Cuba's Government and Economy

Right before the socialist revolution in 1959, Cuba’s economy was best described as lively but unpredictable. Although Cuba was one of the biggest importers of cars and telephones, and President Batista (who went on to become a dictator) oversaw a vast expansion of the sugarcane trade, one-third of the population lived in poverty. Even the middle class was unhappy with the political climate, due to the privileges Batista afforded the labor unions and the wealthiest sugar plantation owners.

What was once a peacful agrarian society populated by indigenous people became a country which has known almost nothing but strife — this is the history of Cuba. However, the country's ethnically diverse population is part of what accounts for Cuba's friendly and lively culture, and the seemingly unbreakable spirit of the Cuban people.

While Havana was an impressive city — some called it the “Latin Las Vegas” — money that didn’t go straight into Batista’s pockets ended up with foreign investors. This hedonistic atmosphere was also rife with signs of poverty, such as rampant prostitution and mafia activity. While foreign businesses and mobsters remained loyal to Batista, revolutionary sentiment rose among the poor and middle class, who longed to bring the economic control to the Cuban people.

Communism in Cuba

The Cuban government is 'stable' but the term is relative, given that it is a communist nation. Technically, Cuban citizens are allowed to vote, but given the nation's current voting systemm, there is little opportunity to exercise this right the way it is in other western countries.

Since the 1959 revolution, led by Fidel Castro and Che Guevara, Cuba has been a socialist republic. The island of less than 12 million people is one of the last remaining socialist countries in the world. The Communist Party of Cuba is the only one allowed to rule. and is dedicated to the creation of a socialist society, but by 2010, even Fidel Castro publicly stated that the communist economic model no longer works for Cuba.

The government in Cuba controls more than 90 percent of the country’s economy, rationing worker’s salaries in exchange for the free healthcare, education, and low cost transportation and housing. The housing available to most Cubans, however, is not in good condition. In the capital city of Havana, over 1 million housing units are considered substandard. By the Cuban government’s own estimation they have around 6,000 houses too few. Many Cubans are currently living in shelters.

Communism and the Economy

The Cuban people are completely reliant on the government to provide healthcare, housing, food, and other basic needs. But the government has not been efficient enough in some areas, which has led many Cubans take matters into their own hands. Cubans who own informal businesses — such as a handyman service – can capitalize on the government’s shortcomings. Some choose to run their small businesses without the complicated government license and heavy tax, and thus risk being shut down if caught.

The 1959 revolution promised 100 percent employment for Cuban people of working age. State Owned Enterprises (SOEs) are the largest employers of Cuban citizens, but there are now 201 categories of jobs that people can hold in the private sector. The Cuban government has begun encouraging privately owned businesses, but it’s unclear how much this will change the Cuban economy, or how long this change in policy will last.

Cuba’s centrally planned economy is controlled by the government, but that hasn’t deterred all foreign investment. Businesses from other countries have poured money into Cuban agriculture, infrastructure, the sugar trade, nickel mining, and of course, tourism. Though the economy isn't great, it is slowly beginning to improve. Despite this, poverty is still a significant issue within the country, so you will likely see examples of it during your trip.

Cuba and the Soviet Union

The collapse of the Soviet Union played a major role in Cuba’s economic development. Cuba’s government had immediately established ties with the Soviet Union after the 1959 revolution. The Soviets had been implementing a Marxist-Leninist state since 1922, and in the 1950s and 1960s they enjoyed a period of scientific and technological successes, as well as relaxed censorship. The Soviets agreed to aid Cuba, and traded fuel for Cuba’s sugar.

These two countries would continue to support each other throughout the 20th century: the Soviet Union negotiated with the United States to prevent it from invading Cuba during the Missile Crisis, and Cuba served as a strong Cold War ally for the Soviets. Economically, the Soviet Union picked up the slack for Cuba, investing billions of dollars in Cuba’s infrastructure, industry, and military.

The Soviet Union began to crumble when General Secretary Gorbachev began to restructure the economy, opening it up for private initiatives. This signalled death knell for the long partnership. The Soviet Union fell in 1991, and Cuba had to suddenly do without its main trading partner.

Cuba plummeted into an economic depression known as the Special Period, in which people were forced to go without gasoline and electricity. Parts of the country even suffered from famine when the government failed to ensure a proper harvest. Fortunately, this crisis was the impetus for an overhaul of Cuba’s industry, healthcare, and agriculture. It also pushed Cuba to expand its tourism.

Politics in Cuba

The media in Cuba is strictly supervised by the Cuban Communist Party’s Department of Revolutionary Orientation. There is no advertising, except billboards praising communism, and ad campaigns for politicians. Underneath the executive branch in Cuba is the legislature, which is called the National Assembly of People’s Power. This consists of 612 members, each elected from a different municipality every five years. The purpose of the committee is to sanction the decisions of the Executive power.

After serving as Cuba’s president for 49 years, Fidel Castro turned power over to his younger brother in 2008, due to chronic illness. Interestingly, President Raúl Castro stated that he would establish term limits for his office.

Natural Resources

The Cuban government has begun to make strides in improving certain elements of the ecosystem, including their much-publicized organic farming and new permaculture system. Cuba’s inability to import pesticides and chemical fertilizers has helped to preserve the health of its land.

Though oil was discovered in Cuba in the early 1900s, it wasn’t until the collapse of the Soviet Union that Cuba was forced to find its own crude oil. There are now three offshore oil fields along the Cuban coastline, and the government has announced that its reserves hold about 20 billion barrels. This would give Cuba one of the top 20 oil reserves worldwide. Cuba now leases blocks of the ocean floor to other countries for oil exploration, including Russia, Norway, and Vietnam. Environmentalists — and concerned citizens living in Cuba and Florida — fear that Cuba is unprepared for an oil spill, and that all the drilling will harm the delicate ocean ecosystem. But for now, oil remains a viable economic resource for Cuba.

Changes for Cuba

Foreign investment in Cuban tourism may be about to see its biggest boom yet. Since the U.S. and Cuba re-established diplomatic relations in 2015, there is hope that an increased number of visitors from the U.S. will help the Cuban economy.

Since President Raúl Castro’s recent decision to expand the private sector, many speculate that a new middle class will develop quickly. There is no doubt that a strong middle class would be a heartening sign for a people that have struggled to live by their own rules for so long.

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