The Cuban Economy

The Cuban economy has been remarkably resilient over the years surviving a great many difficulties. For many years the country relied on trade with the Soviet Union but when that came to end they had to find different ways to keep their economy going. Despite an embargo by the United States, Cuba has managed to keep its economy afloat. They are one of the few communist countries remaining in the world and it seems unlikely that that is going to change anytime soon.

The main driver of the Cuban economy is agriculture. The country is a major producer of several crops but sugar and tobacco are the big money products. Despite not being able to export their products to the United States Cuba has become a major exporter of agricultural products. The downside is that because most of their agricultural production is focused on cash crops they need to import most of their food. This works well for the government from a balance of payments perspective but it is a problem for the people who have to spend a fair chunk of their wages on food. This is unlikely to change in the near future as the Cuban government relies heavily on the cash that is generated by exporting cash crops.

There has been an attempt on the part of the Cuban government to diversify their economy and it looks like natural resources will be one way that they can do this. The country has become a major nickel producer and this has quickly become one of their largest exports. There is also the potential for Cuba to become a major oil producer. There are large reserves of oil in the Caribbean that are in Cuba's territorial water. It is very likely that in the near future they will take advantage of these reserves in order to help diversify the economy.In recent years Cuba has become a major tourist destination and this has become an important part of the economy. With the US embargo preventing American visitors from coming to the country the growth of the tourism industry has been slow. However there have been large numbers of visitors from Canada for many years and both European and

Chinese visitors are also starting to arrive in large numbers. The main reason is that Cuba is probably the cheapest destination in the Caribbean for tourists.

Another of the attractions for tourists to Cuba is the health care. The Cuban health care system is very good and very cheap by western standards. This has resulted in a lot of medical tourists going to the country to get medical procedures that they need. The strength of the Cuban education system has helped to keep the Cuban economy going. They have even started to export skilled workers like doctors and teachers to other Latin American countries in order to bring in the resources that they need.

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The economy of Cuba is  a   largely   centrally planned  economy dominated  by   state-run  enterprises overseen by the Cuban government, though there remains significant foreign investment and private 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,   although   in   recent   years,   the   formation of cooperatives and self-employment has been encouraged by the Communist Party.In   the year  2000,  public  sector  employment  was 76% and private  sector  employment  was 23% compared to the 1981 ratio of 91% to 8%.[4]Capital investment is restricted and requires approval by the government. The Cuban government sets most prices and rations goods to citizens. In 2009, Cuba ranked 51st out of 182 with an HDI of 0.863; remarkably high considering its GDP per capita only places it 95th.[5]Public services and transport in Cuba however are regarded to be second-rate compared with its more developed counterparts on the mainland.[6]In the 1950s, Cuba had a vibrant but extremely unequal economy, with large capital outflows to foreign investors.[7] In the 1950s, Cuba's gross domestic product (GDP) per capita was roughly equal to that of contemporary Italy, and significantly higher than that of countries such as Japan, although Cuba's GDP per capita was still only a sixth as large as that of the United States.[8]   [9]    The country has made significant progress since the Revolution towards a more even distribution of income but economic growth has been considerably slower than under Batista and Cuba has been placed under economic embargo by the United States.  The economy grew intermittently under Castro until the collapse of the Soviet Union, which provided Cuba with $4 billion to $6 billion in subsidies annually. Between 1990 and 1993,  Cuba's  GDP declined by 33%, partially  due to  loss of  Soviet  subsidies.[10] Yet Cuba has managed to retain reasonably high levels of healthcare and education.[11]Cubans receive  low housing and transportation costs,   free education,  and health care and food subsidies.[12] Corruption is common, though allegedely lower than in most other countries in Latin America.[13]However,  in their book, Corruption in Cuba, Sergio Diaz-Briquets and Jorge F. Pérez-López   Servando   state   that   Cuba   has   "institutionalized"   corruption   and   that state-run monopolies, cronyism, and lack of accountability have made Cuba one of the world's most corrupt states".[14] Despite high levels of equality, poverty is still widespread in Cuba

