Cuba - Domestic policy

Under Castro, Cuba's economy was transformed from a capitalist economy, which was extremely dependent on U.S. investment, to a socialist economy. The Cuban state not only owns most enterprises but also sets economic plans for all sectors of the economy. In terms of economic development, the Castro government has been successful in addressing many of the problems that affect developing countries. For example, advances have been made in terms of life expectancy, health services, housing, living conditions, and education.

In the early 1990s, however, Cuba suffered a severe decline prompted by the collapse of the Soviet Union and consequent termination of favorable aid and trade arrangements that had supported its economy. This resulted in shortages of petroleum and basic raw materials, which seriously affected production. To deal with this crisis, Castro was forced to soften many of his fundamental socialist principles and move toward a more market-oriented economy. A graduated income tax, price increases on goods and services, and limited individual private enterprise were introduced. Government subsidies to inefficient state enterprises were reduced. Business laws were revised and the banking system was restructured to facilitate foreign investment. The government reported that gross domestic product (GDP) declined by 35% from 1989–93 (the years following the loss of Soviet aid), but since then the GDP has been increasing, reportedly by 1.2% in 1998.

However, the terrorist attacks of 11 September 2001 did not help the Cuban economy. Although it was not directly affected by the attacks, the Cuban economy is highly dependent upon tourism, and thus suffered when worldwide tourism markedly decreased.

In response to the economic downturn, and the fact that after the collapse of the Union of Soviet Socialist Republics. Cuba must sell sugar on the open market, Cuban officials announced in 2002 that they plan to close half of the state-owned sugar mills, a plan that will eliminate many jobs in one of Cuba's largest sectors.

At the 1997 party congress, Castro endorsed policies intended to maintain the status quo for as long as possible. Sheer necessity has forced him to seek foreign investment in state companies and allow some limited self-employment. In 1999, the government announced that it would use the euro as the official currency for trade with European nations, although the U.S. dollar would not be eliminated completely.

In 2002, Cuba's National Assembly passed an amendment to the Constitution to make Cuba's socialist system "irrevocable." To mark the occasion, Castro closed down all factories, banks, schools, and offices for three days so that citizens could watch the proceedings on television. In the days before the session, eight million voters signed a petition supporting the measure.

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