UNIVERSITY OF SANTO TOMAS

FACULTY OF ARTS AND LETTERS

St. Raymund de Peafort Bldg.
Espaa Manila, Philippines

Prepared by: Joseph Andre Dela

Pasion
Subject: HETAR
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Chapter 2

Economic System: Cuba

Cuba is an archipelago of islands located in the Caribbean Sea, 90 miles Southeast of the United States.
Capital: Havana
Land Area: 110,860 km2 (42,803 sq mi)
Provinces: 15
Municipalities: 168
Population: 12 Million with 99% literacy rate
Language: Spanish

Cubas Government
Structure
Government type: Totalitarian Communist State (West
definition)
Socialist Republic (Marxist-Leninist definition)
Politics: Cuban politics retains a top-down structure run
by a minority, but with very low levels of political
opposition.
Ruling Party: Communist Party of Cuba (Founded 1965)
Has the upper-hand when it comes to politics
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Cubas Government
Structure
Cubas leading institution: Revolutionary Armed

Forces (FAR)
Has the upper-hand when it comes to economic decision
making. FAR is the go to in terms of problem solving.
It controls 60% of the Cuban economy.
Former President: Fidel Castro (1959 until 2008)
President: Raul Castro (February 24, 2008)

 Rauls government at the highest level is a

gerontocracy, with an average age of over 70,
underscoring the theme of continuity and consensus
policy direction that characterizes the regime. Raul is an
institution man who is focused on process and
predictability and would like the government to work
better.
Separation of Power: There is no separation of power
in the liberal sense. No meaningful checks and balance in
the formal sense.
Civil Society is weak with no common agenda and there is
no political expression with a national reach. It does not
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 Judiciary: The judiciary is institutionally differentiated but

not independent, as its decisions and doctrine are
subordinate to political authorities.
Constitution: Cuba has had five constitutions. The
current constitution was drafted in 1976. In 2002, the
Cuban Constitution was again amended to stipulate that
the socialist system was permanent and irrevocable.

Computer ownership bans, computer ownership rates are among the

world's lowest. The right to use the Internet is granted only to selected
people and these selected people are closely monitored. Connecting to the
Internet illegally can lead to a five-year prison sentence.

Citizens cannot leave or return to Cuba without first obtaining official

permission, which is often denied.

Human Rights Watch alleges that the government "represses nearly all
forms of political dissent" and that "Cubans are systematically denied basic
rights to free expression, association, assembly, privacy, movement, and
dueThe
process
law". Unit's index of democracy
Source:
Economistof
Intelligence
7

http://www.eiu.com/public/

Indicator
Rank in the
World

Rank in Latin
America

#25 of 165

#2

2. "Freedom of the Press", Freedom House (2010)

# 190 of 195

#33 of 33

3. Press Freedom Index 2010, Reporters Without

Borders (2010)

#166 of 178

# 26 of 26

"Unfree"

"Unfree"

Political Indices
1. "Political Instability Index", The Economist
(2009/10)

4. "Freedom in the World", Freedom House (2010)

Source: The Economist Intelligence Unit's index of democracy

http://www.eiu.com/public/

In 2014, the Cuban government

continued to suppress dissent, including
harassing, intimidating, and detaining
independent journalists. At the same
time, the country eased some
restrictions on expression, allowing
previously taboo topics to be aired in the
national media and certain opposition
voices to be more widely heard.

Source: Freedom House Orgnization

https://freedomhouse.org/report/freedom-press/2015/cuba

Legal Environment

Political Environment

Cuba has the most restrictive laws on

freedom of expression and the press in
the Americas. The constitution prohibits
private ownership of media outlets and
allows free speech and journalism only
if they conform to the aims of a socialist
society.

For years, independent or critical

Cuban journalists and bloggers have
suffered harassment for their
reporting on topics deemed sensitive
by the government.

Source: Freedom House Orgnization

https://freedomhouse.org/report/freedom-press/2015/cuba

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Economic Environment
The government owns virtually all
traditional media except for a number of
underground newsletters.

Cuba has one of the lowest internet

connectivity rates in the world. The
majority of users can reach only a
closely monitored Cuban intranet
consisting of e-mail addresses
ending in .cu and a few
government-controlled and approved
websites. The penetration rate for
real access to the global internet is
estimated to be around 5 percent,
and continues to come mostly
through outdated dial-up technology.
There is almost no broadband
service on the island

Source: Freedom House Orgnization

https://freedomhouse.org/report/freedom-press/2015/cuba

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Corruption Perceptions Index 2003 - 2010

