Pavel Vidal points out that the purchasing power of families “has been pulverized”
14ymedio, Madrid, October 28, 2024 — “In economics everything is paid for; you can’t create wealth out of nothing.” This is the forceful conclusion of the most recent special report of the National Office of Statistics and Finance of Cuba (ONEI), directed by the Cuban economist living in Colombia, Pavel Vidal. In it, the expert analyzes the six essential macroeconomic indicators of the Island that explain “the cost of doing nothing,” as the document is titled.
The six indicators, all with data ONEI and the Economic Commission for Latin America and the Caribbean (ECLAC), collect figures from 1990 to 2022 and address the fiscal deficit, money supply, gross domestic product (GDP), the exchange rate in the informal market, the average exchange rate, and the wage-productivity ratio. The result is clear: all indicators grew exponentially, with the exception of GDP, which is collapsing.
“The contraction of GDP not only aggravates the imbalance between supply and demand for products, but also increases dependence on imports, thus generating a permanent and structural demand for foreign currency,” explains the report, which arrives a few days after another publication was made public, under the title of International Trade Prospects 2024, in which ECLAC states that imports will contract by 5% this year.
“The contraction of GDP not only aggravates the imbalance between supply and demand for products, but also increases dependence on imports”
Exports will suffer even more, with a contraction of 15% as a result of the productivity crisis that Vidal also mentions. “The low figures in exports, agriculture and manufacturing production are scary. The crisis has affected the potential production capacity; it is not just a short-term issue,” he adds. The outlook is discouraging, as the energy crisis, mass migration and the rampant deterioration of infrastructure do not allow an improvement to be seen either in the short or medium term
The report reviews well-known data: there is no hard currency; the deficit is compensated with an uncontrolled issuance of unsupported currency; inflation is officially above 30% and reaches three digits if the data of the informal market are included; the depreciation of the peso is constant and, although wages increased in 2021, they have not done so significantly again. This, although it causes suffering in the population, is paradoxically one of the few good decisions of the Cuban government, says the economist.
The measure “avoids the generation of repetitive and superfluous cycles of wage increases, price increases, new wage adjustments, and so on, as has happened in economies that end up in hyperinflation scenarios, as has happened in Venezuela.” In this way, Cuba has avoided placing itself in a hyperinflation scenario, formally corresponding to those who exceed the limit of more than 50% in a single month.
However, the social cost is “extremely high.” The purchasing power of fixed income in Cuban pesos, he continues, “has been pulverized and has led to poverty for families who do not have other alternative sources of resources,” Vidal reflects.
The economist calls “inflationary tax” the overcost reached by goods and services on the Island because of the unstoppable rise in prices, which falls on the entire population regardless of their salary or sources of income, generating greater vulnerability in those who have the least. “By not doing anything substantial to stop the fall in national production and exports, and to reduce the imbalance of the budget, the Government has allowed an asymmetric adjustment of the crisis that falls on families that depend on fixed income in pesos,” he insists.
Cuba cannot continue to wait for “an international ally that does not exist and miracles of an economic model that does not give more”
Thus, Vidal considers that the model preserves little more than the name and the “discourses” but does not give in practice. “The social benefit of subsidies, programs and budgeted transfers, and free education and health, is not real when it must be paid by the poorest families through an onerous inflationary tax.”
The report also recalls that Cuba cannot continue to expect “an international ally that does not exist and miracles of an economic model that does not give more,” nor inflating a state business system that only “drains human, financial and budgetary resources.”
The document was made public this Monday, just a few days after the bad news of the ECLAC report, otherwise expected. The Economic Commission for Latin America and the Caribbean, which depends on the UN, underlines that the fall in the price of nickel and the collapse of sugar production make Cuba one of the five nations on the continent with the greatest contraction in exports.
The report does not include the resources that the Island will obtain from the export of services, since Havana has not provided them, “something that draws attention due to the high weight they have,” recalls economist Pedro Monreal, without expressly mentioning doctors, who represent billions a year for the State, even despite the decline in recent years.
Translated by Regina Anavy
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