Cuba

Politics:

• Analysis

  Cuba politics: Shift to a new generation of leaders accelerates

  The outcome of recent elections in Cuba-for provincial and national assemblies and, subsequently, appointment to the Council of State-offered a useful insight into the long-debated question of how the succession process from the president, Raúl Castro, to a new generation of leaders is going, and into a number of broader issues. The election of 53-year old Miguel Díaz-Canel as senior vice-president (replacing the octogenarian guerrilla veteran, José Ramón Machado Ventura) may have surprised many observers (although many Cubans had long noted his rise), it confirms several recent trends seen in Cuban political circles.

  The first of these is in the significant opposition to the reform programme that Raúl Castro launched in 2008. Raúl faced continuing resistance from within the Partido Comunista de Cuba (PCC) which, long-ignored by his brother Fidel, had become a political base for Mr Machado Ventura and other members of the old guard (many of whom took part in the 1959 revolution). These were supported by hundreds of rank-and-file members (especially in the new zonal, non-workplace based party branches) who feared that the ideals of the revolution were being dismantled. It was only by threatening to call an unprecedented National Party Conference that Raúl Castro was able to face down opposition and allow a 6th Party Congress to take place in April 2011, and thus continue the process of economic reform and rejuvenation. Mr Díaz-Canel's appointment is evidence of further success for Raúl in this area.

  Second, stagnation under Fidel Castro (from the early 2000s) had led party members-particularly younger politicians-to jockey for position and attempt to present themselves as potential future presidents. However, Raúl Castro's very different approach to politics-he despises such political manoeuvring-saw the fall of Carlos Lage and Felipe Pérez Roque, two rising stars who were widely seen as the main contenders for succession but were also perceived by the leadership as overly ambitious. In their place, the president, who has always placed great emphasis on efficiency, reliability and loyalty, steadily replaced Fidel's government appointees with his own cabinet choices. Meanwhile, he used the Assembly and the government to outflank PCC opposition. Within the PCC, a steady process of rejuvenation (in the unseen middle ranks and provinces) was also under way, and the National Party Conference (which followed the 6th Party Congress) took that further, restricting the power of the zonal branches, which had become an area of concern.

  An ongoing shift to military loyalists and technocrats

  Throughout this process Raúl Castro's power base has continued to be the armed forces, whose presence in government has steadily increased, alongside a new generation of younger, more technocratic, appointees. Mr Díaz-Canel falls into the latter category. He rose through the PCC's provincial ranks (especially in politically influential Holguín province), becoming minister of higher education in 2009 and then, in December 2012, becoming a "super minister", with responsibility for a wide area of strategically important government functions.

  This process has given the latest National Assembly elections a new significance. The new Council of State (the Assembly's permanent executive authority) is much younger (average age 57), more female (13 of the 31 members are women), and more clearly Raulista. While the older generation remain in the Council (most notably Mr Machado Ventura, Abelardo Colomé Ibarra and Ramiro Valdés Menéndez), they have had their power curtailed, and have been retained more out of respect for their years of service. These generational and gender changes are also reflected in the 15 Provincial Assemblies, which now have an average age of 47 (the National Assembly's is also 48), with ten of them now chaired by women.

  New assembly president to play role in future changes

  Two other potentially significant changes took place recently: first was the unexpected departure of the long-standing and influential assembly president, Ricardo Alarcón (first signalled by his absence from the election ballot). Mr Alarcón was long seen as a possible medium-term successor and also as a key reform ally. However, his exclusion has been partly explained by widely expressed rumours surrounding his failure to root out official corruption. However, to reward his loyalty as a key ally to Raúl Castro and the reform process, he was officially appointed to lead the campaign for the release of five Cuban agents imprisoned in the US (known as "the Cuban five")-a high-profile job, which carries little real power. In his place, Esteban Lazo has become the assembly president. Long dismissed by outsiders as simply a time-server, supposedly included more because of his colour than his qualities (he is one of the Council's 12 black or mixed-race members), he is in fact a key operator, unquestionably loyal and ideologically sound, but also flexible and politically skilful. Alongside him as one of the vice-presidents is Salvador Valdés Mesa, a similar political operator, who, as head of the trade union confederation, has proved both skilful at adapting to the reform programme and powerful, using his support base to negotiate changes to some reforms. As the coming years see the focus of the process of political change shift towards the PCC before its 2015 Congress, those two may well have a key role to play.

