By Dalia Acosta
HAVANA, Jun 12 2002 (IPS)

The unpopularity of the price hikes adopted this month in government stores that only accept dollars seems to have forced Cuban authorities to backtrack somewhat on the measure, which was designed to boost state revenues.

The increase in the prices of goods like home appliances, shoes, clothing, perfumes and a number of food items, alongside a tiny drop in the prices of a few basic products, went into effect on Jun 3 and was touted by the government as “indispensable” for dealing with a new worsening of the more than one-decade-old economic crisis.

But the price rises have only been applied in some of the dollar stores, and in a few cases, products that were marked up 10 percent in the morning were back to their original prices by the afternoon.

Fuel hikes, which had been announced to service station employees, have not been implemented, and have reportedly been postponed or even cancelled.

Nor did the value of cigarettes go up, while the prices of soft drinks appear to have remained unchanged. One department store employee even said cans of a national brand of beer had been pulled off the shelves until authorities reached a decision on the price.

An economist who asked not to be identified told IPS that “either there has been a counter-order, or they have thought better of it. It seems authorities had not really considered just how unpopular a rise in prices in the dollar stores would be.”

He said, however, that it was still early to reach any conclusions.

The economist added that a generalised rise in prices would not necessarily lead to an increase in state revenues. “Most people will have to re-work their budgets and spend less. In any case, they will not be able to spend more. The result will be a drop in consumption and an increase in the unsold merchandise sitting on shelves and in warehouses.”

An official statement released by the Ministry of Economy and Planning on May 31 announced the rise in prices in the “Tiendas de Recaudación de Divisa” (TRD) – the government dollar stores – confirming the rumours that had been flying around Havana for weeks.

But prices were already high in Cuba. The news prompted people to flock to the stores. In fact, in the week prior to the price hikes, sales in the TRD stores surpassed total sales from the first five months of the year.

In Cuba, the average monthly salary stands at 245 pesos, while the peso trades at 26 to the dollar in government exchange houses. With few exceptions, people are not paid in dollars, although they need that currency to purchase several basic goods.

Since possession of dollars was legalised in 1993, the government has set up a broad network of stores that sell only in that currency, and which provide products that are unavailable in stores that accept pesos, which have a much more limited offer and high-priced, low-quality goods.

An estimated 60 percent of Cubans have occasional or regular access to dollars through remittances sent from family members abroad, government work incentives, or services provided – with or without authorisation – to tourists and foreign residents.

“Last year, I earned between 20 and 30 dollars a day washing tablecloths for a restaurant, but in the past few weeks I haven’t taken in more than five or six dollars a day,” said Raquel Ramírez, just one more victim of the resurgence of the crisis that has had this Caribbean island nation in its grip since 1990, in the wake of the collapse of the Soviet Union and the east European socialist bloc.

The Cuban economy began to give off alarm signals once again in mid-2001, due to a new fall in sugar production, a slump in global demand for tobacco, and a drop in nickel prices.

The situation was compounded by the fallout from the Sep 11 terrorist attacks on New York and Washington, which led to a decline in money orders sent home by the Cuban exile community in the United States, and a plunge in the number of tourist arrivals to Cuba due to the impact on the airlines and the global tourism industry.

For the socialist government of Fidel Castro, the situation meant a substantial decrease in two of its principal sources of revenue, which had not yet recovered by late May. To that was added a slide in the price of sugar.

In addition, Venezuela confirmed last month that oil shipments to the island had been suspended until the payment of a 100 million dollar debt owed by Cuba is negotiated.

It was against that backdrop that the price hikes were adopted, as one of various measures to be implemented by the government with the aim of drawing in more dollars in order to remedy the scarcity of hard currency in the state coffers.

Experts estimate that Cubans are hoarding hundreds of millions of dollars in their homes. However, the lion’s share of that money is reportedly in the hands of a small group of families, as are bank deposits in dollars.

Financial sources reported that just 13 percent of savers hold 86 percent of all of the money deposited in the banks in Cuba. But many people who receive large amounts of money through illegal channels prefer to keep it “under the mattress.”

Billions of pesos are reportedly moved on the black market, which is expected to receive a new boost from this month’s price rises.

To that is added a substantial increase in the local currency supply since the end of last decade. According to Cuba’s Central Bank, the money supply stood at 12.3 billion pesos late last year, 5.9 billion of which was held in savings accounts, while the rest was in the hands of the population.

The situation has not been this bad since the government was forced to adopt a series of measures to tighten the money supply in 1993, at the peak of the crisis.

Experts consulted by IPS saw the increase in the money supply as proof of the exhaustion of the measures implemented in the 1990s, and evidence that new reforms of Cuba’s economic system have been needed for several years.

Among the options being considered by the government are opening up to Cubans the hotels where only foreign tourists are allowed to stay, and the liberalisation of sales of cars to private owners, which up to now have been tightly regulated.

Power outages have also become daily occurrences once again, although sources close to the government say the policy is to save as much energy as possible in the public sector, to minimise the impact on the population.

Many government buildings and offices have disconnected their air conditioners to save electricity, and some central state institutions are to stop interrupting the workday for the lunch hour.

As occurs every time “the belt is tightened,” rumours are once again circulating about a supposed government decision to allow the departure of anyone interested in heading to the United States.

U.S. sources have reported an increase in the number of arrivals of Cuban immigrants to the coasts of that country in the past few months. Most have paid up to 8,000 dollars to traffickers for the 90-mile trip in a speedboat.

Granma, the publication of the ruling Communist Party, reported that 186 Cubans were repatriated between Jan 1 and May 24 after they were intercepted by U.S. authorities in their attempt to reach the United States.

Excerpt: