David

Cuba Economical Analysis

Figure 1

Statistics

GDP (Billion $) 87.13

GNI (Billion $) 208.9

GDP/Capita ($) 7,602

GNI/Capita ($) 6,679

Adult literacy rate – 99.75%

Life expectancy (Years) 80

HDI (Human Development Index) 0.77 (Rank 73)

GDP growth (Annually) 4.4%

GDP/Capita growth (2015-2016) 4.24%

The Republic of Cuba is an island located south of Florida, in the Caribbean ocean. With a surface area of 109,884 km2, Cuba is the largest island in the Caribbean. As of 2016, Cuba's population was 11.48 million, with about 90% speaking the official language: Spanish. In 1959 Cuba's government was overthrown by Fidel Castro during the Cuban revolution. During this period, Castro established a socialist party in the Cuban government, making it the first closed market economy in the western hemisphere.

After Fidel Castro had turned Cuba into a communist country, it became a lucrative ally and trading partner for the Soviet Union. During the Cold war era (1947-1991) the Soviets were looking for communist allies. Cuba, a country close to America was a very strategic position. Diplomatic ties were established and the Soviet Union became allies with Cuba. Over the Cold war period, the Soviet Union would support Cuba economically and provide military aid in exchange for using Cuba's proximity to America as a military advantage.

In 1991 the Soviet Union collapsed, leaving Cuba without its economical support. This time of hardship became know as the "Special Period" for Cuba.

Current Economical information

Export

Cuba is a planned economy, meaning that most enterprises and businesses are run by the government. Since Cuba is an island and there are not enough raw materials for manufacturing, its main export consists of miscellaneous items.

The export side of Cuba's GDP is mostly made up of the following items: raw sugar, rolled tobacco, nickel mattes, hard liquors and other alcohols, crustaceans, fruit juice, charcoal, and refined petroleum.

Figure 2

These exports only make up around 4% of Cubas GDP. The rest of the GDP is from the services Cuba provides. Cuba is one of the most visited places in the Americas, with Cuba receiving about 4.8 million tourists in 2018. Services used by these tourists all count towards the GDP, accounting for about 73.5%. The rest of the GDP is from industry.

Figure 3

Import

Since Cuba is an island and has no space for production of its own machinery and mechanical parts, those are some of the largest imports. Other things include vegetable products, animal products, chemical products, transport vehicles, metals, textiles and plastics.

Above is a graph showing the imports and export difference in Cuba. For Cuba, the import rates are much higher because it's GDP consists of mostly services. Since Cuba is an Island it has to import most of its natural resources.

Trading partners

Currently, Cuba's largest import and export partners are as follows:

As seen in figure 4 and 5, Cuba trades with several countries around the globe. Even though it would be beneficial for Cuba and America to trade, due to the location, the two countries don't trade due to their history.

The first reason Cuba and America don't trade is due to the American Embargo. After the revolution an Embargo was imposed on Cuba by America, hindering large-scale international trade. This is why many of Cuba's oldest trading partners are south-American countries like Venezuela. Another reason is the different economic systems. America is an open-market or free economy, and Cuba is a planned or close-market economy. The second reason is due to the presence of Soviet military in Cuba during the Cuban missile crisis, which also caused tension between the two countries.

Figure 4

Export destinations:

Figure 5

Import origins:

Figure 6

Cuba during economic shocks

Figure 7

During the "Special period", Cuba had no more financial support from its former ally the Soviet Union. In 1985, 6 years before its collapse, the Soviet Union was Cubas largest trading partner, accounting for over 70% of Cuba's entire trade.

Figure 6 shows the GNI and GDP of Cuba over the last 70 years. From 1959-1989 the steady increase in both values can be seen. This was the time the Soviet Union supplied Cuba with oil and economic support. As seen in the chart, in 1991, there was a massive GDP and GNI reduction. During this time, Cuba lost 80% of its trading partners and its GDP got reduced by approximately 47%. This drop happened extremely quickly and left Cuba in economic shock, causing it to go into a large debt.

Cuba has been recovering steadily over the past few years, despite its economic situation. This could be due to its closed market system, which in general are more self-sustainable and prepared for economic shocks than other systems. Cuba is still a developing country and with 5.5% inflation rates, economic inequalities and many unpaid debts, it has a long way to go before being a fully thriving economic system.

Income distribution

Since Cuba's economy is built on a socialistic ideology, one of its main purposes is to distribute income fairly and equally. Many Cubans make around USD$ 20 a month. Even though there is a lot of poverty, the equity of income was quite well preserved. The age dependency ratio in Cuba as of 2016 was 43%. This means 43% of the population is in a standard working age (15-64). In every economic system, there will always be inequality and Cuba is relatively balanced. Another reason for income inequality in Cuba is the migration of Cubans after the revolution. More than 500,000 Cubans emigrated to Miami in the 1960s because they opposed Fidel Castro's views. In the 1980s another large amount of Cubans emigrated to Miami due to economic reasons. The more recent migrants have close ties with their Cuban relatives today and support them financially. This support causes wealth differences between families and therefore it increases the equality gap.

Changes to the economic system

In 2015, 1 year before his death president Fidel Castro claimed that he wanted to keep Cuba's socialistic values but introduce new, open market features so that Cuba can grow further as an economy. Cuba would then transition into a mixed economy, which many nations are in the world today.

Works Cited

Baron, Christof. “Cuba - GDP Distribution across Economic Sectors 2015 |

Statistic.” Statista, 2015, www.statista.com/statistics/388566/cuba-gdp-distribution-across-economic-sectors/.

Grillet, Benjamin. “Cuba – WID – World Inequality Database.” WID, 2017, wid.world/country/cuba/

Index Mundi. “Cuba - Age Dependency Ratio.” Cuba - Age Dependency Ratio, 2016, www.indexmundi.com/facts/cuba/age-dependency-ratio.

International Monetary Fund. “List of Countries by Projected GDP.” List of Countries by Projected GDP 2018 - StatisticsTimes.com, 6 May 2018, statisticstimes.com/economy/countries-by-projected-gdp.php.

Simoes, Alexander. “Cuba.” OEC - Cuba (CUB) Exports, Imports, and Trade Partners, 2014, atlas.media.mit.edu/en/profile/country/cub/#Imports.

Trading Economics. “Cuba - GDP per Capita Growth (Annual %).” Cuba Gdp Per Capita Growth Annual Percent, 2019, tradingeconomics.com/cuba/gdp-per-capita-growth-annual-percent-wb-data.html.

World Bank Group. “Population, Total.” Population, Total | Data, 2019, data.worldbank.org/indicator/SP.POP.TOTL.

Image bibliography

Figure 1- Maps, Google, 2019, https://www.google.com/maps, 14/3/19

Figure 2,3,4,5,6-

Simoes, Alexander. “Cuba.” OEC - Cuba (CUB) Exports, Imports, and Trade Partners, 2014, atlas.media.mit.edu/en/profile/country/cub/#Imports.

Figure 7- Grillet, Benjamin. “Cuba – WID – World Inequality Database.” WID, 2017, wid.world/country/cuba/