Survival Story: Cuba’s Economy in the Post-Soviet Decade

One decade ago, the demise of the Soviet Union and its socialist economic bloc plunged Cuba into an economic crisis that many observers believed it would not survive.

The Soviet subsidy to Cuba’s economy, one fourth of Cuba’s national income, vanished. Cuba’s gross domestic product fell 35 percent between 1989 and 1993. Cuban mothers tell that in the severest years of the crisis, 1992 and 1993, they gave their children a glass of water with sugar before sending them to school. Students recall wearing shoes made of tire scraps and adhesive tape. Parents allowed children to play in the street all day because fuel shortages brought vehicular traffic to a near-standstill. Factories closed; workers were laid off. Farmers replaced their tractors with horses and oxen.

In Miami, a prominent expert published Castro’s Final Hour in 1992, a book about “the coming downfall of communist Cuba.” In Washington, U.S. officials pored over intelligence analyses and tried to guess the month when Cuba would run completely out of fuel. Yet Cuba survived the crisis and went on to achieve modest economic growth
during the 1990’s. This paper, based on interviews with Cuban citizens, officials, and executives, and with analysts and investors in Cuba, describes the measures behind this survival story and the challenges Cuba continues to face.

Cuba’s policymakers had no choice but to restructure the socialist economy, widely using markets and elements of capitalism, and adopting strategies to generate growth and income in the uncharted territory of the global market economy.

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