CUBA. Poverty and Wealth

This paper focuses on Cuba and, more specifically, poverty and wealth in that Caribbean country.  In order to better understand some of the reasons behind Cuba’s current economical situation this paper will briefly address the political situation that has a very real impact on the economic condition in Cuba.


The very mention of Cuba elicits a variety of images.  One is the romantic vision of royal palms gently swaying above beautiful white sandy beaches while a handsome couple sips mojitos.  If that stereotypical image does not capture the perceived Cuban experience then maybe the image of erotic salsa dancing and Cohibas seems to encapsulate how Cuba is seen.  Others will automatically associate Cuba with that of Castro and communism and others, strangely enough, think of Argentinean Che Guevara when they think about Cuba.  All of these images are partially correct, as each one does portray some aspect of Cuban life and history, but they are just that, partially correct.


Prior to January 1, 1959, when General Fulgencio Batista was overthrown, Cuba had a similar social situation to that of many other Latin American countries.  The gap between the well to do and the poor was tremendously large.  There existed a very small but very wealthy upper class.  This upper class consisted mainly of land owners and government officials, or in short Batista’s close circle.  It was the developed urban centre of Havana where the majority of the wealth was situated, while the majority of the rest of the island was very poor, rural, and undeveloped.  At this time it is estimated that approximately 75% of Cubans were illiterate and there was no modern health care available.  It was this situation that many people found completely unacceptable and prompted them to make change.  In 1953 Fidel Castro led a failed attack on the military barracks in Santiago Cuba, this failed attack lead to his imprisonment and he subsequently went into exile in Mexico.


 It was in Mexico that Fidel met with the man whose picture has arguably become the world’s most recognizable picture, Che Guevara.  It was as a young Argentinean medical student that Che took a year off from his studies and traveled throughout Latin America on a motorcycle.  It was that trip that influenced his political views.  Che was profoundly troubled by the poverty that he saw throughout all of Latin America and he came to the realization that capitalism worked for a very select few while the majority suffered in poverty.  This was of course the same view that Fidel Castro held, so in December of 1956 Fidel and Che, along with others, left Mexico aboard the Granma and sailed for Cuba where they would launch the 26th of July Movement.


The poverty faced by the majority of Cubans during Batista’s reign was quite real and disturbing.  As stated earlier, universal health care and education were almost non-existent in Batista’s time.  The majority of Cubans worked very hard and were extremely poor; they managed to scrape out a merger existence from the very dirt they walked on.  By contrast, a handful of wealthy Cubans and Americans used Cuba as their playground.  The beautiful beaches of Cuba and the vibrant nightlife of Havana became America’s first “sin” city.  Long before Las Vegas drew in criminals and lured the wealthy with gambling, alcohol, and sex, Cuba, and Havana in particular, was teaming with wealthy Americans and their Cuban counterparts.  Money spoke and as such corruption was running as freely as the rum.  Cubans were tired of being repressed and having their beautiful island quite literally rapped by American owned giants like United Fruit.  The 26th of July Movement came at just the right time.


The situation in Cuba did not change overnight on January 1, 1959.  The transition would be difficult at times and to this very day Cuba continues to struggle in many areas.  Castro’s main focus was on abolishing the middle and upper classes and eliminating poverty in the lower classes.  Fidel started by grabbing the large landholdings and companies of the rich, which caused many of them to flee the country.  The move to nationalize the businesses in Cuba resulted in the state having control of the economy, a position that many have blamed for Cuba’s finical short comings.  A 4 level wage scale was established and rates for rent were fixed at 10% of one’s salary and money was starting to be spent in rural areas.  Additionally, the state provided medical care, transportation, vacations, subsidized food, and other goods.


Of course this did not mean that Cuba was completely self sufficient or that everyone was happy.  Becoming a socialist state did not sit well with everyone, especially those with American ties, and while food, housing, education, and medical care were starting to find the lower class in the rural areas, other rights and freedoms were being sacrificed in order to provide these benefits to the majority of Cubans.  Additionally, for 30 years (1959-89) Cuba relied heavily on the Soviet Union for economic support.  With the fall of the Soviet Union, and the recession that hit Cuba as a result, Cuba has been forced to change it policies.

