Economic Freedom: Country Studies — Cuba

Cuba Country Study

Rankings in Freedom in the World 2016: Status: Not Free. Freedom Ranking: 6.5; Political Rights: 7; Civil Liberties: 6.



Cuba, the largest island in the Caribbean Sea, was claimed by Christopher Columbus for the Kingdom of Spain in 1492 on his first transatlantic voyage. The island was under Spanish rule for more than 400 years until 1898, when it was ceded to the US as a result of the Treaty of Paris ending the Spanish-American War. Cuba gained independence in 1902 but the island's politics and economy remained intertwined with those of the United States until the overthrow of the Batista dictatorship in 1959 by the July 26 Movement led by Fidel Castro. Under his leadership, Cuba became a repressive Communist dictatorship allied with the Soviet Union. In consolidating power, the Castro dictatorship carried out summary executions, instituted a massive police state, and nationalized nearly all property. Despite the loss of large subsidies after the Soviet Union’s collapse in 1991 and a continuing economic embargo by the US, Cuba remained politically unchanged and adopted only minor economic reforms. The Communist Party remains in control of all of Cuba’s political and state structures.

Cuba has been ranked “not free” in all of Freedom House’s world surveys since 1973. Cuba is also consistently ranked by the Heritage Foundation's index as among the least economically free countries in the world. Despite some policy changes allowing specified economic activities and limited property ownership, state structures still employ 80 percent of the workforce and continue to control most economic activity. The independent economy remains highly constrained and subject to severe state controls. The usual economic rankings are difficult to ascertain.

Cuba’s population of 11 million is 65 percent white, 25 percent mestizo (mixed race), and 10 percent Afro-Cuban. Since 1959, more than one million Cubans have left the island for political and economic reasons. Most of them landed in the United States by boat. The World Bank and IMF no longer estimate Cuba’s GDP either by nominal or PPP (purchasing power parity) measurements. The last IMF estimate in 2013 ranked Cuba’s nominal GDP at 65th in the world (around $71 billion in total output) and the World Bank estimated its nominal per capita income at 92nd ($6,501 per annum) for 2012. These measurements, however, do not accurately depict Cuba’s economy, which has been aided until recently by a large oil subsidy from Venezuela. State employees average around $25 per month in salary, while state benefits are generally exaggerated in value.


Spain established its first permanent settlement in Cuba in 1511. From that time, Cuba was under continuous Spanish colonial rule until 1898 (with the exception of 1762–63, when the British briefly occupied the island during the 7 Years’ War before returning it to Spain). The indigenous peoples on the island (estimates of their number range from 16,000 to 200,000 people) were quickly decimated by disease, forced labor, and dislocation. From the outset, Spanish colonists imported large numbers of African slaves to carry out agricultural labor. In the 18th century, slavery expanded with the increased cultivation of sugar cane and production of sugar. Aided by French colonists fleeing the slave revolts in Haiti, Cuba became the world's largest sugar producer as well as a major tobacco and coffee exporter.

Jose Marti

Abolition of Slavery and Independence

The path to independence began in 1868 when Carlos Manuel de Cespedes and some other landowners freed their slaves and organized an armed rebellion against Spanish control. Their ten-year struggle to establish a republic failed, but the conflict led to the eventual abolition of slavery in 1886. In 1895, Jose Marti, whose writings in support of freedom made him a symbol of the Cuban independence struggle, led fellow exiles in an armed attack to end Spanish rule on the island. He died a month after the landing, but the uprising gained strength in the countryside. Even so, the rebel forces failed to take any major cities until the United States intervened in 1898 as part of the Spanish-American War. After the US armed forces won a quick victory, Spain ceded control over Cuba, Puerto Rico, Guam, and the Philippines to the United States in the Treaty of Paris. Cuba gained independence from Spain, but as a protectorate under US occupation.

Independence and the Platt Amendment

Cuba declared its independence in 1902, when US authorities formally ceded power to newly elected Cuban leaders under a constitution modeled on that of the United States. As part of the handover of power, the US Congress adopted the Platt Amendment, which required Cuba to lease Guantanamo Bay to the US on an open-ended basis and granted the US the power to intervene in Cuban affairs. (The amendment had to be made part of the new republic's constitution.) US forces reoccupied the country from 1906 to 1909 in order to put down a rebellion against the US-backed government. After returning control to Cuban leaders, the US remained highly involved in Cuba and US investors dominated many aspects of the island's economy, including sugar production, industry, and tourism.

