INTRODUCTION

The beautifully encouraging rate at which formerly acknowledged disadvantaged countries of

the world have massively gained independence from their former colonial masters has brought
a sense of newness to the citizens of these countries who were formerly officially known as
'Third World Countries'. Coupled with the creation of an international organization that promise
to enforce equality and make the world a better place, Third World Countries (countries in
Africa, Asia, the Caribbean, Middle East and Latin America) began to feel more at ease with an
assurance that they belong in the world. However, despite all of these, the world is not in any
way close to accepting equality in its international system and has since the late 1940s been
polarized into three.

With the conceptualization of the term 'Third World', came two prominent theories that
proferred solutions to the problems that were accorded to countries under the category of the
'Third World'. Many of the factors that contributed to the Third-worldism of these nations are
difficult to measure and even more difficult to compare across nations. The first amongst these
theories is the modernization theory which says that for a Third World country to develop, she
has to open up her borders and allow an intimate relationship with the West. They believe that
no Third World country can develop on its own accord, with assistance from the West.
Unfortunately, these superpowers that make up the West, set up indices that make it almost
impossible for any nation to leave the category of Third-World.

This unwillingness to watch the Third World countries develop is what the opponents of this
theory (dependency theory) have seen and so they outrightly declared that the Third World
countries are underdeveloped because of the manipulation of their economies by the so-called
'First World' countries. They also concluded that the three fundamental things that came out of
colonialism were: cheap labour, raw materials and dependent market. The proponents of this
dependency theory believe that a country seeking to develop must amidst all other things, have
a drive for industrialization, take on a sub-urban economy, prioritise self-development and be
able to provide all it needs.

However, to know which of these theories is worth giving heed to, we would use Cuba as our
case study. Cuba is located in the northern Caribbean region at the meeting point of the
Caribbean Sea, the Atlantic Ocean, and the Gulf of Mexico. One of the most interesting facts
about Cuba is that it has a very diverse culture, made up of many different people who are
famous all over the world for their high-quality cigars. Unlike many other places, Cuba has
about nine UNESCO World Heritage Sites and early enough, Cuba had begun a swift relationship
with the outside world (most especially the West). However, this group work would be giving
details about Cuba's relationships with the West and would understudy how far that has
brought Cuba so far. This would go a long way in determining which of the theories would be
best suitable for other Third World countries to stick to.

Latin America, which is considered a part of the Third world, subsumes the area between the
Caribbean sea and the Atlantic Ocean referred to as the 'West Indies', an ambiguous and
colonial term employed to describe the island territories of Cuba, Haiti, Puerto Rico and other
smaller islands. History has it that after the discovery of the Latin American islands, the
Europeans continued into resources depletion, colonization, slavery, and ultimately, the
genocide of dozens of millions of native Americans. Ironically, however, these conditions of
oppression and murder forced the 19th-century Latin American colonies to be the first — in
what is today referred to as Third World — to undertake wars of national liberation against
European domination. The Latin American struggle for independence seemed successful, and
although independence movements promised an improvement in the quality of life, those
promises quickly diminished with the increasing USA hegemony, stagnant economic conditions
and political turmoil.

In 1957, however, the UN came up with the UNECFLA (United Nations Economic Commission
for Latin America) for how Latin America can attain development. The United Nations said that
for any country in Latin America to develop, they have to open up its borders. Andrea Frank
was the first to oppose this theory in his book 'The Under-development of Development'.
However, for this group work, Cuba would be our major focus in determining if Andrea Frank
was right to have tagged the UNECFLA a 'massive failure'. During the 20th century and up to the
present, Latin American countries have undergone substantial changes. Unfortunately, U.S
policy toward Latin American countries (i.e., Dollar Diplomacy and the Big Stick policy, which
expanded the U.S. role in Latin America) further added to the economic and political difficulties
of Latin American states.