Foreign ownership is now possible with- in Cuba, as is the ownership of private business.  A tax system was also introduced for those earning hard currency and tourism is encouraged.  It has been through these newer measures that income inequality has emerged.  Although education is provided free from the state it seems pointless to become a physician and make the equivalent of $40.00usd a month when a taxi cab driver or a waitress in a tourist hotel can make that in a week on tips alone.  It is also the pursuit of hard currency that has prompted other kinds of tourism.  Dark tourism has become a bit of a reality as middle class westerners travel to Cuba, among other places, to view those living in standards that are not comparable to those in the developed west.  Even more disturbing is the increasing sex tourism industry that has emerged not only in Cuba but in many countries throughout Latin America and the world.  Jineteras, short term Cuban girlfriends, are a reality in the Cuban tourism industry, regardless of what the state officially says.

While medical care remains free in Cuba, and Cuba has the second highest per-capita number of physicians in the world (behind Italy), Cubans still die prematurely from curable diseases because the medicines required to treat and cure these diseases are not available in Cuba; this is largely due to the US embargo against Cuba.


It was after the fall of the former Soviet Union when Cuba quite literally lost $4 – $6 billion annually in subsidized trade, and almost overnight, importers required hard currency.  Cuba no longer had access to the eastern bloc’s raw materials and finished products and as a direct result the country was left feeling the painful pinch from the US trade embargo.  The Cuban Democracy Act of 1992 added further difficulties to the situation by prohibiting foreign subsidiaries of US companies from trading with Cuba.  This is one of the few sanctions worldwide that explicitly includes food and defines trade restrictions that block access to medical supplies.  It should come as no surprise that with a restriction on food imports, medical equipment, pharmaceuticals, that a country, such as Cuba, would struggle.  Considering that since 1975 roughly 50% of the newly patented drugs worldwide have been produced by American companies, it is quite remarkable that Cuba has managed, in spite of the American embargo, to deal with the effects of poverty as well as they have.

In 1993 the Cuban government legalized self-employment of approximately 150 occupations.  Many of these occupations were already being performed as black market activities and the state thought that by regulating and taxing these activities they would be able to control them.  The numbers are relatively small, between 150,000 and 200,000, and recently the government has been trying to squeeze these private businesses, like family ran restaurants, back into the public sector.  This has resulted in many opting to enter the informal economy, or black market.

While foreign ownership is now possible with-in Cuba, all would be foreign investors are required to form a joint venture with the Cuban government.  The only exceptions to this rule are Venezuelans, who are allowed to hold 100% in businesses.  Recently, Venezuela has been providing cheap oil to Cuba in exchange for Cuban “missions” of doctors.  Unfortunately, the US embargo continues to harm Cuba.  The United States have excluded entry into their country of 15 executives of foreign countries that deal with Cuba and as a result over a dozen countries have withdrew or drastically changed their plans to invest in Cuba due to US threats.


Still many countries continue to trade with Cuba despite American pressure.  Venezuela, with their massive oil reserves, continues to trade with Cuba with what appears to be little or no concern for what the American government thinks.  China has also begun doing a considerable amount of trade with Cuba in the past few years and now that the restrictions on electronic devices has been lifted in Cuba there has been a increase in Chinese products in that country.  Companies like Sherritt International, a multinational conglomerate based in Fort Saskatchewan Alberta, do not view the US embargo as a real threat to their profits.  Although Sherritt admits that the embargo makes raising money in the United States difficult, it regards the US sanctions as more of an “irritant.”


Unfortunately, the impact on many Cubans proves more than just an irritant and the restructuring of the Cuban economy has created new pockets of poverty and fewer options for mobility.  While the Cuban government puts 32% of its GDP into social programs, the highest investment in Latin America, the high levels of income inequality continues to widen the gap between what are now becoming different socio-economic classes in Cuba.  While the government continues to struggle with this “new” problem, they are still able to ensure that all Cubans basic needs are indeed met.  Cubans have one physician and one nurse for every 100 – 200 citizens and they also have special maternity hospitals for expecting mothers.  Recently, many of these health care facilities were upgraded with newer equipment and extra facilities were added in rural areas in order to bring high-tech medicine to local communities.  Additional spending has also been put into their education system.  Increasing salaries for teachers and equipping classrooms with televisions and computers, as well as reducing class sizes, has been done.


