Cuba's relations with Russia were less friendly 20 years ago than they seem to be today. The disintegration of the Soviet Union abruptly halted the imports of cheap Russian oil and disrupted trade relations within the former Communist bloc. The withdrawal of Soviet aid was blamed for a decline of over a third in Cuban GDP. For a few years conditions were so bad as to be labelled the "Special Period", with food shortages leading to significant falls in people's calorie intake. (There are reports, perhaps unreliable, that people ate domestic pets and animals from Havana Zoo.) The once iconic sugar industry was also seen as a major culprit for the disaster. It had been the backbone of the economy in the first half of the 20th century, when the small island of Cuba was the world's biggest sugar exporter. But state ownership undermined incentives, and by the Nineties the industry was inefficient and high-cost by international standards. Its production, and hence Cuban export revenues, collapsed once the protected Comecon market disappeared. 

What was to be done? Tourism received official blessing (from Fidel's brother, Raúl, no less) and was to be promoted as the new growth industry. Prohibitions on private enterprise were relaxed, and families were to be allowed to have foreign guests in casas particulares (small guest houses) and to run paladares (restaurants for tourists). The number of foreign visitors has indeed grown since the mid-Nineties. Everyone agrees that the economic situation has improved since the Special Period. Nevertheless, Cuban tourism is crippled — like so much of the economy — by government inefficiency of one sort or another. (On my visit, a long wait for luggage at Havana airport was infuriating. If airports cannot handle large numbers of people, large numbers of people cannot have holidays in Cuba.)

Anyhow tourist receipts have not increased enough to offset the slump in sugar, and Cuba suffers from a chronic shortage of foreign exchange. The obvious answer, the answer that virtually all sensible economists would now recommend, is for Cuba to devalue its currency and to try to encourage new export activities. But Cuba is Cuba. It has its distinctive brands of revolutionary socialism and the Castro family is not interested in advice from the International Monetary Fund, the World Bank, the Inter-American Development Bank or other gringo capitalist organisations.

Instead of devaluing the currency and starting again, Cuba has imposed exchange controls on its citizens and limited their ability to acquire foreign exchange. Modern Cuba therefore has two currencies, its own national peso (earned and spent by the locals) and a so-called "convertible peso". When tourists come to Cuba, they switch their hard currencies (euros, sterling and so on) into convertible pesos, which enables them to pay for hotels, taxis, meals in paladares and so on.

The social effects of this arrangement are poisonous. The revolution sought its justification in the achievement of greater equality. Market forces and the price mechanism were abolished, and replaced by planning and ration coupons, but everyone was to have the same value of coupons and hence the same share of consumption. Even if the average level of consumption was lower than before, the defenders of the revolution argued that it was worthwhile, because everyone would feel the warmth of "socialist emulation" and "fraternal competition". But the dual-currency device mocks this notion. Blatant financial apartheid divides society into two. A small proportion of Cuban residents (senior members of the ruling Communist Party, holiday tour operators and their staff, expatriates working on contracts) have access to convertible pesos; the rest do not.