CUBA –COMMAND ECONOMY

• Fidel Castro – introduced the concept of a

command economy
• The economy of this government controls all
means of production and determines prices
for most of the goods in the economy
• Cuba does not have proper property rights in
place
 Fidel
Castro
 FLASHBACK!
• Cuba, once a colony of US, gained its independence through Cuban
Revolution in 1959
• They nationalised three US oil refineries in June 1960
• On July 3, 1960, US suspended trading sugar with Cuba
• On July 5, they retaliated by nationalising all US businesses and
commercial property
• The following day, US cancelled tones of sugar remaining in Cuba’s quota
• Sugar-for-oil exchange between Cuba and USSR was born
• In September & October 1960, Fidel nationalised all US banks and local
firms
• Following this, US imposed a trade and economic embargo on Cuba
• Cuba defeated the US army at Bay of Pigs on April 17, 1961 after 3 days of
fighting
 FLASHBACK!
• On May 1, 1961, Fidel declared Cuba as socialist country
and declared himself as “Marxist-Leninist and extended his
personal dominion over every dimension of government”
• Agricultural production remained high with USSR buying
sugar from it
• But in 1990, as the USSR collapsed, so did Cuban economy
and its agricultural production
• Instead of choosing to open up its markets, Cuban
government continued to control agricultural production
and marketing
• Sugar production started falling. Sugar industry fell from 8.1
million metric tonnes in 1989 to 3.5 million metric tonnes
in 1995
 ALL ABOUT CUBA: STRENGTHS
• Non-Tariff Barriers to Trade are very Restrictive
• Equitable Distribution of Income and Wealth
 Income gap between the farmers and the urban workers
decreased
 Employment for all
 All Cuban children go to school
 Remote village has a school
 Literacy Rate of 99.8%
 Good healthcare and achieved many breakthroughs in the field
of biotechnology
• Cuba’s Gini Coefficient of 0.25
• Low Unemployment Rate
• Moderate Level of Inflation
 CUBA’S HUMAN DEVELOPMENT INDEX - 2006
HDI Value Life expectancy Adult literacy Combined GDP per capita
2006 at birth (years) rate (ages 15 primary, (PPP in $)
2006 and above (%)) secondary and 2006
2006 tertiary gross
enrolment
ratio (%)
2006
0.855 77.9 99.8 94.8 6,876
Source:”2008 Statistical Update Cuba”, http://hdrstats.undp.org/2008/countires/country_fact_sheets/cty_fs_CUB.html
 INFLATION AND UNEMPLOYMENT FIGURES OF SWITZERLAND,
CUBA AND INDIA - 2008
Country Inflation (CPI) (%) Unemployment Rate (%)
Switzerland 0.9 2.5
Cuba 3.6 1.8
India 6.4 7.2
Compiled by the author from 2009 Index of Economic Freedom
 ALL ABOUT CUBA: WEAKNESSES
• Governmental Spending for the year 2008
equaled 72.6% of GDP
• Poorly Run State Factories and Firms that
Results in Shortages
• Difficult Investment Environment
• Freedom of Expression (Freedom of Speech &
Press) are Denied
 ALL ABOUT CUBA: OPPORTUNITIES
• Exercise Control Over Employment Issues
• Introduction of Market Reforms
Legalisation of dollar
Allowing foreign investment
Opening of the country for tourism
Legalisation of some private enterprises
Self-employment for 150 occupants
 ALL ABOUT CUBA: THREATS
• Continuous and Rapid Flourishing of
Shadow/Black Markets
• “Established Soviet-Style Rationing of
Housing, Goods, and Food”
 ANNOUNCEMENT MADE BY RAUL CASTRO
 Expanding access to public land for private farmers
 Permitting some Cubans to own their homes
 Increasing wages and retirement pensions
 Licensing private taxis to operate
 Limited deregulation of the construction industry
 Expanding access to certain previously restricted consumer goods
 Launching a new-24 hr. television station to include mostly foreign-produced
content
Compiled by the author from:”Background Note: Cuba”, http://www.state.gov/r/pa/ei/bgn/2886.htm, August 2008