BUS TO ECONOLAND#3 - CUBA
- Dương Yên Thy
- 2 thg 2
- 5 phút đọc
Đã cập nhật: 5 thg 2
by Dương Yên Thy, và Nguyễn Anh Trâm
Introduction
Welcome, all readers, to the third stop on the Bus to Econoland journey! This time, we will explore a very interesting economy: Cuba. Let's dive into the details with us!
Cuba is an island nation located in the Caribbean, south of the United States and east of Mexico. With an area of approximately 110,000 km², it is the largest island in the Caribbean, home to over 11 million people. Cuba is famous for products like sugar and tobacco. Despite the U.S. embargo, Cuba has achieved significant accomplishments in many fields.
We chose Cuba because Vietnam and Cuba have a traditionally close diplomatic relationship. Despite many economic difficulties, Cuba has remained resilient.
Historical context
Cuba's economic history has undergone major transformations. Before 1959, the economy was heavily dependent on the U.S., primarily producing sugar with a monotonous economic structure and a large wealth gap.
Following the Cuban Revolution, the country transitioned to a socialist economic model, nationalizing the means of production. Between 1959 and 1990, Cuba received aid from the Soviet Union, boosting development in education and healthcare but increasing external dependence. From 1990 to 2000, the economy fell into a severe crisis after the dissolution of the Soviet Union led to a lack of support. GDP plummeted, resulting in food and fuel shortages. Consequently, Cuba began opening up to tourism and allowed the use of USD to attract foreign investment.
From 2000 to the present, Cuba has gradually developed while facing a prolonged U.S. embargo, alongside natural disasters and epidemics that have caused slow economic growth and hardships for the people.
Cuba occupies a strategic position in the Caribbean, near international shipping routes and the U.S., which is favorable for trade. However, political tensions and the U.S. embargo have reduced its ability to access international markets.
Cuba's GDP is approximately $107 billion, ranking 69th out of 197 countries globally. Per capita income was about $9,600 in 2020, which is around the world average.
Recent economic trends
• GDP growth approximately 1% in 2025
• GDP: $107 billion
• Per capita income: ~$7,500 (2025)
• Inflation: ~25%
• International tourists decreased by about 25%
• Unemployment rate: ~3.3%
• Trade balance deficit: ~$6.5 - $7.4 billion
In the 2000s, Venezuela was the largest supplier of preferential crude oil through bilateral cooperation (exchanging oil for medical services and experts), helping Cuba reduce energy import costs.
However, in 2010, due to a sharp drop in oil production, lack of investment, and international sanctions, Venezuela significantly reduced oil exports to Cuba. This caused severe fuel shortages, forcing rolling blackouts and disrupting industry, transportation, and services.
Tourism was also affected, causing difficulties as Cuba lacks sufficient domestic alternative energy. This led to increased import costs and decreased foreign currency income, resulting in a trade deficit and low exchange rates. Rising costs have triggered inflation and low GDP growth.
The agriculture sector remains important but has trended downward recently (~53.4%), showing slow development. Industry has also decreased sharply (by about 23%). Key sectors such as exports and tourism have also seen significant declines.
Strengths
Subsidized education
Public education in Cuba is free and remains a top priority of subsidies. Up to 2025, the average years of schooling are 11.8 with the elimination of illiteracy. The quality of education was ranked high in Cuba: the University of Havana, for instance, is known as a prestigious and leading educational institution in Cuba, with a relatively high quality of teaching.
Female participation
After the Cuban revolution in 1959, the Federation of Cuban Women (FMC) was founded. It involves women working in fields that cope with the social, political, economic, and cultural challenges that Cuba is facing. Opposite to the tradition of working as house maids and having limited opportunities in agriculture only, women have been offered job training programmes. New school buildings were provided for Cuban women.
The top priority in education and high female participation results in a well-educated workforce and an increase in the size of the labour force.
Weaknesses
Import dependent & Foreign trade sanctions
Although Cuba has a well-educated workforce, it still lacks resources, which are heavily imported from other nations.
Due to historical and political complexities, the Cuban economy has been dependent on imports from other trading partners. Over a course of time, the USSR had been supplying Cuba primarily with oil and other resources. Thus, after the collapse of the Soviet Union in the 1990s, the Cuban economy has been experiencing significant hardship.
Cuba has been tightening its relationship with Venezuela, the crucial source of crude oil and refineries for Cuba. However, the Venezuelan economic crisis results in a loss of imported resources, which has partially given rise to the economic downturn in Cuba.
Notably, in the second presidency of former President Trump, tensions between the US and Cuba have escalated; the economic sanction is inclusive of a total ban on U.S tourism to Cuba and all financial transactions to entities that are controlled by the Cuban military. These U.S sanctions are deep-rooted in historical and political complexities between the two nations.
Not only does the economic sanction reduce imports, thus leading to the current famine and lack of basic goods and services, but it also reduces the island’s growth. As a heavily-dependent country, the downturn eventually worsens.
Inefficient economic system
Despite previous efforts in reforming the system by introducing market-oriented reforms, the Cuban economy remains a centrally planned economy. Therefore, there has been a lack of competition between state-owned enterprises. There are minor incentives to increase productivity (such as employing machinery, investing in R&D, etc.).
The economy also lacks effective mechanisms for the entry/exit of firms, which hinders innovation and the efficient distribution of resources.
Due to the overcontrol of the public sector on production, a rise in underdeveloped markets is seen.
Note that it is import-dependent due to the historical economic structure, which was mainly shaped by dependence on the USSR. The Soviet Union supplied Cuba with numerous resources.
Now that the Soviet Union has collapsed, although Cuba has a well-educated workforce, it lacks resources, and these have to be imported from other partners. It is hard to transition from such a deep-rooted, historic economic structure to a new system.
Ongoing energy crisis
Cuba’s energy infrastructure has been substandard due to the lack of investments and deferred investments.
Recorded in 2024, Cuba’s weak, outdated grid infrastructure caused widespread outages. The unforeseen shutdown of the Antonio Guiteras oil-fired power plant resulted in a total blackout, leaving the city in darkness.
Eventually, the standards of living are severely lowered due to the frequent blackouts and lack of electricity. Although Cuba praises its medical care, it is of paramount importance that healthcare systems rely on electricity to operate. Homes need electricity for their refrigerators, showers, and cooking.
Most thermal power plants in Cuba are run on crude oil and fuel. Thus, this links with the previous section on Cuba’s oil shortages due to its heavy dependency on imports. Not only has Venezuela dwindled the supply of oil to Cuba due to its own economic crisis, but other providers, such as Turkey, have also withdrawn in response to the island’s inability to pay high prices.
Despite Cuba’s hindered potential in its renewable energy sector, significant projects usually get delayed due to the lack of public investment. Notably, the installments of renewable energy requires stable connections of power grids, which are currently unstable. Therefore, it is difficult for the country to fasten its transition to renewable sources.
The COVID-19 pandemic
Following the tragic pandemic is a fall in the number of mules - people who frequently travel back and forth to Cuba, bringing cash, remittances to the country.
Together with a reduction in remittances, the pandemic also contributes to limited tourism, leading to stagnated growth.
References
Bình luận