Democracy, Dictatorship, and the Sergeants' Revolt

Cuba had a fitful electoral democracy with competing political parties (although the one Afro-Cuban party was banned in 1912). In 1933, the increasingly dictatorial Gerardo Machado, first elected president in 1924, refused to leave office and resigned only after a general strike and army revolt. A short-lived provisional government was then toppled in a coup led by Fulgencio Batista, an army sergeant. Assuming the title of army chief of staff, Batista wielded power behind the scenes before he ran for president himself in 1940. Although he retired to the US after losing his re-election bid in 1944, he returned to run for president again in 1952 on a platform to end corruption. Trailing in opinion polls, he seized power in a coup three months before the elections. After initially suspending the 1940 constitution, he held elections in 1953. He won the presidency despite strong opposition to his political manipulation.

Fidel Castro

The Overthrow of Batista

Batista's leadership provoked opposition from various political parties. When he failed to win a legislative seat in elections, the young lawyer and activist Fidel Castro organized an unsuccessful attack by armed guerillas on the Moncada army barracks on July 26, 1953. After being jailed for two years, he was amnestied and went into exile in Mexico. He returned in December 1956 with another small rebel force called the July 26 Movement. The group's initial landing was also a failure, with most of the fighters killed or captured. But Castro and several associates escaped to the Sierra Maestra highlands, recruited new guerrillas, and allied themselves with several other anti-Batista groups. By late 1958, the rebellion was gaining ground and he had lost US support. In the face of increasing military defections and civilian resistance in the cities, Batista fled on January 1, 1959. Castro seized control with his guerrilla force and formed a provisional government with other groups.

Consolidation of a Communist Regime and the Embargo

Castro consolidated power quickly by marginalizing other revolutionary leaders and imprisoning one-time supporters who broke with him over his dictatorial methods (one, Huber Matos, served nearly 20 years in prison before agreeing to exile in the US). Castro signed a trade agreement with the Soviet Union in early 1960 and seized the facilities of US oil companies that refused to process Soviet crude oil at their Cuban refineries. After further expropriation of assets of US companies, the US government imposed a trade embargo on exports to Cuba in October 1960 and soon afterwards broke off diplomatic relations. In April 1961, an armed force of Cuban exiles, sponsored and trained by the CIA, landed at the Bay of Pigs on Cuba's southern coast. The uprising was quickly defeated by government forces, after which the regime intensified police repression of the population. By the end of 1961, Castro had collectivized agriculture and publicly defined himself, and the Revolution, as Communist. Castro began repressing the Roman Catholic Church by taking over its schools and imprisoning or expelling clergy members. The trade union federation was taken over and made into a monolithic structure to control the workforce.

Missile Crisis

In October 1962, the US government confirmed that the Soviet Union was establishing intermediate-range nuclear missile bases in Cuba. President John Kennedy ordered a naval blockade to prevent the transfer of missiles to the island. After a tense standoff that included threats to use nuclear weapons, Soviet leader Nikita Khrushchev agreed to withdraw the weapons and dismantle the bases in exchange for a US pledge not to invade Cuba in the future and to remove nuclear missiles from Turkey. Considering the Cuban regime an ongoing threat, however, the US government maintained a full trade embargo.


The regime required exit visas to leave the country, but in 1965 agreed for a time to allow the US to provide air transport for people seeking to leave. Around 250,000 Cubans emigrated to Florida between 1965 and 1973 under this agreement, mostly small business owners whose property had been seized. In 1980, when Castro briefly relaxed exit requirements again, 125,000 people fled Cuba in the so-called Mariel Boatlift. Castro used the boatlift to expel violent criminals and psychiatric patients in violation of humanitarian law. A surge in attempts by Cubans to reach the US on flimsy rafts led to a US-Cuban agreement in 1994. The US would admit 20,000 people a year through normal immigration channels but agree to return refugees caught at sea making an illegal crossing. Cubans who set foot on US shores are still granted asylum. Altogether since 1959, an estimated one million Cubans have fled the island.

Refugees from the Mariel Boatlift

Economic Freedom

Since 1959, the Castro regime adopted a Communist model of dictatorship. Under the constitution, the Communist Party controls the political structures of the state and through these all of Cuba’s social and economic structures. Much of the state-directed economy is devoted to the military and security forces, which exercise dominant control over the society and oversee key economic sectors. Since the Cuban Revolution, assets of foreign companies were expropriated, private property owned by Cubans was seized without compensation, and the state undertook to direct all economic activity, including production, distribution, and purchase of all goods and services. Food rationing was imposed in 1962 and has continued to the present day. Each household is restricted to a minimal amount of basic foods through use of coupons, although reforms eased some controls on distribution and private sales of goods.

