Cuba Cuts Prices by 20% on Food Products
HAVANA TIMES — The Cuban government implemented this Friday a reduction of 20 percent in the price of 70 products, mainly food, in response to the demands of the general population over the insufficient purchasing power of their salaries and pensions.
The news was officially announced Thursday night on the National Television News and published with the list of products in the official Granma and Juventud Rebelde newspapers.
Unofficial versions of the new prices had begun to circulate in Cuba since the beginning of this week.
The announcement from the Ministry of Finance and Prices speaks of this reduction as a measure to “gradually increase the purchasing power of the Cuban peso (CUP)”. The overwhelming majority of the price reduction affects products sold in convertible pesos (CUC) in state stores chains. (1 CUC = 24 CUP = 1.15 USD)
Insufficient wages and pensions
In justifying the change, the Ministry quoted the central report submitted by President Raul Castro at the recently concluded Seventh Congress of the Communist Party, which recognized that “wages and pensions are still insufficient to meet the basic needs of the Cuban family.”
“The ultimate solution to this complex reality will be achieved with increased productivity and efficiency of the national economy. However, the political will of the leadership of the Party and the Government to make every effort to improve the situation of the population in the midst of the limitations combined with the decline in food prices on the world market, led to adopting a set of measures to gradually increase the purchasing power of the Cuban peso in the short term, to take effect on Friday April 22, “said the government statement.
The measures announced are:
-Reduce prices in the vicinity of 20% in the hard currency stores (TRD) and the parallel market of the Ministry of Internal Trade (MINCIN) for a group of selected products, especially food.
-Reduce the price of imported rice sold freely on the controlled market from 5.00 CUP a pound to 4.00 CUP. -The price of domestic rice sold freely on the controlled market drops from 3.50 CUP a pound to 3.00 CUP.
-The price of peas sold freely on the controlled market drops from 3.50 CUP a pound to 3.00 CUP.
-Institute the selling of chicken in large format (boxes), with a decrease of 6% from the current retail price.
Pending task
The government statement said that other measures with the same purpose are under study.
Monetary unification is one of the major outstanding tasks before the government of Raul Castro. The process to eliminate the dual currency was launched in October 2013, but has been continuously delayed. Monetary duality exists in the country since legalizing possession of the US dollar in August 1994, then, in 2004, the government eliminated domestic transactions in dollars and imposed the use of the CUC.
The elimination of the dual currency was a stated objective since April 2011, when the Sixth Party Congress implemented the new guidelines for updating the economic model of the country. Cubans co-exist with two currencies: the CUP, with which the population takes their wages and pay rationed goods and public services, and the CUC, which is equivalent to 24 CUP.
Last March, the government promised to eliminate a tax of 10 percent that is imposed on citizens for the conversion of US dollars into CUC, as soon as Cuban banks could use the US dollar in its international transactions, as stipulated by the new measures announced by the White House to relax the embargo. However, so far the decision to eliminate the tax on the dollar has not been implemented.
Below the list of products with new prices at the State monopoly retail stores:
Ministerio de Finanzas y Precios
It’s not semantics, it’s economics. You can’t pay if you don’t have the money, whatever the currency. A salary of 500 CUP or $20 doesn’t stretch to the whole month. Reducing prices on products most Cubans can’t afford to buy anyway is meaningless.
If the government really wanted to help the people, they would raise their salaries. But that would cut into their own cash-flow, so tough luck.
The average salary in Cuba is about $20 per month, paid in Cuban pesos, CUPs. A fortunate few work in the tourism sector where they can earn CUC’s in tips, which is legal, by the way. What waiters, taxi drivers, bar tenders, tour guides & etc earn in CUC tips far outstretches their standard peso salary. For example, a bar tender at a resort might take in 20 CUC per day or more. I would imagine the staff engage in some form of tip-sharing, just as most restaurant workers in the US & Canada do, so the busboy, dishwasher & cooks get some tips, too.
This extra income is spent at CUC stores to buy the extra food they need, beyond the meagre rations.
Those who don’t work in the CUC sector are stuck trying to get by on $20/month. After rent, utilities, bus fare and rations, they might have 100 to 150 CUPs left, which would convert to 4 or 5 CUCs. How can they live on that?
So to say that ordinary Cubans who are paid in CUPs only still have access to CUCs is kind of like the old saying that the law is fair as “rich and poor alike are banned from seeping under bridges”.
As Moses pointed out, those Cubans who earn only CUPs are forces by necessity to engage in some under-the-table transactions to get by.
I suspect our differences are actually only semantic. Any Cuban can buy anything in any government store and pay in either CUC or CUP. That includes TRD and Panamericana, the traditional “dollar stores”. Prices are marked in both currencies. A Cristal costs 1 CUC or 25 CUP, your choice. A TV costs 300 CUC or 7,500 CUP, your choice. The two currencies have become interchangeable. It is not unusual to pay in one currency and receive change in another.
It makes no difference if you get paid 500 CUP or 20 CUC a month as they are the same thing now. Easy to exchange one for another. There is no more “CUC economy” and separate “CUP economy” unless one uses the terms to differentiate price markets as one would use “champagne economy” vs. “beer economy”.
Griffin says most Cubans are not paid in CUC’s. No doubt he or she is correct. But Bob Michaels says that Cubans have access to CUC’s at an official exchange rate. If this is true, then all Cubans will benefit from a price drop even if it is in CUC’s.
To me it would seem to be very stupid politics to announce a price drop that most Cubans could not benefit from.
That’s not a separate issue: it is the issue. Cubans who do not have access to the CUC market, by which is meant, they are not being paid in CUC from any source, don’t have the cash to spend at CUC stores.
I’d lived in Cuba for 37 years and I’m still here. Not precisely being part of the most privileged, but just a common Cuban who has studied. I must endorse the majority of Moses’s comments (in this and other posts in the past) as lucid and accurate.
Cubans must use remittances from abroad, steal from their work or “resolve” by any means necessary to make up the shortfall. Many Cubans only eat one meal a day. And even that meal is lacking in nutrition and diversity. And no, increasing two more days is NOT significant. By the way, they are still waiting for the “glass of milk on every table” that Raul promised.
While I understand that there are shortages and privations in Cuba, I find it hard to believe that some Cubans have been eating only six days a week. But if you’re right, then an increase to eight days would be a significant improvement.
OK, so instead of Cuban monthly salaries covering the the first 6 days of monthly food costs, this decrease will add help Cubans to eat two more days. Wuujuuu!
All Cubans have access to CUC. Anyone can walk into any cadeca and exchange 25 CUP for 1 CUC. Every “dollar store”, the ones that previously only accepted CUC, now post 2 prices, one in CUC and one in CUP at the official 25:1 exchange rate.
The issue that Cubans have so little money, either CUC or CUP, is separate and remains.
You make an good point. If you are right, then the headline on this article, Cuba Cuts Prices by 20% on Food Products, is inaccurate.
But only for Cubans with access to the dollar or CUC economy. The average Cuban who earns only a salary in Cuban pesos gets no benefit, nor do those on the miserable state pensions.
This price cut is intended to undercut the black market and keep the majority of CUCs flowing to the regime.
If the items listed make up 30% of the monthly budget, then according to my arithmetic, Cubans are getting an 6% increase in purchasing power.