Cuba's Economy Is Recovering, But Hardships Remain
By Bill Rodgers
31 January 2007
The fate of Cuba's ailing leader, Fidel Castro, has focused renewed
attention on his communist nation and generated speculation about the
Caribbean island's political and economic future. Cuba's economy — now
largely dependent on tourism and subsidies from Venezuela — grew by
eight percent in 2005, according to independent estimates, and continued
expanding in 2006. This growth comes after years of stagnation
following the collapse of the Soviet Union, Cuba's patron, in the early
1990s. VOA's Bill Rodgers reports.
Musicians entertaining visitors to Havana
Tourism is now the mainstay of the Cuban economy. The island's natural
beauty, its Afro-Caribbean culture, and historic sites attract hundreds
of thousands of foreign visitors each year.
Tourism has replaced sugar as the communist nation's top earner of
foreign exchange. The sugar industry — despite production drives that
began in the 1960s — has fallen victim to communism's inefficiencies.
Fidel Castro implanted communism in Cuba with the support of the former
Soviet Union shortly after he came to power in 1959. Once heavily
subsidized by Moscow, the Cuban economy is only now recovering from the
collapse of the Soviet Union in 1991, thanks in large part to financial
support from leftist Venezuelan President Hugo Chavez who has forged
close ties with Mr. Castro.
But Cuba expert Wayne Smith, of the Center for International Policy,
says Venezuela's help is just one factor contributing to the current
expansion of the Cuban economy. "It is not simply that they get cheap
Venezuelan oil. They have something like 14,000 Cuban medical personnel
in Venezuela, for which they are paid handsomely. And they have a new
relationship with China. They have a new oil field, it hasn't come in
yet, but there are other countries already bidding for drilling rights.
And the price of nickel, which is Cuba's leading export, is at an
all-time high so everything is going in their favor."
But not well enough for most Cubans, who can only find ample supplies in
hard-currency stores and can only buy them if they have access to
foreign currency. So while economic growth is up, Ian Vasquez of
Washington's Cato Institute says most Cubans are not benefiting. "The
ration cards only last several days a month. There aren't the products
that most Cubans used to be accustomed to during the time of the Cold
War, and so very basic needs, including basic health needs, are not
being adequately provided by the state because the state has not had the
money to provide it."
For years, Mr. Castro blamed the U.S. economic embargo for his country's
economic troubles, but most experts say the fault lies in the communist
Despite the embargo, Cuba in recent years has been allowed to buy food
from the United States on a cash-only basis. And European and other
foreign companies have ignored the U.S. sanctions by investing in Cuba,
primarily in the tourism industry.
Cuba's military, led by Fidel's brother, Raul, is involved in tourism
and other businesses — a trend that could accelerate after the elder
Castro leaves the scene, according to Wayne Smith: "The Cuban armed
forces have been deeply involved in the economy and especially in the
tourism industry, in which they've shown themselves excellent
businessmen [and] made great profits. I would expect that the armed
forces will continue that role, and that the kind of situation they will
encourage will be one with greater and greater reforms."
As Fidel Castro's designated successor, speculation has centered on what
defense chief Raul Castro might do in a post-Fidel era. Raul is said to
admire China and its economic reforms. But such a policy also poses
risks, says Cato's Ian Vasquez. "The more that an economy is
liberalized, the more that people become independent from the state. So
they have a classic dilemma. They either continue with liberalization
and lose political control, or they crack down and risk instability,
political instability. And I think that's the way Cuba is headed under
But for now, these scenarios are in the future as Cubans try to make
ends meet while they wait to see what happens to their long-time ruler.