Private Businesses Fined in Cuba While Products Disappear
Reportedly 393 businesses punished for violating price caps
Readers of the official press are divided between those in favor of a heavy hand and those against the government’s measures.
HAVANA TIMES – In less than 72 hours, the Cuban authorities already had almost 400 violators of the price cap for six basic products that came into force on Monday. Last week, the Deputy Minister of Finance and Prices, Lourdes Rodríguez, warned on Canal Caribe that 7,000 inspectors were prepared to verify that the provisions were complied with, and this time their effectiveness has been proven, since on Wednesday night 1,079 “control actions” had been carried out that imposed fines on 393 private individuals, some in response to complaints from the population.
The information was offered by the Minister of Finance and Prices, Vladimir Regueiro Ale, in a television program in which he reviewed the Resolution that marks the highest selling prices for chicken (680 pesos per kilo), oils, not including olive (990 pesos per liter); powdered milk (1,675 pesos per kilo); pasta (835 pesos per kilo); sausages (1,045 pesos per kilo); and detergent powder (630 pesos per kilo). He said that these six products are exempt from import tariffs and that, in addition to the cap on consumer prices, there cannot be a profit margin of more than 30% in sales from the private sector to the State.
Regueiro insisted that the objective is to contain inflation, since the cost of these essential products had progressively increased, and admitted that for a large part of the population they are still very high prices, in particular for retirees or people with low incomes.
However, he said that this measure came from meetings with more than 50,000 “economic actors,” the self-employed, members of cooperatives and owners of private businesses. The State is not subject to this policy, at least for the moment, since stores in Freely Convertible Currency (MLC) sell at prices much higher, as a large part of the population denounced, which, however, admits that it matters little, since there are no products in those establishments.
“I wish we could buy in MLC [hard currency] stores,” commented a user this Wednesday in a Cubadebate forum that asked for experiences from consumers, “but there the prices are equally high and abusive, the shelves are empty and then again, what percentage of the population owns that currency?” “In the province, in MLC there is nothing or almost nothing, and even less in municipalities; most of the merchandise is in Havana, that’s why the people of the province had to end up in the MSMEs, which also annoy people a lot. Now there’s nothing on offer by the State or the MSMEs,” complained another.
Regueiro Ale added that, since local governments have the power to set other price caps, if they are lower than the State ones, they do not have to raise them.
The official also insisted on two important ideas: the first, that the State makes a “sacrifice” by renouncing the income it would obtain at Customs in order to “favor the reduction of costs”; the second, that the measure is not isolated and that there will be others “that will have an implementation soon and will allow the creation of a scenario where we have more production and provision of goods and services.”
He did not specify anything else, but the warning may be linked to the six decrees that the authorities say they have ready to approve in the coming days that “correct the distortions that are present in the action of non-state forms of management.” There is no concrete information yet, but progress has been made concerning reforms to the decrees that regulate self-employment, mipymes and non-agricultural cooperatives, as well as the Social Security rules for their workers and the tax system.
In addition, the municipalities will progressively assume the ability to authorize MSMEs, a process that has begun in Ciego de Ávila – the province with the most entrepreneurs outside of Havana – with the training of officials, who “dominate the business ecosystem and know the potential of the respective actors who are there or can be there, based on their needs and priorities.”
The new rules, said Prime Minister Manuel Marrero, will try to fill legal gaps or aspects that they had not initially foreseen, in order to continue “perfecting” the system and making it clear that “the main player in the economy is the socialist state enterprise, and the different forms of non-state management are a complement to it.” “It’s not about prohibiting or taking a step back; this is regular, it’s accompanying, driving, controlling,” he added.
Uncertainty reigns, between some things and others, in the private sector, where many have chosen to “hide” the products with capped prices, as 14ymedio has been able to see in tours made in Havana, although in other provinces the absence is not so noticeable, according to the collaborators of this newspaper. The real impact cannot be evaluated until more time passes, but economist Pavel Vidal, in his report for the OMFI (Cuban Observatory of Money and Finance), fears the worst.
“The measures are concentrated almost exclusively on the containment of expenses, on the management of the crisis in the very short term and on the use of instruments of direct economic control of proven failure (such as price caps). A part of the proposals generate predictable negative effects and greater uncertainty for the private sector, especially those that sell imported products,” he says.
The expert, who reports that imports from the United States increased by 65% in the first five months of the year and by 59% in May, compared to 2023, advances that “if a contractive impact is confirmed on the dynamics of external purchases of the private sector, there would be a moderating effect on the exchange rate,” although he rules out that it is significant, due to the absence of “background” measures. This Thursday, the dollar was exchanged in the informal market for 335 pesos.
Consumers, meanwhile, are divided between those who experience a slight relief from the new prices and those who already feel the lack of products on the street. “Great move. We all knew what they were going to do. Several of the products disappeared in the MSMEs. Now they will sell them secretly and at higher prices. It ’s a war against the State that engendered them and protects them. Control and monitoring of the application of exemplary measures is being imposed,” says a reader of Cubadebate.
A hard hand that asks for more. “They show that the State has the legal force, and, to all those who don’t offer anything, let them boycott the measures, encircle them and that’s it. Stop passing the buck and defend the working people.”
But others differ. “Competent policies are essential to improve the functioning of the markets, which in turn benefits consumers,” considers one person. Another says, “These policies seek to increase competition in the markets so that consumers have more options and lower prices. In addition, they promote transparency and asymmetric information so that consumers can make well-informed decisions.”