Until 1991, Cuba depended on the Soviet Union and Soviet bloc countries for massive subsidies in exchange for sugar and other agricultural products. As part of its alliance with the USSR, Cuba supplied troops and medical personnel to conflicts in Africa. In addition, Cuba sponsored numerous revolutionary groups in Latin America with arms and money in order to establish other Communist and Soviet-allied states in the Western Hemisphere. Since 2000, Venezuela has provided Cuba substantial oil subsidies, loans, and investments in exchange for the involuntary services of security, medical, educational, and other personnel. That subsidy — estimated at 8 percent of the state budget — has recently been halved and is likely to be ended entirely due to Venezuela’s economic collapse and the opposition victory in 2015 elections (see Country Study). The confiscation of assets of US companies and Cuba’s alliance with the Soviet Union resulted in the breaking of diplomatic relations and a US economic embargo, which remains in place despite resumed diplomatic relations in 2014 (see Current Issues).

The False Dichotomy

The communist regime imposed strict political controls, instituted a nationwide system of surveillance through neighborhood vigilante groups (known as Committees for the Defense of the Revolution), and severely repressed opponents of the regime and those considered social deviants (mostly drug addicts, prostitutes, and homosexuals).  Initially, the regime executed and imprisoned citizens on a massive scale. Since consolidating power, the regime has engaged in more targeted and systematic repression.

Sympathizers with the Cuban revolution or Fidel Castro's vocal opposition to the United States have often pointed to the regime's so-called protection of “social and economic rights” as justification for its lack of political or economic freedom. While this poses a false dichotomy (see Essential Principles), the social achievements of the Cuban Revolution are highly overstated. In education, there are chronic shortages of textbooks and basic materials (not to mention newer technology such as computers). The regime uses education as a vehicle for indoctrination and limits learning by strictly controlling access to literature, other books, and the internet. Higher education is limited and entrance depends on political loyalty to the state. In health care, there is a chronic shortage of medical supplies, drugs, and now medical personnel (due to their involuntary service to countries like Venezuela in exchange for oil and other subsidies). Most hospital facilities serving the general population are dilapidated and Cubans often pay bribes for basic treatment. (The best health care facilities are typically reserved for the ruling elite and paying foreign guests, who are led to believe that ordinary Cubans receive the same care.)

Overall, social and economic well-being and inequality have worsened. Today, the population has a lower standard of living than in 1959; the average state wage is $25 per month. Ongoing racial discrimination has left most Afro-Cubans living in severe poverty. Meanwhile, favored groups loyal to the regime (such as military officers and party officials) live in better housing, have higher salaries and benefits, and receive luxury goods.

Communist economic policies resulted in severe impoverishment of a country that was once the most prosperous in Latin America.  

The “Special Period”

After the Soviet Union collapsed in 1991, Cuba lost an estimated $5 billion a year in economic subsidies and the country's gross national product fell by nearly half between 1989 and 1993. Cuba entered what Fidel Castro called the “special period” and he announced the need for additional revolutionary mobilization and sacrifice, such as forcing students and government workers to plant and harvest crops and further rationing of all necessary goods. In 1994, the regime adopted economic reforms to allow foreign investment, especially in telecommunications and tourism, a limited degree of independent economic activity, and use of the US dollar as legal currency alongside the peso. Joint ventures were formed by foreign companies and Cuban state entities. Small, semiprivate cooperative farms were established and permitted to sell surplus agricultural products on the market. Private restaurants opened, as did special state-sponsored dollar stores (usually run by people close to the regime). In 1994, US President Bill Clinton allowed the possibility for family remittances and limited travel to the island. But after the Cuban military shot down two unarmed civilian airplanes operated by a US-based exile group, Brothers to the Rescue, the US Congress adopted the Helms-Burton Act, which extended the embargo to penalize foreign firms doing business in Cuba. Travel and family remittances to the island were restricted by US President George W. Bush in 2004 but eased by President Obama in 2010.

Resilience of the Regime

While some predicted the fall of the Castro regime after the Soviet Union's collapse, it has proven resilient. Since the reforms of the 1990s, the economy depends in part on a foreign tourist industry financed by European and Canadian investment. Since the early 2000s, Venezuela's socialist president, Hugo Chavez, has also provided a substitute energy subsidy, bartering oil for the free services of Cuban medical personnel, teachers, and others sent involuntarily to Venezuela. Overall, Chavez provided an estimated $14 billion in loans, investment, and grants.

In July 2006, expectations for change in Cuba were raised when Fidel Castro, nearing 80, transferred presidential and other powers to his brother Raúl, the Minister of Defense, before undergoing intestinal surgery. Failing to return to health, the elder Castro resigned in February 2008, making Raúl’s titles as President of the Council of State and Council of Ministers permanent. The regime has continued to operate smoothly under Raúl’s leadership with no sign of a political crisis. In February 2013, the National Assembly, made up solely of Communist Party-approved members, elected Raúl Castro to a second term as president of the Council of State at the age of 81. He continues to also serve President of the Council of Ministers, Commander in Chief of the Armed Forces, and First Secretary of the Communist Party. Announcing that this would be his last term as state president, Raúl selected a younger candidate for first vice president of the Council of State, Miguel Diaz-Canel, who began his career as head of the Young Communist League.

