The economy of Cuba: the structure of economic relations and their development

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:40

While sociologists, politicians and scientists pay attention to the economic sector of developed countries, and the world media play reports and news reports about the strongest of this world, developing countries unfairly remain in the shadows. Almost no one writes about them, they are not studied, their example, of course, is not followed, no one takes them into account. For example, no one really 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 Sea. The capital is the city of Havana, which is also the largest on the entire 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, by the Caribbean Sea. One of Cuba's closest and most powerful neighbors, the United States, is only 180 km away.

The territory of the island is almost 111 thousand km², inhabited as of 2017year 11.5 million people. The Institute of Cuban Studies in Miami indicates that 68% of the inhabitants of Cuba are blacks and mulattoes. The Indians, the original inhabitants of the island, are almost gone. The official language is Spanish. Currency - Cuban and convertible pesos. Cuba is a socialist state headed by the President of the Council of State. April 19, 2018 it was Miguel Diaz-Canel.

Economic development of the 16th-18th centuries

The first European settlement within the Spanish colony in Cuba appeared in 1512. Already in 1541, the first enterprise engaged in the production of cigars appeared on the island. At the beginning of the 17th century, Spain began to export sugar and tobacco from Cuba, while at the same time customs duties and decrees hindered the full development of the region.

Up until the beginning of the 19th century, agrarian traditional elements prevailed on the island, far from the future planned economy of Cuba. Traditionalism, meanwhile, is being squeezed by capitalist relations that are gaining strength. The first cigar factories appear in Cuba. And in the sphere of sugar production, small enterprises begin to crowd out the positions of large ones.

In 1885, Negro slaves who had worked on the sugar plantations for centuries were freed. Six years later, the United States and Spain signed a trade agreement. Its result was the spread of American influence to Cuba.

After the war of independence in 1898, the island did not become a sovereign state - it came under the control of the American side. In 1903, the United States, under the "Platt Amendment", could send its troops to Cuba, making it, in fact, its semi-colony.

Cuban economy before 1959

In 1959, an event took place in Cuba, known to the whole world thanks to such personalities as Che Guevara and Fidel Castro - the socialist revolution. Then the island began close economic and political cooperation with the socialist camp and the USSR in particular. But what was in Cuba before that? Until 1959, the Cuban 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 until the Cuban revolution itself, the country's foreign policy, including trade, large sectors of the economy, was controlled by the United States. At this time, the main market for the country is also the United States. 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 nomenclature (90% of total sales). At this time, there is also a strong property inequality on the island, the Cuban people were divided exclusively into very poor and insanely rich. There was no middle class in principle.

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 forrapprochement with the Soviet Union. At the same time, foreign enterprises and banks were nationalized, mostly American ones.

In 1960, the United States, extremely dissatisfied with the policy of the new head of state, imposes a trade blockade on Cuba. By the end of the same year, the Cuban government had already nationalized 979 American enterprises, to which the United States responded with a complete embargo.

Cooperation between the Island of Freedom and the USSR is rapidly developing. With the participation of Soviet scientists, the command economy of Cuba began. In the mid-1960s, her government, however, decided to do some economic manipulation based primarily on forced labor.

This only worsened production figures, forcing 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 beginning of the 1980s, with the support of the Soviets, the Cuban economy was able to ascend to a new stage of development: from agrarian to industrial-agrarian. However, sugar, tobacco, cigars and rum still occupied a massive share of exports. But the export nomenclature was still able to replenish with chemical, metallurgical products, and engineering products.

The economy of Cuba 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, she had to enter a regime of austerity. Gradually, elements of the market are introduced into the economy, the country opensborders for tourism and foreign investment.

In 1993, the circulation of foreign currency began in the country due to the lifting of the ban on it. In 1996, 3 free economic zones were created in Cuba.

Only by 2002, the country's GDP growth rate was able to step over the negative mark, amounting to 1.8%. Since the late 1990s, the island has begun close economic cooperation with the countries of Latin America, in particular, with Venezuela. In 2010, the Cuban government allowed business activities on the island. By 2012, more than 380,000 entrepreneurs were registered.

Key economic indicators

As of 2015, Cuba's GDP was $87 billion, with a per capita of $7,600. GDP growth rates are quite high and average 4.4% per year. Compared to 2014, it has grown by as much as 8%. The economy of Cuba (country) is distinguished by a low unemployment rate - only 2.5% of the working population in 2017 did not have a permanent income. More than half of working citizens (58%) are employed in the service sector, another 25% - in forestry and agriculture, as well as in fishing. The inflation rate in 2017 was 4.5%. However, only 1.5% of the population lives 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 the high level of state participation. Until now, the planned economicmodel.

At the moment, Cuba is one of the most backward countries in terms of the level of economic freedom and is in 178th place with an index of 31.9. Government spending in 2015 was slightly higher than income: 2.9 billion dollars against 2. 7 billion. Government debt is $25.2 billion.

Export and import

In 2016, Cuba exported goods and services worth $1.2 billion. The main export items continue to be cane sugar ($370 million), tobacco and cigars ($260 million), as well as strong alcohol and nickel ($103 million 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 goods worth $6.7 billion. As a result, the Cuban economy has an extremely negative trade balance. The main imports are: meat (mainly poultry) worth $180 million, corn and wheat ($170 million each), and soybeans ($133 million). Cuba also buys $142 million worth of refined oil needed by its industry. The country buys the most from China and Spain ($1.8 billion and $1 billion respectively).

Agriculture and industry

Historically, sugarcane, tobacco and cigars play an important role in the Cuban economy, accounting for a significant share of the country's agriculture. Sugar was such an important part of the economy until 1959 thatworld 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 were eventually exported. Cuban agriculture is characterized by a high degree of mechanization. But manual labor is still in high demand, especially in the production of expensive cigars.

Cuba's mining and manufacturing industries are not particularly developed. Their share in GDP is small: for example, the extractive industry accounts for only 3%. But the island has large reserves of nickel, in terms of their volume, Cuba ranks 2nd in the world. The manufacturing industry is represented by metallurgical, chemical and machine-building plants. Cuba also has two oil refineries.

General conclusion

The Cuban economy has come a long and difficult path of development. Dependent on either American or Soviet influence, Cuba has only recently begun to pursue its own policy. After the Cuban Revolution of 1959 under Fidel Castro, the growth of the Cuban economy was indeed noticeable. Historically, sugar, cigars, tobacco and spirits have been and are the main exports of the country.

But after the revolution, the mining and manufacturing industries, mechanical engineering began to develop. The Cuban economy is generally growing positively, but low diversification and a highly negative trade balance remain key challenges.