chapter  8
39 Pages

Cuba – export promotion, poverty, inequality and growth in the 1990s

ByANGELA FERRIOL, XUAN HOANG, ALFREDO GONZÁLEZ, ALINA HERNÁNDEZ

Abstract Cuba introduced important reforms during the 1990s, including special facilities to promote foreign investment inflows, the reduction of tariffs and other trade restrictions, the opening up of the foreign exchange market and the flexibility of rules regarding non-state activities. These reforms changed the way the economy functioned, but remained far from turning Cuba into a market economy. Rather, dual structures were introduced in commodity and labour markets with national currency and dollar segments. There is also segmentation in the domestic money supply for the public and for business activities. Import tariffs were reduced and export promotion policies were geared towards attracting foreign investors to the tourist industry and towards export diversification. These measures were a response to the collapse of the socialist regimes in Europe, which had provided Cuba with foreign assistance and export market access. Various domestic policy measures allowed the economy to recover gradually after 1993. Export performance responded positively to the process of opening of the economy. The share of exports of services increased, exports diversified geographically and the competitiveness of Cuba’s exports to industrialized countries improved. The composition of exports has changed fundamentally since 1989, as Cuba has moved from an agriculture-led to a service-led economy. Manufacturing exports, especially those requiring more advanced technology, have not performed well. Labour productivity and average real wages increased during the 1990s, along with rising inequalities between groups of workers. This also caused rising inequality and poverty at the household level.