Spanish colonial administrators did not place much importance on the economy of Cuba. The island was poor in precious minerals, so Spain largely ignored Cuba. Instead, Spain focused on mainland colonies, such as Mexico and Peru, that were rich in gold, silver, and precious gemstones. Spanish authorities used Cuba’s hardwood forests to provide wood for shipbuilding and repairs for the galleon fleets that arrived in convoys in Havana harbor twice a year to transport the wealth of Spain’s American colonies back to Europe. Colonial administrators used the harbor as a stopping point between Spain and her colonies, giving Cuba strategic rather than economic importance. Cuban residents lived on relatively small farms and eked out meager livings raising cattle, tobacco, some sugarcane, and commodities to supply the ships. The residents were allowed to trade only with Spanish merchants. The merchants charged high prices for imported goods, while colonists made only small profits from exports.

By the end of the 1950s Cuba had developed one of the leading economies among Latin-American nations. Nevertheless, the country was confronted by a number of major problems: a sugar monoculture (sugar accounted for four-fifths of total exports), a low rate of economic growth, a heavy dependence upon the United States for investment and trade, high rates of unemployment and underemployment, and significant inequalities between urban and rural areas and among the various ethnic divisions.

The government, the primary player in the economy, has undertaken limited reforms in recent years to stem excess liquidity, increase enterprise efficiency, and alleviate serious shortages of food, consumer goods, and services, but prioritizing of political control makes extensive reforms unlikely. Living standards for the average Cuban, without access to dollars, remain at a depressed level compared with 1990. The liberalized farmers' markets introduced in 1994, sell above-quota production at market prices, expand legal consumption alternatives, and reduce black market prices. Income taxes and increased regulations introduced since 1996 have sharply reduced the number of legally self-employed from a high of 208,000 in January 1996. Havana announced in 1995 that GDP declined by 35% during 1989-93 as a result of lost Soviet aid and domestic inefficiencies. The slide in GDP came to a halt in 1994 when Cuba reported growth in GDP of 0.7%. Cuba reported that GDP increased by 2.5% in 1995 and 7.8% in 1996, before slowing down in 1997 and 1998 to 2.5% and 1.2% respectively. Growth recovered with a 6.2% increase in GDP in 1999 and a 5.6% increase in 2000. Much of Cuba's recovery can be attributed to tourism revenues and foreign investment. Growth in 2001 should continue at the same level as the government balances the need for economic loosening against its concern for firm political control.