

The U.S. trade ban under the Cuban Democracy Act, enacted in 1992 to destabilize late Cuban leader Fidel Castro’s regime, isolated the country further.

Cuba is still grappling with shortages of food and power to this day.

The country’s economy shrank by 10.9 percent during the peak of the Covid-19 pandemic in 2020. Its growth rate hovered around 0 to 1 percent from 2021 to 2022, according to the World Bank’s data.

Trading volume with Korea remained meager as well.

Out of Korea’s 248 trading partners last year, Cuba placed 138th in export volume.

Korea’s export volume to Cuba, which included goods like cars and construction equipment, stood at $34.68 million, and imports, including sugarcane, coffee and more, were worth $6.85 million.

Cuba still has room for further economic development and has grown more willing to open its market further to the world.

Like its neighbors in Central and South America, the country is rich in natural mineral resources such as nickel, cobalt and manganese.

In 2021, Cuba was the sixth largest producer of nickel, a key material in EV battery manufacturing, with the country potentially home to the world's third-largest reserves.

“Nations in Central and South America hold significance not only for their positions in the global natural resource supply chain but also as a bridge into the North American market,” said Hong Seong-woo, head of Korea Institute for International Economic Policy’s Africa, Middle East, and Central and South America regions.

“We need to pay attention to Cuba to bolster ties with the economic block of the emerging Central and South American region rather than simply as an individual country,” said Hong.

The economic block of Central and Southern America is the fifth largest in terms of size, with Asia ranked top, followed by North America, Europe, and Oceania.

BY KIM KI-HWAN [shin.hanee@joongang.co.kr]