ECONOMY OF CUBA

NOVEMBER 26, 2014

Submitted By:

Abdul Rashid Khan (15048)

Ayush Jain(15005)

Submitted to:

Prof. Madan Survase

TABLE OF CONTENT

Chapter 1. Cuba Countrys Description ............................................................................................ 4

1. INTRODUCTION ............................................................................................................................... 4

2. GEOGRAPHY OF CUBA..................................................................................................................... 5

3. LANGUAGE ...................................................................................................................................... 5

4. Government .................................................................................................................................... 6

5. RELIGION ......................................................................................................................................... 6

6. MAJOR HOLIDAYS ........................................................................................................................... 7

7. RITES OF PASSAGE ........................................................................................................................... 7

8. RELATIONSHIPS ............................................................................................................................... 7

9. LIVING CONDITIONS ........................................................................................................................ 7

10. FAMILY LIFE ................................................................................................................................... 7

11. CLOTHING...................................................................................................................................... 8

12. FOOD ............................................................................................................................................. 8

13. EDUCATION ................................................................................................................................... 8

14. CULTURAL HERITAGE .................................................................................................................... 8

15. EMPLOYMENT ............................................................................................................................... 9

16. SPORTS .......................................................................................................................................... 9

17. RECREATION .................................................................................................................................. 9

18. CRAFTS AND HOBBIES ................................................................................................................. 10

19. SOCIAL PROBLEMS ...................................................................................................................... 10

Objective:- ............................................................................................................................................. 11

Research Methodology ......................................................................................................................... 11

Chapter 2. Economy of Cuba ................................................................................................................ 12

1. INTRODUCTION ............................................................................................................................. 12

2. Cuban Revolution .......................................................................................................................... 13

3. Post-Fidel reforms ......................................................................................................................... 13

5. GDP (Annual Growth Rate) ........................................................................................................... 14

5. SECTOR WISE CONTRIBUTION IN GDP .......................................................................................... 15

6. Agriculture..................................................................................................................................... 15

7. Services ......................................................................................................................................... 15

8. Industry ......................................................................................................................................... 15

9. Inflation Rate ................................................................................................................................. 16

10. Unemployment Ratio .................................................................................................................. 17

11. Balance of Trade ......................................................................................................................... 17

12. Current Account Deficit .............................................................................................................. 18

13. Exchange Rate ............................................................................................................................. 19

14. Human Development Index in CUBA .......................................................................................... 20

15. Effect of Internal and External Factor on growth of economy ................................................... 21

Energy Production ............................................................................................................................. 21

Petroleum Exploration ...................................................................................................................... 21

Government policies ......................................................................................................................... 21

Telecommunication .......................................................................................................................... 22

Poverty .............................................................................................................................................. 22

International trade ............................................................................................................................ 23

Foreign investment ........................................................................................................................... 23

The World Bank ................................................................................................................................. 23

Other ................................................................................................................................................. 24

Chapter 3. Current Scenario of Economy ............................................................................................. 25

3.1 Cuba as a Transition Economy .................................................................................................... 25

3.2 Lessons from the Transition Economies ..................................................................................... 25

3.3 The Role of the International Community in the Transition ....................................................... 26

CHAPTER 4. SWOT ANALYSIS ................................................................................................................ 28

STRENGTH ......................................................................................................................................... 28

WEAKNESS ........................................................................................................................................ 28

OPPORTUNITY ................................................................................................................................... 29

THREAT .............................................................................................................................................. 30

CHAPTER 5. ANALYSIS AND FINDING .................................................................................................... 31

Chapter 6. References ........................................................................................................................... 34

Table of Graphs

Graph no. 1 GDP ................................................................................................................................... 14

Graph no. 2 GDP contribution .............................................................................................................. 15

Graph no. 3 GDP Components .............................................................................................................. 16

Graph no. 4 Inflation Rate ..................................................................................................................... 16

Graph no. 5 Unemployment Rate ......................................................................................................... 17

Graph no.6 Balance of Trade ................................................................................................................ 17

Graph no. 7. Penta Graph of GDP parameters ..................................................................................... 18

Graph no. 8 Current Account Deficit .................................................................................................... 18

Graph 9. Trend of HDI in Cuba .............................................................................................................. 20

Table of Figures

Fig 1. States of Cuba ............................................................................................................................. 5

Fig 2 . Exchange Rate ......................................................................................................................... 19

Fig 3. Contribution of Each parameter of HDI ................................................................................. 20

Chapter 1. Cuba Countrys Description

Cuba is the largest island in the Caribbean, and with over 11 million inhabitants, is the second-most

populous after Hispaniola, albeit with a much lower population density than most nations in the

region. It is a multi-ethnic country whose people, culture and customs derive from diverse origins,

including the aboriginal Tano and Ciboney peoples, the long period of Spanish colonialism, the

introduction of African slaves, a close relationship with the Soviet Union during the Cold War, and

proximity to the United States.

Cuba has a Human Development Index of 0.815 as of 2014. According to data it presented to the

United Nations, Cuba was the only nation in the world in 2006 that met the World Wide Fund for

Nature's definition of sustainable development, with an ecological footprint of less than 1.8 hectares

per capita, 1.5 hectares, and a Human Development Index of over 0.855.

1. INTRODUCTION

Cuba, officially the Republic of Cuba, is an island country in the Caribbean. The nation of Cuba

comprises the main island of Cuba, the Isla de la Juventud and several archipelagos. Havana is the

capital of Cuba and its largest city. The second-largest city is Santiago de Cuba. To the north of Cuba

lies the United States (150 km or 93 mi away), the Bahamas and the Turks and Caicos Islands are to

the northeast, Mexico is to the west (210 km or 130 mi away), the Cayman Islands and Jamaica are

to the south and Haiti and the Dominican Republic are to the southeast.

The island of Cuba was inhabited by numerous Mesoamerican tribes prior to the landing of explorer

Christopher Columbus in 1492, who claimed it for the Kingdom of Spain. Cuba remained a colony of

Spain until the SpanishAmerican War of 1898, after which it was briefly administered by the United

States until gaining nominal independence in 1902. The fragile republic endured increasingly radical

politics and social strife, and despite efforts to strengthen its democratic system, Cuba came under

the dictatorship of former president Fulgencio Batista in 1952.Growing unrest and instability led to

Batista's ousting in January 1959 by the July 26 movement, which afterwards established a

government under the leadership of Fidel Castro. Since 1965 the country has been governed as a

single-party state by the Communist Party.

2. GEOGRAPHY OF CUBA

Cuba is an archipelago of islands located in the northern Caribbean Sea at the confluence with the

Gulf of Mexico and the Atlantic Ocean. It lies between latitudes 19 and 24N, and longitudes 74

and 85W. The United States lies 150 kilometres (90 miles) across the Straits of Florida to the north

and northwest (to the closest tip of Key West, Florida), and the Bahamas to the north. Mexico lies

217 kilometres (135 miles) across the Yucatn Channel to the west (to the closest tip of Cabo

Catoche in the State of Quintana Roo).

The main island named Cuba is 1,250 km (780 mi) long, constituting most of the nation's land area

(104,556 km2 (40,369 sq. mi)) and is the largest island in the Caribbean and 17th-largest island in the

world by land area. The main island consists mostly of flat to rolling plains apart from the Sierra

Maestra mountains in the southeast, whose highest point is Pico Turquino (1,974 m (6,476 ft.)).

