UNIVERSITY OF SANTO TOMAS

FACULTY OF ARTS AND LETTERS

St. Raymund de Peafort Bldg.
Espaa Manila, Philippines

Prepared by: Joseph Andre Dela

Pasion
Subject: HETAR
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Chapter 2

Economic System: Cuba

Cuba is an archipelago of islands located in the Caribbean Sea, 90 miles Southeast of the United States.
Capital: Havana
Land Area: 110,860 km2 (42,803 sq mi)
Provinces: 15

Municipalities: 168
Population: 12 Million with 99% literacy rate
Language: Spanish

Cubas Government Structure

Government type: Totalitarian Communist State (West definition)
Socialist Republic (Marxist-Leninist definition)
Politics: Cuban politics retains a top-down structure run by a minority, but
with very low levels of political opposition.

Ruling Party: Communist Party of Cuba (Founded 1965)

Has the upper-hand when it comes to politics

Cubas Government Structure

Cubas leading institution: Revolutionary Armed Forces (FAR)
Has the upper-hand when it comes to economic decision making. FAR is the go
to in terms of problem solving. It controls 60% of the Cuban economy.
Former President: Fidel Castro (1959 until 2008)

President: Raul Castro (February 24, 2008)

 Rauls government at the highest level is a gerontocracy, with an average age

of over 70, underscoring the theme of continuity and consensus policy
direction that characterizes the regime. Raul is an institution man who is
focused on process and predictability and would like the government to work
better.
Separation of Power: There is no separation of power in the liberal sense.
No meaningful checks and balance in the formal sense.
Civil Society is weak with no common agenda and there is no political
expression with a national reach. It does not provide a vehicle for protest
against the regime.
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 Judiciary: The judiciary is institutionally differentiated but not independent,

as its decisions and doctrine are subordinate to political authorities.

Constitution: Cuba has had five constitutions. The current constitution was
drafted in 1976. In 2002, the Cuban Constitution was again amended to
stipulate that the socialist system was permanent and irrevocable.

Democracy Index 2006 - 2010

Year

Rank

Surveyed

Overall
Score

2006
2008
2010

124
125
121

167
167
167

3.52
3.52
3.52

Electoral
process
and
pluralism

Functioning
of
government

1.75
1.75
1.75

4.64
4.64
4.64

Political
Political Civil
participation culture liberties

3.89
3.89
3.89

4.38
4.38
4.38

2.94
2.94
2.94

Computer ownership bans, computer ownership rates are among the world's lowest. The right to use
the Internet is granted only to selected people and these selected people are closely monitored.
Connecting to the Internet illegally can lead to a five-year prison sentence.

Citizens cannot leave or return to Cuba without first obtaining official permission, which is often
denied.

Human Rights Watch alleges that the government "represses nearly all forms of political dissent" and
that "Cubans are systematically denied basic rights to free expression, association, assembly, privacy,
movement, and due process of law".

Source: The Economist Intelligence Unit's index of democracy

http://www.eiu.com/public/

Indicator
Political Indices
1. "Political Instability Index", The Economist (2009/10)

Rank in the World Rank in Latin America

#25 of 165

#2

2. "Freedom of the Press", Freedom House (2010)

# 190 of 195

#33 of 33

3. Press Freedom Index 2010, Reporters Without Borders (2010)

#166 of 178

# 26 of 26

"Unfree"

"Unfree"

4. "Freedom in the World", Freedom House (2010)

Source: The Economist Intelligence Unit's index of democracy

http://www.eiu.com/public/

In 2014, the Cuban government

continued to suppress dissent, including
harassing, intimidating, and detaining
independent journalists. At the same
time, the country eased some
restrictions on expression, allowing
previously taboo topics to be aired in
the national media and certain
opposition voices to be more widely
heard.

Source: Freedom House Orgnization

https://freedomhouse.org/report/freedom-press/2015/cuba

Legal Environment

Political Environment

Cuba has the most restrictive laws on

freedom of expression and the press in
the Americas. The constitution prohibits
private ownership of media outlets and
allows free speech and journalism only
if they conform to the aims of a socialist
society.

For years, independent or critical

Cuban journalists and bloggers have
suffered harassment for their
reporting on topics deemed sensitive
by the government.

Source: Freedom House Orgnization

https://freedomhouse.org/report/freedom-press/2015/cuba

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Economic Environment
The government owns virtually all
traditional media except for a number of
underground newsletters.

Cuba has one of the lowest internet

connectivity rates in the world. The
majority of users can reach only a
closely monitored Cuban intranet
consisting of e-mail addresses
ending in .cu and a few
government-controlled and approved
websites. The penetration rate for
real access to the global internet is
estimated to be around 5 percent,
and continues to come mostly
through outdated dial-up technology.
There is almost no broadband
service on the island

Source: Freedom House Orgnization

https://freedomhouse.org/report/freedom-press/2015/cuba

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Corruption Perceptions Index 2003 - 2010

Year

Rank

Surveyed

CPI Score

2004
2005
2006
2007
2008
2009
2010
2015

62
59
66
61
65
61
69
63

146
159
163
179
180
180
178
175

3.7
3.8
3.5
4.2
4.3
4.4
3.7
3.7

Source: Transparency International

http://www.transparency.org/

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Cubas Economic Structure

Economic System: State-Controlled Economy
Centrally Planned Economy
Economic Planning Agency: Ministry of the Economy and Planning
Economy: US$56bn worth economy
Banking System: Central Bank of Cuba
Cuban financial system is integrated by 9 banks and a group of non-financial
institutions and offices of representation of foreign financial institutions.

