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Economy of Cuba
Currency	Cuban peso (CUP) = 100 centavos
Fiscal year	yes
Statistics
GDP	$125.5 billion (2007 est.)[1]
GDP growth	4.3% (2008 est.)[2]
GDP per capita	$9,500 (2008 est.)[1]
GDP by sector	Agriculture: 4.6%, industry: 26.1%, services: 69.3%
Inflation (CPI)	3.6% (2007 est.)
Population below poverty line	1% (2006)
Labor force	4.853 million (Public sector: 78%, Private sector: 22%) (2007)
Labor force by occupation	Agriculture: 21.2%, industry: 14.4%, services: 64.4% (2005)
Unemployment	1.9% (2007 est.)
Main industries	Sugar, petroleum, tobacco, construction, nickel, steel, cement, agricultural machinery, pharmaceuticals
External
Exports	$3.231 billion f.o.b. (2007 est.)
Main export partners	Netherlands 21.8%, Canada 21.6%, China 18.7%, Spain 5.9% (2006)
Imports	$10.86 billion f.o.b. (2007 est.)
Main import partners	Venezuela 26.6%, China 15.6%, Spain 9.6%, Germany 6.4%, Canada 5.6%, Italy 4.4%, US 4.3%, Brazil 4.2% (2006)
Public finances
Public debt	$16.79 billion (convertible currency); another $20.8 billion owed to Russia $0.9 billion owed to Romania and $0.2 billion owed to Hungary
Revenues	$35.01 billion (2007 est.)
Expenses	$36.73 billion (2007 est.)
Economic aid	$87.8 million (2005 est.)
All values, unless otherwise stated, are in US dollars

The economy of Cuba is a largely state-controlled, centrally planned economy overseen by the Cuban government, though there remains significant foreign investment and enterprise in Cuba. Most of the means of production are owned and run by the government and most of the labor force is employed by the state. In the year 2000, the public sector employment was 76% and the private sector at 23% compared to the 1981 ratio of 91% to 8%.^[3] Capital investment is restricted and requires approval by the government. The Cuban government sets most prices and rations goods to citizens. The present Cuban Minister of Economy and Planning is Marino Murillo.

In the 1950s, Cuba had a one-crop, backward economy whose domestic market was constricted and whose population was characterized by chronic unemployment and deep poverty. The country has made significant progress since the Revolution, with its rate of economic growth exceeding the rest of Latin America^[4] Cubans receive low housing and transportation costs, free education and health care, and food subsidies.^[5]

Corruption is common.^[6] Preferential treatment exists for those who are members of the Communist Party or who hold positions of power within the government.^[7]

Contents 1 History 1.1 Cuban Revolution 1.2 Special Period 1.3 Recovery 1.4 Post-Castro reforms 2 Energy production 3 Government policies 4 Agriculture 5 Industry 6 Tertiary industries 6.1 Tourism 6.2 Retail 7 Poverty 8 International trade 9 Foreign investment 9.1 US Dollar 10 Biotechnology and informatics 11 Self-employment 12 Connection with Venezuela 13 Other statistics 14 See also 15 Notes 16 External links

[edit] History

The neutrality of this section is disputed. Please see the discussion on the talk page. Please do not remove this message until the dispute is resolved. (July 2009)

Cuba prior to the Revolution had a one-crop, backward economy whose domestic market was constricted and whose population was characterized by chronic unemployment and deep poverty. US monopolies like Bethlehem Steel Corporation and Speyer and Company gained control over Cuba's national resources, from which they made huge profits. The banks and the country's entire financial system, all electric power production, and most industry was dominated by US capital. US monopolies owned 25 percent of the best land in Cuba, and more than 80 of all farm lands were occupied by sugar and livestock-raising latifundia. 90 percent of the country's raw sugar and tobacco exports was sent to the USA. Before the Revolution, most Cuban children were not included in the school system. There was almost no machine-building industry in Cuba.^[8]

87 percent of urban homes had electricity, but only 10 percent of rural homes did. Only 15 percent of rural homes had running water. Nearly half the rural population was illiterate, as was about 25 percent of the total population. Poverty and unemployment in the rural areas forced desperate residents to migrate to Havana, where there was high levels of crime and prostitution.^[9] More than 40 percent of the Cuban workforce in 1958 was either underemployed or unemployed. Schools for blacks and mulattoes were vastly inferior with those for whites. Afro-Cubans had the worst living conditions and held the lowest paid tribes.^[10]

