While sociologists, politicians and scientists are paying attention to the economic sector of developed countries, and the world media are broadcasting reports and news reports on the world's strongest, developing countries unfairly remain in the shadows. They hardly write about them, they don’t study them, of course, they don’t follow their example, nobody takes them into account. For example, no one particularly remembers the Cuban economy, although it seems interesting to trace the history of its development and evaluate its current state.
Country Brief
Cuba is an island nation located in the Caribbean. The capital is the city of Havana, which is also the largest on the whole island. In the east, Cuba is washed by the Atlantic Ocean. The north of the island is washed by the waters of the Gulf of Mexico, and in the south, respectively, of the Caribbean Sea. One of the closest and most powerful neighbors of Cuba - the United States, is located at a distance of only 180 km from it.
The territory of the island is almost 111 thousand km 2 , as of 2017, 11.5 million people live on it. The Miami Institute for Cuban Studies indicates that 68% of Cubans are blacks and mulattoes. There are almost no Indians - the original inhabitants of the island. The official language is Spanish. The currency is Cuban and convertible pesos. Cuba is a socialist state headed by the chairman of the Council of State. On April 19, 2018, he became Miguel Diaz-Canel.
Economic development of the XVI-XVIII centuries
The first European settlement within the Spanish colony in Cuba arose in 1512. Already in 1541, the first cigar manufacturing company appeared on the island. At the beginning of the XVII century, Spain begins to export sugar and tobacco from Cuba, while at the same time customs duties and decrees hinder the full development of the region.
Until the beginning of the 19th century, the island was dominated by agrarian traditional elements, far from the future planned economy of Cuba. Traditionalism, meanwhile, is being squeezed by growing capitalist relations. The first cigar factories appear in Cuba. And in the sphere of sugar production, small enterprises begin to squeeze the positions of large ones.
In 1885, Negro slaves who worked for many centuries on sugar plantations were liberated. Six years later, the United States and Spain entered into a trade agreement. Its result was the spread of Cuban American influence.
Following the results of the 1898 War of Independence, the island did not become a sovereign state - it came under the control of the American side. In 1903, the United States, as part of the Platt Amendment, could send troops to Cuba, making it virtually its own semi-colony.
Cuban economy until 1959
In 1959, an event known to the whole world due to such personalities as Che Guevara and Fidel Castro, the socialist revolution, took place in Cuba. Then the island began close economic and political cooperation with the socialist camp and the USSR in particular. But what happened in Cuba before that? Until 1959, Cuba's economy was closely linked to the American one. During the First World War, the island was the largest exporter of sugar in the world (half of world production).
In the early 1920s and before the Cuban Revolution, the country's foreign policy, including trade, large sectors of the economy, was controlled by the United States. At this time, the United States is also the main market for the country. They also owned the lion's share of investments in Cuban development - $ 1.5 billion in 1927.
A distinctive feature of the Cuban economy in the 20th century was the predominance of cane sugar, cigars and tobacco in the export range (90% of total sales). At this time, the island also observed strong inequality in property, the Cuban people were divided exclusively into very poor and insanely rich. The middle class was not in principle.
The post-revolutionary state of the economy
After the victory of Fidel Castro during the Cuban revolution, after the so-called victory of socialism over capitalism, the country headed for rapprochement with the Soviet Union. At that time, foreign enterprises and banks were nationalized, most of them American.
In 1960, the United States, extremely dissatisfied with the policies of the new head of state, imposed a trade blockade on Cuba. By the end of that year, the Cuban government had already nationalized 979 American enterprises, to which the United States responded with a complete embargo.
The cooperation of Liberty Island and the USSR is developing rapidly. With the participation of Soviet scientists, the Cuban command economy began. In the mid-1960s, her government, however, decided to conduct some manipulations with the economy, based mainly on the introduction of the principle of forced labor.
This only worsened performance, which forced the government to return to the planning system. In 1970, an agreement on economic and social cooperation was signed between the USSR and Cuba.
