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CUBA: Despite Raises, Incomes Still Fall Short

Dalia Acosta

HAVANA, Feb 7 2006 (IPS) - Despite a series of government measures adopted last year to strengthen the local currency, boost incomes and improve economic conditions for the neediest segments of society in Cuba, wages and pensions still fall short in relation to the high cost of living.

“I was given a raise of nearly 50 pesos a month, but that means nothing when it comes to facing my household expenses,” said Carmen Díaz, a computer technician who works for a cultural institution. “Everything you earn goes towards putting more or less decent meals on the table and paying the water, telephone and electric bills.”

Díaz lives with her son – a university student – and her elderly parents.

“My parents also benefited from the rise in pensions, but that didn’t stretch far either,” she added. “The cost of living in Cuba has gone up a lot in the last few years, and if it weren’t for my brother, who helps us from the United States, I wouldn’t know what to do.”

After pension and wage hikes were implemented in 2005, the average salary in this socialist Caribbean island nation rose to around 300 Cuban pesos, or 15 dollars according to the rates at the government exchange bureaus.

Two currencies are now used as legal tender in Cuba: the regular peso and the “convertible peso” or CUC, which was created in 1994 as a substitute for the U.S. dollar in internal transactions. The CUC and dollar were used interchangeably until late 2004, when the U.S. currency was removed from circulation on the island.

At the current exchange rate, the U.S. dollar is worth 80 cents of a CUC, and 25 pesos are needed to purchase one CUC.

Cubans receive their state salaries and pensions in regular pesos, which they use to pay the low utility rates and to buy a very limited amount of low-cost rationed food items. Regular Cuban pesos can also be used to buy products in the farmers’ markets that opened in the mid-1990s and operate according to the laws of supply and demand, as well as in stores that sell a limited range of consumer goods and food products in Cuban currency.

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

Education and complete health care coverage are free of charge for Cuba’s 11.2 million people.

According to an expert who spoke to IPS, more than 6.6 million people benefited from the wage and pension rises and increases in social assistance last year, a larger number than was originally projected by the authorities, who had predicted that 5.1 million people would be affected.

The measures represented an extra 4.26 billion pesos a year in spending for the state, according to official sources.

Observers say the raises were necessary but not sufficient, given the extraordinary rise in the cost of living on the island since the early 1990s.

According to one study, the average family of four saw their wage income increase by around 105 pesos last year. But at the same time, the rise in prices of a number of staple goods drove up the cost of the basic basket of consumer goods to 90.6 pesos a month, or 22.95 pesos per person.

For instance, while the quality of the coffee sold at subsidised prices improved, the cost nearly doubled.

“The rise in prices for subsidised items alone absorbed 86 percent of the total average rise in wages, leaving a margin of just 15.02 pesos a month,” the author of the study, who preferred to remain anonymous, told IPS.

“With those 15 pesos, families have to pay their power bills, which went up last year, go to the farmers’ markets, and purchase other staples that are only sold in CUCs or Cuban pesos, at very high prices,” he added.

Cuban families generally only have access to dollars or other hard currency by means of remittances from family members living overseas, through work in tourism-related activities and a limited range of authorised self-employment ventures, or through incentives put in place by the state in some sectors of the economy, such as Cuban-foreign joint ventures.

Cubans receive subsidised food products like rice, beans, sugar, coffee, cooking oil, eggs, salt, pasta, bread, crackers, fish, chicken, sausages and milk through the “libreta” or ration book.

But the total number of calories of the food provided through the ration books and in school and workplace cafeterias continues to fall short, leaving a monthly deficit of 8,790 calories, 293.7 grams of animal protein, 73.8 grams of vegetable protein and 376.8 grams of fat.

The economist also pointed out that families have no choice but to buy vegetables and other products in the farmers’ markets, where prices tend to rise steadily.

In the farmers’ markets in Havana, five medium-sized onions can cost up to 10 pesos, a pineapple ranges between 12 and 15 pesos, and one kilo of tomatoes fetches around 20 pesos.

Official sources indicate that from January to April 2005, Cubans purchased 42.6 percent less food than in the same period in 2004. The drop was attributed to the rise in prices of meat, beans, fruits and vegetables, and to the significant drop in the average family’s buying power.

A survey conducted in Havana at the start of the decade found that a family of four would require seven times the average salary to meet their basic needs.

Another challenge for household expenses was a rise in electricity rates since November for families that consume more than 100 kilowatt-hours.

The government justified the electricity rate hike, the first in over 10 years, by pointing to the soaring international oil prices, the increasing scarcity of energy sources, and the need to create public awareness on the necessity for energy saving.

This reality “overshadows the increases decreed by the government with the aim of reducing the existing gap between peoples’ incomes and the rising cost of living that has appeared since the early 1990s,” he told IPS.

While electricity rates have risen and food prices have remained high, wages have not yet recovered their role as the main source of income for Cubans and as an important stimulus for the production of goods, he added.

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