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Consumer goods out of reach of most Cubans
April 8, 2008
By Anita Snow - HAVANA (AP) -- Cuban President Raul Castro's lifting of
restrictions on consumer goods and hotel stays is, at this point,
unlikely to benefit most Cubans.
They get paid in virtually worthless pesos, which can't buy basic
items like toilet paper, let alone a DVD player or poolside mojito
cocktails at the Hotel Capri.
Nearly everything Cubans want or need must be bought with a separate
currency created for tourists and foreigners. So, until the regular
peso increases in value, Mr. Castro's moves will be bittersweet
gestures.
The new leader's solution, now the talk of the island: merge the two
currencies. But this turns out to be much easier said than done.
Shelves remain virtually bare at the few stores where Cubans can buy
things in regular pesos, which they mostly use for heavily subsidized
items like rationed food, trans****tation and medicine. In one store,
recent offerings included a half-dozen motorcycle helmets, a thin
blanket and a single pair of boy's underwear.
Overpriced DVD players, flat-screen televisions, French cosmetics and
Uruguayan steaks are now available to anyone who can afford them at
the elite stores Cubans call "el shopping." But they must be bought
with the "convertible" pesos tourists get when they trade in their
dollars, euros and other foreign currency.
Cubans can use their regular pesos to buy convertible pesos known as
CUCs (pronounced "kooks"), but at a dizzying exchange rate of 24 to 1.
Even then, few can afford expensive goods on average salaries
equivalent to $19.50 a month.
Regla Jimenez's 15-year-old daughter wants an MP3 player for her
birthday, but "I can't give it to her," said the 45-year-old office
worker, who earns the equivalent of $17 a month. "With my salary of
350 Cuban pesos, my priority is food."
If only Mr. Castro could declare a 24-fold increase in the value of
all state salaries with a wave of his hand.
It would cause an unprecedented buying spree, but with a terrible
hangover when the few available goods are gone.
Moreover, the government lacks the hard currency needed to pay much
higher salaries, so Cubans could soon find themselves even worse off,
with little reason to work harder, save more and spend their pesos.
"Let's assume the government decides tomorrow to gradually reach one
single monetary system and starts by making one CUC equal to eight
pesos instead of 24," said Carmelo Mesa-Lago, a Cuba economics
specialist and professor emeritus at the University of Pittsburgh.
"People will immediately change their pesos to CUCs, which suddenly
buy three times as much, and clean out the shops. Then what does the
government do the next day?"
The dual currency system is despised among Cubans because it has
created two cl***** of people in a socialist society supposed to be
based on egalitarianism: the 60 percent who have at least some access
to CUCs, and the rest who don't.
In pockets of extreme poverty, especially in western Cuba, people are
restless over their dire living conditions. Even middle-income workers
in Havana can hardly benefit from their newly announced freedoms.
"Now I can go to hotels. That's nice, but with what? Not on my
salary," said Silvita, a 42-year-old doctor who like many Cubans would
not give her last name to international news media.
"If they don't give the peso more value or create one money system, I
think these measures will be worse. Because they'll just remind us
that our salaries don't buy anything."
Economists say Mr. Castro could start to reconcile the gap by offering
the new goods and services in pesos, rather than CUCs.
"That will increase the demand and raise its value," said Arch Ritter,
a Cuban economics specialist at Carleton University in Ottawa, Canada.
"If you can only buy these things in CUCs, that's not going to be much
help."
But dropping the value of the CUC precipitously also could lead to
disaster, since Cubans often face shortages of basic goods and must
turn to CUC stores to acquire them. There, a four-roll package of
toilet paper costs what the average government worker earns in two
days. A bottle of cooking oil is four days' wages.
Mr. Castro and other Cuban officials say productivity must be
increased before the currencies are reconciled.
However, because low state salaries discourage Cubans from working
harder, what the government really needs to do is loosen restrictions
on Cubans working for themselves, dissident economist and writer Oscar
Espinosa Chepe said.
"Over time, wealth could be created, and the offering of products and
services could grow," Mr. Espinosa Chepe wrote in an essay last week.
"Truly productive work positions could be established, and that could
allow the use of an enormous excess of work force that today is not
taken advantage of by the state sector."
Cuba's dual economy emerged in the early 1990s, after the Soviet
collapse led to the loss of preferential trade and aid.
To boost tourism and foreign investment, Cuba legalized the dollar,
the only currency accepted at stores created exclusively for
foreigners. Called "diplotiendas," they stocked im****ted luxury items
but also many basic goods that Cubans could obtain nowhere else.
The CUC was created about the same time and circulated at a 1-to-1
rate with the dollar until 3 1/2 years ago, when Fidel Castro banned the
greenback. The Central Bank later revalued the CUC so that it now
trades at one to $1.08.
The values of the CUC and peso are artificially set by the Cuban
government, and neither is traded on international markets.
Since Raul Castro replaced his brother as president in February, there
have been rumors the peso's value would be increased from 24 to 15 per
CUC, raising the average monthly salary to nearly $30. That sparked a
brief run at exchange houses as people began trading CUCs for pesos,
hoping to profit in the end.
In the short term, allowing Cubans to buy previously off-limit
electronics could soak up many of the pesos people have hoarded. But
real reforms, like merging the two monetary systems, are inescapably
tied to other fundamental changes in salaries, production and
investment, in a country where the government controls 90 percent of
the economy.
And no one understands such complex theories better than average
Cubans, who survive month to month through budgeting, bartering and
black-market dealing.
"Nobody knows how long it will take," said retiree Guillermo Soler,
70. "But we all know it's not going to happen immediately."
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