The main objective of this analysis, which is by no means a finished piece of work, is to frame an
academic discussion on the growth of the Cuban economy. An analysis of Cuba’s economic
realities has served as the cornerstone for the hypothesis on which this group study is based:
that between 1986 and 2009, the growth of Cuba’s production sector was subject to dual
constraints stemming from both supply- and demand-side factors. On the one hand, an overly
centralized regulatory framework may have suppressed economic efficiency, thereby reining in
the expansion of output through supply-side factors. On the other, the shortage of foreign
exchange that is typical of an open, developing economy may affect demand-side factors. It is a
valuable example of what the book, Politics and Culture in the Developing World, describes as a
colonial legacy.

'Colonialism and its legacies are widely believed to also contribute to the
 growing gap between rich countries and poor countries. Most poor countries,

just as they did during colonialism, continue to be exporters of primary products

and importers of manufactured goods and technology from the rich.

Stunted growth as a result of the relationship between the Third World Countries and the
Western powers using Cuba as a case study

The stated objectives of this study are limited to an analysis of the constraints and
determinants influencing the country’s economic growth. Ever since the birth of economics as a
scientific field of inquiry, the identification of the determinants of economic growth and income
differences across countries has been one of the recurring topics covered in the economic
literature. In the 1930s, Harrod (1939) and, later, Domar (1946) extended the time horizon of
analyses of the instability of capitalism to encompass a long-term perspective. Unlike the
Keynesian approach, the exploration of growth trends within the framework of neoclassical
models focused on supply-side factors such as technical progress and the available supply of
factors of production.

During the 1970s, the need to incorporate countries’ historical and cultural landscapes was
recognized by proponents of the new institutional economics school of thought. At the same
time, Thirlwall (1979), Kaldor (1975 and 1976) and others were questioning the exogenous
nature of factors of production, and the approach that was taken to explain the dynamics of
economic growth shifted to the demand side. Thirlwall was the first to formally describe the
economy’s dependence on the external sector when he expressed its growth as a function of
exports, the terms of trade and the income elasticity of the demand for imports. The main idea
behind this approach is that no country can grow more rapidly than its balance-of-payments
equilibrium rate unless it can sustain deficits over a lengthy period. In the decade that followed,
Romer (1986), Lucas (1988), Rebelo (1991) and others framed what came to be known as the
“endogenous growth theory”. These authors took the neoclassical models and then reworked
some of their basic assumptions, such as the exogeneity of technical progress or the constant
returns to scale of the production function.

Growth was not viewed as a priority in the Cuban economic literature until the last few
decades. Instead, economic and social development was the pivotal focus of the political and
academic agenda. Until the late 1980s, for example, González and others (1989) had not
offered up an empirical analysis based on Cobb-Douglas production functions. In later studies,
such as those of Mendoza (2003) or Torres (2007), this line of inquiry was pursued, and factors
such as human capital and structural change were incorporated into the models. Doimeadios
(2007) was the first to underscore the positive effect of a group of variables (proxies for
structural change, openness to outside economies and the regulatory framework) on gains in
total factor productivity in Cuba. Her study is one of the main reference works used by
researchers working on the subject now since it represents the first and only time that a
researcher has included the regulatory framework in a growth analysis of the Cuban economy.
In other studies, such as those of Mendoza and Robert (2000), Cribeiro and Triana (2005), Vidal
and Fundora (2008), and Fugarolas, Matesans and Mañalich (2008), Cuba’s economic growth
has been modelled on demand, with balance-of-payments constrained growth models being
contrasted with foreign-exchange constraints on GDP.

