Before the 1959 revolution, Cuba was one of the richest countries in Latin America. Significant inequalities existed between city and countryside and between whites and blacks. Health care and education were not available to the rural poor, many of whom were seriously undernourished.[1] The country's economy in the middle part of the 20th century, fuelled by the sale of sugar to the United States, had grown wealthy. Cuba ranked 5th in the hemisphere in per capita income, 3rd in life expectancy, 2nd in per capita ownership of automobiles and telephones, and 1st in the number of television sets per inhabitant. Cuba's literacy rate, 76%, was the fourth highest in Latin America although two-thirds of the people received three years of education or less; one-third never attended school and half the adult population could neither read nor write.[2] Cuba also ranked 11th in the world in the number of doctors per capita, although there was massive inequality in the distribution of doctors; for example more than 60% of all doctors lived and worked in Havana in 1958 and even when they worked outside Havana province they typically worked in other provincial capitals.[3]

US companies dominated the Cuban economy before the Revolution, controlling 80% of Cuba's trade. US firms ran public utilities, the railroad, and all of the oil refineries. Two-thirds of food production came from US-owned agro-business enterprises. US developers owned half of the arable land on the island.[2] Just 8% of landholders owned three-quarters of the land. At least 25% of the population was unemployed. 20% of the population received 58% of the income, while the bottom 20% took in just 2%.[2]

According to PBS, a thriving middle class held the promise of prosperity and social mobility.[1] According to Cuba historian Louis Perez of the University of North Carolina at Chapel Hill, "Havana was then what Las Vegas has become."[4]

 

Cigar production in Santiago de Cuba

After the Cuban Revolution and before the collapse of the Soviet Union, Cuba depended on Moscow for substantial aid and sheltered markets for its exports, valued at $65 billion in subsidies in total from 1960 to 1990. This accounted for between 10% and 40% of Cuban GDP, depending on the year.[5] The loss of these subsidies sent the Cuban economy into a rapid depression known in Cuba as the Special Period, which saw the country's GDP decline by 33% between 1990 and 1993.[6] Cuba took limited free-market oriented measures to alleviate severe shortages of food, consumer goods, and services. These steps included allowing some self-employment in certain retail and light manufacturing sectors, the legalization of the use of the US dollar in business, and the encouragement of tourism. Cuba has developed a unique urban farm system called organopónicos to compensate for the end of food imports from the Soviet Union. The U.S. embargo against Cuba was instituted in 1960 in response to nationalization of U.S.-citizen-held property and was maintained on the grounds of perceived human rights violations. It is widely viewed that the embargo hurt the Cuban economy. In 2009, the Cuban Government estimated this loss at $685 million annually.[7]

In 2005, Cuba had exports of US$2.4 billion, ranking 114 of 226 world countries, and imports of US$6.9 billion, ranking 87 of 226 countries.[8] Its major export partners are Canada 17.7%, China 16.9%, Venezuela 12.5%, Netherlands 9%, and Spain 5.9% (2012).[9] Cuba's major exports are sugar, nickel, tobacco, fish, medical products, citrus fruits, and coffee;[9] imports include food, fuel, clothing, and machinery. Cuba presently holds debt in an amount estimated at $13 billion,[10] approximately 38% of GDP.[11] According to the Heritage Foundation, Cuba is dependent on credit accounts that rotate from country to country.[12] Cuba's prior 35% supply of the world's export market for sugar has declined to 10% due to a variety of factors, including a global sugar commodity price drop that made Cuba less competitive on world markets.[13] It was announced in 2008 that wage caps would be abandoned to improve the nation's productivity.[14]

Cuba's leadership has called for reforms in the country's agricultural system. In 2008, Raúl Castro began enacting agrarian reforms to boost food production, as at that time 80% of food was imported. The reforms aim to expand land use and increase efficiency.[15] Venezuela supplies Cuba with an estimated 110,000 barrels (17,000 m3) of oil per day in exchange for money and the services of some 44,000 Cubans, most of them medical personnel, in Venezuela.[16][17]

 

Cubans are now permitted to own small businesses in certain sectors.

In 2010[update], Cubans were allowed to build their own houses. According to Raúl Castro, they could now improve their houses, but the government would not endorse these new houses or improvements.[18] There is virtually no homelessness in Cuba,[19][20] and 85% of Cubans own their homes[21] and pay no property taxes or mortgage interest. Mortgage payments may not exceed 10% of a household's combined income.[citation needed].

On 2 August 2011, The New York Times reported that Cuba reaffirmed its intent to legalize "buying and selling" of private property before the year's end. According to experts, the private sale of property could "transform Cuba more than any of the economic reforms announced by President Raúl Castro's government".[22] It would cut more than one million state jobs, including party bureaucrats who resist the changes.[23] The reforms created what some call "New Cuban Economy".[24][25] In October 2013, Raúl said he intended to merge the two currencies, but as of August 2016[update], the dual currency system remains in force.

 

Tobacco fields in Viñales

In August 2012, a specialist of the "Cubaenergia Company" announced the opening of Cuba's first Solar Power Plant. As a member of the Cubasolar Group, there was also a mention of ten additional plants in 2013.[26]

In 2016, the Miami Herald wrote, "... about 27 percent of Cubans earn under $50 per month; 34 percent earn the equivalent of $50 to $100 per month; and 20 percent earn $101 to $200. Twelve percent reported earning $201 to $500 a month; and almost 4 percent said their monthly earnings topped $500, including 1.5 percent who said they earned more than $1,000."[27]

In May 2019, Cuba imposed rationing of staples such as chicken, eggs, rice, beans, soap and other basic goods. (Some two-thirds of food in the country is imported.) A spokesperson blamed the increased U.S. trade embargo although economists believe that an equally important problem is the massive decline of aid from Venezuela and the failure of Cuba's state-run oil company which had subsidized fuel costs.[28]

In June 2019, the government announced an increase in public sector wages of about 300%, specifically for teachers and health personnel.[29] In October, the government allowed stores to purchase house equipment and similar items, using international currency, and send it to Cuba by the Cuban emigration. The leaders of the government recognized that the new measures were unpopular but necessary to contain the capital flight to other countries as Panamá where Cuban citizens traveled and imported items to resell on the island. Other measures included allowing private companies to export and import, through state companies, resources to produce products and services in Cuba.

On January 1, 2021, Cuba's dual currency system was formally ended, and the convertible Cuban peso (CUC) was phased out, leaving the Cuban peso (CUP) as the country's sole currency unit. Cuban citizens had until June 2021 to exchange their CUCs. However, this devalued the Cuban peso and caused economic problems for people who had been previously paid in CUCs, particularly workers in the tourism industry.[30][31][32] Also, in February, the government dictated new measures to the private sector, with prohibitions for only 124 activities,[33] in areas like national security, health and educational services.[34] The wages were increased again, between 4 and 9 times, for all the sectors. Also, new facilities were allowed to the state companies, with much more autonomy.[31]

The first problems of the new reform, for the public opinion, were with the electricity prices, but that was amended quickly. Other measures corrected were in the prices to the private farmers.[citation needed] In July 2020, Cuba opened new stores accepting only foreign currency while simultaneously eliminating a special tax on the U.S. dollar[35] to combat an economic crisis arising initially due to economic sanctions imposed by the Trump administration,[36] then later worsened by a lack of tourism during the coronavirus pandemic. These economic sanctions have since been sustained by the Biden administration.[37]