Although a third of the population lived in poverty, Cuba ranked ahead of other countries in Latin America.^[11] Cuba's large income disparities were a result of the fact that Cuba's unionized workers enjoyed perhaps the largest privileges in Latin America, "obtained in large measure at the cost of the unemployed and the peasants".^[12]

[edit] Cuban Revolution

Following the Cuban Revolution, the country made economic progress. In the period 1960-85, real income growth per capita averaged 3.1 percent per year, compared to 1.8 percent in the rest of Latin America. As a result of this growth, Cuba's per capita income in 1987 exceeded $3500, compared to only $2200 in the rest of Latin America.^[4]

Unemployment in Cuba is minimal. Basic services for Cuban citizens have been maintained and improved. Lower income groups have experienced a rise in their wages and state-set prices have remained stable for Cubans.^[4]

The share of agriculture in the GDP fell from 25 percent to only 10 percent in 1985. The country also has had immense industrial growth, with manufacturing's share in the GDP rising from 23 to 36 percent. In the 1980s, with the exception of Argentina, Cuba's manufacturing share was the highest in Latin America. Branches of industry such as machinery and transport equipment have had significant growth, as their share of manufacturing output rose from under 2 percent in 1961 to over 20 percent in 1986.^[4]

Between 1980 and 198, Cuba introduced over 100 new products for export and had significant growth in exports of citrus fruits, steel products, gas stoves, paper products, transport material, radios, batteries, among others.^[4]

Cuba also has succeeded in reducing poverty and equalizing the distribution of wealth. According to the United Nation's Economic Commission for Latin America, the decile ratio (share of total income for the top 10 percent of wage earners divided by the bottom 10 percent) in Latin America was 45 to 1, while that of Cuba was only 4 to 1. Cuba's income distribution was more than 10 times more equal than the rest of Latin America in the 1980s. Before the Revolution, Cuba's decile ratio was 65 to 1.^[4]

During the Revolutionary period, Cuba was one of the few developing countries to provide foreign aid. Foreign aid began with the construction of six hospitals in Peru in the early 1970s.^[13]

Foreign aid expanded later in the 1970s to the point where some 8000 Cubans worked in overseas assignments. Cubans built housing in, roads, airports, schools, and other facilities in Angola, Ethiopia, Laos, Guinea, Tanzania, and other countries. By the end of 1985, 35,000 Cuban workers had helped build projects in some 20 Asian, African and Latin American countries.^[13]

For Nicaragua, Cuba pledged to provide over $130 million worth of agricultural and machinery equipment to the country, as well as some 4000 technicians, doctors, and teachers.^[13]

[edit] Special Period

The Cuban economy is still recovering from a decline in gross domestic product of at least 35% between 1989 and 1993 due to the loss of 80% of its trading partners^{[clarification needed]} and Soviet subsidies.^{[citation needed]} This era was referred to as the "Special Period in Peacetime" later shortened to "Special Period". A Canadian Medical Association Journal paper states that "The famine in Cuba during the Special Period was caused by political and economic factors similar to the ones that caused a famine in North Korea in the mid-1990s. Both countries were run by authoritarian regimes that denied ordinary people the food to which they were entitled when the public food distribution collapsed; priority was given to the elite classes and the military."^[14] Cubans had to resort to eating anything they could find, from Havana Zoo animals to domestic cats.^[15] Because of the overthrow of the Soviet Union and other socialist countries, Cuba experienced economic difficulties, which led to a drop in calories per day from 3052 in 1989 to 2600 in 2006.^[16]

The government has undertaken several reforms in recent years^[when?] to stem excess liquidity, increase labour incentives, and alleviate serious shortages of food, consumer goods, and services. To alleviate the economic crisis, the government introduced a few market-oriented reforms including opening to tourism, allowing foreign investment, legalizing the U.S. dollar, and authorizing self-employment for some 150 occupations. (This policy was later partially reversed, so that while the U.S. dollar is no longer accepted in businesses, it remains legal for Cubans to hold the currency.) These measures resulted in modest economic growth. The liberalized agricultural markets introduced in October 1994, at which state and private farmers sell above-quota production at free market prices, have broadened legal consumption alternatives and reduced black market prices.^{[citation needed]}

