Introduction[1]
At least by early December 2023, it was evident that Cuba was experiencing a horrible economic crisis. One commentator put it this way: “Cuba is going through the worst crisis it has experienced in decades, with widespread shortages of food and medicines, rolling blackouts and a sky-high 400% annual inflation rate. The calls on the communist leadership to open up the economy to the market are getting loud, even from close political allies.”
t also was a Cuban political crisis on how to respond to this economic crisis. As John Kavulich, the president of the U.S.-Cuba Trade and Economic Council based in New York City, said in early December, Cuban “bureaucrats have become more reluctant to take risks since there is uncertainty about who is really in charge.” They are “either frightened or untrusting, and certainly not risk-takers.”
The most vivid criticism of this situation came from Roberto Alvarez-Quinones, a Cuban journalist, economist and historian who after working in Cuba for Granma and Cuban television stations has been doing that work in Los Angeles, California. He said, “Never in the history of the entire West has there been such an overwhelming economic and social crisis that it has affected practically 99% of the total population of a country, without having been caused by a natural catastrophe or a war, but by the Government of the nation.”
Cuban Government’s Response[2]
At a December 20-22, 2023, meeting of Cuba’s National Assembly, the Minister of the economy and planning, Alejandro Gil Fernandez, reported that for 2023 Cuba’s GDP fell almost 2%; exports were $770 million below predictions; food production was less than that for 2022; tourism, although more than the prior year, had a yield only 69% of the 2019 figures; overall production was down; there were shortages of supplies and fuels; and health care and education sectors where harmed by loss of workers to emigration.
Fernandez attributed Cuba’s inflation to international price hikes, the government’s release of money to finance its budget deficit, fewer goods being produced, the agricultural sector being burdened by labor shortages, high costs and low yields and Cuba being forced to import over 70% of the food that [was] being consumed.
Prime Minister Manuel Marrero Cruz said the government’s lack of control over production and distribution “adversely affects production by state entities and lets currency exchanges on the illegal market determine the pricing of products from the non-state sector.”
President Diaz-Canel, of course, criticized the U.S. embargo (blockade), but admitted that the Cuban government had made some errors in the “design and implementation of currency unification,” “approving new economic actors without performance norms having been established” and “the complexity of making decisions in a context of extreme tension [and of] commitment to preserving social conquests.”
All of these “difficult realities” were summarized by W.T. Whitney, Jr. (an U.S. political journalist focusing on Latin America) as “the adverse effects of diminished tourism, inflation, and emigration; social inequalities based on varying access to resources; production stymied by shortages of resources; inadequate food production; lack of buying-power for most Cubans, and for importing necessary goods; and the near impossibility of securing foreign investment.”
To meet these problems, Whitney said, Cuba was preparing these responses: “further decentralization of political and economic administration; cutbacks on the expenditure of central government funds; reduced subsidies for the purchase of water, fuel, transport, and electricity by business entities; adjustment of import tariffs to favor the availability of resources for production; capturing more tourist dollars; protecting state-operated production entities; fixing prices; and producing more food.”
Moreover, Whitney said, the U.S. needs to cancel its embargo (blockade) of Cuba and remove Cuba from the U.S. list of countries that are sponsors of international terrorism.
Criticism of Cuban Government Responses[3]
Javier Perex Capdevila, Doctor of Economic Sciences and Professor at the University of Guantanamo, said the Government measures are based on cutting subsidies, but “there are no measures to get out of economic stagnation and . . . to reduce inflation, accompanied by a fiscal deficit that entails generating more liquid money which does not stimulate the economy, but rather inflation. The measures that have been announced in a confusing and ambiguous manner are supposed to achieve macroeconomic stabilization, but that is not a real solution . . and there is no guarantee that they will work.”
In addition. Capdevila noted that increases in long-distance transportation rates will adversely affect many people who have to use such transportation to reach competent medical personnel. He said, “You cannot save a country if you do not save the people.”
Pedro Monreal, a Cuban economist, criticized the purported justification for increasing black market prices for currencies by saying the government had not designed that market. Monreal said this was “a fig leaf to cover up the poor design of the ‘organization that made this informal market necessary.’” The Cuban State did something worse in 2020 when “it designed a defective official exchange market with an overvalued [peso].” Monreal also “predicted more inflation” this year with a government deficit of 18.5% of gross domestic product.
