Economy

Economy

The Cuban state adheres to socialist principles in organizing its largely state-controlled planned economy. Most of the means of production are owned and run by the government and most of the labor force is employed by the state. Recent years have seen a trend towards more private sector employment. By 2006, public sector employment was 78% and private sector 22%, compared to 91.8% to 8.2% in 1981. Capital investment is restricted and requires approval by the government. The Cuban government sets most prices and rations goods. Any firm wishing to hire a Cuban must pay the Cuban government, which in turn will pay the employee in Cuban pesos. Cubans cannot change jobs without government permission. The average wage at the end of 2005 was 334 regular pesos per month ($16.70 per month) and the average pension was $9 per month.

Cuba relied heavily on trade with the Soviet Union. From the late 1980s, Soviet subsidies for Cuban goods started to dry up. Before the collapse of the Soviet Union, Cuba depended on Moscow for substantial aid and sheltered markets for its exports. The removal of these subsidies (for example the oil) sent the Cuban economy into a rapid depression known in Cuba as the Special Period. In 1992 the United States tightened the trade embargo, hoping to see democratisation of the sort that took place in Eastern Europe.

Like some other Communist and post-Communist states following the collapse of the Soviet Union, Cuba took limited free market-oriented measures to alleviate severe shortages of food, consumer goods, and services. These steps included allowing some self-employment in certain retail and light manufacturing sectors, the legalization of the use of the US dollar in business, and the encouragement of tourism. Cuba has developed a unique urban farm system (the organopónicos) to compensate for the end of food imports from the Soviet Union. In recent years, Cuba has rolled back some of the market oriented measures undertaken in the 1990s. In 2004 Cuban officials publicly backed the Euro as a “global counter-balance to the US dollar”, and eliminated U.S. currency from circulation in its stores and businesses.

Tourism was initially restricted to enclave resorts where tourists would be segregated from Cuban society, referred to as “enclave tourism” and “tourism apartheid”. Contacts between foreign visitors and ordinary Cubans were de facto illegal until 1997.In 1996 tourism surpassed the sugar industry as the largest source of hard currency for Cuba. Cuba has tripled its market share of Caribbean tourism in the last decade; as a result of significant investment in tourism infrastructure, this growth rate is predicted to continue. 1.9 million tourists visited Cuba in 2003, predominantly from Canada and the European Union, generating revenue of $2.1 billion. The rapid growth of tourism during the Special Period had widespread social and economic repercussions in Cuba, and led to speculation about the emergence of a two-tier economy. The Medical tourism sector caters to thousands of European, Latin American, Canadian, and American consumers every year.

The communist agricultural production system was ridiculed by Raúl Castro in 2008. Cuba now imports up to 80% of food used for rations. Before 1959, Cuba boasted as many cattle as people.

For some time, Cuba has been experiencing a housing shortage because of the state’s failure to keep pace with increasing demand. The government instituted food rationing policies in 1962, which were exacerbated following the collapse of the Soviet Union and the tightening of the U.S. embargo. Studies have shown that, as late as 2001, the average Cuban’s standard of living was lower than before the downturn of the post-Soviet period. Paramount issues have been state salaries failing to meet personal needs under the state rationing system, chronically plagued with shortages. The variety and quantity of available rationed goods declined.

Under Venezuela’s Mission Barrio Adentro, Hugo Chávez has supplied Cuba with up to 80,000 barrels (13,000 m3) of oil per day in exchange for 30,000 doctors and teachers.

In 2005 Cuba had exports of $2.4 billion, ranking 114 of 226 world countries, and imports of $6.9 billion, ranking 87 of 226 countries.[112] Its major export partners are China 27.5%, Canada 26.9%, Netherlands 11.1%, Spain 4.7% (2007). Cuba’s major exports are sugar, nickel, tobacco, fish, medical products, citrus, and coffee; imports include food, fuel, clothing, and machinery. Cuba presently holds debt in an amount estimated to be $13 billion, approximately 38% of GDP.[ According to the Heritage Foundation, Cuba is dependent on credit accounts that rotate from country to country. Cuba’s prior 35% supply of the world’s export market for sugar has declined to 10% due to a variety of factors, including a global sugar commodity price drop that made Cuba less competitive on world markets. At one time, Cuba was the world’s most important sugar producer and exporter. As a result of diversification, underinvestment, and natural disasters, Cuba’s sugar production has seen a drastic decline. In 2002 more than half of Cuba’s sugar mills were shut down. Cuba holds 6.4% of the global market for nickel, which constitutes about 25% of total Cuban exports. A 2005 US Geological Survey report estimates that the North Cuba Basin could contain 4.6 billion barrels of oil and 9.8 trillion cubic feet of natural gas.

In 2010, Cubans were allowed to build their own houses. According to Raul Castro, they will be able to improve their houses with this new permission, but the government will not endorse these new houses or improvements.

On August 2, 2011, The New York Times reported Cuba as reaffirming their intent to legalize “buying and selling” of private property before the year ends. According to experts, the private sale of property could “transform Cuba more than any of the economic reforms announced by President Raúl Castro’s government”. It will cut more than one million state jobs including party bureaucrats which resist the changes