Government efforts to lower subsidies to unprofitable enterprises and to shrink the money supply caused the semi-official exchange rate for the Cuban peso to move from a peak of 120 to the dollar in the summer of 1994 to 21 to the dollar by yearend 1999. Living conditions in 1999 remained well below the 1989 level. New taxes introduced in 1996 have helped drive down the number of self-employed workers from 208,000 in January 1996.^{[citation needed]}

Havana announced in 1995 that GDP declined by 35% during 1989-93, the result of lost Soviet aid and domestic inefficiencies. The drop in GDP apparently halted in 1994, when Cuba reported 0.7% growth, followed by increases of 2.5% in 1995 and 7.8% in 1996. Growth slowed again in 1997 and 1998 to 2.5% and 1.2% respectively. One of the key reasons given was the failure to notice that sugar production had become dramatically uneconomic. Reflecting on the Special period Cuban president Fidel Castro later admitted that many mistakes had been made, “The country had many economists and it is not my intention to criticize them, but I would like to ask why we hadn’t discovered earlier that maintaining our levels of sugar production would be impossible. The Soviet Union had collapsed, oil was costing $40 a barrel, sugar prices were at basement levels, so why did we not rationalize the industry?" ^[17]

[edit] Recovery

Due to the continued growth of tourism, growth began in 1999 with a 6.2% increase in GDP^{[citation needed]}. Growth in recent years has picked up significantly, with a growth in GDP of 11.8% in 2005 according to official Cuban information^{[citation needed]}. In 2007 the Cuban economy grew by 7.5%, below the expected 10%, but higher than the Latin American average rate of growth. Accordingly, the cumulative growth in GDP since 2004 stood at 42.5 %.^[18][19]

[edit] Post-Castro reforms

In 2007, Raúl Castro's administration hinted that the purchase of computers, DVD players and microwaves would become legal. However, monthly wages remain less than 20 U.S. dollars.^[20] Mobile phones, which have been restricted to Cubans working for foreign companies and government officials, have become legalized. The new program could put phones in the hands of hundreds of thousands of Cubans.^[20]

[edit] Energy production

Due to the reliance on declining Soviet era electricity generators, many areas of Cuba suffered^[when?] frequent blackouts and brownouts for extended periods, creating additional pressure on society. To counter these problems, the government has put Cuba through "Energy Revolution", which has placed increased emphasis on the efficient use of electrical energy and more efficient,^{[citation needed]} small-power generators linked in a synchronized network. The country has increased the number of solar- and wind-powered generators.^{[citation needed]} Though development was hampered by large-scale damage created by Hurricane Dennis and Hurricane Wilma, which cut Cuba's electricity generation capacity by half in the areas most affected, Cuba now exceeds the government set demand in electricity production.^{[21][clarification needed]} Raul Castro told Cubans in his July 26 speech in 2007, that the Special Period is not yet over.^[22]

[edit] Government policies

Rationing in Cuba refers to the system of food distribution known in Cuba as the Libreta de Abastecimiento ("Supplies booklet"). The system establishes the rations each person is allowed to buy through that system, and the frequency of supplies.

On top of rationing, the average wage at the end of 2005 was 334 regular pesos per month ($16.70 per month) and average monthly pension was $9.^[23]

A person can get more jail time for killing a cow (10 years in prison) than killing a human. Those who sell beef without government permission can get three to eight years in prison. Eaters of illegal beef can get three months to one year in prison.^[24]

After the 1959 Cuban Revolution, citizens were not required to pay a personal income tax (their salaries being regarded as net of any taxes). However, from 1996, the State started to impose income taxes on Cubans earning hard currency, primarily the self-employed.^[25]

In their book, Corruption in Cuba, Cuban American authors Sergio Diaz-Briquets and Jorge F. Pérez-López claim that the Communist regime institutionalized corruption; "Castro's state-run monopolies, cronyism, and lack of accountability turned Cuba into one of the world's most corrupt states".^[26] On the other hand, the Corruption Perceptions Index ranks Cuba 65th (from best to worst) out of 180 countries, better than most other countries in Central America, Latin America, or even the whole developing world.

