Economy of Cuba
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| Economy of Cuba | ||
|---|---|---|
| Currency | 1 Cuban peso (CUP) = 100 centavos | |
| Fiscal year | Calendar year | |
| Statistics | ||
| GDP Ranking (2005) | 89th by volume adjusted for PPP; | |
| GDP PPP(2005) | .24 billion | |
| GDP growth rate (2005) | 5.5% | |
| GDP per Capita (2005 est.) | ,300 | |
| GDP by sector | agriculture: 5.5%, industry: 26.1%, services: 68.4% | |
| Inflation rate (2005) | 4.2% | |
| Pop below poverty line (2005) | NA% | |
| Labour force (2005) | 4.6 million | |
| Labour force by occupation (2005) | agriculture: 21.2%, industry: 14.4%, services: 64.4% | |
| Unemployment rate (2005) | 1.9% | |
| Main Industries | sugar, petroleum, tobacco, construction, nickel, steel, cement, agricultural machinery, pharmaceuticals | |
| Trading Partners | ||
| Exports (2005) | .388 billion | |
| Main Partners (20054) | Netherlands 22.8%, Canada 20.6%, China 7.7%, Russia 7.5%, Spain 6.4%, Venezuela 4.4% | |
| Imports (2005) | .916 billion | |
| Main Partners (2005) | Germany 14.1%, USA 8.7%, France 8%, Netherlands 7.2%, Belgium 5.5%, Italy 4.9%, China 4.1%, Ireland 4% | |
| Public Finances | ||
| Public Debt | N/A | |
| External Debt | 38% of GDP | |
Special Period
- See main article Special Period
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.
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 criticise 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 rationalise the industry.[link]’’
Recovery
Growth recovered again in 1999 with a 6.2% increase in GDP, due to the continued growth of tourism. Central control is complicated by the existence of the informal economy. Growth in recent years has picked up significantly, with a growth in GDP of 11.8 % in 2005 alone, according to official cuban information. Due to the reliance on declining Soviet era electricity generators, many areas of Cuba suffer frequent blackouts and brownouts for extended periods, creating additional pressure on society. To counter these problems, Cuba is currently undergoing an "Energy Revolution", with increased emphasis on efficient use of electrical energy and the innovative use of more efficient small-power generators linked in a synchronized network. There is talk of increasing the implementation of solar- and wind-powered generators. Though development was further 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 effected.
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. The official projections for 2000 are only slightly higher than in 1999. Independent analysts and journalists partially attributed low numbers in January to Y2K concerns.
Agriculture
Sugar remains an important part of the Cuban economy with large amounts of land, labour, and other resources dedicated to the industry. Sugar production in 1989 was over 8 million tons, but fell to about 3.5 million tons in the 1994-95 harvest, one of the lowest on record. With increased fertilizers and management attention, subsequent harvests have improved but remain well below the 1989 level. Prospects for regaining that level of output are poor unless the Cuban Government undertakes substantial reform of the sugar industry, something it has been reluctant to do, since it has become government policy to substantially and deliberately phase out the sugar industry.
Industry
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. Cuban vaccines are sold, among other countries, in Russia, China, India, Pakistan, and several Latin American countries.Foreign Investment
To help keep the economy afloat, Havana actively courts foreign investment, which often takes the form of joint ventures with the Cuban Government holding half of the equity, management contracts for tourism facilities, or financing for the sugar harvest. However, as part of an economic agreement with Venezuela, Venezuelans are allowed to hold 100% ownership in businesses. 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. 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.US Dollar
In 1993 the Cuban Government made it legal for its people to possess and use the U.S. dollar, nicknamed fula. From then until 2004, the dollar became a major currency in use. 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 taxi 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. A 10% surcharge is levied for conversions from US dollars to the convertible peso, to discourage the entry of dollars into the country; 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.
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#redirect 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.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.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 TWh (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: $-748 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)
See also
- List of Cuban companies
- United States embargo against Cuba
- Ubre Blanca the Cuban cow used by Fidel Castro in the 1980's to symbolise Cuba's economy
External links
- [Association for the Study of the Cuban Economy (ASCE)]
- [What Castro wants]- Time Story about the U.S. embargo.
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