  Meanwhile, Raúl Castro himself in effect confirmed his own departure by reiterating that he will adhere to the two-term limit on presidential terms (a reform he introduced). This will mark a real, historical change in the Cuban leadership in 2018, as, for the first time in over 50 years, a Castro will not head Cuba's government. As a result, the process of handing power over to a new generation is picking up pace. However, as with other reforms, it will be carried out in a tightly controlled and gradual way.

  March 08, 2013

• Background

  Cuba: Key figures

  Raúl Castro Ruz

  Raúl Castro had served as deputy to his older brother, Fidel, for 30 years before becoming president in February 2008, when Fidel announced his retirement. At 81, Raúl can be considered only a temporary successor. Lacking his brother's charisma and unquestionable authority, he has adopted a more collegiate style of leadership, with broader public debate and efforts to strengthen state institutions. He has replaced most ministers since he assumed office in February 2008.

  Fidel Castro Ruz

  After leading the country for almost 40 years, Fidel Castro formally relinquished the presidency in early 2008 and confirmed that he had ceased to be First Secretary of the PCC in early 2011, although Raúl had been deputising in both roles since 2006. He is physically weak, and rarely makes public appearances, but continues to grant audiences to favoured foreign leaders. For as long as his health permits, he will influence policy discussions through informal channels and articles in the official press.

  José Ramón Machado Ventura

  Mr Machado Ventura became first vice-president in February 2008, and second secretary of the PCC in April 2011, making him the official deputy to Raúl Castro in both posts. He was trained as a medical doctor before joining the guerrilla campaign that culminated in the 1959 revolution. As he is 81 years old, he may be replaced in 2012-16.

  Ricardo Alarcón de Quesada

  Mr Alarcón de Quesada has served as Cuba's ambassador to the UN and he is now president of the National Assembly. He has proved to be a political survivor and has considerable authority, but his age (75) reduces the chance of him assuming the presidency.

  Marino Murillo Jorge

  Mr Murillo, who is a generation younger than the old guard, has been one of the most rapidly-promoted figures in the government since Raúl Castro assumed the presidency. He was appointed minister of the economy and planning, and a vice-president of the Council of Ministers in March 2009. He also has responsibility for oversight of implementing the guidelines for economic policy approved at the April 2011 congress. To free him up for this task, he was replaced by his deputy (Adel Yzquierdo Rodríguez) as economy and planning minister. At the Congress he also became a member of the PCC's Politburo (executive body).

  Gladys Bejerano Portela

  In December 2009 Ms Bejerano was made the first female vice-president of the Council of State since 1959. She had assumed the new post of comptroller-general in August 2009, having previously headed the Ministry of Audit and Control. In the context of the intensified effort to improve accountability and tackle corruption, her role has become increasingly powerful. Ms Bejerano, who is in her mid-60s, has been working in related fields for many years, and is regarded as a competent and effective administrator. Since she took the job she has overseen investigations into a series of high-level corruption scandals that have resulted in convictions. Her international profile has grown in recent months, as she has begun to appear at international events as the government's representative, and in June 2011 she assumed the presidency of the Organisation of Latin American and Caribbean Supreme Audit Institutions (OLACEFS).

  Dissidents

  Each of the most prominent dissidents heads a separate organisation: Laura Pollán is leader of the Damas de Blanco (Ladies in White), a group representing the families of political prisoners; Elizardo Sánchez heads the Comisión Cubana de Derechos Humanos y Reconciliación Nacional (Cuban Commission of Human Rights and National Conciliation); Osvaldo Payá the Movimiento Cristiano por la Liberación (Christian Liberation Movement) and Proyecto Varela (Varela Project); Marta Beatriz Roque the Instituto Cubano de Economistas Independientes (Institute of Independent Economists); Vladimiro Roca the Asamblea para la Promoción de una Sociedad Civil Alternativa (Assembly for the Promotion of an Alternative Civil Society); Hector Palacios the Partido Liberal; Eloy Gutiérrez, Cambio Cubano (Cuban Change); Óscar Elías, the Fundación Lawton por los Derechos Humanos (Lawton Foundation for Human Rights); and Manuel Cuesta, the Partido Arco Progresista (Progressive Arch Party). Other notable dissidents include Darsi Ferrer, a doctor, Guillermo Fariñas, a journalist, Óscar Espinosa Chepe, an economist, and Yoanni Sánchez, a blogger. While these figures are well-known outside Cuba, they are unlikely to assume prominent national roles in the medium term.