Current Issues

In December 2014, US President Obama announced the resumption of diplomatic relations with Cuba and eased travel restrictions as part of an overall agreement with the Cuban government involving the exchange of American and Cuban nationals held as prisoners and the release of 53 political prisoners by Cuba. Embassies were reopened in 2015. The president also increased the cap on remittances to Cuban nationals to $8,000 annually, eased some export restrictions, and called for an end to the trade embargo, which must be removed by act of Congress. President Obama stated that the policy of isolating Cuba over 50 years had not resulted in desired change and argued that engagement with Cuba would better encourage political and economic reforms. Leading members of Congress from both parties, however, continue to support maintaining the embargo as pressure on the regime to improve human rights.

The regime is still under the firm control of Raúl Castro and the Communist Party of Cuba. It remains resistant to change. Economic reforms, which began in 2008, have been small and often depend on use of convertible pesos, which are available by exchange in foreign currency and are 25 times the value of ordinary pesos that most Cubans earn in wages. In 2013, the regime announced the possibility to travel without an exit visa and to buy and sell homes and cars on a limited basis. It also extended the number of allowable private economic activities (from 178 to 203). Cubans are now able to earn income privately and even to hire non-relative employees, but all such private economic activity remains under strict state supervision. The government must approve all professional licenses and property sales, which are routinely denied those considered dissidents or not loyal to the regime. Profits are subject to high tax. And state security harassment of entrepreneurs is common. A new foreign investment law provides incentives that continue requiring a majority Cuban partner, usually a state-enterprise or institution associated with the military or security services (which together control two-thirds of the Cuban economy). All foreign investment must be approved by the Council of State or Ministers. In practice, the reforms allowing buying and selling of goods and property do not benefit ordinary Cubans but rather the nomenklatura (the communist state hierarchy), whose members are more likely to own goods and property. The reforms largely bypass Afro-Cubans, who are less likely to receive remittances or be hired in the tourist industry, where foreign and convertible peso currency is used.

The government's control of all media and its sweeping restrictions on free expression means that the public has no reliable information about the political and economic situation in Cuba and the world.

The basic political and economic structure remains wholly unchanged. The Communist Party controls all state power and most economic enterprises. Access to housing, jobs, or state privileges depends on political loyalty or serving as an agent or informant to the police. Independent political activity is subject to severe reprisal, including harassment by state vigilantes, unending unemployment, and worse: imprisonment and extra-judicial killings. In one day in 2003, the regime arrested 75 leading dissidents. They were released over the course of the next ten years but only if they agreed to being exiled from Cuba. Since then, the regime has continued to imprison dissidents and pressure them into exile. The police routinely use “preventive detention” against civic and political activists. The Cuban Commission for Human Rights reported a record number of 9,000 detentions in 2014 and a similar number the next year, including hundreds of persons held during Pope Francis’s trip to Cuba in September 2015. The practice continued in 2016 and escalated prior and during President Obama’s historic trip to Cuba in March. During his trip, President Obama met with a representative group of dissidents on his trip and specifically called for the Cuban government to repression. Such appeals have not altered government behavior. Police and state-sponsored vigilantes routinely attack independent demonstrations, such as the weekly protests of Ladies in White, a group of female relatives of current and former political prisoners, and cultural events organized by independent performance artists and musicians.

Despite such repression, many Cubans bravely organize opposition to the regime and promote democracy and human rights. Organized opposition to the regime was almost eradicated in the ‘70s and ‘80s, but a revived democracy movement emerged in the mid-1990s to organize a variety of initiatives: human rights organizations, political groups, home libraries, self-employment centers, independent trade unions, among others. Musicians and artists have attempted to organize alternative culture. All such groups and initiatives are considered illegal and involvement in them is the basis for imprisonment.

In general, the government's control of all media and its sweeping restrictions on free expression means that the public has no reliable information about the political and economic situation in Cuba or the world. But among the most significant independent activities on the island are efforts to break through the information blockade. Within Cuba, a movement of independent bloggers, led by Yoanni Sanchez, including her Generation Y blog and now the daily news outlet she and her husband edit, 14yMedio, is now tolerated. Their web pages are blocked to Cuban residents by government control of the internet, but many Cubans are able to read them, although often at high cost, with the increase in access to satellite Wi-Fi.