As in other former socialist countries, few citizens hesitate to steal from the government when given opportunity. Since the vast majority of people are in state jobs and the state makes up much of the economy, petty crime is widespread.^[26]

Sociolismo also known as amiguismo meaning "friend-ism" or "partner-ism" is the informal term used in Cuba to describe the reciprocal exchange of favors by individuals, usually relating to circumventing bureaucratic restrictions or obtaining hard-to-find goods. It comes from the Spanish word socio which means business partner or buddy, and is a pun on socialismo, the Spanish term for socialism. It is analogous to the blat of the Soviet Union.^{[citation needed]}

The term is particularly associated with the black market economy, and perceived cronyism in Cuba’s state controlled command economy. Socios can be black market operators who "facilitate" (steal) goods that are officially reserved for the state. They can also get someone a job or obtain paperwork.^{[citation needed]}

[edit] Agriculture

As a result of inefficient state-run agriculture, Cuba imports up to 80% of its food.^[27] After coming to power, Raúl Castro, Fidel Castro's brother, has ridiculed the bureaucracy that shackles the agriculture sector.^[27]

Before 1959, Cuba boasted as many cattle as people. Today meat is so scarce that it is a crime to kill and eat a cow without government permission.^[28] Cuban people even suffered from starvation during the Special Period.

[edit] Industry

In total, industrial production accounted for almost 37% of the Cuban GDP, or US$6.9 billion, and employs 24% of the population, or 2,671,440 people, in 1996.^{[citation needed]}

More recently Cuba's world-class biotechnology and pharmaceutical industry is gaining in its importance to the economy. It has been claimed that soon it will become Cuba's main source of foreign exchange. Among the products sold internationally are vaccines against various viral and bacterial pathogens, and promising anti-cancer vaccines are undergoing exhaustive clinical trials. Some Cuban scientists, like V. Verez-Bencomo, have been awarded international prizes for their contributions in biotechnology and Sugar Cane. Cuban vaccines are sold, among other countries, in Russia, China, India, Pakistan, and several Latin American countries.^[29]

[edit] Tertiary industries

[edit] Tourism

In the mid 1990s tourism surpassed sugar, long the mainstay of the Cuban economy, as the primary source of foreign exchange. Tourism figures prominently in the Cuban Government's plans for development, and a top official cast it as the "heart of the economy". Havana devotes significant resources to building new tourist facilities and renovating historic structures for use in the tourism sector. Cuban officials estimate roughly 1.6 million tourists visited Cuba in 1999 with about $1.9 billion in gross revenues. In 2000, 1,773,986 foreign visitors arrived in Cuba. Revenue from tourism reached US $1.7 billion.^[30]

The rapid growth of tourism has had widespread social and economic repercussions in Cuba. This has led to speculation of the emergence of a two-tier economy^[31] and the fostering of a state of tourist apartheid on the island. This situation was exacerbated by the influx of dollars into the Cuban economy during the 1990s, potentially creating a dual economy based on the dollar (the currency of tourists) on the one hand, and the peso on the other. Scarce imported goods - and even some of local manufacture, such as rum and coffee- could be had at dollars-only stores, but were hard to find or unavailable at peso prices. As a result, Cubans who earned only in the peso economy, outside the tourist sector, were at an economic disadvantage. Those with dollar incomes based upon the service industry began to live more comfortably. This widened the gulf between Cubans' material standards of living, in conflict with the Cuban Government's long term socialist policies.^[32]

[edit] Retail

Cuba has a very poorly developed retail sector. There are no large shopping centers and the commercial districts that existed before the revolution are largely shut down. Those that remain carry few and poorly made products that are priced in dollars and are too expensive for the average Cuban to purchase. The majority of the stores are small dollar stores, bodegas, agro-mercados (farmers' markets), and street stands.^[33]

[edit] Poverty

Typical wages range from factory worker's 400 non-convertible Cuban pesos a month to doctor's 700. That is only around 17-30 U.S. dollars a month.^[34] After Cuba lost subsidies in 1991, malnutrition resulted in an outbreak of diseases.^[35] Cuba's poverty level is one of the lowest in the developing world, ranking 6 out of 108 countries, 4 in Latin America, and 48 among all countries.^[36]. Pensions are among the smallest in the Western hemisphere at $9.50. In 2009, Raul Castro increased minimum pensions by 2 dollars, which he said was to recompense for those who have "dedicated a great part of their lives to working... and who remain firm in defence of socialism".^[37]