The view we have of poverty in Cuba comes from two separate sources.  One is of the poor rural farmer who uses a horse drawn buggy for transportation and the other is of a young child standing in front of a deteriorated building in Old Havana.  To a North American these images may be the epitome of poverty but they are just images.  All Cubans are provided with housing.  While it is true that the standard of housing may very well be below typical North American standards and that standards vary greatly in Cuba, housing is still provided to all Cuban citizens.  The brown and black outs that ravaged Cuba during the 1990’s have all but disappeared as Cuba plans to be 100% energy sufficient by 2010.  Partially because of this Cuba has now lifted the band on owning of electrical devices; a step that will increase the comfort and quality of life for all Cubans.  It should also be noted that while all Cubans have subsidized rations, those that live in rural areas are also able to grow additional produce for sale or for their own consumption.  There are also many advantages of being an island nation, as fresh seafood is easily attainable for many citizens living in coastal areas.  While there is no doubt that a rural lifestyle may have its drawbacks, it may also have many advantages that come from having a simpler self sustaining life style.  With-in the cities we tend to focus on the deterioration of the buildings, streets, and other structures.  This came about as monies were diverted from Havana and spent in rural areas, thereby leaving much of Havana looking as ghettos.  However, it is not just the urban poor that live in the cities dilapidated neighborhoods.  There is an incredible mix of individuals that live in these neighborhoods.  Doctors, engineers, and other professionals live along side of tradesmen and some of the urban poor.  Additionally, many middle and upper-class homes were occupied by peasants early on in the revolution and many of these homes are still occupied by their children and grandchildren.  Living in these urban areas also provides opportunities that are unavailable to residents of rural areas and gives many the opportunities to obtain hard currency.


While poverty does exist to varying degrees in Cuba, the contrast between rich and poor, which has been widening in the recent past, is not as notable as in other Latin American countries.  Being a socialist country ensures that all of its citizens receive the bare necessities in order to survive.  While lacking many medical products, drug treatments in particular, Cubans still have a free and highly effective medical system; one that has contributed in giving Cubans the same life expectancy as Americans.  Furthermore, Cubans access to free education from the state has all but eradicated illiteracy in Cuba and given Cuba a highly educated workforce.  It is also compulsory for all children in Cuba between the ages of 6 and 15, 16 in some cases, to attend school and wear uniforms.  This is in sharp contrast to some other Latin American countries such as Mexico where it is estimated that between 8 and 11 million children under the age of 15 years works.  Effectively, Cuba does not have any street children.  While it is common to see Cuban children carelessly playing in the streets of Old Havana, among other places, and the occasional child trying to get a dollar off of a tourist, there are no street children in Cuba.  All of these children have homes and many have large extended families that care for them at home and in the community.  Sadly, Mexico City has approximately 1,900,000 underprivileged and street children, and of that number it is estimated that 240,000 of those children are abandoned.  The numbers for all of Latin America do not appear any better, where in 1996 it was estimated that 40 million children lived or worked on the streets of Latin America.


In 1997of the 78 indexed countries in the United Nations Human Poverty Index (HPI) Cuba, along with Trinidad and Tobago, Chile, Singapore and Costa Rica were the only countries to reduce human poverty to less than 10% of the population.  While in the most recent United Nations Human Development Index (2006) Cuba with a GDP of $31.72 billion (US) outperforms some high and middle income countries in areas such as infant mortality, under five mortality, life expectancy, adult literacy and physician to patient ratio.  In relation to their Latin American neighbors with similar populations, between 10 and 12 million, Honduras and Guatemala placed 117th and 118th as opposed to Cuba’s placing of 50th.  Additionally, there are only seven Latin American countries in the high development category: Argentina, Chile, Uruguay, Costa Rica, Cuba, Mexico, and Panama.


While it is clear that Cuba continues to struggle with the US imposed embargo and the dual economy that it has created Cuba could possibly be Latin Americas, or the Caribbean’s, next economic tiger.  It appears that relations with the United States may not be as strained in the future as they were in the past.  Raul Castro has been open and optimistic about the idea of having meaningful dialog with the new US President and the emergence of a new and powerful China could be quite beneficial to the Cuban economy.  It is Cuba’s large number of highly educated professionals that could be the spring board for new technologies and economic opportunities that would ensure the Caribbean Island a bright future.



Works Cited

Diaz, Luis Pizarro. Personal interview. 24 May 2008
Inter-American Development Bank. Forthcomming. Economic and Social Progress in Latin
America 2003: Labor Markets in Latin America. Washington, DC.
Mickelson, Roslyn A.  Children on the Streest of the Americas.  Routledge, New York, New York