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Cubas Economic Structure

Currency Regime: Monetary Duality (Dual Currency System)
The Cuban economy currently operates with two local currencies the Cuban
peso (1857) and the convertible peso (1994), both with convertibility problems and
multiple and overvalued exchange rates and has been subject to a banking crisis since
2009. It is a veritable monetary and financial jigsaw puzzle. In order to do away with the
dual currency and overcome financial imbalances, monetary policy must devalue the two
domestic currencies. Cubas banks are facing a systemic liquidity crisis with no lender of
last resort to help them out of it.

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 Rationing in Cuba (March 12, 1962) refers to the system of food distribution known in
Cuba as the Libreta de Abastecimiento ("Supplies booklet"). The system establishes the rations
each person is allowed to buy through that system, and the frequency of supplies.

Workforce: 4.9 Million

Employment: 95% of the labor force are employed by the state.
Self-employment requires license from the government. License cost
$12 to $ 200 USD or 40 to 700 Cuban Peso per month
The income tax rates rise progressively

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 Cuba is a net food importer, and manufacturing potential is limited due to high nonwage
cost imposed by the government. Agriculture is Cubas most glaring economic weakness,
with low food imports. Food security is a national security issue.
Infrastructure is decrepit, especially electricity, water, sewage, and transportation.
Lack of free media is a major economic disincentive, and institutional secrecy inhibits
reliable economic statistics.
The most promising sector of the Cuban economy are medicines and biotechnology,
medical services, energy and tourism

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 International Membership:
IMF Withdrew its membership on 2nd April 1964
WBG Withdrew its membership on 14th November 1960
IDB Inter-American Development Bank Not a member
UN Member since 24th October 1945
WTO Member since 20th April 1995

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 Foreign Debt: $17.8 Billion USD Active Debt (Cuba 2007)

$ 21 Billion roughly estimated by analyst
Soviet Union - $26 Billion USD (Frozen)
China - $4 Billion USD (Cubas creditor of last resort)
Venezuela - $3 Billion USD (Cubas creditor of last resort)
Japan - $1.70 Billion USD
Russia - $162 Million USD and recently offered 350 Million
South Africa - $137 Million but recently wrote off and issued
$30 Million aid package
Source of hard currency revenues: tourism, sugar, oil, nickel and
services thru sending an army of doctors oversees.
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Cubas Economic Freedom

Business
Freedom

Trade
Freedom

Mostly Unfree to Repressed

To form and run a business remains constrained by the state. The
application of regulations is inconsistent and non-transparent.

Moderately Free
The trade regime remains largely non-transparent, customs corruption
is common, rules and regulations are burdensome, and imports and
exports are dominated by the government.

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Fiscal
Freedom

Mostly Unfree to Repressed

The overall tax level is punitive. Cuba has a high income tax rate of 50
%. The top corporate tax rate is 30 % (35 % for companies with entirely
foreign capital).

Extremely High
Total government expenditures, including consumption and transfer payments,
are very high. This depicts state dominance over the economy. Expansive
Government
government employment commitments are an obstacle to sound fiscal
management.
Spending

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Monetary
Freedom

Investment
Freedom

Mostly Free to Moderately Free

Inflation has been low by suppressing food cost. The government
determines prices for most goods and services and subsidizes much of
the economy, although some private and informal-market retail activity
is not government-controlled. Food ration is implemented by the
state.
Repressed
Foreign investment must be approved by the government. There is no
foreign ownership of land.

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Financial
Freedom

Property
Rights

Repressed
Cubas financial sector remains underdeveloped, and access to credit
for entrepreneurial activity is seriously impeded by bureaucracy and
the shallowness of the financial market. Over a dozen foreign banks
have opened offices, but they are not allowed to operate freely.
Repressed
Cuban citizens may own land and productive capital for farming and selfemployment. The law and trial practices do not meet international standards for
fair public trials. The constitution subordinates the courts to the National Assembly
of Peoples Power and the Council of State.

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Labor
Freedom

Repressed
The formal labor market is not developed, and the governmentcontrolled labor market has helped to create a large informal economy
and over-employment. In an attempt to reduce labor market rigidity,
the government implemented a measure to allow workers to hold
more than one job. Its impact has been limited.

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Major Economic Burdens:

1. The tightening of the U.S. embargo that took effect on October 1960 and
recently extended until September 14, 2011 by U.S. President Barack
Obama.
2. The collapse of the Soviet Union in 1991 that ended annual US$ 500 per
capita Soviet subsidies or a total 6 billion dollars-per-year subsidy.

3. The difficulty in finding funds as Cuba has negative reputation as to its debt
repayment and that Cuba has no lender of last resort.
4. Dual Currency System
5. The economic system itself.

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If you cant explain it simply,

you dont understand it well
enough.

- Albert Einstein
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End
of
Presentation
japdp
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