Private Businesses on the Downturn in Cuban provinces
By Daniel Valero (Progreso Weekly)
HAVANA TIMES – When the Cuban government capped the prices of six essential foods and toiletries in July 2024, many consumers pointed out that the new official price tags were much higher than those actually found in the island’s markets.
At that time, a liter of cooking oil typically cost between 700 pesos in the western region and 800 pesos in the southeastern provinces. Meanwhile, the resolution on the issue allowed it to be sold for up to 990 pesos. Other notable cases included chicken, for which a cap of 310 pesos per pound was established, and powdered detergent, capped at 630 pesos per kilogram. Even in the eastern region, chicken could be found for no more than 300 pesos per pound, while powdered detergent rarely exceeded 500 pesos per kilo.
Criticism regarding the disparity between legislation and reality grew so intense that in the following weeks, the Ministry of Finance and Prices (MFP) was compelled to send several officials to radio and television programs to clarify that the resolution merely set a maximum price limit, rather than an obligation to sell at those prices.
Eight months later, most consumers would be satisfied if at least those rates were upheld.
In 2024, food prices rose by 18% compared to 2023, according to a recent report from the National Office of Statistics and Information. This increase was primarily evident in the second half of the year, coinciding with the announcements in July and December regarding progressive restrictions on private micro, small, and medium-sized enterprises (MSMEs) and a decrease in deliveries of the regulated food basket. Consequently, towards the end of the year, a pound of chicken reached 800 pesos, and rice entered an inflationary spiral that would push it close to 300 pesos per pound by mid-February. The outlook remains bleak.
“This is going to be a tough year. If you compare last year’s [ration book] with this year’s, you will see how many items are no longer available. Many are absent from discussions about ‘mandados’ (food orders). Despite what the Commerce Department representatives claim, it feels as if they have been taken out of the quota. On the other hand, prices for various goods rise daily in MSMEs,” lamented Dulce, a retired woman from Camagüey who admits to “surviving” only with the help of her daughters.
Exhorbitant Transportation Costs
Miguel (name has been changed at his request), the manager of a private business in Camagüey, has been asked to pay up to a half million pesos to rent a trailer for transporting cargo from the port of Mariel.
“It’s true that it’s a 1,200-kilometer round trip, but it’s hard to understand prices like that. If you add that money to the other expenses related to the cargo operation and taxes, how much do you need to sell a container of chicken for in order to make a profit?” he reflected.
By mid-2024, differing opinions on cargo transportation had already resulted in disagreements between Lourdes Rodriguez Ruiz, the deputy minister of the Ministry of Public Works and Transport (MFP), and a group of private business owners. During a meeting, they questioned the official’s decision to impose price caps on their sales without considering factors such as rising transportation costs, for which the State presents no alternatives.
Official discourse has emphasized for years the importance of linking new management methods with state-owned enterprises, a claim that could be especially relevant in areas like the one mentioned above.
The resolution on multimodal freight transportation services, issued by the Ministry of Finance and Prices in March 2021, lists especially competitive rates. For example, shipping a 20-ton container from the Mariel terminal to Camagüey costs 13,742 pesos, while a 40-ton container costs 19,535. At current private trailer rates, renting two of these vehicles could cover the expenses of a full train of 25 flatbeds, which can transport up to 50 containers.
However, Miguel asserts that contracting the services of Cuban Railways is virtually impossible for private companies. “Although it’s not prohibited, whenever this possibility is raised, the constraints begin to emerge. The Railways lack sufficient platforms or containers, and they claim they are required to prioritize cargo, such as items in the basic food basket. In over two years, they only reached out to me once to see if I wanted to hire a container platform, and it was a rushed inquiry. They had lost a previous client, and I could take advantage of that week’s departure if I moved quickly to arrange the removal of the container from the port. Naturally, I didn’t have the time to do so. Businesses don’t operate that way.”
“Everyone knows that transportation services are quite complex, to the point that the standardized food basket is sometimes supported by private carriers,” Ministry of Finance and Prices deputy minister stated last July. Ideally, non-state management systems could contract freight services with state-owned companies—which would lower costs—but that will not be feasible in the short or medium term due to a lack of resources, she acknowledged.
Juan Carlos, co-owner of another private business, believes that “the time for private businesses is over… at least in the provinces.” He makes this statement only after being assured that his real name will not be included in this report.
“That’s the first indicator you should consider. Two years ago, I would have told you to mention me, no problem. Now, it’s a different story. The environment surrounding entrepreneurship has changed. There’s more reservation on the part of the authorities and increased pressure of all kinds. The procedures for establishing new business have practically come to a standstill. I have two friends who have been stuck in this process for months without receiving a clear response to their applications. The Ministry of Economy and Planning refers them to their municipal government, which simply tells them that they are ‘waiting for instructions without specifying when they will receive permits for their respective projects. For now, one of them has been informed that his application to engage in wholesale trade will not be approved because ‘that activity is not in the interest of local development.’”
Miguel, Juan Carlos, and the owners of two other private businesses interviewed for this article agreed that business is no longer progressing at the pace expected in 2023 or early 2024. “Given the pressure from inspectors regarding banking and foreign currency exchange, along with the constant changes in import policy, one has no choice but to protect oneself. So, if you previously bought a container of chicken each week, now you’re likely limited to bringing in one a month or every two weeks.
Under these circumstances, there are inevitably gaps in supply. Ultimately, one is affected, but the worst off is the population because what we private owners don’t sell, the State doesn’t sell in its stores either,” noted one of the latter. Until a couple of months ago, the business he runs was planning to open a subsidiary in one of the province’s municipalities. Now, that plan is no longer in motion.