However, before analyzing the struggle for economic development in Cuba, let's go a bit back in time to
the 1850s, back to when diplomatic relations between Cuba and the United States began in early
colonial times and were focused around extensive trade. America was then divided between pro-slavery
and anti-slavery politics, one of the many fights was over the Spanish colony of Cuba. Pro-slavery
lawmakers wanted to buy Cuba from Spain or take it by force to turn it into a new slave state and the
anti-slavery politicians opposed this, calling it 'imperialism'. In 1898, after slavery ends, Americans have
a different version of this same argument when Cubans rise against Spain. The U.S joins them, starting
the Spanish–American War, but Americans divide on whether they should seize Cuba from Spain for
themselves or liberate it. This was an argument between respecting Cuba as a sovereign nation and
controlling, and like most other Third World Countries, this argument has continued in different forms
ever since.

This led to Cuba's independence. Under the Treaty of Paris, Cuba became a U.S. protectorate
from 1898 to 1902; the U.S. gained a position of economic and political dominance over the
island, which persisted after it became formally independent in 1902. This means that Cuba
became independent but with a quasi-imperial American rule: the U.S would take over
Guantanamo Bay, dictate Cuba’s foreign policy and give itself the right to intervene over Cuban
affairs. In regards to this, in 1906 and 1917 respectively, the U.S military takes over for a few
years extensively to resolve some political crisis, but that usually means protecting America's
interest, such as sugar imports.

Following the Cuban Communist Revolution of 1959, the U.S obsessed with the fear of
communism backs the authoritarian leader, Fidel Castro despite his brutality, and when the
communists win in 1959, the U.S fearing the spread of communism sets up an embargo to
strangle Cuba’s economy, try to assassinate Castro and try to take over the island. Thus,
bilateral relations deteriorated substantially.

In October 1960, the U.S. imposed and subsequently tightened a comprehensive set of
restrictions and bans against the Cuban government, ostensibly in retaliation for the
nationalization of U.S. corporations' property by Cuba. In 1961 the U.S. severed diplomatic ties
with Cuba and attempted to use exiles and Central Intelligence Agency officers to invade the
country. For decades afterwards, the beautiful island of Cuba became the subject of a travel
ban for U.S. tourists. Another interesting fact is that Cuba is one of the very few places on Earth
where you can find classic American cars on the roads in greater numbers, which dates back to
before the communist revolution and the resulting USA embargo which den saw car exports to
the island restricted. In November of 1961, the U.S. engaged in a campaign of terrorism and
covert operations over several years in an attempt to bring down the Cuban government. The
terrorist campaign killed a significant number of civilians.

In October 1962, the Cuban Missile Crisis occurred between the U.S. and Soviet Union over
Soviet deployments of ballistic missiles in Cuba. Throughout the Cold War, the US heavily
countered Fidel Castro's attempts to "spread communism" throughout Latin America and
Africa. The Nixon, Ford, Kennedy, and Johnson administrations resorted to back-channel talks
to negotiate with the Cuban government during the Cold War. In modern society, three factors
determine sustainable development which are economic development, environmental
conservation and social justice. Cuba has been ranked the world's most sustainable country by
the recently published Sustainable Development Index. Cuba gained formal independence in
1902. In the years following its independence, the Cuban republic saw significant economic
development, but also political corruption and success of despotic leaders, culminating in the
overthrow of the dictator Fulgencio Batista by the 26th of July movement led by Fidel Castro
during the 1953-1959 Cuban Revolution.

The Cuban economy was solely supported by Soviet Subsidies. With the dissolution of the
USSR in 1991, the subsidies disappeared and Cuba was plunged into a severe economic crisis
known as the special period that ended in 2000 when Venezuela began providing Cuba with
subsidized oil. The country has been politically and economically isolated by the United State
since the Revolution but has gradually gained access to foreign commerce and travel as efforts
to normalize diplomatic relationships have progressed. The Cuban economy depends heavily on
the suitcase crop. Additionally, the chief crops are rice, citrus fruits(important export),
potatoes, plantains, bananas, cassava, tomatoes and corn.

