Market-Based Reform, Industrial Restructuring and Economic Development of Cuba

Abstract

This paper examines whether market-based reform, industrial restructuring and diversification efforts have contributed to economic development of Cuba. The disintegration of the Soviet Union led to serious depression in Cuba in the early 1990s. To overcome the economic difficulties, the Cuban government began to adopt market-based reform in the mid-1990s. Cuba gradually strengthened market-based reform measures again in the late 2000s and economic growth rate rose in the meantime. Cuba could diversify its economic structure from its heavy reliance on the agricultural sector to the service sector. Cuba has overcome the negative effects of US’ economic sanctions by strengthening its bilateral relationships with countries within the socialist bloc such as the Soviet Unionand Venezuela and developing value-added industries where it has a comparative advantage. The government’s emphasis on education appears to have contributed to the development of the Cuban economy led by tourism, exports of professional services such as medical services, and a technology-intensive pharmaceutical industry. Meanwhile, insufficient allocation of resources to science and engineering coupled with the chaos in Venezuela have had negative impacts on Cuba. Finding other trade partners and foreign investors while emphasizing science and technology education may provide better opportunities for the Cuban economy.