The second-largest island is Isla de la Juventud (Isle of Youth) in the Canarreos archipelago, with an

area of 2,200 km2 (849 sq. mi). Cuba has an official area (land area) of 109,884 km2 (42,426 sq. mi).

Its area is 110,860 km2 (42,803 sq. mi) including coastal and territorial waters.

Fig 1. States of Cuba

3. LANGUAGE Cubans speak Spanish. Their names are composed of three parts: first (given) name, father's

surname, and mother's maiden name; for example, Jose Garcia Fernandez.

4. Government Under the constitution of 1976, the Republic of Cuba is a "socialist state". A single political party

the Partido Comunista de Cuba (Communist Party of Cuba), also known as the PCC, governs Cuba.

The Communist Party was established by the Constitution as the leading authority in the

government and society. The highest levels of policy are made by the Central Committee of the PCC,

and it exercises control over all formal government institutions. Membership in the PCC was highly

restricted until the late 20th century. The PCC aimed to attract greater numbers of young people,

women, and Cubans of African descent.

The constitution provides for a popularly elected legislature called the National Assembly of People's

Power. The 589 deputies of the Assembly are elected by the people to five-year terms. All

candidates must have the approval of the Communist Party to appear on the ballot. The National

Assembly holds two regular sessions a year. It elects the Council of State, an executive body

consisting of a president, a first vice president, 5 vice presidents, a secretary, and 23 other members.

The council's president serves both as president of the country (head of state) and as premier (head

of government). The president, with the approval of the Assembly council elects the Council of

Ministers, the highest-ranking and most powerful executive bureaus as it enforces laws, directs

government agencies, and conducts Cuba's foreign policy. The Communist party is the only political

party. All citizens 16 years of age and older may vote.

Cuba has 14 provinces, which are divided into about 170 municipalities, with each having its own

assembly. The people elect the members of each municipal assembly. The municipal assemblies of a

province elect the members of the provincial assembly. The Isle of Youth, Cuba's largest offshore

island does not belong to any province and is ruled directly by the central government

Municipal assemblies supervise and control local economic enterprises, including retail operations

and factories that produce goods for the local market. Municipal assemblies also exercise authority

over schools, health services, motion-picture theatres and sports facilities, and all transportation

within municipal boundaries.

Cuba's highest court is the People's Supreme Court. It consists of a president, a vice president, and

the members of the court's five divisions. These divisions, called chambers, are civil and

administrative, criminal, labour, military, and state security. Each chamber consists of a president, at

least two other professional judges, and a number of lay judges. The National Assembly elects the

Justices of the Supreme Court. The president and vice president of the court are nominated by the

president of the Council of State and approved by the National Assembly.

Cuba also has a number of lower courts, which include 14 provincial courts and about 170 municipal

courts that operate throughout the island.

5. RELIGION As a communist country, Cuba has officially condemned participation in religion. Nonetheless, many

Cubans maintain a Catholic tradition, although they do so secretly for fear of punishment. Much

more openly practiced is Santeria, an African-based religion introduced into Cuba by slaves brought

in from Africa in the late 1700s. The rough equivalent of a priest in Santeria is known as a babalao.

When one is initiated into Santeria, he or she dresses completely in white clothing for one year.

6. MAJOR HOLIDAYS Major holidays in Cuba mark significant events in the revolution: January 1 and July 26. May Day, a

communist holiday worldwide, is an official holiday, as is October10 which marks the historic revolt

against Spain that began in 1868. Catholics honour Three Kings Day on January 6, the feast of the

Epiphany.

7. RITES OF PASSAGE Girls in Cuba sometimes celebrate turning fifteen years old with los quince (literally, "the 15"), the

Latin American version of a "sweet sixteen" party. Often los quince is celebrated as festively as a

wedding. The young lady will usually wear an extravagant gown made especially for the occasion.

8. RELATIONSHIPS Cubans are known for their warmth, wit, sense of humour, and resilience. They greet each other by

shaking hands and by saying hola (hello). Like other Latin peoples, Cubans are known for using very

expressive body languagewrinkling one's nose, for instance, means "What?" Traditionally, when

young women went on dates, they brought along a chaperona (chaperone), although this has

recently gone out of fashion.

9. LIVING CONDITIONS The Soviet Union sent aid to the island nation of Cuba. Since the collapse of the Soviet Union in

1991, Cuba has gone through what it calls the "Special Period"a mandatory belt-tightening, or

cutting back on its standard of living. Energy consumption has been drastically reduced, food rations

are low, and people get around on bicycles. Patients must bring their own bed-sheets to the

hospital, and surgeons are given one bar of soap per month with which to wash their hands.

Macetas are people who illegally buy and sell goods such as food, clothes, liquor, medicine

cigarettes, and gasoline. In sharp contrast to the living conditions of the local people, tourists enjoy

the best accommodations, food, and drink that Cuba can offer.

10. FAMILY LIFE Extended families often live together for traditional and economic reasons. Often one or more

grandparent lives with a married couple and their children. For economic reasons, children also tend

to live at home until they marry. Women are expected to work outside the home and are also

expected to cook, clean, and take care of the home.

11. CLOTHING People normally wear casual Western-style clothing. As in so many parts of the world, blue jeans

from the United States are a popular commodity. The guayabera, an embroidered man's shirt, is a

traditional and elegant article of clothing that is still worn today for both formal and informal

occasions.

12. FOOD Like other aspects of Cuban culture, traditional Cuban foods are rich in both Spanish and African

influences. Pork, the meat of choice in a traditional meal, is almost always accompanied by rice and

beans. When white rice and black beans are cooked together, they are called arroz congri, which

literally means "rice with gray." Black beans, prepared many different ways, are a Cuban specialty.

Fried green plantains, called tostones or mariquitas, and ripe plantains, or maduros, round out the

meal. Yuca (cassava), malanga (taro), and boniato (sweet potato) are also commonly served in

traditional meals. Typical fruits include avocados, mangoes, guavas, and papayas. Customary

beverages include guarapo (sugarcane juice) and rum.

Poor economic conditions that resulted in reduced food rations have made the traditional meal a

thing of the past. Rations under the Special Period consist of a piece of bread per person per day,

three eggs per week, and a portion of fish or chicken per month. Milk is available only for children

under the age of eight. Rice and beans are hard to get and many Cubans have not had beef or pork

in years. On the black market, a piece of beef can cost as much as a month's wages.

13. EDUCATION Education is free and compulsory up to the age of seventeen. There are more than four hundred

schools and colleges in rural areas where students divide their time between working in agriculture

and the classroom. Shortages have made it necessary for textbooks to be shared and workbooks to

be erased and passed along to the next class. Higher education is also free. Scientific and technical

fields are emphasized. The University of Havana, founded in 1728, is the leading institution of higher

education on the island. Cuba's government initiated a campaign to wipe out illiteracy in 1961 and

now has one of the highest literacy rates, at 94 percent, in all of Latin America.

14. CULTURAL HERITAGE Music is probably the most important aspect of Cuba's popular culture. Cuban music combines

Spanish and African influences. Typical music styles include charanga, son, rumba, mambo, cha-cha-

cha, and danzon. From a blend of these rhythms evolved salsa which literally means "sauce." Celia

Cruz, known all over the world as the Queen of Salsa, began her career in Havana in the late 1940s

with a group named Sonora Matanzera. In addition to traditional music, Cubans teenagers enjoy

rock and roll, both Cuban and American versions.

In Cuba, ballet is to the fine arts what baseball is to sports: the top. The Cuban National Ballet

Company, founded by its leader and star performer, Alicia Alonso, has performed all over the world.