  July 27, 2012

• Structure

  Cuba: Political structure

  Official name

  Republic of Cuba

  Form of government

  Centralised political system, with close identification between the Partido Comunista de Cuba (PCC) and the state

  Head of state

  The president, Raúl Castro, took over from his brother, Fidel, on February 24th 2008

  The executive

  The Council of Ministers is the highest executive body; its Executive Committee is composed of the president, the first vice-president and the vice-presidents of the Council of Ministers

  National legislature

  National Assembly of People's Power; 612 members elected by direct ballot; the Assembly meets twice a year, and extraordinary sessions can be called

  Legal system

  A People's Supreme Court oversees a system of regional tribunals; the Supreme Court is accountable to the National Assembly

  National elections

  Provincial and national assemblies: last elections February 3rd 2013; next elections due in February 2018

  National government

  The organs of the state and the PCC are closely entwined, and power devolves principally from the Executive Committee of the Council of Ministers

  Main political organisation

  The Partido Comunista de Cuba (PCC) is the only legal political party. Official "mass organisations" (including labour unions and organisations for students, women and farmers) are a feature of the Cuban political system

  President of the councils of state & ministers: Raúl Castro Ruz

  First vice-president: Miguel Díaz-Canel Bermúdez

  Vice-president of the Council of Ministers: Marino Murillo Jorge

  Secretary of the Council of Ministers: José Amado Ricardo Guerra

  President of the National Assembly: Esteban Lazo Hernández

  Key ministers

  Agriculture: Gustavo Rodríguez Rollero

  Communications & information: Maimir Mesa Ramos

  Culture: Rafael Bernal Alemany

  Defence: Leopoldo Cintra Frías

  Economy & planning: Adel Yzquierdo Rodríguez

  Energy & mines: Alfredo López Valdés

  Finance & prices: Lina Pedraza Rodríguez

  Foreign relations: Bruno Rodríguez Parrilla

  Foreign trade & investment: Rodrigo Malmierca Díaz

  Higher education: Rodolfo Alarcón Ortíz

  Industry: Damar Maceo Cruz

  Interior: Abelardo Colomé Ibarra

  Justice: María Esther Reus González

  Labour & social security: Margarita González Fernández

  Public health: Roberto Morales Ojeda

  Science, technology & the environment: Elba Rosa Pérez

  Education: Ena Elsa Velázquez Cobiella

  Tourism: Manuel Marrero Cruz

  Transport: César Ignacio Arocha Masid

  Central Bank president

  Ernesto Medina Villaveirán

  March 28, 2013

• Outlook

  Cuba: Key developments

  Outlook for 2013-17

  • Political uncertainty is on the rise as reforms continue to be implemented to hand an increased role to private enterprise at the same time as power begins to shift to a younger generation of political leaders.
  • The appointment of Miguel Díaz-Canel (who is relatively young at 52) as first deputy president in February's meeting of the National Assembly suggests that this shift is proceeding and will take place gradually.
  • Given the persistent weakness in the global economy and the expectation that the positive impact of economic reforms will take some time to materialise, we expect real GDP growth to average 4.1% in 2013-17.
  • We expect the fiscal deficit to narrow slightly, to 3.1% of GDP in 2017 from an estimated 3.8% of GDP in 2012, as Cuba's highly centralised system enables the government to control spending.
  • We expect efforts to unify Cuba's hard currency (CUC) and domestic currency (CUP) to accelerate in 2013, following the announcement of a pilot scheme that will introduce a new exchange rate of CUP7:CUC1 for some enterprises.
  • We expect a moderate current-account deficit in 2013-17 (averaging 1.3% of GDP annually) as import spending outstrips export earnings. Growth in tourist arrivals will be supportive in the latter part of the forecast period.