businesses in Cuba he placed the state in control of the economy, thus allowing it to control wages for all positions. A wage scale was established that had only 4 levels from top to bottom. In 1960, rent prices were established at 10 percent of one's salary.  State funds were diverted away from Havana and funneled  into the countryside.  The state provided or subsidized food, medical  care, funerals, transportation, vacations, and other consumer goods.During the period from 1959 to 1989, the state was also relying heavily on assistance from the Soviet Union   (see   Overview   of   Economy).   When   the   Soviet   Union   was   no   longer   able   to   help, the recession of   the  early   1990s   forced  Cuba   to   change   its   policies.  It   loosened   control   of   the markets,  allowed people   to  own their  own businesses,  allowed foreign  ownership  within  Cuba, encouraged tourism,  created a tax system, and  legalized U.S.  currency.  Informal  economy black market   Income inequality has resulted; those who are on a fixed income from the Cuban state are earning far less than those who have contact with U.S. dollars. For example, a doctor might earn 40 dollars a month, while a taxi driver might receive 40 dollars a week in tips.The Cuban state still provides free education from primary school through the university level, an ironic situation given the difficulties of finding employment after graduation. If a job is available, it will pay less than a job as a waiter or taxi driver. Medical care is also free, and Cuban hospitals do remarkable  work   considering   the   available   resources;   however,   people   often  die   from   curable diseases simply because the medicines required are unavailable.While traditionally the rural poor have struggled more than the urban poor, it was easier for the rural poor to maintain a healthy diet during the economic difficulties of the 1990s because of their proximity to farms and their ability to plant small plots of land with fruits and vegetables.Housing has been a particularly difficult situation in Havana under the Castro government. In the 1990s, the housing deficit grew by 20 percent per year. Out of 2.6 million units of housing in Havana, almost 1 million are in a substandard condition. Most buildings in the city have not been properly maintained since 1959, and little new construction has taken place.

 Cuba is an insular nation, with a population of 11 million, making it the most populous nation in the Caribbean. Its immediate neighbors are the USA, Bahamas, Haiti, Jamaica and the Cayman Islands. The main island has a surface area of 105,006 square kms and a population of 11,451,652 (2009 est.).

cuba is also the second largest mineral resource of nickel, after Russia. Cuba is also the world’s fifth largest producer of refined cobalt. Oil exploration has been able to locate oil beds, which can produce 4.65 billion to 9.3 billion barrels. Cuba’s economy is largely state controlled and the current government of Cuba is trying hard to maintain a balance between preserving firm political control and reviving the economy. The standard of living of the Cuban people is far below the levels witnessed before the economic downturn of the 1990’s, which was triggered by the withdrawal of soviet subsidies.

Cuba Economy: Reforms and the GDP

The country’s government undertook certain economic reforms in 1993 and 1994 to alleviate the country’s economic problems, including the shortage of food and consumer goods. Some of the prominent reforms included the opening up of the country’s tourism segment, allowing foreign investment, authorizing self employment in some areas and legalizing the holding of the US dollars. Raúl Castro's administration has launched an electricity revolution, aimed at removing the country’s electricity problems.Continued growth in the country’s tourism sector from 1999 onwards has enabled Cuba to witness improved levels of GDP growth in recent years. However the country’s real GDP growth rate stood at a low of 1% in 2009, according to estimates, as compared to the 2007 GDP growth of 7.5% and 2008 GDP growth rate of 4.3%. Nearly 75% of the country’s GDP is contributed by the service sector, which largely comprises of doctors and medical professionals. While industry contributes nearly 21% of Cuba’s GDP, agriculture contributes a mere 4%. Cuba Economy: Cuban Economic ProfileAlthough the Cuban economy is largely state controlled, it has significant foreign investments. The Cuban government owns and runs most of the means of production and offers free health care, free education , universal employment, compensation and retirement benefits, as well as basic necessities like food at low cost. Listed below are certain key features of the Cuban economy:It imports 80% of its foodIt has a strong biotechnology and pharmaceutical industryThe tourism industry is the main growth driverWage and pension levels are very low in CubaThe Cuban peso’s value is pegged to the US dollarCuba exports sugar, medical products, nickel, tobacco, shellfish, citrus and coffeeIt imports petroleum, food, machinery and chemicalsIt buys oil from Venezuela on preferential terms and sends its doctors as aids in return Cuba Economy: Key StatisticsHere are some key statistics as per the 2009 estimatesGDP (real growth rate): 1%Unemployment rate: 1.6%Consumer Price inflation : 4.3%Industrial Production growth rate: -2.8%

