Economy of Cuba

In 1993 the Cuban Government made it legal for its people to possess and use the U.S. dollar. From then until 2004, the dollar became a major currency. To capture the hard currency flowing into the island through tourism and remittances - estimated at $500-800 million annually - the government set up state-run "dollar stores" throughout Cuba that sold 'luxury' food, household, and clothing items, compared with basic necessities, which were bought using the Cuban peso. As such, a gap in the standard of living developed between those with access to dollars and those without. Jobs that could earn dollar salaries or tips from foreign businesses and tourists became highly desirable. It was common to meet doctors, engineers, scientists, and other professionals working in restaurants or as taxi drivers.

However, in response to stricter economic sanctions by the US, and because the authorities were pleased with Cuba's economic recovery, the Cuban government decided in October 2004 to remove the American dollar from circulation. In its place, the Cuban convertible peso is now used, which although not internationally traded, has a value pegged to that of the dollar. As a source of additional revenue, a 10% surcharge is levied for conversions from US dollars to the convertible peso; this surcharge does not apply to other currencies, so it acts as an encouragement to tourists to bring currencies like Euros, pounds sterling or Canadian dollars into Cuba. Indeed, an increasing number of areas rich in tourism now also accept Euros directly for many transactions.

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Biotechnology and informatics

Since the very beginning of revolution, the idea of a more diversified and more sophisticated production of wealth in the island was present. In an early speech Fidel Castro announced that "the future of Cuba ought necessarily to be a future of men doing science". In the mid 1980s and during all the '90s this dream grew as a set of Biotechnology I+D institutions at the west of Havana. The so called polo cientifico del oeste is a biotechnological park, located at the west of Havana, and with some tens of institutions devoted to the development of human, animal and agricultural biotechnology. This park is claimed to be a successful experiment of Cuba’s economy, as it was able to create first world standard biotechnology institutions, with several patented drugs and a net annual income of some hundred million US dollars. Although most of the small institutions have a negative net balance and rely on government subsides, successful vaccines and drugs from bigger institutions, like CIGB and CIM greatly overcome the deficit, and put this sector as one of the most important in Cuban economy.

In recent years, the Cuban government decided to make a big investment in a similar experiment, this time creating a technological park and a nearby Computer Science University intended to be an Informatics analogue of the successful Biotechnology adventure. Although in both cases market is a big issue, Cuba is relying in its world recognized high educational level for the fast developing of these new knowledge based economy.

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Self-employment

To provide jobs for workers laid off due to the economic crisis, the government was having difficulty providing, and to try to bring some forms of black market activity into legal - and therefore controllable - channels, Havana in 1993 legalized self-employment for some 150 occupations. The government tightly controls the small private sector, which has fluctuated in size from 150,000 to 209,000, by regulating and taxing it. For example, owners of small private restaurants (paladares) can seat no more than 12 people^[8] and can only employ family members to help with the work. Set monthly fees must be paid regardless of income earned and frequent inspections yield stiff fines when any of the many self-employment regulations are violated. Rather than expanding private sector opportunities, in recent years, the government has been attempting to squeeze more of these private sector entrepreneurs out of business and back to the public sector. Many have opted to enter the informal economy or black market. In recent years there has developed what is called "urban agriculture", production which takes place on small parcels of land in the cities. Growing organopónicos (organic gardens) in the private sector has been attractive to city dwelling small producers who get to sell their products in the same place where they produce them, avoiding taxes and enjoying a measure of government help from the Ministry of Agriculture (MINAGRI) in the form of seed houses and advisors.

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Connection with Venezuela

The relationship cultivated between Cuba and Venezuela in recent years has resulted in agreements that Venezuela provide cheap oil in exchange for Cuban "missions" of doctors which aid and help to improve the Venezuelan health care system. Cuba, with the second-highest per capita number of physicians in the world (behind Italy), sends tens of thousands of doctors to other countries as aid, as well as for obtaining favorable economic terms of trade.

While Venezuela says that Cuba is paying part of the bill with the professionals, medicines, books and other items that Cuba sends, some independent analysts say the numbers don't add up. Havana would have to be collecting about $80,000 per year per Cuban worker in Venezuela to cover the costs of its oil imports, the analysts say. Instead, Cuban doctors in Venezuela receive about $3,000 per year, according to three Cuban doctors who defected from the program. The White House's point man on plans for a post-Castro transition, Caleb McCarry, recently told The Miami Herald that U.S. estimates of total Venezuelan subsidies to Cuba per year "are up to the $2 billion figure." This can be compared to the $4 billion to $6 billion that Moscow once pumped into Cuba per year. [6]

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Economic freedom

The 2006 Index of Economic Freedom Report ranks Cuba 150 out of 157 nations surveyed. The report states typical imports are food, fuel, clothing, and machinery. Exports include nickel, cigars, and state-sponsored labor, for which the government charges many times what it pays in state salaries. Lacking investment, Cuba's sugar industry is no longer viable: The island has become a net importer. Venezuela now supplies up to 80,000 barrels of oil per day on generous credit terms, although Cuba produces small amounts of poor-quality sulfurous crude on its own. Venezuelan assistance has also enabled Cuba to retreat on limited liberal reforms such as allowing self-employment in careers like snack vending and bicycle repair. [7]

On the other hand that report is in conflict with the socialist agenda of the Cuban government, which states in theory, that economic freedom results from the negative freedom of not having to deal with private owners of the means of production - freedom would be the freedom to control the means of production despite of capitalist laws of private ownership, which exist in the USA.