Tag Archives: Inflation

HOW CAN WE REDUCE PRICES AND STOP INFLATION IN CUBA?

Posted on February 1, 2022 by Arch Ritter

Original Article: INFLATION IN CUBA

January 29, 2022

Omar Everleny Perez Villanueva (El Toque)

HAVANA TIMES – Figures published by the Cuban Government place inflation at 77%. Calculations by other economists have set it much higher. The complexity of giving a number proves just how complicated the Cuban economy is, where different markets coexist, alongside each other yet completely divided, each of them with their own prices and currencies.

If we stick to the basic concept of “inflation”, which is the widespread increase of average prices in a country over a certain period of time, then we need to calculate it bearing in mind a basic basket of products and services essential to keep an average household going.

There is a basic basket that is available to every household every month, and it is no longer subsidized today. However, it isn’t enough to cover the monthly needs of a family. It’s estimated that this basket only lasts approximately ten days, on average.

Families must turn to sketchy markets in either Cuban pesos or the USD priced products with foreign currency (MLC) cards to make up for the rest of the month, or to free supply or demand markets, both agricultural and industrial, or to the illicit market even to satisfy certain needs. Prices of food and other products have shot up by 500% on these markets.

This high rate of inflation distorts market signals and generates inefficiency, while driving up Cubans’ cost of living.

Causes and prediction of Cuba’s informal exchange rate in 2021

Less supply and more demand for foreign currency has prompted a tendency for the devaluation of the Cuban peso on the illicit market, almost all year round.

Cuba’s inflation crisis today isn’t news though. The country experienced the Special Period, which was the result of the disappearance of the Socialist market, when the national GDP dropped by over 35% in the early nineties, at the same time there was a setback in exports, going hand-in-hand with shortages of monetary resources because of the cancelation of credit that Cuba received from Socialist economies. However, times are even more testing today.

We know that prices shot up in the early nineties because of shortages of products and wages remaining the same, even though companies were paralyzed. This is why the population had 73% of liquidity compared to the GDP. This liquidity dropped when Cuban began to reap the benefits of its economic reform. Liquidity stood at 58.9% in 2018.

During the Special Period, the exchange rate for the dollar was 160 Cuban pesos given the non-existence of a formal market – very few people were receiving or earning in dollars. This currency was also needed to buy at new stores created for this end: there were products being sold only in dollars. With the creation of CADECAs (bureaus de change, the exchange rate stabilized at 24 Cuban pesos: 1 dollar, despite fluctuations. The Government decided to set this fixed exchange rate.

The inflation domino

No matter how much they say inflation can’t exist, it doesn’t answer to bureaucracy, leaders or their followers. The only way to control it is to apply appropriate measures at the right time and place; which takes us back to science, historic experience, studies and analysis, never a political agenda.

Currency Reform (January 2021) brought with it a significant pay rise. Quite a considerable group of workers are receiving higher wages via profit sharing at their institutions; although, in most cases, public sector workers’ monthly wages have less purchasing power today than they did in previous years, as a result of prices skyrocketing.

The basic basket anticipated by the Reforms Process was to be sold for 1528 CUP. This calculation must have been based on the official exchange rate of 1 USD : 24 CUP. However, it was recently reported that this basket shot up to 3250 CUP in Havana and to 3057 CUP in the eastern provinces, while average wages in the country only stand at 3838 CUP. Our friend Pedro Monreal recently said that the cost of the basic basket represented 46.6% of wages in 2019, but according to Cuban authorities, it now represented almost 85% in 2021 and in 2022, this figure will surely continue to grow.

While higher wages or incentives given to a part of the population is socially just, it implies more money in the population’s hands, without this returning to the State as revenue in sales or taxes, because there is very little supply on the market and services running.

The only way to calm down current inflation rates is by producing more. Solutions have been contemplated and the Government has announced a national plan. However, the only thing we’re seeing up until now is their insistence on getting rid of red tape that grinds production to a halt, without seeing any results. While they continue to bet on gradual results from their decisions, the economy will continue to roll backwards.

The following are possible actions that could be taken, but they aren’t the only ones:

  • Getting rid of red tape and decisions that come from “superior bodies” to guide state-led companies. The Government keeps saying that they need to decentralize, but results in companies’ production aren’t being seen because they don’t have any real autonomy.
  • Get rid of appeals to “make an effort”, “sacrifice” to increase production and substitute this with concepts such as “benefits” and “profits” and others that can be expressed in concrete, measurable statistics, and not aspirations belonging to the metaphysical universe.
  • Allowing MSMEs to import without state intermediaries.
  • Allowing private owners or foreign companies to invest in the retail market, getting rid of the State’s monopoly on retail stores; that is to say, go from direct control of commercial activity to indirect control via taxes and other control instruments.
  • Proposing a more encouraging official exchange rate for MSMEs and other private figures, so they don’t have to turn to the informal market to buy MLC, which the State then demands they purchase their supplies in.
  • Encourage business owners to sell in CUP, giving tax breaks to those who sell in this currency.

If only the reforms economists have been proposing for decades are finally set into motion. However, if they continue to disregard them, decision-makers should remember that there is a menu of options still, even in these circumstances, and despite some options on this menu clashing with firmly rooted political and ideological beliefs among the leadership circle.

The Reforms Process and foreign situation with foreign currency is leading to society’s reduced purchasing power, with the corresponding nuisance that this goes hand-in-hand with from a political standpoint. The population is questioning political decision-makers and their questions are growing every day that inflation grows. On the whole, economists point out two reasons for the downfall of a government: high inflation and high unemployment rates.

Inflation has already reached Cuba, and it needs to be reduced. But this implies bold decisions and the courage to break with dogmas. Clearly, will power and appeals won’t fix this problem. These are economic problems that can only be overcome with economic solutions. Cubans emigrating because they’ve lost hope shouldn’t be the solution. The number of people emigrating has shot up exponentially in January 2022 alone, even with the travel restrictions that exist today and the need for foreign currency to go ahead with this decision.