She is considered one of the best ballet dancers of all time.

Several Cuban writers and poets, including Jos Marti and Alejo Carpentier (190480), have left their

mark upon Latin American literature. A notable poet, Herberto Padilla, whose collection of poems,

Out of the Game , received praise worldwide but was banned in Cuba, was even arrested.

Before Fidel Castro came to power in 1959, Cuban painters and sculptors demonstrated European

influences. Post-revolutionary artists like Manuel Mendive (1944) have incorporated Afro-Cuban

mythology and folklore into their work. Many artists have produced works that protest government

policies, although artists who disagree with the Revolution may be persecuted.

15. EMPLOYMENT The labor force in Cuba is divided almost evenly among service-related jobs, agriculture, trade,

manufacturing and mining, and utilities. Jobs in tourism are highly desirable because of their access

to U.S. dollars and foreign goods. Even teachers, doctors, and engineers have left their professions

to work in tourism jobs because they can earn more money.

16. SPORTS Sports are a very important part of Cuban life and identity. "Sports is a right of the people," reads a

banner inside the arena in the athletic complex in Havana. Castro, himself an athlete and sports

enthusiast, was once offered a contract to pitch on a baseball team in the United States. At the age

of eight or nine, outstanding young Cuban athletes are selected to attend a boarding school where

they take academic courses and play various sports.

Cuba has been referred to as "the best little sports machine in the world," consistently turning out

champion Olympic athletes. In 1992, Cuba won more Olympic medals per capita than any other

country. Cubans excel in baseball, boxing, track and field, and volleyball. Top Cuban athletes are

heroes in their society, but unlike the highly paid athletes in the United States, they only earn about

two to four times the salary of the average Cuban.

17. RECREATION Cuba's state-run television stations are on the air from six to twelve hours a day broadcasting sports programs, novelas (soap operas from Latin America), and some recent American movies. Young

Cubans rarely sit home watching television. When they are not playing sports, young people are

often involved in government youth programs, some of which operate computer instruction centers.

Older Cubans enjoy playing dominoes and chess, sitting in ice cream parlors, and strolling along the

water-front.

18. CRAFTS AND HOBBIES Handmade Cuban cigars, considered the finest in the world, are as much a craft as they are an

important export. More than three million are produced each year, one at a time. An experienced

worker can make a cigar from start to finish in just two minutes.

19. SOCIAL PROBLEMS After the collapse of the Soviet Union in the early 1990s, an already struggling Cuban economy took

a turn for the worse. Many of the social problems in Cuba can be related to its poverty.

The Cuban government is often accused of violating human rights. Members of neighbourhood

watch groups report nonconformist behaviour to the government. Paramilitary agents deal harshly

with protesters.

Tourism has been good for the economy, but locals are not allowed into the resorts unless

accompanied by foreign tourists. Very few blacks are in the upper levels of government. Banned

from membership in the Communist party, gays and lesbians are openly discriminated against, and

AIDS sufferers are quarantined.

Objective:-

Our purpose of study can be summarized as follows:-

To study the macroeconomic policies of the country.

To measure the GDP accounting, unemployment, inflation, real and nominal interest

rates, fiscal policy, the operation of the Federal Reserve Bank and its monetary policy.

To use economic principles to analyze economics by applying models such as demand

and supply to determine quantity and price in markets, and various macro models to

determine real GDP and price levels, and to analyze the effects of fiscal and monetary

policy.

To analyze how changes in fiscal policy (taxes, government spending and changing

deficits/surpluses) and monetary policy are expected to impact outcomes such as

unemployment and inflation.

Students will be able to explain and evaluate basic current economic issues, concepts, and

controversies discussed in media.

To analyze how exchange rate is determined in the long run and the short run.

To measure the effectiveness of national macroeconomic policy in an interdependent

global economy.

Through this project we are going to find out in depth about the Economic Position of Germany

using different types of measurement indicators like GDP, GNP, NNP, etc.

Research Methodology

As we will be doing the whole project from secondary data that we will be getting from the internet.

Apart from the internet we will be taking data from proquest because there are vast data available.

While collecting the data we went through many problems in gathering the authentic data yet we

have the data from valid resources.

We will be doing the project taking in consideration the economic perspective of the country and

widely will be studying the population.

Chapter 2. Economy of Cuba

1. INTRODUCTION The economy of Cuba is a largely centrally planned economy dominated by state-run enterprises

overseen by the Cuban government, though there remains significant foreign investment and

personal enterprise in Cuba. Most of the means of production are owned and run by the

government, and most of the labour force is employed by the state, although in recent years, the

formation of cooperatives and self-employment has been encouraged by the Communist Party.

In the year 2000, public sector employment was 76% and private sector, mainly composed by

personal property, employment was 23% compared to the 1981 ratio of 91% to 8%.Capital

investment is restricted and requires approval by the government. The Cuban government sets most

prices and rations goods to citizens. In 2009, Cuba ranked 51st out of 182 with an HDI of 0.863;

remarkably high considering its GDP per capita only places it 95th.[8] Public services and transport in

Cuba, however, are second-rate compared to more developed counterparts on the mainland. The

country's public debt in 2012 was measured at 35.3% of GDP. At the same time, inflation (CDP) was

ranked at 5.5%. Furthermore, in the same year, the economy encountered a 3% growth in GDP.

Before Fidel Castro's 1959 revolution, Cuba's capital, Havana, was a "glittering and dynamic city.

The country's economy in the early part of the century, fuelled by the sale of sugar to the United

States, had grown dynamically. Cuba ranked 5th in the hemisphere in per capita income, 3rd in life

expectancy, 2nd in per capita ownership of automobiles and telephones, and 1st in the number of

television sets per inhabitant. Cuba's literacy rate, 76%, was the fourth highest in Latin America.

Cuba also ranked 11th in the world in the number of doctors per capita. Several private clinics and

hospitals provided services for the poor. Cuba's income distribution compared favourably with that

of other Latin American societies. A thriving middle class, according to PBS, held the promise of

prosperity and social mobility.

Cuba had a vibrant but extremely unequal economy, with large capital outflows to foreign investors.

The country compared favourably with Spain and Portugal on socioeconomic measures.

Furthermore, its income in 1929 was reportedly 41% of the US, thus higher than in some Southern

states of the US, such as Mississippi and South Carolina The country has made significant progress

towards a more even distribution of income since the Revolution and being placed under economic

embargo by the United States. Following the collapse of the Soviet Union, Cuba's GDP declined by

33% between 1990 and 1993, partially due to loss of Soviet subsidies, and partly due to a crash in

sugar prices in the early 1990s. Yet Cuba has managed to retain high levels of healthcare and

education.

Cubans receive low housing and transportation costs, free education, and health care and food

subsidies. Corruption is common, though allegedly lower than in most other countries in Latin

America. However, in their book, Corruption in Cuba, Sergio Diaz-Briquets and Jorge F. Prez-Lpez

Servando state that Cuba has "institutionalized" corruption and that state-run monopolies,

cronyism, and lack of accountability have made Cuba one of the world's most corrupt states".

2. Cuban Revolution During the Revolutionary period Cuba was one of the few developing countries to provide foreign

aid. Foreign aid began with the construction of six hospitals in Peru in the early 1970s.Foreign aid

expanded later in the 1970s to the point where some 8000 Cubans worked in overseas assignments.

