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Bilateral Relations   Cuba  

Country Note

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Embassy of India
Havana
Country Note on Cuba

General outline and history: Cuba, the largest island in the Caribbean, was discovered by Christopher Columbus on his first voyage on 29 October 1492. It consists of one large island and about 1,600 smaller islands and cays with a total land area of about 114,000 square kilometres. The Cuban population of 11.14 million is a product of the mix of three cultural groups: Spaniards, Africans and Asians. The composition is, Whites (64.1%), Mulattoes and Mestizos (26.6%) and Blacks (9.3%).The average temperature varies from 23 to 28 degrees. The period from July to November is hurricane season. Timber resources include tropical pine, mahogany, ebony, royal palm, and ceiba. Major crops and fruits are tobacco, coffee, sugar cane, potato, cassava, yam, beans, citrus, banana, pineapple, avocado, papaya and guava. Cuba has the second largest reserves of nickel in the world and presently, is the seventh largest producer. It has some copper, silver, gold and petroleum.

Because of Cuba's strategic location, the Spanish used the island mainly as a naval base and shipping centre. Havana was occupied briefly by the British between 1762 and 1763. By 1860, Cuba had a large sugar industry which was a major supplier to the United States. Slavery, a major factor in the expansion of the sugar industry, was abolished in Cuba in 1886. British and subsequently American capital began to play a major role in the economy during this period.

Increasing Cuban nationalism led to wars of independence during 1868-78, and in 1895 revolution broke out under the leadership of the legendary poet José Martí. He was killed in battle, and remains a revered martyr in Cuba today. Following an explosion aboard the USS Maine in Havana Harbour, the US joined the conflict on the side of the rebels, declaring war against Spain on April 25, 1898, leading to the end of Spanish rule. Under the subsequent Treaty of Paris, Spain ceded possession of Cuba which became “independent" on January 1, 1899 as an American protectorate. The new constitution included clauses imposed upon Cuba by the US under the Platt Amendment, which seriously compromised Cuban sovereignty. The US intervened militarily on subsequent occasions to support the parties it favoured. Governments of this period were characterized by corruption, racism and violence.

 In 1934, under the so-called "good neighbour policy", Franklin D. Roosevelt sponsored initiatives that abrogated the Platt Amendment, except for continuing rights to the American naval base at Guantánamo Bay. A former army sergeant Fulgencio Batista dominated the political scene for much of the next twenty-five years. He overthrew President Machado in 1933 with support from the United States. After exercising power directly and through surrogates for several terms, Batista stepped down and emigrated to Florida in 1944. He returned to Cuba in 1951 to re-enter politics. He displaced the elected government in a coup d'etat in March 1952 and ruled through a brutal and corrupt dictatorship. His government was recognized by the US within two weeks of the coup.

The Cuban revolution: These events motivated a revolution, led by Fidel Castro, a young lawyer who was a candidate for the election scheduled for June 1952, but which was cancelled after the coup. On 26 July 1953, Castro and about 150 young revolutionaries launched simultaneous attacks on the Moncada army barracks in Santiago, and another at Bayamo. The attack was unsuccessful and he was tried and imprisoned. His defiant courtroom defence – “History shall absolve me¨”- is the source of many famous Castro quotations and is regarded by some observers as Cuba's modern declaration of independence. He was released into exile in Mexico in May 1955.In Mexico, Castro met the Argentine medical doctor Ernesto "Che" Guevara. They organized a return to Cuba with a force of 85 men on the yacht Granma, which departed Mexico on 25 November 1956. After a perilous journey, the boat ran aground off Los Cayuelos in southeast Cuba on 2 December 1956, and the revolutionaries had to wade ashore. Only 12 of them survived the initial attack, and after escaping into the Sierra Maestra mountains, they became the nucleus of a successful revolution.

Two years later, Castro took power on New Year's Day, 1959. At that time, foreign interests (largely American) owned three-quarters of the arable land, 90 percent of transportation, electrical and telecommunications services, and close to half of the sugar industry. The creation of a centrally planned economy under the Cuban Communist Party made it the first communist state in the Western Hemisphere.

