ECONOMY: Cubans Brace Themselves for Rumour Mill’s Price Hikes

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, May 31 2002 (IPS) - Word has it that the prices of a number of items, including gasoline, clothing, food and home appliances, are about to rise in Cuba, where it is becoming increasingly difficult to scrape by on a salary paid in pesos in an economy dominated by the dollar.

The “bola”, as the rumour mill is known in this socialist Caribbean island nation, is at the core of most conversations between residents of Havana, where price hikes are expected to go into effect within the next few days.

“I have a one-year-old daughter who is growing and needs new clothes and shoes all the time. Things were already quite expensive, so I don’t know what my wife and I will do now,” Reynaldo Cabrera, a technician in the health industry, told IPS.

Cuba needs to strengthen its monetary system in order to withstand the impact of the global crisis that hit the tourism industry in the wake of the Sep 11 terrorist attacks on New York and Washington.

Besides the slow recuperation of the tourism industry – Cuba’s main source of foreign exchange – the prices of export products like nickel remain low, and the country has not yet recovered from the enormous damages caused by Hurricane Michelle in November.

Against that backdrop, the government of Fidel Castro has been purchasing food, with payment in full, from U.S. companies, in the first such transactions since 1960, when the United States slapped its trade embargo on Cuba. Completed purchases and pending orders total around 150 million dollars.

In the meantime, Venezuela’s oil exports to Cuba have been suspended until Havana starts paying off a debt of around 100 million dollars, said spokespersons for the state oil monopoly Petróleos de Venezuela.

Although Cuba’s state-monopolised media have remained silent about the new measures aimed at tightening the money supply, an off-the-record source told IPS that a government document distributed to public employees mentions imminent icreases in the retail prices of 30 basic products.

But responding to the insistent questions of customers, the staff of department stores say they only know what people are saying in the streets, and have no official information.

However, an employee at a service station of the state oil company CUPET (Cuba Petróleos), said that “premium gasoline will go from 90 cents of a dollar to 1.20 per litre, and mid-grade from 0.66 to 1.05.” He added that a new, lower-grade gasoline will also begin to be sold, at 0.85 cents a litre.

If prices indeed rise, Cuban families will need more money to buy clothing, shoes and several food products that authorities do not consider of vital necessity, along with beverages, cigarettes, furniture, household products and home appliances.

But the government will also lower the prices of a number of basic products sold in dollars, including chicken, milk, noodles, soap and feminine hygiene products.

The prices of imported and nationally produced sunflower seed oil were already reduced in April from 2.45 to 2.15 dollars, and from 2.15 to 1.95 dollars, respectively.

But the talk of a reduction in prices of some products has had less of an impact among the public than the reports of price hikes, because people believe the prices of food and other basic items are already so high that a reduction will not make much of a difference.

Prices have been on an upward spiral since 1993, when the government legalised the dollar and opened to the public the exchange houses that until then only served foreign residents and tourists.

The Cuban government says the revenues taken in by the state- owned chain of stores that only accept dollars are invested in imports of food, which are sold to the public at subsidised prices, through a system of ration-books.

“In 1992, my family survived for a year on 400 dollars that I brought home from a trip abroad. Now, even though I earn more per month, it’s not enough to get by on,” said an employee of a foreign firm who asked not to be identified.

In the late 1990s, retail sales to the population in the chain of stores that sell only in dollars included a tax that raised the cost 200 percent above wholesale prices, according to specialised sources.

A considerable number of goods that can be bought in dollars are imported, and as a rule it is impossible to find items of comparable quality in stores that accept Cuban pesos.

The parallel circulation of the peso and the dollar is seen by economists here as one of the greatest distortions of the Cuban economy, caught in the grip of a severe crisis since the break-up of the Soviet Union and the disappearance of the east European socialist bloc in the late 1980s and early 1990s.

The peso currently trades at 26 to the dollar, while the monthly salary of Cubans averages 245 pesos. At the peak of the crisis, in 1993 and 1994, Cubans were paying up to 150 pesos for one dollar.

Experts at the non-governmental Centre of Studies on the Cuban Economy estimate that an average family in Havana needs seven times their actual salaries to meet their basic needs.

According to official sources, around 60 percent of Cuba’s 11.2 million people have access to dollars through government work incentive programmes, remittances from family members living abroad, or legal or illegal self-employment initiatives.

But “the statistics include people who have regular access to hard currency, as well as those who receive a few dollars occasionally, maybe once a year, when a family member sends them a little present or something like that,” one economist clarified.