Cuba

Cuba's Economy

Cuba 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-marketdollarized 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 thestate. 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 controlledforeign 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 In 1998 the Government rescinded some of the changes that had led to the rise of legal nongovernmental business activity when it furthertightened restrictions on the self-employed sector by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 least35% 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, aredeficient 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 fewimprovements 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 plansfor 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 thedownturn 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...