Cuba tries price controls to tame food inflation

A man sells garlic on a street in Havana January 19, 2016. REUTERS/Enrique de la Osa

A man sells garlic on a street in Havana January 19, 2016. REUTERS/Enrique de la Osa

HAVANA, Jan. 21th. (REUTERS) Cuba is backtracking on some key agricultural reforms and experimenting with restoring price controls in the face of public demands that the government tame rising food costs.

Prices are up because of limited production, poor weather and greater demand fueled in part by the market-oriented reforms championed by President Raul Castro.

Those reforms, which the government says will modernize its socialist economic model, have led to growing numbers of wealthier Cubans even as most workers have seen food prices grow far faster than their state salaries.

With new market rules in play, but limited food supplies, prices have floated toward what affluent Cubans can afford.

Aware of public sentiment and eager to contain inequalities, the government is now buying, distributing and selling more food at fixed prices.

It has ordered privately owned trucks to unload at wholesale markets instead of retail outlets, and some private street vendors have apparently been shut down to push more produce through controlled markets.

In central Ciego de Avila province, the government will resume “the old strategy” of buying and transporting all crops once it receives more vehicles from the central government to get the job done, the local Communist Party weekly Invasor reported.

Just west of Havana, in Artemisa province, the state this month opened outlets that sell basic foods at fixed prices, reversing a trend to get out of the retail food business. A similar plan was announced this week for the capital, creating at least one such market in each of its 105 districts, said Tribuna de La Habana, another official newspaper.

At a military-run market in the Vedado district of Havana this week, there were mounds of plantain and onions and nothing else. Nevertheless, hundreds gathered to buy at low prices.

“The government had to do something so I support this, even if there is less variety,” homemaker Graciela Costa said as she waited in line. “Hopefully they can force speculators to lower their prices.”


Raul Castro, who took over from his ailing brother Fidel in 2008, has pushed through market-style reforms to encourage more private enterprise, but he has vowed to move cautiously and maintain socialist policies.

Fidel Castro routinely rolled back reforms when they started to create problems for the Communist government. This would be the first reversal under Raul since the Communist Party approved sweeping reform five years ago.

In the National Assembly last month, some deputies called for a return to price controls and Castro himself said “a solution must be found” to bring prices in line with wages.

“At the end of December after Raul spoke, all the street vendors disappeared and they still haven’t returned,” said Rosalia Leon, a pensioner from Havana. “There used to be a produce kiosk across the street from where I live and it shut down and still hasn’t reopened. These days I have to look far and wide for what I need to eat.”

Cuban authorities have so far balked at imposing across-the-board price controls, but they have mounted a campaign against “unscrupulous middlemen and speculators” through state-run media, blaming those who buy directly from farmers, truck drivers and urban vendors for high prices.

Such rhetoric from the past, which had disappeared until recently, is driven by a clear divergence between food prices and salaries.

About 70 percent of Cuban workers are employed by the state with an average salary of $25 per month, but Cubans who receive remittances or work in growth businesses such as tourism are doing much better.

Economy Minister Marino Murillo said poor and low income Cubans spend 75 percent of their salary on food, though they also receive free social services and subsidized utilities and pay no rent or mortgage.

The cost of a family’s basket of basic foods rose 15 percent in both 2012 and 2013 and 28 percent in 2014, according to the Union of Young Communists’ newspaper, Juventud Rebelde.

Government data showed average state wages rose just 13 percent in 2014 after barely increasing the two previous years.

By restoring some price controls, the government hopes to push down market prices and signal it will not leave the least fortunate behind.

Still, one Cuban agricultural expert, who asked for anonymity due to restrictions on talking with journalists, said the measures taken this year are futile except as short-term tactics.

Despite reforms in agriculture under Castro, central planners had continued to assign scarce inputs and tell farmers what to plant rather than let the market decide, he said.

“The problem is that the reforms are being implemented in a piecemeal and contradictory fashion,” he said. “They decentralized distribution, but not production. Food production through to consumption is a chain that is only as strong as its weakest link.”

(Reporting by Marc Frank; Editing by Daniel Trotta and Kieran Murray)