COMPARATIVE STUDY OF CUBA’S GROSS DOMESTIC PRODUCT (GDP)

BASED ON EXISTING STATISTICAL DATA DURING THE REPUBLIC AND TODAY’S COMMUNIST SYSTEM

Por Humberto (Bert) Corzo*

Columnista

La Nueva Cuba

Julio 30 2002

The following analysis has been prepared for the purposes of comparing Cuba’s GDP to the GDP of other Latin-American countries as well as Spain both in the pre-Castro era and after 43 years under a communist system.

The main goal of this analysis is to put to rest Castro’s created myth that during its Republican era Cuba was an economically backward country. Cuba’s GDP will be compare to the GDP of other countries which share a common historical, economic and social background with that Island.

Among those countries the comparison with Chile is the closest one. Although Chile is a larger country (albeit with a vast desert area sparsely inhabited), both countries in 1958 were similar with regard to total population, racial composition as well as economic and educational levels.

Costa Rica, a smaller country than Cuba in size and population, had reached high socioeconomic levels. During the beginning of the period selected for the comparison the socioeconomic development of Costa Rica was inferior to the one in Cuba.

Mexico, a larger country in size and population, had at that time an economic system somewhat similar to the present system in Cuba. For many years Mexico had a state oriented economy and was ruled by a single political party. Since the political opening and the implementation of NAFTA in1995, Mexico’s economy had enjoyed an accelerated development. Also there are similarities between the tourist industries of both countries, since in 1958 Cuba was second to Mexico with respect to the number of tourists.

Spain, also a larger country in size and population, remained in close contact with Cuba in all respects. Cuba’s basic social, political, economic and cultural ties with Spain remained strong during Cuba’s era as a Republic. In 1958 about 70% of the Cuban population was of Spanish descent. In the early 50’s Spain’s GDP was 40% below the majority of European countries. Between 1953, the year when Spain and the USA signed the Treaty of Madrid, and 1958, Spain received an economic infusion of over one billion dollars from US military bases established in that country. At that point, Spain’s GDP registered a yearly average growth of 5%. The transition to a democracy after Franco’s demise and the admission of Spain into the European Community in 1986 has resulted in an accelerated economic growth until the present day.

Year Country PIB (Millions) Population (Millions) Per Capita

1958 Cuba 2,360 6.631 356

Chile 2,580 7.165 360

C. Rica 259 1.126 230

España 5,475 30.318 180

México 9,335 32.868 284

2000 Cuba 19,200 11.000 1,700

Chile 153,100 15.160 10,100

C. Rica 25,000 3.731 6,700

España 720,800 40.040 18,000

México 915,000 100.550 9,100

Sources: 1. U.N. 1964 estimates based on PPP exchanges rates.

2. CIA The World Fact book.

Between 1923 and 1958 Cuba’s GDP registered a positive growth. According to statistics provided by the International Monetary Fund, in 1958 Cuba had monetary reserves of $387 million (1), which in the year 2000 would represent a total of $2.307 billions after the corresponding inflationary index adjustment. During the period 1960-1979, Cuba was the only Latin American country showing negative GDP results (2).

In the 1991-2000 decade its GDP annual average was –1.9%, thereby placing Cuba next to the last among the Latin American countries, only higher than Haiti (3). Cuba enjoyed a positive growth between 1980-1989 only, due to subsidies from the Soviet Union, which amounted to $5 billions a year. A report from the United Nations development program shows that in 1999 Cuba occupies the next to the last place among the poorest countries in Latin America, only higher than Haiti.

In 1958 the Cuban peso and the dollar circulated in Cuba on a par-basis. Between the 1960’s and the 1990’s, the inflation index (consumer price index, CPI) changed to 5.96 (4). In other words an item that cost $1.00 in 1958 will cost $5.96 in the year 2000. For example a gallon of milk that cost $0.47 in 1958 in the U.S. cost $2.80 in 2000.

At the end of November 2001 the official exchange rate of the convertible Cuban peso (equivalent to the dollar) was 27 units of the Cuban peso in circulation. In the year 2001 Cuba’s monthly average was 230 pesos per capita, which at the exchange rate prevailing for that year would be equivalent to $8.52 per month. In 1958 Cuba’s monthly average was $110 per capita, 12.9 times larger than in 2001.

The combined effect of the devalued Cuban peso with respect to the dollar, and the rate of inflation for the last 40 years (27x5.96) have been devastating to the standard of living experienced in Cuba from the 1960’s to the 1990’s. To remain at the same purchasing power, the average salary would have to be 161x110=17710 pesos today. Current per capita figures represent only 1.3% of the 1958 per capita.

Che Guevara, who had replaced Felipe Pazos as President of Cuba’s National Bank, during his trip to Algeria in1965 when questioned about the economic failure cynically replied: “We have a country to experiment on; we make mistakes but we will go on experimenting until we learn”. Such learning adventure has resulted in the biggest economic debacle ever experienced in Latin America, as this study clearly illustrate.

Based on Chile’s GDP annual average growth of 1.41%, Cuba’s per capita today should be $12,700. If we assume a GDP growth of 2.3%, as in the case of Mexico and Costa Rica, such per capita would be $20,275. Assuming a growth of 3.13% of the GDP like in the case of Spain the per capita would be $28,204. The average per capita would be $20,600.

In summary, it would be reasonable to assume that between 1958 and 2000, Cuba’s economy should have growth along the same parameters of the countries included in this study. This economic growth would have happened under any type of government, except under Castro’s tyrannical regime. The difference among the results shown here and those of Castro’s tyranny can be attributed to the catastrophic results of it over the Cuban economy.

References:

1. IMF statistics, 1960

2. World Bank statistics, 1980

3. ECLAC, Per Capita Gross Domestic Product, 2001

4. Bureau of Labor Statistics

*Humberto (Bert) Corzo nació en 1935 en Itabo, Matanzas, Cuba, y a los dos meses los padres se trasladaron a la ciudad de La Habana. Recibió su educación elemental y secundaria en el Colegio de Belén en Marianao, La Habana. Graduado de La Universidad de La Habana con el título de Ingeniero Civil en 1962.Desde su arribo a los Estados Unidos en 1969 como exiliado se estableció en Los Angeles, California, obteniendo la registración como Profesional Engineer en 1972. Cuenta con más de 40 años de experiencia en la rama de la Ingeniería Estructural involucrado en el desarrollo de proyectos, diseño, supervisión, especificaciones, estimado de costos e inspección de todo tipo de construcciones que incluyen desde puentes hasta edificios de múltiple pisos. Miembro de la American Society of Civil Engineers y de la Sociedad Cubana de Ingenieros Civiles en el Exilio.