  Review

  • Elections were held for the national and provincial assemblies on February 3rd. A total of 612 deputies and 1,269 delegates for provincial assemblies were chosen for five-year terms.
  • Raúl Castro was re-elected president of the Council of State for his second five-year term and confirmed that this would be his last term. Mr Díaz-Canel is to become his new first deputy president.
  • The death of Venezuela's president, Hugo Chávez, has sparked renewed speculation over the future of the generous subsidies that Venezuela provides for Cuba.
  • Pressure on the US authorities to revise Cuba's inclusion on a list of state sponsors of terrorism increased following reports that senior US diplomats have concluded that Cuba should no longer be included.
  • On February 21st Russia and Cuba signed a wide-ranging co-operation agreement that included an outline deal for writing off most of Cuba's debt to the former Soviet Union.

  March 28, 2013

Economy:

• Background

  Cuba: Country fact sheet

  Fact sheet

  Annual data	2012a	Historical averages (%)	2008-12
  Population (m)	11.2b	Population growth	0.0
  GDP (US$ m; market exchange rate)	63,967	Real GDP growth	2.8
  GDP (US$ m; purchasing power parity)	126,653	Real domestic demand growth	2.1
  GDP per head (US$; market exchange rate)	5,691	Inflation	3.1
  GDP per head (US$; purchasing power parity)	11,269	Current-account balance (% of GDP)	-1.0
  Exchange rate (av; official) CUP:US$	1.00	FDI inflows (% of GDP)	–
  a Economist Intelligence Unit estimates. b Actual.

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  Background: Cuba gained independence from Spain in 1899. The first constitution, in 1901, gave the US strong influence over the island, as well as control over the Guantánamo naval base, which it retains today. Following the overthrow of the military government of Fulgencio Batista through a revolution led by Fidel Castro in 1959, relations with the US quickly turned sour, and Cuba joined the Soviet bloc. Since 1990 Cuba has reintegrated into the global economy, but unilateral US economic sanctions remain in place. Fidel Castro stepped down from the presidency for health reasons in July 2006 and, in February 2008, the National Assembly confirmed his deputy and brother, Raúl, as his replacement.

  Political structure: The Partido Comunista de Cuba (PCC, the Cuban Communist Party) is the only legal political party and the leadership remains dominated by the individuals who led the 1959 revolution, although a process is under way to change this. Opposition activists face harassment and are prosecuted for a range of offences. The government describes the political system as a "participatory democracy", with a range of official "mass organisations", as well as a system of elected national, regional and local government assemblies.

  Policy issues: The economy has been predominantly state-owned since the 1960s, with private-sector activity limited to agriculture, a limited range of small service businesses and foreign participation in joint ventures. Since 1990 major changes have expanded the role of markets and in 2010 a strategy for expanding the private sector was unveiled. There is a dual currency system in place: the Cuban peso (CUP) is used for most domestic transactions and the convertible peso (CUC) for transactions in the tourism and domestic retail sectors, but a wide gulf between the official and unofficial rates has fuelled a large informal economy, which includes an extensive black market in stolen goods. The government continues to resist pressure for a "transition" to a market economy, but has begun a process of gradual and partial economic liberalisation.

  Taxation: In line with an economy that is predominantly state-owned, the tax system is unorthodox. Only the small private sector and those earning hard currency (or convertible pesos) pay income taxes. Sales in convertible-peso outlets are subject to a high retail margin, which amounts to a sales tax. State enterprises and joint ventures are subject to social security contributions and profit taxes (between 30% and 50%, but with exemptions). State companies pay aportes, the equivalent to dividends on profits payable to the state as owner, set at the discretion of the planning authorities.

  Foreign trade: Foreign trade is conducted entirely through state entities or joint ventures. The Economist Intelligence Unit estimates that, after registering a small surplus (of 0.3% of GDP) in 2011, the current account slipped back into deficit in 2012 (recording a shortfall equivalent to 0.6% of GDP).

