By Alejandra Garcia on January 9, 2024 from Havana
Cuba is facing a war-like economic scenario, with the pressures of the intensified U.S. blockade, a complex international context, and growing inflation amid the constant search for self-sustainability… This reality hinders all the efforts being made for the country’s economic performance. This was warned by high-ranking officials of the Caribbean island, who announced new measures to encourage the vulnerable Cuban economy, which went into effect yesterday.
“Amid the tensions faced by the country to maintain economic and social vitality, based on the economic resources available, we must overcome, we must find alternatives to put an end to some distortions,” Prime Minister and Minister of Economy Alejandro Gil said.
The Minister of Finance, Vladimir Regueiro Ale, also affirmed that many of these distortions are due to the complex scenario of tension that has been taken to face the complexities of the economy. Some of them are the unsustainable low prices of gasoline, public transportation, and taxes on electricity consumption.
Fuel
A second distortion is related to fuel. Can this country maintain the fuel prices, which are probably the lowest in the world, and when compared to the currency exchange prices in the Cuban informal market? One of the main problems the economy “is that what we sell does not cover the costs of restocking. If you buy fuel and sell it cheaper than what it costs us, how do we buy another oil ship for the country’s sustenance?”
The fuel that is bought in foreign currency on the foreign market is sold at a low price in national currency, and Cuba does not yet have an internal mechanism to ensure that dollars can be bought with those Cuban pesos and the fuel can be imported again because of the complication of the restrictions of the blockade.
Therefore, starting Monday the equivalent of USD 1.30 will be charged for each liter of gasoline at the country’s gas stations for all owners of private cars. For foreigners, payment will be made with international cards. Previously, the value was in local currency for visitors and locals and did not exceed USD$1 per liter.
“With this price increase, what we are trying to do is to regulate commercialization,” said the Minister of Economy.
Electricity and Transportation
Finally, as of this Monday, public transportation prices and electricity consumption fees have also increased for businesses and other high consumers.
“Families have to save energy because it has a high cost. And we need to incentivize that saving with certain measures. Those who consume more also affect those who consume less,” Gil warned. Behind this scenario, it must be mentioned that the cost of foreign currency involved in energy generation, “which we do not recover with the sale of domestic energy in the country. So, again, how sustainable is that?”
Likewise, the public transportation tariffs, which in one way or another are capped, do not cover the costs of the state companies. “That is why many state-owned passenger and cargo transportation companies are operating in losses. What incentives do the workers of these entities have if they are in losses? How are they going to generate more income for the distribution of profits?
The Measures are Not Neoliberal
Given broad versions that the measures have a neoliberal character, Gil Fernandez specified that all these decisions are based on a wide consultation and analysis process within the government institutions, with the participation of academics, the Party’s militants, and the analysis made based on people’s opinions.
“We are talking about increasing the role of the State as a regulating entity in the economy, of intervening in the exchange market. We are not talking about more privatization but about guaranteeing greater social justice and equity while trying to boost our economic development. These measures are taken to protect the social achievements of the Revolution,” Gil concluded.
Source: Resumen Latinoamericano – English