Cost of Living in Cuba

by moveforward on September 20, 2010

Fidel Castro, cigars and violence are three common factors which are often associated with Cuba thereby creating many blinkered views on this country. While it would be wrong to suggest that strict government controls have totally disappeared in Cuba, indeed they have been weakened but are still relatively strong, progress has been made over the last 20 or 30 years and more is expected in the future. This was a country which had relatively strong links with the USSR only to be left to fend for itself when the USSR split up.

If you’re looking at living costs in Cuba one factor which will become very apparent at a very early stage is the massive problem of poverty in the country. There are still millions of people in Cuba who live on literally just a few dollars a day although it has to be said that progress has also been made in this particular area. In general, as you will find later in this article, the cost of living in Cuba is still relatively low compared to other countries in the region.

Where is Cuba

While many people will have heard of Cuba very few people will be able to spot the country on a map and be aware that Cuba is actually an island in the Caribbean. There are a number of surrounding small islands that make up Cuba as well but the main island of Cuba is where the action happens and where the prospects for the future are more positive. Despite the fact that Cuba is actually a group of islands it is within easy travelling distance to the United States of America, Haiti, Jamaica, Mexico, the Bahamas and the Cayman Islands to name but a few.

Cuba itself is the 16th largest island in the world and despite the reputation of a hot and humid climate it is actually home to a vast array of different climates, landscapes and cultures. Again, Cuba may not be something which will appeal to everybody looking for a new homeland overseas there is no doubt that Cuba which many people will have ingrained in their memory from 50 years ago is very different today. Perhaps Cuba could offer you a relatively high standard of living?

Economy

It will come as no surprise to those who have come across Cuba before that the economy is effectively controlled by the state. However, we are seeing more and more private ventures in Cuba and while in the year 2000 a rather large 76% of the workforce was employed by the state, with 23% by the private sector, this is still a vast improvement on the 91% to 8% ratio from 1981. Capital investment in Cuba is still restricted and does require government approval but there is no doubt that the authorities are beginning to loosen the purse strings and their control over the Cuban economy.

Even though great strides have been made in the areas of corruption, which has been rife for many years, there is still much work to be done although the large capital outflows to foreign investors seen in the 1950s have now been replaced by a more balanced economy. There have been problems with energy supplies in the past although thankfully these have been rectified and the situation is much better than it has been for some time.

The largest areas of employment in Cuba are agriculture, industry, tourism, oil and many people will be surprised to learn that Cuba has a world-class biotechnology and pharmaceutical industry. Many believe that these two areas in particular will form the gangplank for a stronger and more lucrative Cuban economy in the medium to longer term. So while poverty may still be a major problem in Cuba there have been major developments within the economy and slowly but surely the purse strings which are well and truly held by the authorities are being loosened. Even though foreign investment is still fairly tightly controlled by the authorities there is no doubt that Cuba is now more popular with regards to foreign investment than ever before. As poverty is still a major problem it is likely that foreign investors will continue to prey on the minds of the authorities in Cuba and we could see further “give-and-take” in the area of foreign investment and foreign owned operations in Cuba.

The ongoing trade embargo implemented by America back in 1961 still continues to this day even though the likes of the UN believe now is the time to lift the embargo. The Cuban authorities believe that this particular embargo has cost the economy over $750 billion since it began in 1961 and continue to lobby heavily for its abolishment. If the trade embargo with the US was to be abolished this would be a major plus point for the Cuban economy and Cuba as a whole.

Property

While the property market in Cuba is relatively lackluster to say the least there have been a number of changes over the last few months in relation to foreign investment and foreign ownership of property in Cuba. Before these recent changes foreign investors were allowed to lease Cuban property for up to 50 years with an additional 25 years extension available on request. However, this relatively short timescale was not to the liking of all investors and many have been pushing for a 99 year lease option. Thankfully, the Cuban authorities have now given way with regards to the 99 year lease which is now available to foreign investors.

Many believe that a reduction in the restrictions on foreign ownership of Cuban property could have a monumental impact upon the property market in the country. However, a number of other investors have been highlighting similar moves in the past which were followed by the withdrawal of such incentives as and when the economy was back on its feet. Whether the Cuban authorities would be “brave enough” to effectively use foreign investment in property to shore up the economy in the short-term is debatable because we are in a very different era now. However, until further confidence is warranted in the Cuban property market we may well only see a gradual increase in popularity as investors become more and more confident.

