Because of Cuba's strategic location, the Spanish used the island mainly as a naval base and shipping centre. Havana was occupied briefly by the British between 1762 and 1763. By 1860, Cuba had a large sugar industry  which was a major supplier to the United States. Slavery, a major factor in the expansion of the sugar industry, was  abolished in Cuba in 1886.  British and subsequently American capital began to play a major role in the economy during this period.

Increasing Cuban nationalism led to wars of independence during 1868-78, and in 1895 revolution broke out under the leadership of the legendary poet José Martí. He was killed in battle , and remains a revered martyr in Cuba today.  Following an  explosion aboard the USS Maine in Havana Harbour, the US joined the conflict on the side of the rebels, declaring war against Spain on April 25, 1898, leading to the end of Spanish rule. Under the subsequent Treaty of Paris, Spain ceded possession of  Cuba which became  "independent" on January 1, 1899 as an American protectorate. The new constitution included clauses imposed upon Cuba by the US under the Platt Amendment, which seriously compromised Cuban sovereignty. The US intervened militarily on subsequent occasions to support the parties it favoured. Governments of this period were characterized by corruption, racism and violence.  

In 1934, under the so-called "good neighbour policy", Franklin D. Roosevelt sponsored initiatives that abrogated the Platt Amendment, except for continuing rights to the American naval base at Guantánamo Bay. A former army sergeant Fulgencio Batista dominated the political scene for much of the next twenty-five years. He overthrew    President Machado in 1933 with support from the United States. After exercising power directly and through surrogates for several terms, Batista stepped down and emigrated to Florida in 1944. He returned to Cuba in 1951 to re-enter politics. He displaced the elected government in a coup d'etat in March 1952 and ruled through a brutal and corrupt dictatorship. His government was recognized by the US within two weeks of the coup.

Two years later, Castro took power on New Year's Day, 1959. At that time, foreign interests (largely American) owned three-quarters of the arable land, 90 percent of transportation, electrical and telecommunications services, and close to half of the sugar industry.  The creation of a centrally planned economy  under the Cuban Communist Party made it the first communist state in the Western Hemisphere.

The American government initially recognized the Castro regime, but was wary of its new ties with the Soviet Union. The situation deteriorated in early 1960 when American-owned oil refineries in Cuba refused to process oil bought from the Soviets. This provided the impetus for a series of decree laws which ultimately nationalized all of Cuban industry. Initially, the government nationalized the oil companies, followed by the telecommunications company and the sugar plantations. Relations between the US and Cuba fell apart rapidly in a series of retaliatory moves, including break in diplomatic relations and imposition of economic sanctions on Cuba by the US in 1962. Foreign businesses with a book value of around US $1 billion, the bulk of which were American-owned, were nationalized. The Cuban government eventually negotiated compensation agreements with all of the countries involved, except the United States. Cuban officials say that the US refuses to negotiate on this issue.  

One outcome of these events  was  a closer association with the former Soviet Union, including close economic, political and defence ties. According to some estimates, Cuba received massive subsidies in the order of US $40 billion between 1962 to 1989, some of which was compensation for military cooperation. Soviet military bases were installed after the ill-fated invasion of Cuba by Cuban exiles at Playa Girón ( Bay of Pigs), which was sponsored by the United States.  Growing defence cooperation with the Soviet Union also led to the Missile Crisis of October 1962.

During the cold war Cuba received huge quantity of assistance and aid from the Soviet Union which also served as a ready market for Cuba’s agricultural produce. After the fall of the Soviet Union the cuban economy collapsed and entered into a very difficult face called as the ‘’Special period” .During the period 1989-1993 the Cuban economy shrunk by 35 % and the cubans faced starvation. To alleviate the economic crisis, the government introduced a few market-oriented reforms including opening of tourism, allowing foreign investment and legalizing the U.S. dollar. Due to the continued growth of tourism and rising prices of nickel, growth began in 1999 with a 6.2% increase in GDP. In 2009, in spite of the world economic crisis the Cuban economy grew by 1.4%.As a result of inefficient state-run agriculture, Cuba imports up to 80% of its food requirements. However President Raul Castro has introduced new agricultural reforms and the government has declared the production of foodgrains as a matter of top national security. Cuba has begun to grant unused agricultural land to the common people. Cuba is in the Hurricane belt and frequently faces huge losses due to impact of hurricanes. In 2008 Cuban economy faced a loss of 10 billion USD due to the damages caused by Hurricanes Gustav, Ike and Paloma.

 Cuba has two currencies viz Cuban Pesos (CUP) and Cuban Convertible Pesos (CUC) (1CUC = 24 CUP).The state provides to the Cuban people heavily subsidized food, transport, housing, medical and educational facilities in CUP. Their salaries are paid in CUP. It is reported that the goods provided in the rationing system are not sufficient and the people have to buy most of their requirements from retails shops in CUC. This dichotomy of earning in CUP and spending in CUC has led to lot of discontent in the society and has provoked rampant corruption in the system. Low wages, dual currency and poor public transport system are the major challenges in front of President Raul Castro. Raul Castro has lifted various restrictions on Cuban nationals pertaining to the purchase of mobiles, consumer goods and stay in hotels. He has also promised to bring in structural economic changes within the frame work of socialism. Cuba has been getting oil from Venezuela (90000 barrels per day) at preferential terms in exchange of services of its medical personnel in Venezuela. The most important mineral resource is nickel, of which Cuba has the world's second largest reserves after Russia. Cuba is also the world's fifth-largest producer of refined cobalt, a by-product of nickel mining operations. Tourism, Remittances from Cuban Americans, Medical services, Nickel, Cigars, Sea-Food, coffee, biotech products and medicines, Sugar, Citrus are the major exchange earners. Petroleum, Food Items, machinery and equipment, Textiles & Garments, Fertilizers & Chemicals constitute the major import items. Main destinations of exports are –Canda (20.9%),China(18.4%),Venezuela(11.3%) and Netherlands(7.8%).Main origins of import are – Venezuela(31.4%),China (10.4%),Spain(8.7%),US(5.6%),and Canada(4.6%).