14ymedio, Madrid, 13 April 2022 — Stores in Cuba that take payment in the national currency — Cuban pesos — will be able to set the prices of the products they sell according to a resolution of March 30 published in the Official Gazette this Tuesday. Chain store bosses will now have the power to decide the prices of the items they have available, with the exception of a group of products considered essential, such as edible oils, chicken thighs and drumsticks, and ground poultry and beef.
The new provision indicates that these measures will be carried out under the supervision of the president of the Business Administration Group (Gaesa), who will inform “this Ministry about the results obtained from the decentralization process, at the end of 2022.” Gaesa is the military conglomerate that owns several chains of stores that only accept payment in hard currency, which is directed by General Luis Alberto Rodríguez López-Calleja, the former son-in-law of Raúl Castro and a strongman of the regime.
The group of products with controlled pricing also includes domestically produced hygiene and cleaning items of an economical line, such as toilet and bath soap, detergents, toothpaste, deodorants and cleaning cloths. Havana Club rum is also a protected product.
The rule indicates that, when setting prices, “current general principles are taken into account, with a comprehensive evaluation of costs and expenses with criteria of rationality and efficiency, as well as the correlation with market benchmarks.”
The authorities have called this measure “decentralization of powers to the business system,” while the Cuban economist Pedro Monreal has described it as ‘Ordering Task* 2.0’. The economist considers it “a risky bet, with no explanation of its economic rationale” and believes that this future “microeconomic price flexibility” can “provoke macroeconomic instability.”
According to Monreal, the decision seems to be based on the fact that there will be a positive effect of profitability on investment, instead of a negative effect on aggregate demand due to the reduction in real income, which can make the complex situation worse, since that there is a full conviction that prices are going to rise, in the current context of high costs for production due to the increase in the cost of raw materials, imports and freight, among other things.
The first reactions to the news, published by the official media Prensa Latina and Cubadebate, could not have been worse. There is a panic among the population that prices are going to increase immediately and they fear that businesses will raise prices trying to obtain higher profits.
“Another measure that instead of curbing inflation and favoring the population, favors the profitability of companies, already very high given the sales in the discriminatory stores in MLC [freely convertible currency]. Let’s see the prices they set now, obviously instead of lowering prices, they will rise like everything that has been left to the discretion of business groups, in a scenario of almost zero retail competition,” warns a reader who managed to capture the attention of a Ministry spokesman who responded to him:
“The decentralization process of powers for the approval of prices is aimed at strengthening the powers of the business system. (…) The increase in prices in the international market and the complexity for our country of accessing financing for acquisitions, with additional increases in freight costs. Companies cannot make arbitrary use of these powers, but must apply principles and procedures that allow them to cover marketing costs and expenses. Certainly, the process demands supervision and control that allows the identification of deviations, violations and rectifying them opportunely.”
Although concern is visible in the majority of comments responding to the news, there is also an important sector that seems disillusioned and makes fun of the repercussions that a measure like this can have at a time when stores in national currency are conspicuous by their absence and they lack any product whose price can be liberalized. The scarcity of products available in this context is a determining factor, since prices will go up according to scarcity.
“Please, it makes me laugh. Which are the stores in pesos that sell these items here in Mayabeque? Another measure very unpopular, against the working people, who already with their miserable salaries can [buy] less, and now every boss is going to set prices that are a gain for them,” replied one commentator. Another user, on Twitter, summarized the idea: “Calm down, in national currency they don’t even sell shit in this country, there are no problems.”
*Translator’s note: Tarea ordenamiento = the [so-called] ‘Ordering Task’ which is a collection of measures that includes eliminating the Cuban Convertible Peso (CUC), leaving the Cuban peso as the only national currency, raising prices, raising salaries (but not as much as prices), opening stores that take payment only in hard currency which must be in the form of specially issued pre-paid debit cards, and others.
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