San José State University
Department of Economics
Thayer Watkins
Silicon Valley
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The Economic History of Havana, Cuba:
A City So Beautiful and Important
It Was Once Worth More
Than All of Florida

On the western end of the north coast of Cuba there is a uniquely natural harbor sheltered from the storms at sea. It has a relatively narrow channel 250 meters wide and 1400 meters long. This channel connects the sea to a hospitable bay and it is deep enough to accommodate deep sea vessels.

The Founding of Havana

The Spanish conquistador Diego Velázquez de Cuéllar in 1515 first sited a town on the coast directly south of the present site of Havana. He named it Batabanó. It never amounted to much. This is some evidence that the expedition of Hernan Cortéz stopped there briefly on its way to conquer Mexico.

The residents of this first site saw the greater potential of a site on the bay to the north and established a town there in 1519. A notable feature about this new town was its name. Officially the town was named San Cristóbal de La Habana. This honored the patron saint of travelers but, as was often the case, the name also was an allusion to Christopher Columbus.

But the migrants sited their town some distance away from the harbor, probably adjacent to the Almendares River for fresh water. It was not a good choice because the land was swampy then and plagued with mosquitoes.

In the course of four years the settlers moved to the present site of Habana Vieja (Old Havana) on the west coast to the channel leading into the harbor. Although the capital of Spanish Cuba was initially at Santiago de Cuba at the eastern end of the south coast of Cuba it was transferred to Havana in 1592.

One of the first industries of Cuba was the panning for gold at the river streams. Natives were taken prisoner and forced to do the panning. Enough gold was found to keep some of Spanish pursuing it for several years before giving up in 1547. When Hernan Cortéz left for Mexico he took with him the stock of gold that had been accumulated in that year. l

Because Havana was located at a convenient stopping place for ships traveling between Spain and New Spain it became the key port of the Spanish Empire in the Americas. It grew and prospered. The ships needed fresh water, dried meat, leather and wood for repairs. The climate of Cuba was not suitable for growing wheat so the settlers adopted the staple food of the natives, casabe made from a flour ground from the roots of the yucca plant.

The Water Problem

Initially Havana depended upon rainwater captured in cisterns. When the needs were greater Havana authorities decided in 1550 to bring fresh water from the Almendares River about five miles to the west. A canal (zanja) needed to be dug and the problem was how it was to be financed. The cost turned out to be eight thousand ducats. The residents wanted to impose the cost on the ships visiting Havana Bay and the King of Spain authorized an anchoring fee. The anchoring fee was heavy enough that it discouraged some ships from stopping at Havana. The economy deteriorated to the point that the historian I.A. Wright in his book, The early history of Cuba characterized it as A lemon not worth squeezing.

In 1562 the anchoring fee was rescinded and instead two taxes were imposed upon Havana residents. One was an income tax and the other was an excise tax on wine, soap and meat. The canal was completed in 1592 and by 1600 the costs fully paid.

The Plundering of Havana by Pirates

The fleets carrying treasure from the Americas to Spain rendezvoused at Havana to travel in convoys across the Atlantic. As a result of this Havana was the target of French, English and Dutch marauders.

Pirates attacking Havana

Over the early years there were numerous attacks of Havana by pirates. Two were particularly notable. In 1537 pirates attacked and captured Havana. They demanded a ransom of 700 ducats for their leaving the town. The received this amount and left. Soon afterwards two Spanish ships carrying treasure from Mexico. The governor of Havana demanded the ships leave there treasure in Havana and pursue the pirates. The ship captains complied. But the treasure ships were no match for the pirate ship. The pirates captured the treasure ships and soon found out about the new treasure back in Havana. They returned and captured the additional treasure.

In 1555 the infamous French pirate Jacques de Sores captured the city of Santiago de Cuba in the east. He held the archbishop and the leading citizens for a ransom of eighty thousand pesos. He then brought his four ships to Havana expecting to find treasure ships there from Mexico. There were none. He waited for nearly a month and still none showed up. He then demanded a ransom that the residents could not pay so he burned their homes. Later he went to the countryside and captured landowners and slaves. When the ransom was not paid for six slaves Sores had them hung.

The Spanish authorities decided that given the key role played by Havana in the transporting of gold and silver from the empire in the Americas they should build fortifications and a city wall to protect Havana. First, in 1558, a fort in Havana was started. It was called El Castillo de la Real Fuerza (The Castle of Royal Might). It was completed in 1577.