Government and Politics:

Cuba is divided into 15 provinces and a special municipality of Isla de Juventud, which are further subdivided into 169 municipalities. The latter are composed of electoral districts. District delegates are elected every two and a half years. The National Assembly of People’s Power (Parliament) with 614 seats is the highest State body and is elected every five years. It appoints the Council of State – which acts on behalf of the Assembly between sessions and represents the State – and the Government. The latter is headed by a President and is composed of vice-presidents and ministers. The only recognised party is the Communist Party of Cuba (PCC). Other mass organisations are the Federation of Cuban Women (FMC), the Union of Young Communists (UJC), the Confederation of Cuban Workers (CTC), and the Federation of University Students (FEU), and the Federation of Middle School Students (FEEM), all affiliated to the PCC. A Pioneers organisation covers children below the age of 14. During the 7th Party Congress held in Havana in April 2016, the Central Committee was increased to 142 members from earlier 115, and, the Politburo to 17 from 15.

The death of Fidel Castro, at the age of 90,  in November 2016 and stepping down of his brother Raul Castro from Presidency in April 2018 marked the end of a truly historic era for Cuba. Fidel’s death did not change the course of the country, especially how it is governed. During his tenure as President for 10 years, Raul had a firm hold on power ensured by trusted military leaders in key positions and a new economic course in which private enterprise plays an important, but unthreatening, role.

On 11 March, 2018, Cuba held the last elections for the National Assembly (605 members), as well as over 1,600 provincial government representatives, both for five-year terms under the one-party (Communist) system.

Cuba’s National Assembly on 19 April 2018 officially confirmed 57-year-old Miguel Díaz-Canel as Cuba’s new head of state, ending Castro rule after nearly 60 years and shifting power to younger generation born after Cuba’s revolution. Díaz-Canel’s name was put forward on 18 April 2018 as the sole candidate to for the Presidency.  Díaz-Canel’s selection amounts to the dawn of a new era in a country deeply identified with the Castros, who led the revolution that triumphed in 1959 and resulted in the most enduring communist system in the Western Hemisphere.  Díaz-Canel, a consensus-builder, is almost sure to make decisions in concert with the country’s communist brain trust. As the country’s First Vice President since 2013, he was wary of the thaw in relations  External website that opens in a new windowwith the United States under then-President Barack Obama and has tended to echo concerns that economic change should not occur abruptly. Raul Castro will remain first secretary of the Communist Party, a potentially more powerful position. Since power in Communist Cuba has long flowed from personalities more than institutions, how much influence Diaz-Canel will actually wield is an open question.

Cubans ratified a new Constitution in a referendum that took place on February 24, 2019.  Voters were asked whether they approved of the new constitution passed by the National Assembly in July 2018.   The new Constitution enshrines the one-party socialist system as irrevocable while instituting modest economic and social changes.  The new constitution includes several major changes to Cuba’s traditional economic and political model. Additionally, the drafting process that yielded the final text that was approved in the February 24 referendum involved a citizen consultation process that was inclusive and even resulted in changes to the final document, an important indication that the Cuban government’s gradual process of reform is continuing.  

Economy:

Cuba has a centrally planned economy. Industry, petroleum, agriculture and banks were all nationalised after the Revolution. It introduced an Agrarian Reform Law under which land was collectivised into co-operative state farms. Cuba expropriated American owned sugar properties as part of its Agrarian Reform Bill of May 1959. USA cut financial aid to Cuba, lowered the sugar quota by 95% and together with UK refused to refine Soviet crude oil. Havana responded by nationalising all remaining American properties. In 1961, US severed diplomatic relations with Cuba and in 1962 imposed economic sanctions.