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¿CÓMO BAJAR LOS PRECIOS Y DETENER LA INFLACIÓN EN CUBA?

Posted on January 31, 2022 by Arch Ritter

27 / enero / 2022

por Omar Everleny Pérez Villanueva

Articulo Original: Inflación en Cuba

Cifras publicadas por el Gobierno cubano sitúan la inflación en un 77 %. Cálculos de otros economistas la han llegado a fijar en valores más altos. La complejidad de dar un número demuestra lo complicada que es la economía cubana, en la que coexisten varios mercados, muy segmentados, todos con diferentes precios y monedas.

Si nos atenemos al concepto más simple de «inflación», que es el incremento generalizado de los precios promedio en un país durante un período de tiempo determinado, habría que calcularla teniendo en cuenta una canasta básica de productos y servicios necesarios para la existencia de un hogar promedio. 

Existe una canasta básica mínima que mensualmente se pone a disposición de todos los núcleos familiares, hoy a precios sin subsidios. Pero sus cantidades resultan insuficientes para cubrir las necesidades mensuales de las personas. Se estima que, como promedio, esa canasta alcanza para unos diez días.

El resto del mes se completa con los mercados exiguos en CUP o MLC o con los mercados de libre oferta o demanda, tanto agrícolas como industriales, e incluso con los mercados informales que satisfacen determinadas necesidades. Los precios de los alimentos y otros productos en estos mercados han subido hasta un 500 %. 

Este alto nivel de inflación distorsiona las señales del mercado y, además, genera ineficiencias y ha encarecido la vida de las personas.

La crisis inflacionaria que en estos momentos hay en Cuba no es nada nuevo. El país atravesó un Período Especial, derivado de la desaparición del mercado socialista, cuando el PIB cayó en más de un 35 % durante los primeros años de la década de los noventa, al igual que se produjo un retroceso en las exportaciones, sumado a la escasez de recursos monetarios por la cancelación de los créditos que se recibían de las economías socialistas. Hoy, sin embargo, el momento es más complicado.

Se sabe que a comienzos de los noventa se produjo un incremento de precios debido a la escasez de productos y que los salarios se mantenían, aunque las empresas estaban paralizadas. Por eso la población llegó a tener un 73 % de liquidez monetaria respecto al PIB. Esa liquidez disminuyó cuando Cuba comenzó a obtener los frutos de su reforma económica. En 2018 la liquidez era de un 58.9 %. 

Durante el Período Especial la tasa de cambio del dólar a peso cubano llegó hasta 160 pesos por dólar ante la inexistencia de un mercado formal —pocas personas recibían o ganaban dólares—. También era necesaria esa moneda para comprar en las nuevas tiendas creadas al efecto: había productos que solo se vendían en dólares. Con la creación de las Cadeca (Casas de cambio), la tasa de cambio, a pesar de altas y bajas, se estabilizó en 24 pesos por dólar. La decisión gubernamental fue establecer esa tasa de cambio fija.


31/1/2022 05:37 PM CUBA

El dominó de la inflación

Por más que se oriente que no puede existir, la inflación no es subordinada de la burocracia, de los gobernantes ni de sus seguidores. La única forma de controlarla es aplicar las medidas apropiadas en el momento y los lugares apropiados; lo cual nos remite a la ciencia, a la experiencia histórica, al estudio y el análisis, nunca al panfleto.

El Ordenamiento Monetario trajo consigo un significativo aumento de los salarios. Un grupo no despreciable de trabajadores están recibiendo altos montos por la repartición de utilidades en sus instituciones; aunque, en la mayoría de los casos, las compensaciones mensuales de los trabajadores estatales hoy tienen menos poder adquisitivo que los salarios de años anteriores debido al desmedido aumento de los precios. 

La canasta básica prevista por la Tarea Ordenamiento era de 1 528 CUP. Debe haberse calculado teniendo en cuenta la tasa oficial de CUP a USD de 1 por 24. Pero recientemente se informó que esa canasta ascendía a 3 250 CUP en La Habana y a 3 057 CUP en las provincias orientales, mientras el salario promedio del país era de 3 838 CUP. El colega Pedro Monreal comentaba recientemente que en 2019 el costo de la canasta básica representó el 46.6 % del salario, pero de acuerdo con las autoridades cubanas, en 2021 era casi el 85 % y en 2022 esa proporción seguramente seguirá ascendiendo. 

La alta masa de salarios o estímulos entregados a un segmento de la población, si bien es justo socialmente, conlleva a una mayor masa monetaria en manos de la población, sin que retorne como ingresos para el Estado por concepto de ventas o de recaudación de impuestos, porque hay muy pocas ofertas y servicios en funcionamiento.

Solo es posible atenuar la actual inflación con una mayor producción. Existen soluciones pensadas y un plan nacional que el Gobierno ha anunciado. Pero hasta ahora lo único que vemos es la insistencia en llamar a suprimir trabas que frenan la producción, sin que se observen los resultados. Mientras se apuesta por la gradualidad en las decisiones, la economía continúa retrocediendo.

Entre las acciones por emprender podrían estar las siguientes, pero no son las únicas.

  • Quitar las trabas o decisiones que vienen de «órganos superiores» para orientar a las empresas estatales. Se sigue diciendo que hay que descentralizar, pero los resultados productivos de las empresas no se ven porque su autonomía no es real.
  • Desterrar las exhortaciones a «esfuerzos», «compromisos» para incrementar producciones y sustituirlas por conceptos como «beneficios» y «utilidades» y otras que expresen estadísticas concretas, medibles, no aspiraciones pertenecientes al campo de la metafísica.
  • Permitir a las mipymes que puedan importar sin intermediarios estatales.
  • Permitir las inversiones en el comercio minorista por parte de privados o empresas extranjeras, eliminando el monopolio estatal sobre el comercio minorista; es decir, pasar del control directo de la actividad comercial al control indirecto vía impuestos u otros instrumentos de control.
  • Proponer un tipo de cambio oficial más estimulante para las mipymes y otras figuras no estatales, para que no tengan que acudir al mercado informal a comprar el MLC que el Estado después le exige para sus compras de insumo.
  • Estimular las ventas en CUP de los empresarios dándole exenciones fiscales a quienes vendan en esa moneda.

