In the picture
Cuba Street [GregMontani].
Ten years ago, the perspective that opened the agreement with the Obama Administration of reestablishing diplomatic relations between Cuba and the United States meant a 5% jump for the island's GDP (2015). Since then, however, Washington's backtracking on various measures and above all Havana's indecision on how to manage post-Castroism (Fidel died in 2016 and Raul left his last official position in 2021) have placed Cuba in a spiral of contraction that its own recipes only accelerate. The 'warEconomics ' invoked by President Miguel Diaz-Canel tries to reedit the epic of a country that managed to survive the fall of the USSR, but today the crisis is more serious because it starts from a comparatively worse status .
The Cuban government admitted last November that in 2024 the island experienced another year of recession and avoided any optimism for 2025. The Minister of Economics, Joaquín Alonso Vázquez, did not want to provide a figure, but acknowledged that the evolution of the year that ended had been negative, agreeing with the UN Economic Commission for Latin America and the Caribbean (ECLAC), which had made a forecast of a -0.5% drop in Cuban GDP, later raised to -1%. However, the decline may have been greater: ECLAC itself initially spoke of -1% for 2023 and then the Government raised it to -1.9%. For 2025, ECLAC speaks of a decrease of -0.1%, but it is possible that this is also an understatement. If so, in the last ten years, then, the size of the Cuban Economics will have shrunk four times, in combination with other years of hardly any growth.
From that floor of an already deteriorated Economics , any new worsening only aggravates the downward spiral and accentuates the collapse. In the previous 'special period' suffered by the island, with the end of the USSR and the cessation of all aid received from Moscow, Cuba's GDP fell by more than a third in four years. Now the fall in GDP is not so pronounced, but only because it starts from a comparatively worse status .
If up to now the present crisis has been compared to that moment of great hardship in the early 1990s, the reality has already surpassed it, and experts speak of the worst crisis in the history of independent Cuba. Thus, Javier Corrales, professor of Political Science, warns that Cuba is in its worst crisis since it gained independence from Spain after the war of 1898. "Cuba's Economics is in the midst of its greatest collapse, perhaps since its independence in 1902," he says. It's not just GDP: in the last ten years the island has suffered shortages of basic consumer products, high inflation, declining investment, worsening harvests, repeated power outages (electricity generation capacity fell 25% between 2018 and 2022), while "poverty and inequality are higher than ever," Corrales lists.
This extreme status has been echoed by the international media. Also 'The New York Times' has concluded that Cuba is "in its worst crisis" since Fidel Castro took power 66 years ago, on January 1, 1959. Among other aspects, it refers that tourism has fallen by almost 50% since 2017, that one million people have left in the last four years and that since the Covid emergency infant mortality has risen, in a country that prided itself on high health standards. Otherwise, the general blackouts - three since the summer, in addition to numerous partial power outages, but equally long hours - speak of a collapse to which it is difficult to see a remedy as long as the regime does not dare to deep reforms.
Inflation and poverty
The government has been taking some measures, but they are as insufficient as the economic openings attempted since 2011, once Raul Castro became president. At that time, it could be blamed on the reluctance of a retired Fidel, but after the death of Fidel and some other old leaders, Diaz Canel's plans continue to fall short. This is what has happened with the Macroeconomic Stabilization Program (PEM) that the Government proposed to apply in 2024, which envisaged implementing urgent measures to slow down inflation, generate foreign currency income for the country, strengthen the socialist state business and the process of bankarization.
Although inflation has fallen from the 77.3% figure at the end of 2021, it is still high: 2022 ended with 39.1% and 2023 with 38.7%, according to ECLAC, which at the beginning of 2024 estimated that this last year could end with a year-on-year inflation rate of around 25%. data ECLAC, which at the beginning of 2024 estimated that the latter year could end with year-on-year inflation of around 25%, although subsequent decisions on price increases probably shifted that forecast upwards.
Thus, the Government decided to eliminate the gasoline subsidy it had maintained since 1959, so that as of February 1 the price of fuel increased by more than 500%. The liter of regular gasoline went from 25 Cuban pesos (0.20 cents) to 132 (1.10 dollars); the authorities also ordered that foreign tourists begin to pay for fuel in foreign currency. In addition, the electricity tariff was increased by 25% for those with a consumption of over 500 kWh (a figure which, although much higher than the average citizen's consumption, also contributes to an inflationary environment). In order to mitigate the inflationary trend, the Government approved in 2024 a 50% reduction in tariffs for the import of inputs and raw materials for production.