Cubans built housing, roads, airports, schools, and other facilities in Angola, Ethiopia, Laos, Guinea,

Tanzania, and other countries. By the end of 1985, 35,000 Cuban workers had helped build projects

in some 20 Asian, African and Latin American countries.

For Nicaragua in 1982, Cuba pledged to provide over $130 million worth of agricultural and

machinery equipment, as well as some 4000 technicians, doctors, and teachers.

In 1986 Cuba defaulted on its $10.9 billion debt to the Paris Club. In 1987 Cuba stopped paying

entirely on the $10.9 billion Paris Club debts. In 2002 Cuba defaulted on $750 million in Japanese

debts. Some have attributed Cuban economic growth to Soviet subsidies. However, comparative

economic data from 1989 showed that the amount of Soviet aid was in line with the amount of

Western aid to many Latin American countries.

The prostitution of children with lax penalization and human trafficking for profit is reported in Cuba

as a source country for the global black market industry. Cuba has been ranked in the lowest global

rating of Tier 3 which is defined for a government's failure to meet minimum standards to prevent

trafficking and are not making significant efforts to do so.

3. Post-Fidel reforms Either we change course or we sink." President Ral Castro, December 2010[44]

In 2011, the economic reforms or Nuevo lineamientos economics "The new economic reforms were

introduced, effectively creating a new economic system, referred by some as the "New Cuban

Economy". Since then, over four hundred thousand Cubans have signed up to be entrepreneurs. As

of 2012, the government lists 181 official jobs no longer under their controlsuch as taxi driver,

construction worker, and shopkeeper. People may also purchase licenses to work as a mule driver,

palm tree trimmer, well-digger, button coverer, and "dandy"gentleman in traditional elegant

white suit and hat. In effect, the economic system now operates much more like a market system,

however unlike a true market system, it still maintains nationalized companies for the distribution of

all essential amenities (water, power, ...), and other essential services to ensure a healthy population

(i.e. free schooling, ...).

5. GDP (Annual Growth Rate)

The Gross Domestic Product (GDP) in Cuba expanded 2.70 percent in 2013 from the previous year.

GDP Annual Growth Rate in Cuba averaged 2.13 Percent from 1990 until 2013, reaching an all-time

high of 12.10 Percent in 2006 and a record low of -14.90 Percent in 1993. GDP Annual Growth Rate

in Cuba is reported by the National Office of Statistics, Republic of Cuba

Graph no. 1 GDP

Interpretation: This entry gives the gross domestic product (GDP) or value of all final goods and

services produced within a nation in a given year. A nation's GDP at purchasing power parity (PPP)

exchange rates is the sum value of all goods and services produced in the country valued at prices

prevailing in the United States. This is the measure most economists prefer when looking at per-

capita welfare and when comparing living conditions or use of resources across countries. The

measure is difficult to compute, as a US dollar value has to be assigned to all goods and services in

the country regardless of whether these goods and services have a direct equivalent in the United

States (for example, the value of an ox-cart or non-US military equipment); as a result, PPP estimates

for some countries are based on a small and sometimes different set of goods and services. In

addition, many countries do not formally participate in the World Bank's PPP project that calculates

these measures, so the resulting GDP estimates for these countries may lack precision. For many

developing countries, PPP-based GDP measures are multiples of the official exchange rate (OER)

measure. The difference between the OER- and PPP-denominated GDP values for most of the

wealthy industrialized countries are generally much smaller.

5. SECTOR WISE CONTRIBUTION IN GDP

Graph no. 2 GDP contribution

6. Agriculture Analysis:- Cuba imports up to 80% of the food it rations to the public. Despite the Embargo, as of circa 1990, the majority of these imports comes from the United States After coming to power, Ral

Castro, Fidel Castro's brother, has ridiculed the bureaucracy that shackles the agriculture sector.

Before 1959, Cuba boasted as many cattle as people. Today meat is so scarce that it is a crime to kill

and eat a cow without government permission. Cuban people even suffered from starvation during

the Special Period.

7. Services

Analysis:- Services is the main part of the Cubas economy. This sector highly contributes to the total GDP of the country. Cuba is generally based on the service sector for its contribution to the

GDP. Almost 75% of the total GDP comes from the Service sector. Association for the Study of the

Cuban Economy (ASCE) and the University of Havanas Center for the Study of the Cuban Economy

(CEEC) are rare islands of dispassionate empirical analysis in the sea of rhetoric surrounding the

political economy of Cuba.

8. Industry Analysis:- In total, industrial production accounted for almost 37% of the Cuban GDP, or US$6.9 billion, and employs 24% of the population, or 2,671,440 people, in 1996. A rally in sugar prices

since 2009, has stimulated new investment and development of sugar processing.

More recently Cuba's world-class biotechnology and pharmaceutical industry is gaining in its

importance to the economy. It has been claimed that soon it will become Cuba's main source of

foreign exchange. Among the products sold internationally are vaccines against various viral and

bacterial pathogens, and promising anti-cancer vaccines are undergoing exhaustive clinical trials.

Some Cuban scientists, like V. Verez-Bencomo, have been awarded international prizes for their

contributions in biotechnology and Sugar Cane. Cuban vaccines are sold, among other countries, in

Russia, China, India, Pakistan, and several Latin American countries..

Graph no. 3 GDP Components

9. Inflation Rate Analysis:- Inflation Rate in Cuba is expected to increase to 7.90 Percent in June of 2014 from 5.50 Percent in December of 2012. Inflation Rate in Cuba is projected to trend around 3.28, 3.83 and

3.88 Percent in the years of 2020, 2030 and 2050 respectively. In 2015, Inflation Rate is expected to

decrease to 3.35 percent. In 2015, Inflation Rate is expected to decrease to 3.35 percent. In 2015,

Inflation Rate is expected to decrease to 3.35 percent.

Graph no. 4 Inflation Rate

0

10

20

30

40

50

60

70

80

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

GDP COMPONENT

Industry Services Agriculture

10. Unemployment Ratio Analysis:- This entry contains the percent of the labour force that is without jobs. Substantial underemployment might be noted. In Cuba, the unemployment rate measures the number of people actively looking for a job as a percentage of the labour force.

Graph no. 5 Unemployment Rate

11. Balance of Trade Analysis:- Cuba recorded a trade deficit of 9190.30 CUC Million in 2013. Balance of Trade in Cuba averaged -4019.75 CUC Million from 1990 until 2013, reaching an all-time high of -535.50 CUC

Million in 1992 and a record low of -10372.30 CUC Million in 2008. Balance of Trade in Cuba is

reported by the National Office of Statistics, Republic of Cuba

Graph no.6 Balance of Trade

Graph no. 7. Penta Graph of GDP parameters

12. Current Account Deficit

Analysis:- Cuba recorded a Current Account surplus of 330 CUC Million in 2011. Current Account in Cuba averaged -287.43 CUC Million from 1997 until 2011, reaching an all-time high of 513 CUC

Million in 2009 and a record low of -2308.80 CUC Million in 2008. Current Account in Cuba is

reported by the National Office of Statistics, Republic of Cuba.

Graph no. 8 Current Account Deficit

-2500

-2000

-1500

-1000

-500

0

500

1000

2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4

-

13. Exchange Rate

Analysis In 1994 the Cuban Government made it legal for its people to possess and use the U.S. dollar. From then until 2004, the dollar became a major currency. To capture the hard currency

flowing into the island through tourism and remittances - estimated at $500800 million annually -

the government set up state-run "dollar stores" throughout Cuba that sold 'luxury' food, household,

and clothing items, compared with basic necessities, which were bought using the Cuban peso. As

such, a gap in the standard of living developed between those with access to dollars and those

without. Jobs that could earn dollar salaries or tips from foreign businesses and tourists became

highly desirable. It was common to meet doctors, engineers, scientists, and other professionals

working in restaurants or as taxicab drivers.