If, as expected, foreign ownership of property in Cuba continues to grow after the recent changes it is highly likely that the tourism sector will be the main benefactor. Already there is talk of golf course developments and similar projects around Cuba which have the potential to literally change the economy over the next decade or so. Any improvement in the economy should be reflected in the employment market which should then allow the authorities to lift more and more people out of poverty.

Living costs in Cuba

The cost of living in Cuba is often difficult to summarise because of the lack of information available for so many years. However, using information available we know that the groceries index a 68.74% of the New York index and the restaurant index’s 38.5%. Thankfully there is more information available regarding individual items and individual services which we will cover below.

A relatively inexpensive restaurant will charge around seven dollars per person, a meal for two at a midrange restaurant is likely to cost around $40 and a combo deal at your local McDonald’s will set you back just two dollars. Domestic beer and imported beer are around $1.5 per bottle with Pepsi and Cola just over $1.1 with water costing you around 87c. However, goods available in local markets are on the whole cheaper with milk around $3.5 a litre, a fresh loaf of bread around $1.7 and 12 eggs will cost you $2.4. A midrange bottle of wine will cost you less than four dollars and domestic and imported beer will cost you two dollars, the same price as a packet of Marlboro cigarettes. Taxis and gasoline in Cuba are relatively cheap due to the close proximity to large oilfields and basic utilities such as electricity, gas, water and refuse collection are unlikely to cost you more than $20 a month. Internet access, which was once frowned upon by the domineering Cuban government, is very expensive at $70 a month which perfectly illustrates how the government still has a very strong hold on prices.

Even though the Cuban authorities have released some of their power and opened up some areas of economy to the “free market” they are still very much in control of rationing of food and items such as clothing and very often these prices are fixed by the authorities. While this particular activity is likely to change in the longer-term it may be some time before Cuba could in any way shape or form be regarded as a “free economy”.

Entertainment

Even though the vast majority of everyday prices are fixed, or in some way influenced, by the Cuban government there is no doubt that the famous nightlife of the country is still there for all to see. As with so many Central American and North American countries night life can be as varied, as loud or as quiet as you want it to be. While it will depend on which area of the country you live in it is relatively inexpensive to enjoy a good night out in Cuba. As more and more expats join the party we are seeing entertainment venues and entertainment options influenced by the ongoing influx of foreign investors, foreign companies and foreign visitors.

Taxes

Tax rates in Cuba are not as bad as many would have expected when you bear in mind the heavy communist influence over the region. Corporation tax is set at 30% although wholly owned foreign companies will be charged 35%. Individual taxation ranges from 10% for those are relatively low incomes to 50% for those of relatively high income with a 12% VAT/sales charge.

Hopefully, as the Cuban economy is opened up to new initiatives, self-employment and more foreign investment we may see some changes in the tax rates to try and attract new investors and new visitors to the region. However, it has to be said that the rates in Cuba are not as bad as you might have expected for a country with such a history.

Expat Communities

There are few countries in the world where there is no expat community and Cuba is one which has a relatively healthy number of expats in the region. As ever, the ability to talk to people who have been there, done it and bought the T-shirt is vital when you’re moving overseas to begin a new life. While there are still some restrictions regarding freedom of movement in some areas of Cuba there is no doubt that enormous progress has been made in this particular area and the current regime is less restrictive than it has been for many years.

Conclusion

Cuba is again one of those countries which has made enormous progress over the last few years but still has some way to go before it can be comparable to other expats hotspots. However, this has not stopped the influx of expats to Cuba and the opening up of the economy, encouragement of foreign investment and a generally less restrictive environment are all helping to improve the attractions of this beautiful area of the world. While there are still traces of the old communist influences in and around Cuba there is no doubt that the authorities have decided to move with the times and now appreciate the importance of overseas investors.

The recent reduction in restrictions regarding foreign ownership of Cuban property has been welcomed in the short to medium term and will likely have a massive impact in the longer-term. However, some investors may be sceptical until the government demonstrates it has learned from problems in the past where similar incentives were reversed once the economy was back on its feet. Foreign investors have very long memories although there are many who are willing to take the extra risk for the potential extra rewards in the medium to longer term.

Cuba is one of a group of American countries which has been forced to change to support its economy which had struggled to survive. However, while these changes may have occurred over an extended period they are very much welcomed and certain to benefit the Cuban economy, international trade and above all the Cuban population.

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