Ojalá se implementaran las reformas que los economistas llevan décadas proponiendo. Pero si van a continuar sin tenerlas en cuenta, los decisores deberán recordar que incluso en estas circunstancias existe un menú de opciones, aunque algunas ofertas de ese menú choquen con preceptos políticos e ideológicos enraizados en sus esferas de dirección. 

La Tarea Ordenamiento y la situación externa con las divisas están llevando a una disminución del poder adquisitivo de la sociedad, con el correspondiente disgusto que el hecho trae aparejado desde el punto de vista político. El cuestionamiento de la población a los hacedores de política se mantiene y crecerá cada día en que se manifieste la actual inflación. Los economistas, en general, señalan dos razones para perder un Gobierno: la alta inflación y el alto desempleo.

La inflación llegó a Cuba, y hay que intentar bajarla. Pero eso supone audacia y valor para romper dogmas. Obviamente, la voluntad y las exhortaciones no lo van a resolver. Son problemas económicos que solo se superan con soluciones económicas. La emigración de la población cubana ante la falta de esperanza no debe ser la solución. Solo en enero de 2022 ha crecido de manera exponencial, aun con las restricciones que existen y las divisas que se necesitan para esa decisión.

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CUBAN PESO IN FREE FALL AGAINST THE DOLLAR

Posted on January 28, 2022 by Arch Ritter

Marc Frank, Reuters, January 26, 2022

Original Article: Cuban peso in free fall

HAVANA, Jan 26 (Reuters) – The Cuban peso was trading at nearly 100 to the dollar on the informal market Tuesday, according to a trader and online trackers, a depreciation of more than 30% in less than a month and four times the fixed official rate.

Informal Market Exchange Rates, January 28, 2022

The peso’s free fall is bad news for a population that for two years has confronted a grave economic crisis and unusually severe shortages of food, medicine and other goods, a predicament made worse by the coronavirus pandemic and the Cold War-era U.S. embargo.

Local economists and business leaders attributed the recent depreciation to a growing perception that Cuba’s economy continues to weaken, with runaway inflation, while the government appears unable to reverse the trend.

Independent online news outlet El Toque tracker, the most watched in the communist-run country, had the greenback trading for 97.50 pesos on Tuesday, compared to 72 when the year began.

The local electronic currency, called the MLC, which Cubans use on par with U.S. dollars to purchase goods in domestic specialty markets, was rising in tandem with the U.S. currency. It was trading on the informal market at 95.90 on Tuesday, the online trackers showed. The peso and MLC have no value outside of Cuba. The government fixes the exchange rate, currently 25 to a dollar, but has stopped trading dollars and other exchangeable currencies because it says it has no cash.

“We have to deepen the political discussion with those who are increasing prices in the state and non-state sector,” President Miguel Diaz-Canel told a Communist Party meeting last week, blaming speculation and greed for rising prices.

Cuba’s government late last year put annual inflation at 70%, but at least three economists consulted by Reuters say the rate is between 300% and 500%. Soaring prices have squeezed consumers already hard hit by economic crisis and the pandemic.

The state controls most wholesale and retail trade in Cuba, offering the most basic goods in pesos and virtually everything else in MLC, while all wages are in pesos as are subsidized utilities and fuel. Health care and education are free.

Cuban officials in December said they hoped to ease the burden by driving down inflation in the coming months, but sources told Reuters that the government was increasingly hobbled by the crisis.

Three foreign businessmen, requesting anonymity, said that some government entities that had managed during most of the crisis to meet obligations to suppliers and other foreign partners were for the first time falling behind on payments. “This has led people to realize the situation continues to deteriorate and MLCs, like the peso or letters of credit, have no real backing so there is a flight to exchangeable currency,” one of the businessmen said. That flight, they said, has further weakened the peso.

The government, meanwhile, had pinned its hopes of 4% growth in 2022 on the recovery of the Caribbean island’s all-important tourism sector.

“I think there was an expectation that the reopening of borders, airports, hotels, and travel would bring in more dollars and improvements in the economy, and that was holding back a further depreciation of the Cuban peso,” Pavel Vidal, a former economist at Cuba’s central bank, said. “But this recovery is turning out to be slower than expected and there is great pessimism everywhere, which is expressed in the exchange rate,” Vidal, who currently teaches at Colombia’s Pontificia Universidad Javeriana Cali, said.

 [AR1]

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LA ECONOMÍA CUBANA: ENTRE LA CONFUSIÓN Y EL SIN SENTIDO

Posted on January 21, 2022 by Arch Ritter

Mauricio De Miranda Parrondo, 20 diciembre 2021

La economía cubana: entre la confusión y el sin sentido

A partir de lo visto en el recién concluido III Pleno del Comité Central del Partido Comunista de Cuba (PCC), resulta claro que la dirigencia política del país insiste en conducir la economía cubana con criterios ideológicos voluntaristas que demuestran su confusión respecto a las leyes objetivas de la economía y el sin sentido que genera despreciar y vulnerar esas leyes.

Hemos pasado por esto varias veces y los resultados han sido siempre los mismos: el fracaso. ¿Cuál es el objetivo de insistir en lo que ya se ha demostrado que no funciona? Pareciera que a falta de creatividad y sentido común, insisten en revitalizar círculos viciosos que han afectado severamente el desempeño de la economía nacional desde los años sesenta del pasado siglo hasta hoy.