Fig 2 . Exchange Rate

14. Human Development Index in CUBA

Cubas HDI value for 2013 is 0.815 which is in the very high human development category

positioning the country at 44 out of 187 countries and territories. Between 1980 and 2013, Cubas

HDI value increased from 0.681 to 0.815, an increase of 19.7 percent or an average annual increase

of about 0.55 percent. The rank is shared with Bahrain.

Table A reviews Cubas progress in each of the HDI indicators. Between 1980 and 2013, Cubas life

expectancy at birth increased by 5.5 years, mean years of schooling increased by 3.7 years and

expected years of schooling increased by 2.4 years. Cubas GNI per capita increased by about 104.9

percent between 1980 and 2013

Fig 3. Contribution of Each parameter of HDI

Graph 9. Trend of HDI in Cuba

15. Effect of Internal and External Factor on growth of

economy

Energy Production As of 2011, 96% of electricity was being produced by burning fossil fuels. Solar panels have been

introduced in some of the rural areas to reduce blackouts, brownouts, and use of kerosene. Citizens

were encouraged to swap old inefficient lamps with newer models to reduce consumption. A power

tariff imposed economically punitive measurements on inefficient use of power. This entry is the

total capacity of currently installed generators, expressed in kilowatts (kW), to produce electricity. A

10-kilowatt (kW) generator will produce 10 kilowatt hours (kWh) of electricity, if it runs continuously

for one hour. Electricity - installed generating capacity: 5.914 million kW

Petroleum Exploration As of August 2012, off-shore petroleum exploration of promising formations in the Gulf of Mexico

have been unproductive with two failures reported. Additional exploration is planned. This entry is

the total oil produced in barrels per day (bbl/day). The discrepancy between the amount of oil

produced and/or imported and the amount consumed and/or exported is due to the omission of

stock changes, refinery gains, and other complicating factors. Oil - production: 50,800 bbl/day

Government policies Further information: Rationing in Cuba, Corruption in Cuba and Socialism

Rationing in Cuba refers to the system of food distribution known in Cuba as the Libreta de

Abastecimiento ("Supplies booklet") with coupon booklets. Despite rumors, as of 2012, ration books

at bodegas still supplement families with rice, oil, sugar, and matches, above government average

wage 15 monthly. The government also sells licenses for entrepreneurs to increase tax revenue.

After the 1959 Cuban Revolution, citizens were not required to pay a personal income tax (their

salaries being regarded as net of any taxes). However, from 1996, the State started to impose

income taxes on self-employed Cubans.

The 2012 Corruption Perceptions Index ranks Cuba below 50, indicating undesirable corruption.

Telecommunication Telephone System: - 1.217 million (fixed) & (1.682 million)

Greater investment beginning in 1994 and the establishment of a new Ministry of Information

Technology and Communications in 2000 has resulted in improvements in the system; national fiber-

optic system under development; 95% of switches digitized by end of 2006; mobile-cellular

telephone service is expensive and must be paid in convertible pesos; cell phones in Cuba number

around 2 million; state communications started service of email to cell phones through nauta.cu

accounts; Cuban Government has opened Internet cafes around the island, which are expensive and

offer slow-speed connections

domestic: fixed-line density remains low at 10 per 100 inhabitants; mobile-cellular service expanding

but remains only about 10 per 100 persons

international: country code - 53; the ALBA-1 fiber-optic submarine cable links Cuba, Jamaica, and

Venezuela; fiber-optic cable laid to but not linked to US network; satellite earth station - 1

Intersputnik

Broadcast Media

Government owns and controls all broadcast media with private ownership of electronic media

prohibited; government operates 4 national TV networks and many local TV stations; government

operates 6 national radio networks, an international station, and many local radio stations; Radio-TV

Marti is beamed from the US

Internet: - 1.606 million

Private Citizens are prohibited from buying computers or accessing the Internet without special

authorization; foreigners may access the Internet in large hotels but are subject to firewalls; some

Cubans buy illegal passwords on the black market or take advantage of public outlets to access

limited email and the government-controlled "intranet"

Poverty Typical wages range from 400 non-convertible Cuban pesos a month, for a factory worker, to 700

per month for a doctor, or a range of around 17-30 U.S. dollars per month. However, the Human

Development Index of Cuba still ranks much higher than the vast majority of Latin American nations.

After Cuba lost subsidies in 1991, malnutrition resulted in an outbreak of diseases and general

hunger. Despite this, the poverty level reported by the government is one of the lowest in the

developing world, ranking 6th out of 108 countries, 4th in Latin America, and 48th among all

countries. Pensions are among the smallest in the Western hemisphere at $9.50. In 2009, Ral

Castro increased minimum pensions by 2 dollars, which he said was to recompense for those who

have "dedicated a great part of their lives to working... and who remain firm in defence of

socialism".

International trade The Netherlands receives the largest share of Cuban exports (24%), 70 to 80% of which go through

Indiana Finance BV, a company owned by the Vant Woot family, who have close personal ties with

Fidel Castro. Currently, this trend can be seen in other colonial Caribbean communities who have

direct political ties with the global economy. (For example, British West Indies, United States Virgin

Islands, French outer-territories, and so on). Cuba's primary import partner is Venezuela. The

second largest trade partner is Canada, with a 22% share of the Cuban export market. [74]

Foreign investment Since the Special Period, Cuba has actively courted foreign investment. All would be foreign

investors are required to form joint ventures with the Cuban government. The sole exception to this

rule are Venezuelans, who are allowed to hold 100% ownership in businesses due to an economic

agreement between Cuba and Venezuela. Cuban officials said in early 1998 that there were a total of

332 joint ventures. Many of these are loans or contracts for management, supplies, or services

normally not considered equity investment in Western economies. Investors are constrained by the

U.S.-Cuban Liberty and Democratic Solidarity Act which provides sanctions for those who "traffic" in

property expropriated from U.S. citizens.

The World Bank The relationship cultivated between Cuba and Venezuela in recent years has resulted in agreements

in which Venezuela provides cheap oil in exchange for Cuban "missions" of doctors to bolster the

Venezuelan health care system. Cuba, with the second-highest per capita number of physicians in

the world (behind Italy), sends tens of thousands of doctors to other countries as aid, as well as to

obtain favourable economic terms of trade. In nominal terms, the Venezuelan subsidy is higher than

whatever subsidy the Soviet Union gave to Cuba, with the Cuban state receiving very cheap oil and

the Cuban economy receiving around $6 billion in total annually. According to Carmelo Mesa-Lago, a

Cuban-born US economist. "If this help stops, industry is paralysed, transportation is paralysed and

you'll see the effects in everything from electricity to sugar mills," he said.

Other In a 2007 estimate, Cuba produces 16.89 billion kWh and consumes 13.93 billion kWh with no kWh

of exports or imports. In a 1998 estimate, 89.52% of its energy production is fossil fuel, 0.65% is

hydroelectric, 0% is nuclear, and 9.83% is other production. In both 2007 and 2008 estimates, the

country produces 62,100 bbl. /d of oil and consumes 176,000 bbl. /d with 0 bbl. /d of exports and

104,800 bbl. /d of imports, as well as 197,300,000 bbl. proved reserves of oil. Venezuela is Cuba's

primary source of oil.The country, in a 2008 estimate, produces and consumes 400 million cu m of

natural gas, with no cu m of exports or imports and 70.79 billion cu m of provided reserves. In terms

of agriculture, Cuba produces sugarcane, tobacco, citrus, coffee, rice, potatoes, beans, and livestock.

