The Cuban economy has experienced important transformations over the last two decades that have brought it within the trends of the rest of the Caribbean. With an economy historically based on the export of sugar, Cuba was thrown into crisis by the fall of the former Soviet Union in the late 1980s. By the middle of the 1990s, the Cuban economy turned to tourism, as well as a more diversified portfolio of exports, and adopted an economic policy that was guided to a greater degree by the market. The reform measures included the opening to tourism, allowing foreign investment, the legalization of the U.S. dollar and allowing self-employment in certain professions. By the middle of the 1990s, tourism surpassed sugar as the main source of revenue and in 2008 Cuban tourism reached a level of 2.3 million tourists, mainly from Canada, Spain, Italy and Britain. Later, the government of Raúl Castro introduced changes to the laws governing land ownership that had important effects on the agriculture industry by allowing free use of land by those who wanted to work it. This measure increased production relatively quickly and has contributed to greater agricultural diversification into sectors such as fruits and vegetables and export products such as pineapples, guava, sugar-apples, mammee apples, papaya, coffee, tobacco, lettuce, Swiss chard, carrots, radishes and rice, as well as a small fishing industry.
Mining is another important export sector in Cuba that has also marked its involvement in world markets. Cuba exports nickel, copper, steel and especially cobalt. Cuba has 26% of the world reserves of cobalt, making it the nation with the second-largest reserve of that mineral, and it is responsible for approximately 10% of worldwide production. Most of the cobalt produced is exported to China and Canada.
Remittances sent home by relatives abroad have also played an important role in Cuba’s accounts and are believed to amount to between $800 million and $1 billion per year in an economy of $18 billion. Most of these remittances come from the United States. U.S. law allows residents to send up to $1,200 to the island per year. This gives about 60% of the Cuban population access to U.S. dollars.
Two basic facts act as obstacles to the integration of the Cuban economy into the Caribbean region and the global economy. One is the economic situation in Cuba, which is negatively affected by the high prices it must pay for foreign financing because the Cuban government defaulted on its foreign debt in 1986 and therefore does not have access to credit from international financial institutions. The other is the U.S. trade embargo, which caused damages that were estimated in 2008 to amount to $96 billion.
Author: Luis Galanes
Published: June 24, 2012.
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