Country Fact Sheet Cuba Table of contents

Political Structure⁴

The Communist Party of Cuba (PCC) has been the only legal political party since 1965. The Asamblea Nacional del Poder Popular (the National Assembly of People’s Power) is the paramount state institution, “representing and expressing the sovereign will of the Cuban people”. Elections to the Assembly take place every five years; the most recent ones were held in 2008. Under the current legislature, the Assembly includes 611 members of which 43 percent are women.

In principle it is not compulsory for candidates to belong in the PCC, although in practice almost all deputies are members of the Party or of an affiliate organisation. Candidates for the National Assembly are chosen by Candidacy Commissions chaired by local trade union officials and composed of elected representatives of “mass organisations” representing workers, young people, women, students and farmers. There is only one candidate per seat in the national and local assemblies.

The Assembly members – “Diputados” – elect the 31-member Council of State. The President of the Council of State is the Head of State and Government. The Council of State holds the legislative power when the Assembly is in recess. The Council of Ministers exercises executive and administrative functions through its 9-member executive committee.

The Constitution provides for independent courts; however it explicitly subordinates them to the National Assembly and to the Council of State, with the People’s Supreme Court being the highest judicial body.

Fidel Castro was Head of State and Government from 1959 (marking the date of the revolution that overthrew the regime of General Batista) to February 2008. Raul Castro was elected President of the Council of State by the National Assembly on 24 February 2008. Following his appointment as President of the Council of State, Raul Castro announced a series of reform measures ranging from largely symbolic reforms, such as allowing Cubans to own mobile phones, stay in international hotels or buy DVDs, to farther-reaching reforms such as the lease of agricultural land, the decentralisation of some decision-making in this sector and the liberalisation of private taxi transport. No significant new reform measures are expected to be decided before the next Congress of the Communist Party. The Party Congress had not met for 12 years and was frequently postponed. A consultation campaign, unusual for Cuba, began in December 2010. It finally took place in April 2011.⁵ The Congress decided on an important number of economic reforms amongst other the liberalisation of limited form of free enterprise and the reduction of the number of civil servants. A Communist Party convention, addressing political issues will likely follow in 2011.

In January 2011 Castro made another cabinet shuffle showing an increased role for career military leaders and a continuation of placing long-time allies in top posts. Dissident movements are active despite strong repression. The European Union has underscored its dissatisfaction with the human rights situation, and the U.S has consistently opposed easing of its embargo until Cuba implements political and economic reforms. The U.S. sanctions law also precludes any major shift in US policy while either Fidel or Raúl Castro is in power. However, in March 2009, Washington lifted Bush-era restrictions on travel and remittances, and relaxed limits on the sale of food and medicine. Washington announced another round of easing restrictions on remittances and travel in late 2010/early 2011. Any more substantive U.S. opening is likely to come very slowly. In 2006 Cuba signed a “'Peoples' Trade Agreement” with Venezuela and Bolivia, and the resultant access to Venezuelan oil on favourable terms is now a critical part of Cuba’s economy. Other countries have also forged closer ties with Cuba in recent years, including Russia, Brazil, China and other Asian countries like Vietnam. Cuba is very wary of heavy dependence on any one relationship.

The civil and political rights situation in Cuba is still a matter of concern, in particular with regard to the situation of political prisoners and restrictions on freedom of expression, such as access to media, and internet use.

In February 2008, Cuba signed the International Covenants on Civil and Political Rights and on Economic, Social and Cultural Rights. In February 2009, Cuba ratified the International Convention for the Protection of All Persons from Enforced Disappearance.

2. Economic Performance - synthesis⁶

Cuba has a dual monetary system. Two currencies are in circulation: the Cuban convertible peso (CUC) is equivalent to 1.08 USD and to 24 Cuban pesos (CUP) or moneda nacional (but the official exchange rate of 1:1 is also used for some public transactions). The economy has a rather competitive external component (nickel, tourism, biotechnology, services) for which the CUC is used, and a protected and not very efficient domestic component managed in CUP, as well as a parallel economy⁷.