Cuba's EconomyCuba has  a  dual  economy,  with   two distinct  systems  operating  side  by  side.  The socialist  peso economy applies to most Cubans, providing them with free education, free health care, universal employment,   unemployment   compensation,   disability   and   retirement   benefits   and   the   basis necessities of life: food, housing, utilities and some entertainment at very low cost. The free-market dollarized   economy  operates   in   the   tourist,   international   and   export   sectors,   and   substantially sustains the socialist economy.The Cuban Government continues to adhere to socialist principles in organizing its state-controlled economy. Most of the means of production are owned and run by the government and, according to Cuban Government statistics, about 75% of the labor force is employed by the state. The actual figure is closer to 90%, with the only private employment consisting of some 200,000 private farmers and some 100,000 "cuentapropistas," or private business owners.

The   country's  population   is   approximately  11  million.  The  Government   continues   to   control   all significant means of production and remained the predominant employer, despite permitting some carefully controlled foreign investment in joint ventures. Foreign companies are required to contract workers only through state agencies, which receive hard currency payments for the workers' labor but  in turn pay the workers a  fraction of  this   (usually  5 percent)   in   local  currency.   In 1998 the Government  rescinded some of   the  changes   that  had  led  to   the  rise  of   legal  nongovernmental business activity when it further tightened restrictions on the self-employed sector by reducing the number of categories allowed and by imposing relatively high taxes on self-employed persons. In September 2000, the Minister of Labor and Social Security publicly stated that more stringent laws should be promulgated to govern self-employment.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 Soviet subsidies. To alleviate the economic crisis, in 1993 and 1994 the government introduced a few market-oriented reforms, including opening to tourism, allowing foreign investment, legalizing the dollar, and authorizing self-employment for some 150 occupations. These measures resulted in modest economic growth; the official statistics, however, are deficient and as a result provide an incomplete measure of Cuba's real economic situation. Living conditions at the end of the decade remained well below the 1989 level. Lower sugar and nickel prices, increases in petroleum   costs , a post-September 11 decline in tourism, and a devastating November 2001 hurricane created new economic pressures on the country, threatening to take back the  few  improvements  made  in   the mid-  and  late  1990s.  Shortages  of   food and  fuel   increased dramatically.Cuba experienced a surge in foreign tourist visits over the past decade, from a few thousand in 1990 to 1.4 million in 1998. 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   is  at   the  "heart  of   the  economy." Havana   devotes   significant   resources   to   building   new   tourist   facilities   and   renovating   historic structures for use in the tourism sector. Roughly 1.7 million tourists visited Cuba in 2000, generating about $1.9 billion in gross revenues, but the government's hopes for continued growth in this sector were unrewarded by  the downturn  in  the global  economy  in 2001 and the negative effects  on tourism regionally  after September  11.  The final  figures   for  2001 show negligible  growth  in  the number of tourists  and no change in gross revenues over 2000. The prospects  for 2002 are for decreased tourist arrivals and revenues.Remittances play a large role in Cuba's accounts, accounting for between $800 million and $1 billion per year to an $18.6 billion economy. The majority of remittances come from families in the United States that are permitted by U.S. law to send to the island up to $1,200 in a year. This provides nearly 60% of the Cuban population with some access to dollars. The Cuban Government tries to capture   these  dollars  by  allowing  Cuban   citizens   to   shop   in   "dollar   stores"   and  expanding   the categories  of  goods that can only be purchased with dollars.  Last  year's  global  economic slump delayed and reduced remittances, which contributed to Cuba's faltering economic growth. Sugar, which  has  been   the  mainstay  of   the   island's  economy  for  most  of   its  history,  has   fallen  upon troubled times. In 1989, production was more than 8 million tons, but by the mid-1990s, it had fallen to   around   3.5   million   tons.   Inefficient   planting   and   cultivation   methods,   poor   management, shortages of spare parts, and poor transportation infrastructure combined to deter the recovery of the sector. In June 2002, the government announced its intention to implement a "comprehensive transformation" of this declining sector. Plans are to align production with world prices and close almost half the existing sugar mills, laying off more than 100,000 workers. These workers will be "retrained" in other fields and given new jobs.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. A new legal framework laid out in 1995  allowed   for  majority   foreign  ownership   in   joint   ventures  with   the  Cuban  Government.   In 

