What You Might Not Know About the Cuban Economyby Jorge Dominguez
Harvard Business Review, 2015 On the front page of a Cuban newspaper recently there was an item about a two-story home in the old city of Havana that crumbled—and that in the course of its collapse, killed four people.
This is a harsh glimpse the physical reality facing many of the buildings across Havana and elsewhere in the country. But it’s also a metaphor for much of the Cuban economy. Cuba is, in many ways, an economy stuck in time and at risk of further unraveling. read more |
"When you put all these pieces together around education and health care, it’s clear that Cuba is likely a champion of investment in the development of human capital—but for the last 50 years it has an extremely low economic return on this investment. If you invest in human capital, whether in your company or in your country, sooner or later it will pay off if you have the right set of incentives. |
The Beginning Decades
1960-1990 The early years of the Revolution were marked by the Cuban dependency on the USSR and the tightening of the US embargo. Rationing was instituted with ration booklets - libretas - given to people establishing the supplies each could buy. Castro asked for help from the Soviets and in response Khrushchev approved the temporary purchase of Cuban sugar at well above market prices in exchange for Soviet fuel. This deal was to play a part in sustaining the Cuban economy for many years to come. The Soviet Union became the island’s top trading partner, taking some of the sting off the embargo. In general, the performance of the Cuban economy in the 1959 to 1990 period was problematic and mixed. Improvements were made in terms of socio-economic well-being, most notably in the education of the population. This was also a period of militarizing the society with widespread Committees for the Defense of the Revolution (CDR) which were neighborhood vigilance committees on a grand scale. Duties of the CDR are vigilance, police work, internal security, "civic action," morale building, civil defense, Cubans experienced increasing infringements on economic, political, and religious liberties. Sources: Encyclopedia,com Cuban Economy: Revolution, 1959-90, A. Ritter Havana's Military Machine by JH Williams, 1988 |
The Special Period
1990-2010 The Special Period in Time of Peace ( Período Especial) in Cuba was an extended period of economic crisis that began in 1989 primarily due to the dissolution of the Soviet Union. The economic depression of the Special Period was at its most severe in the early to mid-1990s before slightly declining in severity towards the end of the decade. It was defined primarily by the severe shortages of energy resources in the form of gasoline, diesel, and other petroleum derivatives that occurred upon the implosion of economic agreements between the petroleum-rich Soviet Union and Cuba. The period radically transformed Cuban society and the economy, as it necessitated the successful introduction of sustainable agriculture, decreased use of automobiles, and overhauled industry, health, and diet countrywide. People were forced to live without many goods and they had to resort to eating anything they could find. Malnutrinution was the norm. Source: Wikipedia Special Period Remembered by Irina Pino
A steak dinner during the Special Period
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Economic Changes
2010 - the present To revive the Cuban economy, the government under Raul Castro has reformed the Cuban model, shedding state jobs and focusing on increasing efficiencies, reducing subsidies, and strengthening the private sector. The Communist Party Congress in 2011 formally ratified expansion of the internal market and access to global markets. The Communist government considers this an updating of the Cuban socialist model, although it is commonly referred to as economic reforms. It resulted in significant changes:
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"Cuba’s government wants to open up the economy while preserving social gains and guarding against growing inequalities. It’s concerned about an increasingly two-tier economy where people with access to tourist dollars or remittances from relatives abroad live in luxury, compared to those struggling on government salaries.
Racial inequalities are growing as well, partly because of the Cuban government’s tolerance of paladares — privately operated bistros. As these restaurants are located in people’s own homes, the arrangement favors the wealthier white Cubans who are more likely to have larger homes and relatives abroad who can provide start-up cash. So Cuba sees a big need to expand its economy through foreign trade."
By Medea Benjamin
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"First, none of the government’s strategic goals for the economy—boosting work incentives, reducing income inequality, ending the dual-currency monetary system, improving fiscal and trade balances, improving international creditworthiness, reforming social subsidies—can be met if output and productivity do not rise. And, second, that economic production will only increase if Castro and his generation of leaders meet their “duty to correct the mistakes we have made in these five decades of constructing socialism.”
That means serious changes of “structures and concepts” in the Cuban economy, to use Castro’s term. And it explains why the neighborhood entrepreneur, once a necessary evil, is now considered a strategic necessity."
