Shortages, inflation frustrate Cubans struggling to get by

By AP News

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Julia Sardiñas awoke early so she could reach a grocery store in Cuba's capital by 6 a.m.

Julia Sardiñas awoke early so she could reach a grocery store in Cuba's capital by 6 a.m.

After seven hours in line, she achieved her goal: the purchase of two plastic 1 liter bottles of cooking oil for which she paid 48 Cuban pesos — $2 — each.

“I was standing for many hours; you have to wait your turn to be able enter for two bottles, but it's something," said the retired 65-year-old.

Grocery shopping has become an increasingly costly and arduous struggle for many people in a country where the pandemic, inefficient production, government controls and U.S. 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, 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 state store where Sardiñas bought her oil scanned her identity card to ensure she wasn't buying more than two at a time.

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," complained Marcia Ochoa, a state worker who said she makes 2,400 pesos — $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 administration of former U.S. President Donald Trump tightened economic sanctions on Cuba in November 2020 and blocked remittances via Western Union.

Her son used to send her roughly $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 1.

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 $40 a kilo ($18 a 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 recognized inflation as a serious problem.

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

A carton of 30 eggs cost 150 pesos — $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 subsidized 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 enteprize 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% 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.

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Andrea Rodríguez está en Twitter: www.twitter.com/ARodriguezAP

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Author: AP News

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Originally published by Associated Press Valuethemarkets.com, Digitonic Ltd (and our owners, directors, officers, managers, employees, affiliates, agents and assigns) are not responsible for the content or accuracy of this article. The information included in this article is based solely on information provided by the company or companies mentioned above.

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