Cuba Continues in Macro and Micro Crises

By Francisco Acevedo

HAVANA TIMES – Just when the heat is at its peak in this country, the government acknowledges the existence of another serious crisis in electricity generation, due to a lack of fuel and the poor condition of power plants.

This isj old hat, but after having a relatively calm month (from mid-July to mid-August) with few blackouts, at least in Havana, the outages have returned, causing the population to be understandably upset.

It’s not surprising, especially when this week the official annual inflation figures for Cuba’s formal market were released. They show that in July, inflation reached 30.48%, practically the same rate as the previous month, according to the National Office of Statistics and Information (ONEI).

Additionally, the Consumer Price Index (CPI) rose by 0.83% from June, bringing the accumulated inflation rate for the year to 18.78%.

According to ONEI, the products and services with the highest annual increases were Alcoholic Beverages and Tobacco (50.48%), Restaurants and Hotels (36.71%), Food and Non-Alcoholic Beverages (35.17%), and Transportation (32.58%).

All these categories were driven up by the shortage of state supplies on the one hand and the emergence of new private entrepreneurs (included in the monthly report for the first time), whose prices are governed by the uncontrollable US dollar – Cuban peso exchange rate. This caused nearly all items to experience annual increases of over ten percent, except for Recreation and Culture (9.32%), Communications (0.75%), and Health (0.72%), because they are practically state monopolies.

The undeniable effects of the Covid-19 pandemic and the tightening of US sanctions under the Trump administration (2017-2021 and maintained by the current Biden administration) have combined with repeated errors in economic and monetary policies to exacerbate Cuba’s structural economic problems, directly impacting the wallets of most of the island’s residents.

The official data released this Thursday also reveals that the Cuban state spent 38.8% more in 2023 than it took in, recording its largest fiscal deficit since 2020.

Total net revenue was reported at 245 billion pesos (slightly above 2022 but below 2021), while total expenditures rose to 340 billion pesos (eight percent more than in 2022), leaving the Cuban state with a fiscal deficit of 95 billion pesos (3.798 billion US dollars at the official exchange rate, which is just above a third of the informal rate).

This marks the fifth consecutive year of high fiscal deficits, which have not been curbed by any of the government’s adjustment plans aimed at increasing revenue —mainly in foreign currency— and by cutting spending.

All this macroeconomic imbalance seems to have no end, with the government continuing to grasp at straws, trying to reinvent the wheel without acknowledging the failure of the current model.

How this plays out with the population

Given this situation, despair and widespread social discontent are normal, as seen in the increasingly frequent protests and an unprecedented wave of migration in both scale and duration.

The official rhetoric continues to bet on the same approach, applying band-aids to mistakes when not outright ignoring them, while the prices of basic goods continue to rise almost daily.

The rationed food products was once a lifeline for many, is becoming increasingly inadequate, and if it hasn’t been eliminated entirely, it’s only because the authorities are too ashamed to abandon one of their “social achievements.”

The “modules” sold through the ration book every 45 days continue to shrink, with no oil or hygiene products being provided for months, and no chicken for over a year. In the best-supplied areas, it’s just two tubes of ground mincemeat, a package of sausages, and liquid detergent. The rest has to be bought on the street, where prices are often higher than those set by the government, which are already high.

Walking by restaurants, cafeterias, and leisure spots, you can still find people, but besides being a small percentage of the population, you have to go into each place to see the personal sacrifices required for that outing, which might be a once-a-month event, and that’s not even counting the high cost of transportation unless it’s somewhere nearby.

The most resigned simply pray that the power doesn’t go out, as it’s the one thing they can’t control and the hardest to endure when it’s frequent and prolonged, as it is in much of the country.

The big problem is that there’s no light at the end of the tunnel, and every emergency plan only makes the situation worse. Meanwhile, those who hoped to leave the country safely are now also waiting for the resumption of the humanitarian parole program, which has yet to release the results of its fraud investigation, let alone provide a restart date.

Amid this bleak outlook, families are also beginning to agonize over the start of the new school year, with the associated costs of backpacks and shoes for the children, not to mention providing the snacks that will come later.

In short, this country is running on inertia, each day setting new records for collective endurance in a situation that has been unsustainable for quite some time.

Read more from Cuba here on Havana Times.