Cuban economist Emilio Morales commented on the continued emigration of Cubans in 2023 while there was a 3.3% decrease in remittances to those on the island due to the need for those now in other countries to pay for their outbound transportation and expenses of living in other countries on their “march for family freedom.” Morales concluded that this result shows “the systemic crisis demands radical reforms and the entrenchment of the mafia regime in its totalitarian model blocks any possibility of survival. History teaches that bayonets cannot sustain a regime for long, indefinitely without fundamental reforms.”
The most recent news about Cuba’s laws affecting private enterprises was the January 16th announcement of new income tax regulations. Now “private sector employees will have to pay a 20% income tax on earnings above 30,000 Cuban pesos, about $109 per month. That’s a 15% tax rate increase from the previous scale set up in 2021, which imposed a 5% income tax for earnings over 9,510 Cuban pesos. Business owners must automatically deduct the tax payments monthly, the decree says.”
This recent announcement is in addition to the tax burden on Cuban private businesses: 35% tax on profits, a 10% tax on sales or services provided, a 5% payroll tax, a one percent revenue tax to support local governments and contributions to social security equal to 14% of workers’ salaries. Owners of the [private businesses] also have to pay up to 20% taxes on dividends.
Such private businesses “cannot hire more than 100 employees, they cannot be involved in economic activities handled by the state, such as telecommunications, and must import products and supplies through state companies working as intermediaries. According to the new regulations published this week, they can also be hit with price controls at any time ‘when circumstances advise it to achieve more favorable prices for the population.’”
At about the same time as this announcement of new taxes on private enterprises, the Cuban government announced a new “’ethics code’ for government officials and members of the Communist Party and similar organizations that mandate them to ‘be faithful to socialism,’ fight against the ‘genocidal’ U.S. embargo and ‘be loyal to the Cuban Communist Party, the Revolution… and to the Revolution´s Commander in Chief, Fidel Castro.”
Conclusion[4]
This blog consistently has advocated for U.S. repeal of the embargo (blockade) of Cuba and the U.S. designation of Cuba as a state sponsor of terrorism. However, all of the blame for Cuba’s current crises cannot be attributed to these U.S. measures. Indeed, the U.S. now is the sixth largest exporter to Cuba.
Moreover, now the U.S. is preoccupied with the Israel-Hamas and the Russia-Ukraine wars, problems with Iran, North Korea, China, Yemen and the Red Sea and the problems created by large number of immigrants at our southwestern border. As a result, the U.S. does not have the time and resources to devote to Cuba’s problems and U.S. policies regarding same.
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[1] Analysis of Cuba’s Current Economic Crisis, dwkcommentaries.com (Dec. 5, 2023); Almost All Cubans Suffer Worst Economic Crisis in the History of the Western Hemisphere, dwkcommentaries.com (Dec. 11, 2023);
[2] Whitney, A revolution in trouble: Cuba’s government, People’s World (Jan 8, 2024).
[3] ‘You can’t save a country if you don’t save the people.’ a Cuban economics doctor explodes in response to the package, Diario de Cuba (Jan. 13, 2024); Another rise in the price of the dollar and the euro on the Cuban black market, Diario de Cuba (Jan. 15, 2024); Emigration grows, but remittances to Cuba sink, Diario de Cuba (Jan. 16, 2024);Through resolutions, the Castro regime intends to stop the astronomical fiscal deficit that it approved, Diario de Cuba (Jan. 17, 2024); Reyes, The economic package opens a political crisis in the Government of Cuba, Diario de Cuba (Jan. 17, 2024); Torres, As the economy craters, the Cuban government hits private-sector workers with tax hike, Miami Herald (Jan. 18, 2024).
[4] E.g., posts listed in sections “Cuba: State Sponsor of Terrorism?” and “U.S. Embargo of Cuba” in List of Posts to dwkcommentaries—Topical: CUBA [as of 5/4/20]; Cuba Still on U.S. List of State Sponsors of Terrorism, dwkcommentaries.com (Dec. 2, 2023);U.S. Senators and Representatives Demand Ending of U.S. Designation of Cuba as State Sponsor of Terrorism, dwkcommentaries.com (Jan. 12, 2024); COMMENT: Another Congressman Calls for Ending Cuba as a State Sponsor of Terrorism, dwkcommentaries.com (Jan.13, 2024); U.S. Increasing Exports to Cuba, dwkcommentaries.com (Jan. 12, 2024).