practice, majority ownership by the foreign partner is practically nonexistent. By the end of 2000, nearly   400   joint   ventures  were  operating   in  Cuba,   representing   investment  by  46   countries  of between $4.2 billion and $4.5 billion, although about 70 of these would not be considered foreign investment by international standards because they operate outside of the country. Many of these investments 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   (Libertad)  Act   that  provides   sanctions   for   those  who   "traffic"   in  property expropriated from U.S. citizens. As of August 2002, 18 executives of two foreign companies have been excluded from entry into the United States. More than 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.In 1993 the Cuban Government made it legal for its people to possess and use the U.S. dollar. Since then, the dollar has become the major currency in use. To capture the hard currency flowing into the island   through   tourism   and   remittances--estimated   at   $800  million   to   $1   billion   annually--the government  has   set  up  state-run  dollar   stores   throughout  Cuba   that   sell   food,  household,  and clothing items. The gap in the standard of living has widened between those with access to dollars and those without. Jobs that can earn dollar salaries or tips from foreign businesses and tourists have  become  highly   desirable.   It   is   common   to  meet   doctors,   engineers,   scientists,   and  other professionals working in restaurants or as taxi drivers.To provide jobs for workers laid off due to the economic crisis, furnish services 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 by regulating and taxing it. For example, owners of small private restaurant can seat no more than 12 people 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, and others have closed.   These  measures   have   reduced   private   sector   employment   from   a   peak   of   209,000   to approximately 108,000 in 2000. No recent figures have been made available, but the Government of Cuba reported at the end of 2001 that tax receipts from the self-employed fell  8.1% due to the decrease in the number of these taxpayers.Prolonged austerity and the state-controlled economy's  inefficiency  in providing adequate goods and services have created conditions for a flourishing informal economy in Cuba. As the variety and amount of goods available in state-run peso stores has declined, Cubans have turned increasingly to the black market to obtain needed food, clothing, and household items. Pilferage of items from the work  place   to   sell   on   the  black  market  or   illegally  offering   services  on   the   sidelines  of  official employment is common, and Cuban companies regularly figure 15% in losses into their production plans to cover this. Recognizing that Cubans must engage in such activity to make ends meet and that attempts to shut the informal economy down would be futile, the government concentrates its control efforts on ideological appeals against theft and shutting down large organized operations. A report by an independent economist and opposition leader speculates that more than 40% of the Cuban economy operates in the informal sector.Cuba's   precarious   economic   position   is   complicated   by   the   high   price   it  must   pay   for   foreign financing. The Cuban Government defaulted on most of its international debt in 1986 and does not have access to credit   from international  financial   institutions  like the World Bank,  which means Havana must rely heavily on short-term loans to finance imports, chiefly food and fuel. Because of its poor   credit   rating,   an   $11   billion   hard   currency   debt,   and   the   risks   associated   with   Cuban investment, interest rates have reportedly been as high as 22%.According   to   official   figures,   the   economy   grew  3.6   percent   during   2001.  Despite   this,   overall economic  output   remained  below   the   levels  prior   to   the  drop  of   at   least  35  percent   in   gross 

