Cuba reports big increase in food prices

Reuters News
Posted: Jan 31, 2012 1:34 PM
Cuba reports big increase in food prices

By Marc Frank

HAVANA (Reuters) - Cubans paid almost 20 percent more for food in 2011 as economic reforms, reduced imports and stagnating farm production touched off price inflation at the country's many produce markets.

The National Statistics Office reported on its website (ONE.CU) that meat prices rose 8.7 percent while produce prices were up 24.1 percent, for an average of 19.8 percent.

The report was bad news for President Raul Castro, who has been loosening the state's grip on farming and retail food services and sales as it seeks to reform its Soviet-style economy by allowing more private initiative and market forces to kick in.

The changes are part of more than 300 reforms adopted by the ruling Communist Party last year to "update" the economy, which authorities have warned will entail a difficult transition.

Similar reforms in other state-monopolized economies have proved inflationary in the early stages, but the Cuban government hoped increased output would mitigate price increases.

President Castro has made agricultural reform and increased food production a top priority since taking over for ailing brother Fidel Castro in 2008.

But agricultural output increased just 2 percent last year, after falling 2.5 percent in 2010 and remains below 2005 levels.

At the same time, Castro has cut food imports to reduce spending by the debt-ridden government. Because of low farm output, Cuba imports a budget-busting 60 percent to 70 percent of the food it consumes.

Castro also has allowed farmers to sell a growing percentage of their production for whatever price the market will bear.

Rising prices have provoked much grumbling from Cubans, whose buying power has shrunk under Castro's changes.

"Everything is going up, except wages. What I bought yesterday for a peso, today costs 1.10 pesos or 1.20 pesos, but I continue to earn the same," said a Havana office worker who gave her name only as Angelina.

While all Cubans get a subsidized monthly food ration, it is not enough to get by, so they must purchase additional food at the produce markets or other places not included in the statistics office report.

The increased prices are sure to have a big impact on the estimated 40 percent of the population who rely on state wages or pensions and do not have access to other sources of income, such as remittances from relatives abroad.

The average wage increased only a few percentage points to the equivalent of $19 per month in 2011, the government reported, while pensions, which average just over the equivalent of $10 dollars per month, remained the same.

"There is no doubt prices are rising, and from what I can see on the news the problem is worldwide," Yoandry Leyva, who sells plumbing and other supplies in eastern Santiago de Cuba, said in a telephone interview.

"But I live in Cuba and the problems are mine. Every day the prices go up and I keep earning the same. I hope they settle down because every day is more difficult," he said.

(Editing by Jeff Franks; Editing by Sandra Maler)