Cuban Ministers Meet to Discuss Measures to Address a ‘War-Time Economy’

The cap on maximum profits for the private sector on sales to state-owned companies comes into force on Monday

Experts point out that price controls have done nothing to help the Cuban economy. / 14ymedio

14ymedio bigger14ymedio, Madrid, Monday, July 1, 2024 — Today, just as a cap on private-sector profits from sales to state-owned companies takes effect, the official communist party newspaper Granma opened with an article devoted to the most recent Council of Ministers meeting. The gathering was called to discuss what were describes as “issues of vital importance,” specifically ways to for stabilize the country’s “war-time” economy. Nothing in the article, however, indicated what measures might have been adopted that would put an end to the country’s inflationary crisis, nor is the meeting even being billed as such.

“Among other measures, a single, inclusive pricing policy will be established that will be applied equally to all areas of the economy, including both state and non-state sectors,” is as specific as the article gets. However, one need only take a quick trip back in time to see the same phrase being used on at least two other occasions. One was in 2020, when it was announced that efforts were being made to create a single, inclusive pricing policy that would apply, in equal measure, to all areas of the economy and that would serve as the core principal for generating products and services.

After Cuba abandoned its dual currency system and adopted a single currency in 2021, the same idea was trotted out again during a similar meeting. At that time, Prime Minister Manuel Marrero stated, “An update of Cuba’s pricing policy, which was intended to be a single, inclusive policy, equally applicable to all areas of the economy, was one of the ongoing priorities of the Ministry of Finance and Prices.”

Four years later, the announcement remains the same even though the economy is now even further underwater

Four years later, the announcement remains the same even though the economy is now even further underwater. President Miguel Díaz-Canel pointed to delayed deliveries of essential rationed goods, the instability of the National Electrical System and excessive inflation as being among the worst repercussions of the crisis. In his opinion, however, these are “not always a the result of supply and demand but something of a totally speculative nature.” In any case, his claim cannot be proven since supply and demand — to say nothing of economic productivity — are not features of the country’s economy, which Cuban authorities have themselves acknowledged and for which the National Office of Statistics and Information has provided ample documented evidence.

The prime minister, who attributed much of the problem to bureaucracy and insufficient oversight, called for implementing measures the government has designed to address the issue. Nothing is known, however, about what macroeconomic stabilization package the government might have prepared and few people believe one actually exists.

Mildrey Granadillo de la Torre, first deputy-minister of Economy and Planning, said there is a set of measures intended to “correct macroeconomic imbalances, increase the country’s foreign exchange earnings by different ways and means, encourage domestic production (with an emphasis on food production) and regulate the operations of non-state forms of management,” a euphemism the regime uses when referring to the private sector.

One of these measures, in fact, takes effect today. It limits profits from purchases by the state sector from the “non-state” sector for products and services. It also is intended to “promote partnerships and not cede productive capacity [to the private sector].” In the meeting, Díaz-Canel urged local administrators to continue making purchases from private companies based on the particular needs of their regions but “in an efficient manner,” noting that he believed the state was making “excessive payments” to itself.

During his frequent tours though the country’s provinces, the president has claimed that he always finds examples that indicate things can be done well, adding, “Let each of them multiply, with the conviction that all of us are here to save the Revolution and to save socialism.” Díaz-Canel, who always arranges a visit to a successful producer or businessman, does not seem to have noticed, however, that these cases are the exception, not the rule, and are generally due to privileges granted these operations by the state.

“Let each of them multiply, with the conviction that all of us are here to save the Revolution and to save socialism”

Attendees at the meeting discussed the next national budget, which is already being drafted even as the current one is being urgently revised to address “war-time economic conditions.” This phrase simply confirms the dire state of the economy which, rather than recovering from the damage caused by the pandemic, continues to worsen. The minister of Economy and Planning, Joaquín Alonso Vázquez, said in 2023 that there had been “a decline compared to the previous year and to the estimate for the first half of 2024.”

Exports targets for of biopharmaceuticals, processed tobacco, charcoal, lobster, eel and other fishing products were met, but neither nickel, nor honey nor raw tobacco met quarterly forecasts. Income from overseas medical services and tourism also improved, though the latter was below expectations. On the other hand, income from telecommunications fell.

“Rather than focusing on what happened in the first six months, it would be better to identify the causes in order to determine what we should do in the second half of the year,” said Vázquez.

There was no data on the fiscal deficit though one can assume the worst since there were warnings that the first quarter figures would be high.

“Taking into account that the economy needs more resources than it generates, the broad objectives were set” with the the usual good intentions, which has never produced good results.

14ymedio found only a few instances in Cienfuegos where inspectors visited private businesses to tell them that they had to limit their prices

Meanwhile, there are growing rumors on social media about small and medium sized businesses being hit with price controls. Upon further investigation in several provinces, 14ymedio found only a few instances in Cienfuegos where inspectors visited private businesses to tell them that they had to limit their prices if they wanted to avoid being fined. So far, officials have not commented on the matter.

On Sunday, economist Pedro Monreal commented on the price lists circulating online. “I am not disclosing them because I am not sure the they are reliable but they are figures that the government should be reporting,” he wrote. “The measure is a repeat of the same mistake the Ministry of Finance and Prices made. It relies on a flawed methodology to determine prices at the local and national level. It is an attempt to impose a predetermined profit that fails to take into account the actual relationship between supply and demand,” he points out. “If Cuba’s experience with price caps has taught us anything, it is that they do not work well. The ’contained prices’ we see in official reports are a form of ’repressed inflation’ that shows up in the form of shortages and black market prices.”


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