In 1898, Spain lost Cuba, one of the few remnants of former colonial power. But that did not mean independence for Cuba. The island was just transferred from one colonial power to another: the United States of America. For three years after 1898, Cuba was militarily occupied and ruled by the US and the Cuban Republic was only declared on 1902, after Washington passed the Platt amendment declaring the right of the US to militarily intervene in the island at any time. Cuban politics for the next 60 years were to be determined by the US, and its economic and political agendas.
The Cuban economy was also largely dominated by the US and by 1920; US investors owned two thirds of the land. The island's main source of income was sugar cane which was sold at preferential prices to the powerful northern neighbor. Most of the country's sugar mills were in the hands of American companies and so were most of the other key sectors of the economy. The sugar monoculture while prosperous in the some times was to heavily dependent on export prices as aforementioned. These world prices were dependent on total sugar production, terms of trade (currency structures), transportation costs and overall demand of the good. Cuba heavily entrenched in this process was unable to find a viable replacement. This inability to diversify its production lead to extreme losses and inefficiency of the production sector, US capital began to flow into Cuba as method expand the sugar market and increase trade. In the tailwind of World War I, sugar production increased at rapid rate which has many benefits. First the import dependent market could now be augmented, that is the new forming domestic production that could produce these non-sugar goods (pg. 18). This was an important step in the creation of a domestic economy with the premise of self-sustainability. This reforming of the present economy was a key factor to the future success of the economy.