In 1589 King Philip of Spain ordered the building of two forts at the entrance to the harbor. These forts were called El Castillo de San Salvador de la Punta (The Castle of Saint Salvador of the Point), popularly known as La Punta and El Castillo de los Tres Reyes del Morro (The Castle of the Three Kings of the Cliff), popularly known as El Morro. La Punta was completed in 1600 and El Morro in 1610. Their construction required financing coming from a tax on shipping, a tax on sales in Havana and a subsidy from New Spain (Mexico).

El Morro and La Punta, 1830

The protective wall was not started until 1674 and it was not completed until 1767. The map below shows the wall in 1849. (It was torn down in the 1860's.)

In 1589 Francis Drake brought his ship to the vicinity of Havana, but after observing the new defenses decided not to attack and left the area.

These defenses were successful until the Seven Years' War brought a major British effort to capture Havana.

The Seven Years' War
(World War 0)

The Seven Years' War arose when the enemies of France in two separate conflicts joined forces. France and Britain went to war in 1760 over territories controlled by the French in North America and in India. This is called the French and Indian War.

In Eastern Europe there had been a war over the Austrian Succession, which resulted in Prussia gaining control of the formerly Austrian-controlled province of Silesia. In the 1760's the Hapsburg rulers of Austria sought to regain control of Silesia from Prussia. They sought the aid of France and brought in the Russia Empire as allies. Spain joined France and attacked Portugal. Britain came to the aid of Portugal and thus Britain and Spain were at war. This gave Britain the justification for attacking key Spanish colonial cities; namely Havana and Manila.

Havana from the Sea

The Siege of Havana

The British Capture of Havana

The British realized that Havana was a keystone of the Spanish Empire and a prize in itself. They decided to launch an invasion to capture Havana. This was to be an overwhelming involving two hundred ships and twenty thousand troops and subsidiaries. The troops and ships were to be assembled from Britain, Jamaica and the British North American colonies. This was such a large force that when the governor of Havana heard of it he refused to believe it could be true.

Not all of the invasion force arrived together but Havana did find itself facing 50 warships, at least 100 transport ships and 15,000 troops. The British commanders decided not to confront the canon batteries of El Morro and La Punta. Instead the ships landed at Cojímar far to the east of Havana Bay.

A siege of Havana was launched by the British in May of 1762. The troops traveled overland and took control of the hill where later the fortress known as La Cabana was built. The British set up canons and bombarded El Morro from the landward side, the side it was not prepared for. Soon the British captured El Morro and used its canons to bombard La Punta into surrender. Another four thousand of the British forces arrived.

After three months Havana capitulated and the British took control of the city. The bounty captured was enormous. There were first of all the funds in the city treasury. The British also confiscated the Spanish ships and cargoes. They took the goods of the Spanish merchants of the city and imposed reparation payments on the elite and the churches of Havana. Altogether the loot amounted to about three million British pounds. And the British got control of a city of thousand which was probably the third largest city in the Americas at that time.

There was also an enormous cost. The British lost five thousand men primarily from disease. The Spanish losses were much less, about two thousand.

The British authority eliminated the monopolies that Spain had created. They also prohibited government officials from demanding and taking bribes. (A lot of good that probably did.) They also eliminated the tax on imports to Havana and opened up Havana to merchants from the other islands of the Caribbean, Europe and North America. Also Havana businesses could market the sugar and tobacco of Cuba more widely. But the sugar planters of Cuba needed machinery in order to expand production but under the Spanish such machinery was not available or too expensive due to taxes. British control made the machinery available and cheaper. The sugar planters also needed more slaves and British control also made them more available and cheaper.

Although the British held Havana for less than a year they instituted some economic policies which could not be reversed. Under the Mercantilist system imposed by Spain upon its colonies land owners in Cuba were restricted on what they could use their land for. Britain allowed Cuban growers to market products through Havana which were forbidden under the Spanish system. Generally the British set of policies for its colonies better encouraged economic development than those of the Spanish. See Adam Smith on this topic.

In the Treaty of Paris of 1763 Spain recovered Havana by ceding Florida to the British. The restrictions which Spain had imposed upon Cuban landowners before the British occupation of Havana could not be re-imposed.

(To be continued.)