Year

Rank

Surveyed

CPI Score

2004
2005
2006
2007
2008
2009
2010
2015

62
59
66
61
65
61
69
63

146
159
163
179
180
180
178
175

3.7
3.8
3.5
4.2
4.3
4.4
3.7
3.7

Source: Transparency International

http://www.transparency.org/

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Cubas Economic
Structure
Economic System: State-Controlled Economy
Centrally Planned Economy
Economic Planning Agency: Ministry of the Economy and
Planning
Economy: US$56bn worth economy
Banking System: Central Bank of Cuba
Cuban financial system is integrated by 9 banks and a
group of non-financial institutions and offices of
representation of foreign financial institutions.
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Cubas Economic
Structure
Currency Regime: Monetary Duality (Dual Currency System)
The Cuban economy currently operates with two local
currencies the Cuban peso (1857) and the convertible peso
(1994), both with convertibility problems and multiple and
overvalued exchange rates and has been subject to a banking
crisis since 2009. It is a veritable monetary and financial jigsaw
puzzle. In order to do away with the dual currency and overcome
financial imbalances, monetary policy must devalue the two
domestic currencies. Cubas banks are facing a systemic liquidity
crisis with no lender of last resort to help them out of it.
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 Rationing in Cuba (March 12, 1962) refers to the system of food

distribution known in Cuba as the Libreta de Abastecimiento
("Supplies booklet"). The system establishes the rations each person
is allowed to buy through that system, and the frequency of
supplies.
Workforce: 4.9 Million
Employment: 95% of the labor force are employed by the state.
Self-employment requires license from the government.
License cost
$12 to $ 200 USD or 40 to 700 Cuban
Peso per month
The income tax rates rise progressively

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 Cuba is a net food importer, and manufacturing potential is

limited due to high nonwage cost imposed by the government.
Agriculture is Cubas most glaring economic weakness, with low
food imports. Food security is a national security issue.
Infrastructure is decrepit, especially electricity, water, sewage,
and transportation.
Lack of free media is a major economic disincentive, and
institutional secrecy inhibits reliable economic statistics.
The most promising sector of the Cuban economy are medicines
and biotechnology, medical services, energy and tourism

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 International Membership:
IMF Withdrew its membership on 2nd April
1964
WBG Withdrew its membership on 14th
November 1960
IDB Inter-American Development Bank Not
a member
UN Member since 24th October 1945
WTO Member since 20th April 1995

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 Foreign Debt: $17.8 Billion USD Active Debt (Cuba

2007)
$ 21 Billion roughly estimated by analyst
Soviet Union - $26 Billion USD (Frozen)
China - $4 Billion USD (Cubas creditor of last
resort)
Venezuela - $3 Billion USD (Cubas creditor of
last resort)
Japan - $1.70 Billion USD
Russia - $162 Million USD and recently offered
350 Million
South Africa - $137 Million but recently wrote off
and issued
$30 Million aid package
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Cubas Economic Freedom

Business

Freedom Mostly Unfree to Repressed

To form and run a business remains constrained by
state. The
the
Moderately
Freeapplication of regulations is
inconsistent and non-transparent.
The trade regime remains largely non-transparent,
customs corruption is common, rules and
Trade
regulations are burdensome, and imports and
Freedom
exports are dominated by the government.
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 Mostly Unfree to Repressed

The overall tax level is punitive. Cuba has a high
income tax rate of 50 %. The top corporate tax rate
Fiscal
is 30 % (35 % for companies with entirely foreign
Freedom
capital).

Extremely High
Governm Total government expenditures, including consumption and
transfer payments, are very high. This depicts state
ent
dominance over the economy. Expansive government
Spending
employment commitments are an obstacle to sound fiscal
management.

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 Mostly Free to Moderately Free

Inflation has been low by suppressing food cost.
The government determines prices for most goods
Monetary
and services and subsidizes much of the economy,
although some private and informal-market retail
Freedom
activity is not government-controlled. Food ration
is implemented by the state.
Repressed
Foreign investment must be approved by the
government. There is no foreign ownership of
Investme
land.
nt
Freedom
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 Repressed
Cubas financial sector remains underdeveloped,
and access to credit for entrepreneurial activity is
Financial
seriously impeded by bureaucracy and the
shallowness of the financial market. Over a dozen
Freedom
foreign banks have opened offices, but they are
not allowed to operate freely.

Property
Rights

Repressed
Cuban citizens may own land and productive capital for
farming and self-employment. The law and trial practices
do not meet international standards for fair public trials.
The constitution subordinates the courts to the National
Assembly of Peoples Power and the Council of State.

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 Repressed
The formal labor market is not developed, and the
government-controlled labor market has helped to
Labor
create a large informal economy and overemployment. In an attempt to reduce labor
Freedom
market rigidity, the government implemented a
measure to allow workers to hold more than one
job. Its impact has been limited.

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Major Economic Burdens:

1.The tightening of the U.S. embargo that took effect on
October 1960 and recently extended until September 14,
2011 by U.S. President Barack Obama.
2.The collapse of the Soviet Union in 1991 that ended
annual US$ 500 per capita Soviet subsidies or a total 6
billion dollars-per-year subsidy.
3.The difficulty in finding funds as Cuba has negative
reputation as to its debt repayment and that Cuba has no
lender of last resort.
4.Dual Currency System

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If you cant explain it simply,

you dont understand it well
enough.
- Albert Einstein
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End
of
Presentation
japdp
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