This has been faced by a population that, in spite of increasing salaries - in mid 2024 the Government approved salary increases for health service workers and operators and staff professor of the Education-, is increasingly unable to afford to buy less. If already data of 2023, of the Cuban Observatory of Human Rights, indicated that extreme poverty had risen 13 points in one year and had reached 88%, in 2024 the status had worsened even more. These reports indicate that seven out of 10 Cubans have stopped eating breakfast, lunch or dinner due to lack of money or food shortages. In March 2024, the Cuban government made its first request to the UN World Food Program financial aid the UN World Food Program for the distribution of milk to children under 7 years of age; the program already assisted 760,000 people the previous year.
Deficit and debt
ECLAC estimates that the fiscal deficit in 2022 and 2023 was 13% of GDP, and nothing suggests that there will be any particular correction in 2024, given the poor performance of the external sector and tourism.
Pending the closing of last year's data , ECLAC has estimated that in December 2023, international trade in goods had fallen by 11% compared to December of the previous year, especially affected by the decrease in exports of nickel and its derivatives (-32%), when the Government had placed great hope in the steep rise in prices that this mineral had previously had. Lower foreign sales of alcoholic liquids (-28%) and sugar (-82%) also played a role. Precisely, the significant reduction of harvests in recent years, with the worst results since the end of the 19th century, is evidence of the unprecedented crisis the island is going through.
Foreign purchases, on the other hand, also fell in 2023, especially those for the purchase of fuels, which dropped by 31%, which has had an impact on electricity generation problems.
All this has increased the pressure on the state's indebtedness. According to agreement with ECLAC, "this status has worsened in the last three years due to the fall in tax collection, as a result of the decrease in activity levels, as well as the maintenance of expenses associated with vital public services". Despite the fact that the country has not paid the external debt since 2019, it has managed to renegotiate new terms to make payments until 2027, but the figure will be encumbered by the late interest surcharge.
Lack of foreign exchange
All this economic crisis has reduced the supply of foreign currency "so that the shortage is growing, with a notable impact on productive activity and the capacity of the public sector to meet its external commitments", according to ECLAC.
Cuba has a dual exchange regime. On the one hand, there is an official exchange rate subject for state sector operations, which is fixed at 24 Cuban pesos (CUP) per dollar. On the other hand, the official exchange rate for the private sector and households is 120 CUP per dollar. Individuals, micro, small and medium-sized private enterprises (MSMEs), non-agricultural cooperatives, self-employed workers, individual farmers and others operate under this exchange rate.
In the case of the state sector, access is determined by the needs of economic planning. While in the private sector, access by individuals is limited to a fixed daily amount of US$100 per person. However, since they do not belong to the state directly, they do not really have access to the purchase of foreign currency.
The process of 'de facto dollarization' has gained even more scope in the different sectors, leading to an ever greater substitution of the national currency. This has been reflected in the continuous depreciation of the Cuban peso in informal exchange spaces, in addition to the non-convertibility of the national currency.
'Economics de guerra'
In its admission of the seriousness of the crisis, the Cuban government has spoken of 'Economics of war', thus covering the adoption of austerity policies, where the State redirects scarce resources to sectors considered a priority, to the detriment of civilian consumption.
In statements to the press, Ricardo Torres, former researcher of the programs of study Center of the Economics Cuban considers that the term "is intended to be installed in the public opinion to justify the inevitable adjustments that the Government has to introduce". For his part, Omar Everleny Pérez Villanueva, former director of the Center of programs of study of the Cuban Economics of the University of Havana, highlights the error of government policies, such as the administrative control of the prices of some products sold by MSMEs, which constitutes "total nonsense", because "the results are known: increased shortages, smuggling, informal market, and a long etcetera".
The government takes advantage of the expression 'Economics of war' to present the crisis as result of the U.S. attack through a decades-long embargo, which the regime inappropriately labels as 'blockade'. Without explaining how it arrives at these calculations, Havana assures that this U.S. policy had a cost for Cuba in 2023 of some 4,867 million dollars, which caused a negative impact equivalent to 19.2% of the island's GDP and 55.8% of its exports.