Cuba now has elements of a market economy. Political change has been slower.
Around one-quarter of Cuba's territory is mountainous, with three main systems, of which the most extensive is the Sierra Maestra in the south-east. Most of the island, however, consists of plains and gently rolling hills. For a relatively small island, the environment is biologically rich—particularly in its mangrove forests and wetlands.
Cuba's population is racially mixed: most people are white or mulatto. There is little overt discrimination, but those with darker skins tend to have the worst jobs. Very few members of the Communist Party's leadership are black.
Though they are far from rich, Cubans enjoy some of the world's best levels of social development. Health and education services are free. In the mid-1990s the school system lost many teachers to the tourist industry but pay rises have stemmed the flow.
Agriculture accounts for only around 7% of GDP and directly employs only 20% of the workforce, but it remains critically important to the economy. The main crop used to be sugar, but with the disappearance of the main buyer, the Soviet Union, the output of Cuba's inefficient producers collapsed. Between 1990 and 2007 production fell by 90%.
Tobacco was the other main source of income but in this case production has increased. Other crops, including fruit and vegetables, have also done better, but Cuba only grows around one-quarter of its staple food, rice, and has to import the rest.
Cuba's land reform created state farms, but also left around 20% of the land with smallholders and cooperatives. Since then most state farms have been dissolved and transformed into ‘Unidades Básicas de Producción Cooperativa’ (UBPCs). This involves the government leasing land rent-free to former workers running financially independent cooperatives. This seems to have raised production, though few of the UBPCs are profitable. Farmers can sell surplus production in ‘agropecuarias’—farmers' markets.
Manufacturing has suffered from the loss of the Soviet market and the continuing US boycott. To generate more industrial jobs, the government has now created free-trade zones and has invested over $1 billion in research investment in areas such as biotechnology and pharmaceuticals.
Mining is also an important source of foreign exchange. Cuba has large reserves of nickel and cobalt, which are mined in conjunction with the Canadian corporation Sherrit International. High international prices have boosted production.
Tourism to Cuba encourages unofficial enterprise
The most vigorous part of the economy has been tourism. Arrivals have increased dramatically to around 2.2 million in 2005, with Canadians, Italians, and Spanish in the lead—chiefly heading for beach resorts on the northern coast. Tourism brings in around $2 billion annually but three-quarters of this goes straight out again to pay for related imports and as profits to the many foreign companies who run the hotels. Officially tourism employs 100,000 people as well as many more who are working in informal ancillary enterprises, including prostitution.
After 1993, Cubans were able to hold dollars, replaced in 2004 by ‘convertible pesos’ that they could spend in ‘dollar shops’. These are virtually the only source of non-essential consumer goods; prices are around 40 times higher than in the official shops. ‘Peso shops’ distribute food rations, though Cubans can also buy more expensive produce from farmers' markets.