Cuban Leadership Met to Discuss Their “War Economy”

Experts remind that capped prices have not brought any benefits to the Cuban economy.  Photo: 14ymedio

By 14ymedio

HAVANA TIMES – On Monday, July 1st, when the cap on private sector profits in sales to state companies begins, the official newspaper Granma opened with information dedicated to analyzing the most recent Council of Ministers gathering, where “topics of vital importance for stabilization” were evaluated in a “war economy” scenario. Nothing in the official Communist Party organ’s note indicates that any measures have been adopted to end the inflation crisis affecting the country.

“Among other measures, a single, inclusive pricing policy will be established on equal terms for all economic actors, including both the state and private sectors,” the text states. However, a brief trip to the past reveals the same phrase on at least two occasions: once in 2020, when the aim to design a single and inclusive pricing policy on equal terms for all economic actors was announced, with the key focus on both products and services.

With the economic reforms of 2021, the concept was reiterated in a similar meeting where Prime Minister Manuel Marrero reaffirmed that “updating Cuba’s pricing policy under the principle of being single, inclusive, and on equal terms for all economic actors was one of the priorities of the Ministry of Finance and Prices.”

Nearly four years later, the announcement remains the same, although the economy is more dire straits. Miguel Diaz-Canel cited among the worst repercussions of the crisis the delays in selling the basic food rations, the “instability” of the National Electric System, and the “excessive” inflation, which, in his view, “is not always a product of supply and demand and is entirely speculative.” The assertion cannot be proven in any case, as the lack of supply and near zero productivity define the Cuban reality, as the same authorities have acknowledged and as there is ample statistical documentation published by the National Office of Statistics and Information (Onei).

Marrero, who attributed many problems to “bureaucracy and inefficient control,” called for “implementing government projections designed to confront them,” though nothing is known of the much-touted macroeconomic stabilization package that few believe really exists.

Mildrey Granadillo de la Torre, First Deputy Minister of Economy and Planning, said that a group of measures aim to “correct macroeconomic imbalances, increase foreign exchange earnings in various ways and concepts, incentivize national production with an emphasis on food production, and organize the functioning of non-state forms of management,” the regime’s euphemism for the private sector.

Among these measures is the one taking effect today “to limit the profit on the purchases of products and payments for services and inputs made by the state sector from the non-state sector” and urged to “promote linking and not give up productive capacities.” Díaz-Canel urged local administrations at the Council of Ministers to make purchases from private companies through state companies based on the specific needs of the territory, “but efficiently,” as he considered excessive payments are being made, also to the state itself.

The president stated that during his many visits to various Cuban provinces, he always finds examples of how things can be done well. “Each one should promote that they can multiply, with the conviction that we are all here to save the Revolution and to save socialism.” Diaz-Canel, who local authorities always organize to visit a successful producer or entrepreneur, does not seem to have noticed, however, that these cases are the exception and are generally due to privileges granted by the state.

In the meeting, the upcoming national budget was discussed, which is already starting to be drafted, but the current budget is still being urgently adjusted to the “war economy conditions,” confirming the poor state of the economy, which continues to worsen instead of recovering as the pandemic recedes. The Minister of Economy and Planning, Joaquin Alonso Vazquez, said that in 2023 there was “a decrease compared to the previous year and the estimate for the first half of 2024.”

Exports of mechanized tobacco, charcoal, lobster, eel, and other fishery products, as well as biopharmaceuticals, met expectations, but neither nickel nor bee honey nor rolled and raw tobacco met the semester forecasts. Income from medical services exports and tourism also improved —though below expectations in the latter sector— while telecommunications revenue declined.

“More than focusing on what happened during the first six months of the year, it is important to evaluate the causes to focus on what we must do in the second semester,” said the minister.

The fiscal deficit data was missing, though the worst is to be feared, as it was warned that the first semester was “marked by a high level” of that figure.

“Given that the resources demanded by the economy exceed those generated, the usual good intentions were set as general objectives, which have never yielded results.”

On social media rumors abound on the price caps on sales by private businesses.  14ymedio has inquired in several provinces and has only confirmed that in Cienfuegos, some inspectors have visited private businesses to inform them that they must limit their prices if they want to avoid fines, but the authorities have not commented on the matter.

Economist Pedro Monreal commented on the price tables circulating on the internet on June 30th. “I do not disclose them because I cannot confirm their reliability, but they are the data the Government should report. The current measure repeats the Ministry of Finance and Prices’ mistake of assuming an erroneous methodology for pricing at the local and national levels, trying to impose a ‘planned’ profit that disregards real supply and demand relationships,” he noted. “If there is an obvious lesson from Cuba’s history of capped prices, it is that they do not work well. The ‘containment’ of prices achieved in official documents turns into ‘repressed’ inflation, coexisting with shortages and black-market prices,” he predicts.

Read more from Cuba here on Havana Times.

One thought on “Cuban Leadership Met to Discuss Their “War Economy”

  • The Diaz-Canel regime has expertise in that old weary communist practice of double-speak. Spouting trite phrases in a jargon that not even the most knowledgeable linguist can translate. Indeed they themselves puzzle about their meaning. The Mad Hatter in Alice in Wonderland might have assisted!

Leave a Reply

Your email address will not be published. Required fields are marked *