The Cuban Economy

The “Update” of the Cuban Economy

The process of updating the Cuban economic model formally began in April 2011 when the Communist Party of Cuba (PCC) adopted a resolution approving a number of socioeconomic policy guidelines, known as lineamientos, for the country’s development.

As it entered the sixth decade of the Revolution, , the Cuban government identified various changes, or updates, to the system that would need to be made in order for the country to survive and prosper economically. These updates would be geared toward increasing economic efficiency and productivity, so that the country could be competitive on international markets, while simultaneously seeking to maintain relative equality of income distribution and strong social programs for all its citizens. In this unique scenario, Raul Castro’s administration relied on the gradual introduction of reforms that acknowledged the role of market forces. According to Cuban economist Ricardo Torres, the scope of the 313 measures (most of which have not yet been implemented) extends beyond short-term objectives and represents the deepest transformations Cuba has embarked upon since 1959; they are characterized by “significant achievements as well as marked weaknesses.”

As their introductory sentence explains, the guidelines are intended to “update Cuba’s economic model with the objective of guaranteeing the continuation and irreversibility of socialism, as well as fostering the country’s economic development and improving the standard of living of the population.” The new guidelines permit some previously restricted economic activities, such as the purchase and sale of homes and automobiles and creation of non-agricultural co-ops.

In 2016, the VII Congress of the PCC amended and expanded the guidelines. Among the most significant reforms-in-progress today are the growth of the small-business private sector, the promised opening to foreign investment, the emergence of markets for family residences and cars, and greater freedom for Cubans to travel abroad.

The number of authorized self-employed workers (cuentapropistas) rose from some 150,000 in 2008 to about 580,000 in 2017, and by the same date authorities had approved 439 non-farm cooperatives. The self-employed in Cuba are currently taxed considerably more heavily than joint ventures. Official tax rates are reported to oscillate between 25% and 35%. The scope of private business activities is defined by politically driven administrative rules, which are sometimes frustrating to small business owners. For example, lawmakers have placed seemingly arbitrary limits on the number of seats allowed in private restaurants: at first 12, then 20, and now 50 are permitted.

Sections of the guidelines that have not yet been implemented include merging the country’s two currencies; developing domestic wholesale and retail markets; assigning legal status to private businesses; and rationalizing state enterprises, that is restructuring the state run companies in order to make them profitable.

Sources

Download a PDF with sources for this report here.