U.S - Cuba Dependency Relations

Cuba and the United States restored diplomatic relations on July 20, 2015. Relations had been
severed in 1961 during the Cold War. U.S. diplomatic representation in Cuba is handled by the
United States Embassy in Havana, and there is a similar Cuban Embassy in Washington, D.C. The
United States, however, continues to maintain its commercial, economic, and financial
embargo, making it illegal for U.S. corporations to do business with Cuba. Although in
Afghanistan Taliban issue the state of Cuba supports the USA at any cost because they have
great diplomatic relations and Cuba is an ally of the USA because the USA is their biggest
trading partner.

Relations began in early colonial times and were focused on extensive trade. In the 1800s,
manifest destiny increasingly led to the American desire to buy, conquer, or otherwise take
some control of Cuba. This included an attempt to buy it during the Polk administration, and a
secret attempt to buy it in 1854 known as the Ostend Manifesto, which backfired and caused a
scandal. The hold of the Spanish Empire on possessions in the Americas had already been
reduced in the 1820s as a result of the Spanish American wars of independence; only Cuba and
Puerto Rico remained under Spanish rule until the Spanish–American War (1898) that resulted
from the Cuban War of Independence. Under the Treaty of Paris, Cuba became a U.S.
protectorate from 1898 to 1902; the U.S. gained a position of economic and political
dominance over the island, which persisted after it became formally independent in 1902.

Following the Cuban Revolution of 1959, bilateral relations deteriorated substantially. In

October 1960, the U.S. imposed and subsequently tightened a comprehensive set of
restrictions and bans against the Cuban government, ostensibly in retaliation for the
nationalization of U.S. corporations' property by Cuba. In 1961 the U.S. severed diplomatic ties
with Cuba and attempted to use exiles and Central Intelligence Agency officers to invade the
country. In November of that year, the U.S. engaged in a campaign of terrorism and covert
operations over several years in an attempt to bring down the Cuban government. The terrorist
campaign killed a significant number of civilians. In October 1962, the Cuban Missile Crisis
occurred between the U.S. and Soviet Union over Soviet deployments of ballistic missiles in
Cuba. Throughout the Cold War, the US heavily countered Fidel Castro's attempts to "spread
communism" throughout Latin America and Africa. The Nixon, Ford, Kennedy, and Johnson
administrations resorted to back-channel talks to negotiate with the Cuban government during
the Cold War.

Cuba and the United States restored diplomatic relations on July 20, 2015. Relations had been
severed in 1961 during the Cold War. U.S. diplomatic representation in Cuba is handled by the
United States Embassy in Havana, and there is a similar Cuban Embassy in Washington, D.C. The
United States, however, continues to maintain its commercial, economic, and financial
embargo, making it illegal for U.S. corporations to do business with Cuba. Although in
Afghanistan, the Taliban issued the state of Cuba supports the USA at any cost because they
have great diplomatic relations and Cuba is an ally OF USA because she is their biggest trading
partner.

In 2014, U.S. President Barack Obama and Cuban leader Raúl Castro announced the beginning
of a process of normalizing relations between Cuba and the U.S., which media sources have
named "the Cuban Thaw". Negotiated in secret in Canada and the Vatican City, and with the
assistance of Pope Francis, the agreement led to the lifting of some U.S. travel restrictions,
fewer restrictions on remittances, access to the Cuban financial system for U.S. banks, and the
establishment of a U.S. embassy in Havana, which closed after Cuba became closely allied with
the USSR in 1961. The countries' respective "interests sections" in one another's capitals were
upgraded to embassies in 2015. In 2016, President Barack Obama visited Cuba, becoming the
first sitting U.S. president in 88 years to visit the island.

On June 16, 2017, President Donald Trump announced that he was suspending the policy for
unconditional sanctions relief for Cuba, while also leaving the door open for a "better deal"
between the U.S. and Cuba. On November 8, 2017, it was announced that the business and
travel restrictions that were loosened by the Obama administration would be reinstated and
they went into effect on 9 November. On June 4, 2019, the Trump administration announced
new restrictions on American travel to Cuba.