By the early 1980s, with the support of the Soviets, the Cuban economy was able to enter a new stage of development: from agrarian to industrial-agrarian. However, sugar, tobacco, cigars and rum still occupied a massive export share. But the nomenclature of exports was still able to replenish with chemical, metallurgical and engineering products.
Cuba's economy at the present stage of development
After the collapse of the Soviet Union in 1991, Cuba had a hard time: having no support from either the American or the Soviet side, it had to enter into austerity regime. Gradually, market elements are introduced into the economy, the country opens the borders for tourism and foreign investment.
In 1993, a foreign currency turnover began in the country by virtue of the lifting of the ban on it. In 1996, 3 economically free zones were created in Cuba.
Only in 2002, the country's GDP growth rate was able to surpass the negative mark, amounting to 1.8%. Since the late 1990s, the island began close economic cooperation with the countries of Latin America, in particular, with Venezuela. In 2010, the Cuban government allowed business on the island. By 2012, more than 380 thousand entrepreneurs were registered.
Key economic indicators
As of 2015, Cuba’s GDP was $ 87 billion, with $ 7,600 per capita. The GDP growth rate is quite high and averages 4.4% per year. Compared to 2014, it grew by as much as 8%. The economy of Cuba (country) is characterized by a low unemployment rate - only 2.5% of the working population in 2017 did not have a constant income. More than half of working citizens (58%) are employed in the service sector, another 25% are in forestry and agriculture, as well as in fishing. The inflation rate in 2017 was 4.5%. However, only 1.5% of the population live below the poverty line.
Cuba is still a country dominated by communist ideology. Speaking briefly about the Cuban economy, we can say that its distinguishing feature is a high level of state participation. The planned economic model still dominates.
At the moment, Cuba is one of the most backward countries in terms of the level of economic freedom and is on the 178th line with an index of 31.9. State expenditures in 2015 were slightly higher than revenues: $ 2.9 billion versus $ 2.7 billion. Government debt is $ 25.2 billion.
Export and Import
In 2016, Cuba exported $ 1.2 billion worth of goods and services. The main export items continue to be cane sugar ($ 370 million), tobacco and cigars ($ 260 million), as well as strong alcohol and nickel ($ 103 and 77 million, respectively). The main exports go to China and Spain ($ 256 and $ 140 million), as well as to Brazil and Germany ($ 55 million each).
In the same year, the country imported $ 6.7 billion worth of goods. As a result, the Cuban economy was marked by an extremely negative trade balance. The main import items are: meat (mainly poultry) worth $ 180 million, corn and wheat ($ 170 million for each type of cereal), soybeans ($ 133 million). Cuba also buys $ 142 million worth of refined oil needed by its industry. Most of the country purchases from China and Spain (1.8 billion and 1 billion dollars, respectively).
Agriculture and industry
Historically, sugarcane, tobacco and cigars play an important role in the Cuban economy, occupying a significant share of the country's agriculture. Sugar until 1959 was such an important component of the economy that world prices for it strongly influenced the pace of its development. Therefore, it was decided to focus on the production of citrus fruits, of which more than half eventually went to export. Cuba's agriculture is highly mechanized. But manual labor is still in high demand, especially in the production of expensive cigars.
The mining and manufacturing industry of Cuba is not particularly developed. Their share in GDP is small: for example, the mining industry accounts for only 3%. But on the island there are large reserves of nickel, in terms of their volume Cuba occupies the 2nd place in the world. The manufacturing industry is represented by metallurgical, chemical and machine-building plants. Cuba also has two refineries.
General conclusion
The Cuban economy has come a long and difficult path of development. Being dependent on either American or Soviet influence, only recently has Cuba begun to pursue its own policy. After the 1959 Cuban Revolution under Fidel Castro, the growth of the Cuban economy was indeed noticeable. Historically, sugar, cigars, tobacco and strong alcohol were and are the main export items of the country.
But after the revolution, mining and manufacturing industry, machine building began to develop. The Cuban economy as a whole is characterized by positive growth rates, but the key problems remain low diversification and an extremely negative trade balance.