Translated by Regina Anavy for Translating Cuba
It`s really sad that in Cuba, it`s always one step forward, two steps back. Let the people have some private enterprise and then scale the reforms back because they fear losing control over the population
Costco in Canada has a average markup of about 20% yet the gov store in Cuba is 3 times the price of the same item at Costco or a Co op run store in United States
Companies and non-profit that ship from Mexico report often many items are missing when shipped by containers into Havana amlog with fees often costs are equal to the price of the raw product
The Cuban government doesn’t take 20 to 30% of remittances sent to Cuba That is absolutely BS. I am a foreigner who lives in Cuba and none of my transfers of money have been taken by the government. The bank takes the usual exchange rate which all banks in the world do. So stop making lies and misleading information.
The Cuban government members, comrades, old military personnel and all of castro’s old buddies operates business such as Supermarket 50 and Supermarket 23. That food and merchandise is meant for the Cuban people but instead, are sold to foreigners who can afford, using credit cards, bringing hard cash to the government leaders. The purchases are for the cuban people delivered by trucks.The government leaders care less for the Cuban people using them as slaves where their income can’t allow them a kilo of chicken. Foods meant for the Cubans are sold in government run stores, some are operating from Miami by old Cuban General families. As an example Garcia who was with Fidel when the attack happened in 1959. That old General’s family operates big business in Cuba, only using visa, master card and any other form of foreign currency. This is the Cuba of today. Many children starves while the leaders enjoy the life of luxury. Shame on the Cuban government.
Greg,
“On other subject of raising money the Cuban government takes 20 to 30 % of all
remittances sent to Cubans by friends abroad.” Isn’t that totally unjustified?
This is why the Cuban government together with the Nicaraguan government colluded to allow Cubans the freedom to travel to Nicaragua – no visa required. The Cuban government knowing full well those fortunate Cubans travelling to Nicaragua have no intentions of returning to Cuba.
Hence, once exiting Cuba to a destination outside the island those Cubans now in a foreign country – USA, Spain, Mexico, Canada, wherever – begin sending remittances to their Cuban families and friends. The Cuban government as you indicated reaps a significant monetary pay back from all those ex-Cubans.
How many thousands of Cubans have exited the island in the last couple of years? The number is staggering. Likewise the amount of remittance rip offs the Cuban government must be raking in has to be substantial. To add insult to injury those fortunate Cubans receiving remittances must spend the money in government operated stores where the markups on essential items , if available, are astronomical.
Again, as you so eloquently expressed: “ Communism only works for the proletariat the public be damned.”
Those totalitarian cadres know exactly where their bread is buttered and certainly will not even try to reverse massive emigration. Why kill the golden goose?
It doesn’t have to be this way. Vietnam is a communist country. Yet its citizens, though ruled by a one party system, live lives comparable to any Western country. Vietnam has one of the fastest growing economies in the world yet its political system is so called: “communist”.
Cuba’s political cadres have never left their 1959 Revolutionary Marxist-Leninist ideologies. They are stuck in a time warp which, unfortunately, for the majority of Cubans is bringing the country to its knees. You, and many others, have witnessed the economic devastation. It saddens those island visitors in the know. How and why such a rich, gifted country with such talented people and abundant natural resources can be so devastatingly destroyed. Sad indeed.
Correct me if I’m wrong but by capping the markup to 30% the government can add on what they believe is justified. On other subject of raising money the Cuban government takes 20 to 30 % of all
remittances sent to Cubans by friends abroad. I find it puzzling as to why some people around the world believe communism is
the better system. Communism only works for the proletariat the public be damned! I’ve traveled to Cuba for 19 years and it saddens me to see how these wonderful people are being treated.
“The new rules, said Prime Minister Manuel Marrero, will try to fill legal gaps or aspects that they had not initially foreseen, in order to continue “perfecting” the system and making it clear that “the main player in the economy is the socialist state enterprise . . . “. Here lies the crux of Cuban malaise.
As long as Cuba continues to operate its economy with this archaic anti- business philosophy – “ the socialist state enterprise “ – all Cubans will continue to suffer while the Revolutionary idealists constantly imposing “new rules” keep and proliferate their unproductive positions.
Talk about unproductive and costly government expenditures on a state that is already on the verge of collapse – “7,000 inspectors were prepared to verify that the provisions were complied . . . “ And heaven forbid for that poor government inspector who at the end of the day comes back to the office without a concrete “ controlled action” translating into a heavy fine on some poor enterprising Cuban entrepreneur. The inspector will be sacked.
These multitude of inefficient government inspectors to earn their government salaries must produce results – hefty fines on fellow Cuban business owners whether legitimate or otherwise to sustain their unproductive positions. Instead of reducing red tape in a functional market economy, the Cuban government goes to extremes in the exact opposite direction making life even more difficult for those few enterprising entrepreneurs who actually contribute tangible benefits to the Cuban economy.
When the State imposes anti business decrees such as “there cannot be a profit margin of more than 30% in sales from the private sector to the State.” what incentive is there for any Cuban to operate a business? The disincentives are so great to make Cubans not engage openly in the market and to operate in a clandestine fashion thereby not contributing at all to much needed revenue for the State.
Cuban enterprising entrepreneurs must spend exorbitant amount of their valuable resources constantly trying to dodge and stay one step ahead of the government inspectors who will impose any fine to justify their unproductive existence. No doubt these poorly paid government inspectors can be bribed so that at the end of the day in a corrupt economic system what was initially intended by the Ministry never occurs.
The economic system continues to stagnate and the totalitarian State continues to blame the Cuban business class for all its failures and so more “new rules” need to be imposed to ensure that it is abundantly clear to all Cubans that “the main player in the economy is the socialist state enterprise.” End of story.
As long as the Revolutionary ideals are sacrosanct in the Cuban economy and these archaic ideals are the premises for all economic activity, the Cuban economy will continue to stagnate and experience unproductive responses to simple basic business activities.