{"id":247071,"date":"2021-12-17T15:28:06","date_gmt":"2021-12-17T20:28:06","guid":{"rendered":"https:\/\/oncubanews.com\/en\/?p=247071"},"modified":"2021-12-17T15:28:06","modified_gmt":"2021-12-17T20:28:06","slug":"inflation-in-cuba-the-signal","status":"publish","type":"post","link":"https:\/\/oncubanews.com\/en\/cuba\/economy\/cuban-economy\/inflation-in-cuba-the-signal\/","title":{"rendered":"Inflation in Cuba: the signal"},"content":{"rendered":"

More than a year ago, more precisely on July 2, 2020, I published in <\/span>Progreso Semanal<\/span><\/i> \u201cLa inflaci\u00f3n en Cuba: una se\u00f1al a atender\u201d<\/span><\/a> (Inflation in Cuba: a signal to pay attention to). I don\u2019t know if it was attended to or not, but then the country was far from having the inflation rates it has today.<\/span><\/p>\n

It is quite complex to have a figure for the real inflation rate in Cuba. Several markets coexist, highly segmented, all with different prices and currencies…. But what is understood by inflation?<\/span><\/p>\n

Inflation is nothing more than the generalized increase in average prices in a country during a given period of time. Like other economic indicators, they are usually calculated for one year. The inflation rate provides the annual percentage change in consumer prices compared to the previous year.<\/span><\/p>\n

There are many calculation methods. One consists of establishing a basic basket of products and services necessary for the livelihood of an average household. In the Cuban case, there is a minimum basic basket that is sold monthly to all households, today at prices without subsidies. But their amounts are insufficient to cover the monthly needs of the people. It is estimated that, on average, this basket lasts for about ten days.<\/span><\/p>\n

The rest of the days of the month are completed with the markets in CUP or freely convertible currency or with the markets of free supply or demand, both agricultural and industrial, and even with the informal markets that satisfy certain needs.<\/span><\/p>\n

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Photo: Archive.<\/figcaption><\/figure>\n

Economic theory holds that it is good for any economy to keep inflation low. A high level of inflation distorts market signals and also creates inefficiencies and makes people\u2019s lives more expensive.<\/span><\/p>\n

A structural crisis such as the one experienced by the Cuban economy, together with external factors such as the U.S. <\/span>blockade<\/span><\/a>, the <\/span>COVID-19<\/span><\/a> pandemic and the lack of foreign exchange due to imbalances or decreased exports, among others, has affected the supply of goods and services. And it has resulted in an increase in the prices of products in some markets accessed by the population, such as the agricultural and informal markets. But the problems derived from the so-called <\/span>Task of Reorganization<\/span><\/a> have been added to this hyperinflation.<\/span><\/p>\n

The inflationary crisis that currently exists in Cuba is nothing new. The country has already gone through a Special Period, derived from the disappearance of the socialist market, when GDP fell by more than 35% during the first years of the 1990s, as well as a decline in exports, added to the shortage of monetary resources due to the cancellation of the credits received from those former socialist economies. Today, however, the moment is more complex.<\/span><\/p>\n

It is known that at the beginning of the 1990s there was an increase in prices due to the shortage of products and that wages were maintained, although enterprises were paralyzed. That is why the population came to have 73% of monetary liquidity with respect to GDP. That liquidity diminished when Cuba began to reap the fruits of its economic reform. In 2018 that liquidity was 58.9%. Figures that already showed inequality: there was an important group of workers whose income was not enough for basic consumption, among other factors due to the excessive prices in CUC \u2014 which are not the product of inflation, since they are stable prices, only stable and high \u2014, and by the increasing price increase in CUP.<\/span><\/p>\n

Cuban government recognizes 6,900% inflation in informal market<\/a><\/p><\/blockquote>\n