domestic product (GDP) that occurred in the early 1990's. This drop was due to the inefficiencies of the centrally controlled economic system; the loss of billions of dollars of annual Soviet bloc trade and Soviet subsidies; the ongoing deterioration of plants, equipment, and the transportation system; and the continued poor performance of the important sugar sector. The 2000-2001 sugar harvest was   more   than   3.5   million   tons,   the   second   worst   harvest   in   more   than   50   years.   In November Hurricane   Michelle  killed five persons and caused severe damage to tens of thousands of homes, the telecommunications system, and the electrical infrastructure; it also destroyed much of   the  export-earning  citrus  crops  and affected  54  percent  of   the   sugar  crop.  The Government continued its austerity measures known as the "special period in peacetime," which were instituted in early 1990's. Agricultural markets provide consumers wider access to meat and produce, although at prices beyond the reach of most citizens living on peso-only incomes or pensions. Given these conditions,  the flow of hundreds of  millions  of  dollars   in remittances from the exile  community significantly helped those who received dollars to survive. Tourism remained a key source of revenue for the Government. The system of so-called "tourist apartheid" continued, with foreign visitors who paid in hard currency receiving preference over citizens for food, consumer products, and medical services. Most citizens remained barred from tourist hotels, beaches, and resorts.

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Special PeriodMain article: Special PeriodThe 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 .[22] 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."[23] Cubans had to resort to eating anything they could find, from Havana Zoo animals to domestic cats.[24] Because of the collapse of centrally-planned economies in the Soviet Union and other countries of the Eastern bloc, Cuba experienced economic difficulties, which led to a drop in calories per day from 3052 in 1989 to 2600 in 2006.[25]

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 marketprices,  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 year-end 1999. Living conditions in 1999 

remained well below the 1989 level. New taxes introduced in 1996 have helped drive down the number ofself-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?" [26]

[edit]Recovery

Historical   evolution   of GDP per capita of   Cuba   and   some  other   Caribbean   countries,   based on Maddison and current Cuban statisticsDue 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 %.[27][28]

[edit]Post-Fidel reformsIn  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.[29] 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.[29]

In 2010, Fidel Castro,   in agreement with Raul  Castro's reformist  sentiment,  admitted that the Cuban model based on the old Soviet model of centralized planning was no longer sustainable for the Cuban economy. While both leaders remain committed to dialectical materialism, they are encouraging the creation of a co-operative variant of socialism where the state plays a less active role   in   the   economy,   and   the   formation   of   worker-owned   co-operatives   and   self-employed enterprises is being encouraged.[30]

[edit]Energy production

Electricity generated in Cuba, 1985-2011Due   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 an "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. Citizens are also encouraged to swap their old, electricity consumptive lamps with those of newer model to reduce consumption, which is also complemented with a new power tariff, which imposes economically punitive measurements on inefficient  use  of  power.[31] 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.[32][clarification needed] Raul Castro told Cubans in his July 26 speech in 2007, that the Special Period is not yet over.[33]

[edit]Government policiesFurther information: Rationing in Cuba, Corruption in Cuba, and SociolismoRationing 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. It is rumoured that the rationing card, and the whole rationing system, will be abolished. The abolishment of the rationing system will become official at the next Communist Party of Cuba's party congress set for April 2011.[34]

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.[35]

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.[36]

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.[37]

The Corruption Perceptions Index ranks Cuba 65th (from best to worst) out of 180 countries, better than most other countries in Central or Latin America.[edit]AgricultureMain article: Agriculture in CubaAs a result of inefficient state-run agriculture, Cuba imports up to 80% of the food it rations to the public.[38] After coming to power, Raúl Castro, Fidel Castro's brother, has ridiculed the bureaucracy that shackles the agriculture sector.[38] 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.[39] Cuban people even suffered from starvation during the Special Period.[edit]Industry

Oil pumps in CubaIn 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.[40]

[edit]Tertiary industries[edit]Tourism in CubaMain article: Tourism in Cuba

White sand beach in Varadero, CubaIn 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.[41]

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[42] 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.[43]