Looking across the Bay
and Havana from the east

The Racial/Ethnic Demographics of Havana
up to and Including the 19th Century

The expansion of the importing of slaves from Africa, Jamaica and elsewhere had a major effect on the demographics of Cuba. In the 251 years between 1512 and 1763 the number of slaves imported into Cuba was about sixty thousand. In the thirty five years after the British occupation the number of slaves imported was about one hundred thousand. Between 1790 and 1865 the number imported reached about six hundred thousand.

Over the years there developed a substantial population of free Blacks and Mulattos. Some slaves were freed by their owners, often in the wills of the owners. Others purchased their freedom. And, of course, some were the free descendants of those freed people. The free Black and Mulatto people in Havana supported themselves as crafts people and peddlers.

In the first half to the 19th century most of the crafts people were Black or Mulatto, as shown in the records for 1846.

Free Blacks
and Mulattos
Wage earning
cooks and coachmen
Wet nurses69%
Builders and masons63%
Hat makers34%
Tobacconists and
cigar makers

In the second half of the 19th century there was a vast expansion of immigration into Cuba from Europe.

However most of these immigrants were male. In 1861 the number of White males in Havana was twice as great as the number of White females. In the Black and Mulatto population there was approximately the same number of males and females. Thus the immigration led to a continued mixing of the races.

The immigration led to most of the crafts people being White by the end of the 19th century. By that time slavery had ended and there was a wage labor market.

The Population of the City of Havana


Havana and the Sugar Industry of Cuba

The sugar plantations of Cuba became more refined and modern. See, for instance, the plantation shown below

The Tinguaro Sugar Plantation

Havana and the Tobacco Industry of Cuba

The Spanish settlers learned of the use and cultivation of tobacco from the Taino natives. Soon there was an international demand for tobacco products as well as a domestic demand.

Tobacco was brought into Havana in 40 pound bundles for processing into cigars, cigarettes and snuff. Middle class business owners often had homes in which the first floor was a warehouse, the second floor was the slaves quarters and the third floor was where the family lived.

The role of Havana in international trade was characterized as

Havana handles two thirds of Cuba's imports and twenty percent of the
exports, but one hundred percent of the tobacco and tobacco products exports.

The United States developed into the major market for Cuban tobacco products. When the U.S. raised the import duties for such products the Havana companies reacted by transporting their workers to Key West and Tampa in Florida.

(Under construction.)

The Districts of Havana and Nearby Areas

Avenida España with
its covered sidewalks

Sections of the Havana Waterfront

A Section of the
Havana Waterfront

Looking Out to Sea
Along the Channel

Other Scenes of Havana

Looking westward over Centro Habana

View of Havana from El Morro

(To be continued.)

The Urban Structure of Havana

The general pattern of the major streets of Havana is shown below.

The pride of Havana is the seawall highway and promenade named El Malecón (the breakwater).

It extends all along the north coast of Havana from about La Punta to the Almendares River, as shown below.

Here is what El Malecón looked like when it was used as a promenade.

Some cities hava a single center from which all other uses are radiate concentrically. Havana is more of a polycentric city. Below is given a depiction of the locations of those multiple centers.

Havana's Barrio Chino (Chinatown)

In the 19th century there was a major migration from China to the Americas, including the Caribbean area. The Chinese migrants to Havana settled in an area bordered by the streets of Zanja, Reina, Galiano and Belascoaín. This was approximately the area shown in red below.

The Tacón Market was nearby.

On special holidays decorative gates were erected at the entrance to Chinatown on Zanja Calle, as shown below.

Almost all remnants of Havana's Chinatown have disappeared in modern times.

The Carnal Pleasure Services Industry of Havana

For a port such as Havana where healthy young males were arriving on ships after a couple of months voyage and were anticipating soon leaving on month long voyages a carnal pleasure services industry was a necessity. And, of course, it was very easy for the sailors and women in the port to reach a mutually beneficial agreement. Local residents also made use of this service industry. It was only in the Northern European Protestant countries where authorities saw it appropriate to suppress this industry. Probably the justification was in terms of protecting the sanctity of marriage. However undoubtedly on average marriages last longer in countries in which this industry is not suppressed.

In Havana in the past, before the Castro regime, there were a substantial number of red light districts. Altogether they occupied over a hundred acres of the area of the city. One major brothel district was along Calle Zanja in the Barrio Chino. Nearby, at the end of Calle Galiano in the Plaza del Vapor there was a market devoted to prostitution. Southwest of this plaza, along Xifré street there were also brothels.