Since taking office in 2021, the Biden administration has been labelled as "tougher than Donald
Trump on the island’s government". Today, 10. 68 percent of Cuban-Americans favour
normalized relations between Cuba and the U.S.

Katharine Moon also points out that 90 percent of younger Cuban-Americans favour
normalization. The divergence between older hardliners and a conciliatory new generation is
key in approaching other diplomatic challenges, such as re-evaluating relations with North
Korea, she says,

'Vendors wait for customers at their stalls, with prices tagged in Cuban pesos, at a market in
Havana October 23, 2013. Cuba took the first step towards scrapping its two-tier currency on
October 22, 2013, in a move that could boost local workers' income and remove a major hurdle
for importers and exporters. Cuba's convertible peso (CUC) is pegged to the U.S. dollar, while
the local peso (CUP) is valued at a fraction of the greenback's value, angering the population
which is paid in the latter, and complicating accounting, the evaluation of performance, and
trade for state companies. The writing on the wall in the background reads, "Socialism".
REUTERS/Desmond Boylan (CUBA).

The economy of Cuba is a mixed command economy dominated by state-run enterprises.

Cuba's planned socialism was patterned after the economic system of the Soviet Union, the
Soviet-bloc countries like East Germany (the German Democratic Republic), Czechoslovakia,
Hungary, Poland, and Bulgaria before the fall of the Berlin Wall. Planned socialism was the
economic system of Maoist China. For three decades after World War II, about a third of the
World’s population lived under the planned-socialist economic system. Today, only Cuba and
North Korea remain. Planned socialism and capitalism differ along four distinct dimensions:
ownership and control of resources, the structure of decision making and information, the
incentives that motivate economic behaviour, and the mechanism that coordinates the
decisions of economic actors (producers and consumers). Most of the labour force is employed
by the state. Following the fall of the Soviet Union in 1991, the ruling Communist Party of Cuba
encouraged the formation of worker co-operatives and self-employment. In the late 2010s,
private property and free-market rights along with foreign direct investment were granted by
the 2018 Cuban constitution. The economic reforms recently implemented in Cuba do not
adequately deal with the structural issues that hamper the country’s economic development.
The paper presents a system dynamics model to investigate Cuba’s development process, and
simulation analysis to compare different policy scenarios that may be realized in the future as
economic reforms will continue. The results indicate that the most effective development policy
would be to combine active public policies to enhance the R&D sector, on the one hand, and
foster the emergence of an efficient private sector that will develop the capital infrastructure of
the economy, on the other.

The influence of external interference on Cuba's sustainable development

On the heels of the announcement of the restoration of U.S.-Cuban diplomatic relations on July
20, Cuba’s removal from the U.S. state sponsors of terrorism list, and the re-opening of
embassies in the two countries, findings were made on some of the most interesting facts
about Cuba.

1. Cuba receives almost 100,000 barrels of oil a day from Venezuela.

The easing of diplomatic hostilities between the United States and Cuba may work to lessen
Cuban dependence on the Venezuelan regime, Ted Piccone notes. Russian President Vladimir
Putin also recently wrote off $32 billion, 90 percent of the debt Cuba owed dating back to the
Soviet era.

2. The aggregated gross national income per capita of Cuba is $5,539, but the take-home salary
for most Cubans is around $20 a month.

While there is little publicly available data regarding individual incomes, Richard Feinberg
concludes, using a variety of indicators, that 40 percent of the Cuban labour force falls within a
broadly defined middle class, though consumption remains depressed due to low government
wages.
3. Less than five percent of Cubans have access to the Internet.

While demand is increasing for American cultural and telecommunications products, companies
like Netflix and Google are working on long-term plans to find their way into the country’s
economy. The first step in this process came in early February, according to Darrell West, when
Netflix announced it would begin streaming in the island nation.

