The idea of this research is to examine the external sector of tobacco in Cuba.
More specifically, we contrast the hypothesis about to what extent estimates of income
and price elasticities provide information on the behavior of exports demand of Cuban
tobacco for the euro area by using industry-specific exchange rates. As far as known, this
paper is the first of its kind which analyzes the export demand for Cuban tobacco in
bilateral trade with euro area. Another novelty of this study is the construction of a
tobacco-specific exchange rate to better capture the distinctions of this sector when
competing overseas. Some of the results to bring forward are related to the importance of
foreign income to the development of tobacco sector in Cuba and the stability of relative
prices which becomes a key variable in the determination of policies for this sector.