El problema de la inflación

La inflación es el aumento de precios de los bienes y servicios que componen la «canasta» del «consumidor promedio» de un país, y se mide como un índice de precios respecto a un período base. Lo usual es que se calcule mensualmente, como valor acumulado del año, y también interanual respecto al mismo período del año precedente.

En general, los economistas preferimos que se creen las condiciones para que los precios mantengan una relativa estabilidad, usando los recursos de las políticas monetaria y fiscal. En ocasiones, un incremento «moderado» de los precios puede estimular a los productores a producir más para aprovechar ese diferencial. Pero la historia económica indica que la inflación «galopante» o la hiperinflación destruyen la capacidad adquisitiva de la población y el tejido productivo, pues deterioran la demanda y, en consecuencia, poseen un efecto recesivo.

La teoría económica demuestra que cuando se establece un precio por vía administrativa, por debajo del que sugiere el equilibrio entre la oferta y la demanda, la oferta desaparece y se produce escasez de bienes. Entonces la inflación no se manifiesta en el mercado formal sino en el informal, hacia el cual se canalizan los bienes escasos a precios superiores.

Esa es precisamente la secuela que tienen los «topes» de precios en la actualidad, y también el efecto que tuvieron los precios administrados estatalmente en los años sesenta, cuando no se tenían en cuenta los costos de producción ni las condiciones del mercado.

Durante muchos años no se calculó la inflación en Cuba. En la crisis de los noventa se evidenció que aunque los precios oficiales no fueron aumentados, los productos que se vendían por esa vía representaban una fracción baja y decreciente de las necesidades de subsistencia de la población; sin embargo, en los mercados informales los precios siguieron un curso que estuvo determinado por el tipo de cambio informal del dólar con el peso cubano. Eso está volviendo a ocurrir, pero no solo en los mercados informales sino también en aquellos en los que se desarrollan actividades económicas no estatales.

El primer secretario del Comité Central abogó por hacer un llamado a los empresarios privados y cooperativos a «renunciar a parte de las ganancias sin caer en pérdidas» para bajar los precios, y de nuevo convocó «al pueblo», esta vez a consumar un «control popular» sobre los precios.

¿Realmente cree Díaz-Canel que de esa forma se combate la inflación? No, así se oprime una vez más al productor y el resultado será la caída de la producción, que es todo lo contrario de lo que se necesita.

Por su parte, Alejandro Gil, ministro de Economía y Planificación, hizo referencia en el Pleno partidista al tema de la inflación, emplazando a combatir a «las personas inescrupulosas que aprovechándose del escenario de escasez que está viviendo el país, intentan vivir de eso y hacerse ricos a costa de las necesidades del pueblo y no lo podemos permitir». A lo anterior añadió que «la fortaleza del socialismo que nos da y la autoridad moral para enfrentar eso lo tenemos que tener siempre presente y es el combate de este momento».

Haciendo gala de la escasa autocrítica a la que la dirigencia cubana nos tiene acostumbrados, el ministro insistió en que el problema no era el «Ordenamiento». No se ha admitido que la llamada «Tarea Ordenamiento» se realizó a destiempo, dejando pasar muchas oportunidades, en el peor momento posible y cuando existían muy pocas posibilidades de que la oferta de bienes y servicios reaccionara a la recesión.

Tampoco reconoció que el tipo de cambio utilizado no tuvo asidero alguno con la realidad y resultó de colocar un tipo de cambio «deseado» en lugar de tener en cuenta las condiciones del mercado cambiario. La economía no puede ser «forzada» a aceptar el tipo de cambio que los gobernantes consideran conveniente establecer.

Cuando se adoptan medidas como las tomadas por el gobierno, el mercado les recuerda que siempre existe la válvula de la informalidad, y eso es lo que está pasando en la economía. Quienes diseñaron el proceso y quienes lo aceptaron —que son miembros del aparato institucional del Partido, el Gobierno y la Asamblea Nacional—, pretendieron que los mercados podían ser dominados por sus voluntades; y está más que demostrado que eso no es posible.

La inflación actual

Una explicación sencilla de la teoría cuantitativa del dinero, afirma que el equilibrio monetario en un mercado existe cuando la oferta monetaria es igual al nivel de precios multiplicado por el nivel de transacciones (lo cual se traduce en el nivel de ingreso o del producto de una sociedad). Si se incrementa la oferta monetaria en condiciones de estancamiento económico, o incluso de recesión, no existe otra cosa que pueda pasar que no sea el incremento de los precios. Eso es lo que ocurrió en Cuba.

Habría resultado similar de producirse el reajuste de salarios y pensiones antes, pero las circunstancias serían otras si previo a ese proceso se hubiera estimulado la producción, lo que implicaba desatar los nudos que frenan el desarrollo de las fuerzas productivas en el país. Eso debió ser lo primero, y había que hacerlo mucho tiempo antes. El escenario de la crisis agravada por la pandemia fue el peor de los momentos posibles.

No obstante, hasta el momento nadie ha respondido por esos errores. No lo han hecho las direcciones del Partido elegidas en el 6to, 7mo y 8vo congresos; ni los gobiernos existentes desde entonces. Y ellos son responsables máximos de tales fallas, conjuntamente con los diputados a la Asamblea Nacional en las diversas legislaturas, por permitirlas sin cuestionamientos.

La moral y la ética que algunos dirigentes exigen al pueblo, debería llevarlos a asumir sus responsabilidades políticas por estos yerros. Al mismo tiempo, la inteligencia y el sentido común debiera conducirlos a análisis objetivos y a la adopción de medidas necesarias y urgentes, en lugar de continuar insistiendo en un enfoque ideológico que no conduce a otro lugar que no sea a un callejón sin salida.

No dudo que algunos productores, en su afán de lucro, «aprovechen» las condiciones del mercado escuálido y desabastecido de Cuba para obtener ganancias extraordinarias. Pero estoy seguro de que la mayoría simplemente está reaccionando a la realidad de sus condiciones objetivas.