As of 2009, Cuba has $47.08 billion in revenues and $50.34 billion in expenditures with 34.6% of GDP

in public debt, an account balance of $513 million, and $4.647 billion in reserves of foreign exchange

and gold.

Cubas economic freedom score is 28.7, making its economy one of the worlds least free. Its overall

score is 0.2 point higher than last year, with deteriorations in trade freedom, fiscal freedom,

monetary freedom, and freedom from corruption counterbalanced by an improvement in business

freedom. Cuba is ranked least free of 29 countries in the South and Central America/Caribbean

region, and its overall score is significantly lower than the regional average. Cubas average tariff

rate is 10 percent. The countrys planned economy deters foreign trade and investment. The

financial sector remains heavily regulated, and access to credit for entrepreneurial activity is

seriously impeded by the shallowness of the financial market. The state maintains strict capital and

exchange controls.

Chapter 3. Current Scenario of Economy

3.1 Cuba as a Transition Economy

It was a small step for Cuba, maybe, but with Fidels recent decision to step aside the reform genie

is now out of the bottle. Rauls first actions in office meeting the Vatican representative, signing

human rights treaties, talking about economic reform speak volumes. Rigid control by the Party

and the Revolutionary Armed Forces is directly threatened by a failed economy and unacceptably

low standards of living. The loss of the shield of Fidels charisma exposes the fault lines of the

regime. It is reform hopefully gradual, but maybe not or else.

In a recent op-ed, Moises Naim suggests looking at the Cuban economy in the light of the transition

economies of Eastern Europe. He reminds us that the majority of those regime changes were not

always smooth affairs and that Cubas probably wont be either. Most of the transitions involved

huge and sustained drops in output and social distress. Think in other words, about Albania or

Romania, not the Czech Republic when looking for future scenarios for Cuba.

3.2 Lessons from the Transition Economies

Raul may be right in thinking the regime has time to reform gradually. The Cuban people have really

never experienced democracy or market institutions for any length of time. But what will the new

leadership do with the time?

The economic reform agenda is opaque. Some sort of economic reform along Chinese or

Vietnamese lines is likely with market institutions tolerated in the context of rigid Party control.

(Army-controlled enterprises already dominate the tourist sector and engage in active, if limited,

trade with US agricultural suppliers.) The vagueness of the reform agenda, and Cubas adverse

initial conditions, suggest that the best comparisons are to be found in the less successful transition

economies such as Bulgaria and Georgia.

These less successful reformers had initial conditions similar to Cuba today: very long periods of

time under communism, a dependence on natural resources, a low level of industrialization, and a

slow pace of reform once the transition began. Compared to their more successful transition

counterparts such as Poland and Hungary, the less successful reformers traded relatively less with

their regional partners, had lower per capita incomes, and were relatively more agrarian.

Most troubled transition economies experienced severe output drops following the onset of reform.

Economic policy difficulties included monetary overhang and inflation, overvalued exchange rates,

and large fiscal deficits as the scope for raising revenues was quite limited and the institutional

system for collecting taxes collapsed. The lack of adequate legal frameworks was an enormous

obstacle.

Turning from the past experience of transition economies, the economic situation in Cuba today is

not entirely bleak. In fact, Cuba is benefiting from the same set of factors boosting the rest of the

Latin America.

Economic growth has picked up since 2007 (7% GDP growth in 2012).

Cubas access to Chinese goods and services (about 15% of imports) has helped; the Venezuelan oil

subsidy (in exchange for Cubas export of professional services) has been a life saver.

Rising commodity prices for nickel and cobalt, family remittances, and tourist earnings have helped

boost foreign exchange reserves.

Transition planners would probably seek to take advantage of a number of other potential

advantages for a liberalized Cuba:

Reorienting trade to the US would be of great importance in easing the transition if the embargo can

be eased.

The islands low wage structure suggests plenty of room for growth in assembly operations; the high

levels of human development could promote more skill-intensive offshore operations such as

biotechnology.

A substantial pool of entrepreneurial talent could be tapped in the exile community which could also

provide equity capital.

Cubas low levels of debt could permit significant leveraging once a new legal framework is in place.

3.3 The Role of the International Community in the Transition

The case can easily be made that a smooth and rapid transition in Cuba is in the long-term interests

of the US and Latin America. Just think about the disruptive potential of the worst case scenario.

Depending upon the speed and pace of economic reform, Cuba may not need massive financial

assistance which is probably not going to be forthcoming in any case even if the old regime goes.

(Think Afghanistan.) But it does need other forms of economic cooperation from abroad to ease the

transition pain.

What might this consist of? In the beginning, the most draconian aspects of the US embargo could

be eased, starting with the restrictions on family travel and remittances, disaster relief, and medical

supplies. Further easing might come gradually and in sectors where the US is already trading with

Cuba, such as agriculture. (Despite the embargo, Cuba imports substantial amounts of foodstuffs

from the US.)

The US can also play a useful role in intermediating investment flows between the expatriate

community in Miami and elsewhere, along the lines of the first Taiwanese investments in the

mainland following the easing of US-China tensions in the early 1970s. This could be in the broader

context of US efforts to promote dialogue between the exile community and the islands leadership.

Recent opinion polls among the Cuban-American community in the US suggest that dialogue is not

far-fetched.

Latin American and other nations can also play a most useful role once the US trade restrictions

begin to ease. One could see a relatively rapid rise of interregional trade in the Caribbean, for

example, significant Brazilian assistance to the sugar industry, and the combined diplomatic efforts

of many Latin American countries to maintain the oil trade with Venezuela. Canada has long

pursued a much more open economic and political relationship with Cuba and could possibly be

counted on to ease the US-Cuban dialogue in its early stages.

The key is for the international community principally the US, but not only to facilitate the

economic transition in Cuba while respecting the principle of non-intervention. The economic and

political transition in Cuba will not be smooth in any case; hardship is unavoidable. However, the

alternative scenario of extremely slow reform amid severe economic and social stress would be

much more costly.

CHAPTER 4. SWOT ANALYSIS

(Strengths Weaknesses Opportunities Threats)

STRENGTH

The Cuban population is one of the most educated amongst developing nations. Cuba must

make dramatic improvements in many facets of its traditional and IT economy before

achieving status as a major global IT player. Much of this stems from Cuba's adherence to a

centrally planned economy operating under a political system that discourages capitalism.

Labor costs are lower than for most software developing countries. The continued lack of

privatization of IT and telecommunications providers will maintain excessive prices for

Internet and telecommunications services that will not make technology accessible to the

Cuban citizenry. The current daily economic struggle must be addressed first and foremost

before PC and telecommunication penetration can increase across the island. The Cuban

population remains unenthusiastic about participating in the development of an IT economy

when nearly all citizens must receive government subsidies and rations to survive.

The Cuban government is fostering FDI.

Cuba is already recognized as a leader in biotechnology.

