Cuba Has New Prices, Same Crisis

By Francisco Acevedo

HAVANA TIMES – This week, new fuel prices came into effect in Cuba, a measure that was already known to be coming, but according to Cuban authorities, it was postponed because there were issues with the software marketing platform, a “cybersecurity incident,” as they said. So in a way, Cubans have to thank the anonymous hackers who plundered the system for having lived a couple of months longer without being fined again for products and electricity.

It accompanies the tariff, exchange rate, and tax measures announced in December 2023 supposedly to put a brake on inflation, but which generally have the opposite effect.

Currently, Small and Medium-sized private businesses are one of the fundamental economic actors in the country, and these types of cost increases have a negative impact on their  management and therefore are felt at the final link of the chain, which is the average Cuban, as product prices will rise even more.

So far, we have only seen the dollarization of the Cuban economy and a greater devaluation of the Cuban peso, the effects of which are more aggressive on sectors with lower incomes and without remittances from abroad, an important group of citizens.

On the one hand, tariffs for the importation of raw materials and intermediate goods are halved for all economic actors, especially those aimed at agricultural production and other foods, but on the other hand, tax exemptions for non-state entities are eliminated, from zero months up to one year when first established, which discourages the creation of new private businesses. Let’s not forget that foreign companies are given an eight-year tax exemption, so the disparity is evident.

If we add to this the plans to extend the application of the sales tax to all operations carried out by these businesses, we see that their profits are affected, and that always ends up the same way: an increase in prices for their products.

These businesses used to pay a tariff where they charged 1 USD at 24 pesos (CUP) and now they charge it at 120 CUP, so there is a fivefold increase, a 500 percent increase in the cost of the tariff.

At this moment, private businesses have to pay a tax of 14 percent on salaries, but now that figure will increase to 34 percent of the worker’s income, in addition to social security and the tax on having a labor force. In other words, to hire a person, you must pay a tax of 44 pesos for every 100 of their salary, approximately.

What seems like a truism, which is to increase supply to reduce the gap in demand, reduce inflation and prices, is not seen the same way by the Government of our beloved Miguel Díaz-Canel.

In reality, more economic actors are needed, and the almost 10,000 existing ones must be able to subsist, consolidate, and grow. However, if they have to pay more for electricity, for example, they would incur losses. The chicken that the population has been consuming for months is thanks to these private businesses, but that needs refrigeration.

In addition to these general measures, when a liter of gasoline costs one dollar (around 300 Cuban pesos on the informal market), the entire production chain is disrupted, as well as impacting socially, because public transportation also increases.

Now, if a private collective taxi driver charges 100 CUP for a specified route, when they do their math, they will have to double the price, and the same will happen with those who provide interprovincial trips. As announced on the government’s TV Roundtable program, prices will not be raised for transporters associated with the State, so they deduce that prices for trips for the population will not rise, but in reality, this fosters the black market because it is much easier for the associated ones to buy subsidized fuel and sell it to an individual, and they will earn more than if they spend hours and hours driving.

International market prices with salaries 100 times less

If we believe what they tell us on the National Television News, these are international market prices, but they don’t mention our incomes, which are quite different.

If you earn two thousand dollars a month, paying one dollar for a liter represents a much lower percentage than for someone who earns 20 (the average salary in Cuba).

Once again, the math doesn’t add up with the directives of the Communist Party of Cuba government, which already has the Ministry of the Interior (MININT), the Armed Forces (FAR), and State Security working to monitor who raises prices, when they are the ones causing the imbalance.

It’s not profitable for private transporters to do what they do if their costs are constantly rising, and the same goes for other private businesses because fuel intervenes in all spheres. Authorities insist that “abuses” to the population cannot be allowed, so what’s next?

For Manuel Marrero, it is inconceivable that private taxi owners raise the price of the fare because public transportation will not go up, but the state’s offer has been insufficient to meet the movement demand for decades. When you must spend hours waiting for a bus, you cannot expect that someone who can take you will charge you as if gasoline were cheap.

“We want there to be more private entities associated with the State to help them, but when we can, because our buses are standing still,” said the vice president. So?

Díaz-Canel also lashed against “speculative” prices and recalled that those who apply them do not pay for health or education.

They want to fight, as they say, but if they are the first ones raising costs, they cannot expect others below them not to do the same. In short, once again, we will have new prices, but the same crisis.

Read more from Cuba here on Havana Times.