El ministro al menos reconocía que determinados productores requerían insumos en divisas y debían comprarlas en el mercado informal a un precio varias veces el oficial —que está lejos de las condiciones del mercado— por lo cual eso se traslada a los precios. ¡Y es lógico que así sea! Ello no lo hace inmoral ni muestra una ética expoliadora, sino es el resultado de la acción objetiva de las leyes de la economía.

Adicionalmente, el gobierno sigue sin reconocer el daño moral causado a su imagen y a la del PCC con el establecimiento y posterior expansión de las tiendas en monedas libremente convertibles (MLC). Con esta medida se ha apelado al mismo expediente, segregacionista y rentista, que caracterizó el surgimiento del mercado en las llamadas shopping de los años noventa. Se apela a una dolarización de los costos de los consumidores y los productores privados sin que se dolaricen sus ingresos.

La inflación actual en Cuba es hija de la escasez estructural en los mercados de bienes y servicios. El sector productivo no es capaz de reaccionar a las necesidades de la demanda por múltiples factores. Entre ellos cabe mencionar las restricciones persistentes al desarrollo de negocios privados en una serie de sectores; las limitaciones del sector agropecuario en el acceso a los mercados; la obsolescencia tecnológica de la mayor parte de las industrias; los precios de monopolio de muchos servicios, entre ellos los tecnológicos y de telecomunicaciones; las restricciones al desarrollo de dichos servicios mediante un clima de competencia; el subdesarrollo de los sistemas de transportes, comunicaciones e infraestructura; pero sobre todo, la escasa capacidad de ahorro e inversión de la economía doméstica.

Eliminar la dolarización o dolarizar/euroizar toda la economía

Soy partidario de que Cuba conserve su moneda nacional. El establecimiento del peso en 1914, aunque atado al curso del dólar, fue una muestra de soberanía. Sin embargo, en las actuales condiciones el peso cubano carece de soberanía en todas las transacciones dentro del territorio nacional, debido a la decisión del gobierno de captar divisas frescas mediante tiendas en las que solo se venden productos en MLC.

Eso ha llevado incluso al restablecimiento de relaciones inter-empresariales que se denominan en moneda extranjera. Esta simple decisión es factor decisivo para la depreciación de la moneda cubana en el mercado doméstico, y debilita la tan cacareada soberanía que el gobierno dice defender.

Resulta inmoral y éticamente cuestionable que la sociedad cubana deba depender de transferencias desde el exterior para satisfacer necesidades elementales de la vida cotidiana. El carácter rentista del Estado, acostumbrado a exprimir por diversos mecanismos extractivos, se traslada a la sociedad en su conjunto y ello debilita el emprendimiento y la productividad.

No es posible continuar con la situación actual, que es una reedición de la que existía a inicios de los noventa. ¿Qué hacer? O toda la economía se expresa en pesos cubanos, a una tasa que se corresponda con las condiciones del mercado, o reconocemos de una vez y por todas que la soberanía nacional se ha deteriorado al punto de requerir que nuestra moneda deje de ser la que funcione en la economía del país y reemplazarla por otra que, debido a las circunstancias de enfrentamiento persistente con el vecino del Norte, podría ser el euro.

Para ello resultaría necesario un acuerdo con la Unión Europea, tal como han hecho Montenegro y Kosovo. Pero un acuerdo implicaría no solo una disciplina monetaria y fiscal, sino también una serie de condicionamientos políticos.

Yo preferiría defender la moneda nacional, no por prurito nacionalista o patriotero, sino porque contar con la soberanía monetaria permite que el tipo de cambio sirva de válvula de escape a los desequilibrios internacionales. Si la economía mantiene su vocación deudora respecto al mundo, la devaluación reflejará esa realidad, pero, si por el contrario, fuéramos capaces de crear condiciones para que la inmensa iniciativa empresarial y capacidad de emprendimiento de los cubanos, aun reprimidas, florezcan en condiciones de libertad —con regulación pero sin control—, podríamos prosperar económicamente, lo cual debe traducirse también en bienestar social.

Control popular sobre la gestión del gobierno, no sobre los precios

No es posible esperar un cambio fundamental hacia la prosperidad en las condiciones actuales de Cuba si no se democratiza nuestra sociedad. A estas alturas es imposible desligar las transformaciones estructurales de la economía sin realizar modificaciones estructurales en las instituciones políticas que apunten a una democratización real.

Los principales obstáculos frente a esas necesidades son: la persistencia del dominio político de un partido único, no democrático en su vida interna, que controla a toda la sociedad siendo minoritario y que en su gestión ha estado lejos de constituir una verdadera vanguardia de la sociedad; la exclusión de la crítica y la oposición a la gestión del gobierno, tildada de mercenaria cuando simplemente es resultado de los sucesivos yerros de una dirigencia que desconoce las realidades objetivas de la vida contemporánea y se niega a rendir cuentas ante la sociedad, como debería; un sistema institucional que no responde a las necesidades y demandas de la sociedad aunque insistan en no reconocerlo.

Esa realidad puede ser cambiada desde el poder o desde la sociedad, o desde ambos. Sin embargo, para empezar, valdría la pena que las autoridades abandonen su confusión y el sin sentido de sus medidas.

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CUBAN ECONOMY IN 2022

Posted on January 4, 2022 by Arch Ritter

It is essential to deepen the reforms where reality has shown that what has been done is not enough. Delaying that deepening is not healthy, as we know.

Juan Triana Cordoví

ON CUBA Newws, December 29 2021

Original Article: Cuban Economy in 2022

The good news that the decline in the national economy has stopped thanks to the good performance of the second and third quarters of this year, is doubly good because in general and due to the seasonal nature of our economy the first and the last quarter of each year are the busiest. So in 2021, that performance has changed.