[edit] International trade

The Netherlands receive the largest share of Cuban exports (24%), 70 to 80% of which through Fondel Finance, a company owned by the Van 't Wout family who have close personal ties with Fidel Castro. Currently, this trend can be seen in other colonial Caribbean communities who have direct political ties with the global economy. (e.g. British West Indies, United States Virgin Islands, French outer-territories, etc.) The second largest trade partner is Canada, with a 22% share of the Cuban export market.^[38]

[edit] Foreign investment

Since the Special Period, Cuba has actively courted foreign investment. All would be foreign investors are required to form joint ventures with the Cuban government. The sole exception to this rule are Venezuelans, who are allowed to hold 100% ownership in businesses due to an economic agreement between Cuba and Venezuela. Cuban officials said in early 1998 that there were a total of 332 joint ventures. Many of these are loans or contracts for management, supplies, or services normally not considered equity investment in Western economies. Investors are constrained by the U.S.-Cuban Liberty and Democratic Solidarity Act which provides sanctions for those who "traffic" in property expropriated from U.S. citizens. As of March 1998, 15 executives of three foreign companies have been excluded from entry into the United States.^{[citation needed]} Over a dozen companies have pulled out of Cuba or altered their plans to invest there due to the threat of action under the Libertad Act.^{[citation needed]}

[edit] US Dollar

In 1993 the Cuban Government made it legal for its people to possess and use the U.S. dollar. From then until 2004, the dollar became a major currency. To capture the hard currency flowing into the island through tourism and remittances - estimated at $500–800 million annually - the government set up state-run "dollar stores" throughout Cuba that sold 'luxury' food, household, and clothing items, compared with basic necessities, which were bought using the Cuban peso. As such, a gap in the standard of living developed between those with access to dollars and those without. Jobs that could earn dollar salaries or tips from foreign businesses and tourists became highly desirable. It was common to meet doctors, engineers, scientists, and other professionals working in restaurants or as taxicab drivers.

However, in response to stricter economic sanctions by the US, and because the authorities were pleased with Cuba's economic recovery, the Cuban government decided in October 2004 to remove the American dollar from circulation. In its place, the Cuban convertible peso is now used, which although not internationally traded, has a value pegged to that of the dollar. As a source of additional revenue, a 10% surcharge is levied for conversions from US dollars to the convertible peso; this surcharge does not apply to other currencies, so it acts as an encouragement to tourists to bring currencies like Euros, pounds sterling or Canadian dollars into Cuba. Indeed, an increasing number of areas rich in tourism now also accept Euros directly for many transactions.

[edit] Biotechnology and informatics

Since the very beginning of revolution, the idea of a more diversified and more sophisticated production of wealth in the island was present. In an early speech Fidel Castro announced that "the future of Cuba ought necessarily to be a future of men doing science". In the mid 1980s and during all the '90s this dream grew as a set of Biotechnology I+D institutions at the west of Havana. The so called polo cientifico del oeste is a biotechnological park, located at the west of Havana, and with some tens of institutions devoted to the development of human, animal and agricultural biotechnology. This park is claimed to be a successful experiment of Cuba’s economy, as it was able to create first world standard biotechnology institutions, with several patented drugs and a net annual income of some hundred million US dollars. Although most of the small institutions have a negative net balance and rely on government subsides, successful vaccines and drugs from bigger institutions, like Center for Genetic Engineering and Biotechnology|CIGB^[39] and CIM greatly overcome the deficit, and put this sector as one of the most important in Cuban economy.

In recent years, the Cuban government decided to produce a big investment in a similar experiment, this time creating a technological park and a nearby Computer Science University intended to be an Informatics analogue of the successful Biotechnology adventure. Although in both cases market is a big issue, Cuba is relying in its world recognized high educational level for the fast developing of these new knowledge based economy.

