Cuban government acts to hold down prices on basic food items

BY BRIAN WILLLIAMS   In the face of mounting economic pressures, the Cuban government has taken steps to hold down the price of basic goods, and in the case of some key food and personal hygiene items it has actually lowered them. At the beginning of June the Cuban government announced price increases on a range of goods available for purchase at the dollar stores within the country. In a statement published in the May 31 Cuban newspaper Granma, the Ministry of the Economy said that at the same time prices would be lowered "on a range of vital products broadly consumed, in particular food." The increases are on "items, which though they are also necessary, are not the same." In 1993 the Cuban government decriminalized possession and use of the U.S. dollar in an effort by the government to counter the exorbitant prices being charged for some goods on the black market and increase the flow of dollars instead into the state treasury. The move helped curb the impact of inflation and led to a revaluation of the Cuban peso, which in 1994 had sunk to a low point in relation to the dollar of 150 to 1. The measure took the edge off shortages of basic necessities like soap, shampoo, and cooking oil, which were unavailable for pesos.

Cubans mobilize to defend revolution Granma Millions mobilized in Havana June 12 in a massive display of support for the revolution and its leadership. Marchers across the country supported a constitutional amendment that declares, "The socialist revolution rescued Cuba from a humiliating imperialist domination." Cuba’s "political, economic, and social regime," it states, is "untouchable."

Since their inception, the prices set in the dollar stores had been maintained without any important changes, noted the Ministry of the Economy statement, despite the effects of the international capitalist economic crisis in which the prices received for major exported goods like sugar have plummeted while the cost of imported goods like oil have tripled, making worse the country’s deficit and balance of payments.

The unequal terms of trade that negatively affect semicolonial countries in relation to the imperialist powers hits Cuba as well. The country is forced to compete in capitalist markets and is buffeted by declining prices for agricultural exports and high prices charged for finished and processed goods. Under the impact of deflationary conditions, the world price for sugar, for example, which is one of Cuba’s main export products, has sunk to the rock-bottom price of about 5 cents a pound. This situation is made worse by the U.S. imperialists’ trade embargo, which Washington seeks to pressure other countries to join.

The price changes, which took effect June 3, are the first such hike in the prices of goods available in dollar stores. Nearly 37 percent of the goods sold in these stores are food products and 14 percent are items of personal hygiene. The amount of increase depends on the type of product, with the most necessary items slated for the smallest increase, noted the Ministry statement.

Among the changes announced by the government are an increase in the cost of domestic cigarettes to 34 cents from 26 cents per pack; imported cigarettes rise to $2.50 from $1.50 per pack; and beer rises from 85 cents to $1. Products such as mayonnaise, crackers, and hair dye have increased by 5 to 10 cents. Mild price reductions are planned for more essential goods, including food such as powdered milk and chicken, and basic personal care products such as soap, toothpaste, and disposable diapers.  
 
Fight to increase output
After a sharp decline in industrial and agricultural output in the first half of the 1990s, working people in Cuba, led by the Cuban Communist Party, began to fight their way out of what they call the Special Period and register increases in production, alleviate food shortages, and increase the reliability of transportation and electrical power.

Prior to 1989, 85 percent of Cuba’s trade was with the former Soviet Union and Eastern European countries, often at preferential prices. With the collapse of the regimes in those countries at the opening of the 1990s, Cuba’s gross domestic product contracted by an estimated 35 percent.

In order to begin to get production of food and industrial goods moving again, and to begin finding sources of foreign currency needed to purchase imports such as oil, the revolutionary government in Cuba has had to organize a retreat, which included the decriminalization of U.S. dollars and granting concessions to attract foreign capitalists in joint ventures.

This course, along with a political campaign to defend the revolution and its social conquests, helped turn the situation around. But the measures have also inevitably led to growing social stratification in Cuba and the strengthening of middle-class layers in the country. Differentiation has grown between the cities and countryside, and layers of working people that do not have access to hard currency bear a greater share of the burden of the economic crisis.

In response, the Cuban government has refused to retreat on maintaining a health care system that is free of charge and has sought ways to broaden access and involvement in the education system for all generations. Other conquests of the Cuban Revolution, such as the fact that most families either own their own homes or pay low rents, and that farmers and peasants cannot be evicted from their land, help mitigate the harsh impact of the economic crisis on working people.  
 
Several blows to Cuban economy
In the context of these relative improvements, four factors have weighed in against the Cuban economy over the past year.

One was the devastating Hurricane Michelle in 2001, after which Cuba was allowed to buy food from the United States for the first time since 1959. Another is the rock-bottom price of sugar, which is also affecting countries such as Mexico that rely on sugar exports.

Recent articles, such as a June 11 Reuters news release based on interviews with unnamed government officials and sugar-mill employees, report that in the coming months Havana is preparing to close 71 sugar mills--about half of the 156 mills in the country--as part of restructuring the industry. Most news articles point out the plants slated to be closed are at least 50 years old and are inefficient relative to modern plants in the United States and elsewhere. The industry in Cuba employs some 400,000 workers.

A third area is tourism, where the Cuban government has reported a 14 percent drop in visitors to the island during the first quarter of this year.

To entice more travelers from Europe, Havana recently announced that tourists can now use euros as an alternative to U.S. dollars to pay for meals, hotel rooms, and other expenses on the island. More than half of the estimated 1.7 million tourists who visited Cuba in 2001 were from Europe, according to official government figures.

A fourth setback is that since the April 11 failed coup against Venezuelan president Hugo Chávez, Cuba has not been receiving any oil from Venezuela, which had been supplying Havana with more than 50,000 barrels a day. This represents about a third of the country’s needs and it is supplied at reduced prices in exchange for the service of Cuban doctors, teachers, and other technicians who volunteered to participate in internationalist missions. Much of the oil was financed over 15 years at 2 percent interest.

The call to halt oil deliveries to Cuba was promoted by the military coup plotters and wealthy businessman Pedro Carmona, who very briefly seized control of Venezuela’s government. During their stint in power, they did halt the oil deliveries to Cuba, which almost two months later have not resumed.

The suspension of the petroleum shipments has "caused gave damage to our country," stated a recent Granma article, forcing the Cuban government to spend "dozens of millions of dollars more than planned" on the spot market to make up for it and dipping into the country’s own petroleum reserves.  
 
Increase domestic production
Cuba has been taking steps to increase its domestic production of oil, helping to stabilize the generation of electricity in the country. The minister of basic industry, Marcos Portal, stated in early June that "in 1991 the island produced half a million tons of oil, and in 2002, we are going to reach 3.5 million tons, a sevenfold increase." He added, "In 1999, 50 percent of the country’s electricity was generated with national oil; in 2000, it reached 70 percent and in 2001, 90 percent."

Cuba consumes about 160,000 barrels of oil per day, a third of which is imported. In addition, the country imports about $600 million annually in food and food products. Since November, in the aftermath of Hurricane Michelle, Havana, for the first time since 1959, purchased about $90 million worth of agricultural products from U.S. companies, with an additional $48 million projected to be bought this year. Under strict U.S. regulations, these sales are required to be on a cash-only basis.  
 
 
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