The start of the Special Period devastated Cuba’s economy. According to the U.S. state department, “Cuba suffered a significant decline in gross domestic product of at least 35% between 1989 and 1993 as the loss of Soviet subsidies laid bare the economy’s fundamental weaknesses.” Inflation rates reached 183% by 1993. But by the late 90s, the structural adjustments made to account for the economic situation in Cuba had worked to an extent, and the economic situation became less dire.
This economic deficiency was compounded by American attempts to reinforce the blockade and thereby force Cuba to embrace a capitalist economic orientation. The 1992 Torricelli act officially prevented food and medical shipments from the United States to Cuba with the exception of humanitarian aid. Adding to this, the Helms-Burton act of 1996 extended the embargo to foreign companies that did business with Cuba in an attempt to dissuade foreign companies from propping Cuba up economically.
The Cuban government responded by focusing on exporting services rather than agricultural goods and sugar. It also looked for new trading partners with similar political and economic prerogatives such as China and Venezuela. And, as I have extensively talked about in other sections, the Cuban government promoted tourism as a new means of economic activity.
GDP structure for 2008. (Source: Socialism and Democracy)
While the sugar industry has become progressively weaker, producing just 1.6 million tons of sugar per year between 2003 and 2009, the structural changes enacted by the Socialist party and the aid and cheap imports Cuba received from Venezuela has kept Cuba afloat. Today, China and Venezuela represent a combined 37% of Cuba’s exports. In return, Cuba sends medical assistance to these countries. Cuba has further invested heavily in its biotechnology industry, and pharmaceuticals are one of today’s biggest export markets.
Foreign trade of goods and services (Source: Socialism and Democracy)
The Cuban government has enacted several major changes in recent years to respond to increasing economic concerns and falling production. According to the State Department: “since 2008, the government has authorized private farmers to work small plots of fallow public land; eliminated some subsidies, including food rations and subsidized lunches in workplace cafeterias; allowed a limited number of traders to operate privately; allowed used cars to be sold; and expanded access to certain previously restricted consumer goods (like cell phones, computers, and home appliances), among other things.”
GDP trend in Cuba since 2001. (Source: Socialism and Democracy)
In 2011, the Cuban government made it legal for Cubans to sell their homes. This is a major breakthrough, and it remains to be seen what sort of effect the reopening of the Cuban real estate market will have on Havana and Cuba in the coming years. According to the New York Times, this move is the “most significant market-oriented change yet approved by the government of Raúl Castro, and one that will probably reshape Cuba’s cities and conceptions of class.” For more about housing in the Special Period, click here.
For further reading about the current economic situation in Cuba:
Socialism and Democracy economic study
Havana Special Period 