HAVANA, Feb. 10th Shortages and scarcity are racing ahead in Cuba. Failure of the Tarea Ordenamiento, economic reforms that sought to resolve Cuba’s dual-currency situation,
against the backdrop of the recent economic crisis, has created more problems than solutions.
Ever since 2004, two currencies circulated in Cuba: the Cuban Peso (CUP) and the Cuban Convertible Peso (CUC). Currency reform cut the CUC out of circulation to leave CUP as the only national currency. One of the purposes of this Reform was to limit the use of dollars (USD) in authorized state-led companies and institutions. The Government also wanted to fix an exchange rate of 1 USD : 24 CUP.
Despite planned unification, this currency reform left room for buying goods at stores with prices in USD, only accepting debit cards loaded by foreign currencies, called MLC (Freely Convertible Currency).
Before the reform, some workers received their wages in Cuban Pesos (CUP) and bonuses in CUC. With CUC out of the picture, this means that two currencies continue to exist in the market, with the additional problem of some citizens having an advantage over others because they have foreign currency saved up or relatives living abroad who can put money on their MLC cards, so they can buy goods that don’t come into the ration stores, or other stores selling in regular pesos.
This economic reform didn’t bring about the desired result, thus changes have had to be made which the Cuban Government has called “rectification”.
The year 2021 was a very tough year for the entire Cuban economy, with the economic crisis because of the pandemic and a drop in revenue from the tourism sector. This, in addition to US economic sanctions, means that the Gross Domestic Product (GDP) in 2021 was the lowest it’s been in years.
In early 2022, the economy picked up a little, and while this was a positive sign, it wasn’t enough to offset the many problems that already exist. The effects of this crisis and economic reform translated into shortages of food and hygiene products for the average Cuban citizen.
“Lines” to get food became never-ending – in an interview carried out for the Food Monitor observatory, they said that you can wait in line for six hours and even then, it wasn’t a sure thing you’d be able to buy the food you were looking for. Furthermore, stores that used to sell in CUC, such as military-owned TRD stores, CIMEX gas stations or DiTu kiosks, have empty shelves because of problems with supply distribution.
That said, there are two sides to this crisis of food and consumer goods: on the one hand, there are problems with shortages at kiosks, stores, bodega ration stores, agro-markets and the so-called organoponicos (urban farms), and on the other, there’s the inability to get hold of foreign currency such as the Euro, because of tourism picking up very slowly and restrictions on the cash US dollar, because using it or making cash deposits on MLC cards is forbidden from inside the country.
Shortages of foreign currency mean that there are fewer people today who can access products that were once sold in CUC and are now selling in MLC. “We were rich and we had no idea,” is something a citizen said when remembering times before the Currency Reform, when you could get “cigarettes, a selection of croquettes and small sausages, and a can of TuKola” for 3 CUC, and still get some change back.
DiTu, a successful food chain store, which had hundreds of stores and kiosks back when the CUC existed and sold all kinds of products, has found itself in a tight spot to stock their products since MLC came onto the scene. In some stores, there’s only “sparkling water and a brand or two of cigarettes that nobody smokes.”
In other stores, when there’s even ice cream and chorizo that you can see it from the store window, long lines quickly form, where only a select few lucky ones can purchase these valuable goods.
A petition looking for the end of MLC stores on Change.org has reached 12,216 signatures, until the date of this article. The petition is based on Articles 1, 3 and 31 of the Cuban Constitution and alleges that there is a generation of inequality because of unequal access to foreign currency; most of the Cuban population only have access to the national currency. Therefore, the petition is calling for closing the MLC stores and for all products to be sold in Cuban pesos.
It would seem the Government was poorly prepared when it implemented the reform, as it didn’t take external economic factors into account, which make it even more difficult to get a hold of foreign currency. Nor did it take global economic trends into account, with significant inflation and low production because of the pandemic.
Back in the day, forced parity between the CUC and dollar (1:1) at state companies guaranteed citizens’ access to certain hygiene and food products. The CUC’s devaluation against the dollar, which was stable on the official market at a 24:1 rate, but volatile on the black market, has meant that there’s no way out of this situation, which can be seen in calculations recorded on the El Toque website, between January 28th 2021 and December 27th 2021.
It’s important to remember that part of the Cuban population has access to foreign currency via the illicit exchange market. The Cuban pesos’ devaluation against the dollar and euro on this market has driven up the value of MLC by 112% since it first entered circulation, in 2021.
Likewise, there is a chain of resellers on the illicit market (or bolsa negra, as the Cubans call it) which translates into high inflation by the time it reaches Cuban households. These two factors make goods on the street more and more expensive.
For example, the price of pork, Cuba’s Dow Jones Industrial Average, is an excellent indicator of price inflation: a kilo of pork can cost between 10 and 13 USD, while a kilo on a market in similar conditions to Cuba can cost around 4.5 USD.
Both shortages and price markups in MLC negatively affect access to food in Cuban pesos. This situation is made worse by the lack of State-regulated goods at its stores and bodegas. Cuban citizens wait in never-ending lines to get some kind of substitute for the food and personal hygiene items that you can buy in MLC but are inaccessible to them because they don’t have any foreign currency.
Even coffee is in great shortage because of decreasing national production, plus shipping companies and financial problems to bring in imports.
We have yet to see whether in this landscape this so-called “Rectification” manages to let the economy breath a little under the crushing weight of chaos created by the Reforms Process, making many basic essentials out of most of the Cuban population’s reach.