Shortages, inflation frustrate Cubans struggling to get by

Grocery shopping has become an increasingly costly and arduous struggle for many people in Cuba where the pandemic, inefficient production, government controls and US economic sanctions have aggravated an economic crisis.

A drastic drop in crucial tourism income caused by COVID-19 helped spur the government last year to adopt reforms it had long considered. Those included elimination of an inefficient dual currency system that had made the local peso – in which most Cubans were paid – a sort of second-class currency.

It had been a poor cousin to the ‘convertible peso’ used by tourists, the people who worked with them, and those who received money from relatives abroad.

Adoption of a single currency for all, along with shortages, led within a few months to sharply increased prices for many goods that weren’t matched, for most at least, by the simultaneous rise in salaries.

And because the government has had trouble producing or importing all the goods needed, it also led to emergence of a black market, with people paying a premium for dollars or for scarce items.

That has led to limits on individual purchases.

The problems have fed a sense of inequity among many that is especially bitter in a socialist system that prides itself in a relatively equal distribution of goods.

“It’s impossible to maintain my family on my salary,” said Marcia Ochoa, a state worker who said she makes 2,400 pesos – US$100 at the official rate – each month and lives with her husband and elderly parents.

She said she depended on money sent by her son in the United States to help buy things like soap, shampoo and food.

Life became more complicated when the US tightened economic sanctions on Cuba in November 2020 and blocked remittances via Western Union.

Her son used to send her roughly US$100 a month via Western Union. “I could go to a store to shop and resolve many problems.”

With those exchange houses closed, she relies on visitors who bring in money from her son and recently got about 70 pesos per dollar on the informal market – nearly three times the official rate. That black market rate over the past week rose further to about 100 to one.

To help confront shortages and bring in hard currency, the government also expanded a network of hard currency stores that are often better stocked but much more costly than standard shops. They now accept dollar-linked debit cards – though not cash itself. Cubans can use euros or Canadian dollars to purchase such cards.

But long lines now are common both in local and hard-currency stores, where products ranging from soap, to beans, to chicken, tend to suddenly appear and rapidly vanish.

That’s led to an increasing black market as people speculate by buying what they can and reselling it days later when shortages increase.

In recent weeks, the price of powdered milk touched about US$40 per kilogramme (US$18 per pound) on the black market

“There are many factors [for the rising prices], but the principle is the fall in the supply of goods and services,” said economist Omar Everleny Pérez.

The government itself has recognised inflation as a serious problem.

Economy Minister Alejandro Gil said overall prices rose by about 70 per cent in 2021, though increases for some goods clearly have been far greater.

A carton of 30 eggs cost 150 pesos – US$6 – last year, but are now 400 pesos on the black market. A package of sausage that cost 40 pesos is now 118 even in official stores. Pork that used to cost 40 pesos a pound now goes for 200.

“In the country it is the topic of greatest debate and worry,” Gil said recently on state television. “We are permanently seeking alternatives within our possibilities.”

He said the problem was due to “a deficit of supply,” given limited domestic production, which “brings with it speculation and resale” of goods.

Still, he noted that prices for electricity, communications and subsidised basic good rations had held steady, even if rations have been cut back in recent years.

Inflation and shortages were commonly cited complaints among Cubans who took to the streets in nearly unprecedented protests last July.

While the government has moved to allow more private enterprise in a system once almost wholly state controlled, many economists say it needs to be yet more flexible, for example, by allowing freer export and imports and allowing more professionals to work privately. Some urge greater automony for state enterprises estimated to employ 70 per cent of working Cubans.

“There are many short-term macroeconomic imbalances that are strangling a part of the population and the companies,” said Oscar Fernandez, an economist at the University of Havana.

AP