- The measure prohibits price increases in retail and wholesale.
- The island president, Miguel Diaz-Canel, announced at the beginning of the month, emergency measures to combat stagnation of the economy.
- The measures included an increase in salaries and pensions for more than two million state employees.
Cuba has imposed a general price control plan on Tuesday for all state and private companies in the midst of a deepening economic crisis and increasing US sanctions. The new measures prohibit the rise in prices in retail and wholesale trade, except for products imported and distributed by the State, where current profit margins cannot be increased.
“Indeed, they have suspended what was left on the free market,” said an economist, who asked for anonymity due to restrictions on speaking with foreign journalists. Although state-owned companies dominate the economy, the reforms carried out in recent years have led to the growth of the private sector, mainly cooperatives, farmers, small businesses and independent workers such as taxi drivers.
The Cuban Ministry of Finance and Prices listed all the actors known as a non-state sector to say that “they cannot increase current prices and products rates and services.” The island president, Miguel Diaz-Canel, announced at the beginning of the month emergency measures to combat the stagnation of the economy and curb the fall in foreign exchange earnings that began in 2015. As the crisis in Venezuela gets worse every day, the poor dynamics of the Cuban economy have been affected and aggravated by US sanctions.
The measures included an increase in salaries and pensions for more than two million state employees, which raised the annual bill to $8 billion, almost 13% of this year’s budget. Diaz-Canel said that other measures, which are yet to be detailed, will include price controls and policies aimed at stimulating local production to meet the increase in consumer demand without causing inflation. Like other small business owners, Manuel Rodriguez, owner of a coffee shop in Havana, says he had no problems with the controls if the state and the underground economy respect him.
Andrew Zimbalist, an economist specializing in Cuba from Smith College in the United States, says these types of measures are “acceptable for short periods of time.” But if they become permanent, he adds, “they begin to create serious distortions in the economy.” In the opinion of Pavel Vidal, a former economist at the Central Bank of Cuba, “the more they control prices on formal markets, the more inflation, and instability in informal markets.”
The United States has been increasing economic sanctions on Cuba. Using harsh sanctions and fines applied by the US to any bank doing business with the island, the goal is to pressure the international financial system against operations involving Cuban entities.
This situation, which affects companies of all nationalities and sectors, reaches multinationals such as Nestle (with an important business relationship on the island) and international organizations such as the United Nations Development Program (UNDP), making it increasing difficult to perform financial transactions. The Cuba Treasury Department, an entity linked to the Cuban Armed Forces, has been historically blacklisted. Also targeted, hotels managed by Spanish companies, which the US penalizes.