The Cuban Economy: After the Smoke Clears

For most Cubans, life remains a slog. But here's the surprise: There's plenty of potential for growth in everything from oil exploration to upscale tourism

Illustration by Hellovon based on photography by Wally McNamee/CORBIS

By Geri Smith

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Small biz: A shoemaker at work in Havana Sven Creutzmann/Getty Images

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Roger Johnson knew that Fidel Castro would step down eventually. But the Cuban leader's Feb. 19 retirement announcement, while Johnson was in Havana, added an unexpected bit of drama to an otherwise routine visit. As North Dakota's agricultural commissioner, he was on his seventh trip to Cuba in as many years, signing a contract to sell $7.5 million worth of peas and lentils.

Wait a minute. What was a North Dakotan doing peddling beans to a country that Americans aren't supposed to trade with? He was taking advantage of rules that, since 2000, have allowed U.S. companies to sell food and agricultural products to Cuba. And he's far from alone. The U.S. shipped $438 million in such goods there last year. "We have a lot of commodities that Cuba wants," Johnson says.

And somehow, Cuba scrapes together enough cash to pay for them. Despite the run-down buildings, potholed roads, and empty store shelves, the country's economy grew by 7.5% in 2007, the third straight year of rapid expansion. Record high prices for nickel exports, promising deepwater oil finds in the Gulf of Mexico, brisk sales of premium cigars, and white sand beaches that attract millions of foreigners all add up to a stronger economic base than you might imagine. The robust growth could keep the communist regime under Fidel's brother Raúl Castro afloat by allowing him to raise salaries and improve crumbling infrastructure. "Cuba's state economy is in the best shape it has been in since the Soviets left in 1991," says Jorge R. Piñon, a Cuba expert at the University of Miami. "They don't need the embargo to be lifted."

That's not to say Cuba is in glowing health. Far from it. When Raúl Castro took over as acting President in 2006, he publicly acknowledged that government services were inefficient, and he urged Cubans to air their grievances and suggest how to make things better. In a series of roundtable discussions across the country, people complained about lousy public transport, low salaries, shoddy housing, and excessive government regulation. Although some 53,000 new homes were built last year, a half-million more are needed. And while Havana splurged on hundreds of new Chinese-made buses to replace tractor-pulled contraptions called "camels" that once hauled commuters, most people still wait in long lines or hitchhike to get to work.

For anyone outside a small elite, just getting by is a struggle. Benito, a 48-year-old cobbler who declined to give his last name for fear of losing his job, earns just $11 a month repairing shoes at a government-run, open-air workshop in Havana. His wife earns $13 monthly as a seamstress in a state factory. They live with Benito's sister because they can't afford their own apartment. The family gets a monthly ration booklet that provides enough food for 10 days; the rest has to come from less regulated markets where prices are far higher than in stores with rationed goods. In January, as part of a program to cut electricity consumption, the government delivered a new Chinese refrigerator and carted away their 30-year-old Soviet model. They'll pay off the new appliance—they had no choice in the matter—through a payroll deduction of $2.50 a month over eight years. "Everyone is expecting big changes under Raúl," says Benito. "It's impossible to live like this forever."

Many Cubans are looking for more than better salaries and food: They want to be less isolated from the world. Cuba's television stations spew out mind-numbing fare such as lectures on dialectical materialism and platitudes about the revolution. Few young people have pocket money to go to a disco or buy a beer, so many hang out in a park along Havana's Avenida de los Presidentes. On a recent Friday evening, 20-year-old Miguel Alejandro, his hair in dreadlocks, and 18-year-old Reinier, sporting a Marilyn Manson T-shirt, chain-smoked cigarettes and spoke dreamily of the possibility of traveling. "Even if we had the money, the government wouldn't let us leave the country," Reinier said.