Cuba in 2004

To understand what we see in the world, we need to look behind the scenes, to view the invisible. In the case of Cuba, we are dealing with a "collapsed economy," similar to the formerly centrally-planned economies of Eastern Europe, including the Soviet Union. With the breakup of the Soviet Union in 1989, Cuba lost 80 percent of its trade and U.S.$5 billion a year subsidies! In the first five years after the cut-off of Russian aid, the economy contracted by a third. Vital commodities such as grains, diesel oil, vehicles, and consumer products were no longer available at subsidized prices and caloric intake fell by a third or more.

By any measure, Cuba is a materially poor country today, yet the basics in food, housing, education, and medical care are still provided for all and income inequality is still minimal -- in sharp contrast to the huge inequality of income and services in other Latin American countries. Yet even in Cuba the 4:1 income gap between the best-paid and the worst-paid has widened in ten years (1987-1997) to 25:1 and with the huge increase in the dollarization of the economy, the income-gap was much higher in 2004.
Source for the data in the table: CIA Factbook. Cuba's president, Fidel Castro, announced that from 8 November 2004 the dollar would cease to be legal tender and there would be a 10% commission for converting dollars to pesos.

Special Period in Time of Peace
The Cuban government consequently declared the Special Period in Time of Peace which introduced austerity measures:
1) severe food rationing, gasoline and electricity shortages, and factory closings. As a result, Cubans, on average, have 500 fewer calories per person.
2) traditional medicines are officially being re-introduced;
3) horses, oxen, and bicycles are supplementing buses, trucks, and tractors.
4) In 1993, the U.S. dollar was legalized allowing Cubans to receive dollars from relatives in the United States (estimated at $500-800 million annually) and to buy imported goods of considerable variety and diversity in "dollar stores." This created a dual economy of pesos for most Cubans and dollars from those relative few Cubans connected directly or indirectly and legally or illegally with tourism. The legal and mostly peso economy is shown in yellow on the diagram.
5) The government signed joint ventures with foreign companies from Canada, Spain, Italy, for example, to develop its tourism industry by building new  and restoring hotels, restaurants, and shops. While 51 percent of the control of these foreign investments remain with the Cuban government and these properties become Cuban property in 10 years, foreign companies can take their profits abroad. All official tourism activities are run by state-controlled companies, including hose run by the Cuban military! Tourism has increased from 300,000 in 1989 to about 3 million in 2003; and hotel rooms expanded from 5,000 in 1987 to over 30,000 in 1999.
6) The government converted 75 percent of state farms into agricultural cooperatives, which elect their own leaders and sell their production over the government quota on the open market for the benefit of their members.
7) In addition, over 150 self-employment activities were made permissible in 1993: making and selling home-made crafts and art to operating restaurants. Private restaurants (paladares) can only use family workers, are limited to 16 seats, must buy all their supplies from state-run companies, and are prohibited from selling "luxury" items, such as lobsters, beef, and horsemeat -- which are available for high dollar prices in state-operated restaurants.

Read about the changes the Cuba government plans to make starting in 2010.

By 2003, the European Union (EU) accounted for some 40% of Cuba's trade, as well as much of its foreign investment and many tourists. The EU provides Cuba with euro15 million ($16.5 million) a year in development aid. The euro is legal tender at the island's main tourist resorts and "dollar" stores.

For other photo sources, view
1) the wonderful expressions of Havana, by the Cuban photographer and artist Nelkis Leonor;
2) the beautiful photos of Cuba by the Dutch photographer, Henk van der Leeden, whose work is available at CubaImages.