The Soviet Union stepped in to fill the gap signing a bilateral trade agreement in 1962. Cuba joined COMECON in 1973 linking its trade and developmental plans with the Socialist bloc countries. Almost 85% of Cuba's trade was conducted with COMECON. The increasing sugar crop yields, year after year during the 1970s and 80s, at an annual average of 8 million tonnes, proved advantageous for Cuba in maintaining a very strong economy, much ahead of most of its Latin American counterparts. As a case in point, Cuba used to import 13 million tons of oil from Russia at preferential price against its usual requirement of only 6 million tons - and sell the remaining in the open market for foreign exchange. With the responsibility of having to feed only 11 million people, Cuba maintained a booming economy in the 1970s and 80s.The sudden changes in East Europe and the collapse of the Soviet Union in 1989, proved disastrous for Cuba's economy. Having to purchase everything including essential items and oil with hard currency that was scarce, Cuba ran into severe economic crisis. Cuba's economy contracted by roughly 35%, as it entered the "special period".

In a bid to overcome its difficulties, the Government was compelled to introduce reforms. Several sectors of the economy - tourism, Energy, Nickel, services, beverages, tobacco etc. - were opened to attract foreign investment opportunities. In September 1993 it introduced co-operative farming with a provision for small individual share in place of erstwhile State farming. In October 1994 the Government introduced free markets for agriculture and artisan products to stimulate production to meet severe domestic shortages. Taxes on consumer items, salaries, profit and toll were introduced for the first time to correct the imbalances in the economy. A new Investment Law introduced in September 1995 provides for 100% equity participation in certain cases and investment guarantees. The widely prevalent practice of renting to tourists and foreigners was legalised, but taxes were imposed. In July 1993 the Government for the first time legalised holding of dollars and gave permission to Cuban exiles to return to Cuba. However, w.e.f. from 8th November 2004, all cash transactions within the country had to be done in Cuban Convertible Peso only.

The reforms of Raul also aim to free state businesses from party and government administration, move some 20 per cent of the state’s 5 million workers to “non-state” sector over next three years. About half million state posts were to be slashed by April 2011 but it could not be done and the process has been slowed down.

Reforms also permit the buying and selling of homes for Cuban citizens, encourage cooperatives which could function as mid-sized companies with a right to hire workers and to fix their salaries, legalising the sale of cars and other vehicles to another owner only, lending cars to fellow Cubans, convert government buildings into residential property to provide accommodation to its citizens, cuts in subsidies and to compensate needy people and not subsidize products in general, government’s desire to eliminate dual currency system, legalise sale of construction material at unsubsidized rates, promote fishing industry and link sugar prices paid to Cuban producers with prices paid on international markets and most importantly permission to travel abroad as tourists. Government also announced a new Foreign Investment Law in 2014.

Countries like Canada, Spain, Germany, U.K, Italy, France, Brazil, and the Netherlands  are cautiously making investments from a long-term perspective. Priority areas for overseas investment include Oil and Gas, nickel, biotechnology, software development, hotel development and financing. According to Ministry of Foreign Trade and Investment, Cuba has approved 83 foreign investment projects worth more than $1.5 billion since the passage of a new foreign investment in March 2014.  The list of 83 projects, however,  includes many that are in very early stages or have yet to begin construction. Cuba has failed to realise the target FDI on account of various challenges for doing business in Cuba including highly centralised decision making,  lack of  legal system for protection of foreign investors, failure to carry out labour and currency reform, among others.

Following diplomatic rapprochement with the US, remittances and tourism emerge as the  leading foreign exchange earners. Net earnings from medical services provided to countries in Latin America, Africa and  to Brazil fetch substantial foreign exchange. Cuba's Principal exports include Nickel, biotech products; Coffee, Tobacco, Citrus, Rum, Sugar and Sea-food and its imports include food items, Oil & Lubricants, Fertilisers & Chemicals, and Textiles & Garments. The fall in commodity prices have severely dented its export earnings.  Preferential oil imports from political ally Venezuela in exchange for services of Cuban medical professionals in Venezuela have been instrumental in the survival of the Cuban economy.

The fallout from US sanctions on Cuba and Venezuela will keep GDP growth low in the immediate fututre owing to lack access to financing, growth in tourism and progress on economic reforms.    In June 2018 the US government announced new travel restrictions on Cuba, including a end to cruise tourism to the island. Given that most tourism growth was due to US cruise tourists,  tourist arrival estimates are expected to go down in Cuba.

 
 
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