2017 Index of Economic Freedom

Cuba

overall score33.9
world rank178
Rule of Law

Property Rights32.4

Government Integrity41.8

Judicial Effectiveness10.0

Government Size

Government Spending0.0

Tax Burden51.3

Fiscal Health81.2

Regulatory Efficiency

Business Freedom20.0

Labor Freedom20.0

Monetary Freedom66.0

Open Markets

Trade Freedom64.5

Investment Freedom10.0

Financial Freedom10.0

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Quick Facts
  • Population:
    • 11.2 million
  • GDP (PPP):
    • $141.5 billion
    • 4.3% growth
    • 2.8% 5-year compound annual growth
    • $12,580 per capita
  • Unemployment:
  • Inflation (CPI):
    • 4.6%
  • FDI Inflow:
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State control of Cuba’s economy is both pervasive and inefficient, hampering any meaningful development of a job-creating private sector. As the largest source of employment, the bloated government sector soaks up much of the labor force. After decades without effective economic reform, the government has eased the rules on private employment in an effort to reshape the economy and improve efficiency.

Cuba’s potential entrepreneurs have long been shackled by tight government control and institutional shortcomings. No courts are free of political interference, and private property is strictly regulated. Excessive bureaucracy and lack of regulatory transparency continue to limit trade and investment.

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Background

Although Fidel Castro died in November 2016, his 85-year-old younger brother Raúl continues to lead both the government and the Cuban Communist Party. Raúl’s only son, Colonel Alejandro Castro Espín, and former son-in-law, General Luis Alberto Rodríguez López-Callejas, are being groomed to perpetuate the family’s political and economic control of the island. Ironically, violent repression of civil society and religious persecution actually increased in the run-up to President Barack Obama’s March 2016 visit that showcased weakened U.S. economic sanctions and looser travel restrictions on Americans visiting Cuba. In the absence of significant future oil subsidies from nearly bankrupt Venezuela, Cuba’s dysfunctional economy is even more dependent on external assistance such as remittances from Cuban émigrés.

Rule of LawView Methodology

Property Rights 32.4 Create a Graph using this measurement

Government Integrity 41.8 Create a Graph using this measurement

Judicial Effectiveness 10.0 Create a Graph using this measurement

Most means of production are owned by the state. Seizures of property by police without legal justification are common. The nominally independent but heavily politicized judiciary is directly subordinate to the National Assembly and the Communist Party, which may remove or appoint judges at any time. Corruption is a serious problem, with widespread illegality permeating both the limited private enterprises and the vast state-controlled economy.

Government SizeView Methodology

The top individual income tax rate is 50 percent, and the top corporate tax rate is 30 percent. Other taxes include a tax on property transfers and a sales tax. The overall tax burden equals 38.3 percent of total domestic income. Government spending has amounted to 63.3 percent of total output (GDP) over the past three years, and budget deficits have averaged 3.2 percent of GDP. Public debt is equivalent to 35.0 percent of GDP.

Regulatory EfficiencyView Methodology

Only limited private economic activity is permitted. Inconsistent and nontransparent application of regulations impedes entrepreneurship. State control of the formal labor market has led to the creation of a large informal economy. Prices are tightly controlled to contain inflation, but in 2016, the government backpedaled from plans to eliminate its dual currency system, which has long been a source of economic distortions.

Open MarketsView Methodology

Trade is only moderately important to Cuba’s economy; the value of exports and imports taken together equals 26.4 percent of GDP. The average applied tariff rate is 7.7 percent. State-owned enterprises significantly distort the economy. Access to credit for private-sector activity is severely impeded by the shallow financial market. Despite a decade of incremental changes, the state remains firmly in control.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Canada78.50.5
2Chile76.5-1.2
3United States75.1-0.3
4Colombia69.7-1.1
5Uruguay 69.70.9
6Jamaica 69.52.0
7Peru68.91.5
8Panama 66.31.5
9Saint Vincent and the Grenadines65.2-3.6
10Saint Lucia65-5.0
11Costa Rica 65-2.4
12El Salvador 64.1-1.0
13Dominica63.7-3.3
14Mexico63.6-1.6
15Guatemala 631.2
16Dominican Republic62.91.9
17Paraguay 62.40.9
18Trinidad and Tobago61.2-1.7
19The Bahamas61.1-9.8
20Nicaragua 59.20.6
21Honduras 58.81.1
22Belize58.61.2
23Guyana58.53.1
24Barbados54.5-13.8
25Brazil52.9-3.6
26Argentina50.46.6
27Haiti49.6-1.7
28Ecuador49.30.7
29Suriname48-5.8
30Bolivia47.70.3
31Cuba33.94.1
32Venezuela 27-6.7
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