[edit]RetailCuba  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.[44]

[edit]PovertyTypical wages range from factory worker's 400 non-convertible Cuban pesos a month to doctor's 700. That is around 17-30 U.S. dollars a month. However, the Human Development Index of Cuba still ranks much higher than the vast majority of Latin American nations.[45] After Cuba lost subsidies in 1991, malnutrition resulted in an outbreak of diseases and general hunger.[46] Despite this, the poverty level reported by the government is one of the lowest in the developing world, ranking 6th out of 108 countries, 4th in Latin America, and 48th among all countries.[47] 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 defense of socialism".[48]

[edit]International tradeThe Netherlands receives the largest share of Cuban exports (24%), 70 to 80% of which go through Indiana Finance BV, 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. (for example, British West Indies, United States Virgin Islands, French outer-territories, and so on). The second largest trade partner is Canada, with a 22% share of the Cuban export market.[49]

[edit]Foreign investmentSince   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]

Tobacco plantation, Pinar del Río.[edit]US DollarIn 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 for tourists to  bring   currencies   like Euros, pounds sterling or Canadian dollars into  Cuba.   Indeed,   an increasing number of tourist zones now also accept Euros.[edit]Self-employmentTo provide jobs for workers laid off due to the economic crisis that the government was having difficulty providing, and to try to bring some forms of black market activity into legal, and regulated, 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[50] 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. Growingorganopónicos (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 advisers.[edit]Public FacilitiesLa Bodega For Cuban nationals only. Provides subsidized food and other necessities including rice, sugar, beans, peas, coffee, meat, milk, and cooking oil at low prices.La Copelia A government-owned facility offering ice cream, juice, and sweets.Paladar A type of small, privately-owned restaurant facility with no more than 12 seats.La Farmacia Low-priced medicine, with the lowest costs anywhere in the world.Etecsa National telephone service provider.La Feria A weekly market (Sunday market-type) owned by the government.Cerveceria Bucanero A   beverage   manufacturer,   providing   both   alcoholic   and   non-alcoholic beverages.Ciego Montero The main soft-drink and beverage distributor.[edit]Connection with VenezuelaThe   relationship   cultivated   between Cuba and Venezuela in   recent   years   has   resulted   in agreements in which Venezuela provides cheap oil in exchange for Cuban "missions" of doctors to bolster 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 to obtain favorable economic terms of trade.[edit]Other statistics

Electricity - production: 16.89 billion kWh (2007 est.)[2]

Electricity - production by source:fossil fuel: 89.52%hydro: 0.65%nuclear: 0%other: 9.83% (1998)Electricity - consumption: 13.93 billion kWh (2007 est.)[2]

Electricity - exports: 0 kWh (2008 est.)[2]

Electricity - imports: 0 kWh (2008 est.)[2]

Oil - production: 62,100 bbl/d (9,870 m3/d) (2008 est.)[2]

Oil - consumption: 176,000 bbl/d (28,000 m3/d) (2008 est.)[2]

Oil - exports: 0 bbl/d (0 m3/d) (2007 est.)[2]

Oil - imports: 104,800 bbl/d (16,660 m3/d) (2007 est.)[2]

Oil - proved reserves: 197,300,000 bbl (31,370,000 m3) (1 January 2009 est.)[2]

Natural gas - production: 400 million cu m (2008 est.)[2]

Natural gas - consumption: 400 million cu m (2008 est.)[2]

Natural gas - exports: 0 cu m (2008 est.)[2]

Natural gas - imports: 0 cu m (2008 est.)[2]

Natural gas - proved reserves: 70.79 billion cu m (1 January 2009 est.)[2]

Agriculture - products: sugarcane, tobacco, citrus, coffee, rice, potatoes, beans, livestock[2]

Annual budget: revenues: $47.08 billion expenditures: $50.34 billion (2009 est.)[2]

Public debt: 34.6% of GDP (2009 est.)[2]

Current account balance: $513 million (2009 est.)[2]

Reserves of foreign exchange and gold: $4.647 billion (31 December 2009 est.)[2]