It is also good news that a growth of 4% is planned for 2022, something that will require a significant effort if we take into account that the recovery conditions of the international economy are still far from reaching the years preceding COVID-19; that world inflation, and especially in the United States, seems to be turning into a big headache; and that world trade will continue to suffer from excessively expensive freight, a shortage of containers and high prices for them; foreign investment will continue to have a weak recovery and tourism flows on a world level will still be far from what they were three years ago.

Global inflows of FDI, forecast for 2021-2022. UNCTAD

Macroeconomic stability

Growth is much more than a goal, a slogan or an exhortation, and having done a good planning exercise is not enough. It is necessary to achieve a minimum of macroeconomic stability that reduces uncertainty for all economic agents, that guarantees that the rules of the game will be followed, that discretion will have adequate limits, that the adjustment will produce the necessary changes at the microeconomic level to transform the business system, clean it of inefficient enterprises — because not all those that are in losses are — and that the allocation of resources is guided by efficiency criteria. Efficiency and productivity must be rewarded, and the costs of this adjustment must be cushioned with adequate policies. Condemning efficient enterprises to losses is not the best decision in a country that needs to purge its production system.

Inflation, what to do?

Much has been written about inflation in Cuba this year. Today it is the factor that generates more instability, uncertainty, a reduction in the purchasing power of “reorganized” wages and, logically, social unrest. At least we economists know that speculation is not its cause, in the same way that we know that appealing to the good faith of sellers will not solve, even momentarily, this scourge.

Three exchange rates instead of one, as the design promised, the reincarnation of the CUC in the freely convertible currencies whose access is more restrictive and a passive monetary policy are among its monetary causes. If reality surpassed the design, then the design must be adapted to this new reality.

The other cause is historical, secular and structural, the insufficient supply that has accompanied us since the early 1960s, due to the weak production system and restrictions to import, especially as of the 1990s. Generating a significant increase in supply keeping in mind a speedy recovery of the production system does not seem achievable (500 state companies in losses, and 67% of cooperatives in an “unfavorable” situation indicate the opposite). Production, even in those economies that function with high dynamism, lags behind in relation to demand, it is less elastic in the face of a variation in income. It will not be there where in the short term prices can be dealt with. Improperly regulating them produces worse effects, it has also been proven. The other component of the supply remains, imports, also limited in the state sector by the availability of foreign exchange. But there are reservations and they involve sharing the consumer market and encouraging non-state agents — national and non-national — to have a greater participation and share the risks.

Consolidating and deepening the reforms

In the annual seminar of the Center for the Study of the Cuban Economy, my colleague Antonio Romero synthesized the characteristics of the environment we will have for 2022, taking into account the performance of recent years:

  1. Deep drop in global economic activity in 2020. Record for some regions/countries.
  2. Strong recovery process since late 2020/early 2021 in most regions/countries.
  3. The per capita income levels reached in December 2019 will not be exceeded until 2023.
  4. Asymmetric recovery, and with great risks/uncertainties:
  5. a) Recurrence of outbreaks/peaks of the pandemic
  6. b) High and rising inflation for some sectors/markets
  7. c) Dangers of the process of reducing monetary stimuli (liquidity) by the main central banks
  8.  Tensions in the international energy market
  9.  Problems with some supply chains/logistics internationally
  10. Growing conflict between major global actors (USA, China, EU and Russia).

Inflation in the United States and Mr. Biden’s “forgetting” his pre-election promises are the other two factors that complicate the national situation.

And at the same time he pointed out the opportunities that this same evolution offered to our country:

  1. -Increase in demand for goods and services in foreign partners,
  2. -Increase in the price of some basic export products (sugar and nickel) and
  3. -Revaluation of the health industry (especially the strategic importance of vaccines).

Sugar prices have gone up by 38% from January to October 2021. It is true that our restriction is on production. Save the sugarcane industry! The phrase deserves more than one book. Saving the sugar industry is not recovering it, it is making it new, from the furrow to the shipping terminal. From 2016 to 2020, this industry received investments of 1.035 billion dollars, less than the trade sector (1.563 billion and not to mention 15.541 billion in the real estate sector). Year after year we witness a new unfulfilled plan to recover the sugar industry, hopefully, this time it will be different.

Nickel prices also offer an opportunity (37% increase in their prices from January to October) and world demand seems to maintain a certain dynamism. Our limit is once again in the productive capacity. Mining was allocated 1.413 billion in the same period and not everything was for nickel mining.

Undoubtedly the greatest opportunity could be in the healthcare and pharmaceutical industries. Despite the complicit silence of some international institutions regarding Cuban vaccines, it is indisputable that today it is our greatest strength in the industrial sector.

The recovery of tourist flows on a global scale will depend on the performance of the pandemic, which has once again shown its face in the omicron variant and complicates our source markets again.

World foreign investment flows will not reach the dynamics of before 2019. Competing for scarce flows with other markets is a difficult task. It is true that something has been announced in relation to FDI, but it seems that time does not count and the necessary reform of requirements and procedures did not arrive in 2021. It is not enough to recognize that “the little progress is not attributable only to the difficulties generated by the blockade and, in the last two years, by the international crisis derived from the COVID-19 pandemic, but also internal factors.” And if we know which ones, then why don’t we just eliminate them?

Because there are external factors on which there is no way to influence to achieve favorable changes to our economy, because there are structural failures that will not be resolved in the short term; consolidating the reforms will be decisive. It is a difficult exercise that requires many means, from the timely and adequate coordination of actions and organizations to the competence of the people who work in it; also agreeing to pay unavoidable costs until the resizing of the state business sector is promoted, not only in terms of its size, but also in the way it operates in the economy. This exhortation to achieve greater autonomy must be made really effective. And also that other that demands a greater relationship with the private and cooperative business sector. More than a thousand SMEs in three months, in the worst conditions in which an enterprise can be born, is enough to understand how dynamic this sector can be. More effective support, better incentives — especially tax incentives —, less prejudice and greater spaces for action are still necessary.

