Photo by Markus Spiske
14th February 2022
In a frank address about the economic challenges facing the Cuban government, the Minister of Economy and Planning, Deputy Prime Minister Alejandro Gil, has asked Cubans for their trust.
Speaking to viewers and listeners to the flagship radio and television programme Mesa Redonda, Gil spoke in detail about many of the difficult choices facing government. Addressing the overlapping problems the country faces of surging inflation, food shortages, economic recovery, and the limitations imposed by the US embargo, he said: “We ask our people for trust, because we are a continuation of this just, revolutionary work”.
Gil said that government had concluded that the only effective way to deal with price inflation was by increasing domestic supply and reducing the budget deficit, without shock policies.
Recognising that “In the country it is the subject of most debate and concern”, he said that government was “permanently looking for alternatives within the possibilities we have”. Inflation, he said, was being driven by an increase in costs, but was not a consequence of the devaluation of the national currency, which he said had in its original design, control through an increase in wages.
Accepting, however, that prices had risen more than anticipated by 2021’s wage uplift, Gil went on to say that while inflation was an international phenomenon, in Cuba’s case it had been compounded by a supply deficit and an excess of liquidity at a time when the cost of the country’s exports were also increasing.
Because as a matter of Cuban social policy the price of products and services with a high impact on everyday life such as fuel, chicken and cooking oil sold in Cuban Pesos was capped, this made finding solutions more complex, he noted.
On possible solutions, he told viewers : “There is a broad consensus in academic circles, government agencies and the population, that the effective way to deal with inflation is to increase supply”. This would, he suggested, overcome hoarding and the criminal reselling of product at inflated prices. Observing that any increase in wages would immediately lead to unsustainable pressure on prices and increase business costs, Gil said that there was a limit to the number of prices that could be capped, and this had left government with increasing domestic supply as the only solution.
Gil said that recognition of this was behind the recent decisions to create greater autonomy in state companies, establish [independent] MSMEs, expand self-employment, and introduce multiple measures aimed at increasing agricultural production. “Everything we do has to be aimed at increasing supply. That’s what we work for”, he told viewers and listeners.
During his address, Gil said that in trying to bring a measure of competition into the economy, the response in some parts of the state sector had been “slowness and fear”. Noting that the expansion of the non-state sector created a more competitive environment, he said, referencing state enterprises: “We need entrepreneurs who don’t stop at a no, because there are cadres who, by staying in their comfort zone, say ‘this cannot be done, this must be consulted on’”. In this scenario, Gil observed, “we find state companies concerned because SMEs are being approved to undertake their activity”. “The state company is the main actor, but it has to earn it”, the Minister said.
Speaking about unprofitable state companies Gil noted that the devaluation of the CUP had made transparent and possible to understand which enterprises were a cost to the country and why they had no incentive to export. Addressing this, he said, “is one of the fundamental tasks that we have now”.
On the problems created by the US embargo, Gil said that this had made finding economic solutions more complex.
“There is not the slightest doubt that the economy is in a very tense situation, experiencing an exceptional situation, with all the complexities that the intensified blockade incorporates, and we do not mention it to use it as an element of justification”. “We have to overcome the blockade, which cannot be insurmountable. We have to find the paths, the ways to survive and develop”, he stressed.
Gil told Cubans that “great leaps” should not be expected, but that theconditions were being created for recovery. Constantly referring to the complexity of the economic situation, he told viewers, “It is up to us to face collectively, and find solutions by consensus”.
“There is no chance that we can, in the short term, solve all these issues , but we are working to find a containment that allows us, with the economic recovery of the country, to order these elements”, Gil said, making clear that the restructuring required is unlikely to be achieved quickly and that Cubans concerns about price inflation are not going to be solved overnight.
The Caribbean Council is able to provide further detail about all of the stories in Cuba Briefing. If you would like a more detailed insight into any of the content of today’s issue, please get in touch.