4. The Cuban government authorizes only 201 different categories of activities for self-
employment.

This creates a problem in forging economic ties, Ted Piccone writes, since “U.S. importers can
only engage in transactions with independent Cuban entrepreneurs” while Cuba fails to expand
the list, excluding “huge swaths of Cuba’s human capital” from trade with the U.S.

5. More than two-thirds of the 2 million Cubans and Cuban-Americans in the United States live
in Florida; 18 percent of Miami residents identify as Cuban.

Audrey Singer explains how these demographic distributions play a key role in normalizing
relations with Cuba. Currently, a visa lottery system allows 20,000 Cubans to emigrate every
year to the United States, while others try to make the trek by the sea—the U.S. Coast Guard
stopped 500 such potential immigrants in December 2014 alone. Thousands more cross the
border where they can claim asylum and get expedited green card privileges.

6. New Cuban hotspots can process 1 megabit per second, far below the average U.S. speed.

Darrell West examines the growth of Internet access in Cuba, noting that improved relations
with the U.S. could relax restrictions on better IT equipment.

7. The dependency ratio of the Cuban population will increase from 54.7 today to 67.7 in 2025.
The dependency ratio is defined as the ratio of those not in the labour force (people younger
than 15 or older than 60) to the working population (aged 15-60). Juan Triana Cordoví and
Ricardo Torres Pérez note that “most growth in developing countries in the last 50 years has
been the exact opposite, spurred by a growing youth population and workforce. Together,
these elements coupled with the current economic model make setting Cuba on a sustainable
long-term growth path an immense challenge.”

8. 90 percent of Cubans own their own homes.

The high homeownership rate on the island is supported by President Raúl Castro’s economic
reform agenda, which attempts to “preserve socialism while introducing new forms of market-
based mechanisms,” writes Ted Piccone. In addition to the ability to buy and sell property,
Cuban citizens can now open small businesses, have cell phones, and form cooperatives both
on and off of farms.

9. Americans can bring back $400 worth of goods from Cuba—including $100 in cigars and rum.

Richard Feinberg reacts to the increasingly open ties between the United States and Cuba and
discusses the implications for citizens in both counties.

Sustainable development: The path to economic growth in Cuba

On April 6, 2017, the Brookings Institution and the Research Initiative for the Sustainable
Development of Cuba (RISDoC) co-hosted "Sustainable Development: The Path to Economic
Growth in Cuba," a daylong, experts seminar, which focused on Cuba's long-term sustainability
planning. The executive summary details the main points of consensus and areas for future
research and discussion.

As it prepares for the post-Castro era in February 2018, Cuba has the opportunity to reenergize
its economic reform agenda to promote sustainable growth and stability on the island. To do
so, the country will have to emerge from its current state of economic stagnation, heavy
reliance on imports, unsustainably low state wages, and ongoing brain drain. The December 17,
2014 announcement of normalization between Cuba and the United States renewed hope that
assuming continued progress toward lifting the embargo, Cuba would be able to access U.S.
markets and investment capital to breathe new life into its economy. However, the election of
Donald Trump has brought that into question and reaffirmed the view that Cuba should secure
its development opportunities with or without the United States.

Experts are increasingly convinced that peer-to-peer relationships between Cubans and
Americans are a more effective route to expanding bilateral relations for increased
development on the island. The newly formed Research Initiative for the Sustainable
Development of Cuba (RISDoC) is putting this idea to the test, bringing together a diverse group
of members that combine deep knowledge of the Cuban context with recognized expertise in
sustainability, economic development, and business acumen to support Cuban development
efforts and achieve optimum sustainability outcomes. In February 2017, RISDoC held an
inaugural conference in Havana that brought together universities and research centres, NGOs,
and government including representatives of Cuba’s ministries of agriculture, energy and
mines, tourism, science, technology and environment. The conference sought to open channels
for further communication about sustainability at the government and grassroots levels.

