At the end of 2023, when the Cuban regime warned of the imminent application of an economic package that would solve the problems that the "Ordering Task," the severe adjustment applied in 2021, had not solved, it looked like cutbacks would be in the pipeline in 2024.
And so it was, at least in the first four months: apart from applying the package's main measure, a rise in the price of gasoline and fuels, as well as the partial dollarization of their sale, a surge in the prices of products and services ensued. All this caused already-astronomical inflation to skyrocket, with the dollar and euro registering historic increases every week.
Then the summer arrived and Cuban regime seemed to set its sights on one of the objectives of its adjustment plan: MSMEs. This came after pointing to the "non-state sector of the economy" as a sign of its openness while trying to disguise the fact that its authorization of these businesses was a concession to a weary Cuban civil society, which rose up on 11-J. When the authorities saw that this sector was beginning to amass money, they moved to crack down on it.
The past months can be summarized as follows: Cuba has gone from inflation to stagflation (inflation plus economic stagnation), and cash became even more scarce as part of a policy planned to contain the increase in circulation, but also to further limit household consumption. All this has resulted in widespread precariousness, to which we can add the consummation of the regime's takeover of MSMEs. The recent elimination of private wholesale trade, which, despite selling at prohibitive prices, had become one of the few sources of basic necessities for Cubans on the island, was the last straw to that bulwark against hunger.
What is behind this apparent spiral of political madness, strangling the economy even more to conform to a failed political ideal?
DIARIO DE CUBA spoke with the economist Rafaela Cruz, who in our pages has traced the recent history of Havana's economic policy, at first glance a series of erratic swerves. From her perspective, however, they actually serve a very clear objective.
"If something stands out about Castro's economic policy, it is its cruel inflexibility. Even under circumstances that can be described as desperate, even when the suffering of the population is extreme, and even when it is known that the cure for such misfortunes is to change the socialist model to which they cling as a method of political control, Castroism does not budge one inch on its economic line. And, when it seems that it is doing so, that it is taking steps towards a market, this is only a bluff to resolve a specific crisis, never a change going to the root of a failed model for a destroyed people, but one highly beneficial for an elite that continues to plunder the country," said the expert.
"The consolidation of Castroism's flirtation with the private sector in 2024 is the dominant trend this year. At the end of 2023 the prime minister warned that they were going to reorganize the private sector, and that is what they have been doing, structuring it not to make it more efficient, not to lower prices, not to satisfy more people's needs, but rather to serve better as another vacuum to suck up dollars, which they have finally achieved - or so they hope. We will see how private entrepreneurs react to Resolution 56 and the de facto end of wholesale trade and private foreign trade," she said.
Regarding the apparent containment of the inflationary spiral, which in recent months has frozen the dollar and euro above 300 pesos on the informal market, Cruz has a strong opinion.
"Inflation has not been contained, it has been transformed. Now it is not expressed in higher prices; because there is less money circulating, it is mathematically impossible for prices to continue rising as long as supply remains stable," she explained.
"In a 2025, marked by Resolution 56, we will see what will happen to supply. Inflation has resulted in longer lines to get cash, which is what is really used to consume, and in financial expenses in the gap between cash and banking money. It has, ultimately, spawned growing misery within households that, even with more stable prices, can consume less and less, since the monetary instrument is scarce and is concentrated in private entrepreneurs or the State itself. "
Faced with such a scenario, Cruz ventures to predict what situation Cubans will have to face in the year to come.
"My personal impression is that they would rather exterminate every last Cuban on the island, forcing them to emigrate, or squeezing life out of them, making them depressing old people and increasingly less educated and ignorant young ones, rather than hand over power, which in their mind (and in this they are right) would be equivalent to changing the economic model," she emphasized.
"I only dare to predict two things. First, that there will be more concrete policies allowing the State to paradoxically, take over the private sector; not eliminate it, but instrumentalize it so that it serves the regime and not the people.
"Second, changes in the foreign exchange market can be expected, since they have already reached the limit of the devaluation of the currency via monetary issuance and, given Castroism's need for a weak peso, they can implement an official devaluation against the dollar, going from the current 120 to whatever the black market is setting at that moment, which will force the black market to further degrade the peso," she concluded.
At a recent session of the National Assembly of Popular Power, Prime Minister Manuel Marrero's remarks confirmed both predictions. Specifically, as regards the second, he warned that in 2025 the regime will intervene in the informal foreign exchange market, establishing a new exchange rate for the dollar and euro. Again, this will benefit the Government, but not the majority of Cubans, who struggle just to survive.