mujer mercado alimentos

Photo: elTOQUE.

The Price-Inflation Dilemma Divides Cuban Authorities

10 / abril / 2023

The price of rice, Cubans’ most staple food, has tripled since mid-January 2023. In December 2022, you could buy a pound of this grain for 45 or 50 pesos a pound at agro-markets. A month later, it’s hard to find it selling for under 150 pesos.

Faced with this situation, some people, with the means, try to save money by buying it in bulk. A resident from Camaguey who was consulted for this article said he paid 13,000 pesos for 100 pounds, in the last week of February.

The average Cuban consumes approximately 11 pounds of rice per month, seven of which are sold through the rations booklet. Historically, you could buy this quota in the first few days of every month, which made it easy for families to manage their budgets and limited speculation, to some degree. Plus, it was common for the State to organize sales in rice-producing provinces, selling the grain for a cheaper price than retail prices.

Intermittent imports and a drop in national production have ended this order of things. Delays in the arrival of “groceries” have been commonplace since mid-2022. On February 21, 2023, the Ministry of Domestic Trade (MINCIN) announced that it was going to complete the distribution of 2,090 tons of rice that were still pending that month. This failure to deliver rice hit the eastern region the hardest, Matanzas and Ciego de Avila.

It’s been hard to guarantee even a part of what was agreed for provinces such as Guantanamo – without ports to receive imports or lands cultivating grains. In early March, the director of the Wholesale Food Product company in this region announced that “we are 255 tons short to be able to sell at least the two pounds of rice that were normally available.” Transporting this grain by highway from Santiago de Cuba would take another four days, he anticipated.

Missing rice

Almost a year after the Food Sovereignty and Food and Nutritional Security Law was passed – and four months after it came into effect -, its clauses seem unrealistic. According to official statistics, access to “a sufficient, diverse, balanced, nutritious, and healthy diet,” as stipulated by the Law, became difficult in 2022. The latest update to the Consumer Price Index estimates that prices varied by 42.08% on average between January 2022 and January 2023; in other words, you’d need to invest at least 14 in a product or service that used to cost 10 pesos before.

This upward trend was driven by food and non-alcoholic beverages, which became 67.97% more expensive over this period, and restaurant and hotel services went up 59.85%. The important thing about this is that when the study was being carried out, the effects of the “explosion” in rice prices were yet to be felt, and flour shortages hadn’t reached their current level leading to the bread shortage crisis. Bread being a basic component of most school snacks, and also making street food services more expensive.

In other similar situations, price caps were held up as a leading measure. However, after a series of failed experiences, the Government itself is even finding it hard to “militantly defend” their effectiveness. Contradictory opinions about this issue boil down to local authorities vs. national authorities. While the former continue to bet on administrative control of the market, some officials from the “central level” have given signs that they understand the problem is a lot more complex.

This was demonstrated by the president of the National Assembly, Esteban Lazo, during a meeting with workers from the food industry sector in Havana, on March 4, 2023. “As long as this situation continues [budget deficit], you can’t drop prices, and you can’t raise wages either because it makes the problem worse. More money on the streets, higher prices. People say: why isn’t the State doing something to fix this? The State can’t fix it, because if it caps prices, prices of sweet potato, cassava, milk… of all these things, then they disappear and appear elsewhere for three times the price. And who ends up paying? The people who earn the least. So, the only way out of this is to produce more,” he mused.

It’s easy to take this stance when you aren’t in contact with ordinary citizens, who have seen their purchasing power plummet in the past two years. However, being realistic is a “luxury” the municipal and provincial governments can’t give themselves.

Under social pressure and the March 26 elections drawing near, on March 6th 2023, Villa Clara’s Provincial Government announced a price cap on 20 farm products. Their objective being to limit profit margins by a maximum of 40%, according to Governor Alberto Lopez Diaz.

The new scale tries to force a 30% discount, on average, of the price of six staple root vegetables, the same amount of grains, five kinds of vegetables and three kinds of fruit, and could even extend to bread in the near future. This new price scale was preeempted at the press conference in which they explained that prices won’t be “fixed” and can be adjusted regularly, on the basis of “revenue and peaks in harvests.”

The announcement of this regulation sparked different opinions. The majority of opinions posted on the Government’s page on Facebook believe that it isn’t enough, in terms of how much prices are cut, as well as not going hand-in-hand with incentives for producers. Esther Morejon, a retiree from Las Villas Central University, wondered “what wages are the leaders of our country accruing to get by,” if pensioners now completely depend upon their families; “those who don’t have this support […] are having a really rough time,” she added.

Beyond populism

Somehow anticipating the Villa Clara authorities’ regulation, economist Oscar Fernandez, a professor at Havana University, warned on his Facebook page, a few days before, about the dangers of “responding to an undoubtedly fair complaint in a populist way.” After explaining that “regulating markets isn’t the same thing as capping prices or fixing profit margins,” the expert highlighted that “financial, fiscal, commercial instruments that act as incentives for key links in the supply chain” can only be designed after an in-depth study.

The Provincial Councils and Municipal Assemblies don’t have the power to implement these “instruments” or even address government policies that would need to be reconsidered. At a provincial level, they can only pronounce price caps, speed up the delivery of idle land and pressure ACOPIO (the government’s purchasing agent) to honor timely payments to farmers.

This is just the tip of the iceberg, economist Pedro Monreal believes. He thinks the Government’s efforts spend too much time focusing on commercialization, instead of prioritizing a solution to “production problems in agriculture.” “These problems [low investment, high supply prices…] as well as an inefficient focus on commercialization reduce the ability to produce and keep prices high, playing into “normalizing” high prices,” he tweeted on March 6, 2023.

With a budget deficit of over 75 billion pesos and less revenue in sectors such as medical collaboration and tourism – January 2023 ended with 250,000 foreign tourists, a third less than the number that came in the same month in 2020 -, Cuba is facing great problems to keep up its imports. In the second half of February 2023, liquefied gas stopped being sold because there wasn’t any foreign currency to pay a ship that arrived in Mariel with this fuel; while shipments of wheat and rice were unloaded directly from boats to trucks that took it to mills and bodega stores. In this situation, depending upon imports of 80% of Cubans food makes the country even more vulnerable.

“We need to cap [prices], not cover them up,” a resident from Pinar del Rio joked when talking about the price scale established by his provincial government for March 2023. Ever since Hurricane Ian swept through the country last September, authorities in Pinar have published monthly updates of this list, which inspectors should then enforce. Judging by comments from the local population, it hasn’t worked so well up until now. Nothing indicates that things will work differently in Villa Clara – or anywhere else it’s applied. The spike in prices for rice has demonstrated just how little administrative measures can do when the market has insufficient supply.

This article was translated into English from the original in Spanish.

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