The Cuban Economy

Cuban Economy

In 1492 Christopher Columbus traded with the Cuban aborigines practically useless items in exchange for gold, spices and tobacco. This primitive form of trade became the pattern of the chaotic Cuban economy until 1959. While the rest of the countries that traded with the island grew richer, Cuba remained exploited, leading to the detriment of the country's progress and natural resources. Cuban economy and trade were first of all focused on serving the Spanish metropoli´s interests; afterwards, those of the United States. The resulting economic dependence caused by a sugarcane monoculture favored the establishment of the North American embargo in 1963 and the further dependence by Cuba on the Soviet Union. Production, imports and exports were subsidized and directed to socialist countries´ needs. With the fall of these countries and Cuba's main market, the island found itself in a rather difficult situation. Cuban initiative was put to the test as a result of the worsened distribution of basic food supplies and the deepened economic crisis in the early 90s. Rationing, regular power cuts, rising unemployment resulting from the disappearance of economic sectors due to the lack of raw materials, fuel and spare parts, led to an increasing wave of emigration, new initiatives and an impressive improvisational culture.

The Cuban economic policy, oriented up to that moment in Soviet models, had to adapt to the present scenario. After the announcement of the "Special Period", the country put itself on the way to economic restructuring. In this sense, several drastic measures were taken: privatization in some agricultural sectors, small-scaled private enterprises and the legalization of the possession of hard currency by the population, as well as the encouragement of foreign investment, mainly in tourism and industry. Under the State supervision, careful and important steps towards the regulation of the market based on offer and demand have been taken, while preserving at the same time all the social benefits.

Alter 1995 Cuba experienced a general economic improvement. Opportunities to overcome the fundamental economic problems have grown with the creation of Joint Ventures. As a developing country Cuba has shown great resilience in the light of economic restraints such as the embargo imposed by the United States, and the fact that Cuba does not belong to any of the international credit organizations. The liberalization of the possession of hard currency allowing regular transfers of funds from Cuban families abroad, has largely contributed to the improvement. Yet, rationing of food supplies and other basic products continues to exist in order to guarantee a monthly quota per inhabitant. There is also a network of shops to acquire higher-quality goods in hard currency and the farmers market, which in domestic money, offers meat products, vegetables, roots and fruits which enrich family's diet.

The Cuban economy is not self-subsistent and relies heavily on imports. Foreign trade is hindered by the lack of necessary funds to buy goods, machinery and spare parts. For this reason, in the last few years Cuba has tried to fight foreign dependence by producing nationally the most needed raw materials. At present the main Cuban exports are: tobacco, citrus, fruits, coffee, nickel, pharmaceutical products, lobster and rum. Oil and other raw materials like iron, together with machinery, electrical appliances and many food items remain necessary to import. Cuba possesses huge copper, chrome, manganese and cobalt beds. Nickel is one of the country's main exports, making it the fourth largest exporter in the world. The oil fields exploited up to the early 90s were insufficient and only covered 10% of energy generating needs. The government has presently recruited the aid of foreign companies to search for new oil fields near the northern coast of Havana and Varadero.