Caribbean Tourism

Government & Economy

In 1976 a new constitution was approved by 97.7% of the voters, setting up municipal and provincial assemblies and a National Assembly of People’s Power. The membership of the Assembly is now 595, candidates being nominated by the 169 municipal councils, and elected by direct secret ballot.


Similarly elected are members of the 14 provincial assemblies, both for five-year terms. The number of Cuba’s provinces was increased from six to 14 at the First Congress of the Communist Party of Cuba in December 1975. Dr Fidel Castro was elected President of the Council of State by the National Assembly and his brother, Major Raúl Castro, was elected First Vice-President. There are five other Vice-Presidents.

Economy:

Following the 1959 revolution, Cuba adopted a Marxist-Leninist system. Almost all sectors of the economy were state controlled and centrally planned, the only significant exception being agriculture, where some 12% of arable land was still privately owned. The country became heavily dependent on trade and aid from other Communist countries, principally the USSR (through its participation in the Council of Mutual Economic Aid), encouraged by the US trade embargo. It relied on sugar, and to a lesser extent nickel, for nearly all its exports. While times were good, Cuba used the Soviet protection to build up an impressive, but costly, social welfare system, with better housing, education and health care than anywhere else in Latin America and the Caribbean. The collapse of the Eastern European bloc, however, revealed the vulnerability of the island’s economy and the desperate need for reform. A sharp fall in gdp of 35% in 1990-93, accompanied by a decline in exports from US$8.1bn (1989) to US$1.7bn (1993), forced the Government to take remedial action and the decision was made to change to a mixed economy.

Transformation of the heavily centralized state apparatus has progressed in fits and starts. The Government is keen to encourage self-employment to enable it to reduce the public sector workforce, but Cuban workers are cautious about relinquishing their job security. Some small businesses have sprung up, particularly in tourism. Free farm produce markets were permitted in 1994 and these were followed by similar markets at deregulated prices for manufacturers, including goods produced by state enterprises and handicrafts. Cubans are now allowed to hold US dollars and in 1995 a convertible peso at par with the US dollar was introduced.

The US trade embargo and the associated inability to secure finance from multilateral sources has led the Government to encourage foreign investment, principally in joint ventures. All sectors of the economy are now open to foreign investment and in some areas majority foreign shareholdings are allowed. 374 joint ventures are now established in Cuba, with capital from 46 countries. The leading investors are from Spain, Canada, France, Italy and Mexico, in that order.

Structure of Production:

Sugar is the major crop, and the second most important earner of foreign exchange after tourism. However, the industry has consistently failed to reach the targets set. Cuba’s dream of a 10 mn tonne raw sugar harvest has never been reached and by 1998 output had fallen steadily to 3.2 mn tonnes, the lowest for 50 years. Poor weather and shortages of fertilizers, oil and spare parts cut output. The 1999/2000 harvest achieved its target of 4 mn tonnes, but world prices were low.

Citrus is an important agricultural export. Production in 1998 rose by 6% to 1,850,000 tonnes. Cuba became a member of the International Coffee Agreement in 1985 and produces about 22,000 tonnes of coffee a year but exports are minimal. Tobacco is a traditional crop with Cuban cigars world famous, but this too has suffered from lack of fuel, fertilizers and other inputs. Production is recovering with the help of Spanish credits and importers from France and Britain.

Diversification away from sugar is a major goal, with the emphasis on production of food for domestic use because of the shortage of foreign exchange for imports. The beef herd declined to four million in the first half of the 1990s because of the inability to pay for imports of grains, fertilizers and chemicals. Production is now less intensive and numbers are beginning to rise again. Similarly, milk production is also increasing. In 1993, in a new agricultural reform process, the Cuban state handed over more than 28,250 sq km of land in usufruct to workers in state enterprises. The newly created basic units of cooperative production (UBPCs) now possess approximately 42% of Cuba’s arable land. Taking into account the longer-running cooperative systems and land given to campesino families to cultivate coffee and tobacco, the total non-state utilization of land has risen to 67.3%. The opening of farmers markets in 1994 has helped to stimulate diversification and greater availability of foodstuffs, although shortages still remain. Drought in the east in 1998 reached crisis proportions and was followed by Hurricane Georges and flooding, all affecting crops of beans, grains, vegetables and fruit.

