Welcoming Inflation in Cuba

Dmitri Prieto

HAVANA TIMES — Two weeks ago, the Cuban television program De economia y mas (“The Economy and More”) tackled the issue of inflation. Since such issues have never before been discussed in Cuba outside of expert circles, the show took me by surprise.

The show host touched on a number of details of inflationary processes, and explained why deflation can be as bad as inflation – and how the latter, in small doses, is not really harmful to a country’s economy.

When I watched the show (I did so because it comes right before the TeleSur news programs, some segments of which I follow), I recalled that the price of transportation between Guanabo and Santa Cruz del Norte (where I live) had just gone up. Deaf to the protests of passengers, first the owners of the vans raised the price from 5 to 10 Cuban pesos.

A week later, collective taxi drivers began charging not 10 but 15 pesos for the trip.

For those of us who must make the trip from Havana to Santa Cruz del Norte almost every day, that means a significant rise in costs, for there is no other reliable means of public transportation. The entire stretch is serviced almost exclusively by the private sector.

In Cuba, private transportation prices are “quantic”: very few are expressed in numbers that aren’t multiples of 5, and when prices go up, they also do so in multiples of 5, or 10.

We know that, generally speaking, the inflationary behavior of a country’s currency is a vicious circle: it sets in motion interdependent factors, making it easy for prices to go up collectively, but not so easy for them to drop (and lead to notorious deflation).

Could we be witness to the first symptoms of a process that will engulf our economy in coming years?