The most famous brothel district was at the boundary of Habana Vieja and Centro Habana. It was bounded by the Paseo del Prado and streets of Galiano, Neptuno and San Lazáro. The area closest to the port facilities and the one patronized by sailors was along the streets of San Isidro, Paula, Picota, Conde and Damas (ladies).

Another more upscale district was located between Centro Habana and El Vedado along the streets of Hornos, Marina and Vapor. El Vedado was at one time the choice location for the upper middle class of Havana.

Havana During Administration
of Ramón Grau San Martín

Ramón Grau San Martín

Ramón Grau San Martín served as a political leader in Cuba following the overthrow of the Machado regime. His leadership was not recognized diplomatically by the U.S. and soon ended. In 1940 he was the candidate of the party of the Autentícos against Fulgencio Batista whose party was called the Socialist Democratic Coalition, This Socialist Democratic Coalition included conservatives but also communists. The support of communists for Batista might seem strange given the later political history of Cuba but it was perfectly understandable. The communists had gained control of labor unions in Cuba. The Autentícos wanted to take this control away from them. Batista on the other hand favored union independence. He himself came from a union background; he was the head of the soldiers' union and it was in that capacity that he organized the coup d'état in 1936. And, by and large, Batista at that point was a social democrat. Batista won fairly the election of 1940, but he lost the election of 1944 to Grau San Martín and the Autentícos. The transfer of power was peaceful and Batista left Cuba.

The administration of Grau San Martín and the Autentícos was infamous for its corruption, both in terms of finance and gang power. Two incidents are illustrative of the extent of this corruption.

One incident was known as the Events of Orphila. One afternoon in September of 1947 the National Police under the leadership of Major Mario Salabarría surrounded the residence of the head of the police for the city of Marianao, Antonio Morín Dopico. A fire fight involving machine guns ensued that went on for hours. It happened that there was a radio reporter on the scene who positioned himself close enough to report the gun battle in detail, as if it were a sporting event. At some point the attacking police announced that they would allow the wife of Morín to leave the house. She came out waving a white sheet. Despite the promise of safety, the attacking police shot her down in cold blood and this was reported to the radio listeners. The Cuban army arrived on the scene only after the gun battle and its carnage was over.

The other incident involved the Minister of Education of Cuba, José Manuel Alemán. Alemán was deeply involved in garden variety corruption, such as no-show jobs. These were jobs in which the holder had no duties and showed up only to collect a pay check. Some were just fictional names to cover the routine embezzlement of Alemán. However in October of 1948 Alemán carried out one of the biggest embezzlements in world history. He took a fleet of trucks to the Treasury of the Republic of Cuba. There he and his men went into the vaults and removed stacks and stacks of Cuban money estimated to be in value between $50 million and $174 million. The trucks took the money to a chartered airplane which took it and Alemán to Miami.

There was a two year investigation of Alemán's spectacular theft which implicated President Grau. However just before charges were to be brought the five thousand pages of evidence disappeared. No charges were ever filed against Alemán or Grau.

Havana During Administration of Fulgencio Batista

Fulgencio Batista

Fulgencio Batista returned to Cuba and subsequently carried out a bloodless coup d'état. The financial corruption and abuse of power continued but just not on so spectacular a level as during the Grau years. Much has been made of Mafia figures in Cuba during the Batista years, but the Mafia ties went back to the Prohibition years. During the Prohibition Era of the 1920's Cuban rum was a premium beverage for the U.S. market. The rum runners developed business ties with Cuba during that era. After the repeal of Prohibition the Mafia saw the business potential of casino gambling in Cuba for the American tourist trade. In 1938 Batista made contact with Myer Lansky, an associate of Lucky Luciano, to help make Havana into the Monaco of the Caribbean. Myer Lansky was an astute businessman and a perfectly reasonable choice to handle the special business of gambling. He had been involved in the development of the casinos in Las Vegas. During World War II the U.S. Government made deals with the Mafia to protect shipping from sabotage and arranged through Lucky Luciano to have the Mafia in Sicily cooperate with the Allied invasion of Sicily. The Mafia was a business organization and its involvement in Cuba was as a business organization. It did not, as various leftist organizations did, rob banks.

But Batista and his associates were involved in financial corruption. For example, imported refrigerators and other such appliances would come through customs stuffed with clothing and other consumer goods for which no tariff was paid. These items then could be sold at lower prices than such goods which had to pay the tariffs. This under-pricing drove the strictly legitimate businesses to bankruptcy.

