Thursday, January 21, 2016

In a reversal, Cuba tries price controls to tame food inflation

In a reversal, Cuba tries price controls to tame food inflation

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

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

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

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

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)

Source: In a reversal, Cuba tries price controls to tame food inflation
| Reuters -

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