If you haven’t lived in a communist regime, the basics of economy in such a country as Cuba do seem utterly strange, perhaps even idiotic. The reason for that is—they are.
Cuba is a totalitarian country and most of its economy is controlled by the state, i.e. by the communist party. Private enterprise is extremely limited and although there have been recent signs of some relaxation regarding private enterprise, the people who engage in it are so heavily taxed that it’s almost impossible to gain any wealth. And even if one can earn more money than one’s compatriots, there’s nothing to do with the money anyway.
Cuba legalised the US dollar in 1993 to stimulate the economy, especially tourism, during Periodo Especial, the years following the collapse of the Soviet Union. However, in 2004, the government outlawed the use of the US dollar in response to tightened US embargo, and created its own US$-equivalent money—Cuban convertible peso (CUC) that equals one US$.
This seems like a good place to clear out the confusion I might have created in previous Cuba-related posts. I have, when mentioning prices, talked about “the equivalent of US$x” or plainly “US$x”. What I have meant is, all the prices in Cuba are in CUC, they’re just equivalents of the same amount in US dollars. The use of the US dollar is illegal in Cuba and nowadays no one even yearns for them because exchanging US dollars to Cuban national pesos (CUP, moneda nacional) or even to CUC carries a heavy, 20% commission. So, from now on, when I mention prices, I’m going to refer to them as either CUC or CUP—just bear in mind that CUC1=US$1=£0.68 (£1=CUC1.48), and CUC1=CUP24.
To even add to the confusion, most Cuban prices are written with a dollar sign ($). And only a few places mention whether the prices are in CUC or in CUP, so you have to get a grasp on the situation rather quickly. The basics are: tourists are only supposed to use CUC. If someone tells you a price of something, it’s always in CUC. Even if you’re using a service that is only meant for the locals, you as a tourist will always be given the price in CUC. When you tip (and tipping is rather compulsory), always tip in CUC.
However, in exchange booths called Cadecas even tourists can exchange their CUCs for moneda nacional. As mentioned, the exchange rate is CUC1=CUP24, and for a two-week trip, 240 pesos (CUC10) is more than enough. It’s not like you can do much with it anyway. You can buy street food from places that have a price list (and most street food places do), for example, a pizza can cost CUP5-10, a beer CUP10 etc. You will recognise whether the price list is in CUC or CUP, as no price list will claim CUC10 to be the price of a street pizza. Just a word of warning: pizza in Cuba tastes like shit. And not only street pizza!
But despite outlawing the US dollar and creating its own double money for tourist use, the situation remains the same as it was between 1993 and 2004. There is no difference for a common Cuban whether the tourist uses a convertible foreign currency or a convertible local currency. They all want those convertibles anyway. And therefore, double economy is flourishing in Cuba.
All Cubans get paid in moneda nacional and the amounts they get are ridiculous. Therefore they’re always eager to get some CUCs as for that, they can either buy Western products from tourists shops, or change them to CUPs and use it in their local shops (although there isn’t much to buy there). And the key here is, no matter how many CUPs one has, they can’t exchange them for CUCs. It only works the other way around: they can exchange CUCs to CUPs.
And despite that regular Cubans are not really supposed to use CUCs, if they get them, they use them. And this effectively creates a double economy among Cubans that is almost incontrollable. Yes, regular people who don’t have special permits are not supposed to deal with Westerners and get their hands on CUCs anyway, and if they get caught in such transactions, they can be fined, but that doesn’t stop people from trying. All private taxis, most of the American cars in Havana, are only allowed to serve Cubans and for moneda nacional, and all of them try to offer their services to tourists, as from them, they would get tens of times more money than from locals. No matter that they can’t really do anything with this acquired “wealth”.
What Cubans earn
The average salary of Cubans is about CUC17 (CUP400) a month. It has gone up a little in recent years, but still falls short of any Western standard. Imagine living in London for £11 a month. In comparison, a schoolteacher makes CUP245 a month, an engineer or a doctor about CUP300. A cigar roller, however, can make up to CUP700 a month, and a very good cigar roller can even earn a special bonus, up to CUC30 (yes, that’s CUC!) a month in addition to the salary. A tour guide in Partagas cigar factory, in fact an educated engineer, explained that he’s much better off at his current job as he was as an engineer. He also mentioned his friends who do two jobs in order to survive: they either teach or practice medicine half a day for pennies, and then roll cigars for the other half. Anything to get by.
