Cubans taken by surprise by runaway inflation

In 2021, Xiomara Castellanos, an 80-year-old Cuban retiree, rejoiced when the government announced a sharp rise in wages and pensions as part of a monetary reform

Cubans taken by surprise by runaway inflation

In 2021, Xiomara Castellanos, an 80-year-old Cuban retiree, rejoiced when the government announced a sharp rise in wages and pensions as part of a monetary reform.

But she never imagined that prices would soar.

Cuba is one of the countries in Latin America most affected by inflation, which has taken by surprise its inhabitants who are unaccustomed to this phenomenon in the socialist economic system of the island.

On Tuesday, Cuban President Miguel Diaz-Canel will participate in a virtual meeting with his counterparts from Mexico, Colombia, Brazil and Argentina, countries also affected to varying degrees by inflation and whose leftist governments want to adopt a strategy community to lower prices.

In Cuba, it all started with the implementation in January 2021, by the communist government, of a monetary reform intended to put an end to the presence in the country of a dual currency, including one equivalent to the dollar, which generated distortions in the economy.

However, the reform, introduced in the midst of a pandemic, caused a devaluation of the Cuban peso which saw the price of the dollar drop from 24 pesos to 120 pesos at the official rate, and caused it to soar on the black market, where it is exchanged at 180 pesos.

If the reform has increased salaries and pensions by an average of 450%, "prices (...) are soaring and salaries are not following", laments Ms. Castellanos who receives a pension of 1,528 pesos, or 13, 8 dollars at the official rate.

However, to buy a box of 30 eggs in his Vedado neighborhood in Havana, he now has to pay the equivalent of 14.1 dollars, compared to 4 dollars in mid-2021.

According to official figures, inflation reached 70% in 2021 and 39% in 2022. But according to Pavel Vidal, a Cuban economist from the Department of Economics at the Javeriana University of Cali in Colombia, official statistics 5 and 6 times actual inflation".

"Real inflation in 2022 exceeds 200%, one of the highest in the world," he said.

Faced with soaring prices, Ms. Castellanos is content to buy the products in the stores of the "libreta", the supply book introduced by Fidel Castro in 1963 to face food shortages and symbol for many of food security. .

For the equivalent of $1.42, she buys three kilos of rice, half a liter of oil, seven eggs, 1.3 kg of black beans, 2.7 kg of chicken and a packet of coffee every month. But these products, at controlled prices, are less and less numerous in these stores. "I buy what's there," she says, complaining that she "always eats chicken."

In an analysis of the cost of living in Cuba, Cuban economist Omar Everleny Pérez estimates that a couple needs $113 a month to meet their basic food needs, supplementing "libreta" expenses with food. purchases in state stores in foreign currency where prices are much higher.

But you can't find everything there. The kilo of powdered milk, which Xiomara Castellanos has given up, is only available -- at around $14 -- only in the small private shops that have flourished in Havana since 2021 when the government authorized SMEs. The prices of the products offered, often imported, then adapt to the market.

On the island of 11.1 million inhabitants where the average salary is 33 dollars, part of the population would not survive without the money sent from abroad by their emigrant families.

"What worries me is that the world in which Cubans live is increasingly unequal," said economist Omar Everleny Pérez, who observes an increase in poverty on the island.

Inflation, "how much has it increased? I don't know, but what I do know is that it hits us hard, very hard," exclaims Xiomara Castellanos, unaccustomed to the word.

Before 2021, "there was no consumer price index in Cuba", recalls Pavel Vidal. But from the Gross Domestic Product (GDP) figures, "we can say that this is the highest" inflation ever recorded on the island.

03/04/2023 07:59:37 - Havana (AFP) - © 2023 AFP