In 2008, Cuba spent 50 percent of its current budget on agricultural and energy imports. This has resulted in a current account deficit exceeding 2.5 billion USD (4-5 percent of GDP), which has drained the cash reserves of the Cuban state. Cuba has the world’s third largest reserves of nickel and cobalt, it exports high quality cigars and rum, and has a service industries, high-tech biotechnology and a high level of performance in ICT and health. Offshore oil drilling operations in the Exclusive Economic Zone (EEZ), initially planned for 2009, have been postponed. The Cuban government estimates that there could be 20 billion barrels of oil reserves in its offshore fields. Cuba currently imports 50 percent of its oil from Venezuela on highly preferential terms.

Tourism is another important source of income for Cuba, with over 2 million visitors every year, including 900,000 Canadian and 200,000 British tourists, bringing gross revenues of 2 billion USD. If the US Congress decided to lift its ban on US citizens travelling to Cuba, this could represent a potential flow of 2 to 3 billion USD annually.

It is estimated that remittances from Cuban migrants were about 800 million USD in 1998 and 1 billion USD at the end of 2007. Most of the remittance flows originate from the US, although between 2005 and 2009 estimated remittances from the US fell from 81 to 53 percent as a consequence of the expansion of migration to other countries such as Spain, where the share increased from 12% to 23%. It is reported that many Cubans have stopped sending money back to their home country as a consequence of the global economic crisis.

Due to restrictions in the US and Cuba, remittances are often sent through non-official channels, which makes the true figure difficult to calculate.

The authorities maintain fairly restrictive rules on foreign direct investment (FDI), which has to fulfil several criteria: technology transfer, provision of capital and export markets. The principal investors in the island are Italy (telecoms), Canada (oil, nickel) and Spain (hotels).

Even if Cuba’s human development index (HDI) is high, the living conditions of Cuban people are not easy. Overall, the current economic situation of Cuba is serious. Adding to the structural weaknesses of the economic system, coupled with the long-standing impact of the US embargo, the Cuban economy was seriously affected by the combined effect of the 2008 hurricanes (500,000 houses destroyed or damaged, temporary evacuation of some three million Cubans, and overall damage and losses estimated at almost ten billion dollars, i.e. over 20 per cent of Cuban GDP), rising food prices (Cuba imports 80 percent of its food). Services dominate the Cuban economy, despite the marginal character of the private sector, and their share has increased in recent years. According to estimates based on the latest available data from national sources, services accounted for 69.8 percent of GDP in 2007, compared with 57.2 percent in 1990.

The whole economy is controlled by the state, which acts not only as a provider of both commercial and non-commercial services, but also as a controller of trade in services. In 1990, the agriculture sector accounted for 10.8 percent of GDP; today, it is estimated at less than 4 percent, even though it employs 18.57 percent of the population. The decline of the sugar industry, a lack of finance for agricultural imports and the weak incentives for farmers have resulted in a fall in the share of agriculture in the Cuban economy. Until 2002, sugar accounted for around one half of the land area under cultivation, but a radical restructuring programme initiated during that year has halved this area. Today, there are 700,000 hectares devoted to sugar cane in the country, of which close to 50 percent are harvested each year. Eventually, this is expected to facilitate an expansion of other export crops (mainly citrus and tropical fruits), as well as food crops and forestry.

Industry accounted for an estimated 25 percent of GDP in 2007, down from 32 percent in 1990. After a sharp decline in industrial production in the early 1990s, new investments have brought a recovery in some industries. These include: nickel mining, steel production, light industries supplying the tourism sector and - since the launch of a new housing programme in the second half of 2005 - the construction materials industry.

The Cuban armed forces control significant parts of the economy. As part of the concept of “perfeccionamiento empresarial” (perfecting management), their entities manage the most lucrative sectors of the economy in the country. Boosted by its economic success, the military-industrial Cuban system has grown in importance. Its elites are a significant factor of growth.

