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Havana (AFP) – Xiomara Castellanos, a Cuban retiree, was happy when the government increased salaries and pensions in 2021 as part of a monetary reform, but at no time did she think that prices would reach unprecedented levels in the socialist system in which she has lived 62 of her 80 years.
Cuba is today one of the Latin American countries facing a notorious escalation of inflation, a phenomenon that has taken ordinary Cubans by surprise.
President Miguel Díaz-Canel will participate in a teleconference on Tuesday with his counterparts from Mexico, Colombia, Brazil and Argentina, also affected and whose leftist governments are trying to adopt common strategies to lower consumer prices.
In January 2021, the authorities put into effect a monetary reform to end the application of the rate of one dollar to one Cuban peso, which had prevailed for decades in the state sector and caused distortions in the national economy.
This led to a devaluation of the Cuban peso. The currency shot up from 24 to 120 pesos per dollar at the official rate. On the black market it is now at 180.
How serious is the price increase?
Although in the framework of the reform, the salary increased by 450% on average, “the prices (…) are sky high, they do not match the salary,” according to Castellanos, who receives a monthly pension of 1,528 Cuban pesos, equivalent to 13.8 dollars at the official rate, almost the same as a box of 30 eggs costs today (14 dollars).
According to official figures, inflation increased by 70% in 2021 and 39% in 2022.
For Pavel Vidal, an academic at the Pontificia Universidad Javeriana de Cali, in Colombia, official statistics “underestimated effective inflation by 5 to 6 times,” he told AFP via email.
“Real inflation in 2022 exceeded 200%, one of the highest on the planet,” estimated the Cuban economist.
more than chicken
Xiomara Castellanos resigns herself to purchasing the products from the “supply notebook”, introduced by the late leader Fidel Castro in 1963 to deal with food shortages and which represented a symbol of food security.
However, it includes fewer and fewer products.
At an almost symbolic price of 1.42 dollars, Xiomara buys with her notebook in hand in the store near her house what the State assigns her per month: seven pounds of rice, half a liter of oil, seven eggs, three pounds of beans, six pounds of chicken, and a packet of coffee.
“I buy what they give me and I always eat chicken,” she says while cooking, upset because she doesn’t like that bird.
Cuban economist Omar Everleny Pérez concludes in an analysis that a couple requires about 113 dollars a month to buy a month’s worth of food, including what they sell in foreign currency stores.
In addition, that same couple needs $233 to cover transportation, clothing, recreation, utilities, and internet.
Xiomara stopped drinking milk because a kilo of powdered milk costs 14 dollars in the small private stores that began to swarm in Havana as a result of the government authorizing SMEs (small and medium-sized enterprises) in 2021, which now even sell imported products.
Free market practices have deepened on the island thanks to the opening to the private sector, promoted by Raúl Castro during his term (2008-2018).
“Strong, Strong”
On the island, with 11.1 million inhabitants and where the average salary is 33 dollars, a part of the population receives remittances and another, smaller group, bonuses or other profits in state companies.
Omar Everleny Pérez explained that families receiving remittances have higher incomes when they exchange their currencies for Cuban pesos.
Self-employed workers may also have higher income. “I support my children with my little business more or less,” said Armando Rodríguez, a 52-year-old independent bread vendor. He reckons he would need $400 to support his family, but sometimes he gets half.
“What worries me is that the world has become more unequal for Cubans,” said Everleny Pérez.
The country is going through the worst economic crisis in three decades due to the tightening of the US embargo and the effects of the pandemic.
Inflation “how much did it go up? I don’t know, but I know it’s strong, strong,” Xiomara exclaimed when she heard that word rarely heard in the past.
“Before (2021) there was no CPI” (Consumer Price Index) in Cuba, Pavel Vidal explained, but based on information generated with the GDP “it can be said that it is the highest” inflation recorded on the island, even above the crisis of the so-called Special Period in the 1990s.