WEAKNESS Cuba is under command economy: its domestic policy is the main determinant of Cubas

economic well-being. Socialist policies, in Cuba as elsewhere, stifle initiative, slow an

economys ability to adapt, and suppress output. (Peters, 2000). In no book of Marx, Engels

or Lenin is it said that it is possible to construct socialism without capital, without

technology, without markets. In the case of a small island like Cuba. It is especially difficult to

develop using only ones' own resources (Fredrick et al, 1998). The biggest problem for U.S.

companies who want to do business in Cuba is whether the Cubans will have any money to

buy their products," Holland &Knight's Sirven said (Maya, 1994)

Increasing external debt: Cubas increasing external debt would be strong discouragement

for the USA to consider Cuba to stop paying for the it imports from USA in advance or

through a third party, for fear of being pulled into the debt Cuban pool. The Cuban

Government defaulted on most of its international debt in 1986and does not have access to

credit from international financial institutions like the World Bank. Therefore, Havana must

rely heavily on short-term loans to finance imports, chiefly food and fuel, and structured

financial instruments tied to more stable revenue sources.

Inadequate financial structures and regulations: Accordingly, each countys financial services

liberalization is guided by the countries own circumstances and financial sector master plan.

Financial liberalization services can have a substantial impact on the orderly development of

the financial sector and maintaining the financial and socioeconomic stability (Prasarn, 2011)

.Therefore the absence of standard business traditions and a lack of financial linkages with

diversified banking system, inadequate air and sea transportation and insufficient

information on investment flows in Cuba is a gap that is limiting for Cuba economic

prosperity.

A non sustainable Market: The gap in the standard of living is widening between those

with access to convertible pesos and those without, thus Cubans have a low purchasing

power compared to other Caribbean nations.

Black markets: Prolonged strictness and the state-controlled economys inefficiency in

providing adequate goods and services have created conditions for a flourishing informal

economy in Cuba

Unresolved business that may take years to settle: Experts cite countless of other problems,

not the least of which is the uncertainty of the structure of a post-embargo Cuba. The

questions are endless: Under what legal system will Cuba operate? With which currency?

Who owns the land? How will businesses lease or buy property? Will existing joint venture

laws, which limit foreign investment to 49 percent, still be operable? How will claims against

properties expropriated by the revolution - U.S. claims alone are worth $5.4 billion in today's

dollars - be resolved? What are the assurances against future confiscation?

OPPORTUNITY

Growth in global tourism: Cuba is noted to be tourists hot destinations in Caribbean zone

and report on Oct 3, 2006 (IPS)states that the ban on U.S. tourism to Cuba causes tourist

agents in the U.S. losses of 565 million dollars per million U.S. tourists who are prevented

from visiting the country and an estimated 1.8 million U.S. tourists could have vacationed in

this Caribbean island in 2005, but because of the ban, U.S. tourist agencies lost potential

income of 996 million dollars, the report says. This could stimulate the growth of Cubas GDP

hence benefited from that. Chatham (1998) quote from 1989 to 1993 Cubas Gross

domestic product (GDP) dropped 35percent, imports plummeted 75 percent and deficit rose

33 percent of the GDP.

Technology and education sector: Fidel Castro declared the universal provision of education,

health care, and social welfare to the citizens of Cuba as the government's preeminent

priority. Jose Marti and Felix Varela, Cuban heroes in the struggle for a free Cuba, believed

that education was the key to true freedom and self-reliance. Cubans under the age of forty

have lived all their lives in a society where education, health care, and social welfare are the

driving principles of governance

Energy Sector: Cuba has been long interested in alternative energy apart from petroleum

energy. There prospectus that Cuba has deposits for energy which U.S.A companies have

missed to prospect on which might be an opportunity to them because they are forbidden to

participate in prospecting for oil on Cuba's undersea platform in the Gulf of Mexico, only 137

kilometres from Florida. The platform to the north of Cuba has an estimated potential of

between one billion and9.3 billion barrels of crude and between 1.9 trillion and 22 trillion

cubic feet of natural gas. The Cuban foreign ministry's report (2006) is attributed to the U.S.

Geological Survey (USGS), which said "the possibilities of success are of the order of 95

percent." With normalized conditions U.S Companies can drill this and block companies from

India, China, Canada and Norway from off shoring on this oil.

Agriculture: The role of agriculture in Cuban economy cannot be overstated. Sugar and

tobacco is historically the cornerstone of Cubas economy. Its agrarian roots increase Cuba

interest in technology such as creation of resistant plants and animal husbandry technology

such as cloning. Fish is an important part of Cuban diet. Sugar is the leading export

agricultural products in Cuba. Historically, sugar has always been the key of Cuban economy.

Sugar provided around 80 percent Cuban earnings. With free trade US companies can

benefit in investing in Cubas multi-million sugar industry (Daily finance 2010). Cuban

tobacco popularly known as Cuba cigar is very popular in the world and especially in U.S.A.

With nonexistence of the trade embargo Cuba can benefit from the sale of tobacco and

Cuban Cigar to U.S and thus improve on its balance of payments.

Entrepreneurship: Position of Cuba places it well to pilot the Caribbean region through the

wake of the coming economic revolution of the twenty-first century. Individual

entrepreneurs in Cuba are encouraged by the incentive of keeping the profit from the

venture, after taxes, unlike Cuban corporations. To replace Soviet capital the Cuban

government implemented innovative and creative policies. The next challenge is to create an

enticing environment where foreign investors are comfortable and the tenets of a Cuba

Liber" reign.

THREAT

The economic effects of the Cuban Revolution were somewhat of a mixed bag, and

depending on the timeline you are interested in the immediate impact was negative,

whereas on a longer timeline it was more positive.

Cuba is aggressively spreading anti-Americanism throughout Latin America and is deeply

involved in backing and advising the increasingly totalitarian

Cuba traffics in intelligence. U.S. intelligence secrets collected by Cuba have been sold to or

bartered with Russia, China, North Korea, Iran, and other enemies of the United States.

China is known to have had intelligence personnel posted to the Cuban Signals Intelligence

(SIGINT) site at Bejucal

Beijing is busy working to improve Cuban signals intelligence and electronic warfare

facilities, which had languished after the fall of the Soviet Union, integrating them into

China's own global satellite network.

CHAPTER 5. ANALYSIS AND FINDING

This framework for describing the state of the economy in Cuba through a transparent, data-driven

framework that yields real, seasonally adjusted GDP growth. This framework attempts to address

two potential problems with the official annual real GDP figures published by the Cuban Office of

National Statistics. First, the potential for a bias in the weighting of what Cuban authorities call

other services, specifically, the provision of education, health, and sports services. This is

addressed by reweighting the official data provided by Cuban authorities with GDP sector weights

from a comparable regional economy the Dominican Republic. The second problem is that of

timeliness. Annual releases of real GDP data are insufficient for a timely assessment of the state of

the economy for any country, making it difficult for policymakers and economic agents Comparing

Official and Alternative Real GDP in Levels

Alternative GDP is imputed by reweighting sectorial GDP growth using weights from the Dominican

Republic.in Cuba during the Global Financial Crisis to make informed decisions. The proposed

framework combines the proposed alternative real GDP series with a now casting econometric

methodology to estimate a quarterly real GDP series that is timely, can be updated on an ongoing

basis, and attempts to correct for potential biases in the official data. The alternative real GDP based

quarterly growth rates presented exhibit a number of characteristics that seem reasonable and

comparable to other countries, and are not present in the quarterly estimates based on the official

GDP series. For example, transitions from recessions to expansions in the Cuban economy look

smoother and more plausible in the alternative estimated quarterly real GDP growth rates.

Recessions are shown both after the global downturn in 200102, and again in 2009, consistent with

recessions in neighbouring countries during the same periods. Finally, the forecast suggests a

sluggish recovery, the result of which will be very low growth rates in the near future for Cuba.