On April 6, 2017, the Brookings Institution and RISDoC co-hosted an experts seminar titled
“Sustainable Development: The Path to Economic Growth in Cuba,” which focused on Cuba’s
long-term sustainability planning, building on the discussions that took place during Brookings’s
May 2016 conference “Opportunities for Sustainable Development in Cuba.” The discussion
focused on three main themes: Cuba’s economic response to changing regional and global
contexts (including normalization with the United States), sustainable agriculture, and
renewable energy.

The event brought together Cuban, U.S., and other international thought leaders and
practitioners from multiple disciplines for an in-depth discussion on the intersections between
sustainability, economic development, and public-private partnerships. The first panel set the
stage, highlighting Cuba’s current state of economic stagnation and difficulty attracting and
approving outside investment; then pointed to Cuba’s existing economic assets and how they
could be leveraged to create growth through a sustainable development model. The second
examined sustainable agriculture, arguing that the Cuban government needs to make farming a
more attractive career for young Cubans (most importantly by providing better wages) to
address the current state of food insecurity, which has been exacerbated by the rising food
demands of the tourism industry. Finally, the third panel discussed the Cuban government’s
goal to substantially increase renewable energy sources on the island by 2030 and pointed to
Cuba’s existing energy infrastructure and an abundance of potential knowledge sharing as key
assets that should be utilized to achieve that goal without reinventing the wheel. Throughout
the day of plenary and working group discussions, participants also discussed the evolution of
U.S.-Cuba relations and how they might affect Cuba’s sustainable development trajectory.

It is important to note that jumpstarting the Cuban economy will not be an easy task. From
2008 to 2015, investment in Cuba fell 17 percent, exports dropped 5 percent, and real GDP
shrank by nearly 1 percent. Cuba currently has a fiscal deficit above 12 percent as well as a
significant trade deficit, due in large part to the ongoing crisis in Venezuela. Cuba’s dual
currency system, the country’s remaining debt, and the U.S. embargo all continue to present
major challenges to development and growth as well.

This is not to say Cuba hasn’t made some progress. At the time of the Cuban Revolution of
1953–1959, during the military dictatorship regime of Fulgencio Batista, Cuba's GDP per capita
was ranked 7th in the 47 economies of Latin America. Between 1970 and 1985, Cuba
experienced high-sustained rates of growth; according to Claes Brundenius, "Cuba had done
remarkably well in terms of satisfying basic needs (especially education and health)" and "was
following the World Bank recipe from the 1970s: redistribution with growth." After 1985, the
Cuban economy entered a phase of economic stagnation, leading to the so-called Special
Period, while the government managed to maintain and expand education and health systems,
as growth rates resumed again.

The socialist revolution was followed by the ongoing United States embargo against Cuba,
described by William M. LeoGrande as "the oldest and most comprehensive US economic
sanctions regime against any country in the world."During the Cold War period, the Cuban
economy was heavily dependent on subsidies from the Soviet Union, valued at $65 billion in
total from 1960 to 1990 (over three times as the entirety of U.S. economic aid to Latin America
through the Alliance for Progress), an average of $2.17 billion a year. This accounted for
between 10% and 40% of Cuban GDP, depending on the year. While the massive Soviet
subsidies did enable Cuba's enormous state budget, they did not lead to a more advanced or
sustainable Cuban economy. Described by economists as "a relatively highly developed Latin
American export economy" in 1959 and the early 1960s, Cuba's basic economic structure
changed very little between then and 1990. Tobacco products such as cigars and cigarettes
were the only manufactured products among Cuba's leading exports, and even these were
produced by a pre-industrial process. The Cuban economy remained inefficient and over-
specialized in a few highly subsidized commodities provided by the Eastern Bloc countries.
Following the fall of the Soviet Union, Cuba's GDP declined by 33% between 1990 and 1993,
partially due to the loss of Soviet subsidies and a crash in sugar prices in the early 1990s.