Cuba has twice as many qualified doctors as entire Africa. However, not all of them work as doctors since the pay is just so incredibly ridiculous. Many doctors and nurses also work as waiters and waitresses in addition to their day jobs because of the tips in CUC they get from tourists. Thus at the end of the day they can go to a tourist shop and treat them to a Mexican-produced Coca-Cola (CUC0.65). With their regular salaries, they wouldn’t even be able to dream about such stuff.
What things cost
I have briefly mentioned prices of things before. For a tourist, Cuba is rather expensive and both private entrepreneurs and the state try to charge tourists as much as possible. When meals range from CUC8-20, tourist transport is one of the most expensive things in Cuba. A 400-km bus ride costs up to CUC32, for example. Taxi from airport to Havana sets you back CUC25 (and that’s a 20-km ride!). However, if you’re smart, you can at least use mostly taxis and forget about buses. A taxi ride between cities costs usually four times the price of a bus ticket. So if you have four people, it’s much more reasonable to take a taxi as it’s more comfortable than a bus, the taxi driver stops when and where you want and may even take you on a tour to an interesting nearby place. And most importantly, taxis are as much as twice as quick as buses. Think of the time you save!
For Cubans who live in a totally different economic situation, the prices are completely different. A taxi ride would cost them a few moneda nacional. A can of local cola—TuCola—is about CUP10. Bus ticket in a city CUP0.50-1. And so on. With one exception. When the price of pork and chicken is reasonable for common Cubans, then the price of beef is outrageous. No regular Cuban has seen or eaten beef in decades as the price of one kg of beef is CUC10. Many people don’t earn that in a month. Beef is completely government-controlled and it is only served in government-controlled restaurants and only tourists can afford it.
Private enterprise Cuban style
Starting from the 90ies, the Cuban government has allowed limited private enterprise. Entities like paladares and casas particulares started to emerge all over the country.
A paladar is a privately owned restaurant that is legally allowed to serve up to 12 people at a time. These are usually small rooms in people’s ground-floor flats that have been converted into a restaurant, and they serve reasonably-priced good food (well, as good as it gets in Cuba). In addition to seating limits, they can also serve one type of dessert—fruit with cheese. It’s worthy as a tourist eat at paladares as this way, you support private enterprise and don’t give too much money for the communist party—although all private enterprise is heavily taxed and most of the money ends up in Castros’ pockets anyway.
A casa particular is a bed&breakfast-type accommodation, only breakfast usually costs extra. There are thousands of casas all over Cuba, from flats in apartment buildings to privately owned small houses. They too are heavily taxed, but at least some of the money remains in their hands and helps them to provide a fairly good service (but beware—some casas don’t offer even toilet seats!) The prices per room per night start from CUC20 in countryside and smaller towns and can go as high as CUC35 in Havana Vieja. Breakfast is usually extra and it’s always CUC4. Many of those casas also function as paladares, or at least they cook supper for their guests, and those home-made suppers are quite often the best food one can get in Cuba. For example, if you end up staying with Rafael in Trinidad, for the love of God, try his lobster. It’s close to divine.
In recent months, the Cuban government has started to allow more private enterprise. It started at the end of 2010 when the government decided to lay off 500,000 government employees in order to cut costs amid the economic crisis. As of January 31, 2011, 113,000 people had obtained licences to enter private entrepreneurship. The allowed private jobs include transport of passengers and goods, building, carpentry, shoemaking etc. But of course, all these private entrepreneurs are again heavily taxed.
Socialist planned economy and almost overall government control
Cuba is a socialist economy and most of it is state-controlled. Cuba, like the Soviet Union and many other socialist-communist dictatorships, adheres to planned economy. Most means of production is owned and run by the government.
It’s also worthy to note that Cubans can’t change jobs without government permission. They also can’t buy and sell their flats and houses, although they technically own them. They can only exchange their flats and houses to similar and equal accommodation. Therefore many small flats and houses accommodate many generations under the same roof. Due to that, Cuba has one of the highest divorce rates in the world—we all know that different generations have hardships living together.
All prices are set by the government who also rations goods. If a company wishes to hire a Cuban, they must pay the government, who in turn pays the employee.
There is no freedom in almost anything in Cuba. And the only way to live a happy, successful life in Cuba is when your last name is Castro.