  Major exports 2010	% of total	Major imports 2010	% of total
  Oil products	39.6	Fuel	42.6
  Nickel	24.1	Machinery & equipment	15.7
  Medicines	10.3	Food	15.4
  Sugar and sugar products	5.6	Chemicals	9.1
  Leading markets 2010	% of total	Leading suppliers 2010	% of total
  Venezuela	36.1	Venezuela	40.4
  China	14.3	China	11.5
  Canada	12.7	Spain	7.4
  Netherlands	7.4	Brazil	4.2

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  March 26, 2013

• Structure

  Cuba: Economic structure

  Data and charts: Annual trends charts

  
  

  

  March 28, 2013

• Outlook

  Cuba: Country outlook

  Cuba: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: Political uncertainty is on the rise, as an increasing role for private enterprise and free markets for goods and some services imply major adjustments to Cuba's institutional structure, at the same time as power begins to shift to a younger generation of political leaders (the president, Raúl Castro, is 81). Although Cuba's National Assembly re-elected Raúl Castro to another five-year term in February, The Economist Intelligence Unit maintains that a change of leadership in 2013-17 remains likely, given the president's age and the need to rejuvenate Cuba's ageing leadership. However, this is not expected to include large-scale changes to the tightly controlled political system. Measures to strengthen institutions and further stamp out corruption are also expected. This reflects the fact that, whoever takes over the presidency, political institutions will be more important than they have been under the unchallenged authority of Raúl Castro and his brother, the former president, Fidel Castro. Although these reforms will be implemented in a gradual and controlled manner, they raise uncertainty, particularly as political changes will follow from the government's continued efforts to introduce far-reaching economic reforms. Our forecast is based on the assumption that the transfer of power will be relatively smooth, as was the handover from Fidel Castro, to his younger brother, Raúl, in 2006-08. However, with a less centralised power structure, there will be greater potential for factionalism in the longer term.

  ELECTION WATCH: Raúl Castro was re-elected to another five-year term at February's National Assembly. However, the appointment of Miguel Díaz-Canel (who is relatively young at 52) as first deputy president suggests that the process of ushering in a younger generation of leaders is proceeding. Identifying future leadership candidates is notoriously difficult, but Mr Díaz-Canel's rise from provincial head of the Partido Comunista de Cuba (PCC, the Cuban Communist Party) to minister of higher education in 2009, and now to first deputy president, makes him a likely successor (although in the past rising stars have rapidly fallen from grace).

  INTERNATIONAL RELATIONS: The death of the Venezuelan president, Hugo Chávez, raises uncertainty over the long-term future of the supply of subsidised oil in exchange for the services of Cuban doctors, which has become vital to the Cuban economy. Although we expect Mr Chávez's nominated successor, Nicolás Maduro, to win the presidential election on April 14th (ensuring short-term policy continuity), questions over the future of Mr Chávez's political project without its iconic leader cloud the medium- to long-term outlook for subsidies to Cuba. Partly to mitigate this risk, Cuba is strengthening ties with China and other foreign partners. With the Republican Party retaining its majority in the US House of Representatives (at least until 2014, when congressional elections are due) and Congress facing a busy legislative agenda, the prospect of an improvement in US-Cuban relations in the short term is dim. Cuba's rejection of US conditions for the removal of sanctions will hinder any softening of US policy, as will an influential US-based anti-Castro lobby. EU foreign ministers have shown increased openness towards improving relations with Cuba. However, an easing of the EU's "common position"--which makes official co-operation conditional on political reform--is unlikely in 2013-17, given strong resistance from individual member states (the Czech Republic, Hungary and Poland). Some scope will remain to improve bilateral relations with individual members, particularly those with business interests in Cuba. However, as with the US, we expect relations with the EU to stagnate in 2013-17.

  POLICY TRENDS: Liberalising economic reforms should provide support to the economy in the medium to long term. Major restructuring aims to reduce the state payroll by over 1m workers, expand private-sector activity, tackle widespread low-level corruption, boost productivity and gradually eliminate the ration system. This has been accompanied by reforms to encourage private enterprise, as well as introducing a legal car and housing market. Nevertheless, progress remains uneven and other reforms (such as improved credit provision and closer alignment of the dual exchange rates) have lagged. We expect a gradual improvement in bank lending and greater scope for private enterprise and foreign investment, although infrastructure deficiencies will remain significant. Cuba's main external vulnerabilities lie in its reliance on Venezuelan subsidies and nickel exports as a source of foreign exchange. Although we expect nickel prices to fall in 2013, the decline will not be as sharp as in 2009--when a slump in prices forced fiscal retrenchment, import compression and delays in debt repayments--and so the authorities should not have to resort to dramatic adjustment measures.

  ECONOMIC GROWTH: There is huge scope for catch-up in terms of economic efficiency and development of new private-sector activities. However, given persistent weakness in the global economy and the expectation that the positive impact of economic reforms will take some time to materialise, we expect GDP growth of 3.5% in 2013 (up from 3.1% in 2012). Thereafter, we expect growth to accelerate to 4.5% in 2017, supported by improving external conditions and rising private consumption. Gross fixed investment will remain strong, although we believe the government's 34% growth target for 2013 (driven mainly by construction) is unrealistic and expect investment to grow by 15%.

  INFLATION: The government will continue to influence inflation directly (by using price controls and regulating the limited areas of free-market activity) and indirectly (by controlling monetary emission), but as goods are removed from the ration system, the rate of inflation will rise, at least in the short term. The creation of new businesses will exert downward pressure on prices, but this will be offset by the gradual removal of subsidies, which will increase the average cost of basic goods. The official inflation index currently fails to reflect the rise in the cost of living fully, as a result of the shift away from rationed supplies to a greater reliance on markets. Assuming that the process of adjusting the consumer price basket to reflect this shift commences, inflation will rise in 2013 to an average of 6% as currency adjustment starts. We then expect inflation to fall, to an annual average of 4.3% in 2014-17, as the effects of currency adjustment subside, competition intensifies and output expands. This benign scenario could be threatened if competitive markets fail to emerge, if the adjustment process is prolonged, or if the government is forced to raise sales taxes to compensate for a shortfall in direct taxes.

  EXCHANGE RATES: Efforts to improve integration between the hard-currency (CUC) and domestic-currency (CUP) areas of economic activity, in preparation for eventual unification of the two currencies, are expected to accelerate in 2013 following the announcement of a pilot scheme that will enable some enterprises to experiment with the use of exchange rates of CUP11:CUC1-CUP7:CUC1. This is expected to begin the process of removing the wage and price distortions that prevent the integration of the domestic and external economies. At the official rate, there is currently parity between the Cuban peso and the convertible peso, while an "unofficial" exchange rate (known as the Cadeca rate) of CUP24:CUC1 is applied to personal transactions. Neither the unofficial nor the official exchange rate is close to purchasing power parity level. Our forecast assumes that the revaluation process will occur in stages. This is likely to create adjustment difficulties in the short term but improve dynamism in the domestic economy in the long term. The unofficial rate in our model now represents the average rate for the economy as a whole, including personal transactions (at CUP24:CUC1) as well as the new experimental rates. We expect this rate to be CUP15:CUC1 at end-2013 and to appreciate to an average of CUP10:CUC1 in 2014 as the experiments are rolled out more widely.

  EXTERNAL SECTOR: We expect a moderate current-account deficit in 2013-17 (averaging 1.3% of GDP) as import spending outstrips export earnings. However, the need to build up reserves for exchange-rate unification will force the government to keep the deficit at a manageable level. The goods trade deficit is forecast to fall marginally as a proportion of GDP, from 12.4% of GDP in 2012 to 10.2% of GDP in 2017, reflecting both a rise in domestic productivity and greater export capacity (particularly of nickel, the largest foreign-exchange earner). The nominal services surplus will pick up steadily from end-2014 as tourist arrivals strengthen. Although falling marginally as a percentage of GDP, it will remain large, owing partly to sustained earnings from the export of medical services to Venezuela. The current transfers surplus is forecast to rise in line with increasing US remittances, compensating for a larger income deficit related to growing profit repatriation as nickel exports rise. Inward foreign direct investment (FDI) is expected to peak at US$800m in 2015. This will remain well below potential, owing to strict regulation by the authorities. There are no official data on international reserves, but we assume that they will rise in 2013-17.

