Priorities in Cuba: Attacking Inflation and Inequality

Customers stand and wait outside a store to buy food, in the Central Havana municipality of the Cuban capital. In addition to a shortage of goods and services, exponential growth of prices on the illicit market follows a cycle of “illegality, reselling and speculation,” the government says. Photo: Jorge Luis Baños / IPS

By Luis Brizuela (IPS)

HAVANA TIMES – Controlling inflation that is piercing a hole in families’ pockets and implementing strategies to reduce the inequality gap, including in access to food and medicines, are all pressing issues for Cuba this year.

For the first Council of Minister’s meeting of 2022, President Miguel Diaz-Canel insisted that “we have to work harder on certain areas: first of all, measures to improve shortages for the population and keep inflation in check,” without giving details about possible strategies, according to an official report on February 1st.

[Editor’s note: If it were possible to resolve these issues with discourse, the country would be seeing happy days, but the reality of ordinary Cubans says it all, and you don’t have to be a top leader to see it.]

“Stabilizing socio-economic indicators will be a challenge, and it means guaranteeing the essentials. I’m talking about food, medicines, transport, both in quantity and quality, and give back some quality of life,” Cuban lawyer Mylai Burgos told IPS.

Then, “it’s essential to give priority attention to vulnerable groups, first to the elderly, as well as children, the disabled, women, members of the LTBTIQ+ community and minorities,” Burgos added, also a researcher at the Law Faculty at Universidad Autonoma de Mexico.

According to the human rights expert, the country should also focus on “the coliving or territorial space – thinking of it as a sociocultural space-, that is to say, marginalized neighborhoods.”

The structural crisis of the Cuban economy, which has gotten worse with the effects of the pandemic and enduring US embargo – that reached its 60th anniversary on February 3rd – is making resources availability even more difficult which, Burgos says, would allow the country “to redistribute this wealth under social policies for vulnerable people and groups, which means greater wellbeing.”

Workers at Havana’s Water company fix supply networks to homes in the Regla municipality. After the July protests, the Government began revival efforts to improve living conditions in 70-something underprivileged neighborhoods in Havana and other cities, where basic needs such as access to water and sanitation are resolved, as well as repair works and building roads and homes. Photo: Jorge Luis Baños / IPS

The sword of inflation

Statistics from Cuba’s state-led Office of Statistics and Information (ONEI) show that Cuba ended 2021 with a growth of 77.33% of the Consumer Prices Index, but this figure only takes into account formal market indicators.

Cuban economist Pedro Monreal posted on his Twitter account the opinion that this figure “tends to undervalue inflation because the calculation deals with consumerism structures that are over 10 years old, “and he compared it to the 740% inflation estimate by the Intelligence Unit at the British publication “The Economist”, at the beginning of the year.

Average prices have been increasing on the whole, since January 2021 when the Currency Reforms process was implemented, a much-needed but drawn-out process that included eliminating the dual-currency system and subsidies, the devaluation of the peso, as well as an increase in prices of goods and services.

Currency reform increased the minimum wage to the equivalent of 87 USD, and the maximum to almost 400. In the case of pensions, the lowest stands at 63 USD.

The measure fixed the official exchange rate at 24 pesos to 1 USD, but given the fact it’s impossible to buy them at banks or exchange houses, citizens are turn to the illicit market where the exchange rate is approximately 100 pesos for 1 USD.

Even the Government has admitted problems in the design and implementation of the Reforms Process during which the money in the hands of the population grew, against a product supply deficit estimated at 700 million USD, according to official statistics.

“Making sure there’s food on the table every day has become an agonizing task; you have to wait hours in line to buy bread, a bottle of cooking oil or chicken. Milk can only be found on the illicit market, and eating fruit, vegetables and root vegetables regularly has become a luxury,” nurse Adelaida Nuñez told IPS. She lives in Diez de Octobre, one of Havana’s 15  municipalities.