In 2015, Cuba renegotiated a major portion of its official debt. After reaching agreements with
multiple debtors including China, Mexico, and Russia, a high percentage of Cuba’s debt was
forgiven and the country’s Moody’s risk rating was upgraded from stable to positive. Internally,
the government has now granted licenses to over 500,000 self-employed entrepreneurs
(Cuenta Propistas) and nearly 500 cooperatives, providing opportunities for increased individual
income as well as government savings due to the decrease in state employment. However, the
300 permitted categories for Cuenta propistas are still limited. In the case of cooperatives, the
majority are located in Havana (limiting this source of economic growth in other cities), and
many have been converted from state-owned businesses rather than creating new enterprises.

Cuba also has important barriers to external financing and foreign direct investment (FDI)
including the U.S. embargo, non-engagement with the international financial institutions (IFIs),
restrictions on eligibility for FDI, and bureaucratic constraints that can dissuade the most
interested of investors. One attempt to address this is the Foreign Investment Act No. 118 of
2014, under which the government publishes an annual Business Opportunity Portfolio of
approved opportunities for foreign investment. So far, the Cuban government has approved 60
businesses (mainly joint ventures and management contracts), over half of which are in the
tourism sector. Experts questioned whether this pace was sufficient to have an impact on
growth.

As the Cuban economy develops, will it be able to leap-frog industrialization and move straight
to more sustainable models of development, or will it follow a more traditional path? Experts
agreed that the Cuban government should prioritize sustainability to provide long-term
solutions to its current growth problems. They identified three key facets of sustainability
(social, economic, and environmental), which should be considered in relationship to each
other when developing policy.

Removing barriers to investment is high on the economic priority list. Additional

recommendations included: increasing government transparency as a first step toward a
relationship with the IFIs; attracting increased investment (particularly FDI); diversifying
exports; producing exports at globally competitive prices; decentralizing the management of
state-owned enterprises; investigating opportunities for microcredit through the IFIs; and
promoting urban cooperatives.

Cuba already possesses many assets that can be harnessed to accomplish these goals. The
most obvious is the country’s tourism boom, which is a new, important source of income on the
island. Cuba received four million tourists in 2016, and expects to receive even more in 2017
when Americans will become the second-largest tourist nationality. Cuba also has a well-
educated population, strong civic culture, well-designed laws and regulations, and a
government workforce that is capable of executing policies once the government has approved
them.

The government should employ new strategies to utilize those assets more productively and
efficiently. Experts pointed to collaboration and idea exchange as key factors in promoting
sustainable growth, specifically creating space for collaboration between the Cuban
government, academia, businesses, and NGOs to share their experiences of development.

Conclusion

Just like the USA has at most times treated Cuba as more of a colony than as a real country, the
majority of the First World countries treat most other Third World countries a little less than
sovereign nations and they do not mind hurting their economy and their citizens as long as it
favours their selfish interests. This sets the pace for a clear understanding of the legacies of
colonialism as the evil which planted the foundation for the economic gap between the North
and the South, between the acclaimed First World and the stigmatized Third World. Therefore,
as long as this reformed colonial master and colony relationship remains in the world economy
that perpetuates the status of poor countries as exporters of primary goods/products to and
importers of manufactured goods and technology from rich countries (what is referred to as the
dependency theory), the Third World would continue to be nothing but pencils in the hands of
the First World, living according to its beck and call.

References

Economic Survey of Latin America and the Caribbean(PDF. 2020)

Research Initiative for the Sustainable Development of Cuba (PDF: Latin America Initiative at
Brookings. 2017)

Bacevich, Andrew. Washington Rules: America's path to permanent war (First Ed. 2010). New
York: Henry Holt and Company. pp. 77–80. ISBN 9781429943260.

Franklin, Jane. Cuba and the U.S. empire: a chronological history. New York: New York
University Press(2016). pp. 45–63, 388–392, et passim. ISBN 9781583676059.

Jamal Nassar and Richard Payne. Politics and Culture in the Developing World. (2003)