The need to make the Cuban economy more efficient and self-sufficient is recognised by the Cuban authorities and reiterated at the highest levels. Despite the contribution of Venezuelan subsidies related to purchases of services (especially medical) from Cuba. Cuba has been virtually insolvent since January 2009. Castro stated in his July 2009 speech “no individual, and no country, can indefinitely go on spending more than they earn”. Apart from Venezuelan aid credits to buy oil, loans from China, Brazil and Russia and guarantees capped by Euler-Hermes, Cuba has no access to long-term finance due to its unilateral moratorium on debt since 1986 and the US embargo.

Measures taken by the government to deal with the economic situation are adversely affecting external trade and investment. Banks are not allowed to pay cash directly and transfers in foreign currency are held back by the Central Bank (cf Resolution 1/2009 which imposes restrictions and increased surveillance measures on account movements in order to “avoid undue use of bank services”). Hence, money is withheld in the banks, and the Central Bank uses it for its own payments, thus putting foreign firms in the hands of the Central Bank. Up until now, the Central Bank has implicitly required foreign enterprises to be patient, an expectation which was made more explicit by the authorities in late 2009. Reportedly, in December 2009, the Central Bank also levied a one-off “tax” of 19 percent on all CUC denominated accounts of Cuban public entities.

Cuba is not a member of any of the main International financial institutions (IFIs). The Cuban government withdrew from the World Bank in 1960. Since the budget deficit reached its peak at 6.7 percent of GDP in 2008, economic observers estimate that the Cuban authorities have managed to narrow the budget shortfall in 2009, and this trend is set to continue in 2010.

According to statements by President R. Castro and the Minister for Economy and Planning, Marino Murillo, the main focus in 2010 will be on increasing domestic productivity, careful investment planning, and on sectors producing for export, with an attempt to balance the budget by a tightening of budgetary allocations and even cuts in some of the social benefits for the population. This will involve significant changes, including decentralised decision making and an expansion of the role of markets in some areas, particularly in agriculture and food distribution and retail. A medium-term economic plan was announced on the same occasion, with the 2011-2015 economic plan due to be drafted in the course of 2010.

Although there are plans to formulate a strategy to move towards a single currency, which is expected to remove a major barrier to economic growth, the slowing down of the economy in 2009 delayed efforts to bring the two national currencies (CUC and CUP) into closer alignment.

While petty corruption is pervasive and socially acceptable due to low salaries, corruption involving large amounts is uncommon in Cuba and is frowned upon by the population. Cuba ranks 63^rd (out of 180) in the Corruption Perception Index of the Transparency International report of 2008. In the past, the Cuban government has implemented several large-scale initiatives to reduce theft of state property (i.e. gasoline, meat), but the corrective effects cannot be sustained due to the gap between prices and salaries. A supplement to salaries is being implemented to compensate certain benefits in kind that have been discontinued, such as meals for office workers.

In view of its geographical and economic characteristics – small economy, overall poorly developed industrial base, low productivity of the agricultural sector – Cuba depends mostly on imports for its current operation. In 2008, asset imports rose by 43.8 percent and exports by 2.1 percent. The result is a negative trade balance of 10.7 billion CUC (11.5 billion USD), which increased by 4 billion compared to 2007, i.e. a progression equivalent to almost 70 percent of the deficit.

Three key trade partners have emerged since the beginning of the decade: a) Venezuela, under the Caracas and Petro Caribe agreements, b) China, with priority being given by the authorities to purchases of consumer and industrial goods of Chinese origin, and c) the United States, which became Cuba’s 5^th largest partner in 2007 in spite of the embargo (one way – Cuba can not export to the US). Imports from the US, which had been prohibited by US law since 1961, resumed in 2002, but trade with the US is restricted to imports of food and agricultural and pharmaceutical products. Canada and Spain also carry considerable weight - the former because of its proximity and important presence in the Cuban economy, particularly in the nickel sector, and the latter as a longstanding partner and main investor in the tourism industry.⁸

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