Shortages Force Cuban Gov. to Restructure its Retail Market

By Luis Brizuela (IPS)

HAVANA TIMES – With the retail market in the Cuban capital now being administrated at a municipal level, local governments are looking to facilitate access to food and other products, with shortages and high prices hitting low-income families the hardest, as well as sparking concerns and discontent.

Waiting for dozens of measures geared towards driving agricultural production to pay off, local governments are trying to get greater control over distribution.

This Caribbean island’s depleted coffers are in no condition to take on additional expenses with prices of raw materials shooting up on the global market.

The Havana Provincial Government announced that as of Thursday 21st, residents are only be able to buy at stores of the state-monopoly chains Caribe and Cimex in their municipality of the 15 that make up the capital.

Similar mechanisms have been implemented in some of Cuba’s other 14 provinces, for the sale of regulated and rationed food products by household, which part of the population was asking for.

Pensioner Paula Griñán, a resident in the central neighborhood of Vedado, told IPS that she thought it was the right decision, because “it’s the only way I hope I can buy something.”

Esther Cuesta, a primary school teacher living in the Central Havana municipality, agreed, and pointed out in her conversation with IPS that “resellers make it impossible to buy anything, as they collude with employees at these establishments a lot of the time.”

Other Havana residents consulted by IPS said that Havana’s 15 municipalities need to better organize access to scarce products and find alternatives for municipalities with less stores than the densely populated neighborhoods of Central Havana or Vedado.

In fact, local governments are planning to regulate sales by scanning residents’ ID cards and making a note in their rations booklets.

This document ensures that every Cuban, regardless of income, has a monthly quota of a small quantity of some products. Although it doesn’t come close to covering all dietary needs, it is relief for low-income households and vulnerable groups. Every little bit helps, people say.

It’s worth mentioning that the stores where these measures will be implemented sell in Cuban pesos and ration sales of food and products classified as “basic essentials and high-impact products”, such as cooking oil, chicken, minced meat, soap, detergent, toothpaste, deodorant, cigarettes, etc.

Agricultural products can be bought freely at so-called agro-markets when and if available, although there are plenty of complaints from consumers about prices there being “abusive”.  The only regulated product at these establishments are potatoes, as they are sowed and distributed only by the State.

Another retail network has a far greater variety of foods and products, but you can only purchase them with magnetic cards and prices in USD, backed by foreign currencies deposited in the bank, a mechanism that only Cubans with relatives and friends living abroad have access to.

Citizens and experts have questioned the USD stores, in force since 2019, saying that it creates market segmentation and inequalities in consumer access.

The Government has defended that this is a mechanism to bring in foreign currency and to fund purchases at stores selling in Cuban pesos.

Restricting purchases to municipalities of residence was a measure in force during several months in 2020 and 2021, during the worse moments of the COVID-19 pandemic, with the objective of limiting people’s movement in this city of 2.2 million people, in a country of 11.2 million inhabitants.

The Havana Provincial Government has now underlined that this depends on “availability of products and with the objective of making sales more feasible, reaching greater equity, and as a result, reducing crowds of people at these establishments.”

Cuban economist Pedro Monreal posted on his social media that the measure is an expression of “repressed inflation (price controls used to prevent inflation without removing the underlying inflationary pressures) and exhibit an egalitarian approach, not greater equity, as they’ve [the Government] said.”

The burden of inflation

The structural crisis of Cuba’s economy dating back three decades has become a lot worse because of the impact of COVID-19 on the country’s main sources of revenue such as tourism, selling professional services and receiving remittances.

Meanwhile, the extraterritorial scope of the US’ stricter embargo against the island adds obstacles to purchasing products, makes freight charges more expensive and prohibits the island’s access to loans from international bodies, which the Cuban Government has repeatedly complained about.

In addition to this, the country has the added burden of inflation because of economic reforms that began in January 2021, which included eliminating the dual-currency system and subsidies, the devaluation of the peso, as well as an increase in prices of goods and services, although they stuck with a partial dollarization of the economy.

By the end of 2021, official statistics estimated inflation growth at 77%, but these figures only took formal market indicators into account. Other economists and specialized organizations calculate inflation at over 500%.

“Inflation engulfed the real value of savings in pesos and voided the nominal increase in wages and pensions implemented last year,” Cuban economist and researcher Pavel Vidal told IPS from Cali, Colombia. Vidal works as a professor at the Pontifical Xavierian University in that country.

With currency reform, the minimum wage was increased to the equivalent of 87 USD (at the official 24:1 exchange rate), and the maximum wage to almost 400. In the case of pensions, the lowest stands at 63 USD, at the official exchange rate.

The measure fixed the official exchange rate at 24 pesos to 1 USD, but given the fact it’s impossible to buy them from the Central Bank, citizens are turn to the illicit market where the exchange rate ranges from 110-115 pesos to 1 USD, depending on the region.

The Government has admitted that essential basic goods and services now costs double the 60 USD initially planned for monthly expenses.

“Families with access to remittances, foreign currency or able to invest in private business that benefit from increased prices can find ways to protect themselves against inflation, even if it’s only partially,” Vidal pointed out.

However, “the majority of the population with fixed wages and pensions in Cubans pesos have no way to escape the reality of seeing their purchasing power drop every month,” the expert verified.

Studies before currency reform warned that over 80% of income in Cuban households is dedicated to buying food.

Agriculture still not taking off

President Miguel Diaz-Canel’s government approved a series of measures in April 2021 to stimulate agricultural production, but it still hasn’t reaped significant results in a country that needs to import approximately 70% of its food.

In the financial report presented in March by the minister of Agriculture, Ydael Perez, admitted that 2021 was one of the worst years in the past decade, in terms of producing agricultural goods and services, failing to meet 32 out of the State’s 37 planned production targets.

In another official report it was noted that in January, 457 state-led companies recorded losses, out of which 93% belong to the agricultural sector, the sugar industry, the food industry, construction, transport and local subordinated companies.

For decades, economists have insisted on the need for structural change to the State’s centrally planned and administrated economy, with the objective of increasing production of food and services, as well as cutting further shackles on business management and channeling greater investments towards industrial and agricultural activities. 

Meanwhile, they have urged the State to eliminate its monopoly of wholesale and retail markets, allowing private companies, and cooperatives to work, as well as foreign chains that could support greater availability of food and other supplies, as well as better-quality products.

But it’s very hard for those with a monopoly to give it up or want to compete. This is the state of the formal economy in the hands of the Government and military.

Vidal believes that in Cuba it’s “vital to continue with pending structural reforms, such as implementing a macroeconomic stabilization policy.”

He argued that “the longer we have the currency crisis, the harder and more expensive deflation will be, and the greater the damage will be to the economy.”

Other analysts have observed that an ongoing economic slowdown will mean greater deterioration of the general population’s living conditions, as well as increased emigration and social unrest.

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