By Phillip Peters
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Private Business
Ingenius |
Private Business Sector |
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Co-operative Business Sector |
As seen in the annex of Richard Feinberg’s report on entrepreneurs in Cuba.
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1.Musical Tuning and Repair
2. Water Delivery 3. Construction Laborer 4. Animal Rental 5. Formal Wear Rental 6. Knife Grinder 7. Party Entertainer (clowns, magicians) 8. Mule Driver 9. Artisan (arts and crafts maker) 10. Mechanical Saw Operator 11. Babysitter/Nanny 12. Barber 13. Embroiderer/Knitter 14. Wagon or Pushcart Operator 15. Flower Bed Arranger 16. Carpenter 17. Mobile Hand Cart Hawker of Agricultural Products 18. Locksmith 19. Furniture Repairman 20. Collector and Payer of Bills 21. Operator of Children’s Fun Wagon Pulled by Pony or Goat 22. Buyer and Seller of Records 23. Used Book Seller 24. Builder/Seller/Installer of Radio and TV Antennas 5. Craftsman/Seller/Repairman of Wicker Furniture 26. Breeder/Seller of Pets 27. Window Glass Repair 28. Animal Caretaker 29. Public Bathroom Attendant 30. Caretaker of Elderly/Handicapped 31. Public Park Caretaker 32. Leather Tanner (except cows and horses) 33. Decorator 34. Palm Tree Trimmer 35. Restaurant Owner (paladares) 36. Café Owner (cafetería) 37. Non-Alcoholic Beverage Seller 38. Café Owner (cafeteria, light snacks and beverages) 39. Street-based Seller of Food and Beverages 40. Charcoal Manufacturer/Seller 41. Wine Maker/Seller 42. Maker of Yokes, Harnesses and Rope for Oxen 43. Electrician 44. Automobile Electrician 45. Building Superintendent 46. Book Binding 47. Electric Motor Rewiring 48. Animal Trainer 49. Flower Wreath Arranger 50. Button Coverer (wraps buttons in cloth, popular in the 50’s and 60’s) 51. Photographer 52. Car washer/Oil Changer 53. Bus/Train/Taxi Stop Barker 54. Engraver of Numbers 55. Blacksmith/Seller of Horseshoes and Nails 56. Trader of Scrap Metals 57. Driving Instructor 58. Sports Trainer (except martial arts and diving) 59. Gardener 60. Clothes Washing/Ironing 61. Woodsmen/Logger 62. Shining Shoes 63. Spark Plug Cleaner and Tester 64. Septic Tank Repairman and Cleaner 65. Manicurist 66. Make-up Artist 67. Masseuse 68. Plasterer 69. Refrigerator Mechanic 70. Typist and Copier 71. Messenger |
72. Seamstress/Tailor
73. Miller of Grains 74. Audio Systems Installer/Operator 75. Tire Repair 76. Children’s Ride Operator 77. Parking Attendant (including for cars, bicycles) 78. Hairdresser 79. Animal Groomer 80. Cleaning/Household Help 81. Car Painter 82. Furniture Painter and Polisher 83. House Painter 84. Sign Painter 85. Ornamental Fish Farmer 86. Plastic Covering Maker for IDs 87. Plumber 88. Well Digger 89. Producer/Seller of Items Used in the Home (self-made or made by other selfemployed) 90. Producer/Seller of Rubber Accessories 91. Producer/Seller of Clay Goods (pots, planters, cookware) 92. Producer/Seller of Bricks and Tiles 93. Producer/Seller of Articles and Animals for Religious Use 94. Producer/Seller of Harnesses, Blankets, and Saddles 5. Producer/Seller of Costume Jewelry 96. Shoemaker/Shoe Salesman 97. Producer/Seller of Brooms and Brushes 98. Producer/Seller of Plaster Figurines 99. Grower/Seller of Ornamental Plants 100. Piñata Maker/Seller 101. Grower/Seller of Plants for Animal Feed and Medicinal Purposes 102. Music/Art Instructor 103. Shorthand, Typing, and Language Instructor 104. Computer Programmer 105. Metal Polisher 106. Collector/Seller of Natural Resources (i.e. sell shells) 107. Collector/Seller of Recyclables 108. Watch Repair 109. Leather Repair 110. Jewelry Repair 111. Bedframe Repair 112. Automobile Battery Repair 113. Bicycle Repair 114. Costume Jewelry Repair 115. Fence and Walkway Repair 116. Stove/Range Repair 117. Mattress Repair 118. Small Household Goods Repair 119. Office Equipment Repair 120. Electronic Equipment Repair 121. Mechanical and Combustion Equipment Repair 122.Eyeglass Repair 123. Sewing Machine Repair 124.Saddle and Harness Repair 125.Umbrella and Parasol Repair 126.Disposable Lighter Repair and Refill 127. Tutor (currently employed teachers not eligible) 128.Doll and Toy Repair 129.Art Restorer 130.Night Watchman or Building Doorman 131. Welder 132. Leather Craftsman 133. Upholsterer 134. Roofer 135. Accountant/Tax Preparation 136. Textile Dyer 137. Machinist |
