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Fact Sheet
Bureau of Western Hemisphere Affairs
Washington, DC
July 30, 2003

Cuba: Economic Summary

Cuba experienced economic growth during the second half of the 1990s until 2001. At the end of 2000, Cuba reported a GDP growth rate of 5.6% and an average GDP growth rate of 4.6% for 1996-2000, a very respectable performance within Latin America.

Soviet assistance and subsidies kept the Cuban economy afloat from the 1960s until the end of the Soviet Union in 1991. After Russia ended all its subsidies to Cuba in 1991, the island's economy went into a tailspin. In order to try to pull out of this economic nose-dive, between 1993 and 1996 the Cuban Government implemented several economic measures, which included "elements of capitalism."  Among those measures were permitting foreign investment in limited sectors (tourism and mining); permitting private agricultural production on a small scale; and decriminalizing the use of the U.S. dollar. These measures allowed Cuba to pull out of the economic crash-dive it experienced in the early 1990s, when the economy contracted by some 40%. The Cuban leadership referred to this economic crisis as a "special period in time of peace."

A series of events in 2001, however, contributed to Cuba's economic slowdown:

  • The events of September 11, 2001;

  • The devastating effects of Hurricane Michelle, which hit the island in November 2001; and

  • A decline in the world market price for sugar and nickel, Cuba's main export commodities.
Tourism was especially affected, with revenues declining from over $1.9 billion in 2000 to $1.8 billion in 2001. Direct foreign investment dwindled to a record low $38.9 million in 2001.

In 2002, growth slowed for the second year in a row, from 3% in 2001 to a reported 1.1% for 2002. Tourism, which had been projected to grow slightly, contracted 5% in total number of arrivals. Sugar production was up slightly, but revenues fell $120 million to $441 million as sugar prices fell on the world market. Nickel production fell, but this was offset somewhat by the increase in world nickel prices to bring in an estimated $512 million in revenue. There was no improvement in direct foreign investment in 2002. The island continued to increase dependence on imports and ran a $2.275 billion trade deficit in 2002.

The effects of Hurricane Michelle lasted into 2002 and affected citrus and other non-sugar agriculture. Two hurricanes in the fall of 2002 further damaged citrus and much of the tobacco industry's infrastructure. The only somewhat dynamic industry for the year was oil and gas. However, the Government of Cuba (GOC) still spent $1 billion importing oil, due to the interruption of Venezuelan supplies that force Cuba to purchase more expensive oil on the spot market.

In June 2002, Cuba announced the shutting down of 70 of its 156 sugar cane mills, devoting 14 of those remaining to the production of honey and other derivatives or conversion into tourist attractions. Of the nearly 2 million hectares currently devoted to sugar cane plantations, 1.24 million hectares are being diverted to other agricultural uses. This has thrown 100,000 of the nation's 427,000 sugar workers out of work. The plans are for future sugar production to be aimed at meeting the 700,000 ton per year domestic demand, while limiting export levels to around 4 million tons, provided international prices permit the national industry to break even.

Predictions for 2003 are that the Cuban economy will experience only a growth of 1.5%. While there has been an increase in the number of tourists visiting the island in 2003 and the world price for nickel has increased, Cuba incurred extraordinary expenditures involving the purchase of oil on the spot market. Sugar cane production in 2003 is expected to be the worst in the history of the industry.

A report prepared by the "Cuba Transition Project" in June 2003 indicates the following:

  • Living conditions in Cuba have deteriorated, as evinced by an acute housing shortage estimated at 1.66 million dwellings;

  • At least 13% of the population is clinically undernourished, as the state food rationing system now provides for only a week to 10 days of basic alimentary needs;

  • Unemployment reached 12%, based on official data, and as many as 30% of workers are displaced or underemployed;

  • With real wages down nearly 50% since 1989, and average salaries of $10 per month, university enrollment has fallen 46% as would-be college students opt for more lucrative jobs in the tourism industry;

  • Cuba is projected to have Latin America's oldest population by 2025 with the island's demographic growth rate now at 0.2%. The elderly are already the most vulnerable as real pensions have declined by 42% and most pensioners survive on the equivalent of $4 per month.

Further reading: Cuba's Agriculture: Collapse & Economic Reform

Note: (All amounts are converted to U.S. dollars.)

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