Today there are more than seven hundred local development projects. Local governments should understand that having more local development projects and promoting a greater number of small and medium-sized enterprises is decisive for the prosperity of their municipalities. Thinking of the local as the small, as the complementary, does not seem to be the best option. “The local is not the utopia of a development from the small, but the construction of capacities from the territory to promote sustainable development at the municipal, regional, national and international level”1 It is necessary to take a look at the curb of the well and look from there inward and outward.

It is essential to deepen the reforms where reality has shown that what has been done is not enough. Delaying that deepening is not healthy, as we know.

If a 4% growth is achieved, we will still be very far from the growth dynamics we need, far even from what was achieved in a year like 2019 and we all know that even in that year our production was not able to adequately satisfy that part of the demand that depended on it. It will be good to grow and it will be better if all Cubans manage to perceive it.

Note:

1 Carrizo Luis and Gallicchio Enrique (2006): “Desarrollo local y gobernanza. Enfoques transdisciplinarios. Investigación y políticas para el desarrollo en América Latina,” Uruguay, Latin American Center for Human Economy, CLAEH.

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CUBA SEES SLOW ECONOMIC RECOVERY AT 4% IN 2022 – OFFICIAL

Posted on December 15, 2021 by Arch Ritter

By Marc Frank

Reuters, December 12, 2021

ORIGINAL ARTICLE

HAVANA, Dec 12 (Reuters) – A cash short and crippled Cuban economy will grow 4% next year as the Communist-run country struggles to recover from an economic crisis, according to a report by the prime minister posted over the weekend.

Prime Minister Manuel Marrero’s annual report said the economy began a slow recovery of around 2% this year after declining 10.9% in 2020 and stagnating for several years before that.

New U.S. sanctions on top of the decades-old trade embargo and the coronavirus pandemic cost the import-dependent nation at least $4 billion in revenues over the last two years, according to the government.

The shortfall led to a 40% decline in imports and has hobbled the government’s ability to provide Cubans with food, medicine, consumer goods and inputs for industry and agriculture. Cuba has defaulted on some payments to its creditors and suppliers.

The government’s decision to devalue the peso for the first time since Cuban leader Fidel Castro’s 1959 revolution combined with increased dollarization of the economy have sparked triple-digit inflation estimated by local economists at around 500% this year.

The goal of 4% growth could indicate that Cuba will still see shortages of critical goods and have continued difficulty paying creditors, said a western businessman in Cuba with years of experience in the market.

The government is preparing measures to tame inflation and strengthen the peso, Marrero said. The peso is trading for around 70 to a dollar on the informal market versus the official rate of 24 pesos.

“A set of measures must be adopted with a view to stopping the inflationary spiral,” Marrero said in his report, without stating what they might be.

Marrero credited a vaccination campaign that has reached 80% of the country’s population for clearing the way for a nascent recovery next year.

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ROARING INFLATION COMPOUNDS CUBANS’ ECONOMIC WOES

Posted on June 16, 2021 by Arch Ritter

Marc Frank

Wed, 16 June, 2021,

Original Article: Cuba’s Inflation Accelerates

Marc Frank

HAVANA (Reuters) – Cubans woke up all last year wondering where they could find basic goods such as milk, pork, rice, beans, medicine or shampoo. These days, they also ask themselves: “if I do, what on earth will it cost?”

Amid widespread shortages, the near-bankrupt, import-dependent country has increased sales of goods in convertible currencies like the dollar over the last year, even as it stopped exchanging pesos for those currencies.  That has forced many Cubans to acquire convertible currencies on the black market where they have surged to as much as threefold the official rate since the government sharply devalued the peso https://www.reuters.com/world/americas/explainer-how-cubas-monetary-reform-will-take-place-impact-economy-2020-12-11 in January.

Alternatively, Cubans must purchase the products “at even higher peso prices from resellers,” said Cuban economist Omar Everleny.

Many goods are simply no longer sold in peso shops despite billions more pesos now being in circulation.

The result of dollarization, scarcity and devaluation: prices have skyrocketed and inflation will likely come in at a minimum of 500%, and as much as 900% this year, according to Pavel Vidal, a former Cuban central bank economist who teaches at Colombia’s Pontificia Universidad Javeriana Cali.  “Every day becomes much more difficult because the prices of everything continue to rise,” said Arisleidis Blanco, who works at a private cafeteria in Havana.

Cuba’s government largely blames U.S. sanctions, which were ratcheted up under former President Donald Trump, and the coronavirus pandemic that has ravaged Cuba’s tourism industry, for its economic woes. Some critics say the main issue is the inefficiency of the state-run economy, despite some market-style reforms.

The Communist-run state retained its World War Two-style ration card that offers some highly subsidized goods. It also increased state wages and pensions, up to five times, when it devalued the peso by around 95% in a bid to cushion the blow.  But that covers only some 60% of the population and leaves many Cubans struggling to navigate wildly fluctuating prices to cover their needs.

“The government used to sell LED light tubes for 30 pesos,” state bakery employee Ana Rebeca Labrada said. “On the informal market they now cost 400 to 500 pesos and there are none in the government stores, not even for convertible currency.”

Cuba’s government says there is no money in the bank to exchange or import the goods and sell them for pesos which cannot be exchanged outside the country to buy more.

The economy declined 11 percent last year after years of stagnation and according to Cuban economists has continued to fall so far in 2021.

Inflation should just be a temporary setback, authorities say, with the economy due to pick up as the pandemic subsides and reforms yield results. The devaluation for example aims to boost exports and reduce imports in the medium term.

That is little solace though for Cubans struggling to shop for basic goods as COVID-19 cases hit new highs.

Economists like Everleny say the U.S. embargo is real but the government needs to implement long overdue reforms to boost supply and until then, the informal market, and with it surging prices, will continue to flourish.

