Economy & Trade, Headlines, Latin America & the Caribbean

CUBA: Anxiety Over New Price Hikes, Restrictions on Sales

Patricia Grogg

HAVANA, May 11 2004 (IPS) - Cubans reacted with surprise and worry to the announcement Tuesday of new economic measures by the government of Fidel Castro, which include restrictions on sales of all but the most basic items, and price hikes.

The new initiatives are aimed at confronting any difficulties that might arise from the U.S. government’s recently announced plan to ”hasten the transition to democracy” in this Caribbean island nation.

”You have to buy whatever you can, because prices are going to be raised. We’re running around like mad,” a woman commented to IPS as she stocked up on toiletries, cleaning products and foodstuffs at one of the government-run stores that accept only dollars.

On the door of the shop, a hand-written sign announced that neither liquor, cigarettes nor hardware items were available.

One of the main news items in the state-monopolised print and broadcast media Tuesday was an official communique announcing fuel price hikes and increases in the cost of food items sold in the government chain of dollar-only stores.

The statement says the policy prescriptions presented to U.S. President George W. Bush on May 6 are basically aimed at reducing to a minimum the flow of foreign exchange into Cuba.

The communique does not attribute responsibility for the new Cuban measures to either the government or the ruling Communist Party, but to ”the Revolution, based on its long experience, its impartiality, and the solid unity and high level of political culture of its people.”

That formula tends to be used only in difficult and complex situations in which Cubans may have a hard time understanding and accepting initiatives that will affect their standards of living, which were already hit hard by the crisis of the 1990s that followed the disappearance of the Soviet Union and east European socialist bloc, with which Cuba enjoyed a privileged trade and aid relationship.

The first of the 15 measures announced will suspend, until further notice, sales in the dollar-only stores, ”with the exception of foodstuffs, cleaning articles and toiletries.”

A broad range of items are offered in the vast network of Tiendas Recaudadoras de Divisas (TRD) stores around Cuba, which accept only dollars.

Around 60 percent of Cuba’s 11.2 million people have access to dollars, whether through remittances sent home from family members abroad, or because they are involved in legal or black market activities in connection with the tourism industry.

According to the government, goods and services ”that without any sort of privilege must be received by the entire population” will be guaranteed, and the basic items sold at subsidised prices will also be maintained.

Through a ration-book, every Cuban family receives a set of basic products every month at prices far below cost. However, the items do not totally cover daily needs, and they do not include clothing, footwear or several basic household items.

”The ration-book products are not enough,” said a woman who preferred not to give her name. ”You always have to go to the ‘shopping’ (TRD stores), and that is why I can’t understand why sales of shoes, clothes and other things that you can only buy in dollars are being suspended.”

An economist who talked to IPS said the new provisions took many Cubans by surprise because of the complete lack of warning, and described some as frankly ”incomprehensible.”

”What is going to happen to the employees of the stores that will close their doors? What will happen to the merchandise” on the shelves and in the warehouses? asked the researcher, who spoke on condition of anonymity.

But employees in the TRD stores insinuated that after prices were ”adjusted”, sales will resume, although they did not venture to guess when, nor did they give estimates as to the extent of the price raises.

For now, the government’s strategy appears to concentrate available financial resources on foodstuffs, a large part of which are currently purchased from U.S. companies, under a law passed by the U.S. Congress in July 2000 that lifted limits on food and drug sales to Cuba.

Since late 2001, Havana has purchased more than 800 million dollars in food from companies in the United States, without financing, which was banned by the law.

The new measures announced by the Cuban government are also aimed at guaranteeing bank deposits in both Cuban pesos and dollars, and at keeping the government exchange houses operating at the current rate of 26 pesos to the dollar.

In addition, the free farmers’ markets created in 1994, where products fetch prices dictated by the law of supply and demand, will remain open.

”Days of hard work and sacrifice lay ahead of us,” says the official statement, according to which the country’s systems of free health care, education and cultural activities will remain ”untouchable”.

Another academic source noted in an interview that the economy is a complex set of relationships, in which one measure impacts another, with a multiplying effect.

”For example, if fuel prices rise, the rates charged by private vehicles that make up for the shortage in public transport will also go up, and the cost of products in the farmers’ markets will too,” he pointed out.

Despite the tension that could be generated by the price hikes and increased government controls on the economy in Cuba, where a black market thrives, dissident groups ruled out the likelihood of protests or a ”mass exodus” of Cubans trying to leave the country.

”We have demonstrated an enormous capacity to endure, and will continue to do so,” said Elizardo Sánchez, the head of the Cuban Commission for Human Rights and National Reconciliation, a dissident group.

With respect to government investment, the highest priority will be put on the sectors that bring the greatest immediate benefits, while spending will continue in key areas like nickel and cobalt mining. Exploration for oil and natural gas will also continue, with new techniques, ”until we achieve self-sufficiency,” says the official statement.

Cuba’s oil production covers nearly all of the domestic demand for energy, and the shortfall in fuel is met by imports from Venezuela and other countries.