Cuba's economic struggles and backwardness often raise questions: Is the U.S. economic blockade solely to blame? To understand the local perspective, our "Global Inquiry" team met with Cuban economist Professor Curio in Havana.
Professor Curio noted that Cuba is experiencing its second major economic downturn in 40 years. The first followed the Soviet Union's collapse; the current crisis stems from both U.S. sanctions and internal issues. These problems, learned through decades of trial and error, reveal the heavy price Cuba paid for economic development. For Chinese entrepreneurs considering expansion, is Cuba a viable destination?
Once the "world's sugar bowl," Cuba now produces under 200,000 tons annually—down from 8 million tons—and relies on sugar imports. The decline began when Cuba lost its Soviet trade partner, which had bought sugar at premium prices and supplied cheap oil. Post-Soviet collapse, market-rate sugar prices and U.S. sanctions made many sugar factories unprofitable. The government shut down facilities, laid off workers, and reduced sugarcane cultivation, triggering deindustrialization.
Without sugarcane, Cuba lost export earnings, leaving remaining factories unable to import equipment, fuel, or fertilizers. Overgrown fields, malfunctioning machinery, and broken cold chains hampered production, even affecting rum exports. Similar deindustrialization hit rice and pork production, with import dependency soaring. By 2026, locally produced industrial goods may drop to 38% of consumption, half of 1987 levels.
Despite producing 30,000 barrels of oil daily, Cuba faces frequent blackouts. Most extracted oil is low-quality "heavy crude," which corrodes outdated refinery equipment. Burning it for power damages generators, requiring constant repairs. With limited foreign currency, Cuba cannot afford sufficient fuel imports, and U.S. sanctions disrupt shipments. Power outages halt industry, water supply, irrigation, and transport.
Cuba's official exchange rates—1:24 for government transactions, 1:120 for citizens, and 1:20 for medical workers—are irrelevant next to the black market rate of 1:500. This disparity allows the state to profit from foreign exchange differences. For example, a state cigar factory earning $1,000 receives 24,000 pesos officially, but workers' wages equate to just $48 on the black market. The state pockets the difference, discouraging exports and crippling domestic demand.
Despite food shortages, Cuba invests over 30% of its budget in tourism—compared to 3% for agriculture—to earn foreign currency. With industry collapsed, tourism seems a quicker path to dollars and euros. Cuba has about 1,200 hotels for 11 million people, similar to South Korea's density. However, U.S. travel restrictions cut tourist arrivals from 4 million to 2 million, leaving hotels empty and investments wasted.
Cuba's fertility rate is 1.5, below the replacement level, with a median age of 43—comparable to developed nations. High education levels (43.1% tertiary enrollment) and economic despair drive youth emigration. Over 500,000 Cubans entered the U.S. in 2022–2023, draining the country of young talent.
Skilled workers, capable of mastering new technology in days, earn meager wages—sometimes $20 monthly, insufficient for basic needs. This leads to widespread "micro-corruption," where employees pilfer small amounts of fuel, food, or goods to survive. The system incentivizes petty theft, wasting human potential.
Professor Curio emphasized that U.S. sanctions are not the sole cause of Cuba's woes; internal bureaucratic rigidity and resistance to market reforms share blame. In 1995, he co-authored a book advocating market-oriented changes, but privileged elites blocked reforms to retain control.
A 2021 banking reform sharply raised wages without increasing production, causing inflation—70% officially, over 500% on the black market. Cubans still suffer from this misstep.
Looking to China, Professor Curio advocates learning from its "special economic zones" and rapid error-correction methods. Unlike Cuba's nationwide, abrupt reforms, China tested policies in small areas first. Cuba now allows private enterprise and foreign investment, acknowledging that state funds are insufficient for infrastructure or industry.
Recently, Cuba introduced four reforms: decentralizing state firms, empowering local governments, promoting public-private partnerships, and deepening central reforms. Most notably, foreign companies can now pay workers directly, bypassing state exchange-rate exploitation. This signals serious commitment to change.
In Havana, vintage cars and decaying buildings reflect decades of struggle. While U.S. sanctions remain a barrier, internal economic mismanagement has deepened Cuba's crisis. As the country cautiously opens, those striving for improvement—like our Chinese guide and bilingual Cuban colleague—embody hope for a better future. We share Professor Curio's wish: "May things improve."