CUBA-ECONOMY: Black Market Flourishing

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Sep 4 1996 (IPS) - Cuba’s black market, nearly wiped out by government reforms two years ago, is again flourishing and, unlike most other underground marketplaces, the consumers here can get a better deal.

“I’ve got everything under the sun — soap, jeans, candy, stockings, shoes — anything you want, only much cheaper,” shouts one woman who sets up her stand each day next to a government-run “Ultra” store.

Vendors like her, of both sexes and all ages, indeed seem to offer “everything.”

“Looks like they stole a container with life vests,” observed one shopper on spotting an “exhibit” of the most diverse items for the beachgoer.

In residential neighbourhoods door to dor peddlars offer packets of hard to obtain foreign-made soup. Others make weekly trips to Havana from the countryside, with loads of cheese, shrimps or lobsters and still more devote themselves to the lucrative sale of powdered milk – at one dollar a pound weight.

“Milk is only available in dollars. It is a product in high demand and in order to get it, you have to wait for the boats to reach the ports,” explains one man who sells milk illegally.

Financial observers note that in contrast to what happens in other Latin American countries, the underground economy in Cuba is not an income strategy for the marginal classes nor is it essentially productive. They also confirm that the illegal economy is responsible for circulating and re-circulating goods and services that are generally lacking, and that it is generally fueled by a lack of government control.

According to Alfredo Gonzalez Gutierrez, an expert at the National Institute for Economic Research (INIE), the main feature of the black market phenomenon is its “strong capacity for adaptation” to change.

Studies indicate that the black market emerged as a response to the lack of government provision, and it grew and consolidated with the printing of money without commercial counterpart.

The black market, which until 1989 did not surpass 20 percent of the population’s income, reached the same level of government transactions between 1989 and 1992, and surpassed it between 1993 and May of 1995.

At the beginning, the population resorted to the black market in order to meet basic consumption needs as a result of the economic crisis which hit Cuba six years ago. Now, however, it is the only option for many people wanting to buy anything from soap to fruit.

“If I don’t have a plate of rice on the table, it’s as if I didn’t have anything to eat,” says Francisco Garcia, a worker whose salary of 200 pesos a month is clearly not enough to live on, considering he pays 80 pesos per kilo of rice. The dollar has an exchange rate of 120 pesos in the black market.

Like the majority of Cubans, Garcia has spent all his savings and sold family heirlooms in pawn shops in order have enough money to buy food on the black market.

The black market seemed to reach a state of bankruptcy in May 1994, when the government gave a green light to economic reforms and legalized some activities of the underground economy, leading to a reduction in the mass of circulating currency. But those same reforms which have caused a shrinking of economic space in the underground economy, could also lead to a new surge in activity.

Local experts say that a government tax crackdown against workers could drive many activities – now conducted legally – underground. Middlemen who operate between the countryside and the city – and who sell their products in the “agromarkets” established by the government in 1994 – are the most likely candidates to resort to the black market in order to evade taxes.

“I sell my best products door-to-door,” says one salesman, who works at one such “agromarket” in Havana, but who prefers to pay a person to go building by building in a residential neighborhood, offering prime-quality garlic, onions, and plantains.

Meantime, at the stands authorized by the government, the vegetables are clearly of lower quality, confirming once again the decision of most consumers to buy on the black market.

Observers opine that the vendors of farm products resort to the official markets as an important legal alternative in bad times but, at the same time, will sell their products on the black market as a more profitable option than raising prices.

The problem seems to be shifting from the supply of products to competition in terms of prices, observers noted. Indeed, prices are kept high both in state stores – in order to accrue foreign currency – as well as in free-standing markets.

“There will always be something that can be sold cheaper than what the government sells it for, and therefore a possibility to make a living,” says one vendor, who sells eggs door-to-door.

With an average salary of 200 pesos and paying 21 pesos per dollar, most Cubans save their few U.S. dollars, avoid stores, and resort to the cheaper prices on the streets.

“In stores, 30 eggs cost more than five dollars; in the black market, we sell them for three,” says one vendor, who up till now has not had any problems with the police, nor has been confronted with a buyer who asks her where she got the products she is selling.