138. Roaster (i.e. of peanuts, coffee) 139. Part-time Farm Laborer
140. Document Translator 141. Shearer (as in sheep) 142. Thresher 143. Vegetable/Fruit Street Vendor (from fixed venues) 144. Shoe Repair 145. Contracted Employee of a Self-Employed 146. Event Planner (weddings, etc.) 147. Mason 148. Real Estate Broker 149. Repair of Measurement Instruments 150. Food Wholesaler 151. Food Retailer (in kiosks and farmers’ markets) 152. Room/Home Rental 153. Postal Agent 154. Telecommunications Agent (retail) 155. Building Construction Services 156. Car Body Remolding 157. Maker/Seller of Marble Objects 158. Maker/Seller of Soaps, Dyes 159. Welder 160. Iron Worker (grating for doors, windows) 161. Welder/Flamecutter 162. Maker/Seller of Aluminum Products 163. Maker/Seller of Non-Ferrous Metals 164. Floor Polisher 165. Repairer of Water Pumps 166. Space Rentals in One’s Home to Selfemployed 167. Insurance Agent 168. Maker/Seller of Food and Beverages in “China Town” 169. Private Construction Contractor (in the Havana “Old Town”) 170. Horse and Carriage Rides 171. Antique Dealer 172. Habaneras (women posing in colorful colonial attire) 173. Fortune Tellers 174. Folkloric Dancers 175. Mambises-style Musical Groups (traditional Cuban music) 176. Caricaturists 177. Artificial Flowers Seller 178. Painters (who sell pictures in the street) 179. Dandy (man dressed in Colonial garb) 180. Hair Braider 181. Fresh Fruit Peeler 182. Dance Duo “Amor” (traditional Cuban dances) 183. Benny Moré Dance Team 184. Trained Dog Exhibitor 185. Musical Duo “Los Amigos” (popular music) 186. Extras (people in period dress) 187. Traditional Barber 188. Truck Driver 189. Station Wagon Driver 190. Small-Truck Driver 191. Bus Driver 192. Mini-Bus Driver 193. Taxi Driver 194. Handcar Operator (on rails) 195. Jeep Driver 196. Passenger Boat Operator 197. Motorcycle Driver 198. Three-Wheeled Pedal Taxi Driver 199. Cart Operator 200. Horse-Drawn Carriage Operator 201. Pedal Taxi Driver |
"ONE country, two currencies" is one of Cuba's more peculiar idiosyncrasies. The Cuban peso (CUP) and the Cuban convertible peso (CUC) are both legal tender on the island, though neither is exchangeable in foreign markets. The CUC is pegged to the dollar and worth 25 times as much as the CUP. But whereas most Cubans are paid in CUP, nearly all consumer goods are priced in CUC.
The unusual scheme has been in place since the collapse of the Soviet Union. In 1993, after decades of benefiting from generous trade arrangements with the Eastern bloc, Cuba found itself desperately short of hard currency( money accepted internationally). With few other options, Fidel made the momentous decision to legalise the American dollar (possession of which had previously been punishable by prison). Read more from The Economist |
Cuban currency is NOT traded internationally, so you can’t buy it in advance. You buy it when you arrive in Cuba at a government currency exchange booth, or casa de cambio, called a CADECA.
Most tourists will only ever deal with CUC. For international exchange purposes 1.00 CUC = $1.00 US. In addition to charging an exchange rate there is a 10% penalty charged when exchanging US dollars. So, you will only receive 87 centavos CUC for one US dollar when changing the money, allowing for the 10% penalty and a 3% currency exchange fee. |