Government authorities admit that in addition to the shortage of goods and services, exponential growth of prices on the illicit market follows a pattern of “illegalities, reselling and speculation.”

They also stressed that after products were revalued, the increase in service fees and reforms to some such as electricity, have remained the same.

Nevertheless, they admitted that the basic basket of goods and services now costs double the 60 USD initially planned for monthly expenses.

Furthermore, the reforms process hasn’t stopped the partial dollarization of the economy, after stores opened in 2019 to sell electrical appliances, and then food and basic essentials, with debit cards linked to accounts in foreign currencies.

Shrouded in controversy and criticism because of the market segmentation it creates, government officials argue that this mechanism allows the country to collect foreign currency and that some of this money is used to stock up some products at stores where most of the population go, as they only receive their wages and income in Cuban pesos.

Within this context, the rations booklet continues to be used,  in effect since 1962, ensuring the 11.2 million inhabitants on the island receive a small monthly ration of rice, sugar, grains, coffee, cooking oil and animal protein.

While this doesn’t cover all the population’s dietary needs, it does provide relief for many households, especially low-income households and vulnerable groups.

Steeper living costs were one of the triggers of the July 11, 2021 protests in dozens of cities and towns across the country.

The Government attributes these protests to a soft coup attempt funded by the US government, aimed at forcing a change in government.

Some acts of vandalism of stores and institutions did take place, but many protestors peacefully demanded economic and political change in this country.

According to analysts, this expression of discontent responded to repeated blackouts, shortages of basic essentials and selling food in foreign currency, etc.

View outside the US Embassy in Havana. The persistence of the US embargo, which celebrates 60 years of existence on February 3rd, makes it harder for the Cuban economy to take off, making structural changes that ensure development and modernization in Cuba urgent. Photo: Jorge Luis Baños / IPS

Speeding ahead with reforms

According to official statistics, this Carribean island ended 2021 with 2% growth of its GDP, and estimates for this year stand at 4% growth. However, they are based on previous years where were a sharp decline from 2019 and before.

Before 2021 came to an end, Cuba was scheduled to resume interest payments on its foreign debt to creditors from the Paris Club, government creditors, which have been suspended for two years, due to financial hardship as a result of the pandemic.

With very few tangible results to date, the Government adopted dozens of measures aimed at reviving state-led companies and increasing agricultural production, and has sped up the allowing of micro, small and medium-sized enterprises (MSMEs) and non-agricultural cooperatives since September, and there are already over 1700, mostly in the food sector.

Cuban economists both on and off the island insist on the urgency of speeding ahead with a program of socio-economic reforms, which the population has supported since 2011, and hold the keys to a model of socialist development.

Proposals include passing an anti-inflation program, replacing the centrally-planned economy, promoting and regulating business competition appropriately, and breaking down barriers for the private practice of professions such as architecture or tour guides, whose contributions could benefit the State budget via taxes.

This goes hand-in-hand with appeals for a more attractive Foreign Investment Law (2014), eliminating the State’s monopoly on imports and exports of supplies, as well as lifting the brakes on food production in a country that needs to purchase abroad 70-80% of the food it consumes.

After the July protests, the Government began revival efforts to improve living conditions in 70-something underprivileged neighborhoods in Havana and other cities, where basic needs such as access to water and sanitation is resolved, as well as repair works and building roads and homes.

“I believe governments have the obligation to grant loans, push welfare and social policy, because resources are being concentrated in the hands of a select few, and this especially in Cuba. However, it’s also important to create conditions so that citizens can be active,” Burgos reflected.

He believes it’s extremely important “to see vulnerable neighborhoods as sociopolitical spaces where conditions can be created for people to develop their skills and potential from an economic standpoint, which influences the social aspect.”

According to the expert, this can be done “with credit, other funding, training or setting-up MSMEs or cooperatives that are productive, whether these are services or cultural goods, and improve their living conditions.”

Lea más desde Cuba aquí en Havana Times.