The sudden withdrawal of oil supplies when trade agreements with Russia had to be renegotiated and denominated in convertible currencies, was a crucial factor in the collapse of the Cuban economy. Although trade agreements involving oil and sugar remain, Cuba has had to purchase oil from other suppliers with limited foreign exchange. As a result, Cuba has stepped up its own production: foreign companies explore for oil on and offshore and investment has borne fruit. In 1998 production of oil was 1,678,000 tonnes and gas was 117 mn cu m, but over 7 mn tonnes of hydrocarbons are imported, at a cost of US$1bn, and shortages of fuel remain.

Mining is attracting foreign interest and in 1994 a new mining law was passed. A Mining Authority was created and a tax system set up. 40,000 sq km have been allocated for mining ventures. Major foreign investors included Australian (nickel), Canadian (gold, silver and base metals) and South African (gold, copper, nickel) companies. Nickel and cobalt production rose to a record 68,000 tonnes in 1998, nearly half of which came from the Moa Bay plant run as a joint venture between Canadian interests and the Cuban state. Cuba has one small gold mine at Castellanos in Pinar del Río province. New, Canadian-backed projects in Pinar del Río at the Hierro Mantua site will produce gold and copper, and on Isla de la Juventud, gold and silver.

Tourism is now a major foreign exchange earner and has received massive investment from abroad with many joint ventures. New hotel projects are coming on stream and many more are planned. Most of the development has been along the Varadero coast, where large resort hotels attract package tourism, but Cayo Coco and Cayo Guillermo are now earmarked for major construction. Cuba has around 32,000 hotel rooms, of which two thirds are in beach resorts and a third in cities, although this is to rise to over 60,000 by 2006. Despite political crises, numbers of visitors have risen steadily from 546,000 in 1993 to 2 mn in 1999. Gross income reached US$2.1 bn. 15% of visitors come from Canada, 13% from Italy, 11% from Germany and 10% from Spain. The target is for 7 mn tourists a year by 2010, bringing earnings of about US$11.8 bn.

Recent Trends:

There has been considerable success in reducing the fiscal deficit, which was bloated by subsidies and inefficiencies. A deficit of 5,000 million pesos in 1993 was cut to 570 million in 1996, only 2.4% of gdp, reflecting subsidy reductions. More reforms are planned, which may include the removal of subsidies from almost all state enterprises, new legislation on property ownership and commercial practice, development of the tax system and restructuring of the banking system. Financial services will be overhauled to cater for the accumulation of capital by owners of small businesses, who currently have to operate in cash. In 1997 legislation was approved to transform the Banco Nacional de Cuba; the Banco Central de Cuba was established to assume the central banking functions of the Banco Nacional, which will continue as a commercial bank. There are signs that the Cuban economy has turned the corner, although these have yet to be felt by the population in general. The external accounts remain weak. Foreign debt was US$11bn in 1998 (excluding debt to former members of Comecon), and Cuba’s dependence on high-interest, short-term trade finance is a burden. Cuba is ineligible for long-term development finance from multilateral lending agencies because of the US veto. Renegotiation of debt to some European countries and Japan is progressing.


More . . .

Introduction

Cuba is the largest island in the Caribbean Sea, located at the entrance to the Gulf of Mexico. The main island, together with the Isle of...

Cuba, largest of the Caribbean islands

Cuba, largest of the Caribbean islands and 90 miles south of Florida, is a fascinating place to visit. With a predictably delightful...

CUBA: HOW TO GET THERE

AIRLINES: Aeroflot, Aeromexico, Aeropostal, Air Europe, Air Jamaica, Condor, Cubana de Aviacion, Iberia, L.T.U., Ladeco, Mexicana, Taag,...

CUBA: MONEY/ BUSINESS GUIDE

BANKS: Foreigners, including tourists, who wish to open a bank account in Cuba, may do so at Banco Financiero Internacional (a private bank...

CUBA: COUNTRY PROFILE AND MAP

GEOGRAPHY: The Republic of Cuba is an archipelago made up of the Island of Cuba, the Island of La Juventud and approximately 4,195 cays and...

CUBA: WHAT TO SEE AND DO

DINING: Restaurants available - Local, International, Chinese, Japanese, Argentinean and Vegetarian. A 10-15% optional gratuity is...

CUBA: USEFUL INFORMATION

TOURIST OFFICES Cuba Tourist Board in UK Cuba Tourist Board 154 Shaftesbury Avenue, London WC2H 8JT UK Tel: 020 7240 6655 Fax: 020 7836...