The Revolution of 1959

Fidel Castro and other revolutionaries carried out acts of rebellion against the dictatorship of Batista. These revolutionaries could at best simply hold their own against the army and police. They did not command territory, but Batista's forces could not wipe them out. The revolution came not through any military victories on the part of the revolutionaries but instead through public relations. Castro was able to maintain an image of a democratic reformer. Batista fell because he lost the support of the U.S. government. Shortly after U.S. authorities informed Batista that they would no longer permit the sale of weapons and ammunition to his regime he left Havana. Castro arranged to be the first rebel leader to arrive in Havana after the exit of Batista. That was the extent of his military victory.

(To be continued.)

Havana During the So-Called
Special Period in Time of Peace

The Soviet leaders subsidized Fidel Castro by selling petroleum and petroleum products to Cuba at below-market prices and buying Cuban sugar at prices above the market. There were also special trade arrangements with the Eastern European countries in the Soviet sphere. Castro was quite adept at soliciting subsidizations and loans. A great deal of socialism is feudal in character and Fidel Castro was treated as a socialist prince to be supported even at severe cost to the populations of those socialist states.

When the Soviet Union collapsed and communism was rejected in the rest of Eastern Europe Cuba lost eighty percent of its foreign trade. This not only meant the loss of the consumer and investment goods from Eastern Europe but also the loss of replacement parts for the equipment Cuba was dependent upon.

Soon more than half of the factories of Cuba were shut down or operating at a bare minimum due to the lack of supplies or equipment failures.

Electric power failures were so frequent that the Havana residents began to talk not of the blackouts, which had become the norm, but instead of the infrequent times that power was available as the oddity, the alumbrones.

Food supplies decreased and the challenge of finding food was exacerbated by the problem of whether there would a way to cook it even if found.

Likewise there was the dual problem of having employment and finding a way to get back and forth to that employment. Public transportation was undependable because of shortages of gasoline and replacement parts. Bicycles were imported from China to replace public transportation. Havana had a population of two million people who suddenly were dependent upon walking or bicycling. The regime of reduced food and increased exercise resulted in most of the residents of Havana losing weight, more weight than they wanted to.

Then in March of 1993 Cuba was hit by a hurricane that drove the sea up over the sea wall and flooded great sections of Havana. Special Period was clearly a euphemism for Time of Disaster.

Additional food was available on the black market but only in exchange for dollars. The dollar value of the pay for most Havana residents was only a few dollars per month. Most could not afford those market prices. The ones who could were those that had relatives outside of Cuba who were sending them fifty to a hundred dollars per month. This was not a severe burden for those relatives but a fantastic windfall for those receiving such remittances. The people who had left Cuba had, with the encouragement of the Communist authorities, been called gusanos (worms). The worms had metamorphized into butterflies. The remittances of the butterflies became a major element in the Cuban balance of payments.

Those people without sources of dollars had to start growing food in any patch of space they could find and to raising food animals like chickens, rabbits and pigs in their homes.

The Return of the Tourism Industry

The Government sought to find sources of hard currency funds by building up tourism, particularly for tourists from Europe. Tourism brought in hard currency revenues but about one third of this revenue had to be spent importing the things necessary for operating a tourist industry for Europeans.

Those Havana residents who worked in the tourist industry were suddenly elevated above government officials in status and income. The dollar value of the pay of even high level government officials and professionals was only a small amount per month. The services workers in tourism could make more in dollars in one night than the government officials and professionals made in a month. Some professionals such as doctors were tempted to leave their profession and start working in tourism.

There were also the physically attractive people who saw that they could make far more money and lead a more interesting life serving the desires of the tourists. This could be as intimate companions of tourists during their visits to Havana. The Spanish names for such intimate companions were jineteras and jineteros. Those words were derived from the word for horseman and had the connotation of hustling guides. This activity was not the same as the assembly line prostitution of the past. Being an intimate companion for one customer for several days would bring in enough to meet financial needs and have the interesting possibility of developing into a relationship with someone who could help the Havanan get out of Cuba.


Dick Cluster and Rafael Hernández, The History of Havana, Palgrave MacMillan, New York, 2006.

Roberto Segre, Mario Coyula and Joseph L. Scarpaci, Havana: Two Faces of the Antillean Metropolis, John Wiley & Sons, Chichester, 1998.

Joseph L. Scarpaci, Roberto Segre and Mario Coyula, Havana: Two Faces of the Antillean Metropolis (Revised Edition), University of North Carolina Press, Chapel Hill, 2002.

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