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Cuba Economic Freedom Score 25 World Rank: 176 Regional Rank: 29 Least free uba’s economic freedom score is 28.5, making its economy Chigher one of the world’s least free. Its overall score is 0.2 point than last year, with a notable decline in monetary free- 50 75 Most 0 100 free 28.5 Freedom Trend 30 dom counterbalanced by gains in freedom from corruption and fiscal freedom. Cuba is ranked least free of 29 countries in the South and Central America/Caribbean region, and its overall score is significantly lower than the regional average. 29 28 Cuba scores far below world averages in most areas of economic freedom, and its economy remains one of the world’s most repressed. The foundations of economic freedom are particularly weak in the absence of an independent and fair judiciary. No courts are free of political interference, and pervasive corruption affects many aspects of economic activity. As the largest source of employment, the public sector accounts for more than 80 percent of all jobs. A watered-down reform package endorsed by the Cuban Communist Party in April 2011 promised to trim the number of state workers and allow restricted self-employment in the non-public sector, but many details of the reform are obscure and little progress has been observed. The private sector is severely constrained by heavy regulations and tight state controls. Open-market policies are not in place to spur growth in trade and investment, and the lack of competition stifles productivity growth. Background: A one-party Communist state, Cuba depends on external assistance (chiefly oil provided by Venezuela’s Hugo Chávez and remittances from Cuban émigrés) and a captive labor force to survive. Property rights are severely restricted. Fidel Castro’s 81-year-old younger brother Raul continues to guide both the government and the Cuban Communist Party. Cuba’s socialist command economy is in perennial crisis. The average worker earns less than $25 a month, agriculture is in shambles, mining is depressed, and tourism revenue has proven volatile. But economic policy is resolutely Communist, and the regime rejects any moves toward genuine political or economic freedom. How Do We Measure Economic Freedom? See page 477 for an explanation of the methodology or visit the Index Web site at heritage.org/index. 27 26 25 2009 2010 2011 2012 2013 Country Comparisons 28.5 Country World Average 59.6 Regional Average 59.4 Free Economies 84.5 0 20 40 60 80 100 Quick Facts Population: 11.2 million GDP (PPP): $120.3 billion 2.7% growth in 2010 5-year compound annual growth n/a $10,704 per capita Unemployment: n/a Inflation (CPI): 4.7% FDI Inflow: $110.0 million Public Debt: 35.4% of GDP 2011 data unless otherwise noted. Data compiled as of September 2012. 181 CUBA (continued) THE TEN ECONOMIC FREEDOMS Country RULE OF LAW World Average Rank Property Rights 10.0 Freedom from Corruption 42.0 165th 59th 0 20 40 60 80 100 The government adheres to socialist principles in organizing the state-controlled economy, and most means of production are owned by the state. Citizens may own land and productive capital for farming and self-employment. The constitution explicitly subordinates the courts to the National Assembly of People’s Power and the Council of State. Corruption remains pervasive, undermining equity and respect for the rule of law. LIMITED GOVERNMENT Fiscal Freedom 62.7 Government Spending 0.0 158th 172nd 0 20 40 60 80 100 Cuba’s top income tax rate is 50 percent. The top corporate tax rate is 30 percent (35 percent for companies with entirely foreign capital). Other taxes include a tax on property transfers and a sales tax. Overall tax revenue is estimated to be equivalent to about 20 percent of GDP. Taxation is erratic and not effectively administered. Inefficient public-sector spending remains high at over 70 percent of total domestic output. REGULATORY EFFICIENCY Business Freedom 10.0 Labor Freedom 20.0 Monetary Freedom 67.4 176th 176th 146th 0 20 40 60 80 100 Regulatory efficiency remains poor, and private entrepreneurship is limited. The application of regulations is inconsistent and non-transparent. State control of the labor market has spurred creation of a large informal sector. In an attempt to reduce labor market rigidity, the government has implemented a measure to allow workers to hold more than one job. Monetary stability is vulnerable to state interference, with prices subject to controls. OPEN MARKETS Trade Freedom 62.7 Investment Freedom 0.0 Financial Freedom 10.0 149th 170th 170th 0 20 40 60 80 100 The trade regime remains largely non-transparent, and imports and exports are dominated by the state. Foreign investment must be approved by the government, which exercises extensive control of economic activity. The financial sector remains heavily regulated, and access to credit for entrepreneurial activity is seriously impeded by the shallowness of the financial market. The state maintains strict capital and exchange controls. Score Changes LIMITED GOVERNMENT RULE OF LAW Property Rights Freedom from Corruption 182 0 +5.0 Fiscal Freedom Government Spending REGULATORY EFFICIENCY +1.2 0 Business Freedom Labor Freedom Monetary Freedom 2013 Index of Economic Freedom OPEN MARKETS 0 0 –3.9 Trade Freedom Investment Freedom Financial Freedom 0 0 0