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CUBA Economic Freedom Score 25 World Rank: 177 Regional Rank: 29 Least free 0 uba’s economic freedom score is 29.6, making its economy Chigher one of the world’s least free. Its overall score is 0.9 point than last year, with a slight deterioration in monetary 50 75 Most 100 free 29.6 Freedom Trend 31 freedom outweighed by improvements in three of the 10 economic freedoms, including trade freedom, fiscal freedom, and freedom from corruption. 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. In recent years, the government has made measured concessions to encourage more entrepreneurship and private-sector growth. Communist Party–endorsed reforms to cut government payrolls and expand approved professions have not been broad enough to ensure any meaningful advancement in overall economic freedom. The state continues to interfere in most economic activity. Price controls are pervasive, and the two-tiered exchange rate regime continues to distort prices. Despite membership in the World Trade Organization, the economy remains relatively cut off from the international marketplace. Only state enterprises are allowed to engage in international trade and investment. The state uses an oppressive regulatory environment to suppress entrepreneurial activity and controls most means of production. Shallow credit markets impede access to credit for business activities. BACKGROUND: A one-party Communist state, Cuba depends on external assistance (chiefly oil subsidies provided by Venezuela and remittances from Cuban émigrés) and a captive labor force to survive. Property rights are severely restricted. Fidel Castro’s 83-year-old brother Raúl continues to lead both the government and the Cuban Communist Party. Workers’ wages are not enough to live on, the agriculture sector is starved for investment, and tourism revenue is volatile. Under Raúl Castro, violent repression of civil society and of dissidents has increased dramatically. Much-touted “freemarket reforms” have proven to be cosmetic changes in what remains a socialist state. Restrictions on foreign travel have been eased, but certain Cubans are still barred from leaving. How Do We Measure Economic Freedom? See page 475 for an explanation of the methodology or visit the Index Web site at heritage.org/index. 30 29 28 27 26 2011 2012 2013 2014 2015 Country Comparisons 29.6 Country World Average 60.4 Regional Average 59.7 Free Economies 84.6 0 20 40 60 80 100 Quick Facts Population: 11.2 million GDP (PPP): $130.0 billion 2.8% growth in 2013 5-year compound annual growth 2.3% $11,610 per capita Unemployment: n/a Inflation (CPI): 6.0% FDI Inflow: n/a Public Debt: 37.5% of GDP 2013 data unless otherwise noted. Data compiled as of September 2014. 179 CUBA (continued) THE TEN ECONOMIC FREEDOMS Score RULE OF LAW Country World Average Property Rights 10.0 Freedom from Corruption 46.0 0 20 40 60 80 Rank 1–Year Change 165th 63rd 0 +4.8 100 Although the perceived level of corruption has traditionally been far lower in Cuba than in other Latin American countries, it remains a considerable systemic problem. Low salaries for public officials and the dual exchange rate provide incentives for illicit enrichment. Only state enterprises may enter into economic agreements with foreigners as minority partners. Most means of production are owned by the state. Fiscal Freedom 61.8 GOVERNMENT Government Spending 0.0 SIZE 165th 176th 0 20 40 60 80 +1.8 0 100 Cuba’s top individual income tax rate is 50 percent, and its top corporate tax rate is 30 percent. Other taxes include a property transfer tax and a sales tax. The overall tax burden equals 20.5 percent of domestic production. Public expenditures account for 60.2 percent of the domestic economy, and public debt is equal to about 38 percent of gross domestic product. REGULATORY EFFICIENCY Business Freedom 20.0 Labor Freedom 20.0 Monetary Freedom 64.8 182nd 182nd 172nd 0 20 40 60 80 0 0 –1.0 100 Private entrepreneurship exists only on a very small scale. The inconsistent and non-transparent application of regulations impedes the creation of new businesses. The rigid, statecontrolled labor market has helped to create a large informal economy. The government tries to contain inflation directly by using price controls and regulating the limited areas of freemarket activity and indirectly by controlling monetary growth. OPEN MARKETS Trade Freedom 63.8 Investment Freedom 0.0 Financial Freedom 10.0 154th 176th 174th 0 20 40 60 80 +3.8 0 0 100 Cuba’s average tariff rate is 8.1 percent. The country’s centrally planned economy is a barrier to the free flow of international trade and investment. The financial sector is tightly controlled by the state. Over a dozen foreign banks have opened representative offices, but they are not allowed to operate freely. Credit is not allocated on market terms, and capital markets remain underdeveloped. Long-Term Score Change (since 1995) RULE OF LAW Property Rights Freedom from Corruption 180 0 +36.0 GOVERNMENT SIZE Fiscal Freedom Government Spending +14.2 0 REGULATORY EFFICIENCY OPEN MARKETS Business Freedom –20.0 Labor Freedom 0 Monetary Freedom +1.9 Trade Freedom +3.8 Investment Freedom –10.0 Financial Freedom 0 2015 Index of Economic Freedom