  March 28, 2013

• Forecast

  Cuba: Country forecast summary

  Country forecast overview: Highlights

  • Given the age (81) of the president, Raúl Castro, the administration will focus on ensuring a smooth succession to a younger generation of leaders. Significant changes are expected within the forecast period, although the lack of an obvious candidate to take over from Raúl Castro increases uncertainty.
  • The Economist Intelligence Unit expects a certain amount of adjustment in the power structure, with some decentralisation of authority as the old guard is replaced. However, despite reforms to the economy, we do not anticipate any sudden, radical transformation of the political system.
  • There is huge scope for catch-up in terms of economic efficiency and development of new private-sector activities, particularly in the services sector. However, given weakness in the global economy and expectations that the positive impact of Cuba's gradual economic reform programme will take time to materialise, we forecast average growth of 4.1% in 2013-17.
  • Unemployment has traditionally been very low (owing to a commitment by the government to reach "full" employment), but, as large numbers of public sector jobs are shed, the unemployment rate will rise. Following an easing of exit-visa regulations, we expect emigration to the US to pick up slightly.
  • As subsidies are gradually removed, consumer price inflation will rise, although the creation of new businesses will exert some downward pressure on prices. The government will continue to attempt to influence inflation directly (by using price controls and by regulating the limited areas of free-market activity) and indirectly (by controlling monetary emission).
  • Domestic consumer demand will grow modestly, in line with the expansion of the private sector and increased use of incentive payments for state employees. Investment spending will pick up from its current low level, as a result of increased capital spending in the public sector and in the emerging private sector. This will provide new trade opportunities for foreign businesses, although state controls will continue to inhibit foreign private investment and hamper Cuba's integration into international markets.
  • The current account is expected to remain in deficit in 2013-17 as import spending outstrips export earnings. Rising inflows of external financing are likely to push up the external debt stock. Economic prospects are tied to commodity price movements, owing to Cuba's dependence on imports of food and fuel, and exports of nickel. The death of the Venezuelan president, Hugo Chávez, raises questions over the medium- to long-term future of his political project, raising the risk of a withdrawal of generous subsidies to Cuba.

  Country forecast overview: Key indicators

  Key indicators	2012	2013	2014	2015	2016	2017
  Real GDP growth (%)	3.1	3.5	3.9	4.4	4.3	4.5
  Consumer price inflation (av; %)	5.5	6.0	4.8	4.4	3.9	4.2
  Budget balance (% of GDP)	-3.8	-3.6	-3.4	-3.3	-3.3	-3.1
  Current-account balance (% of GDP)	-0.6	-0.7	-1.2	-1.7	-1.6	-1.4
  Official exchange rate CUP:US$ (av)	1.00	1.00	1.00	1.00	1.00	1.00
  Official exchange rate CUP:€ (av)	1.29	1.33	1.31	1.27	1.26	1.26

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  March 26, 2013

View detailed map

Country Briefing

Land area

110,000 sq km: mainland 105,000 sq km; Isle of Youth (Isla de la Juventud) 2,000 sq km; keys 3,000 sq km

Population

11.2m (December 2010)

Climate

Sub-tropical; average temperature 25°C, average relative humidity 81%

Weather in Havana (altitude 24 metres)

Hottest month, August, 24-32°C (average monthly minimum); coldest months, January and February, 18-27°C; driest months, January and February, 38 mm average rainfall; wettest month, September, 183 mm average rainfall

Weights and measures

Metric system; also old Spanish units. Sugar is often measured in Spanish tonnes of 2,271 lbs and there is a Cuban quintal of 101.4 lbs made up of 4 arrobas. For area measurement, one Cuban caballería equals 13.4 ha or 33.16 acres

Currency

There are two domestic currencies: the Cuban peso (CUP), in which prices and wages are denominated within the domestic economy; and the convertible peso (CUC), used in "hard-currency" retail outlets. One peso (Cuban or convertible)=100 centavos (Cuban or convertible). The official exchange rates, used in national income, fiscal and enterprise accounting aggregates, are CUP1:CUC1 and CUC1:US$1. An "unofficial", but legal, CUP:CUC exchange rate is used for personal transactions. This rate is supposed to be freely floating, but has de facto become pegged. At the end of 2011 this rate was CUP24:CUC1. US dollars exchanged for convertible pesos within Cuba are subject to a 10% commission charge; there is no such charge for the conversion of other currencies into convertible pesos. Since 2002 euros have been accepted in some tourist resorts

Time

5 hours behind GMT (April-October, 4 hours behind GMT)

Public holidays

January 1st; May 1st; July 26th-27th; October 10th; December 25th

January 14, 2013