Economy & Trade, Headlines, Latin America & the Caribbean

ECONOMY-CUBA: Cost of Living Continues to Climb

Dalia Acosta

HAVANA, Jun 28 2005 (IPS) - It has been years since Ana Gutiérrez and Carlos García tried to scrape by on just the salaries they earn in Cuban pesos as professionals working in state-run companies.

But now they don’t know what they’re going to do, because the few dollars they earn on the side “slip through your fingers like sand.”

“People used to say life wasn’t easy,” said Gutiérrez, 39, an economist who cleans houses on the weekends, charging two or three dollars per cleaning job. “Now everyone knows without a doubt that it’s not only hard, but that it’s going to get much worse.”

“The pesos I earn in my job don’t stretch far at all. My brother lives in the United States and sends me something once in a while, but it’s only sporadic, and dollars are worth less and less in Cuba,” said the economist.

In the past few months, the socialist government of Fidel Castro has raised the minimum wage, the salaries of teachers and health care workers, and pensions, besides adopting measures to assist the poorest families.

But the steps taken have fallen far short in a country where many essential goods can only be purchased with “convertible pesos” or CUCs, popularly known as “chavitos”, which trade for 25 pesos or 1.20 dollars.

And prices have not stopped rising.

“Prices go up five cents here, 10 cents there. Taking a ‘maquina’ (collective taxi) in the city costs double what it did a year ago. Everyone, including doctors or dentists, expects you to give them a dollar or two when they attend to you,” complained García, an engineer who like Gutiérrez has had to turn to odd jobs on the side to get by.

An economist who preferred to remain anonymous told IPS that the buying power of Cubans has been shrinking fast, to judge by the marked drop in food purchases in the farmers markets, which were opened around the country in the mid-1990s and operate according to the laws of supply and demand.

Official sources indicate that between January and April, Cuba’s 11.2 million people bought 42.6 percent less food than in the same period in 2004. The figures include purchases from state-run companies, cooperatives, and farmers selling their own produce in the markets.

The prices of meat, beans, fruit and vegetables have risen around the country. “The increase in prices in the free farmers markets counteracts the effects of the improvements that the government was aiming for with its wage and pension hikes,” said the economist.

Although no new across-the-board price rises have been implemented in the government’s chain of stores that only accept hard currency, the cost of some products, like nationally produced tomato sauce or imported instant coffee, has gone up.

Cubans receive their state salaries and pensions in regular pesos, which they use to buy a very limited range of subsidised rationed food items, or to purchase fresh produce in the farmers markets.

The CUC, meanwhile, provides access to a much broader range of often essential goods, including food, clothing, footwear, and personal hygiene and household products in the hard currency stores.

Although health care and education are free, and utility rates are extremely low, a survey conducted in Havana at the start of the decade found that an average family of four would require seven times the average salary – which is roughly 260 pesos, equivalent to 10 dollars a month – to meet their basic needs.

Government sources estimate that 60 percent of the Cuban population has access to dollars, mainly through remittances from relatives living overseas, but also through work in tourism-related or other activities.

Since the crisis that broke out in the early 1990s with the collapse of socialism in eastern Europe, social differences have become more pronounced in Cuba. Today, hotel doormen, taxi drivers, and others who work in the tourism sector, and thus have access to dollars or euros, can make as much in a day as a doctor or other state-employed professional earns in an entire month.

Cuban families who enjoy neither privileges of any kind nor large incomes – the great majority – have been hit hardest by the measures adopted by the United States last year against Cuba, and by the Cuban government’s response.

A programme intended “to hasten the transition to democracy” in Cuba, announced in May 2004 by the administration of President George W. Bush, limited travel to Cuba to visit family to just one trip every three years, and under a specific licence only valid for immediate family members.

Furthermore, the amount of money that visitors from the United States can spend on food and lodging in Cuba was sharply reduced, and recipients in Cuba of remittances and gift parcels were limited to immediate family members.

Washington also made it even more difficult for non-Cuban U.S. citizens to visit the island, such as academics or professionals who had previously been able to attend activities like international conferences or trade fairs.

In response, Havana raised prices in the hard currency stores, removed the dollar from circulation, and slapped a 10 percent tax on exchanging dollars for CUCs.

The reality is that salaries in pesos just barely cover the utility bills – power, telephone, cooking gas and water – the most essential food products, and public transport.

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