[edit] Self-employment

To provide jobs for workers laid off due to the economic crisis, the government was having difficulty providing, and to try to bring some forms of black market activity into legal - and therefore controllable - channels, Havana in 1993 legalized self-employment for some 150 occupations. The government tightly controls the small private sector, which has fluctuated in size from 150,000 to 209,000, by regulating and taxing it. For example, owners of small private restaurants (paladares) can seat no more than 12 people^[40] and can only employ family members to help with the work. Set monthly fees must be paid regardless of income earned and frequent inspections yield stiff fines when any of the many self-employment regulations are violated. Rather than expanding private sector opportunities, in recent years, the government has been attempting to squeeze more of these private sector entrepreneurs out of business and back to the public sector. Many have opted to enter the informal economy or black market. In recent years there has developed what is called "urban agriculture", production which takes place on small parcels of land in the cities. Growing organopónicos (organic gardens) in the private sector has been attractive to city dwelling small producers who get to sell their products in the same place where they produce them, avoiding taxes and enjoying a measure of government help from the Ministry of Agriculture (MINAGRI) in the form of seed houses and advisors.

[edit] Connection with Venezuela

The relationship cultivated between Cuba and Venezuela in recent years has resulted in agreements that Venezuela provide cheap oil in exchange for Cuban "missions" of doctors which aid and help to improve the Venezuelan health care system. Cuba, with the second-highest per capita number of physicians in the world (behind Italy), sends tens of thousands of doctors to other countries as aid, as well as for obtaining favorable economic terms of trade.

While Venezuela says that Cuba is paying part of the bill with the professionals, medicines, books and other items that Cuba sends, some independent analysts say the numbers don't add up. Havana would have to be collecting about $80,000 per year per Cuban worker in Venezuela to cover the costs of its oil imports, the analysts say. Instead, Cuban doctors in Venezuela receive about $3,000 per year, according to three Cuban doctors who defected from the program (see also Mission Barrio Adentro). The White House's point man on plans for a post-Castro transition, Caleb McCarry, recently told The Miami Herald that U.S. estimates of total Venezuelan subsidies to Cuba per year "are up to the $2 billion figure." This can be compared to the $4 billion to $6 billion that Moscow once pumped into Cuba per year.^[41]

[edit] Other statistics

Electricity - production: 15,650 GWh (2004)

Electricity - production by source:
fossil fuel: 89.52%
hydro: 0.65%
nuclear: 0%
other: 9.83% (1998)

Electricity - consumption: 14.62 GWh (2003)

Electricity - exports: 0 kWh (2003)

Electricity - imports: 0 kWh (2003)

Agriculture - products: sugarcane, tobacco, citrus, coffee, rice, potatoes, beans; livestock

Exports - commodities: sugar, medical products, nickel, tobacco, shellfish, citrus, coffee

Imports: $6.916 billion f.o.b. (2005 est.)

Imports - commodities: petroleum, food, machinery, chemicals

Imports - partners: Spain 14.7%, Venezuela 13.5%, US 11%, China 8.9%, Canada 6.4%, Italy 6.2%, Mexico 4.9% (2004)

Current account balance: $-14748 million (2005 est.)

Debt - external: $13.1 billion (convertible currency); another $15–20 billion owed to Russia (2005 est.)

Economic aid - recipient: $68.2 million (1997 est.)

Exchange rates: Cuban pesos (CUP) per US$1 – 25 (2005) (nonconvertible, official rate, linked to the US dollar)

[edit] See also

• Agriculture in Cuba
• Banking in Cuba
• United States embargo against Cuba
• Dollar store (Cuba)
• Sociolismo
• Rationing in Cuba
• Special Period
• Ubre Blanca the Cuban cow used by Fidel Castro in the 1980s to symbolise Cuba's economy

[edit] Notes

[edit] External links

• Economic Illegalities and the Underground Economy in Cuba by Archibald Ritter, Professor of Economics, Carleton University
• Association for the Study of the Cuban Economy (ASCE)
• What Castro wants- Time Story about the U.S. embargo.
• Cuba Comes in from the Cold- Council on Hemispheric Affairs
• Cuba: An economic tiger in the Caribbean?
• Russia negotiating Cuba debt and fresh credit
• Cuba's debt to Spain
• Map of Economic Activity (C.I.A./Univ. of Texas, Austin)
• Map of Sugar Cultivation 1977 (C.I.A./Univ. of Texas, Austin)
• Map of Land Utilization (C.I.A./Univ. of Texas, Austin)
• Cuba is in the Throes of Another Revolution: Now Foreign Buyers are Welcome by Graham Norwood, Daily Mail, June 19, 2009

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