96% of electricity was being produced by burning fossil fuels. Solar panels have been introduced in

some of the rural areas to reduce blackouts, brownouts, and use of kerosene. Citizens were

encouraged to swap old inefficient lamps with newer models to reduce consumption. A power tariff

imposed economically punitive measurements on inefficient use of power. This entry is the total

capacity of currently installed generators, expressed in kilowatts (kW), to produce electricity. A 10-

kilowatt (kW) generator will produce 10 kilowatt hours (kWh) of electricity, if it runs continuously for

one hour. Electricity - installed generating capacity: 5.914 million kW.

The main transmission mechanisms from the global economic crisis to Cuba were: (1) international

market prices of the main commodities that Cuba exports and imports; (2) foreign demand for

Cuban services like tourism and professional services exports (i.e., services provided abroad by

Cuban professionals); (3) fluctuations in the flow of remittances; (4) availability of foreign bank

credit; and (5) international environment for external debt rescheduling.17 The balance of payments

(BOP), a set of accounts that records all monetary transactions between a country and the rest of

the world, would be the most appropriate framework for examining the impact of the financial crisis

on Cubas external sector. However, as will be discussed below, this is particularly challenging

because of the paucity and lack of timeliness of Cubas BOP statistics.

The BOP scheme has two principal divisions or accounts:

(1) the current account, which shows the net amount a country is earning and spending from trade

of goods and services (exports imports), factor income (payments made to foreign investors) and

other cash transfers (remittances, foreign aid)

(2) The capital and financial accounts, which record the net change in ownership of foreign assets,

including loans and foreign investment, and reserves.

FOLLOWING CHINA AND VIETNAM

The economists generally believe Cuba's leaders are listening, in part because the reforms so far

have failed to lead to growth. They say they hope to reinforce the more reform-minded leaders in

closed-door debates at the highest levels.

Many liken Cuba's process to the first years of reform in China and Vietnam, when partial measures

proved ineffective and eventually gave way to deeper reforms.

But Castro has moved at a deliberate pace, and despite official calls for a more critical press

unorthodox views rarely get aired in the state-controlled media. The government revised down its

economic growth forecast for this year to 1.4 percent, a second straight year of slowing growth, and

food prices are rising on average 10 percent a year.

Meanwhile, more than 70 percent of the economy remains in state hands, usually in the form of

monopolies. At the recent seminar, economist Jorge Mario Sanchez criticized state monopolies as

out of step with a growing mixed economy and international competition.

"The state-centrist culture of production and trade by the state and for the state should begin to

transition to another broader mode from and for society," he said.

Others say harsh U.S. economic sanctions against Cuba are only partially to blame for a lack of state

financing and delays in the arrival of supplies and parts, which lead to disruptions in production and

shortages.

"Our top leaders are very aware of these problems, but unsure how to proceed without creating

greater inequality," said the economist who asked to remain anonymous.

Hal Klepak, a Canadian military historian and author of two books on the Cuban military and Raul

Castro, said he thought Castro and other leaders "find criticism welcome not because it is

comfortable but because it allows them to push for more and faster movement of a deeply cutting

kind."

"There will be more and deeper reform since there is really little hope for any other option," Klepak

said. Another outside expert differed, doubting that major changes were coming any time soon.

"There is still no blueprint as to where the major state-controlled sectors will be in 5 or 10 years

time," said Paul Hare, a former British ambassador to Cuba who now teaches at Boston University.

Anti-reform batteries

Reform has powerful enemies. Numbers two and three in the Communist Partys pecking order, Jos

Ramn Machado and Ramiro Valds, are elderly Stalinists. The defence establishment still has ties

with such disreputable regimes as North Koreas. On July 16th Panama announced that it had seized

240 tonnes of arms, including two anti-aircraft missile batteries and two MiG-21 fighter jets,

concealed beneath a cargo of sugar on a North Korean freighter bound from Havana. Cubas

government said they were obsolete defensive weapons being sent for repair. Although this is a

breach of United Nations sanctions, Cubas quick acknowledgment suggested that it does not want

the incident to inflame its relations with the United States.

Having been told for 50 years that communism is the way, theres a natural resistance to change,

says Orlando Mrquez, the spokesman for Havanas Catholic archbishop. Bureaucrats fear losing

their jobs; for some, ideology is more important than the economy, he says. Many mid-ranking

officials still spout the language of central planning.

There is also much inertia. Take Hroes de Yaguajay, a long-established agricultural co-operative an

hour south of Havana. It has leased an extra 200 hectares of land, doubling its size. But it continues

to submit its production plan for approval by the authorities. In an oxymoron of which he appears

unconscious, its president, Alfredo Acosta, says: We are autonomous, but always within the

decision of the country. He says he chooses to continue to sell 80% of the co-ops output to the

state. Mr Acosta has been the president for 25 years.

Chapter 6. References

1. Google Scholar

2. Search.proquest.com

3. World bank website

4. UN website

5. Research Paper

a. The Cuban Economy: Recent Trends By Jos Ral Perales

b. President Speech (http://www.ratb.org.uk/raul-castro/149-full-

text-of-a-speech- president-raul-castro-at- the-first-ordinary-

period-of-sessions-of-the-seventh-legislature-of-the-national-

assembly)

c. As Cuban economy stagnates, economists press for deeper

reforms by Marc Frank; Editing by Daniel Trotta and Kieran

Murray(http://www.reuters.com/article/2014/10/24/us-cuba-

economy-idUSKCN0ID1OA20141024)

6. Wikipedia(http://en.wikipedia.org/wiki/Economy_of_Cuba)

7. Economic Index of World(http://www.heritage.org/index/country/cuba)

8. Cubas economy -Money starts to

talk(http://www.economist.com/news/americas/21581990-and-

eventually-perhaps-one-currency-tempo-reform-accelerates-money-

starts)

http://www.ratb.org.uk/raul-castro/149-full-text-of-a-speech-%20president-raul-castro-at-%20the-first-ordinary-period-of-sessions-of-the-seventh-legislature-of-the-national-assemblyhttp://www.ratb.org.uk/raul-castro/149-full-text-of-a-speech-%20president-raul-castro-at-%20the-first-ordinary-period-of-sessions-of-the-seventh-legislature-of-the-national-assemblyhttp://www.ratb.org.uk/raul-castro/149-full-text-of-a-speech-%20president-raul-castro-at-%20the-first-ordinary-period-of-sessions-of-the-seventh-legislature-of-the-national-assemblyhttp://www.ratb.org.uk/raul-castro/149-full-text-of-a-speech-%20president-raul-castro-at-%20the-first-ordinary-period-of-sessions-of-the-seventh-legislature-of-the-national-assemblyhttp://www.reuters.com/article/2014/10/24/us-cuba-economy-idUSKCN0ID1OA20141024http://www.reuters.com/article/2014/10/24/us-cuba-economy-idUSKCN0ID1OA20141024http://en.wikipedia.org/wiki/Economy_of_Cubahttp://www.heritage.org/index/country/cubahttp://www.economist.com/news/americas/21581990-and-eventually-perhaps-one-currency-tempo-reform-accelerates-money-startshttp://www.economist.com/news/americas/21581990-and-eventually-perhaps-one-currency-tempo-reform-accelerates-money-startshttp://www.economist.com/news/americas/21581990-and-eventually-perhaps-one-currency-tempo-reform-accelerates-money-starts