Last week, the state was selling rice only on the ration card for 10 pesos a pound and on the informal market it was 60 pesos, said Havana resident Miriam.  A 50 peso bottle of cooking oil fetched 200 pesos and a pack of hotdogs 80 pesos compared to the 27.50 pesos when available at the stores, she said. Powdered milk was being rationed for children and the elderly at 2.5 pesos a bag and sold for 300 pesos on the street, she said.

Queuing for currency exchange

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MORE AND MORE CAPITALIST CRACKS IN CUBA

Posted on January 21, 2016 by Arch Ritter

Havana Times, Havana, January 20, 2016

Rogelio Manuel Diaz Moreno

Original article here: http://www.havanatimes.org/?p=116209

Cuba April 2015 213 Cuba April 2015 222

HAVANA TIMES — At the close of 2015, a journalist for Cuba’s Juventud Rebelde newspaper reported that a slight decrease in food product prices had been seen the previous year. The regular contributors and readers of Havana Times then expressed their bewilderment, what with all of the evidence against such a claim.

Many media sites – with greater or lesser candor, depending on their nature – continue to address Cuba’s soaring living costs. Concerns have reached such extremes that a decision to adopt emergency measures was made at the last parliamentary session. This was done when Cuba’s official media sought to deliver the good news that the island’s GDP had grown by 4 %.

Readers will likely recall the oft-repeated government promise that increased production would bring about a drop in prices. No few of us have criticized such claims for their total lack of objectivity.

Personally, I find most statements on the subject made in the news, and the attitude of members of parliament, rather depressing. The reason is simple: the fact they beat around the bush on this matter and show no willingness to acknowledge its true nature. We are encouraged not to become informed about or study the issue, which, to be sure, isn’t that complicated. It’s capitalism, plain and simple.

Though lacking in the talents of the great experts in political economy, we have pointed to a number of basic truths about this situation in previous posts. Those who boast of being Marxists ought to know these well, and they have been confirmed time and time again. As long as such realities aren’t acknowledged, the tired spiels of politicians, the beating of chests by leaders and the appeal to the conscience of workers will be for naught.

I don’t question the growth figures offered by the authorities. Given certain, positive external conditions, an economy based on liberal market mechanisms can indeed grow in macroeconomic terms. And that’s what we’ve had here: cheap imported raw materials, financial arrangements and favorable credit and a considerable softening of the US embargo/blockade. In the case of tourism, this is reflected in the 30% rise in number of visitors. Throw a domestic policy of deregulation into the mix and you’ve got an excellent recipe for growth…capitalist growth, that is.

Because of its very nature, the benefits afforded by this type of growth cannot reach working people, which make up the majority of the population. This is the first point we’ve drawn attention to.

Production has grown and supply has grown with it. They have grown because the policies implemented have lifted certain restrictions that had hitherto been applied. These same policies, however, have produced a specific type of supply side growth, the type that accompanies the growth of demand. More money has flowed into Cuba and a privileged class capable of paying higher prices (and thus raising the standard of living) has flourished.

Have a look, for instance, at Havana’s neighborhood of Miramar. The nouveaux riches have taken up all vacant spaces with their bourgeoning mansions. A good many restaurants have been established, where a single meal costs everything I make in a month (which is twice the average salary). Those restaurants aren’t aimed at people like me, but they have regular customers.

The products and services offered by the State also do not favor a decrease in prices. An employee of ETECSA – Cuba’s telecommunications monopoly – told a journalist that many customers, particularly young ones, ask for cutting-edge equipment, those that cost eight or ten Cuban salaries put together. I walk by these people in public outdoor Internet navigation areas. Despite the many shortcomings of the service, they pay two to three days of my wages to use it. Other basic products have circulation and added value taxes that prove prohibitive.

There’s more money in circulation thanks to remittances, foreign investment, tourism and the new entrepreneurial class. The State itself now has more resources, but its control mechanisms are as inadequate as always – in other words, there’s more to be misappropriated. There isn’t more social justice, there’s just more solvency.

To remain objective and avoid neglecting the positive side to this, the health sector carried out wage adjustments (mostly nullified by inflation). I am also aware of other investments aimed at improving medical services, albeit with many internal deficiencies. These measures, however, are far from satisfying all of the people’s needs, and most people do not spend their entire week at the hospital. As another Havana Times contributor reports, there are other, parallel measures aimed at cutting back on activities, spending and wages.

Thus, within the space of the private economy, the law of supply and demand simply establishes a price balance. We are flooded with complaints about the hoarding of goods, speculation, and monopolistic maneuvers by entrepreneurs to optimize profits at the expense of customers. These are all natural mechanisms inherent to the market and the blessed supply and demand system. We must set aside naivety. Quite simply, that is the explanation offered us by the whole range of political economy theories. You don’t play “nice” in capitalism.

In this context, to say that “Cuba is a socialist country and cannot function that way” constitutes a naive abstraction. What determines the functioning of a socio-economic system are its productive forces and its relations of production, not mere words. “The State has to intervene, regulate prices and fine infractions” – these are calls to return to measures that have been proven to be ineffective time and time again. Popular discontent has again bubbled up to the surface and politicians have revisited the demagogic attitudes of claiming to protect them from the demon they have set lose with their reforms.

What were the consequences of the lastest attempt to regulate food prices? Understocking, which is music to the ears of the black market. If there’s something that’s worse than the “free” market, it is intervention by a bureaucratic apparatus and corruptible officials (inspectors and their underlings).

In short, Cuba’s growth is visible, but this growth is not for everyone, not even the majority. The new game has new rules and the winners walk away with everything. The most painful thing will be the growth of inequality and the impoverishment of the working majorities without access to the new sources of wealth.

Cuba April 2015 120Street Vendors of Vegetables

Cuba April 2015 211

State Food Store, Jovellar and Hospital, Nuevo Vedado

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